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Challenges in meeting President’s target

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Development of renewable energy projects II –

By Dr Janaka Ratnasiri

The comments made by the President at the meeting he had on 15.12.2020 to discuss the development of renewable energy (RE) projects were highlighted in recent media reports, as described in the writer’s earlier write-up which appeared in The Island of 28.12.2020 under the same heading. However, there was no reference in these reports to any feedback that would have been made by officials present. The purpose of this write-up is to discuss likely issues that would have been of concern to institution officials and the challenges they may have to face in meeting the President’s target.

 

FEARS OF DESTABILIZING THE SYSTEM

The first challenge is to change the mindset of professionals concerned. Energy experts both within the Ceylon Electricity Board (CEB) and outside have been saying for years that connecting too many of RE plants such as wind and solar power systems to the grid will cause its destabilization, not being able to maintain the voltage and the frequency within permitted limits. The output of these RE supplies keep fluctuating momentarily, hourly and diurnally and the problem is how to balance the supply and load under such dynamic conditions. It was also said that excess harmonics generated during conversion of direct current (DC) output from solar systems or from DC wind turbines into alternating current (AC) for feeding into the grid could degrade the quality of the supply.

According to a website on RE systems, “Impacts caused by high penetration levels of intermittent renewable distributed generation can be complex and severe and may include voltage increase, voltage fluctuation, interaction with voltage regulation and control equipment, reverse power flows, temporary overvoltage, power quality and protection concerns, and current and voltage unbalance, among others. The uncertainty and intermittency of wind and solar generation are major complications that must be addressed before the full potential of these renewables can be reached”. These challenges require advanced control strategies to solve the problems effectively.

 

PROBLEMS ASSOCIATED WITH RENEWABLE ENERGY SYSTEMS

One problem associated with RE systems is that they are not considered dispatchable, which means that their output is not available as and when necessary, unlike in the case of thermal power plants. Wind power output is available only when wind blows which keeps changing in a stochastic manner hourly, diurnally and seasonally. In Sri Lanka, wind is generally strong during the second half of the year than in the first half. In the case of solar panels, their output is available only during the daytime peaking at noon and declining with the increasing solar angle. Even during daytime, the output would drop if there is cloud cover or rainfall. If there is extended periods of bad weather, a consumer has to depend on some back-up power.

According to the CEB Chairman’s Review given in its 2018 Annual Report, “a study on Integration of Renewable Based Generation into Sri Lankan Grid 2020-2030 was conducted during the year (2018) with the objective of investigating the main challenges faced in renewable energy-based generation and determining the optimum level of renewable energy generation”. However, there is no report of this study available in the CEB’s website.

 

STORAGE SYSTEMS FOR RENEWABLE ENERGY PLANTS

In order to make use of solar energy that is generated during the day, at night time, it is necessary to store the electricity by suitable means. This also applies to wind energy to even out the fluctuating output into a steady output. If the system is connected to the grid, energy generated by solar systems during the day or by wind systems when the wind blows can be fed into the grid and the grid provides the electricity to the consumer during night time or when there is no wind blowing. Hence, there is no need for a separate storage facility with grid-connected systems.

For large scale solar systems, one method of storage is to make use of exiting hydro power reservoirs by saving the water which would have been used for generating an equivalent amount of energy generated by solar panels during the day, and using the water saved during night time. This does not require any additional expenditure on building extra facilities. Another is to build pump-storage facilities comprising two sets of reservoirs at two elevations connected via a penstock with a generator/pump system at the bottom. Already one such system is being planned at Aranayaka.

Any surplus energy generated during the day from solar panels or when wind blows is made use of to pump water from the lower reservoir to the upper reservoir. At night time or when there is no wind, the pumped water is allowed to flow down the penstock driving the pump in the reverse mode to generate electricity. In the West, such pump-storage systems have been used for many decades for peaking purposes. One good example is the system installed at the Niagara Falls.

 

HYDROGEN SYSTEMS FOR STORAGE

Another method available is to feed the solar panel output to a set of electrolyzers, which are available commercially today, to generate hydrogen by splitting water. Hydrogen generated is stored and fed to a bank of fuel-cells to generate electricity in the form of direct current (DC) and later inverted to AC. After filtering out harmonics, this steady output is fed to the grid as and when necessary, day or night, using the stored hydrogen which makes it dispatchable. Each solar or wind or hybrid energy park that is being planned could be supplemented by such hydrogen storage system accompanied by a bank of fuel cells, enabling the output from these RE parks dispatchable.

There is much interest among developed countries to develop hydrogen energy systems. European Union has set out plans which could require up to € 470 billion (USD 570 billion) of investment in green hydrogen by 2050. Germany alone is targeting 5,000 MW of electrolysis capacity by 2030. Japan, a front-runner along with South Korea, is looking to sharply increase a target to import 300,000 tonnes a year of hydrogen in 2030. U.S. President Joe Biden wants to fund research into technology, including large-scale electrolyzers, to help make green hydrogen costs match conventional hydrogen within a decade. (https://energy.economictimes.indiatimes.com/news/renewable/explainer-why-green-hydrogen-is-finally-getting-its-day-in-the-sun/79672523).

