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Colombo Port ECT: Confusion over Investment

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By Eng. D. Godage

The Colombo Port East Container Terminal, ECT, is hot topic, being an important economic nerve centre essential to the country but getting involved as a pawn in geopolitics. Opinion by I. P. C. Mendis in The Island (27.01.2021) prompted to clarify some of the matters and expose true facts.

ECT will neither be sold nor leased; it will be developed through investment from an Indian party and others by giving out 49 per cent share to them while keeping 51 per cent share with the Ports Authority. This is the government stance. Public awareness exists on Build Operate Transfer (BOT) agreements in the port with two terminals operating under this method. Land and sea area are leased to the relevant party by a lease agreement for a specified period, 35 years in both, and the private party invests to develop the terminal. So investment is an essential part in those agreements. But presently announced terminology creates confusion.

The Colombo South Harbour would not have been a reality if not for the Asian Development Bank (ADB), which offered a major loan for infrastructure development when other major donor agencies declined to come forward. The ADB Country Lending programme had only $ 100 million in 2005 while the cost of the South Harbour project was estimated at $ 330 million. There were unfavorable loan covenants such as Jaya Container Terminal (JCT) privatization, and that became a hindrance.

In 2004, the government sought private sector funding for the breakwater works and SEMA (Strategic Enterprises Management Authority) advocated the same even after showing that there was no precedent as regards private sector investment in such port infrastructure globally. Different methodologies, like bond issues, the setting up of a Company as SPV (Special Purpose Vehicle) for commercial borrowing were talked about until May 2006 without success. Fresh negotiations thereafter with the ADB reached fruition and the critical covenants were either relaxed or diluted. The loan amount was increased to $ 300 million and the agreement thereon signed in April 2007.

Critical loan covenant was the selection of private investors for the first two new terminals chosen through open competitive bidding process followed by signing of concession agreements. Subsequent amendment to the Loan Agreement in June 2012 at the request of the Ports Authority changed ‘the first two terminals’ to mean ‘any two’. At no stage did the agreement include private participation in all three terminals.

Proposals were invited from prequalified private investors for the first terminal viz. the South Terminal from February 2007 even before signing of loan agreement to comply with loan covenant. In fact, invitation was made on two occasions as the first was cancelled in February 2008 when a total of five offers with two favourable ones were available. Compliance with the loan covenant was delayed by over a year and this led to a delay in the release of funds from ADB and commencement of construction.

The Memorandum of Cooperation signed with Japan and India in May 2019 proposed the development of the ECT under an Operations Company with 51 per cent shares retained by the Ports Authority. When the Minister submitted a Cabinet Memorandum naming one Indian investor, Adani, disregarding Japan, the government deviated from the agreement as well as the ADB loan covenant of open competitive bidding process. These deviations may be of different degree but the fact remains that they are digressions.

Another issue is that Hambantota Port and the Port City are totally different scenarios. The former is a white elephant in short even though the Chinese have acquired it. Two feasibility studies, one by SNC Lavalin of Canada and other by Ramboll of Denmark did not show viability of the project unless container operations started immediately. While both the Colombo South Harbour and the Hambantota Port projects commenced around the same time, the Hambantota project received priority. As regards the Port City, benefits may accrue after 10 years or more. On the other hand, since last October, the ECT has been operational with one berth built by the Ports Authority and is making profits.

The proposed formula for the ECT, in the referred Opinion, is a Joint Stock Co. As regards both SAGT and CICT, there are BOT (Build Operate Transfer) Agreements signed after being cleared by the highest legal authority of the country; they are between two parties, Ports Authority and the investor. They include a condition that Ports Authority hold a particular share, viz. 15 per cent. On the other hand, Joint Stock Company formation by the Ports Authority as the major shareholder seems a different process. The formation of such company is not permissible under the SLPA Act as found some time ago.

Further to the registration of an unlisted company and proposed structure, it is essential to divulge, inter alia, the total equity in order to estimate the Ports Authority share, Articles of Company to be acceptable to other private party, method of raising $ 500 million as building cost and liability on Ports Authority as lead partner.

Another subject that needs attention is the announcement by the Minister that West Terminal has to be commenced now. It has to be noted that ECT requires at least two more years to operationalize in complete form while only one berth of ECT is operational now by the Ports Authority. Another matter worth mentioning is that the Colombo Port Development Plan prepared and presented by the Ports Authority with the assistance of ADB in March 2019 states the capacity shortage starts from 2020, ECT operations start in 2019 and West Terminal commences operations in 2025. The ECT operations have been delayed and as such the WCT operation is not urgent with ample time available for planning.

