Features
Hambantota oil refinery – From fairy tale to reality?
by Gomi Senadhira
“It is easier to fool people than convince them they have been fooled”– Mark Twain
The signing of US $3.7 billion deal to construct a “state-of-the-art oil refinery” oil refinery, with a capacity of 200,000 barrels, in Hambantota with Chinese state-run oil giant Sinopec during President Anura Kumara Dissanayake (AKD)’s state visit to China, is indeed an important achievement. This is significant because successive governments had tried but failed to attract such a large investment into petroleum refining in Sri Lanka. However, it is appropriate to ask will it become a reality or is it another false promise, a fairy tale? After all, we have been fooled before with “fairy tales” about an oil refinery in Hambantota. Hence, we need to be cautious. Particularly because the most recent attempt to build an oil refinery began as a badly-choreographed farce and ended as a tragedy.
To understand why I am saying so, let’s start with the most recent attempt to build an oil refinery in Hambantota.
Largest Investment under the SLSFTA
In July 2018 the former Minister of Development Strategies and International Trade Malik Samarawickrama announced, during the Parliamentary Debate on the Sri Lanka-Singapore Free Trade Agreement (SLSFTA) that “…. Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products…. In principle approval has already been granted by the BOI and the investors are awaiting the release of land and environmental approvals to commence the project.”
US $3.85 billion investment by Singapore’s Silver Park International
Eight months after the statement by Minister Samarawickrama in the parliament, on 19th March 2019, Deputy Minister Nalin Bandara and technical advisor to the Ministry, Mangala Yapa, announced at a press conference that the construction of US $3.85 billion oil refinery in the Mirijjawila Export Processing Zone in Hambantota will begin shortly by a Singapore-based Silver Park International (Pte) Ltd with Oman’s Oil and Gas Ministry. The project was a joint venture between Silver Park International, with 70 percent stake in the company, and the Ministry of Oil and Gas of Sultanate of Oman, with 30 percent shares. The investment was billed as Sri Lanka’s largest Foreign Direct Investment (FDI), ever. The oil refinery with the capacity to refine 200,000 barrels of crude oil per day, was expected to generate additional US $7 billion of exports per annum when it becomes fully operational in 2023, by exporting a minimum of 9 million metric tons of petroleum products per year.
Within twenty-four hours of the announcement by the Sri Lankan government on the joint venture, officials of Oman’s Oil and Gas Ministry denied being part of a $3.85 billion plan to build an oil refinery in Sri Lanka. According to a report filed by Reuters, addressing a news conference in Muscat, Salim al-Aufi, undersecretary of Oman’s Ministry of Oil and Gas, stated “No one on this side of the panel is aware of this investment in Sri Lanka …. It came as news to me; I don’t know who is signing the cheque for $3.8 billion.” In addition to that, Sri Lankan and Indian media started to question the credentials of the Singaporean investor.
Despite the Omani government’s denial and the media exposure of questionable credentials of the Singaporean Investor, Sri Lanka’s Board of Investments (BOI) decided to go ahead with the “project for a joint venture of Singapore company and Oman.” And on March 24, 2019, the foundation stone for the petroleum refinery was ceremoniously laid by the Prime Minister Ranil Wickremesinghe at the Mirijjawila Export Processing Zone with the attendance of Omani Minister of Oil and Gas Mohammed bin Hamad Al Rumhy, a number of ministers including Sajith Premadasa and several local parliamentarians.
US $20 billion investment by Singaporean company Sugih Energy International
After that, in October 2019, Sri Lankan newspapers as well as international news websites reported, quoting minister Malik Samarawickrama and Finance Minister Mangala Samaraweera that “The Sri Lankan government has given its approval to the Singaporean company Sugih Energy International (SEI) to build a $20 billion refinery at the port (of Hambantota). The project’s value exceeds the total of all foreign direct investment in Sri Lanka over the past forty year.” Mr. Samarawickrama also stated “”The company will invest in two phases. In the first phase, they have committed an investment of $14.8 billion for the refinery, and further $4 to $5 billion for petrochemical and other projects.”
