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Midweek Review

A deal on ECT at the Colombo harbour

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By Shamindra Ferdinando

Sri Lanka Muslim Congress (SLMC) leader Rauff Hakeem, MP, recently told The Island that Sri Lanka had no option but to involve India in the development of the deep water facility, the East Container Terminal at the Colombo Port, which has been built to accommodate the largest container ships that ply around the world carrying as many as 16,000 containers (TEUs), like its competing Chinese-run Colombo International Container Terminal also in the more recently built and what is known as the Colombo South harbour.

The Samagi Jana Balavegaya (SJB) Kandy District lawmaker said so in response to the writer seeking an explanation as regards his stand on the issue at hand in the wake of his quite controversial statement on Derana ‘Wadapitiya’, anchored by Chathura Alwis.

In response to The Island assertion that the SLMC leader took a bold but factual stand on the matter and  responded: “Why beat around the bush? That is the truth.”

He hit the nail on the head, when Attorney-at-Law Hakeem declared that due to the Colombo harbour’s very heavy dependence on Indian transhipment cargo, there was no choice.

Having first entered Parliament in 1994 on the People’s Alliance (PA) National List, Hakeem took over the leadership of the SLMC soon after its founder leader M.H.M. Ashraff was killed in a helicopter crash in September 2000.

Amidst a simmering dispute over alleged Indian investment in the ECT that had engulfed the SLPP administration, Hakeem is the only lawmaker to publicly come out with the somewhat unpalatable truth that the bulk of Colombo port’s business come from Indian transhipment cargo. Hakeem, who has been in the PA, UPFA (United People’s Freedom Alliance) and the UNF (United National Front) governments as a Cabinet Minister didn’t mince his words and quite surprised the other participants, Wasantha Samarasinghe (former JVP MP and its current Anuradhapura District leader) and State Ministers, D.V. Chanaka (Hambantota District) and D.B. Herath (Kurunegala District).

Hakeem joined the programme after its commencement but lucidly explained his stand on a number of matters, including the simmering dispute over cremation of Muslim Covid-19 victims and the high profile ECT transaction. The SLMC group, within the 54-member SJB, consists of five lawmakers, including Hakeem. Hakeem recently suffered a severe setback when his four other MPs in Parliament voted for the SLPP’s 20th Amendment last October, while he alone from his party voted against it.

Besides the yahapalana regime, in which Hakeem’s SLMC was a full partner, had already muddied the Lankan waters by giving away the Hambantota Port to China on a 99-year lease. So it is only natural for New Delhi to have a foothold in Colombo with the ECT. Even our comrades, the JVP, though now making lots of noise over ECT going to the Adani Group of India, hardly murmured a word in protest when it was cavorting with the yahapalana regime at the time of the virtual sale of Hambantota to the Chinese.

The Kandy District MP, who had previously held the Ports and Shipping portfolios, said that the SLPA (Sri Lanka Ports Authority) owned JCT (Jaya Container Terminal) in addition to Unity Container Terminal. The SLMC leader emphasized the need to further develop JCT whereas CMPH (China Merchant Port Holdings) managed Colombo International Container Terminal (CICT) and Keells-led conglomerate owned South Asia Gateway Terminal (SAGT) conducted their operations successfully.

Amidst the simmering ECT issue, the former Minister declared that though some opposed foreign investment in such strategic projects, the country facing a daunting financial crisis had no option but to accept the Indian investment.

Ironically when the SLPA advertised the Colombo South Harbour for investment after it built its breakwater with a USD 300 million loan from the Asian Development Bank after the end of the war, India was not interested and for that matter no one else made any worthwhile offer other than the Chinese. However as in the case of Hambantota, New Delhi awakened to its value when the China Merchant Port Holdings singlehandedly bid and obtained the CICT berth on a 35-year Build, Operate and Transfer agreement after 2010, with the SLPA holding a mere 15 per cent stake in the venture.

Lawmaker Hakeem asserted that the situation here could be stabilized by Indian involvement in the expansion of the overall Colombo Port operations. The SJB constituent took up the position that the country was in such a desperate situation, the incumbent government couldn’t afford to antagonize India.

 

How Indian investments can stabilize Lanka

Hakeem took a very clear stand on ECT as well as overall foreign investment in the ports and shipping sectors. The former Ports Minister articulated that against the backdrop of foreign investment in SAGT, the first public private partnership container terminal in Sri Lanka and also CICT, there couldn’t be any issue with regard to the agreed Indian investment.

SAGT launched operations in 1999. According to the SAGT: “The Company is a Board of Investment flagship entity with approximately 60% of Sri Lankan shareholding, and is backed by John Keells Holdings, APM Terminals, SLPA and Peony investments (subsidiary of Evergreen Marine Corporation).”

State Minister Herath interrupted MP Hakeem to raise a question though the former ignored the SLPP politician.

Hakeem declared that under no circumstances he would say not to accept Indian investment though the final decision lies with the incumbent government. The former Shipping Minister made reference to current Ports and Shipping Minister Rohitha Abeygunawardena declaration that 49 per cent of the ECT ownership would be foreign and the remaining 51 owned by the government. SLPA holds just 15 per cent each of SAGT and CICT. The SAGT deal is for a 30-year period on BOT (Build Operate and Transfer basis) whereas the agreement on CICT covers 35 years.

Hakeem’s stand drew opposition from all other participants, including Chathura Alwis. However, Hakeem stood firm on his stand regardless of consequences. The SLMC leader asserted that Sri Lanka couldn’t turn a blind eye to the need to appease India. Declaring that Sri Lanka had appeased India before, Hakeem, turning towards Wasantha Samarasinghe emphasized the country should come to terms with the reality.

