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No new BOI export processing zones since 2002
The Board of Investment (BOI) has not created any new export processing zones (EPZs) since 2002. Of the two it tried to set up after 2018, one is tied up in legal proceedings while the other is still only inching forward, a report by the Auditor General shows.
The BOI oversees 12 EPZs, although its website lists only 11. Proposals for new zones are pending since 2014. These targets were not achieved, prompting the National Audit Office (NAO) to carry out a performance check.
The former Government through its 2017 budget proposed setting up new EPZs for strategic industries using money allocated via the Treasury to the Development Strategies and International Trade Ministry, then headed by Malik Samarawickrama.
In 2017, the Ministry was allocated Rs 1bn for the project. This was raised to Rs 2.5bn the following year. Another Rs 1bn was made available in 2019. But work only started on two new EPZs. One was in Bingiriya, and the other–in Milleniya–was bungled from the start, the NAO reveals.
In August 2017, the Land Reform Commission was instructed to expeditiously transfer 244 acres from its Neuchatel Estate to the BOI under phase I of the Milleniya EPZ development. The property wass cultivated with rubber.
However, the 2,228-acre Neuchatel Estate had been leased out by the LRC to the State Plantation Corporation which had sub-leased it to the Horana Plantation Company in 1995 for a period of 53 years.
By then, two studies had examined the feasibility of the Milleniya EPZ. One was by the BOI’s “land team” which, under the guidance of the Centre for International Development (CID) of Harvard University, found lands for new EPZs in the Puttalam, Kalutara, Horana, Colombo, Kurunegala and Matara Districts. Among them was Neuchatel Estate.
Another feasibility study conducted by Ernst & Young Shinnihon LLC Company released identified Neuchatel as “A” grade for an industrial zone. Both reports assessed various attributes of the property. But neither proposed how to circumvent the obstacle of it already being leases out for 53 years.
Cabinet approved the Milleniya project, including the land release, in January 2018. The previous year, the BOI had signed a letter of intent with Rojana Industrial Park Ltd, a Thai company that develops parks and zones. Operations were slated to start at the end of the year and Rojana was expected to bring in around US$ 500 in the first stage.
But when notice was served under Section 2 of the Land Acquisition Act, ten parties objected. Chief among them was Horana Plantation Company which insisted, among other things, that it had taken the land on long-term lease.
In May 2019, the company filed litigation in the Court of Appeal and a stay order was issued against acquisition, extended thereafter till January this year. Rojana, meanwhile, abandoned the project. The land takeover was to be completed by 2018 but legal proceedings are still on going.
The Government has spent billions on the Milleniya initiative, the NAO found. For instance, the Ministry paid Rs 95.5mn as a land acquisition deposit to the Divisional Secretary, Milleniya. Since September 2017, it also paid nearly Rs 2bn towards road development, water and electricity without even entering into written agreements.
As for the Bingiriya EPZ, roadwork was started without approved bills of quantity. Submitted estimates and bills had exceeded prescribed rates, the audit stated, adding that the quality of construction was also not satisfactory. T he BOI failed to provide infrastructure within the planned time frame. The zone is still under construction but the BOI had said it will be completed soon.