Fairy Tales to Sell the FTA
Unfortunately, or fortunately, none of these multibillion-dollar investments from Singapore due to the FTA ever saw the light of day. These and almost all other investments from Singapore “thanks to this FTA,” turned out to be “fairy tales” narrated by the government of Prime Minister Ranil Wickremesinghe to sell the Sri Lanka-Singapore FTA, to the parliament and the people of Sri Lanka. Though the “Silver Park” refinery was to become fully operational by 2023, it didn’t even progress beyond the foundation stone by then. The project by “Sugih Energy International Pte Ltd” couldn’t even reach that milestone. In August 2023 the Cabinet of Ministers approved two proposals presented by President Ranil Wickremesinghe in his capacity as the Minister of Investment Promotion to cancel the agreements with these two “Singapore based investors,” Silver Park International and “Sugih Energy International Pte Ltd”, due to their failure in implementing the projects!
BOI’s Failure to exercise Due diligence on these “largest Foreign Direct Investments”
It is difficult to understand as to why the BOI failed so miserably, to exercise DUE DILIGENCE on these “largest Foreign Direct Investments” in Sri Lanka. Due diligence on an investor by BOI is essential to understand the potential risks of the investment and to make informed decisions about whether to allow an investment in or not. More importantly, it is necessary to comply with Anti-Money Laundering regulations and to prevent financial crime. At the very least, the BOI should have ascertained if the investor is a Politically Exposed Person (PEP) and what the sources of the investor’s funds were? If the BOI had undertaken even a cursory appraisal of these two companies, like a simple google search, they would have discovered enough red flags on these two investors.
However, it is necessary to state that it is difficult to find much information on Sugih Energy International through a simple google search. Only news reports on this company are on its “US $20 billion investment in an Oil refinery in Hambantota.” Then there is a reference to a company, based on data from Panama Papers, named Sugih Energy International registered in the British Virgin Islands (which is well-known for its offshore companies) with links to Singapore, in the “Offshore Leaks Database,”. There is also a reference to a Sugih Energy International in the Singapore Business Directory. However, this company had changed its name to AETURNUM ENERGY INTERNATIONAL PTE. LTD. On 10 August 2024. On the same day it had changed its Entity Status from “Live Company” to “In Liquidation – Compulsory Winding Up (Insolvency).”
In contrast, it is possible to get a substantial amount of information on Silver Park International (Pte) Ltd through a simple google search. For example; the registered address of Silver Park International (Pte) Ltd, which is 18, Roberts Lane, #03-01 Singapore, shows the building in Singapore’s Little India where this company is located. #03-01 could be a room number within that building. More interestingly, it reveals the names of nearly a hundred other companies which have 18, Roberts Lane, #03-01 Singapore (218297), as their registered address. This includes an entity specialising in setting up shell companies. Can a shell company located at a shared address, invest US$3.85 billion in Sri Lanka? A cursory appraisal would have also revealed that most of the directors of Silver Park International (Pte) Ltd were Politically Exposed Persons (PEPs) and information on the investigations carried out by India’s Enforcement Directorate on these individuals.
Investigation by India’ s Enforcement Directorate (ED)
Though Sri Lankan authorities failed to carry out due diligence, after an explosive report by ‘The Hindu’ newspaper on ‘single largest foreign investment’ in Sri Lanka by a Singapore based investment company with links to an Indian politician’s family, the authorities across the Palk Strait started to investigate the Indian directors of Silver Park International (Pte) Ltd, namely, Mr S.Jagathrakshakan, a DMK Member of Indian Parliament and former union minister of state for information and Broadcasting, and his family members for their involvement money laundering activities. This was reported widely in the Indian media. And according to these reports in August 2024, Mr. Jagathrakshakan and his family members were fined ₹908 crore ( Sri Lankan Rupees 31 billion) for violation of India’s Foreign Exchange Management Act (FEMA) and the charges were related to “….an investment of ₹42 crore in a shell company, Silver Park International Pte Ltd, incorporated in Singapore in 2017, and an investment of ₹9 crore (Sri Lankan Rupees 308million) in a Sri Lankan company.”
