Colombo Port City Controversy – SLPA Tight-lipped On World Bank Debarment On Chinese Company

Although the Sri Lankan Ports authorities issued a statement yesterday refuting allegations on the Colombo Port City Project, the statement does not utter a single word about the World Bank debarment on China Communication Construction Company (CCCC) - which is constructing the ‘Port City’- over fraudulent practices.

One of the main issues with regard to the Colombo Port City project is the government’s decision to construct the ‘Port City’ with a company that is facing a World Bank debarment over corruption.

 According to the statement, the Project could be known as the largest ever private, overseas  financial investment project implemented via Sri Lanka Ports Authority (SLPA) in Sri Lanka. The investment in its initial stage comes to US$ 1340 million which is US$ 1.34 billion. Most importantly, the project is not funded by the Government of Sri Lanka or the SLPA.

“As per an unsolicited proposal forwarded by M/S China Harbour Engineering Company Ltd; (CHEC) a partnership of the China Communication Construction Co. Ltd; (CCCC) which falls under Fortune 500 Companies of the world, has been granted permission  to develop the Colombo Port City Project, including reclamation, breakwater construction, connected road network and supply of services, under the procedures adhered by the Government to implement such proposals.  Accordingly, this proposal was primarily submitted for Standing Cabinet Appointed Review Committee (SCARC) through the Department of Public Finance for approval. On instructions by the SCARC, Sri Lanka Ports Authority (SLPA) also entered into a Memorandum of Understanding (MOU) with CCCC and obtained  the detail proposal which  was expressed at the  Technical Evaluation Committee (TEC) appointed by SLPA to evaluate the Project Proposal.  The final approval has been granted thereafter,  subjected to the agreement by the Attorney General.

 Therefore, Sri Lanka Ports Authority (SLPA) responsibly states that it is totally irresponsible for anyone to state that this is a hidden project implementation in  Sri Lanka,” the statement said.

 Responding to the remark made by Opposition Leader Ranil Wickremesinghe on a “formula track’ driving up to Gampaha, the statement said, “it is apparent that it includes only a general track exactly equals to the kind of a course available in Singapore that utilizes the main road to hold such motor races. Therefore, during the constructions of the roads, the project will consider the inclusion of primary components required to conduct such motor events. It is stressed therefore, that this by any means, is not a dedicated construction to hold formula one events.”

Following are excerpts of the statement;

Several concerned personages had raised questions with regard to the  reasons why the project was  implemented via SLPA. This is a larger project that involves a land reclamation exposed to savior sea waves which requires breakwater protection and look after the marine environment. Sri Lanka Ports Authority is the only institution in Sri Lanka who possesses experience and technical expertise to implement and carry out such activities. It is further important to sustainably maintain the canal and artificial beach constructed here and SLPA is the only arm that possesses required machinery and trained man power for this work. Therefore, SLPA itself implements the entire project.

 Many parties’ and persons’ reports  of various issues pertaining to the investor company of the project were countered and answered by the company itself via media.

 The total investment in this regard is invested by the relevant company with a greater concern over the project and 125 hectares of land area out of the total land area of 233 hectares  will be owned by the  Government of Sri Lanka, whilst the rest will be retained by the company to cover their costs of  expenditure, where as only 20 hectares come under the company’s full ownership whilst the rest will be handed over under 99 year lease basis. The investor should hand over these lands to other investors under 99 year lease basis to sustain expenditure and earn revenue.

 Accordingly, the investor, at the initial stage owns only the sea bed. The procedure in this regard therefore, will be leasing the sea bed.  With additions of interest to the  total project expenditure, the cost will be US $ 1918 million. Divided by the land extent owned  by the investor company, the investor should spend Rs.5.8 million for a perch of sea bed. To receive the internal rate of return of the investment as at 16%, one hectare of land extent should be valued at US $ 24 million.  The value is Rs.7.8 million for a perch.

 Therefore, the minimum value of one perch here is Rs. 8 million. As the land extent is not exposed at the market at once, the market value of the lands will not be reduced.

 Similar projects could be seen elsewhere in  the world where investors have been granted with better benefits and conveniences. Instances are also apparent where investors have been offered with the total administration of such projects.  However, in this project, the total administrative  responsibility is vested upon Sri Lanka Ports Authority (SLPA), the Board of Investment and the Urban Development Authority.

 Meanwhile, it is expected to earn investments worth  US $ 20 billion via other investments within this land extent. It will also generate a large number of employment opportunities. Sri Lanka Ports Authority (SLPA) will receive a large financial benefit by granting these land extents on long term lease basis that will enable SLPA in return, to pay back all the loans it has obtained and become the pioneer institute  that strengthens the State financial status.” 


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