 

PROPOSAL FOR ROOF-TOP SOLAR INSTALLATIONS

The 2021 Budget Speech states that a capacity of 500 MW will be added to the grid, by providing solar panels each generating 5 kW, to 100,000 houses of low-income families. At the meeting the President had on 15.12.2020 with the two Ministers and Ministry officials, he has said that the Government would bear the cost of LKR. 800,000 per house for installing solar cell panels under this project. This means the expenditure on this project will be about LKR 80 billion. The question arises who will be responsible for implementing this project? The SLSEA Act grants powers to it for “entertainment of applications for carrying on of on-grid and off-grid renewable energy projects”. It also has powers for “the development of guidelines on renewable energy projects and disseminating them among prospective investors”. Hence, the SLSEA may be assigned the task of coordinating the project.

The purchase of 100,000 roof-top panels and getting them installed is a challenge by itself. There is a large number of local companies, numbering about 200, involved in supplying and installing roof-top solar panels. The government should call for expressions of interest (EOI) from these companies to undertake this assignment requesting information on their track record and proof of their ability and competency. Next, bids need to be invited from selected companies after announcing detailed specifications for the panels.

It is important to specify in the bid document itself the limiting values for key parameters with tolerances that need to be met by the panel offered, without just saying that panels offered should conform to international standards, as normally done by the CEB. The evaluation of the bids would be much simpler and faster then. It is best if the supply is distributed among as many vendors as possible, after agreeing on a fixed price, to expedite the implementation of the project and avoid complaints from unsuccessful bidders.

 

POOR PLANNING FOR RENEWABLE ENERGY PROJECTS

Though the Cabinet of Ministers since 2016 has been taking decisions to introduce RE projects including solar power systems at both domestic level and utility scale, their follow up by the two implementing agencies, viz. SLSEA and the CEB has been rather slow, possibly due to divided responsibility. According to the SLSEA Act, any RE project needs the approval of the SLSEA before commencing any work.

The Electricity Act also requires accepting projects selected only after calling for tenders except those recommended by the SLSEA. The misinterpretation of the Electricity has resulted in projects recommended by the SLSEA getting held up by the CEB for extended periods. The CEB’s draft LTGE Plan for 2020-39 prepared in May 2019, plans to add only 165 MW of mini-hydro systems, 555 MW of wind systems, 880 MW of solar systems and 55 MW of biomass systems up to 2030. Even the SLSEA has failed to come out with a plan to develop RE systems in an optimal manner as highlighted in the Writer’s article in the Island of 28.12.2020.

This is despite the fact that the previous Cabinet decisions had wanted about 2,000 MW of solar power added within a shorter time frame, comprising 1000 MW of roof-top systems and 1000 MW of utility systems. As mentioned in the previous article, even the SLSEA has failed to come up with a plan to develop RE systems though it is a requirement given in its Act. So, another challenge is to get the CEB and SLSEA to enhance their plans for RE generation and fall in line with the Government policy. If they do not comply, the solution is not closing down of the PUCSL as highlighted in writer’s article in The Island of 25.12.2020. (See https://island.lk/cabinet-discussion-on-public-utilities-commission/)

 

INCOMPATIBILITY OF NEW COAL POWER PLANTS WITH INCREASED RE SHARE

One problem possibly encountered in increasing the RE share is the incorporation of several new coal power plants in the system by 2030. This increases the share of fossil fuel share leaving only a small fraction to be filled by RE systems. For example, the draft Plan for 2020-39 shows the demand in 2030 as 31,740 GWh, out of which 20,640 GWh (65%) will be from fossil fuels and 11,100 GWh (35%) from RE sources. Out of the 20,640 GWh expected from fossil fuel plants, 7,721 GWh (24%) will be from the two new coal power plants to be built at Norochcholai (600 MW) and Trincomalee (300 MW). Another 4,781 GWh (15%) will be from the existing coal power plant at Norochcholai.

This means by 2030, 12,502 GWh (39%) of the demand will be met from coal while another 8,140 GWh (26%) will be from oil or jointly 20,640 GWh (65%) from fossil fuels. If 70% of total demand is to be met from renewables, then only 30% could be generated from fossil fuels. This means that the RE contribution has to be 48,160 GWh if the fossil fuel contribution is to be maintained at 20,640 GWh, making the total supply to be 68,800 GWh, which is more than double the forecasted demand in 2030. In order to make achieving of 70% share from RE sources feasible, it is therefore imperative to limit the fossil fuel contribution to 9,520 GWh in order to maintain the total supply at 31,740 GWh.

The easiest way to achieve this target is to stop building the two new coal power plants at Norochcholai and at Trincomalee, and retire the 20-year-old existing coal plant at Norochcholai. Hence, building new coal power plants is not compatible with President’s target on RE share of 70% in electricity generation. The President should therefore give a clear directive to CEB to discontinue planning of new coal power plants disregarding what its Unions say.

It is reported in the media that a former Army Officer has been appointed as Vice-Chairman of CEB to help CEB “to achieve President Gotabaya Rajapaksa’s of goal promoting renewable energy and providing electricity at a minimal cost” (Island of 22.12.2020). Perhaps the new Vice-Chairman will keep those within CEB who oppose President’s move at bay, including the trade unions.