US$ 4.5 billion Oil Refinery by Sinopec
Though the government scrapped these controversial agreements with Silver Park International and “Sugih Energy International Pte Ltd” in August 2023, these agreements with controversial shell companies seriously damaged Sri Lanka’s image as an investment destination. Law-abiding countries do not permit investments, particularly such large investments, without doing a reasonable appraisal of the investors and the sources of the investor’s funds.
After scrapping the agreements with the controversial shell companies in November 2023, the Cabinet of Ministers approved awarding a contract to China Petroleum and Chemical Corporation (SINOPEC) to build a petroleum refinery in Hambantota. It was also announced that the refinery is expected to attract an investment of at least $4.5 billion. However, since then no tangible progress has been reported on this project.
US$ 3.7 billion oil refinery by Sinopec
Now, we have the MOU signed between Sri Lanka’s Ministry of Power and Energy and China’s Sinopec Corporation to build US$ 3.7 billion oil refinery, capable of producing 200,000 barrels of oil per day. Though this was signed during President Anura Kumara Dissanayake’s four-day state visit to China, given the history of this project it is still appropriate to ask will it become a reality this time around or will it be another false promise, a fairy tale?
Conclusion
Given the high-profile manner in which this MOU was signed we can be optimistic about the success of the project. After all, Sinopec is one of the biggest petroleum companies in the world and with a revenue of $429.7billion in 2023, is the fifth on Fortune Global 500 list. We cannot even think about comparing it with shell companies like Silver Park International or Sugih Energy International.
Finally, however, there is one unanswered question about the amount of the investment. The cost of this project appears to have substantially reduced since it was first mooted in November 2023; from US$4.5 billion to US$3.7 billion. Will the Ministry of Power and Energy explain the reasons for this change?
(The writer, a former public servant and a diplomat, can be reached at )
Features
Trump’s tariffs, AKD’s gazette and Sri Lanka’s diplomatic slumber
“We are rather respectable in Colombo. We go to bed fairly early, and we remain there till morning. “
According to Sri Lanka’s diplomatic folklore, the late S.W. R. D. Bandaranaike uttered these words while explaining the reasons for Sri Lanka’s abstention on the UN resolution condemning the Soviet invasion of Hungary. Apparently, SWRD’s foreign ministry officials were asleep at home when the diplomatic cable seeking instructions was received from New York. In those days, there were no cell phones, Internet, or even fax or telex machines. The diplomatic cables were sent through post offices. Decoding them was a slow and time-consuming process. Thus, the government could not provide appropriate instructions to our mission in New York in time, and the Sri Lankan delegation abstained on that sensitive UN vote.
Sri Lanka’s Absence from Section 301 Consultations
But then, how does one explain Sri Lanka’s absence from the crucial bilateral consultation held in Washington by the Office of the United States Trade Representative (USTR) during March-April on “Forced Labour” under the Section 301 of the US Trade Act of 1974? Didn’t our foreign and trade ministries send appropriate instructions to Washington in time? Even if the instructions from the foreign ministry were transmitted to our embassy in Washington by pigeon carriers, there was enough time for Sri Lanka to participate in those meetings.
In March, the USTR initiated these 301 investigations on 60 trading partners, and invited all of them for confidential consultations. Out of the 60, 46 participated in these consultations. Sri Lanka was not one of them. Other countries that didn’t participate in these consultations included China, Russia, and Venezuela! In addition to that, the Section 301 Committee conducted a public hearing with interested parties on April 28 and 29. Washington-based diplomats, representatives from few trade ministries as well as representatives from many foreign trade associations and chambers participated in these hearings. Sri Lanka was once again conspicuously absent.
