The Sunday Leader

Sri Lanka’s Multi Billion Rupee Commitment – Courtesy China

By Dinouk Colombage

Southern Expressway, Nelum Pokuna Mahinda Rajapaksa Theatre and Hambantota Port Development Program

Sri Lanka has spent an astounding Rs. 391.7 billion on investment projects in the country in the last four years. This enormous amount of money has been spread over five projects, of which only two have been completed but are still to serve any real purpose.
All of these projects have been undertaken by Chinese firms, and have been funded by loans obtained from the Chinese state-owned Export-Import bank. Many of these loans have been taken with interest rates for long term borrowing (20 years) varying from 3% to 6%, and short term loans at an interest of 2%.
According to highly placed sources in the Finance Ministry, however, loans from the World Bank and Asian Development Bank for short term loans would have varied between 0.25% and 2%, while the interest rates for the long term loans are the same. It is believed that these loans would have come with stricter guidelines than what is being currently enforced by the Chinese.
Projects such as the Hambantota port, which sees the construction being undertaken by the China Harbour Engineering Company, have cost an astonishing Rs. 149.2 billion. This massive amount of money was spread across the completed first phase, the second phase and additional costs.
The first phase of the Hambantota port cost Rs. 41 billion. Following the ‘successful’ completion of the port, the Ports Authority found that the engineers had missed a large rock which was blocking the entrance to the multi-billion rupee port. Removing this rock saw the cost factor increase substantially. The Sri Lankan government was forced to fork out another Rs. 15.9 billion for the blasting of the rock.
Despite this obvious high cost and questionable knowledge on such projects by China Harbour Engineering Company, it now claims that it has secured the contract for the second phase which is to cost Rs 92.2 billion. What is more concerning is that if this is true, it is believed that no tenders had been called for. The Ports Authority refused to comment on this.
Dr. Harsha de Silva, UNP MP, in a release drew attention to the fact that when China Harbour produced a bid to construct the breakwater of the Colombo South port it was 70% more than the lowest bid. He added that due to the transparent bidding conditions of the Asian Development Bank, the Chinese firm was unsuccessful in securing the contract.
However, in an attempt to soothe the hurt feelings of the Chinese company, Ports Authority recently stated that they had been awarded the contract to reclaim the sea adjoining the Colombo South port at a cost of Rs. 85.4 billion. The reclaiming of this land is to make way for the eventual construction of a port city.
Of course China’s work south is not over having also been awarded the contract to construct the Mattala airport at a cost of Rs. 22.7 billion. The airport is to be the second international airport in the country and is designed to facilitate 1000 passengers at peak time, with an estimated total of one million passengers annually.
This means,  Mattala will have to compete with the existing international airport, the Bandaranaike International Airport. Mattala has been chosen as the site of the new airport due to its close proximity to the Hambantota port. Chairman of the Airport and Aviation Sri Lanka Limited, Prasanna Wickramsooriya, told media that the new airport is expected to accommodate 40% of passenger services and 60% of air cargo services.
All of these projects carried out by China Harbour have been funded by the Exim Bank in China at interest rates between 3% and 6%; the Chinese have also provided the labour force. In effect the Sri Lankan government has paid the Chinese a sum far in excess of what was originally agreed upon. The cost of the Hambantota harbour is estimated at more than 100% the original amount.
Despite these heavy costs for the harbour, Sri Lanka and its people are still to see any benefits from the port.
Further North West in Puttlam the Chinese have also staked a claim in the dysfunctional and highly controversial Norochcholai power plant. China Machinery Engineering Corporation undertook the project at a cost of over Rs. 51.2 billion.
However, the power plant has been inactive for 35 days in the last year (2011). According to Power and Energy Minister, Champika Ranawaka, every non-operational day has cost the Ceylon Electricity Board Rs. 80 million. In total the non-use of the plant has seen the CEB incur losses in excess of Rs. 2,800 million.
According to an Engineering Union official at the CEB, P. R. Wijeratane, these disruptions to the power station have been due to the poor training the staff underwent at the hands of the Chinese company. Wijeratane explained that the Chinese company has been vying for a long term maintenance contract. These efforts to date have been met with little success.
CEB spokesperson, Mahinda Jinadasa, denied these accusations claiming that the Chinese company had been nothing bud ‘helpful in training the engineers’.
Despite the apparent inefficiencies on the part of the Chinese companies involved in these projects, the Rajapaksa government continues to hand out contracts to our Far East neighbours. The newly opened Southern Expressway (connecting Colombo to Galle) was also handled by the China Harbour Engineering Company. The road cost Rs. 68.3 billion, and plans are underway to extend it to Matara and eventually Hambantota.
Once again China Harbour was faulted with an unacceptable job as the opening of the expressway was delayed by a week due to the existence of potholes along several stretches of the road.
The Ministry of Highways claimed that the expressway earned revenue in excess of Rs.1 million in its first 12 hours of operation. It was estimated that nearly 5000 vehicles had travelled up and down the Southern Expressway on the first day.
However, in recent months fewer vehicles have been seen on the highway. An anonymous source in the Ministry of Highways claimed that since the initial rush the number of vehicles travelling on the road has diminished. He explained that it is now estimated that only 150 cars travel on the road per day. At the average cost of Rs. 350 per car, it is believed that the expressway earns only Rs. 52,500 per day. A substantial difference from the initial Rs. 1 million earned on the first day.
The Nelum Pokuna theatre in Colombo provided Sri Lanka with its first ever state of the art concert hall. Once again the cost was a staggering Rs. 3.08 billion and the funding came from the Chinese government. Of which 60% of the loan was financed as a grant by the Chinese government, while the remaining 40% they had agreed to gift.
Following the grand opening of the multi-billion rupee theatre last month there has only been one show carried out to date; that having been organised by the Royal College Old Boys Union. According to Cultural Affairs Minister T. B Ekanayake it will cost the people Rs. 800,000 to book per show. Little wonder that this complex has remained unused since its opening.
With all the supposed success and heavy earning from previous projects, Sri Lanka is now embarking on a project to construct the largest tower in Asia. The exact purpose of this tower is unknown, apart from telecommunication facilities, a hotel and fine dining. The project is expected to cost Rs. 11.9 billion and of course has been provided to our Chinese friends. The construction will be shared between China National Electronics Import and Export Corporation and Aerospace Long-March International Trade Col. Ltd. However, the plans for the tower will be provided by the Faculty of Architecture at the University of Moratuwa.
With this enormous cost on the country, currently standing at Rs. 391.7 billion, many people will have to question where the money will be coming from to fund these projects and will the benefits over-ride the costs. With the apparent failure of the Norochcholai power plant, confidence in these ventures is at an all-time low.