 

IMPROVING RESEARCH CAPABILITY OF CEB

According to the CEB Act of 1969, CEB has powers to conduct research into matters affecting the generation, distribution, transmission, supply and use of electricity (Article 12h). However, CEB’s Annual Reports do not refer to any research being done within the CEB. Students in the Physical Science stream having the highest scores at GCE (A level) examination get admitted to engineering courses and those who follow electrical engineering ending up in institutions like CEB.

It is a pity that the CEB management does not make use of this talented graduates to undertake research to seek solutions to such problems such as integrating RE systems into the grid, develop new storage systems and to provide other research and development support for RE systems. In 2019, the CEB has spent about LKR 97 Billion on importing fuel for thermal power plants (SD 2019).

With the introduction of large scale RE systems, part of this expenditure could be saved which could be utilized to set up a Research and Development (R&D) Division in CEB as provided for in its Act.

Perhaps, a senior academic with research experience in RE systems could be invited to set up the R&D Division and provide him with a team of young engineers comprising both electrical and ICT engineers with aptitude for research to undertake studies on how to make the grid smart as described above.

 

THE WAY FORWARD

 

If the full potential of the country’s RE resources is exploited, it will be possible to achieve the entire electricity generation from RE sources. It will also save hundreds of Billions of Rupees annually on importing fuel required for operating thermal power plants. However, there are many problems to surmount before this could be achieved. Among these are the following:

a. Change the mindset of senior officials controlling the power sector that changing from fossil fuels to RE sources to meet the base load requirements is technically feasible.

b. Discontinue building new coal power plants and retire the existing coal power plant by 2030 as their presence will exceed the 30% share from fossil fuels.

c. Introduce mechanisms for energy storage at utility scale through utilizing existing hydro power reservoirs or building pump-storage systems or adding large batteries or adding electrolyzer-fuel cell systems which are commercially available now.

d. Set up a R&D Division within CEB to seek solutions for problems associated with integration of utility scale RE systems into the grid.

e. Entertain investors directly for RE projects on build, own, operate and transfer (BOOT) basis by providing efficient, clear and transparent mechanism for accepting proposals and guaranteeing security of their investments.

f. Publish a set of guidelines prepared jointly by SLSEA, CEB and PUCSL for accepting and approving candidate RE projects proposed by investors on BOOT basis.

CONCLUSION

It is important for decision makers to take a wholistic view of the power sector in the country and take evidence-based decisions rather than taking a piecemeal approach. It is not possible to build more coal power plants on one hand and fix targets for increased RE share on the other. While the President wants more renewable energy projects, the Ministry and CEB want more coal power plants. The President should decide on his priorities. If his priority is to have more renewable energy share by 2030, then he should get CEB to give up building more coal power plants. He cannot have both. It is his biggest challenge.



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A Policy Science Analysis

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President’s Gama Samaga Pilisandarak

By Dr D. Chandraratna

Trying to place President’s Gama Samaga Pilisandarak (PGSP) in a scientific perspective of public policy making is timely. One of the stated objectives of the Presidents election manifesto, ‘Vistas of Prosperity’ is to create a village-centered development of our predominantly agriculture-based rural economy. The President has pledged to achieve a four-fold objective: a productive citizen, a happy family, a virtuous, disciplined and just society and ultimately a prosperous country. A laudable project worthy of comment and analysis.

President Rajapaksa believes that to achieve this broad objective, he must clearly identify the problems faced by the rural population, which constitutes about 70% of the population in Sri Lanka. It is well known that people in rural areas have suffered for far too long as national development goals are stymied. Given the fact Sri Lanka has an executive presidential system of government it must be understood that decisions that the executive President makes supersede all other decision centres. It is no secret however, that political decisions are tied up with ideology, party politics, group interests, vote banks and the survival of regimes. But in this paper we will leave the ideology and rhetoric aside and examine only the facts, evidence, ends and means only.

Ideal methods of policy making; the end points of a continuum

At the outset it is necessary to contextualise the exercise within the science of policy making in public affairs. Policies are a web of executive decisions made to overcome problems that people in society face in their day-to-day lives. These can be arranged on a continuum from the complex to the simple. At the complex end lies the oldest model, based on the theory of decisions expounded by the management guru Herbert Simon; it is called the Root Method or Comprehensive Rational model, where policy decisions are made after a laborious weighing of all alternative courses in terms of optimum results, costs, and many other value positions. Obviously, this is absolutely necessary in national issues and problems which consume a vast amount of national resources and are costly in nature. Infrastructure projects such as transport systems, communication systems, river and waterways, energy supplies etc., fit in with the comprehensive method of policy making. Governments issue white papers and appoint commissions, task forces and professional consultant bodies before such are undertaken because of the vastness in costs and liabilities. The most important fact is that the country as a whole must realise the value and necessity of such vital state projects. In Sri Lanka, it is a matter of regret that some costly projects such as the Mattala airport and the Hambantota Port have come under criticism because the national implications have not been professionally argued. The author is of the view that both were valuable projects in their own right and if only the relevant Ministry at the time had followed though the correct professional procedure in public policy-making, the projects may have had a different outcome.

