Saturday, June 4, 2016

Back to the old days and old ways

Editorial from Sunday Times

The opening of the Shangri-La Hambantota Resort this week was a grand affair attended by President Maithripala Sirisena, several ministers and other VIPs. A notable absentee was Mahinda Rajapaksa, the former President, who was instrumental in securing investment for Sri Lanka from the renowned Hong Kong listed group.

It did not escape attention that Mr. Rajapaksa was also missing from the list of speakers. President Sirisena did not address the function. He left the task to his Tourism Minister, who welcomed the launch of the 300-room hotel — built on 145 acres of land with views of the Indian Ocean — and said it would help boost tourism in the country as the “best hotel in the Universe”.

There was nary a word about Mr. Rajapaksa under whom Sri Lanka had inked deals, not just with Shangri-La, but with other global brands such as ITC, Sheraton and Hyatt. The common courtesy of “giving the Devil its due” eluded the Yahapalana Government whose proponents were happy to bask in the glow of the prestigious project while watching a fireworks display that went wrong and wolfing down a scrumptious dinner.

But give the ‘Devil its due’ one must, especially when the incumbent regime is hell-bent on carrying on Mr. Rajapaksa’s work: The good, the bad and the ugly. The Port City is a case in point. While in opposition, the United National Party had objected to the project on multiple fronts. UNP leaders vowed to scrap the deal once in power.

Come January 2015 and Mr. Sirisena became President with Mr. Wickremesinghe as Prime Minister. Days before Indian Prime Minister Narendra Modi was due to arrive in Sri Lanka on an official visit, they suspended the Port City project and ordered a reexamination of its terms and conditions as well as its environmental impact. Most other Chinese-funded initiatives were also halted pending review. Having lampooned Chinese projects during the election campaign, the new Government had no choice but to do something.

Considerable publicity was given to these moves in a schoolboy effort to paint the new Government as distinctly different from the old one — corruption free, transparent and accountable. What did not garner as much publicity was the lifting of the suspensions and the resumption of these very same projects. That happened quietly, without much ado. Committees tasked with reviewing the projects predictably found that little could be changed once agreements were signed, finalised and partway through implementation.

The Port City project (with minor, cosmetic changes) was not only given the green light, the Yahapalana Government’s key members travelled to China to canvass for more loans, investment and grant aid. Some of these efforts have come to fruition. As reported in this newspaper last week, China will lend money for several large projects in President Sirisena’s electorate of Polonnaruwa. It is reminiscent of an earlier time when Chinese funds were liberally poured into the Hambantota district, the pocket borough of the then ruling Rajapaksas.

There is one noteworthy difference though, this time. As far as Polonnaruwa is concerned, the money will go towards essential development initiatives such as water supply and railway extension; not vanity projects like the Mattala Rajapaksa International Airport. But there is also one noteworthy similarity. With Chinese funding, the promise of the Yahapalana Government to always adhere to open, competitive bidding in the award of lucrative development contracts goes straight out the window. The country is returning to an era of single-bid projects.

Some of these projects will be solicited, or sought, by the Government. They are in existing development plans and are immediate or short-term needs. However, there is clear indication that grandiose, unsolicited proposals are also making a comeback to the detriment of the country’s coffers. For instance, the Highways Minister recently said in a public forum that he has received several offers to build an elevated highway along Baseline Road in Colombo. He seemed enthusiastic. But not only would such a project be ridiculously expensive, it is not in the Road Development Authority’s plans and is deemed wholly non-essential by officials who know better.

Single-bid projects bring with them a separate set of concerns. The idea of adopting an open bidding process is to encourage competition and to secure the best goods and services at the lowest price. When only one price is quoted and only one company is made available to implement the project — with all goods and services provided at the command of this one entity — it becomes impossible to compare costs or quality or, for that matter, financial terms. On the flip side, the single-bid process is faster, especially where the Chinese are concerned.

The Government volte face has left officials confused. Soon after the change of regime, they were told that contracts will hereafter be given out on open, competitive bidding. They took this position seriously, particularly as some of them were being investigated over projects granted on an unsolicited basis during the tenure of the previous Government. That is why the National Water Supply and Drainage Board advertised the Towns East of Polonnaruwa Water Supply Project in October 2015, attracting no less than 24 bids. But the tender was cancelled and the US$300-400 million contract will now go to China Harbour Engineering Company, the same firm that is building the Colombo Port City.

There have been serious concerns even where open competitive bids are concerned. For instance, in 2015 the Rehabilitation and Resettlement Ministry floated a tender for the construction of 65,000 houses in the North and East. The local construction industry protested that tender requirements — such as the need to post an exorbitant bid bond — were designed in a manner to suit a particular, international bidder with the financial wherewithal. Not only that, the Ministry has been openly canvassing for this bidder even before the tender was called.

Are we seeing more of the same; transparency and good governance giving way to financial expediency with the Chinese back on track with the new Government knowing only too well that it was stewing in its own juice criticising the Chinese funded projects under the Rajapaksa Administration? The nearly new Government has been unable to get the West to put in the cash for the country’s development despite its ostensibly pro-West stance.

Being invited for Davos Economic Forum and the G-7 summit is well and good, but the Western investors are largely the private sector unlike the Chinese who have heavy state backing. How much investor confidence has this Government managed to create despite the Soros visits and the Harvard scholarships among Western companies is a question that is being discussed in diplomatic circles and even in the corridors of power. The confusion and inconsistency in Government policy saying one thing one day and another the next is making even the new Government fall back on China as a longtime friend – with long term interests in Sri Lanka.

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