As a result, when the USTR published the proposed forced labour tariffs on June 2nd, Sri Lanka ended up with a 12.5% duty. Pakistani and Indonesian diplomats participated in these consultations and took appropriate follow-up measures, and managed to enter the 10% duty category. As even a threat of a modest tariff hike could disrupt supply chains and reduce competitiveness, particularly in an industry such as garments, I discussed this issue on 15 June and underscored the importance of Sri Lanka’s participation at the next hearing, which was scheduled to be held from July 7th .
Awakening from Diplomatic Slumber and AKD’s Gazette
Fortunately, Sri Lanka finally awoke from weeks of diplomatic slumber, and Ambassador Mahinda Samarasinghe participated in the public hearing on 9 July, and promised, “…. · We have agreed to the text in our negotiations with the USTR on forced labour, …. The gazette as we speak is being printed and I’m getting the gazette tomorrow morning, and the gazette will be shared with USTR as I get it“.
As promised, President Anura Kumara Dissanayake issued a gazette on 10 July banning the imports of goods produced by forced labour. These new regulations are very similar to what Pakistan and Indonesia enacted in April, after their consultations with USTR in March. Why couldn’t we do it in April? Why did we wait till the very last minute?
Challenges ahead
“War is too important to be left to generals alone,” is a famous saying attributed to former French Premier Georges Clemenceau. Similarly, monitoring our main markets is too important to be left to diplomats alone. The United States is the largest single-country market for Sri Lanka. Therefore, Sri Lankan trade chambers and associations should become more proactive in these markets and participate in these events. For example, the chairman of the Pakistani apparel exporters association participated in the April hearings. Similarly, representatives from the Indian Agricultural and Processed Food Products Export Development Authority, the Federation of Indian Chambers of Commerce and Industry, the Confederation of Indian Industry, and Reliance Industries also participated in July hearings. At an event where each speaker is given only five minutes (strictly enforced), having a number of speakers from a country is an advantage. The presence of industry representatives in these kinds of events also help them understand the market dynamics and the future challenges. This is important, particularly because there will be many more challenges with Trump’s tariffs.
With the gazette issued on 10 July, Sri Lanka has imposed a prohibition on the importation of goods produced with forced labour. Now, the challenge will be to effectively enforce the prohibition. And what are the goods produced with forced labour? The USTR list only focuses on aluminum, cotton, electronics, lithium-ion batteries, rice, and tobacco. However, according to the U.S. Department of Labour, the list is much longer. Hence, this list may change continuously during the next two years and tariffs may fluctuate once again.
So, this is definitely not the time to slumber.
(The writer, a retired public servant, can be reached at senadhiragomi@gmail.com)
by Gomi Senadhira ✍️
Features
Tales of Mystery and Suspense 10 Casino for Sale
After the overwhelming grotesquerie of J K Rowling’s latest Cormoran Strike novel (written, I should have noted, as the others were, under the pseudonym Robert Galbraith), I thought I should return to the world of fun, and also a much shorter description since this thriller moves quickly without the layers of detail that Rowling engages in.
I then move to the second comic thriller by Caryl Brahms and S J Simon. This, their second story to feature Vladimir Stroganoff and Adam Quill, was Casino for Sale, as lunatic a romp as the first, though without the emphasis on the ballet that characterized A Bullet in the Ballet.
This one begins with the impresario Stroganoff buying a casino cheap from Baron Sam de Rabinovich, only to find that it was a rundown place, not the grand casino of La Bazouche, a resort on the Frenc+h Riviera, as he had initially thought. The grand one belonged to Lord Buttonhooke, and Stroganoff could not compete, until he thought of bringing the Ballet Stroganoff to the casino – which of course leads to Buttonhooke deciding to have ballet performances in his Casino too.
Stroganoff invites Quill to visit him, which Quill decides to do since he has left Scotland Yard, having come into a legacy. No one believes this, and he has to face questions as to what he did to have been sacked, with sympathy for having been found out.