In other countries, projects of that magnitude go though extensive weighing of alternatives, open professional debates and university research centres arguing about costs, benefits and opportunity costs of the nation’s limited resources. Science has to be put before ideology because haphazard interventions in national policy or grids or systems can be deleterious.

The opposite method at the other end is called incremental policy making, for as the name suggests it is limited in scope and applicable to small time projects with little or limited national implications. These appear solutions to residual ills, minor dysfunctions of national policies, which need remedial outcomes. Hence, such measures are called disjointed, piecemeal and also having incremental outcomes, benefitting a few at the margins. The fact that they are disjointed invites numerous criticisms. But their positives will be explored first.

This is the method of policy making that the President has taken up as a speedy solution to the numerous problems faced by the rural peasantry in Sri Lanka and his entourage has selected the most backward of villages as the points to touch on.

In fairness to the President, it must be stated at the outset that we do not consider this as a ploy on the part of the President to escape the political overload that he has inherited from years gone past. Ever since the gradual dissipation of efforts by governments since Independence, to kick-start the village economy as the mainstay of the national development strategy, the dividends have been sub-optimal. The colonisation schemes, village expansion schemes, financial assistance to tenants were only partially successful. We do remember the 10-year plans, five-year plans, Operations rooms, Planning Ministries but the results have been poor. The President will succeed to the extent that his advisors keep him informed of the successes, and especially failures of the efforts in the past. The President’s officials must not be a bunch of ‘yes men’ leading the President up the garden path.

Transparency in respect of both means and ends is the path to success. People are not unaware of the fact that politicians are in the habit of recommending such incremental stop-gap policies as a way out to avoid political embarrassment, hoping for a temporary respite. Bottom-up policy making has its positives but its limits and usefulness must be properly grasped.

President’s Gama Samaga Pilisandarak –– the context

Before we evaluate what the President has so far addressed, we must note the following facts about our broad policy field. Sri Lanka has nine provinces, 25 districts, 318 divisions and 14,022 Grama Niladari areas or villages. The country, consisting of 14,022 villages, is demarcated into 196 electorates. For 196 electorates there are 225 Members of Parliament to advance the welfare of all 14022 villages. Given the electoral system these members of Parliament represent not electorates, but districts. They are elected on the proportional representation system of voting. Hence no one at the Centre is responsible, theoretically at least, for any of the problems in any particular village.

Having identified that the PGSP is located at the incremental end of public policymaking we need to put it in an analytical perspective.

 

It is fair to surmise thus far the President has in his encounters identified and sometimes attended to some of the following major issues identified by the President inter alia: shortage of lands and water for agriculture and houses, unavailability of deeds for lands, inadequate health and transportation facilities, shortages affecting school and other educational issues, inaccessibility to drinking water, elephant-human conflicts and difficulties in marketing.

We are also aware that around 30 precent of the total households in rural societies in Sri Lanka live below the poverty line. Moreover, nutrition surveys conducted in the recent reveal a high prevalence of malnutrition among those in rural areas, which may have been caused by chronic poverty.

There are particular issues in some villages, which we will leave out in this paper.

The Analysis: Plusses and Minuses

I will use a famous textbook in policy making by Hogg and Gunn (1984) to follow through with the Presidential initiative. Let us start with the positives of the PGSP.

This move in the President’s opinion is for the top policy maker to ascertain the real situation in the village, which any text will title as an issue search. The pertinent question to ask is why these concerns do not come up on any agenda paper. Basically, it may be that those affected have no voice because organised interest groups with power and influence drive the issues that get priority. In a poor country, this should come as no surprise. The electronic media of late have had a number of programmes as an agenda-setting exercise with limited success but their main objective was to embarrass the local politicians and bureaucrats. The president also has an interest in attending to their immediate concerns before they could intensify in the future creating more headaches for him. Seeing the problem first hand gives the first policy maker in the country a view of the issue plus the complexities and need for ameliorative action.

The other positive from the perspective of the villager is the immediacy of solution, as resources can be mustered straight away by the President, which otherwise takes long years noting the plethora of departments and other bodies that are involved.

Sri Lanka is one of the highly bureaucratised countries with a public service ‘surplus to requirements’ and running the gauntlet is beyond the capacity of villagers. For example, to regularise a land permit, I was told by a one-time Land Commissioner, one has to have approvals from 23 odd government and semi government organisations. Things are unbelievably complicated by the number of authorising bodies. It took me 12 years after occupation to obtain the deed to my apartment from a government department in Colombo, and that too after two costly court cases. Bureaucratic corruption and inefficiency! Let us not talk about it. No wonder that the people awaiting the arrival of the President were sadly disappointed last week by the cancellation of his visit at the last minute.

In this bottom-up policy initiative there are many pitfalls that we can list straightaway. The President can visit only a few villages and those that are neglected can be politically ‘not with him’. Secondly, the problems are the same in most villages and it will be pointless wasting the time of the President because he will reach the saturation point very soon. He will realise that there are better and efficient mechanisms, given the resources, which can attend to these problems. What the information tells the President is that the issues, being common to many of the fourteen thousand villages are crying out for a national plan of action. Hence we wonder whether it is it the enormity of the issues that strained the limits of those who had power before, causing this neglect? Was it lack of insight, proper understanding, ministerial inexperience or the fear of realising the complexity of the interrelationships between issues or sheer lack of resources that caused this oversight?

