The Sunday Leader

Development Projects Will Continue Under A UNP Government – Eran Wickramaratne

Several Chinese funded projects in Sri Lanka including the Port City Project came to a standstill as the interim government temporary suspended those projects based on various concerns especially related to corruption allegations about high level of commissions involved. This has also created the impression that the new government is being hostile towards Chinese companies and Chinese funded projects. However speaking to The Sunday Leader, Deputy Minister of Highways and Investments Eran Wickramaratne said that the government has no intention of being hostile to Chinese funded projects and it is rational for the UNP government after the election to work with China as they have continued to play a big role in investments in Sri Lanka – and the relationship is mutually beneficial.

Following are excerpts of the interview:

By Waruni Karunarathne

Q: There is a general feeling that most of the development projects have come to a standstill. How do you respond to that? What are the development projects the new government has initiated?

A: We are a new government and a temporary government. It takes time to initiate projects – we have focused on continuing some of the projects that have been started. For example we are having discussions about the Shangri-La hotel project in Colombo with the management to smooth out their investment. It is also a mixed development where the housing project is already completed and the condos are being sold at the moment. The ITC hotel project is also going ahead. John Keels is also doing a mix development including a convention centre which continues. Our focus has been to help investors to implement the decisions they have already taken. Since we are a temporary government, it makes more sense to make sure those projects continue.

When it comes to infrastructure like the road projects, our intention is to complete all the road projects that had been commenced by the previous government. We do not think that we would have made some of the same decisions that they made – they have made some poor decisions in terms of economic and financial returns. Our priorities would have been different. However as a government we are committed to honouring the contracts that have been undertaken. But if we think there has been over expenditure and over estimation, those issues are being taken for discussion – and we are trying our best to see what concessions we could get out of the existing agreements.

There are some projects like the China Port City which is slightly a different situation. During the election campaign people expressed concerns over certain projects and with reference to the Port City project the concerns they had was whether it will create some environmental damage. Therefore, we are bound in situation like that to review the project. Right now it is being reviewed. As the former Chief Executive Officer in National Development Bank, I can tell you that there are no projects with absolutely no problems. Every project has some problems. Therefore when the problem is known you have to look for cure. Most problems have some cure. We will first look for cure. Those are not political decisions – these decisions should be taken by the experts in the field. At the moment, with reference to the Port City project, they are looking into the environmental impact assessment and the traffic impact assessment. In extreme situations where the problems cannot be cured then we will have to look for another solution.

 

Q: The Previous government was accused of corruption especially in terms of high level of commission taken by various parties related to the development projects that they undertook . What is the state of investigations into such projects and what decisions have been made related to those projects?

A: Earlier government basically went through a route of awarding contracts on unsolicited project proposals. Unsolicited project proposals are not a new phenomenon but unsolicited projects lack transparency and you are unable to fix the market price for that. When you cannot fix the market price, difference between the market price and the contracted price is the corruption premium – which means that could be distributed to different people and to different interested parties which will include normally politicians and high level officials. That was the basic problem with the entire model of the previous government. Now if we receive an unsolicited proposal we have to basically see how we can turn it into a competitive proposal. There are methods in doing that. The difference between now and then is that we are creating a more transparent environment. For example if we are bidding out the central high way, we will have discussions with multi lateral agencies and other soft loan windows to see if we can get a very favourable financial term. Some of these contracts will be open bidding where anybody can bid. Some of the contract will be tied bidding. Let’s say if you get a facility from Japan, the contract could be tied to contractors from those particular geographical location. That is not unusual either but you can have competition. The earlier government did not adopt such market practices. Therefore we can very reasonably conclude that there were corruptions. The question is now about proving who benefited from those corruptions. As we all know solving white collar crimes is more complicated than solving other crimes. The mechanisms are now being put in place. Investigations are under-way. Some people are being questioned. Some people have been arrested. Some are being held – by the courts of the country not by the political establishment. There are unanswered questions and the judicial process will take over. I think it is a matter of time before corrupt people have to pay for their wrongs.

 

Q: If the China Port City project is to be continued how would you address the concerns related to the project? If the project is to be discontinued where do you stand in terms of the financial agreements reached with the Chinese company?

