Features
WHY THE GOVERNMENT SHOULD HAVE HONOURED THE MOC ON THE EAST CONTAINER TERMINAL
by Sanjeewa Jayaweera
The announcement that the Sri Lanka Port Authority (SLPA) will be the sole owner and operator of the East Container Terminal at the Colombo Port has been greeted by many as a tremendous victory for the country. Leading up to the announcement, we were inundated by news reports as to why we should not be selling a national asset to a foreign party and that the country’s sovereignty and even security was at stake. This despite 80 per cent of ports worldwide been developed and operated as joint ventures involving foreign investors. Two of the existing terminals at the Colombo port are operated with the involvement of foreign investors, and as shown later in this article, they contribute handsomely to the overall profitability of SLPA.
The unionized employees attached to the Jaya Terminal (JCT) were at the forefront of the agitation, egged on by the Janatha Vimukthi Peramuna (JVP), a few cabinet ministers and Buddhist monks and some sections of the media. The trade unions used their favourite tactic of threatening industrial action if the government did not give a written undertaking that the ECT would be 100% owned and operated by the SLPA.
In the middle of all this, the Indian High Commission in Colombo released a press statement stating that the Government of India expected an expeditious implementation of the trilateral Memorandum of Cooperation (MOC) signed in May 2019 and that the commitment of the Government of Sri Lanka (GOSL) with regard to the ECT has been conveyed several times in the recent past, including at leadership level. They drew attention to the fact that the Sri Lanka cabinet also decided three months ago to implement the project with foreign investors. By any reckoning, it was a pretty forthright statement.
By staying that a commitment has been made at leadership level, they confirmed that our President and Prime Minister had assured them that the project will go ahead. It is not unheard of for governments to go back on undertakings given. However, in this instance, it seems that the GOSL has gone back on repeated assurances and as recently as a few days, weeks and months ago. It is a poor reflection on our country and in particular those who govern it. For most, it will appear as if the GOSL caved in to the demands of the trade unions and various other interested parties. Naturally, questions will be posed as to whether government to government agreements can be rescinded due to mob pressure.
GOSL is keen to attract Foreign Direct Investments (FDI) to Sri Lanka, and there is no doubt that the country’s development needs lots of it. Even hardline Communist countries like China and Vietnam have actively sought and obtained FDI. They have created the necessary environment for foreigners to invest in their countries. Unfortunately, in Sri Lanka, as is the case in most other issues, we only pay lip service to attract FDI. Corruption, bureaucratic inefficiency, lethargy, archaic labour laws and misplaced nationalistic idealism try their best to dissuade those who wish to invest their capital in our country. That is why we have stagnated for over 70 years. There is no doubt that the actions of both the Yahapalana and the current government has seriously impacted our country’s image regarding FDI.
The misinformation perpetuated by those opposing the trilateral MOC was disingenuous. The project proposal was to grant a lease of 35 years to the parties who would invest and operate the ECT. It was to be on a Built Operate Transfer (BOT) model. The land was never going to be sold, as stated by some. This was totally incorrect. In most countries, a lease of 99 years, as granted for the Hambantota port, is understood to be freehold and can be deemed a sale. However, to repeatedly state on various forums that the country is selling its national assets was dishonest.
It was envisaged that SLPA would own 51% of the project. It is fair to assume that the Adani group would have sought the participation of a local company who owned a minimum of 15% of the project. This would have meant that the SLPA and the Sri Lankan company together would have owned 66% of the project. So, I am at a loss to understand as to how people could say that Sri Lanka was selling a national asset.
The development of the ECT would require an investment of around US $ 650 million. This is equivalent to Rs. 130 Billion. The SLPA had already spent approximately US $ 80 million, developing a 400-meter finger berth and some backup yard space. The question is, who is going to fund the balance of US $ 570 Million (Rs. 114 Billion)? Certainly, SLPA on its own, does not have the financial capacity. I presume it will be the GOSL. According to the Annual Report (AR) of the SLPA for the year ended 31st December 2018 (FY 2018), there is an existing debt due to GOSL of Rs. 60 billion. Obviously, the SLPA can borrow part of the money as debt in all probability under a GOSL guarantee. Some amount of this debt would need to be dollars. They would certainly need to pay a premium interest rate given the negative credit rating of the country. In FY 2018 the SLPA provided Rs. 11.3 billion as an expense to the income statement as foreign exchange losses. This reflects the exposure to existing foreign currency debt. One can only imagine what it would be in the future with further depreciation of the Sri Lankan rupee and additional dollar debt.
It is evident to any sensible person that in the context of the current economic and financial crises that our country is facing, we do not need any additional financial commitments. This is especially so when capital is readily available from local and foreign entities. The GOSL need to invest in education, health, and many other vital areas. In my view, this itself is a good enough reason to allow foreign investors who would have brought much needed foreign currency to the country.