What is urgently needed is a prompt decision on the ECT operations already behind schedule and the acceleration of the procurement process by the Ports Authority for remaining work and this is time-consuming.

Those in the maritime industry and others who wish for the success of Colombo Port highlighted the delay in operationalisation of ECT. Trade Unions are agitating, politicians are talking but no productive action has been taken. In the end, a prompt decision is essential as terminals cannot be built overnight but that task takes about two years. Otherwise, the Colombo Port will face congestion, ship diversions and bypassing and above all losing global reputation and position.



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Opinion

Developing attitudes of schoolchildren for development

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Sri Lanka was once at an economically comparable level with some of the world’s most developed countries in the 19th century. However, despite our country’s potential, we are still striving to fully develop. Many people often blame politicians, government officers, or various sectors for the situation. However, I believe the root cause of these issues lies not in any individual or group, but in the lack of good attitudes within our society.

We are investing significant resources into our education system, which is funded by the taxes of hard- working citizens. However, when we examine the outcomes, we realise that the academic achievements of our graduates alone are not enough. There are instances where professionals, despite having the necessary qualifications, fail to uphold ethical standards. In some cases, this even results in malpractice or harmful actions that damage our country’s reputation and progress. This highlights the gap between academic success and real-world responsibilities.

The education system, which is currently focused on competitive exams and rote learning, does not emphasise the development of attitudes and character in students. While our students are academically capable, many lack the qualities required to contribute positively to society. This lack of focus on social values, such as patriotism, selflessness and respect for elders, is holding us back from achieving the level of progress we deserve.

To address these concerns, I wrote to His Excellency, the President of Sri Lanka, on 24th September 2024, proposing education reforms that emphasise not only academic qualifications but also attitudes, ethics, and social responsibility. I suggested a holistic approach to university admissions and government recruitment, incorporating moral integrity, character, and extracurricular involvement, key traits for fostering well- rounded, responsible citizens. More importantly, I strongly recommended introducing a compulsory school subject, with both theory and practical components, focused on attitude development, which would be evaluated in university admissions. Encouraging extracurricular participation alongside academics will help shape ethical and socially responsible individuals.

I am pleased to inform you that the President, recognising the importance of these reforms, has directed the relevant ministries (by a letter dated 24th October 2024) to explore integrating these ideas into the education system. This marks a crucial step in transforming the values and attitudes of our youth for the nation’s benefit.

However, meaningful change requires collective effort. Parents, teachers, students, and citizens all play a role in shaping Sri Lanka’s future. Together, we must instill responsibility, ethics, and patriotism in the next generation. I invite you to share your thoughts and suggestions on further enhancing the values and attitudes of our youth. Your feedback will be invaluable in building a brighter future for Sri Lanka, one driven not just by knowledge, but by integrity and character.

Dr. Mahesh Premarathna

Research Fellow, National Institute of Fundamental Studies, Sri Lanka Email: mahesh.pr@nifs.ac.lk

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Opinion

A TRIBUTE TO A GREAT MAN ON HIS 95th BIRTHDAY

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Chandra Schaffter

Former Director-General and Chairman of the Insurance Board of Sri Lanka and the Founder Chairman of the South Asia Insurance Regulators’ Forum. Patron, Insurance Assessors and Engineers Association of Sri Lanka.

“The heights by great men reached and kept were not attained in sudden flight but, they while their companions slept, they were toiling upwards in the night.”

The above words of Henry Wadsworth Longfellow – one of the monumental cultural figures of nineteenth-century America and the nation’s preeminent poet in his era – aptly describes the life and times of Chandra Thomas Adolphus Schaffter who will be celebrating his 95th birthday on April 3, 2025.

At a regional law conference held at the BMICH in the 1990s I found myself seated next to an elderly gentleman with long grey hair immaculately dressed in a white suit. I had sponsored through the United Nations several Indian delegates to attend it. I turned to him during the long wait for the Chief Guest as to from which part of India he was from. He laughingly said “I am Chandra Schaffter 100% Sri Lankan” and asked me why I assumed he is from India. My reply was that in India I have seen many distinguished people in full white suits.

It was in the year 2000 when the late Ken Balendra was the Chairman of the SEC he was also appointed as the first Chairman of the newly established Insurance Regulatory Board and I was appointed as the Director-General. A new regulatory regime came into operation bringing in its wake many uncertainties and confusion within the insurance industry that was hitherto lightly regulated by the Ministry of Finance.

I suggested that we arrange an industry consultation within a week. “How on earth are you going to prepare a good background paper within a week?” asked Ken. I said I have already met some of the key stakeholders privately over breakfast and luncheon meetings and already identified 70 odd problem areas.