State Minister Chanaka asked Hakeem whether the previous yahapalana government entered into a MoC (Memorandum of Cooperation) with India in respect of the ECT. Hakeem however conveniently side-stepped the query, while JVPer Samarasinghe said that was finalized in May 2019.

After having been an active team player in the much muddied yahapalana rule, MP Hakeem however had the nerve to ridicule the incumbent government’s much touted ‘neutral’ foreign policy. “I haven’t the slightest idea what this government meant by neutral or balanced foreign policy. If we took a non-aligned stand, the public can clearly understand what the government intended. How one can balance the foreign policy,” MP Hakeem said.

 

Hakeem silent on inter-terminal transport crisis

Trade union leader Samarasinghe alleged that one-time Ports and Shipping Minister Hakeem conveniently failed to mention the crisis caused by what the JVPer called inter-terminal transport.

Samarasinghe alleged that the inter-terminal transport was in a mess. For want of sufficient space within the harbour area, vessels couldn’t be unloaded. Samarasinghe claimed that successive governments caused unprecedented deterioration due to giving the relevant contract to immensely politically influential people outside proper tender procedures.

MP Hakeem without hesitation acknowledged the crisis within the harbour, in addition to the simmering issue over the ECT.

State Minister Herath sought MP Hakeem’s opinion on the leasing of the Hambantota Port for a period of 99 years to CMPH in late July 2017. Having been a partner to that  pact, MP Hakeem naturally defended the agreement on Hambantota Port to the hilt. Hakeem had been a member of the Cabinet of the yahapalana government that finalized the controversial deal on the Hambantota Port. The then Ports and Shipping Minister Arjuna Ranatunga strongly opposed the deal. UNPer Ranatunga’s stance finally led to him being replaced by SLFPer Mahinda Samarasinghe. Ranatunga was replaced on May 22, 2017. The former national cricket Captain received the Petroleum Resources Development Ministry as a consolation prize.

Both the Minister and his brother, Dhammika objected to the deal whereas Vasudeva Nanayakkara on behalf of the Joint Opposition, moved the Supreme Court against the port transaction.

President Sirisena and Premier Wickremesinghe ensured the finalization of the controversial transaction following the delay caused by the opposition.

Panelist Samarasinghe asked Hakeem whether the yahapalana government used USD 1.2 bn received from CMPH to settle what we owed China. Warning Sri Lanka would run out of foreign reserves next year once debts were settled, MP Hakeem predicted an unprecedented financial crisis.

The SLMC leader asserted that except China all other countries were in deepening financial turmoil. The MP categorized Sri Lanka with Angola, Liberia and Lebanon. While acknowledging the economic deterioration started during the yahapalana administration, MP Hakeem faulted the incumbent government for not being able to tackle the situation.

Hakeem warned that unless the government and the Opposition worked together, the country would have to go down on its knees to international lenders as Sri Lanka had done before on many occasions. In spite of big boasts by some, those in power and others should be realistic and be aware of the challenges faced by the country. Hakeem predicted a massive tragedy. He expressed the view that against the backdrop of the incumbent government asking for foreign investments, it should be ready to consider investments in sectors preferred by those having the wherewithal. “We have to be realistic.”

Emphasizing the responsibility on the part of Sri Lanka to exploit the country’s strategic position in the East-West route on the Indian Ocean, the SLMC leader explained how the two strategic harbours in Colombo and Hambantota could be utilized.

Now that Sri Lanka had given controlling shares to one terminal at the Colombo harbour to China why not another to India, the SJB lawmaker asserted, demanding that Sri Lanka adopt a realistic approach as the country is desperately in need of foreign investment.

Subsequently, Hakeem suggested that the controlling shares of the ECT should be given to India, Japan though JVPer Samarasinghe insisted the SLPA could handle it. “With the installation of three gantry cranes, 400 m long ECT is in operation now. A further 800 m has to be built,” Samarasinghe said, asserting USD 400 mn investment was required. With the three cranes, ECT in op even now with the 440m already built, now had to build 800 m more, which required USD 400 mn.

Declaring the SAGT and CICT generated an annual income of USD 160 mn and 250 mn, respectively,

Samarasinghe asked why investors could not build a terminal in the remaining Western side. “It can be bigger than all existing facilities. Why do we have to give up lucrative ECT?”

Samarasinghe predicted in spite of claims that SLPA would receive 51 per cent and the investor 49 holding per cent, finally ECT, it too, was expected to be eventually shared in the proportion of 15 per cent to the SLPA and 85 per cent to the investor.

 

ECT aggravates Prez, PM dispute

The then President Maithripala Sirisena and Premier Ranil Wickremesinghe clashed over the ECT. The dispute caused rapid deterioration of yahapalana relationship in the run-up to the sacking of Wickremesinghe’s government on Oct 26, 2018. Wickremesinghe insisted on Indian investment whereas Sirisena rejected it. But, Wickremesinghe went ahead with the project regardless of the President’s intervention. Amidst deepening turmoil, Wickremesinghe brought in Japan into the picture.

On the instructions of Wickremesinghe, Sri Lanka, Japan and India signed a MoC on the ECT on May 28, 2019. According to an SLPA statement issued following the signing of the MoC, the GoSL through the SLPA retained 100% ownership of the ECT, while the Terminal Operatiing Company,  is jointly owned. Sri Lanka will hold a 51 per cent-stake in the project and the joint venture partners will retain 49%.

The ECT is positioned about 3 km away from the China-funded Colombo Port City on reclaimed land on Colombo’s sea front.

“Japan is likely to provide a 40-year soft loan with a 0.1 percent interest rate,” The Hindu quoted Sudarshana Gunawardana, Director of Development Communications at the Prime Minister’s office as having said. The SLPA then termed the “envisaged Japanese loan” as “one of the best loan terms Sri Lanka has obtained”.

