The SLPA said 70 per cent of transhipment containers handled by Colombo was Indian export-import cargo

Sri Lanka Tuesday announced it is entering into partnership with India and Japan to develop a deep-sea container terminal next to a controversial $500-million Chinese-run container jetty in Colombo harbour.

The state-run Sri Lanka Ports Authority (SLPA) said a memorandum of cooperation (MOC) had been signed between the three countries to develop what is known as the East Terminal of the Colombo port.

The SLPA said it will retain 51 per cent of the company that will run the terminal while the rest will be owned by India and Japan. It gave no further details of the costs of the project.

"The MOC demonstrates Sri Lanka's ability to maintain and further it's national interests while cooperating with international partners," the SLPA said in a statement.

China owns 85 per cent of the adjoining terminal known as the Colombo International Container Terminal (CICT) which was commissioned in 2013. The SLPA owns the remaining 15 per cent of the company.

The SLPA said 70 per cent of transhipment containers handled by Colombo was Indian export-import cargo.

In December 2017, Sri Lanka, unable to repay a huge Chinese loan, handed over another deep sea port in the south of the island to a Beijing company in a deal that raised concerns at home and abroad.

The $1.12 billion deal first announced in July 2016 allowed a Chinese state company to take over the Hambantota port, which straddles the world's busiest east-west shipping route, on a 99-year lease.

India and the United States are both concerned that a Chinese foothold at Hambantota, 240 kilometres (150 miles) south of Colombo, could give it a military naval advantage in the Indian Ocean.

Sri Lanka has insisted that its ports will not be used for any military purposes.

However, India lodged protests when Chinese submarines made unannounced visits to the Chinese-managed CICT in 2014. Since then, Sri Lanka has not given permission for further submarine calls.