Chandra was one of the first to be contacted and I believe he was then the president of the Insurers’ Association. I was impressed with Chandra’s honesty and integrity. He stated what was happening in the industry, the practices of his own company and what would be the ideal situation. Having gathered my own intelligence I remember observing later that the industry was not full of saints.

The SEC was entrusted with task of enforcing the new Insurance Act and the staff did a remarkably good job until a new Secretariat was later established. The Seminar was a great success as the Controller of Foreign Exchange at the Central Bank was personally present and solved many long standing issues.

After the presentation of my overview of the new Act, I recall Dr. Jagath Alwis of Ceylinco Insurance commented that now they have a much better idea of the Act since I demystified many complex drafting issues.

Chandra and I met at least once a month along with other stakeholders and many outstanding issues were resolved. Over time I gradually came to know more about his personal and corporate life.

Resilience is a strong virtue that Chandra has displayed throughout his career. He lost his mother when he was barely two years old and that was followed by another tragedy when he lost his father too. He entered St. Thomas’ College Mount Lavinia and excelled in both studies and sports. He was best known as a fast bowler and he also represented Sri Lanka at hockey.

Much credit goes to him for having had the courage and fortitude to establish almost singlehandedly Sri Lanka’s first major Sri Lankan-owned life insurance company, Janashakthi, in 1994.

Chandra’s life is best described as one of humble beginnings and reaching the zenith of the corporate life. In 2002 Janashakthi purchased the National Insurance Corporation. As I was a member of the Pubic Enterprise Reform Commission (PERC) at that time I knew the enormous difficulties he faced at that time. After the 2004 tsunami the late Lalith Kotelawala and he took the bold step of making payments considerably in excess of the policy limitations.

I had the privilege of serving as the Chairman of Orient Finance PLC, a subsidiary of Janshakthi, for well over a decade.

Without a doubt, Chandra Schaffter is the doyen of the Sri Lankan insurance industry but his reputation goes far beyond our shores. He reached the top not due to a sudden flight but toiling upwards day and night whilst his competitors possibly slept.

We all wish him many more years of good heath and productivity!

by Dr. Dayanath Jayasuriya P. C.

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Opinion

The Presidential Youth Commission and current social challenges

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By Professor G. L. Peiris
D. Phil. (Oxford), Ph. D.
(Sri Lanka);
Rhodes Scholar, Quondam Visiting Fellow of the Universities of Oxford, Cambridge and London;
Former Vice-Chancellor and Emeritus Professor of Law of the University of Colombo.

I. The Youth Commission in Retrospect

My tenure of office as Vice Chancellor of the University of Colombo coincided with the most turbulent period in the history of the university system in our country. There was a near total collapse of all systems, and the cost in terms of the loss of life, destruction of public and private property and disruption of all sectors of national life, was exorbitant.

As this time of upheaval drew to a close, the Government, in October 1989, appointed a Presidential Commission to examine, inter alia, “the causes of disquiet, unrest and discontent manifesting itself in the rejection of existing institutions and in acts of violence”.

As one of 7 Commissioners I played an active role in the work of the Commission and in the preparation of its Report. Revisiting its content recently, I was struck by the immediate relevance of its major themes and recommendations, and the thinking underpinning them, to dominant challenges in our society today.

II. Politicisation a Central Malady

“The oral and written representations to the Commission indicated virtual unanimity that politicisation and perceptions about the abuse of political power are some of the main causes of youth unrest in contemporary Sri Lanka”. This was the first sentence in the Report of the Commission which identified, as the main issue, “the abuse of political power in the undermining of democratic institutions”.

Pre-eminent among the recommendations of the Commission was the setting up of a Nominations Commission “which will recommend to the President the names of persons who will constitute the membership of (a) important Commissions responsible for recruitment, promotion,transfer and dismissal in certain vital areas; and (b) Commissions responsible for policy making in selected areas”. The composition of the Nominations Commission was to reflect the balance of political parties in Parliament.

Disenchanted youth, giving evidence before the Commission throughout the length and breadth of the Island, insisted that, although they were not averse to acceptance of adversity – inevitable at times in a nation’s history – what they would vehemently reject and rebel against was deprivation accompanied by palpable injustice.

III. An Institutional Response: The Constitutional Council

This concept of a Nominations Commission was the origin and inspiration of the Constitutional Council introduced into our Constitution by the Seventeenth Amendment in 2001.

Militating against the “winner takes all” mindset and seeking to establish merit and fairplay as the cornerstones of a rules-based system of public administration, the Constitutional Council mechanism dominated political events for a quarter of a century.

