Nat Assets during Prabhakaran’s and Ranil’s heydays
By Shivanthi Ranasinghe
PM Ranil Wickremesinghe seemed genuinely overwhelmed with the cheque he received for leasing the Magampura Port for 99 years with massive tax concessions to the Chinese. He proudly touted the huge board dressed as a cheque as money he got into the country. Indeed here is a man without a grasp on value of our national treasures. Nor does he seem to realize the minimal impact USD 292 million would have on our economy.
According to a weekly newspaper, "The project company China Merchant Port Holdings will be getting a 25-year tax exemption in addition exemption from the payment of withholding tax for seven years and tax on dividends following approval by resolution of Parliament. Expatriate staff of the project company will also be exempted from PAYE and the company will not have to pay VAT, PAL, Cess, etc for seven years."
According to that report, State Minister of Finance Eran Wickramaratne explained that these exemptions and concessions are granted under the Strategic Development Projects (SDP). However, the present Government is in the process of replacing SDP, which is apparently complicated, with new investor-friendly laws that will lift restrictions on foreign land ownership and encourage more FDIs.
This turn of events is reminiscent of a Jathaka Katha involving a miserly king and his valuer. The king was getting resentful with his valuer for fixing prices the king was reluctant to pay. At this rate, thought the king, the treasury would be emptied, conveniently forgetting the investment made. Whilst mulling thus, he saw from the window a man shuffling along the road.
Impulsively the king summoned the man and offered him the job, perhaps with the hope of influencing the man in his valuing.
This new valuer was uneducated and hence had no knowledge in art, craft, machinery or any of the things that he must invest on behalf of the kingdom. The man hence fixed whatever price that came to his head. Much to merchants' and traders' dismay the valuer fixed prices that failed to reflect the true value. However, they were helpless as he was the Royal valuer and the king was pleased with him.
One day, a merchant came to sell 500 horses to the king. The valuer without even examining the fine specimen in front of him fixed the price of one measure of rice for the entire lot. The merchant had no choice but to part with his horses for one measure of rice.
Naturally upset, he visited the former valuer for his advice. After listening carefully, the former valuer advised him to bribe the present valuer and make friends with him. Then, he instructed the man to return to courts and ask the present valuer the value of one measure of rice.
The man did as he was instructed. When the new valuer was asked the value of one measure of rice, the new valuer in his careless manner pronounced that it was equal to that of the whole kingdom. Luckily for the king, the courtiers laughed and ridiculed the man for his absurdity and advised the king to get his former valuer to reassess all what this man had valued. In the same manner, we need to ask PM Wickremesinghe what the value of USD 292 million is. It does sound like a lot of money, but is it in the current context of the value of our economy and in terms of our national asset? Dr. Nalaka Godahewa provides a very comprehensive answer in Mawbima on 12.12.2017.
Our Port has been leased for a mere USD 1.2 billion, equivalent of Rs. 184 billion. Again, that sounds like a lot of money until it is compared to our annual commitment to our State pensioners, which is approximately Rs 160 billion. Likewise putting in perspective the USD 292 million, which is the equivalent of Rs 44.8 billion, Dr. Godahewa, quoting newspaper reports, noted that due to this government's ad hoc cancellations of projects we have to pay severe penalties such as:
- the Colombo Port City Project, Rs 21 billion
- the aircraft order for Sri Lankan Airlines, Rs 15 billion
- the Hyatt Hotels contract, Rs 1.5 billion
All these total to Rs 37.5 billion. Furthermore, the damage from the Central Bank bond scams is estimated at over one trillion rupees.
The Government's reasons for justifying the lease of our Port is unacceptable. They claim it is due to their inability to pay back the Chinese loan of Rs 180 billion. If that is indeed the case, the Government must explain why they failed to have the property valued, including the artificial island of about 100 hectares that was also thrown in complimentary into the deal. Value addition that comes with property development has been studiously ignored during the negotiations.
According to Dr. Godahewa the total loan obtained is USD 1,265 million, which must be paid with interest by 2036, amounting to USD 1,762 million. By 2016, USD 498 million had been paid and SLPA had not missed a single payment. There is another 20 years to complete its financial obligation. Therefore, Government's reasoning is without basis.
In 2014, the Sri Lanka Ports Authority (SLPA) had signed contracts with 11 investors to pay USD 50,000 per annum for one hectare and this to increase by 3 per cent with each year in business. Thus, SLPA was set to earn almost Rs. 9 billion per year from its 1,200 hectares. Likewise, together with other similar contracts, the SLPA was to earn an annual income of Rs 10 billion.
To put this Chinese deal in perspective, we need to calculate Rs 10 billion with the necessary 3 per cent increments into 99 years.
Throughout history, Sri Lanka was an important economic and naval hub because of its geographical location in terms of sea lanes. Though we are a country rich in natural resources, our main attraction had always been its geographical position. With a landmass of 65,000km2 and a sea area 25 times of that, our economic progress continues to be very much in development projects such as ports.
With the Chinese investing heavily in recreating the Silk Route that is circling Sri Lanka and penetrating to the far West and the East, involving countries as far away as Germany and Russia, the Magampura Port especially has a bright future.
Currently, the Colombo Port is earning an annual income of about Rs 40 billion. The Magampura Port is to be 20 times that of the Colombo Port in terms of capacity after completing its third phase of development, of which two are already completed. In terms of value, it is not only the port itself that must be taken into account, but also the many associated and complementary businesses that were planned alongside it. If there were issues, then tackling it and moving forward should have been the focus instead of giving it away to the lowest bidder.
It is not only the Magampura Port they are anxious to get rid of, but also Sri Lankan Airlines, Hilton, Hyatt and the Lanka Hospitals among other investments and assets. Interestingly, the US State Department has named Sri Lanka as one of the four countries worst affected by corruption and unable to govern itself. Curiously their diagnosis and prescription for a Colombo-based resident legal advisar (not prescribed for the other three countries) comes after their evaluation since 2016.
The reasons are very clear. To gain a political mileage this Government overemphasized on corruption and white elephants. They convinced their voters that mega development was for mega corruption. Having come to power, they themselves are gorging on the State coffers as never before. Instead of good governance, we see this unusual political matrimony's partners unearthing evidence against each other to prevent desertion. Whether it will be an effective blackmail remains to be seen. As Auditor General Gamini Wijesinghe observed last week, all except the rulers are flabbergasted by the State Department's pronouncements.
Instead of good governance and building on whatever best of the last administration, the present rulers are occupied in selling assets and creating conditions to legitimize its sales, importing to "ensure food security", ignoring escalating corruption and bringing an illegitimate Constitution through the backdoor. To put it in perspective, property Prabhakaran destroyed still belonged to the sovereignty of Sri Lanka. Today, the developing properties built with our money for our children will grow before our eyes, but for the benefit of another nation for its children, all for one measure of rice.
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