Dispute with CATIC over Galle Face deal

Conflicting claims over MoU and millions paid or not paid in advance
By Bandula Sirimanna

The Chinese investor in a multifunctional complex near Galle Face Green has refused their advance payment (to the government) after the government‘s policy decision that land will not be sold outright to them.
CATIC or China Aviation Technology Import-Export Corporation has said that instead it would require land on outright purchase terms. It has said it did not favour a 99-year lease for the same property.
Its demand comes amidst conflicting legal positions taken by the Chinese aircraft manufacturing firm and the government. CATIC has threatened to seek legal relief on the grounds that assurances of an outright sale of land were given to it. It also cites the case of Shangri-La Hotels, a project for which land encompassing the Army grounds has already been given.
The government contends that in terms of the Memorandum of Understanding signed between CATIC and the Ministry of Finance on February 18 this year, $ 50 million (Around Rs 5.5 billion) had to be paid in advance and the balance $ 86 million before April 21, 2011. If CATIC was unable to make payment before this date, it was required to provide a bank guarantee before the deadline. Since the Chinese company had not done so, government officials argue, that the agreement is invalid.
Despite this situation, documents tabled in Parliament by Deputy Economic Development Minister Lakshman Yapa Abeywardena on June 22 showed striking discrepancies in the figures contained in the MoU and the documents he tabled. The MoU refers to $50 million. However, Mr. Abeywardena declared in the House that $54.4 million had been deposited as an advance by April 25, 2011, four days after the deadline for the full payment.
Mr. Abeywardena told the Sunday Times it was only an MoU that was signed with CATIC and not an agreement. He said $54.4 million paid by CATIC is with the Treasury and it had not been returned to the company.
But in another twist to the drama, a senior Finance Ministry source said there was no trace in Treasury coffers or accounts about the money paid by CATIC.
Mr. Abeywardena said there was no need to issue a gazette notification on the cancellation of the deal, though it was made under Strategic Development Projects Act No. 14 of 2008. “We are still having discussions with CATIC officials to offer them an alternate land but no agreement has been reached as yet,” he said.
Other government sources say all agreements under the earlier mentioned law have to be gazetted, a process followed in the case of the Shangri-La project.

NOTE: An error has inadvertently crept into today’s Sunday Times (print edition) story headlined “Dispute with CATIC over Galle Face deal” where, instead of the words … ‘refused their advance payment’.., the words … ‘has declined to make the advance payment’… have been used. 

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