What is not yet clear is whether the incumbent government intends to go ahead with the MoC finalized by Wickremesinghe or change it.

 

JVP, SJB on ECT deal

The JVP played a significant role in paving the way for the disastrous Maithripala Sirisena presidency. The likes of trade unionist Samarasinghe have conveniently forgotten how the JVP backed UNP’s presidential candidate Sirisena, the longstanding General Secretary of the SLFP. Having installed Sirisena, the UNP-led coalition comprising one-time LTTE mouthpiece Tamil National Alliance (TNA), the JVP, the SLMC pursued an agenda of its own. One shouldn’t be surprised by lawmaker Hakeem standing as a UNP breakaway faction the SJB still followed UNP strategies though Wickremesinghe obviously had no say in its affairs.

Chief Opposition Whip Lakshman Kiriella’s recent declaration that the government should take advantage of the constitution making process undertaken by the previous yahapalana government is a case in point.

Lawmakers Kirieilla and JVP leader Anura Kumara Dissanayake recently flayed the government over the decision to involve India’s biggest ports and logistic company Adani Group in the operation. Adani Ports and Special Economic Zone Limited seems to be confident of overcoming the obstacles. The project that had been delayed due to labour protests launched ahead of the last parliamentary polls in August drew stepped up condemnation of the SJB and the JVP.

It would be pertinent to ask whether the SJB and the JVP opposed only the involvement of Adani Group in the ECT development or disputed the MoC finalized in May 2019 in the run-up to Nov 2019 presidential polls by the previous regime, in which JVP and present day SJB members were partners?

SJB heavyweight Kiriella speculated whether the government intended to win over Indian Premier Narendra Modi by giving control of the ECT to billionaire Gautam Adani. Kiriella asserted that Sri Lanka couldn’t appease India by giving ECT to a close friend of Modi. Nothing can be further from the truth.

Obviously, the SJB hasn’t taken into consideration the roles played by India and Japan as well as Australia in the overall Indo-Pacific US strategy meant to counter the growing Chinese challenge. The US led coalition is still struggling to cope up with the vastly strengthened China relentlessly pursuing an anti- China policy.

 

A ‘Comprehensive Partnership’ with Japan

JVP leader Dissanayake is on record as having said that a director and a local shareholder of Shangri-La who had been involved with Viyathmaga, too, promoted the deal with Adani Group. The JVPer also alleged that the same person immensely benefited from recent government decisions to change import levies on sugar and coconut oil.

 

Outgoing US Secretary of State Mike Pompeo’s recent visit to New Delhi and Colombo highlighted their strategy. There is no doubt the Adani Group’s move on the ECT had been approved by the highest level of political leadership and the talk of Sri Lanka trying to appease India by involving Gautam Adani is nothing but bunkum.

The public should not forget the then Premier Wickremesinghe entered into a ‘Comprehensive Partnership’ with Japan in early Oct, 2015. In the following year on Oct 09, the training squadron of the Japanese Maritime Self Defence Force (JMSDF) was in Colombo to underscore the strengthening of the partnership. The writer had an opportunity to visit JS Kashima on the invitation of the Japanese Embassy in Colombo. Asked for a clarification as regards growing Japanese military role in Asia in support of the US as well as joint military cooperation among the US, Japan and India in response to the Chinese Challenge, Commanding Officer of the squadron Rear Admiral Hidetoshi Iwasaki explained the circumstances under which the Japanese forces could be deployed overseas along with the US.

Sri Lanka-Japan ‘Comprehensive Partnership’ should be examined taking into consideration three agreements sought by the US, the ACSA (Acquisition and Cross Servicing Agreement finalized in early August 2017), stalled MCC (Millennium Challenge Corporation) Compact and SOFA (Status of Forces) agreement. The recent US declaration that Sri Lanka wouldn’t be accommodated in the MCC Compact is unlikely to be the end of the US efforts to bring Sri Lanka under its control.

 As part of overall Western strategy, the US seeks a government receptive in Colombo. The US wants to deny China access to Sri Lanka. The US made an abortive bid to install the then General Sarath Fonseka as the President in January 2010. However, the US project succeeded at the January 2015 presidential election. The Sirisena-Wickremesinghe regime initially took a hardline stand on China. Some members of that administration responsible for Treasury bond scams in Feb 2015 and March 2016 alleged corruption couldn’t be tackled here unless Chinese investments were drastically pruned. Having accused China of promoting corruption here, the yahapalana administration ended up handing over the Hambantota Port on a 99-year lease to China.

In the run-up to the July 2017 Hambantota Port deal, former President Mahinda Rajapaksa accompanied by ex-External Affairs Minister and Chairman of the SLPP Prof. G.L. Peiris visited Beijing where the issue was discussed. During the weeklong visit in late 2016, they also visited Southern China. They urged the Chinese to stick to the original Hambantota development project to avert possible protests. They suggested it would be better to utilize 750 acres as originally planned. This suggestion was made against the backdrop of the then Development Strategies and International Trade Minister Malik Samarawickrema’s revelation that the Chinese wanted 15,000 acres of land in the Hambantota district for large scale development projects. In the second week of January 2017, Wickremesinghe launched the Hambantota project in spite of President Sirisrena’s objections. Wickremesinghe ignored Sirisena’s claim that the agreement hadn’t been finalized yet. Having launched the Hambantota project, Wickremesinghe declared that negotiations were underway with India and Japan for the development of the strategic Trincomalee Port.

With US-China hostility on the rise, Sri Lanka shouldn’t expect breathing space from either party. A much weaker economy as a result of the rampaging corona epidemic when compared with the time Gotabaya Rajapaksa won the presidency in Nov 2019, should prompt Sri Lanka to adopt an austerity drive.

