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Double Jeopardy

  • Construction Project Mooted At Double Cost On Hold –  Part II

by Wiraj Silva

A model steel house in Jaffna

The Sunday Leader exclusively reported last week how the government is contemplating on putting on hold a highly controversial US$ one billion housing project earlier speculated to be given to ArcelorMittal and to go for fresh international bidding.

“After CANC Chairman and Minister D.M. Swaminathan’s comments to the effect that the project had been awarded to ArcelorMittal S.A. of Luxembourg, serious concerns were raised by many parties both within and outside the government. Thereafter, the Cabinet Committee on Economic Management (CEM) made strong recommendations to the Prime Minister, that under good governance principles, for which this government stands for; this should not be given to one party but be split and sliced into several projects and fresh round of international competitive bidding (ICB) be held to attract a wider number of parties,” a high-ranking National Policies and Economic Affairs Ministry official told The Sunday Leader last week.

In addition, various government MPs and ministers, opposition politicians including Opposition Leader and Tamil National Alliance MP R. Sampanthan, Parliamentarian M. A. Sumanthiran, the Northern Provincial Council (NPC), and good governance activists raised grave concerns about the project being given all out to ArcelorMittal.

In addition. a highly-renowned panel of top two civil engineers and a renowned architect attached to the University of Moratuwa states that a staggering Rs. 500 million could be saved in the event an alternative construction method such as block wall houses is utilized.  (http://www.thesundayleader.lk/2016/09/19/double-jeopardy/ )

Also independent social/political activist Muhammed Fazl filed a Fundamental Rights Application stating that his rights as a citizen of Sri Lanka has been violated as the awarding of the tender to ArcelorMittal lacks legality and the matter is to be called before the Supreme Court on October 14.

The First Respondent is D.M. Swaminathan Chairman – Cabinet Appointed Negotiation Committee (CANC) for constructing 65,000 nos. houses for conflict affected families in Northern and Eastern Provinces of Sri Lanka and Minister of Prison Reforms, Rehabilitation, Resettlement and Hindu Religious Affairs whilst Ministry Secretary V. Sivagnanasothy is the Second Respondent.

Prime Minister Ranil Wickremesinghe is the third Respondent whilst the other members of the Cabinet are cited as 4-48 Respondents. Sumith Abeysinghe, Secretary to the Cabinet Office of the Cabinet of Ministers is cited as 49th Respondent whilst ArcelorMittal CEO Lakshmi Mittal and ArcelorMittal of Luxembourg are respectively cited as 51 and 52nd Respondents.

The Petitioner states that he makes this Application in his own right and in the rights of the 65,000 homeless conflict-affected families in Northern and Eastern Provinces of Sri Lanka and in the public interest, with the objective of safeguarding the rights and interests of the general public of Sri Lanka and securing due respect, regard for and adherence to the Rule of Law, the Constitution, which is the supreme law of the land, and with a view to protecting the fundamental rights required to be respected, secured and advanced.

 

Background

The Petitioner states that he came to know from the media that existence of a contract to build 65,000 houses in the Northern Province with an International company by the name of M/s Arcellor Mittal three weeks ago (at the time), being the investigative writer that he is, was naturally drawn to many irregularities and inconsistencies in the deal and that which should be absent in a transparent contract of such magnitude.

The Petitioner states that taking few steps further from my initial skepticism and investigating further, the following averments  are what convinced him to seek legal recourse and in the interest of unsuspecting, vulnerable and the downtrodden section of the population.

The Petitioner states that he perused the Daily News item dated 11.04.2016 on or around 14.04.2016 which is titled “Mittal gets Jaffna Housing project” by Zahrah Imtiaz, the columnist, wherein it is stated that said Quote, “There is no question about awarding the tender to another, the minister said”, referring to Minister D.M. Swaminathan quelled rumours surrounding the tender for the 65,000 houses. And he has further emphasised that the Cabinet has approved in February 2016.

The Petitioner states that he perused the official announcements of the Cabinet in the website http://cabinetoffice.gov.lk/cab/ to trace the record of this approval and finds press briefing cabinet decision taken 2015-09-22 on submitting Cabinet paper for housing project and calling expression of interest and that Cabinet has approved it. The Petitioner states that he also perused the official announcements of the Cabinet on the website and the website of the First Defendant’s Ministry – http://resettlementmin.gov.lk to trace the record of any Cabinet approval to grant to 51st or 52nd Respondent the contract, but nothing is available in the links in the subsequent links.

The Petitioner further states that he also perused the official announcements to trace the record of tender calling on the project which has been granted to 51st Respondent the contract and found Invitation of Expression of Interest (EOI) calling for reports for delivered to Tender box on or before 28.10.2015.

