India’s possible role in developing the terminal had become a major flashpoint within the government. Negotiations seemed to have hit a roadblock until Japan stepped in more recently.

Sri Lanka, Japan, and India on Tuesday signed an agreement to jointly develop the East Container Terminal at the Colombo Port.

The signing of the Memorandum of Cooperation (MoC) is significant, given that India and Sri Lanka were negotiating a potential partnership on the project, although with little success.

New Delhi’s interest in partnering the project is well known. Over 70% of the transshipment business at the strategically located East Container Terminal is linked to India, according to official sources.

However, India’s possible role in developing the terminal had become a major flashpoint within the government. President Maithripala Sirisena had opposed any Indian involvement in the project, as roping in foreign actors for developing “national assets” remains a politically sensitive call in the island.

Mr. Sirisena and Prime Minister Ranil Wickremesinghe had a heated argument on the matter during a cabinet meeting last year, with the Sri Lankan PM apparently more inclined towards allowing an Indian role in the project. Negotiations seemed to have hit a roadblock until Japan stepped in more recently. The new dynamic altered the prospects for India, allowing it to play a part in upgrading the terminal.

Japan has been a long-standing partner of Sri Lanka, and one of Sri Lanka’s biggest donors in the past decades. The terms of the agreement will soon be finalized at a joint working group meeting, diplomatic sources said.

-Agencies