 Let that begin at the Parliament, dubbed the most corrupt institution in the country by no less a person than one-time Justice Minister Dr. Wijeyadasa Rajapaksa, PC.



Midweek Review

How bankruptcy paves way for exploitation of Sri Lanka

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First row (from left) Chief Financial Officer, Ports and Shipping Ministry Sandhya Pushparani, Director J.R.U. de Silva, Ports and Shipping Secretary K.D.S. Ruwanchandra, and Chairman, SLPA Dr. Prasantha Jayamanna. Director, SLPA Isuru Balpatabendi,and Chairman Jaya Container Terminal Attorney-at-Law Lakmal Ratnayake on the second row (pics courtesy Parliament)

Mismanagement of cash cow SLPA, where still it’s carry on as usual

By Shamindra Ferdinando

The United States is keen to further enhance and consolidate its role in Sri Lanka. The current turmoil that has been caused by waste, corruption, irregularities, mismanagement of the economy over the years as well as a spate of ill-advised decisions taken by the incumbent administration would facilitate the US strategy here. The global fuel and food crises caused by Russia rushing into a quagmire in Ukraine, essentially tailor made by the West, as happened to its predecessor the Soviet Union in Afghanistan earlier, has further debilitated the Sri Lankan and many other economies.

The failure on the part of the ruling SLPP and the Opposition to reach a consensus regarding a common action plan to face the daunting economic challenges, has assisted the U.S. and common ‘Quad’ approach towards Sri Lanka. The organization consists of the U.S. Japan, Australia and India, the last now more or less a reluctant bride.

The U.S. wants to strengthen Sri Lanka’s accounting and auditing sectors as part of its overall measures to improve the public sector here. Other ‘Quad’ members are pursuing combined as well as individual strategies pertaining to Sri Lanka. India is now in a position to dominate Sri Lanka in every aspect. The push to expand network of Lanka IOC service station is a case in point.

Speculation is rife of New Delhi seeking to further enhance its share of the oil market here in a situation of utter economic turmoil caused by unprecedented shortages.

The recent announcement that the USAID (U.S. Agency for International Development) would partner the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Association of Public Finance Accountants of Sri Lanka (APFASL) to toughen Sri Lanka’s accounting and auditing sectors was amidst the worst ever economic turmoil. The US project, according to a statement issued by the U.S. Embassy in Colombo, is meant to train approximately 600 public sector accountants and audit professionals and 1,200 officers on IT applications and other platforms that support strategic decision-making.

U.S. Ambassador Julie Chung declared at the launch of the project the partnership with CA Sri Lanka and APFASL would contribute towards greater accountability in the public sector. The Embassy, in a statement issued on June 15, 2022, quoted Chung as having said that as one of Sri Lanka’s longstanding development partners, the U.S vision was to help the country to emerge from crises stronger than before.

The statement also quoted Sanjaya Bandara, President of CA Sri Lanka, as having said that “Strong public financial management is very critical for Sri Lanka to achieve its long-term goals. President of APFASL V. Kanagasabapathy profusely thanked the USAID for the recognition of its efforts. The U.S. Embassy quoted Kanagasabapathy as having said that APFASL’ vision was to lead the public financial management to excellence while helping the sector to continue to play a pioneering role in Sri Lanka.

The countrywide U.S. project, according to the statement, is meant to provide a framework for the preparation and presentation of financial statements in compliance with international best practices for quality financial accounting and reporting. Having published the US statement, the writer asked the Embassy whether it would be possible to know the total cost and duration of the project and who would receive the funding?

The Island received the following response: “This initiative is a series of trainings supported by the United States. The training will be attended by public sector accountants and audit professionals to strengthen oversight and accountability capacity in Sri Lanka.”

The Island again asked the U.S. Embassy whether it would be possible to know the total cost of the project. We received the following second response: “This initiative includes 24 training programmes over the course of two years. Training programmes will take place in all 9 Sri Lankan provinces.”

After having thanked the U.S. Embassy, The Island once again repeated the question how much the project would cost the US? The Embassy didn’t respond to that query. That was nearly two weeks ago.

Question mark over 2016 US project

The latest project can be examined taking into consideration the high profile USAID funded three-year project launched in late Nov. 2016. Budgeted at USD 13,000 mn (Rs 1.92 bn), the project launch that took place in Parliament under the auspices of the then Speaker Karu Jayasuriya and USAID Mission Director Andrew Sisson, the gathering was told the Strengthening Democratic Governance and Accountability Project (SDGAP) would improve strategic planning and communication within government and Parliament, enhance public outreach, develop more effective policy reform and implementation processes, and increase political participation of women and underrepresented groups in Parliament and at local levels.

Had that project achieved stated goals, Sri Lanka wouldn’t be in the current predicament. It would be pertinent to mention that the U.S. finalized the project over eight months after the then Central Bank Governor Singaporean national Arjuna Mahendran perpetrated the second far bigger Treasury bond scam. So were all those American efforts nothing more than a smokescreen for other agendas?

The CBSL perpetrated the first scam in February 2015, just few weeks after the US-backed campaign installed Maithripala Sirisena as the President, which they shamelessly crowed about publicly with none other than then Secretary of State John Kerry announcing it to the world. Mahendran carried out the second bond scam in late March 2016, half a year after the UNP won the general election.

The release of the unedited video footage of the examination of public enterprises undertaken by the parliamentary watchdog, the Committee on Public Enterprises (COPE) under the leadership of Prof. Charitha Herath MP has exposed unbridled waste, corruption, irregularities and mismanagement of state enterprises. Unfortunately, the media and the civil society hadn’t taken advantage of the availability of such video footage released by the Parliament to educate the public. The press releases issued by the Parliament on proceedings at the COPE, COPA (Committee on Public Accounts) and COPF (Committee of Public Finance) quite clearly helped the media, but video footage provided much clearer picture of the developments taking place.