Investments Outweigh Education
To put the amount spent on the investments in perspective, the government stated in the 2012 budget that they would be spending Rs. 33.25 billion on education. The yearly repayment for the construction of the Hambantota port, assuming it is repaid with a 5% interest over a 20 year period, is Rs. 7.8 billion. This means that currently the yearly cost of the Hambantota project is 23% of the total amount which is to be spent on education in 2012.

20 Comments for “Sri Lanka’s Multi Billion Rupee Commitment – Courtesy China”

  1. Dr Wombat

    Rubbish development for a third world country that really does not need it, when there is poverty all round and people going without food. It will take generations to pay these stupid loans. What a joke.

  2. Thanks for publishing valuable Information and various statistics on this subject.. It is highly appreciated, If we can get unbiased and accurate views/comments on the contents of this article from a responsible person(s)

  3. Who cares? There is no body to challenge Mahinda Rajapakse today. He does what he thinks is correct. He wants to live on borrowed money. Future generation will have to pay what he borrows today. All our politicians are criminals. Only we can blame ourselves for appointing these criminals. God bless our country.

    • Gotta the hero

      Minnal Sri- hats off to you my friend. This is what I have been saying too. One day someone has to pay these off. By that time the Rajapakse’s will be filthy rich living near by a beach in California. Or the bloody scoundrel would have turned Lanka into his family business and his grandson will be ruling the country.

  4. Lal.Fernando

    This is so sad when millions of people do not know when their next meal going to come from.

  5. suvendrini kakuchi

    a consice and well written article. is there a follow-up or series to be completed?
    for example it would be interesting to read the opinions of the local people abt these massive projects

  6. tank

    LOL, how much of the Chinese donation went into Mahinda aiya’s hands????

    • Gotta the hero

      I believe about 20%. All in the United States of America. Where the Money Laundering rules are adjusted accordingly.

  7. Anton


    Wake up Sri Lanka! Chinese are colonizing Sri Lanka. Read what they are doing in poor African countries. Today in Sri Lanka most of the things are made in China, Very soon every thing will be owned by China.

  8. ajith

    politicians suck people blood every day. they start big project one after other. they do not warry about money. now we need a leader can hang all currupt politician.

  9. yoga

    This is how MR has planned to pay back China for protecting his neck at the UN.
    These tax payer’s fees are used to cover up their crimes committed against humanity.

  10. Manoj

    yes..we & our children have to pay the debt for next 20-50 years…at least our children’s children will benefit from these infrastructure development ..yes MR & co will become rich…at least they give 80% back to the country where as before 100% went to politico’s pocket…The development got to happen…money has to come somewhere….Nobody will give low interest rate loan to SL…you need to have AAA rating for that…This $4 billion is nothing compared to $3 Trillion US owe to got to develop other parts of the country …not just Colombo

  11. junta

    this is China’s century. when the time comes o/s bal will be written off.

    have faith in raja!

  12. junta

    china ‘s rise in the world is unstoppble. they are No colonisers, slave keepers or mass murderers!

    • You have no clue of Chinas human right records and how the Chinese government treat their own people. There is so much poverty. They will definitely take Srilanka for a good ride with the help of Rajapakses who in turn are ready to sell the country as long as they are well looked after.

  13. Puran Appu

    You find a small thing and exaggarated it. When carryout big scale projects, undiscovered and anticipated obstacles has to be gone through. UNP is entirly against any developments which attracts customers from india to sri lanka. This is because of Ravi karunanayake, a Chetty, who is an Indian Origin favours success of India not sri lanka. His always trumphant song Sthu Sumudram, Sri Lanka cannot defeat it.

    • What a pity. Have you ever heard about a thing called Feasibility Report of a project ? This report normally reflects the cost with all unforeseen expenses too. However the maximum of 15% could be added for wastages etc.

      All of these big projects have eaten up 100% more than the initial cost. So at least 85% is stolen which works out to Billions of Rupees. Not only the present generation will have to pay for these sins but also a few more generations to come.

  14. Chinese are very selfish business minded people, who are prepared even to sell their own parents to make money. Ideal people for Rajapakses to rob the country under the disguise of development.

    To make matters worse, most of our people are also like frogs in a well. Never understand the reality and where our country heading for.

  15. natasha

    would you please publish some comments about this from some well-known people especially from any politician of various parties and people working with theaters . thanx. :D

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