President intervenes to get two key  concessions: 50 to70 year lease,  shareholding 60:40 PM finalises provisions of MoU with India, will hold talks in New Delhi Cabinet reshuffle before the show of force on May Day By Our Political Editor It is a year now since Prime Minister Ranil Wickremesinghe last paid a visit to [...]


Major changes in Hambantota deal, signing likely this month


  • President intervenes to get two key  concessions: 50 to70 year lease,  shareholding 60:40
  • PM finalises provisions of MoU with India, will hold talks in New Delhi
  • Cabinet reshuffle before the show of force on May Day

By Our Political Editor

It is a year now since Prime Minister Ranil Wickremesinghe last paid a visit to China.As a nat ion then prepared to observe the national holidays, he was at work talking to Chinese leaders. That was to convert China’s loans to the previous Government of some US$ 1,308 million for the Hambantota Port into equity. The funds came from the Exim Bank of China in two instalments – US$ 306 million and US$ 800 million, both at 6.8 % interest. Other expenses, including the blasting of rocks cost US$ 202 million. The repayment period was twenty years with a grace period of five years. Upon his return, Wickremesinghe even briefed former President Mahinda Rajapaksa, who put through the original Chinese deal.

Wickremesinghe was told later that the loans could not be converted into equity since China’s laws did not permit that. Thus, the increasingly powerful Cabinet Committee on Economic Management (CCEM) which he chairs began talks in May last year with the Chinese Embassy in Colombo for a joint venture. The result was the selection of the offer made by the China Merchants Port Holdings Company Limited (CMPort). A Framework Agreement was signed with it after a protracted process.

The signing of a Concession Agreement is now awaited amidst a variety of issues raised by Ports and Shipping Minister Arjuna Ranatunga. Ahead of the national New Year holidays, talks to reach finality on this agreement saw exchanges in Colombo between the Government and the Chinese side. One of the two touchy areas among others was a provision giving the Chinese company (or the joint venture partnership) a 99-year lease. The other was: the proposed share component in the operating company for CMPort and the Sri Lanka Ports Authority/Government under the draft Concession Agreement is 80 % and 20% respectively.
The Sunday Times has learnt that at President Maithripala Sirisena’s intervention, these two important provisions have been changed. “It can now be anything between 50 and 70 years,” a source familiar with the ongoing process said. Similarly, the shares could be 60% (Chinese company) and 40% (Sri Lanka Government) respectively, the source added. According to the source, “all important issues where the Government wanted changes” are now complete and the agreement would be signed at the end of this month.

The much needed funds totalling US$ 1.4 billion from CMPort would go to meet debt servicing. More will be needed. The Government is throwing its full weight to raise funds and thus avert a serious debt crisis that would have a devastating effect on the economy. Finance Minister Ravi Karunanayake, now in Washington DC, is seizing the opportunity of the spring meetings of the International Monetary Fund (IMF) and the World Bank to brief them on the situation in Sri Lanka.

He will also brief the IMF on the Hambantota Port deal and the yield expected. Karunanayake told the Sunday Times on the telephone from Washington that the IMF is supporting the Government’s ambitious reform agenda to put public finances on a sustainable footing and create space for its social and development programme. He said that the IMF’s executive board is set to approve a further US$ 160 million when it meets in June. This would be the third tranche of the IMF’s Extended Fund Facility where a total of US$ 325.1 million has already been received.

An end of mission statement last month by an IMF mission, among other matters, noted; “Overall, macroeconomic performance in the second half of 2016 was mixed with gradually recovering growth and an uptick in inflation due to the impact of drought and the VAT increase. The current account remained stable, but the financial account weakened with the resumption of capital outflows. A more prolonged drought could raise food and oil imports with adverse impact on growth, inflation, and the balance of payment.”

With this in mind, the Government has also embarked on other measures. Premier Wickremesinghe who heads the Cabinet Committee on Economic Management (CCEM) wants to decide on the form of the 2018 budget without delay. He revealed just weeks earlier, a glaring shortcoming in the ministries. They had utilised less than 40 per cent of the Capital Expenditure in 2016. He has noted that “some ongoing projects are no longer beneficial politically for the Government and economically for the country.” He has said that funds raised be “spent effectively” in 2018 and 2019.

Treasury Secretary R.H.S. Samaratunga briefed the same meeting on the Medium Term Budget Plan and the current economic situation. He said that there should be re-thinking on Capital Expenditure budget in the country. He was of the view that it was “more practical” to increase the revenue through exports and push the liability management out rather than increase taxes and place the burden on taxpayers.

Premier Wickremesinghe also focused on Foreign Direct Investment (FDIs) and the export targets needed. He stressed that “there should be effective policy reforms to attract FDIs, increase revenue, increase productivity and reduce recurrent expenditure and wastage of State Owned Enterprises (SOEs). It was decided not to have ad hoc taxes and to finalise all relevant taxes at an early stage. This is to “ensure predictability” so that the private sector and investors can plan ahead. It was decided to finalise the strategies in April and make announcements in May. By this time, officials said, the Government’s new economic development plan for the rest of its tenure in office would be ready. It will be announced by President Maithripala Sirisena, as revealed in these columns last week.