The video footage of the Sri Lanka Ports Authority (SLPA) top management appearing before the COPE on June 22, 2022 is a case in point. The proceedings revealed not only a pathetic state in public sector finance but the failure on the part of the executive, legislature and the judiciary to address these issues at hand. Prof. Charitha Herath flanked by Auditor General W.P.C. Wickramaratne and Secretary to the COPE Nishanthi Wickramasinghe examined the top SLPA management. Ports and Shipping Secretary K.D.S. Ruwanchandra, flanked by Chairman, SLPA Dr. Prasantha Jayamanna, Director J.R.U. de Silva and Chief Financial Officer, Ports and Shipping Ministry Sandhya Pushparani. They were on the first row. Isuru Balpatabendi, Director sat in between Chairman, Jaya Container Terminal Attorney-at-Law Lakmal Ratnayake, and its Managing Director Upul Jayatissa. Director General Customs Maj. Gen. (ret.) G.V. Ravipriya also sat on the second row as a Director of the cash cow.

The COPE didn’t raise any queries from Isuru Balpatabendi nor did he offer any explanations. Balapatabendi’s presence among the eight-member Board of Directors should be examined taking into consideration of him being the Secretary of the Bar Association of Sri Lanka (BASL). Having offered solutions to overcome the current political, economic and social crisis, the BASL cannot turn a blind eye to continuing waste, corruption, irregularities and mismanagement in the public sector. The SLPA can be a case study for the BASL.

The bottom line is that Sri Lanka is currently in such a desperate situation the US may find the environment conducive for a fresh attempt to force SOFA (Status of Forces Agreement) and MCC (Millennium Challenge Corporation) on Sri Lanka. The US succeeded in securing Sri Lanka’s consent for ACSA (Access and Cross Servicing Agreement) in Aug 2017. Interestingly both Ranil Wickremesinghe and Maithripala Sirisena who approved ACSA that gave US military access to Sri Lanka are now with President Gotabaya Rajapaksa’s government.

Importance of internal audit

At the onset of the COPE proceedings, Prof. Herath sought an explanation as regards the status of the internal audit. Obviously, Chief Internal Auditor, SLPA, Gayani Liyanage responses as well as that of the SLPA Chairman to specific questions didn’t appease Prof. Herath, who asserted that poor internal audit could be one of the reasons for the current issues. Prof. Herath asked the SLPA Chairman not to assign tasks to the 53-strong internal audit unit outside their legitimate duties.

Herath raised several contentious issues with COPE members Patali Champika Ranawaka (PCR), Madura Vithanage, Jagath Pushpakumara, D.V. Chanaka, Eran Wickramaratne and Premanath C. Dolawatta making valuable contributions. PCR was particularly spot on. The former JHU heavyweight dealt firmly and expertly with contentious issues while Vithanage targeted the Finance.

The following are the main points of contention:

(1) The loan obtained from China to build Hambantota port has been removed from all government financial statements. As at Dec 31, 2021, Sri Lanka owed China Rs 165.4 bn (USD 1.89 bn). USD 1.2 bn received from China for 99-year lease of the strategic port hadn’t been utilized to settle the loan. Instead, the USD 1.2 bn had been spent though the COPE was not told of the allocation of USD 1.2 bn. The Treasury now services the loan. Prof. Herath requested Ports and Shipping Ministry Secretary Ruwanchandra to submit a comprehensive report on this matter.

(2) The COPE sought an explanation from the SLPA why the state enterprise failed to market the Hambantota port the way the Chinese did after the finalization of the USD 1.2 bn agreement on the 99-year-lease on the commercially strategic port.

(3) Massive losses suffered as a result of procurement of a stock of oil at a cost of USD 24.3 mn (Rs 8,000 mn) that had to be sold for USD 3.5. COPE questioned Niroshan Siriwardena, Managing Director, Magampura port over the circumstances the outfit unwisely utilized the loan obtained from a bank on the advice of a consultant. COPE recommended the SLPA and the Secretary Ports and Shipping Ministry to take legal measures against the consultant. Proceedings revealed Magampura port operation is nothing but an absolute waste of public funds. The failure on the part of those responsible to take tangible action in this regard stressed.

(4) The inordinate and continuing delay in equipping the ECT (East Container Terminal) thereby giving advantage to the China owned CICT (Colombo International Container Terminal) and SAGT (South Asia Gateway Terminal). The SLPA owned 15 percent each of both CICT and SAGT. The negligence and the failures on the part of those responsible for transformation of the ECT seemed, in a way, deliberate. The parliamentary watchdog questioned the possibility of some interested party purposely undermining the operation. The fault seemed to be at the level of Cabinet of Ministers as well as successive SLPA administrations. The issue of taking delivery of gantry cranes before constructing specific positions they were to be installed shocking and disappointing. The COPE took notice of the fact that such equipment took one and half years to be built after an order was placed. It transpired that the cost of the civil works component was USD 198 mn (65% local currency) and equipment installation cost USD 282 mn. However, the installation has been delayed due to the failure on the part of the SLPA’s state bank to provide the required financing. The shocking revelation that the ECT hadn’t been expanded for five years after the completion of the 400 m stretch is evidence that successive governments failed public expectations. Lawmaker PCR emphasized the pivotal importance of revisiting the ECT project as the ground situation has changed. The MP reminded the SLPA and the COPE of the government’s admission of bankruptcy.

(5) Dispute over the SLPA’s stated profits. The SLPA challenged the Auditor General’s estimate that the state enterprise earned Rs 45 bn in 2021. The SLPA placed annual profits at Rs 62 bn. The COPE also made reference to the SAGT returning to the SLPA in 2019 and the government’s responsibility in that regard.