The day he arrives in La Bazouche there is a murder, of a vitriolic critic called Citrolo, in Stroganoff’s office. He had been going to write a damning review of the opening night of the ballet and Stroganoff, when he realizes Citrolo cannot be swayed, drugs him and dictates the review himself to the papers. He leaves Citrolo sleeping and finds him shot the next morning, whereupon he decides to muddy the waters and leave a suicide note and lots of other murder weapons. So much overkill, as it were, of course ensures that he is arrested.
But the excitable French detective who makes the arrest follows up his suggestion that Buttonhooke was also involved, and so the two casino owners find themselves in cells next door to each other, with the detective Gustave quite happy to provide creature comforts for a fee.
Quill decides he must investigate, and finds Gustave most cooperative, since he has a laid back attitude to work. So it is Quill that finds a notebook which makes it clear Citrolo is an accomplished blackmailer, and that there are lots of possible murderers, including Stroganoff’s croupier, who was crooked, Rabinovich, who was now working for Buttonhooke, a confidence trickster called Kurt Kukumber, whose prospectus for a dud gold mine was found in the office and Prince Alexis Artishok who was engaged in a deal to buy diamonds from the ballerina Dyra Dyrakova.
Stroganoff had been trying to get Dyrakova to dance for him, but having done so previously she had refused. But then to Stroganoff’s chagrin she agreed to dance for Buttonhooke. The clearly crooked Artishok had told Buttonhooke’s mistress Sadie Souse, who was not very bright, that Dyrakova possessed diamonds she was willing to sell cheap, and Sadie was determined to have them.
Quill meanwhile finds out that there was a secret passage to Stroganoff’s office, the obvious solution to what had begun as a locked room mystery, and that this was known by almost everyone apart from Stroganoff himself. And then Rabinovich is murdered, just after Gustave had released his two original suspects, leading him to blame Quill for having insisted on that and thus allowing them to kill again.
Soon afterwards Dyrakova arrives, and the town is full of posters announcing that she will appear in the casinos, elaborate posters for either one, since Stroganoff is determined that she will dance for him, and if she does not come willingly, he has devised a scheme to make her do so unwillingly. So, though Buttonhooke has her taken off to his yacht immediately she arrives at the station, Quill along with Arenskaya gets her into a launch and to Stroganoff’s casino, where she performs to tumultuous applause, not knowing for whom she is dancing.
When Quill asked her about the diamonds, she said she had sold them long ago, and that gave Quill the solution to the mystery. Rabinovich had known about this, and Artishok had killed him to prevent Sadie learning it from him, he had killed Citrolo who had recognized him for an accomplished card sharper, not a Russian prince at all. But before he is arrested, he gets away in a boat, and the police launch that pursues him is on the point of catching him up when it runs out of petrol.
Again, lots of excitement, and entertaining references – Gustave grows marrows – and if not quite as brilliant as its predecessor, Casino was certainly a delightful read.
Features
The challenge of being positive about SAARC
It was a few years back that a former President of Sri Lanka took it on himself to pronounce SAARC ‘dead’. Since then there have been other sections of Sri Lankan opinion that have joined the critics of SAARC and taken the solemn stance that SAARC has indeed died what may be called a natural death.
Their fatalism is understandable. SAARC has failed to meet at heads of government or state level for the past several years to take the SAARC process notably forward. Regional cooperation has more or less been only an appealing idea. No substantive concrete projects have taken off to make the idea a hard reality. ‘Inner paralysis’ seems to be SAARC’s lot. Hence the fatalism in these circles.
However, being one of the worst cash-strapped regions of the world and a teemingly populated one with people virtually left to their devices, what choices do the ‘SAARC Eight’ have other than to try their best to band together and continue with their cooperation efforts, however small they may be?
There is no escaping the mounting debt trap for many of these countries and bankrupt Sri Lanka is a glaring example, but ‘throwing in the towel’ and abandoning themselves entirely to the diktats of the strongest economies and their agencies will prove a ‘living death’ for many countries in the SAARC fold.