The President cannot visit all villages and the solutions he instantaneously gives can be counterproductive. The furore over the environment and forests is a classic case where the Presidents instant solutions have become the weapon in the hands of an environmentally conscious middle class youth on whose bandwagon the opponents of the government are taking a joy ride.

The President will face similar catch-22 situations, which adversely affect his popularity. Incremental policies at the margins by themselves do not achieve much.

Conclusion

Sri Lanka failed in the bottom-up policy development due to many reasons and I can only highlight briefly a few for lack of space. The inefficient and lethargic conduct of the public institutions, the way our peoples representatives are elected without responsibility for particular localities, over 8000 politicians, the haphazard manner in which ministries are created for politicians (Foreign Affairs coupled with Lotteries!), the total lack of coordination between departments, the corruption of public officials, the inability of law to punish those who flout the law, the misuse of power and influence, the non-use or decay of coordination mechanisms such as Divisional, District and Provincial coordinating committees, and the lack of nexus between Provincial Councils and local authorities and many more. The political solution proposed by way of Provincial Councils has become a dead weight. Generally, we are an over governed society and as such the use of modern scientific management for policy implementation is non-existent.

An article appeared in your paper the other day by our colleague Ranjith Soysa from Australia about the successes of China in eradicating poverty in a matter of decades by comprehensive social policy planning which Sri Lanka can learn from. A white paper on poverty alleviation, which outlines the success of policies implemented, the methods employed and her desire to share the unique social experiment with other developing countries was mentioned therein. ‘Sri Lanka should make use of this opportunity to study the programme and follow its guidelines if a national comprehensive policy is to be implemented.

China achieved the largest scale battle against extreme poverty, as 98.99 million people had been lifted out of absolute poverty––a miracle in human history. But China achieves success because it is a planned centrally and the ideology is driven with strict, rigidly enforced rules, but whether we, being overly democratic, can enforce such discipline in a country noted for a poor work ethic is any one’s guess.

References

Hogwood,B.W & L.A.Gunn (1984) Policy Analysis for the Real World, Oxford, Oxford University Press.

D.Chandraratna, Making Social Policy in Modern Sri Lanka (2003), Vijitha Yapa, Colombo.

 

 

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Colombo port city economic commission bill 2021

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“Poorly drafted statutes are a burden on the entire State. Judges struggle to interpret and apply them. Attorneys find it difficult to base any sure advice upon them and the citizens desire to conform to them is confused. At times, totally unforeseen results are seen… On many occasions, defects lead to litigation.”

J. Menard, Legislative Counsel.USA

The Draft Bill, titled Colombo Port City Economic Commission Act 2021, is an important piece of legislation. It can be described as a game-changer for Sri Lanka. It is the biggest foreign investment received by Sri Lanka and it can lead to a success story as in many other countries. At this stage, review of the Draft Bill is of paramount importance, as it constitutes a marketing tool along with the Master-Plan prepared by the Chinese Harbour Company Ltd.

Unfortunately, this Draft Bill was not subject to pre-parliamentary review by our professional organisations and the epistemic community. In modern times, there is a constitutional practice in Commonwealth countries to consult the stakeholders, professional bodies and the epistemic community in regard to important legislation. The Advisory Council, appointed to draft the Securities Exchange Commission Bill 2019, under Dr. Kanag Iswaran, of which I was the Drafting Consultant, decided to involve the stakeholders and those interested in the subject matter by providing them with an exposure draft. It was a very useful exercise to clarify any ambiguities, inconsistencies and grey areas which can create problems in the implementation process.

Before I deal with the review of the draft Bill, I would like to provide a global perspective on legislation relating to port cities and special economic zones.

 

GLOBAL PERSPECTIVE

Legislation relating to port cities and special economic zones differ from one jurisdiction to another. There is no uniformity in such legislation, as “one size does not fit all”.

In Latin America and the Caribbean, special economic zones or offshore financial centres have grown piece-meal over a period of time to meet the needs and demands of the international business community. At the early stage, these countries enacted International Business Companies Act with no-tax or low-tax regime. Later on, they developed offshore banking, offshore trusts, offshore captive insurance and many other products and services to satisfy the needs and demands of high net-worth individuals and corporate clients.

Bahamas Offshore Banks and Trusts Act and the BVI Offshore Companies Act stand out as success stories. Likewise, Panama has registered several offshore shipping companies and provided them with the Panamanian flag to sail around the world. Antigua and Barbuda introduced internet gambling and it was challenged by the USA, but they won the case at the WTO.

In Europe, similar developments took place in Switzerland, Ireland, Jersey, Isle of Man and Cyprus. These countries and territories have made many innovations to attract foreign investments by registering international business companies and later on by introducing various products and services. Switzerland is known for bank secrecy.

In the Middle East, new legislation was enacted to start on a clean slate. Both in Qatar and Dubai, they were confined to one piece of legislation and managed by Qatar Financial Services Authority and Dubai Financial Services Authority respectively according to regulatory policy and the law. It is very different from the way the English-speaking Common Law countries operate Special Economic Zones.