(6) The loss of revenue as well as foreign shippers’ faith in the SLPA as a result of the strike launched on June 10, 2020.

(7) Construction of Adani Group-led CWIT (Colombo West International Terminal). Comparison of the CICT and the SAGT workforce with that of the SLPA and the sharp difference in the number of the private sector workers and the SLPA. The SLPA seemed a law unto itself with the disclosure that the highly profitable venture operated to a certain extent outside the purview of the Management Services Department though the total number of employees remained well under the stipulated figure 9,900. The COPE stressed the need to ensure that the SLPA under any circumstances didn’t go beyond the stipulated number of workers. The current work force comprised 9,300.

(8) Rohitha Abeygunawardena who served as the Ports and Shipping Minister of President Gotabaya Rajapaksa till April 2020 raised the contentious issue of recruitment beyond the approved cadre. The lawmaker stressed the need to compare the private sector operations and that of the SLPA. The COPE was told that though the total approved cadre hadn’t been exceeded, recruitment has been carried out in an irregular and extremely shoddy manner.

(9) Big question mark over the transfer of just Rs. 600 mn out of 69,686 mn profits (2016-2021) period and the pathetic failure on the part of the Finance Ministry to address the issue.

(10) Absence of a cohesive and efficient system to charge CICT and SAGT for certain services rendered by the SLPA.

(11) Growing overtime Bill with 2021 recording a staggering Rs 5.8 bn in extra payments. Scandalous disclosure some workers earned overtime for 400 hours and unskilled work assistants numbering 1,500 continued to be a heavy burden.

(12) Controversy over so-called collective agreement that ensured salary increase every three years. The COPE stressed the need to have guidelines formulated by the Management Services Department to prevent exploitation of collective agreements as the process threatened financial stability.

The SLPA, in spite of being a profit making state enterprise, remains in an utterly chaotic situation. The SLPA hasn’t been a burden on the taxpayer though the national carrier SriLankan, the CEB and the CPC bled the country dry. But casual examination indicates regardless of the financial status a section of public servants continued to enjoy perks and privileges while the entire country suffered as a result of local and some external factors beyond Sri Lanka’s control.

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Midweek Review

The Bonhomie of the Ages

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By Lynn Ockersz

Ignoring aching hearts and limbs,

And unmindful of days passing,

The men slumped in their Tuk-Tuks,

Continue their lonesome vigil,

In queues snaking into the distance,

For those never-coming cans of fuel,

Promised by smooth-talking Sires,

That could help fetch a few more coppers,

And delay the onset of starvation,

But thanks to the age-old wisdom,

Handed to them by their humble elders,

The only inheritors of the pristine Dhamma,

The men are not bereft of compassion,

So much so, they share the frugal meals,

The Sweat of their Brows has yielded.

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Midweek Review

Economic meltdown

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S.R. Attygalle (extreme left) before COPFon June 08,2022. Ajith Nivard Cabraal, Dr.PBJ and Prof. W.D. Lakshman look on

House watchdog committees ascertain culpability of FM, Monetary Board

By Shamindra Ferdinando

The Committee on Public Finance (COPF), inquiring into financial meltdown recently, called several former and serving officials to ascertain their culpability as well as that of the institutions they served for the developing crisis.

Among them were former Governors of the Central Bank Prof. W.D. Lakshman (Dec 2019- Sept 2021), and Ajith Nivard Cabraal (Sept 2021-March 2022), Secretary to the President Dr. P.B. Jayasundera (Nov 2019-Dec 2021) and Treasury Secretary S.R. Attygalle (Nov 2019-April 2022), Sanjeeva Jayawardena P.C. (received appointment as a member of the Monetary Board in Feb 2020) and Dr. Ranee Jayamaha (the retired CB Deputy Governor received appointment to the Monetary Board in June 2020). It would be pertinent to mention that Attygalle earlier served a short stint as the Treasury Secretary (Ministry of Finance) between Oct. 31, 2018 and Dec. 18, 2018 during the constitutional coup staged by ex-President Maithripala Sirisena.

The term of office of an appointed member of the Monetary Board is six years and in the event of vacation of office by the appointed member, another person shall be appointed in his or her place to hold the office during the unexpired part of the term of office.

The COPF meeting took place on June 08. Dissident SLPP lawmaker Anura Priyadarshana Yapa chaired the meeting. CBSL Governor Dr. Nandalal Weerasinghe and Finance Secretary Mahinda Siriwardana, too, were present.

Attygalle didn’t mince his words when he squarely blamed the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister (Nov 2019 to July 2021) for the controversial fiscal policy that had ruined the country. Attygalle declared that the government implemented the first Cabinet paper, dated Dec 04, 2019 presented by Premier Mahinda Rajapaksa.

The former Treasury Secretary, who also served in the Monetary Board till April this year, challenged the widely held view that abolition of a range of taxes, in line with Mahinda Rajapaksa’s fiscal policies, triggered the crisis. Attygalle asserted that the import restrictions, especially the ban on the importation of vehicles imposed at the onset of the Covid-19 eruption, and the economic contraction, resulted in the meltdown.

The COPF should seek an explanation from Attygalle, himself a former top Central Banker, having last served there as Deputy Governor, regarding the failure on the part of the Finance Ministry and the Monetary Board to review the decision to abolish taxes soon after the Covid-19 eruption. The Finance Ministry banned vehicle imports in March 2020 as part of the overall measures to manage the weak foreign currency reserves. Therefore, the Finance Ministry and the Monetary Board cannot absolve themselves of the blame for failing to take remedial measures.