The Petitioner states that if the Cabinet has approved calling tenders on 22.09.2015, the P6 could have been published only on date after that which also gives deadline within 30 days for such massive project based research and field study highly impossible and doesn’t provide greater participation of constructing firms.

The Petitioner states that he also perused a news item on dailymirror.lk dated 13.04.2016 which revealed minister opined in his revelation to question posted to him that, “Reluctantly though, we have to accept one fact which is that local contractors or investors are not capable of undertaking a massive project of this magnitude. That is why we offered the tender to Arcelor Mittal, which is a globally recognised as a multinational construction company. We also want to finish the task within the targeted time and resettle 65,000 families in two years,”; this shows that there was no any tender interviews suggested earlier and that it was all an eye wash. The public outcry and negative comments were evident against the move and they represent public interest views as well.

 

Non-Disclosure of CANC Negotiations

The Petitioner states that he also perused a news item on sundaytime.lk dated 17.04.2016, which revealed that the Ministry of Resettlement proposes to hand over the US$ one billion contract to build 65,000 steel houses throughout the North and East to 51st Respondent ArcelorMittal despite widespread protest from local civil society organisations and others.

 

Expert report

The Petitioner states that he also perused a published preliminary report of Prof. Priyan Dias and Dr. Rangika Halwatura (both engineers) and Architect Varuna de Silva on the feasibility of the project. They are experts attached to the University of Moratuwa who have found after a detailed technical study that in its conclusion points out:

1. The steel houses suffer from the following key drawbacks compared to the block wall houses: (i) inadequate foundations; (ii) insufficient roof support; (iii) risk of steel corrosion despite the coatings provided; (iv) poor ventilation; (v) absence of hearth and chimney; (vi) poor or non-existent capacity for extension or repair; (vii) much shorter lifespan; (viii) unlikely to create a sense of ownership; (ix) very unlikely to foster the local economy and generate employment; (x) at least double the cost.

2. The steel houses have the following advantages over the block wall houses: (i) reduced consumption of natural resources, primarily sand and timber; (ii) reduced erection time; (iii) a reported financing arrangement for their construction.

3. In the above context, it is clear that the way forward is to construct block wall houses, while finding ways to overcome any disadvantages they may have (e.g. finding new sources of natural resources; alternative technologies to reduce natural resource usage; arranging financing).

 

Serious concerns

The Petitioner also states that he also perused a Colombo Telegraph news item titled “Sampanthan Fires Salvo Against Controversial Mittal Housing Project: Writes To Maithri And Ranil” online by the editor where in an interview the Opposition Leader R. Sampanthan laments, “The cost of each house is estimated to be Rs. 2.1. million. This is 2-3 times more than the more environmentally suitable, durable, permanent brick house provided under the Indian housing scheme which provided 50,000 houses in the North. This fact is of greater concern in a context where the housing need exceeds 130,000 and the Government is offering 65,000 – half of that number,” Sampanthan reportedly said in his letter to the President and the Prime Minster. Therefore, the Petitioner is certain that the deal is taint and that it is a part of good governance.

The Petitioner avers that as per web reports the previous business dealings and conduct of the 51st Respondent company is scandalous, “It is amazing how such a significant number of companies abused nearly the entire European construction market for such a long time and for such a vital product. This was almost as if they were acting in a planned economy. Fines were particularly high for the firm owing to two prior convictions. And he urther states that due to slum in steel market the 52nd Respondent attempts to dump stocks in Sri Lanka.”

The Petitioner states that he also perused online news columnist DBSJeyaraj.com wherein Sumanthiran MP had raised his serious concerns and that he had requested the 1st Defendant by a letter about the un-transparent deal and he states there, “it is important that such construction process is undertaken in a transparent manner with the present and future wellbeing of the conflict-affected families in mind”.

The Petitioner states that the Constitution recognises duties both on the part of parliament and the President and the Cabinet of Ministers as well as duties on the part of “persons”. The Petitioner states that that sovereignty in the people is inalienable. (Article 3) Being a representative democracy, the powers of the people in the country are exercised through persons who are for the time being entrusted with certain functions.  The constitutions states that the legislative power of the people shall be exercised by Parliament, the executive power of the people shall be exercised by the President of Sri Lanka and the judicial power of the people shall be exercised, inter alia, through the courts created and established by the constitution.