In Labuan (Malaysia), Dr. Mahatir Mohammed established the Labuan Offshore Financial Authority and introduced lengthy legislation on offshore banking, offshore trusts, offshore insurance, offshore partnerships, etc., so that they are guided by law and not by policy. It has proved to be a roaring success with the participation of a very few but very rich clientele.

In Sri Lanka, the Draft Bill provides the legal and regulatory framework to attract investments to develop the infrastructure of the Port City and also provide offshore products and services to the international business community. This legal framework is one of its kind and conceptually sound, as its scope and content can be expanded by the Economic Commission by way of Regulations, Rules, Orders and By-Laws. Hence, Sri Lanka has adopted the legislative technique of shorter Parliamentary Act and longer Executive Regulations in drafting complex legislation, as advocated by Justice Crabbe at CALC meeting in Ocho Rios, Jamaica (1986).

On reading the draft Bill, I find that there are few gaps and problems relating to legislative drafting. Hence, I wish to say something about legislative drafting before I undertake a constructive review of the draft Bill for the sake of our children and grandchildren.

 

LEGISLATIVE DRAFTING

 

Legislative Drafting is a form of communication very different to any other form of writing. It has no excess words and no repetitions. It must have clarity and simplicity, so that it could be understood clearly by stakeholders, statute users and investors.

Lord Thring, former First Parliamentary Counsel of the UK, said about 150 years ago that legislation must be drafted in the same way as razors are made to sell. Hence, legislation should be marketable, effective and efficient to achieve the objectives enumerated therein. On this basis, I will now proceed to suggest a few changes to make the draft Bill more attractive to investors and reduce ambiguities, lacunae and grey areas in the capacity of a Legislative Draftsman with 40 years standing in many Commonwealth countries.

 

REVIEW OF THE DRAFT BILL

(a) Long Title

The long title is too long. It must be clear and concise to capture the broad scope and content of the draft Bill. I humbly suggest the following long title.

AN ACT

to make the Colombo Port City a Special Economic Zone; to establish and empower the Economic Commission to promote, manage, regulate and attract investments to the Colombo Port City by establishing a single window; to attract corporate clients and high net-worth individuals to establish offshore banks, offshore companies, residential condominium units, hospitals and any other product or service; to provide investors with incentives and tax exemptions; to establish International and National Dispute Resolution Centre within the Zone; and for matters connected therewith or incidental thereto.

(b) Preamble

The preamble to the Draft Bill is not attractive and should illustrate Sri Lanka’s competitiveness by reference to her strategic position in the Indian Ocean. I humbly submit the following opening lines to the preamble.

WHEREAS

, Sri Lanka enjoys an enviable strategic advantage in the Indian Ocean as a gateway to West Asia, East Africa, Indian Sub-Continent and East Asia where the Chinese Belt and Road Initiative will impact on the Special Economic Zone along with the participation of other trading powers in this region and beyond …

(c)

Part II of the Draft Bill

Part II of the Draft Bill deals with objectives, powers, duties and functions of the Commission. It is an important part and should include a clause to ensure that the prime duty of the Commission is to prevent money laundering and inflow of terrorist financing.

Clause 5(b) should be deleted and be substituted by the following sub-clause, in order to avoid inconsistency with the Board of Investment Act –

(b) attract foreign direct investments to develop the infrastructure of the Port City with multiplier effect on the rest of the country.

It is useful to add immediately after paragraph (2) of clause 6, the following new paragraph (3), in order to allow local legal and accountancy firms in Sri Lanka to play a dynamic role as AGENTS in promoting investments in the Colombo Port City as in other Port Cities. The Offshore Directory provides a List of all agents operating in various jurisdictions. The draft Bill does not appear to provide an opportunity to our lawyers and accountants to play a dynamic role in promoting investments as agents and this should be expressly stated in paragraph(3)

(3) In the exercise, performance and discharge of its powers and duties and functions under sub-section (1), the Commission shall approve agents who may represent offshore companies, offshore banks and other investors at the Commission by being resident in Sri Lanka.

 

(d) Part III of the Draft Bill

Part III deals with the composition, administration and management of the affairs of the Commission. The Commission has exclusive responsibility in granting registration to offshore banks and companies. A question may arise whether the Commission could register an offshore bank, if the Monetary Board refuses to give a license or classifies the licence into class A, Class B and Class C Banks and impose certain conditions to protect investors as in other offshore financial centres.

The Commission needs to maintain a check-list of all black-listed investors with the assistance of other Special Economic Zones. Otherwise, criticisms will be mounted against the Commission.

The Commission needs to protect the reputation of the Colombo Port City. If something goes wrong, the Colombo Port City will not be a blessing but a curse. Hence, every endeavour should be made to prevent drug money or terrorist funds coming into the Colombo Port City in a devious manner. Such devious methods include numbered accounts and bearer shares. In this day and age, we cannot adopt the policy “Let the robber barons come”, as the international community will be watching us at every step as to how we handle our offshore business.