The gains may be meagre but giving-up on SAARC cooperation in full would prove self-defeating for the organization and South Asia. Right now, the collective intention ought to be to salvage what the region could from the tenuous cooperative efforts. Moreover, such initiatives could go some distance to generate a degree of goodwill among the Eight and help in sustaining a dialogue process.
Given this backdrop it proved ‘a stich in time’ for the Regional Centre for Strategic Studies (RCSS), Colombo, to recently host the SAARC Secretary General Ambassador Md. Golam Sarwar to a round table discussion on the unifying potential of SAARC and its future possibilities, besides other related issue areas.
Held on June 24th and moderated by RCSS Executive Director and former ambassador Ravinatha Aryasinha, the forum brought together a vibrant, wide ranging audience comprising academicians, diplomats, senior public servants, civil society activists and many others. Following the presentation by Ambassador Golam Sarwar titled, ‘Reigniting SAARC: Achievements, Challenges and the Way Ahead’, a lively Q&A followed.
The above forum could be described as an act of lighting the proverbial ‘candle’ rather than ‘cursing the darkness.’ It surely is a ‘darkness’ that could be seen as daunting considering that the region’s pivotal powers, India and Pakistan, are failing to act in a spirit of accord but are engaged in bitter finger-pointing on a number of questions of vital importance to SAARC.
On the other hand, what is the rest of the region doing to bring the above sides together? It is disappointing that to date the rest of SAARC has failed to launch a major diplomatic drive to bring peace between the feuding regional heavyweights. It needs to act without delay and establish its earnestness and this effort would need to prove SAARC’s staying power in the unfolding months and even years.
In assessing SAARC’s seeming failure local opinion in particular has failed to factor in what could be described as weak leadership. Since Sheikh Mujibur Rahman of Bangladesh, the founding father of SAARC, the region has failed to produce a visionary leader who could advance the SAARC cause with charisma and drive.
Among other reasons, weak leadership accounts considerably for the faltering and stuttering status, as it were, of SAARC. Badly needed are leaders who could go the extra mile, think less of narrow national interests and work diligently towards the collective well being of the region but SAARC’s millions of ordinary people have been made to wait in vain for leaders of such stature. Instead, they have been burdened with politicians who seem to be relishing the apparently moribund state of SAARC.
Looking back, it could be said that it was the dynamic leadership factor that led to the launching of the Non-Aligned Movement and for its sustenance for a few decades. True, it could be seen in some quarters that NAM is no more, but as in the case of SAARC, the former too has been unfortunate to be burdened over the years with politicians who lack the vision and drive to unflaggingly advance the fortunes of the South. NAM and SAARC lack the dynamism and vision of leaders of the stature of Jawaharlal Nehru, for example, to give them the required guidance and intellectual depth.
The reasons are complex for there not being among us currently political leaders with the vision and the steadfast commitment to advance the legitimate interests of the South. However, it could be stated with conviction that the majority of Southern leaders have too easily caved in to the demands of the global North and its financial agencies.
These leaders have failed to see, for instance, that the largely market economy oriented Northern governments would not view with favour a centrist economic model that attaches priority to the interests of the dis-empowered publics of the South. This realization ought to have dawned on the current government in Sri Lanka, for instance, some while ago but it has no choice but to abide by IMF dictates since economic survival at present is unthinkable without the latter’s succour.
Accordingly for SAARC this should be the time for some soul-searching. Priority needs to be attached to ending the feuding between India and Pakistan since at present the material fortunes of the region hinge largely on these regional giants giving peaceful relations among them a try. This is no easy challenge to meet but some daring, visionary diplomacy needs to take hold among the rest of SAARC.
There is some sense in SAARC bringing the peoples of the region together through programs that address their best collective interests. A meeting of minds among SAARC nations could enable SAARC and its agencies to build a region-wide people’s movement for progressive political and economic change that could in turn lead to the region’s political leaders sensitizing themselves more to the neglected needs of their publics.
However, the time is ‘now’ for the initiation of these progressive changes and the voice of SAARC well wishers would need to drown out those of their critics.
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