Dramatic swings of the pendulum from progress to backlash characterised developments during the whole of this period. The Seventeenth Amendment envisaged a Constitutional Council consisting of 3 Members of Parliament (Speaker, Prime Minister and Leader of the Opposition) and 7 representatives of civil society nominated by political parties in Parliament. The Eighteenth Amendment, in 2010, replaced the Constitutional Council with a Parliamentary Council which departed in crucial respects from the role of its predecessor, in that the Parliamentary Council consisting of 5 members – 3 from the Legislature and 2 from outside – could only make recommendations to the appointing authority, the President, but their concurrence was not required as a condition for validity of appointments. It was, therefore, a relatively weak instrument.

The Nineteenth Amendment of 2015, which brought back into being a Constitutional Council of 10 members – 7 Parliamentarians and 3 from outside – represented movement in the opposite direction by investing the Council with real authority. A further twist in the skein was signified by the retrogressive Twentieth Amendment, in 2020, which restored the largely impotent Parliamentary Council functioning as a mere advisory body.

The wheel came full circle with the Twenty First Amendment in 2022 which embodies the current law. This precludes the President from appointing personnel of vital Commissions – dealing with elections, the public service, the national police, audit, human rights, bribery and corruption, finance, delimitation, and national procurement – without an explicit recommendation by the Council.

Moreover, a whole range of important officials – the Attorney-General, the Governor of the Central Bank, the Auditor General, the Inspector General of Police, the Ombudsman and the Secretary General of Parliament – could not be validly appointed unless the appointment had been approved by the Council on a recommendation made by the President.

IV. Vigilance the Key

These are landmark achievements, in restricting the scope for partisan political influence in the higher echelons of governance; they serve to reinforce public confidence in the integrity of institutions.

There is no room for complacency, however. The nation was witness to the unedifying spectacle of an incumbent President upbraiding the Constitutional Council, on the floor of Parliament, for purported interference with the performance of executive functions. The current controversy between the National Police Commission and the Acting Inspector General of Police has the potential to thwart the former in the exercise of its constitutional responsibilities. Institutional norms of independence and objectivity can hardly be swept away by exigencies of operational control.

V. Legislative Sovereignty and Judicial Oversight

My distinguished predecessor in the Office of Minister of Constitutional Affairs, the late Dr. Colvin R. de Silva, was a protean figure in constitution making. Unyielding in his insistence on sovereignty of the Legislature, he fiercely resisted, on grounds of principle, judicial surveillance of any kind over the legislative functions of Parliament.

The rationale for this view was set out by him pithily in an address to the United Nations Association of Ceylon in 1968: “Do we want a legislature that is sovereign, or do we not? That is the true question. If you say that the validity of a law has to be determined by anybody outside the law making body, then you are to that extent saying that your law making body is not completely the law making body”.

So unflinching was the architect of the Constitution of 1972 in his adherence to this conviction that, even when a Constitutional Court with limited functions had to be provided for, he insisted that the Secretary- General of Parliament must serve as the Registrar of the Court, and that its sittings had to be held not in Hulftsdorp but within the precincts of Parliament.

It is a matter for satisfaction that this view has not taken root in the constitutional traditions of our country. Instead,we have opted for adoption of justiciable fundamental rights as a restraint on the competence of Parliament, in the interest of protection of the citizenry. This is a measure of acknowledgement of the dangers of untrammelled power and the lure of temptation. Contemporary experience demonstrates the wisdom of this choice.

The idea itself is not unfamiliar to our legal culture. Although the Constitution Order-in-Council of 1948 made no explicit provision for judicial review, our courts showed no disinclination to embark on substantive judicial review of important legislation including the Citizenship Act of 1948, the Sinhala Only Act of 1956, and the Criminal Law (Special Provisions) Act of 1962. The latter statute was struck down in its entirety by the Judicial Committee of the Privy Council on the ground of repugnance to the basic scheme of the Constitution.

Judicial oversight of legislation, then, is a defining principle of our legal system. However, the manner of its application is exposed to legitimate criticism in two ways.

(a) The Content of Fundamental Rights

It is disappointing that only civil and political rights have been deemed worthy of entrenchment in our Constitution, to the rigid exclusion of economic,social and cultural rights.This approach, which continues to receive expression in Chapter III of the present Constitution, runs counter to current international recognition that the latter category of rights is of overriding importance,especially in the context of the developing world.