Lack of proper scrutiny of the investors may lead to a disaster. In Antigua and Barbuda, Robert Allen Stanford obtained a license to operate an offshore investment bank. He built several offices, condominiums and sponsored 20/20 Cricket Tournaments. Later on, he was convicted of a Ponzi scheme and was sentenced to imprisonment by an US Court for a period of 120 years. In 2015 when I visited Antigua, I was shocked to see that a part of the Financial Centre was like a Ghost City.

 

(e) Part V of the Draft Bill

Part V deals with the Director-General and the Staff of the Commission. There should be a provision in this Part to say that the Director-General and the Staff of the Commission shall be deemed to be public servants under the Bribery Act and the Penal Code.

 

(f) Part VII of the Draft Bill

Part VII deals with the registration of offshore companies. It is not something new to Sri Lanka. Offshore companies were introduced under the 1982 Companies Act, so that youth in Sri Lanka could be employed as seafarers in these offshore shipping companies. It was a dream of late Lalith Athulathmudali to register offshore shipping companies as in Panama and provide opportunities for our youth to be seafarers, marine engineers and pilots.

Offshore company registration under the Companies Act 1982 and the Companies Act 2007 failed for several reasons. The tax regime was not clearly laid down. The provisions relating to offshore companies were inadequate to deal with issues relating to offshore shipping. A provision should be included in this Part of the Draft Bill to make Regulations relating to offshore companies, especially offshore shipping companies, offshore trusts companies, offshore insurance companies, etc., if we were to develop this concept to its logical ends as a competitive destination in the offshore world.

The Economic Commission provides offshore companies with tax exemptions and fiscal incentives, case by case, and thereafter such exemptions and incentives will be submitted for Cabinet approval. Once approved, President will make an Order and it will be gazetted and be laid before Parliament. Hence, it is likely that mere brass plate offshore companies will not be able to operate in the Colombo Port City.

 

(g) Part VIII of the Draft Bill

Part VIII deals with offshore banking. The definition of “banking business” in the Draft Bill is too narrow, if we were to attract reputed banks to operate in the Colombo Port City. The definition should include Investment Banking and Islamic Banking. Regulations made under this Part are of paramount importance to avoid crisis situations. Regulations made under Clause 45 must deal with confidential relationships and bank secrecy. It is the hen that lays the golden egg, as secrecy is fundamental to attract offshore banking business.

On many occasions, law enforcement agencies of other countries may require documentation relating to bank accounts. Sometimes they will subpoena such bank officials when they enter their country. (See: USA vs Bank of Nova Scotia (1982). Hence, there should be a mechanism either in the Draft Bill or in the Regulations to deal with such requests by the Commission if there is a prima facie evidence against a particular bank or a personal account.

 

Constitutionality of the Draft Bill

 

The purpose of this article is not to deal with the constitutionality of the Draft Bill, as this matter is before the Supreme Court of Sri Lanka. The issues are likely to be very controversial but some claims relating to unconstitutionality are not justifiable and spurious. It is a different ball game as we are dealing with foreigners in regard to their offshore operations and therefore discrimination with nationals may not arise on reasonable differetia.

 

However, the failure on the part of government to provide the professional bodies an opportunity to review an important Draft Bill of this magnitude can be construed as a violation of the principles of participatory democratic process and the sovereignty of the people as enshrined in our Constitution. South African Constitutional Court in Doctors for Life vs Speaker (2006) invalidated an Act of Parliament as it failed to consult the professional bodies and the Court thereafter recommended to the Legislature to re-enact the same Act after consulting the relevant professional Bodies.

 

Concluding Remarks

Managing the Colombo Port City by the Economic Commission is an onerous task. The Draft Bill is only “the tip of the iceberg” and many regulations, rules, by-laws, etc,. need to be made to deal with offshore products and services, condominiums, time shares, stock-exchange and hospitals within its area of governance.

It is wrong, unfair and unpatriotic to say that this Draft Bill will convert the Port city into a Chinese colony.ri Lanka will welcome all countries from the East and West to establish international business companies, international banks, hospitals, condominiums, etc., in a strategic location, notwithstanding Rudyard Kipling’s saying “East is East, and West is West, and never the twain shall meet”.

Offshore business is competitive. The developed countries such as the UK and the USA have a “row” with the developing countries for initiating offshore financial centres, as they reduce their tax revenue from high net worth individuals and corporate entities. However, there is duplicity in this matter more severe than the “Geneva process”, as they encourage territories under their control to transfer money to the UK or the USA banks and stock exchanges and impose restrictions on those countries which do not transmit their deposits or invest in stock exchanges in the UK and the USA. Hence, we must be prepared to meet this challenge.

(The writer is a law graduate of the University of Ceylon and holds postgraduate qualifications from the University of Cambridge, UK. He served as UN Legal Expert, Legal Consultant and Legal Draftsman to many Asian, African and Caribbean Countries. He has drafted legislation relating to offshore products and services and handled legal issues on these matters in the Caribbean. Email: mendis_law@yahoo.com).

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900-year-old Buddhist monastery discovered in India’s Jharkhand state

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BY S VENKAT NARAYAN

Our Special Correspondent

NEW DELHI, April 18:

The Archaeological Survey of India (ASI) made a major discovery early this year. It found remains of a sprawling Buddhist monastery at least 900 years old, full of small and large statues of Buddhist deities in Bahoranpur village of Gurhet panchayat in Hazaribagh’s Sadar block in India’s Jharkhand state. There were also some Shaivite remains at the site.