Key economic policy decisions, it was agreed at the meeting, should be taken from one central authority which is the Cabinet Committee on Economic Management (CCEM). It was noted that once tabled at cabinet, CCEM will enforce it and the relevant Minister can intervene at one forum or the other. It would first be at the CCEM and thereafter at the Cabinet. A separate Secretariat is to be set up to service the CCEM in what seems a parallel cabinet secretariat. From recent weeks, President Sirisena has been chairing an apex body that monitors the CCEM every other week. Premier Wickremesinghe is a member. Ministers whose area of activity becomes the subject of deliberations are invited to attend.

The decisions by the CCEM, which some ministers viewed was a parallel cabinet, would not only continue but receive more leverage in making decisions on all economic matters. Such matters even extend to broad range of issues. One such area is military procurements. Early this year, the CCEM deliberated on obtaining financing from a Russian bank to provide military equipment to SL Army troops on UN peace keeping deployment in troubled Mali, a landlocked nation in West Africa. Tuareg rebels there are fighting a secessionist war with the Malian Government to attain independence for the northern region known as Azwad. Sri Lanka has been obligated to deploy 250 soldiers with equipment as part of a UN peace keeping force. Part of the equipment has been salvaged by the Army by repairing those available. Troops assigned to the Malian engagement have undergone specialised training which also included survival techniques.

Before finalising the sustainable economic strategy, Prime Minister Ranil Wickremesinghe and a top level delegation held extensive talks in Japan to work out a number of agreements. Mr. Wickremesinghe is being warmly greeted by Japan's Prime Minister Shinzo Abe

The CCEM authorised the Department of External Resources last August to explore the possibility of obtaining a credit line from the Russian Government to procure the requirements of the Mali contingent. However, the Sri Lanka Embassy in Moscow reported that the Russian authorities had wanted another issue resolved before the credit line could be considered. It was the purchase of a Gerpard 5.1, a frigate with a helipad and a range of 6,000 nautical miles. The MoD in Colombo was of the view that the price of the vessel was too high.

However, two Russian banks – Sberbank and VTB – had made offers to the Sri Lanka Embassy to finance the procurements required for the Mali contingent. The total funding requirement for this procurement is about US$ 46,411,031 million. The deal for a contract amount of over US$ 46 million was worked out with Sberbank. The repayment period will be eight and half years.

Premier Wickremesinghe, also obtained both CCEM and Cabinet approval in the past two weeks to enter into a Memorandum of Understanding (MoU) with India. Upon his return from Japan, where he is on an official visit, he is to travel to India. A string of official engagements have been lined up for him. Thereafter, he will be on a private visit to a town away from New Delhi. His visit will be ahead of the visit to Sri Lanka by Prime Minister Narendra Modi for Vesak celebrations. Among other matters, whilst in New Delhi he is expected to discuss the proposed MoU and when it would be signed.

Last week in Colombo, Wickremesinghe discussed with Indian Foreign Secretary Subrahmanyam Jaishankar, (erroneously identified as Shivshanker last week) the contours of the MoU the two countries are expected to sign. It makes provision for Sri Lanka and India to jointly make investments to develop the Trincomalee Port and establish a petroleum refinery and other industries there. It will also encourage Indian companies to invest in a container terminal in the Port of Colombo. The MoU says the objective is “to achieve greater economic, investment and development cooperation in a progressive manner, through joint ventures and other cooperative activities that ensure the well-being of the people of the two countries on the basis of equality and mutual benefit.”

Interesting enough, both the Hambantota Port deal and the MoU with India are issues for the ‘Joint Opposition’ at the upcoming May Day rally. The offer of the Galle Face Green for the JO rally appears to have united an otherwise divided Opposition. Signs of discontent came after Mahinda Rajapaksa and brothers Gotabaya and Basil held their Viyath Maga meeting at Boralesgamuwa. Though the organisation is made up of professionals led by Gotabaya, the presence of Mahinda and Basil was to cause unease within the ranks of the ‘Joint Opposition’. Some ‘JO’ leaders raised issue over whether the meeting was a sign that a new political entity was in the offing posing a threat to their own well-being.

However, the May Day venue, recommended also by Premier Wickremesinghe, has cast a new responsibility on the ‘JO.’ It wants to ensure that it musters crowds for the rally and ensures the vast expanses of the Galle Face Green are full. Otherwise, the message that it does have sufficient backing would come as heavy embarrassment. This has seen ‘JO’ leader Dinesh Gunawardena and Basil Rajapaksa, among others, working together to muster large crowds. Trade union leaders have been co-opted to visit principal towns and speak to not only opposition groups but others who are not supporting the Government. Gunawardena has been placed in charge of resolutions and Basil Rajapaksa is assisting him.