 The COPF specifically asked whether the Finance Ministry and the Monetary Board officials sought to advise the political leadership of the ground realities against taking such decisions. It emerged that they did nothing. The COPF proceedings revealed that in spite of a rapidly deteriorating financial situation, the Finance Ministry and Monetary Board mandarins failed to take remedial measures. The SLPP members in the COPF, too, should not forget that the change of tax policies had been in line with their 2019 presidential election manifesto ‘Vistas of Prosperity and Splendour’.

A disastrous manifesto

The SLPP made the following proposals:

a- Income tax on productive enterprises will be reduced from 28 to 18 percent.

b- The Economic Service Charge (ESC) and Withholding Tax (WHT) will be scrapped;

c- A simple value added tax of eight percent will be introduced, replacing both the current VAT of 15 percent and the Nation Building Tax (NBT) of two percent;

d- PAYE tax will be scrapped and personal income tax will be subject to a ceiling of 15 percent;

e- A five-year moratorium will be granted on taxes payable by agriculturists and small and medium enterprises;

f- Various taxes that contribute to the inefficiency, irregularities, corruption and lack of transparency of the tax system will be abandoned. Instead a special tax will be introduced for different categories of goods and services;

g- Import tariff on goods competing with domestically produced substitutes will be raised;

h- A simple taxation system will be introduced to cover annual vehicle registrations and charges for relevant annual services, replacing the cumbersome systems that prevail now;

i- Various taxes imposed on religious institutions will be scrapped;

j- A zero VAT scheme will be adopted in the case of businesses providing services to Tourist hotels and tourists, if they purchase over 60% of the food, raw materials, cloths and other consumer items locally;

k- Service charges levied on telephones and Internet will be reduced by 50%;

l- Special promotional schemes will be implemented to encourage foreign investments;

m- A tax-free package will be introduced to promote investment in identified subject areas;

n- A clear and uncomplicated system of taxing will be in place with the use of internet facilities, special software and other technological services;

O- Information Technology (IT) services will be totally free from taxes (Zero Tax), considering said industry as a major force in the national manufacturing process;

p- All the Sri Lankans and Foreigners, who bring Foreign exchange to Sri Lanka through consultancy services, are exempt from income tax.”

Dr. Athulasiri Kumara Samarakoon, Soosaiappu Neavis Morais and Dr. Mahim Mendis in a FR petition filed in terms of Articles 17 and 126 of the Constitution listed the above-mentioned points, in that order, as one of the primary reasons for the current crisis. Among the respondents are Prof. W.D. Lakshman, Ajith Nivard Cabraal, Dr. P.B. Jaysundera and S.R. Atygalle.

All of them earlier appeared before the COPF where the incumbent Governor of the Central Bank Dr. Nandalal Weerasinghe emphasized that officials should never engage in politics and should recognize the difference between them and politicians. Dr. Weerasinghe asserted that officials were duty bound to inform politicians if the decisions taken by the latter were wrong. The outspoken CBSL Chief declared that politicians alone shouldn’t be held accountable for the consequences of such wrong decisions. What Dr. Weerasinghe obviously meant was those who served in key positions at that time, too, were responsible for the current crisis. Dr. Weerasinghe, who had been asked to succeed Ajith Nivard Cabraal, in March, after the former suddenly announced his retirement, told the COPF, the officials’ claim that they had been unaware of the economy was on a wrong path for two years leading to the meltdown was not acceptable. Dr. Weerasinghe also strongly questioned the claim that economic policies had been implemented only on decisions taken by the political leadership.

Lawmakers present participating in the proceedings declared that the political leadership and the officials ignored their concerns as regards the economy raised at different occasions.

Culprits identified

CBSL Governor Dr. Nandalal Weerasinghe before COPE on May 25, 2022. Finance Secretary Mahinda Siriwardana is on Dr. Weerasinghe’s right.

The COPF proceedings should be studied along with revelations made by Dr. Weerasinghe before the COPF and the COPE (Committee on Public Enterprises) on May 24 and May 25, respectively as well as lawmaker Ali Sabry’s shocking declaration on May 02 as regards the origins of the crisis. President’s Counsel Sabry discussed the issue in his capacity as the Finance Minister after having led the government delegation for talks with the IMF.

Appearing before the COPF, Dr. Weerasinghe disclosed that those who had been responsible for preparing budget estimates over the years deliberately deceived even the Parliament by providing unrealistic and inaccurate revenue estimates. The CB Governor explained how such practices further weakened the economy as decisions and allocations were made on the basis of fraudulent estimates.

The whole process had been nothing but a farce. Lawmaker Sabry on May 02 in a live interview with Swarnawahini, and Dr. Weerasinghe on May 25, named those responsible for the current crisis that has ruined the economy with unemployment at an unprecedented high. Sabry alleged that the Secretary to the Treasury, Governor of the Central Bank, and senior economic advisors to the President, misled the Cabinet as regards the economic situation. The National List member revealed how they repeatedly assured that the situation was well under control, in spite of difficulties while expressing confidence that issues could be successfully dealt with.

By the time the Central Bank floated the rupee in March this year even without bothering to inform the Cabinet-of-Ministers of its decision, irreparable damage had already been caused, Sabry said.

The COPF and COPE proceedings and MP Sabry’s interview in which he questioned the role of the Finance Minister have revealed the pathetic situation as regards public finance.

The MP has alleged that those who managed the national economy had prevented the country seeking IMF’s intervention well over a year back. Had President Gotabaya Rajapaksa and the Cabinet-of-Ministers received proper advice, Sri Lanka would not have been in the current predicament, Minister Sabry said.

Dr. Weerasinghe named those who refused to heed IMF warnings when he appeared before COPE on May 25. The role played by Mahinda Rajapaksa, Dr. P.B. Jayasundera and the Cabinet-of-Ministers were discussed during the proceedings with Finance Secretary Mahinda Siriwardana, too, helping to ascertain the environment in which the SLPP leadership operated.

