Sri Lanka teams up with Chinese firm for $1.4 billion port city

COLOMBO Wed Jul 24, 2013 9:12am EDT

1 of 2. A general view of the Colombo South Harbor at Colombo Port July 24, 2013.

Credit: Reuters/Dinuka Liyanawatte

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COLOMBO (Reuters) - Sri Lanka has finalized a $1.43 billion deal with China Communications Construction Co Ltd (601800.SS) to build a city on a 230 hectare site that will be reclaimed from the sea, the head of the state-run Ports Authority said on Wednesday.

The site is next to the island nation's main Colombo port and Colombo's historic Galle Face Green seafront. It is also close to where Shangri-La Hotels Lanka Ltd, a subsidiary of Hong Kong-listed Shangri-La Asia Ltd (0069.HK), is building a 500-room hotel.

"The Chinese firm will invest in reclaiming the land and infrastructure of the port city," Priyath Wickrama, chairman of Sri Lanka Ports Authority, told reporters. "It will be given around 50 hectare of reclaimed land on a 99-year lease for its investment."

The 39-month long construction project will start in September, Wickrama said, adding the city would include eco-parks, residential areas, offices and shopping malls.

Since the end of a nearly three-decade war in May 2009, the Indian Ocean island nation has been spending heavily on infrastructure, including ports to attract foreign investments to its $59 billion economy.

It has already created new land near the proposed port city as part of its expansion of the Colombo port to double its capacity by 2015.

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by David Holmes)

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