Sri Lanka’s government has entered into an agreement with China Merchants Port Holdings to develop Hambantota Port under a public-private partnership.

Under the agreement, the port will be converted into a joint venture between the Chinese state-owned company, which will hold an 80% share, and the Sri Lanka Ports Authority, which will hold 20%.

According to Malik Samarawickrema, Sri Lanka’s minister of development strategies and international trade, the transaction is not an attempt to sell the port to a foreign country but is aimed at restructuring it so as to achieve economic growth.

“Accordingly the objective of the government is to make the Hambantota Port an income-generating enterprise retaining its ownership and leasing it on a 99-year lease agreement,” said Samarawickrema in a statement. “Another objective is to convert it from the present position of a white elephant to a prime commercial centre of the economy. The target of the present government is to make this port a centre of active economic operations by converting it as a hub connecting the East and the West and as an entry point into the Sri Lankan economy.”

The government has already borrowed more than Rs150 billion (US$1 billion) from China to build Hambantota Port, according to Samarawickrema.

China Merchants Port Holdings and the SLPA also hold a joint venture in the Port of Colombo’s Colombo International Container Terminals Ltd., with China Merchants holding 85% and the SLPA 15%.