Dr. Weerasinghe went to the extent of naming Dr. PBJ as the one who prevented the government seeking IMF’s intervention.

The Customs, Inland Revenue and the Excise Department responsible for revenue collection are run in a shoddy manner. In spite of the watchdog committees exposing glaring omissions and commissions by them that had caused revenue losses in billions of Rupees over the years, the political leadership hasn’t taken remedial measures. Committee reports paint an extremely bleak picture.

But what could be the most unforgivable sin is then Finance Minister Basil Rajapaksa joking about having himself used the illegal Havala/Undiyal system that completely shut down  several billion dollars that should have legitimately come to Sri Lanka as in past years as remittances from our migratory workers, especially serving in West Asia. Even at the height of the COVID pandemic the country received about six to seven billion dollars from mainly those unappreciated poor Lankan workers slaving in those countries as mainly labourers and housemaids. Such money may not be enough to pay back the country’s USD 50 billion foreign debt. That money, however, would have ensured that the country had the few million dollars to clear a shipment of gas or other necessities, instead of having to beg all over the world.

Unfortunately, the Parliament seems incapable of taking corrective measures. The Parliament should explore the possibility of appointing, a smaller team, comprising members of COPE, COPF and the COPA (Committee on Public Accounts) to recommend remedial measures, including possible criminal prosecution of dual citizen Basil Rajapaksa for his many omissions and commissions, but especially for not applying the full weight of the law against those running the underground money transfer system, that has even robbed the education of our children.

 Keeping the currency steady is the wish of any Finance Minister as otherwise in a country like Sri Lanka dependent on imports for many of its essentials, like milk food, wheat, etc., it would result in basics skyrocketing in price as experienced now and as former Finance Minister Ronnie de Mel also learnt it the hard way after allowing the rupee to devalue almost overnight by over 40 percent in the aftermath of opening up the economy to market forces after the victory of the UNP in 1977 with a staggering 4/5th majority in Parliament. It led to government workers staging a general strike demanding a Rs 10 wage increase, but was ruthlessly crushed by that regime.

A corrupt ministry

The Parliament needs to take tangible measures to restore public faith in the system. The Finance Ministry should be overhauled. Perhaps, the IMF, currently engaged in negotiations with the government, should look into the current system in place. The government can formulate an action plan on the basis of findings and recommendations made by the parliamentary watchdog committees. Perusal of proceedings of these committees reveals that the government hadn’t acted on their findings. The inordinate delay in taking action regarding the mysterious decision to reduce the duty on a kilo of white sugar from Rs 50 to 25 cents on Oct 13, 2020 without passing on its benefit to the people is a case in point as pointed out by the COPF Chairman Anura Priyadarshana Yapa, MP. It, however, cost the cash starved Treasury dearly in billions in lost revenue.

Mahinda Rajapaksa served as the Finance Minister at the time of the issuance of the relevant gazette notification. S.R. Attygalle had been the Finance Secretary. It would be pertinent to ask both MP Mahinda Rajapaksa and Attygalle who recommended the duty reduction.

Actually, the COPF should ask Attygalle to explain the circumstances leading to the issuance of that controversial gazette. As Dr. Weerasinghe pointed out recently the officials cannot absolve themselves of the responsibility for the highly questionable decisions taken by politicians.

Who benefited from the reduction of duty imposed on sugar? In fact, the parliamentary watchdog committees should undertake a comprehensive study. Perhaps, the Finance Ministry role in the Yugadanavi deal can be investigated. Sri Lanka finalized the Yugadanavi transaction with US based New Fortress Energy at midnight on Sept 17, 2021 against the backdrop of Basil Rajapaksa receiving the finance portfolio. The government also brought in retired controversial figure M.M.C. Ferdinando from Australia to assume the leadership at the CEB before making the final move. S.R. Attygalle played a critical role as the Secretary to the Finance Ministry. The SLPP had no qualms in going ahead with the agreement in spite of Vasudeva Nanayakkara, Wimal Weerawansa and Udaya Gammanpila challenging the transfer of 40 percent shares of the power station held by the Treasury among other concessions not fully revealed to the public.

The President’s Media Division (PMD) defended the agreement with the US energy firm. On the invitation of the then Presidential Spokesperson Kingsley Ratnayake, M.M.C. Ferdinando briefed the media of the usefulness of the US investment. It would be pertinent to mention that Ferdinando, who fled the country in the wake of Maithripala Sirisena’s triumph in 2015 returned from Australia after the change of government in Nov 2019. Ferdinando’s 2015, move should be examined against the backdrop of corruption accusations directed at him by civil society activists Rajith Keerthi Tennakoon and Attorney-at-Law Namal Rajapaksa. The lawyer lodged a complaint with the then anti-Corruption Committee Secretariat. There had also been a case in the Fort Magistrate Court regarding the import of coal for Lakvijaya coal-fired power plants at Norochcholai.

In spite of initial public interest, such major cases are often not pursued properly even by those initiating them possibly with ulterior motives. When The Island inquired, lawyer Namal Rajapaksa acknowledged not being aware of the developments of his own case. At the time of the Norochcholai project, Ferdinando had served as the Secretary to the Power Ministry. The unholy alliance between the Finance Ministry and monstrous institutions, such as the CEB, should be investigated and mechanism put in place to protect the public interest.

The controversy over President Gotabaya Rajapaksa’s alleged intervention on behalf of India’s Adani Group at PM Narendra Modi’s persistent request led to Ferdinando’s resignation recently. The disclosure made by Ferdinando at the COPE, his subsequent denial and a letter dated Nov 25, 2021 Ferdinando wrote to the then Treasury Secretary Attygalle exposing the horrific way business of the State is being conducted. Accountability and transparency seem to be the last thing in the minds of political leaders here.

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