 

Cause of Action/Violation of Fundamental Rights

The Petitioner states that the refusal and or denial of the beneficiaries by the 1st or anyone or all of the respondents, who are representatives of the beneficiaries of the proposed houses and who have been entrusted to disclose information about plans to accommodate in such houses upon considering their views and consulting experts on suitability of housing intended in the given socio eco economic, cultural and environmental context, violated the constitutional right to freedom of expression, speech of the citizens and beneficiaries, because the petitioner acts in the public interest in seeking more information on the proposed transaction.

The Petitioners state that unless Your Lordships’ Court makes interim orders restraining the unlawful unconstitutional acts sought to be prevented through this application, grave and irreparable loss, harm, damage and prejudice would be caused to the fundamental rights of the petitioner, beneficiaries and the people of Sri Lanka, as the 1st Respondent will continue to grant and the 51st Respondent is about to start operations.

The Petitioner states that unless the infringement of the fundamental rights sought to be redressed through this application is prevented through appropriate interim order(s) by Your Lordships’ Court until the hearing and final determination of this application, the Rule of Law itself would be eroded.

In view of the grave, urgent need to have the grievances addressed by Your Lordships’ Court, this Application is made notwithstanding the constraints of the limited time and material available to the Petitioner at present.

Accordingly, the Petitioner respectfully reserves the right to furnish to Your Lordships’ Court such further and/or other material, developments, facts or circumstances as may transpire and/or appear relevant to the subject matter of this Application as well as to add such parties and/or effect any amendment of pleadings as may become or transpire to be necessary.

 

Reliefs prayed for

The Petitioner prayed for the following reliefs and remedies –

a)  Leave to proceed in the first instance and issue notices on the Respondents

b)    Declaration that there is an imminent infringement of Petitioner and beneficiaries’ Fundamental Rights guaranteed under Articles 10, 11, 12 (1) (2) (3), 14 (1) (a) and 14 (1) (h) of the Constitution of the Democratic Socialist Republic of Sri Lanka by the conduct of the Respondents as set out in the petition

c)     Grant interim relief in the first instance directing the 1st respondent to desist from entering into any contract relating to the Constructing 65,000 Nos. Houses for conflict affected families in Northern and Eastern Provinces of Sri Lanka with 51st and or 52nd Respondent, up to the time

(1)   A comprehensive exploration and study relating to the (a) suitability (b) feasibility of steel houses in Sri Lanka is made by the 33rd respondent, Minister of Housing and Construction, in consultation with the National Housing Development Authority of Sri Lanka and the State Engineering Corporation of Sri Lanka, and the results of such exploration and study are published:

And

(2)           Any project proponent whomsoever obtains the approval of the Cabinet according to law in transparent and accountable manner, including the decisions of the superior Courts of record of Sri Lanka.

d)    Declare that the 1st and or all or anyone of the Respondents have violated the Petitioner’s Fundamental Rights guaranteed under Articles 10, 11, 12 (1) (2) (3), 14 (1) (a) and 14 (1) (h) of the Constitution of the Democratic Socialist Republic of Sri Lanka by their conduct as set out in the petition.

e)     Quash the Decision by the 1st Respondent to grant the contract to 51st and or 52nd Respondent the Constructing 65,000 Nos. Houses for conflict affected families in Northern and Eastern Provinces of Sri Lanka.

 

Previous scandals of ArcelorMittal

There seem to be significant number of anti-competitive, price-fixing, collusion and other unethical activities ArcelorMittal is alleged to have engaged in.

Just last month, ArcelorMittal was fined SA Rand 1.5 billion (roughly LKR16.17 billion) – the biggest fine imposed by South Africa’s Competition Commission on a single company for anti-competitive behaviour in SA’s history. The commission said Arcelor had admitted to its involvement in long steel and scrap metals cartels, but denied allegations of collusion in the flat steel and wire rod markets.

Mittal’s acquisition of the Luxembourg-based Arcelor, which was valued at €18bn (£15.2bn) in 2013, was being investigated in the French courts at the time over claims of alleged criminal conduct in an escalating legal row with hedge funds and other investors. The inquiry relates to a breach of contract claim initially brought by investors in the civil courts relating to Mittal Steel’s €26 billion acquisition of rival Arcelor in 2006, the Telegraph of UK reported.

In the second half of 2006, when the second largest manufacturer of large diameter pipes in the world – India’s Welspun Corp – were sued for providing substandard; the company charged Arcelor Mittal for supplying defective steel.

Bloomberg reported in 2013 that ArcelorMittal and its three subsidiaries based in Italy, Belgium and France, were among steel producers fined on June 30 for fixing the prices of steel used to reinforce concrete for 18 years until 2002. However, the world’s biggest steelmaker managed to get the fines cut down to 45.7 million euros ($65 million) from 230.4 million euros in an appeal.

