Lack of transparency in Chinese contracts were the concern – Harsha
Our major concern was the lack of transparency with the way infrastructure projects were originally awarded to the Chinese, Deputy Minister Foreign Affairs Harsha Desilva said in an interview. Speaking to Finance Asia he added that where we could, we were able re-negotiate and restructure the contracts to bring the overall costs down.
Full interview with Finance Asia:
Q: Sri Lanka has undergone some fairly seismic changes over the past year. What would you say tops the list?
A: Our major achievement was re-integrating with the rest of the world. We’re now seen as a credible nation again. Up until that point, we’d been classified with a group of pariah countries and constantly pulled up in front of the UN Human Rights Council because of the way the civil war ended in 2009.
But the election of Maithripala Sirisena as President and Ranil Wickremesinghe as prime minister in January last year started to change all that. We’ve been able to repair our relationship with the West and continue our friendships with India and China.
We’ve come a long way in the space of a year. Right now, we’re in the process of drafting a new constitution. This is being structured to achieve reconciliation with the Tamil minority in the North so all the different peoples who live in Sri Lanka can do so in harmony.
One of the coalition government’s first big steps was suspending more than 30 projects initiated by the previous government on the grounds they were not won through open tenders and huge bribes were paid to the family of [former president] Mahinda Rajapaksa. Many of these contracts were with Chinese firms. Did this harm Sri Lanka’s relationship with China and how successful have you been in trying to restructure them?
The past year has given us space to re-evaluate all the outstanding contracts and by and large many of the issues have been resolved to the benefit of both China and Sri Lanka. The biggest project, which got suspended, was the $1.4 billion Port City development in Colombo.
This was being financed with Chinese money. The government ordered an environmental impact assessment and after that was released, there were a number of public discussions, which led to a raft of revisions. It now looks like the project will go ahead with an announcement expected shortly, possibly before the beginning of March.
Our discussions with the Chinese concerning the various infrastructure projects have enabled us to cement the relationship between our two countries. Where we could, we were able re-negotiate and restructure the contracts to bring the overall costs down.
Our major concern was the lack of transparency with the way they were originally awarded.
So have all the stalled projects been re-started?
No not all of them. There are still some concerns. The Northern Expressway project from Colombo has not been re-started, for example. This is a very important project because the expressway will form a backbone up the country from Colombo to Jaffna in the north with an extension to Kandy, our second largest city.
When we were in opposition we’d been led to believe it was all set for implementation. But that was not the case at all and there are multiple issues, which remain to be sorted out.
What about the Southern Expressway from Colombo to Mahinda Rajapaksa’s hometown of Hambantota on the other side of the country?
The government announced this project would re-start in January. It was already about three-quarters complete and now there is only one final 96-kilometre stretch left to finish.
The big challenge we have in the Hambantota area is what to do with the white elephants which were built there. We spent $1.3 billion on a port and $220 million on an airport that no one uses.
I thought the port was being used and that a Chinese company might put in a ship repair yard there?
No, that’s not the case. The ports minister is going to call for fresh proposals to find new tenants for the port at the very least. That is a viable project.
What are the government’s main objectives for 2016?
The overriding objective is to make sure the new constitution is written. It’s essential because it will bind all the different ethnic groups together and build a national identity we can all be proud of. When we do that Sri Lanka will become a place that investors want to come to and it will help us to meet our development objectives.
Isn’t there a danger that by focusing so heavily on constitutional change the government will not give the economy the priority it needs?
Yes that’s a challenge we’ll need to meet. But by putting a new constitution in place we will do much to address issues relating to corruption and governance that have held back investment in the past.
Under the previous government exports fell heavily as a percentage of GDP from about 35% to 15%. At the same time our commercial debt grew rapidly.
Before Rajapaksa’s time in office, Sri Lanka was funded through soft loans and concessionary loans. But that changed and he took on short-terms loans and built investment projects like the ones I mentioned in Hambantota, which do not generate the revenues needed to service the loans.