The site, at the eastern side of Jharkhand’s Sitagraha hills, has been cordoned off by security personnel. Over the last several weeks, groups of people have been making their way to the site, about 12 kilometres outside Hazaribagh town, on foot or on bicycles.

Hazaribagh is 124km from Bodh Gaya in Bihar, where Gautama Buddha (567-487BC) had attained enlightenment at the age of 35 after 49 days of continuous meditation under the Bodhi Tree.

“Bhagwan ke darshan karne aaye hain,” (“I have come to see God”), said Prajapati, a skilled labourer trying to make his way to the site. He is hoping the excavation will continue for some time so he can perhaps find a job at the site.

Already, shops selling tea and sugarcane juice have come up at some distance from the site. Villagers claimed there are days when up to 5,000 people come to look at the statues.

Among the ASI’s discoveries are four statues of Taras, the “saviouresses” of the Thunderbolt Vehicle, displaying the Varada mudra, a hand gesture signifying the dispensing of boons. There are six statues of the Buddha in the Bhumisparsha mudra, with all five fingers of his right hand extended towards the earth, symbolising his enlightenment. Then there are remnants of a statue of the (Hindu) Shaivite goddess Maheswari, with a coiled crown and chakra, suggesting a degree of cultural assimilation at the site.

Assistant Archeologist Niraj Kumar Mishra of Excavator Branch III, Patna, said: “We had excavated this area in November 2019… Since January 31 this year, we focused on a mound near Juljul Pahar in the Sitagarhi hills, where we found remains of a Buddhist monastery-cum-shrine, with an open courtyard and rooms along the sides.”

Soon after the findings became widely known, two of the statues disappeared from the site. The thieves were arrested in Jharkhand capital Ranchi a week later, and the statues were recovered. But the incident underlined the neglect that the priceless archaeological site faced.

Mahesh Tigga, head of Gurhet panchayat, said: “Buddhist relics have been found at several places in this area. We have asked the government to build a museum here. We will not allow the statues to be taken away from our land.”

The first archaeological discoveries in this area were made three decades ago. In 1992, veteran environmentalist and tribal arts conservationist Bulu Imam, convener of the Hazaribagh chapter of the Indian National Trust for Art and Cultural Heritage (INTACH), stumbled upon pottery and remains of Buddhist relics and statues here.

Imam reported the discovery of painted grey ware (PGW) pottery, a votive stupa, a black basalt apsara torso, and an “eight-petalled astadala lotus” inscribed on stone.

“Remains of a vihara, stupa, and village with iron smelting siter alongside in a Sarna or sacred grove which yielded PGW fragments are confirmed. It seems that several tanks and wells and villages in the region were once part of comprehensive Vihara on the pilgrim route to Midnapore (Tamralipti),” Imam wrote (Damodar Valley Civilisation, 2001).

Imam estimated the antiquity of the Buddhist sites of Hazaribagh from 300 BC to the period of the Palas (8th to 12th centuries AD), and the Sena (11th-12th centuries). The monastery that has now been excavated lies on the old trade route from Varanasi to Tamralipti, via Sherghati in Gaya district in neighbouring Bihar state, and the Sitagraha hills in Jharkhand.

 

A lot of Hazaribagh district is forested, and is home to the Birhor tribals to whom Juljul Pahar is sacred. Every year, on Buddha Purnima day and other occasions of religious significance, local people go to the top of the hill with offerings of rice and milk. Besides the remains of the ancient vihara, the hill has a 65-foot stone face that the Birhors revere as Mahadeva (Lord Shiva, a Hindu deity).

Imam, who is now 79 and runs a museum that contains neolithic artefacts and collections of the local Khovar and Sohrai paintings, said he had been trying to get the Central Government to relocate a BSF (Border Security Force) firing range in the area from the early 1990s.

“However, till date, the firing range remains as it is… I informed ASI in 1992, but it took them close to 30 years to begin excavating this major Buddhist site… The ASI’s recent findings are the most significant archaeological discovery in Jharkhand in modern India. No other intact Buddha statue of this beauty and quality, around four feet tall and with heavy back support typical of the time of the Palas, has been found … Even in Bihar only a few statues of this quality have been found,” he said.

Imam’s discoveries were confirmed in the ASI’s report on ‘Exploration in districts Hazaribagh and Chatra, 1995’. The report, published in 2000, said: “Historical sites at Sitagarh yielded evidence of three circular brick structures besides one habitational mound, while Itkori yielded temple remains alongside a huge habitational area.

“At both these sites were noticed the sculptures of both Brahmanical and Buddhist pantheon. At Itkori a large number of sculptures, majority of which comprised votive stupas, were noticed. These sculptures belong to the Pala period, and only a few of these are inscribed.”

Imam believes the Chinese scholar Hiuen Tsang (Xuan Zang) may have visited Sitagraha during his travels in India in the seventh century. “His visitations were very complex, but at that time, he could have gone back to China through one of only two routes, from Mayurbhanj in Odisha and Tamralipti in Bengal,” he said.

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