 

Ministry Refutes Allegations

Sarasi Paranamanna, Media Secretary to the Minister of Prison Reforms, Rehabilitation, Resettlement and Hindu Religious Affairs writing to The Sunday Leader averred that the article titled – Double Jeopardy: Construction Project Mooted at Double Cost on Hold, which appeared on 18/09/2016 ‘biased and contains mere allegations which cannot be proved by substantive facts’.

“We also wish to bring to your notice that the said article reflects poor journalism as it does not present a balanced view and only contains the allegations of a social media activist. The reporter of the said article has only taken the effort to express the concerns of the Petitioner of the said case and not the views of the Respondent. It should be stressed that this social media activist is also commenting on a matter that is currently before the Supreme Court, and we should also like to point out that there is a pending Contempt of Court case against the said social media activist before the Supreme Court for distorting facts with regard to the 65,000 housing project.

“As per our right of reply, we specifically refer to the erroneous contents of the article as quoted by the social activist referred to this article. The said social activist states that the 65,000 housing project is an insult to the local construction industry and he questions in the article as to why the tender was not awarded to a consortium of local construction companies. During the tender procedure, a consortium of local companies did not come forward with the prescribed requirements. 35 companies submitted expression of interest to the technical evaluation committee and the Cabinet appointed negotiation committee evaluated the expression of the interest based on the approved criteria. 15 companies pre-qualified for the bid after the evaluation of Expression of Interests submitted by 35 companies. Of the 15 companies, only 13 companies paid non-refundable deposit to collect RFP. Of 13 companies, only eight companies submitted RFP proposals.”

“Please see annexure one attached herewith as it contains the assessment criteria for selecting the bidders since the article, as quoted by the social media activist is alleging that the tender procedure is skewed.

In response to the concerns raised by the report prepared by a panel of experts of Moratuwa University, we wish to state that the said report was not even officially authorized to be prepared. Also in response to the conclusions of this report, we wish to point out the following excerpts of the report compiled by a panel of experts of the University of Peradeniya, which was an officially authorized report.

The report of Peradeniya University states, “ the measurements of temperature and humidity inside pre-fabricated metal houses and conventional block work houses showed no major difference. (Paragraph 3.2 of the report).

According to the report, the cost of a pre-fabricated house that will be constructed with other facilities such as solar power connection, toilet facilities, furniture etc., will not deviate much from the cost of a conventional house with the same facilities. The assessment report further notes that pre-fabricated houses are much favourable when considering the amount of local material, labour and time that have to be invested in constructing conventional houses. Due to the large number of houses that have to be constructed within the span of several years, the pre- fabricated houses seem a feasible option because according to the report, pre- fabricated houses cause less environmental impact, less contribution to soil erosion, material depletion and less use of local timber.   (Paragraph 4 of the report)

ArcelorMittal, explaining about the concern raised with regard to corrosion has stated that the steel panels are manufactured using ArcelorMittal’s latest patented metallic coated steel (ZM Evolution and Magnelis), which provides enhanced anti corrosion properties.

Further, the company has stated that they will install in each room passive ventilation below the roof in order to enhance air flow and that considering the local usages, they will study the implementation of a concrete cooking bench aside from the house even though using gas is proven to be cheaper than firewood as it is costly to harvest.

The full report is available on the Ministry website as well for your perusal. Hence we regret that your newspaper has carried this article without clarifying the allegations from our end. If it was done so, it would have been a balanced and accurate portrayal of facts.

 

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Writer’s note :

Although the writer took so much of efforts to get in touch, neither the Minister nor his Media Secretary found time to answer or call back the numerous calls given by the writer.

The writer would like to find answers for the following, in the interests of the public:

Although the Media Secretary states that ‘the full report is available on the Ministry website as well for your perusal’, why is it difficult to find the University of Moratuwa report in the Ministry website and only the University of Peradeniya report online?

When the Minister announce on 13.04.2016 that they had already offered the tender to ArcelorMittal; what was the purpose of the report of the University of Peradeniya published only on 2 May 2016?

What is the Minister’s comment on the opinion by the University of Moratuwa that the project can be implemented at around Rs. 500 million, just half the cost of the ArcelorMittal contract?

What are the concerns raised by the Cabinet Committee on Economic Management (CEM)?

Why has the University of Moratuwa report opined the project ‘to be very unlikely to foster the local economy and generate employment’?

What can you say about the global unethical practices for which Arcelor has been charged for?

Who is the local partner for Arcelor? Why wasn’t the name/s made public, since this government came in the name of safeguarding good governance, democracy, rule of law and transparency?

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