(b) Exclusion of Post-enactment Review

Judicial scrutiny of legislation is confined in our system to pre-enactment review. There is provision for gazetting of bills and for challenge by the public on the basis of conflict with constitutional provisions. The proposed legislation cannot be debated or passed in Parliament until the Determination of the Supreme Court is received by the Speaker. The Court is required to decide, within a stipulated period, whether the legislation, or any portion of it, contravenes the Constitution and, if so, whether a special majority (two-thirds of the total membership of the House) is sufficient to secure its enactment or whether endorsement by the People at a Referendum is needed, as well. Amendments required by the Court must be compulsorily included at the Committee Stage, as a condition of validity (Articles 78 and 121).

A serious lacuna has been laid bare by recent events. In an egregious affront to the mandatory constitutional scheme, the Government, during passage of the Online Safety Bill, secured enactment of the legislation at the Third Reading, without moving all of the Amendments insisted upon by the Court. This resulted in a Vote of No Confidence being moved by the Opposition against the Speaker for intentional violation of the Constitution.

There have been other instances of flagrant abuse of the legislative process. A Bill which, as presented to Parliament and adjudicated upon by the Supreme Court, dealt with representation of women in Provincial Councils, was fundamentally altered in content AFTER judicial scrutiny through extensive Amendments at the Committee stage, making it virtually impossible to hold Provincial Council elections at all.

Deliberate manipulation of this kind, enabling subversion of constitutional procedures, goes without remedy because of the unqualified exclusion of post-enactment review. This derives from the conclusive bar imposed by Article 80 (3) of the Constitution: “When a Bill becomes law upon the certificate of the Speaker, no court or tribunal shall inquire into, pronounce upon or in any manner call in question the validity of such Act on any ground whatsoever”.

In the overall reform envisaged in the near future, this anomaly calls for urgent attention as a key issue.

VI The Public Service: Neutrality or Control?

Provision for an enabling environment for public officials to fulfil their responsibilities in a spirit of independence, without fear or favour, is generally considered an essential feature of a robust democracy.

However, this has not been looked upon as elf-evident at every stage of our constitutional history. On the contrary, political control of the public service has been sanctified as a cardinal virtue, and its cultivation assiduously promoted.

Root and branch opposition to the idea of a public service beyond the reach of political authority is exemplified by the Constitution of 1972, the sheet anchor of which was the principle that “The National State Assembly is the supreme instrument of State power of the Republic” (Article 5). Political control of the public service was held to be a necessary corollary.

This found expression in the emphatic statement that “The Cabinet of Ministers shall have the power of appointment, transfer, dismissal and disciplinary control of all State officers” (Article 106 (2)). For the exercise of this power, it was declared that the Cabinet “shall be answerable to the National State Assembly” (Article 106 (1)).

The State Services Advisory Board consisting of 3 persons appointed by the President, as its designation made clear, was no more than an advisory body. This, indeed, was true even of the Judicial Services Advisory Board set up under the Constitution of 1972: “The appointment of judges shall be made by the Cabinet of Ministers after receiving the recommendation of the Judicial Services Advisory Board” (Article 126). This Board was required to send a list, but the Cabinet had full power to appoint persons not on the list, with the reasons applicable tabled in the National State Assembly.

The Legislature, then, with the Cabinet as its delegate, became under the Constitution of 1972 the clearly identified source of authority over all State officers including judicial officers. The seed had been sown; and an abundant harvest was reaped in succeeding years.

Happily, our constitutional values took a different trajectory, leaving this tradition behind. The aborted Constitution Bill, which I presented to Parliament as Minister of Constitutional Affairs on behalf of President Chandrika Kumaratunga in August 2000, sought to reverse this trend frontally.

Making a radical departure from the policy stance of political control over the public service, the present Constitution provides unequivocally that this authority “shall be vested in the Public Service Commission” (article 55 (3)). An exception is made in the case of Heads of Department, in relation to whom the corresponding power is vested in the Cabinet of Ministers (Article 55 (2)). The power of appointment of Heads of the Army, Navy and Air Force is placed in the hands of the President (Article 61E). These are reasonable exceptions.

VII Precept vs. Example

Laws, skilfully crafted, do not furnish cast-iron guarantees. They simply provide a conducive environment for persons of goodwill and competence to fulfil their public duties, unencumbered by pressure: the rest is up to individual conscience. Constitutional provisions confer security of tenure on judges, prevent reduction of salary and other benefits during their tenure of office and protect them against attacks harmful to the dignity of their office.

The Lawyers’ Collective, comprising public-spirited members of the legal profession, pointed out last week the danger of judges, upon retirement, accepting lucrative appointments within the gift of the government in power. Public perception is the overriding factor in this field. To be remiss is to invite debilitating weakness and to risk erosion of confidence in the foundations of a functioning democracy.

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