A: We do not know yet. As I said the project is being reviewed right now. The experts will have to tell us if those concerns are real. If the concerns are real, the next question will be to look into the methods to mitigate it. We will obviously call on local and international expertise to arrive at those decisions. We are doing everything in a very transparent manner. China and Sri Lanka have had a very long and historical relationship. We have had fifty to sixty year strong diplomatic ties like trade agreements, rice pacts etc. Subsequently, Chinese have made donations to this country. China is one of the emerging economic powers in the world. As part of the global economy it is important to the Chinese government as much as it is important for us that whatever the project done here is going to benefit the Sri Lankan people. Your question is a hypothetical question. If such a hypothesis actually materialises given that we have done everything in a transparent way, we will have to sort the issue through a conversation with the Chinese.

 

Q: Prime Minister Ranil Wickremesinghe has said that the government will continue development initiatives with minimal corruption and will seek financial assistance from Japan or the Asian Development Bank (ADB) for some projects including the Colombo – Kandy highway. How is that working out?

A: If you look at hard infrastructure like roads the financial return is low. When the financial return is low we cannot attract the private capital. Private capital comes only if the return is high. If we take market borrowings for constructions, we really cannot support it in terms of the financial model as we will have to pay high interest rates. When looking at projects like roads where there is only long term return, the Prime Minister is absolutely right to look at multilateral agencies, other institutions and soft loan windows because we will get it at low interest rates which means debt burden will be much lower for the country. Returns are going to come after a long period of time.

 

Q: Why does the government seem to be hostile towards mostly Chinese projects in Sri Lanka?

A: If that impression has been created I would like to set the record straight by saying that there was no intention to be hostile to Chinese companies. We need to correct that if that impression is there. In the heat of an election campaign with all sorts of corruption allegations many things are being said. I do not think that having corruption in commercial transactions is anything new. That cannot be confined to a country. If it’s there it needs to be dealt with. If you have corruption in commercial transactions, we cannot go around the world blaming Indians, Chinese, Europeans and Americans for that matter. We have to look at it internally and correct ourselves. The anti-corruption drive is basically to clean the system. We should be blamed for it and we need to take responsibility for it. I hope that the Constitutional Council will be functional soon. If the Constitutional Council is functional and commissioners are appointed to the anti-bribery Commission, some of the investigations done will lead to persecution immediately. I think the opposition is scuttling the Constitutional Council primarily because they do not want the Anti-corruption and Bribery Commission to function . Therefore they are finding all sorts of excuses.  In the 10 members Constitutional Council, we always wanted only 3 politicians – Speaker, the Prime Minister and the Leader of the Opposition. We did not want any MPs or any other politicians but civil society to participate in it. However the opposition insisted through amendments to the 19th Amendment that the parliament needed control over it by appointing MPs to the Constitutional Council. We had to agree to their amendment because we are a minority government. Now when the people are being proposed the opposition comes up with lame excuses – because they have fear if an independent commission actually begins to work then the public will see what is really wrong.

 

Q: In an interview with CNN Money, Finance Minister Ravi Karunanayake said, ‘the Chinese companies used the opportunity of a corrupt regime to crowd out other companies coming in … There was no even playing field’. How valid do you think this statement?

A: I wouldn’t want to say it is only Chinese companies as it is unfair to put a racial connotation into it. I look at it this way. Businesses could be corrupt. They look for opportunity if a government is corrupt. If anybody else had had that opportunity they would have done it too. I think it is to do with business and human nature. I do not think that has anything to do with a particular nationality. There may have been a preponderance of certain kind of companies coming from one particular country in this particular situation.

 

Q: Deputy Chinese Ambassador to Sri Lanka Ren Faqiang has said that regardless of queries over certain Chinese funded projects, China continued to be Sri Lanka’s largest provider of Foreign Direct Investments (FDI’s), preferential loans, communication equipment and infrastructure development. If the UNP government comes to power after the next general election, will you let China be the biggest development partner of Sri Lanka? And how will that work?

A: The reality is that economy of India and China is growing. We are an Asian country. Basically the Chinese have their surpluses and have made their investments around the world and it will only be rational for us to make use of that opportunity in attracting those surpluses. Therefore I could see a mutually beneficial relationship. On the other hand, India is our closest neighbour and cultural partner – we have lots of ties with India. The economy of Sri Lankan and Indian has been integrated for over 1000 of years. While China plays a big role in investment, India plays a big role in trade. If we look into the future, Sri Lanka has lot to gain by developing more comprehensive economic partnerships with them. Sri Lankan businesses have a legitimate fear that it is difficult to do business with India because the Indian system with the central government and states creates a lot of non tariff barriers. Therefore even though we agree on the tariffs we might have problems with the non-tariff barriers. That is a legitimate concern and we have to work hard with Indian authorities in minimising those non tariff barriers and then the opportunity for the relationship with India to grow is also tremendous.