Economists frequently say Sri Lanka needs to do more to improve tax collection to manage its budget deficit. What’s your view?
Yes they are correct. At 12% of GDP our tax revenues are among the lowest in the world. That is a structural problem that needs to change.
The other criticism leveled at the government concerns a lack of focus. While the government has been widely praised for its desire to listen and take on board many different opinions, some commentators worry that it will not be able to formulate or execute a coherent strategy.
I have every confidence in the government. Our prime minister has come up with a very detailed medium-term strategy for the country. He has very clearly articulated the steps Sri Lanka needs to take to become a global player and position itself at the heart of the Indian Ocean by turning itself into a logistics hub etc.
If you look at what we’ve done in 2015 then you’ll see we have delivered already. When the two coalition parties came together everyone was very surprised and skeptical. They thought we’d never be able to work together or make it last, but we have forged a national consensus. That’s a remarkable achievement in itself.
On the economic front, it will take some time to turn things round. These changes don’t happen overnight, but we are moving in the right direction now. There are multiple external challenges to deal with including the state of the global economy, which we cannot control.
But are very clear about the issues we need to address internally and committed to achieving them, Finance Asia reports.
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That’s an excellent and balanced viewpoint.
There was no transparency in awarding contracts to Chinese Companies and their financiers who were charging exorbitant interest rates.
The Chinese funded projects were not based economically and socially beneficial outcomes.
The roads that we build should spur economic activity that benefits the GDP. Harbours and Airports that we should also be productive and not be used as paddy storage.
The Katunayake International Airport has adequate capacity to meet with demand for at least a decade. As a risk management measure where the KIA has to be shut for a short period of time either due to weather or terrorism, the Trincomalee airstrip should have been developed to cater to short term demand for large bodied passenger aircraft. At the same time, developing the Trincomalee Harbour would be beneficial in the long run providing access to the communities in the north-east and east. These two measures would cost maybe a tenth of what the southern infrastructure had cost.
Good on you, Harsha, wish we had more of your calibre in Parliament.
Hi Nocholas,
I think it is time that the current regime stop blaming MR. They have been complaining about any thing and every thing that went wrong during this period that they have been in power on MR.
What we want to see is what these jokers can do going forward. Not harping on MR and his peolpe’s faults.
First they rubbished the Port City project and now they are going ahead with it.
Paddy storage at the Hambanthota Airport was a bright idea of spite by the current regime.
Countless number of the MR clan has been taken in to custody just for revenge but no one is still serving a prison sentence as yet although there was a lot of talk about how much proof these jokers had to put the MR clan away for good prior to the elections. “All fart and no shit”
Giving all government servants ( majority lazy,rude, unproductive workers in the country) a pay rise of RS 10,000 a month and then realize a few months later that they had no money and the reason for no funds was of course MRs clan stealing. Don’t you think they ought to have checked their cash flow before they give such generous increases.
I am also glad that you have mentioned terrorism because they will be coming back with the backing from the western world and the Sri Lankans who still want to lick the white mans a***. God help Sri Lanka when they do because MR or Gota won’t be there to save our country. MY3 was afraid to speak up for more than 8 years knowing that MR was stealing all the time he was with him so how can he face the tigers this time around. You can forget Sarath Fonseka I think his use by date is gone. He does not even know if he is responsible for winning the war or not.
Mahinda bashing has reached Law of Diminishing Returns! It is not an effective ‘manthra’ anymore. Fols start to ask what MY3 & RW government has done so far. As Fernando already stated putting Rajapakses in prison and releasing the not going to achieve much leverage. It is just like arresting Indian Fishermen releasing them. We also heard that Shiranthi Rajapakse was summoned questioned release (though there is ample evidence to put her behind bars but she is female!!!). Mr. Fernado the only reason SF is inside the parliament because he is a bitter enemy of MR & Gota. Yes, Mr. Fernando you right; I don’t know the wisdom of storing paddy and removing it? Again, criticizing the Chinese port city project and eventually giving a Green light to it. These are all just gimmicks I would say.