Secondly, in addition to capital, foreign investors would bring superior technology and best practices along with a good marketing plan that would attract the bigger shipping lines. Additionally, management would be in the hands of professionals with proven skills and capabilities in the maritime industry. A recent discussion highlighted the complete transformation of Sri Lanka Telecom (SLT) once it was privatized and a Japanese investor took over the management. I should know, because in 1993 when I built a house and applied for a telephone connection, I was told that the waiting period was two years! Given that transhipment volumes account for about 80% of the Colombo port’s business, most of which is to India, an Indian investor’s presence would undoubtedly enhance and ensure the ECT’s success.
Thirdly we know that the JCT terminal operated by the SLPA is inefficient and the profit generated is not commensurate to the revenue. According to the Annual Report (AR) for FY 2018 of SLPA, Rs. 8 billion was received for the year from the two privately managed terminals as Lease rentals, Royalties and Dividend Income. This is income from just being the “Landlord” and a 15% investor in these two terminals. I understand that various other revenue streams are generated and received from the two terminals. So it seems that just being a “Landlord” and a minority shareholder is far more profitable for the SLPA, GOSL and obviously for the citizens of this country than SLPA undertaking the entire investment and operation of the ECT terminal. According to the AR 2018, the Return on Capital of SLPA is only 2%.
The current Chairman of the SLPA, General Daya Ratnayake, in a television talk show said that there are 10,000 employees at the JCT terminal when the actual requirement is only 3,000! In my opinion, this too is excessive. The two privately owned terminals handle more than twice the volumes handled by SLPA at the JCT terminal with a staff cadre less than 3,000. A reflection of efficiency and productivity! It is a fact that many politicians of both parties have used the SLPA as a convenient source of employment for their supporters. Their wages and various other perks will make most public servants, and even those in the private sector cry in frustration. Even 40 years ago, I remembered stories of how some port workers would get a friend to sign their attendance while they were doing another job or sleeping at home!
According to AR 2018 the overall salaries, wages, allowances and other related staff costs at the Colombo port is around Rs. 20 billion paid to 8,948 employees. An average cost of Rs. 2.2 million per employee. The Rs. 20 billion includes an overtime cost of Rs. 3.6 billion despite being significantly overstaffed! I presume a reflection of poor work norms? No wonder the unions were agitating.
Unfortunately, this is how state enterprises work and the reason for their sorry state. Only a handful of state enterprises make money. The losses posted by the Ceylon Electricity Board, Ceylon Petroleum Corporation, SriLankan Airlines and the National Water Board are staggering. The fact of the matter is that ordinary citizens are funding these losses through both direct and indirect taxes. It is generally acknowledged that governments must not involve themselves in running businesses because of their lack of entrepreneurial skills. Into that equation when you add rampant corruption and nepotism, we have an ideal recipe for failure!
Fourthly, whether we like it or not, keeping India happy is essential. She is the regional power under whose umbrella we take refuge. Long gone are the days when Mrs Sirima Bandaranaike masterfully navigated our foreign policy to remain non-aligned. To her eternal credit, she kept both India and Pakistan as our friends during and after the 1971 Indo Pakistan war. Since 1977 we have had a plethora of Foreign Ministers, to whom the subject of foreign affairs was double Dutch. We need to exclude from that list the late Mr Lakshman Kadirgamar, a skilled and highly competent Foreign Minister.
No doubt, the world has become much more complicated since Mrs Bandaranaike’s time.After the collapse of the Soviet Union, we have seen China’s inexorable rise as an economic superpower. They now want to be recognized as such with a status similar to the USA. In this scenario, many countries are forced to align themselves to either the USA and its allies or China. President George W Bush in September 2001 stated “Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists.” I must hasten to say that he was not referring to China; however, the message is quite clear.
In the last 50 years, India has played a decisive role in our country’s affairs, and it is our misfortunate that India and China are not the best of friends. However, geopolitical reality is that we need to be friends with India just as much with China which is at odds with what President Bush said! The actions of the GOSL in abrogating the MOC might adversely impact our relations with India. This is when the country’s economy is in dire straits, fighting a raging pandemic and facing a barrage of issues at the forthcoming UNHRC meeting. Not the best of times to antagonize Big Brother!
It was announced that the cabinet has approved for the “West Terminal” at the Colombo Port to be developed as a joint venture with the Indian and Japanese governments and their nominees. One must assume that many who agitated against the ECT would again take to the streets and protest. Will India and Japan be once bitten twice shy? In case both the ECT and the West terminals are developed parallely will there be sufficient business volume for both the terminals to make money or will ECT become a White Elephant?
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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