 

Q: Previous government gave priority to big projects like Hambantota harbour, Mattala airport, many road development projects and Colombo beautification. If the UNP formed the government after the next election, what is the area of development you would focus?

A: One issue I have is how it is being phrased in such a way that people often equate development with projects and infrastructure. When you go to the village the ‘development’ comes down to roads. This is a tremendous fallacy. When we think about development our focus will be on individuals and family unit. Even during the interim period of this government, we have increased the income of the family unit. We have brought the price of food and energy down. We have brought the cost of living down. We have increased the salaries of the government servants and it is having an impact on the private sector. Some private sector salaries have also come up. Altogether, the household income has come up. When the purchasing power of people increase, it increases people’s freedom. People are making the choices. In terms of development we want to develop the individual.  Earlier they built roads but our emphasis will be on building the public transport system. Not everybody uses the express-way. Only a certain set of people are benefited from that. Development has to be seen in terms of what is the benefit it brings and to whom. I redefine development as something that brings disproportionate benefit to the low income groups in society. Public transport will bring disproportionate benefit to the low income groups in society than the highways. Once we form the government after the next election, the other hard infrastructure that we will focus on is building houses where people in this country actually own their lands and houses. They will become market participants because their individual balance sheet will go up because of their wealth creation and they can trade in that asset. There will be a whole dynamic change. The major shift will be the investment on soft infrastructure where we will basically invest in people. Education will be our prime focus. At present Sri Lanka is investing the lowest amount on education even compared to the South Asian standards – we have only 1.5 of GDP for education. We are a South Asian country with high literacy and the highest living standard but we have not been investing in our biggest asset which is a crime. We want to double the investment as quickly as possible in education and our ultimate goal is to allocate at least 6% of GDP for education. It means giving every child a quality education. It is no more about getting a good school it is about improving standards of all schools. Students after O/L and A/L need to have a higher education – it is possible to give every student a higher education. Right now we are sending our young mothers to the Middle East to work for a very low income in unprotected environments when they can earn lot more if they had the training and skills. We have to take this a social responsibility to invest in developing skills of the individuals. We have already started some discussions with the Germans who have succeeded in the dual education system where we expect everybody to have either skill development, professional development, university education or a technical education to get an income or a job. Then we will also look at investing more in better medical care.

 

Q: Among many massive projects undertook by the previous regime, project such as Mattala Airport, Hambantota Harbour and Hambantota Cricket stadium are incurring losses as they are not commercially viable – how does the UNP government expect to make these profitable?

A: The Hambantota Magampura Harbour has a basic economic logic to it. I think that the return on that can be improved. The question is about initially investing carefully in stages as we get our return. That has prospects and we will basically try to maximize that. The Mattala Airport is much more problematic. It was a very poor decision and a bad choice. When I say poor decision and bad choice, it is all time bound. 20 year from now some may find it as a good decision. Economic and financial decisions are time bound. We have to look at it in a particular context. Now it is already there and there is no point grumbling about it. We have to regard it as a sunken cost. We have to look at different ways in which we can make returns. One of the emphases in the investment side is turning Sri Lanka into a logistic hub. There are some suggestions and proposals and we will work on it and see how it will give benefit.

2 Comments for “Development Projects Will Continue Under A UNP Government – Eran Wickramaratne”

  1. its too late now, UNP has condemn Chinese lenders during and after the election, there was massive development projects running during previous regime, if there were trillion $ these lenders won’t continue lending, they won’t take risk if there is no economic gain to the borrower there will be risk in loan repayments. Even here in Australia the government make a lot of commitment to attract investors from China. Your government came to power spreading lies codeming massive developments achieved after the end of war in Sri Lanka

  2. Eng.M.V.R.Perera

    To develop our country we need a National Energy Policy to give us least cost electricity and for our representatives to realize the importance of electricity all those who are getting free electricity should be made to give up free electricity and the average per month over last 6 months period and the units consumed should be made public. There should be a discussion on a National Energy Policy to give us least cost electricity with the stake holders such as the CEB, PUCSL,, Institution of Engineers Sri Lanka , Institution of Engineering and Technology Sri Lanka Branch,the Central Bank and the Chamber of Trade and Comers

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