Just last week, Basil was asked to report to the Financial Crimes Investigation Division (FCID) and questioned over a deal in the Tourist Board, a body which was under him then as Minister of Economic Development. Some ‘JO’ leaders voiced fears that he may face arrest ahead of the May Day — a claim which was dismissed by senior FCID officers. Dinesh Gunawardena (leader of the Mahajana Eksath Peramuna) who heads the ‘JO’ told the Sunday Times; “One of the resolutions would be against the sale of state assets, particularly the Hambantota and Trincomalee Ports.” Others, he said, would include the rising cost of living and the neglect of troops of the armed services. Basil Rajapaksa added that “those who are not members of the ‘JO’ will also be invited to attend.” An example, he said, would be Ceylon Workers Congress leader Arumugam Thondaman.

It is not only the ‘JO’ for whom the May Day rally will come as a test of strength, particularly in the wake of reported moves by the Government to hold local or some provincial council elections. It would be the same for the United National Party (UNP) which is conducting its rally at the Campbell Park in Borella. As for the pro-Sirisena SLFP, which is holding its rally at Getambe in Kandy, mustering crowds is a near certainty. Just weeks earlier, a top politico invited contractors and suppliers to his ministry to give them a pep talk. He made the point that there had been no complaints of corrupt activity in this particular ministry since he was keeping a close eye. He then made an appeal – it was necessary to conduct a successful May Day rally so the confidence of the people in the Government would be further strengthened. He said he would welcome any contribution they could make. Needless to say, the appeal turned out to be a great success.

With the National New Year holidays now over, it will be back to business. Ministers who did not conduct their weekly meetings in the past two weeks will meet on April 25, i.e. the week after next. This is just ahead of a re-shuffle of ministers likely before May Day.  Whether it will take place before the ministerial meeting on April 25 or thereafter is unclear. The only two persons who are aware of the upcoming changes are President Sirisena and Premier Wickrememsinghe.

Weeks earlier, ministers approved a multi-million dollar project to replace the Bambalapitiya Flats, one of Colombo’ leading landmarks over the years. It came on a recommendation of Housing and Construction Minister Sajith Premadasa, It is being billed as a “Public – Private Partnership Agreement” between the National Housing Development Authority and an Indian developer whose name has not been mentioned in Premadasa’s memorandum. Without any identification it simply refers to a “prospective developer.”

A number of matters that were put on hold two weeks earlier will come up for deliberation. One is the Energy Supply (Special Provisions) draft Bill. Premier Wickremesinghe has noted in a cabinet memorandum that “a proper legal framework is required to provide for the constitution of an Energy Supply Committee. The objective of the Committee will be to ensure generation, transmission and distribution of an adequate supply of electrical energy, petroleum and other alternative energy requirements to meet the national demand for the next decade on emergency basis. The provisions of this Act will be valid for a period of two years from the date of operation.” He wants the Cabinet to approve (a) to publish the Energy Supply (Temporary Provisions) Bill in the Government Gazette; (b) To present the Energy Supply (Temporary Provisions) Bill in Parliament thereafter.

The draft Bill says that among the ex officio members of the Energy Supply Committee would be the Secretary to the Ministry of National Policy and Economic Affairs, the Secretary to the Ministry of Finance, the Secretary to the Ministry of Power and Renewable Energy and the Secretary to the Ministry of Development Strategies and International Trade.

At present, distribution and supply of electrical energy is the responsibility of the Minister of Power and Renewable Energy. Petroleum and other alternative energy requirements come within the purview of the Minister of Petroleum Resources Development. The Premier’s concerns come at a time when the different intelligence arms of the Government have been on alert to possible activity including recruitment of locals by foreign terror groups. This is particularly in the wake of reports from their overseas counterparts about the likelihood of groups from neighbouring Maldives operating here. Political leaders and senior officials have given strict instructions to maintain confidentiality over these matters for fear of repercussions.

Another is the Policy and Legal Framework relating to the proposed Counter Terrorism Act of Sri Lanka. The original draft of this legislation with revisions was approved by the Cabinet of Ministers in January this year. It was thereafter referred to the Sectoral Oversight Committee on National Security in Parliament. Now, a Committee headed by Law and Order Minister Sagala Ratnayake has recommended further changes. Thus, the amended document is due for approval. Official sources said Megapolis and Western Province Development Minister Patali Champika Ranawaka has expressed strong reservations over some inadequacies in the draft Bill. He is learnt to have forwarded a memorandum highlighting them.

Yet another matter listed for discussion is a proposal by President Sirisena to introduce “guidelines for the media” during times when there is an election or a referendum. These guidelines, however, have not been discussed with the media nor made public earlier, though there were moves by his predecessor President Rajapaksa also to introduce such guidelines. It is to apply to both the electronic and print media and is expected to come in the form of amendments to election laws. If it is mid-term for President Sirisena, for the UNP, it is half way since it was ensconced in the Government. They formed a Government in January 2015 and they returned victorious at the August parliamentary elections the same year.

Thus, midway in its political journey, the Government will have to look to the post-national New Year challenges. A ministerial re-shuffle, not much to the liking of most, will no doubt give the Government a ‘new political face.’ However, the many promises they made during the polls and the new challenges appear insurmountable. That is when their political wedlock, agreed for two years, comes up for renewal in August this year. It is not only stock taking that is awaiting them and an anxious public. It is also the stock in trade for the rest of the term. For the people at large, the biggest question would be whether it would ease the burdens that are weighing high on them, if not altogether, at least in a small way.

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