PM says MoU with India essential for development and to allay concerns about China’s role More issues over Hambantota port deal, Cabinet approval given but talks continue and signing further delayed  Ranil insists debt servicing a priority; IMF says Lanka doing well on fiscal matters but other benchmarks still to be achieved By Our Political [...]


After New Year, Government to tackle crucial economic issues


  • PM says MoU with India essential for development and to allay concerns about China’s role
  • More issues over Hambantota port deal, Cabinet approval given but talks continue and signing further delayed
  •  Ranil insists debt servicing a priority; IMF says Lanka doing well on fiscal matters but other benchmarks still to be achieved

By Our Political Editor
“Apita Indiyawath oney, oi. Apita Indiyawa tharaha karaganna behe oi,” exclaimed an angry Prime Minister Ranil Wickremesinghe at last Tuesday’s weekly meeting of Cabinet ministers.

The retort, mildly derogatory, made clear the message; “We need India. We cannot antagonise them.” The word “oi” akin to “hey” could be used in different contexts, friendly or otherwise.

The outburst came when Premier Wickremesinghe placed for approval a Cabinet paper titled; “Memorandum of Understanding between the Government of the Republic of India and the Government of the Socialist Republic of Sri Lanka for cooperation in economic projects.” It had been previously approved by the Cabinet Committee on Economic Management (CCEM) which he chairs.

President Maithripala Sirisena was joined by a visiting senior Chinese official Chairman of the National Committee of the Chinese People’s Political Consultative Conference Yu Zhengsheng this week to lay the foundation stone for a 9 story outpatient department (OPD) wing for the National Hospital, Colombo. The new wing costing US $ 100 million is expected to be completed in three years.

Reported exclusively in these columns last week, the MoU 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. They 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 wellbeing of the people of the two countries on the basis of equality and mutual benefit.”

Wickremesinghe’s unusual response was triggered by Sports Minister Dayasiri Jayasekera. He was to remark that the Government needed “to be careful” when the country’s “assets” were given to foreign countries. Jayasekera said that the Hambantota Port project has already caused problems. He did not want a similar fate to befall the deal with India. A defiant Wickremesinghe declared, “We want to get along with both China and India.” He said dealing with all countries with equal terms was the policy of the United National Party (UNP). He insisted that he was not going to compromise on that position.

Petroleum Resources Development Minister Chandima Weerakkody expressed his own reservations. He claimed that though the Lanka-India Oil Corporation (LIOC) took over 15 of the World War II vintage oil storage tanks built by the British in China Bay, Trincomalee, it had not developed them. He also claimed that India was entering into agreements only to tie the Government down from engaging with other countries. Megapolis and Western Province Development Minister Patali Champika Ranawaka noted that before signing the MoU, all relevant stakeholders should be consulted. This should even include trade unions, he said. A meeting has now been fixed for April 25 for this purpose.

Premier Wickremesinghe was to remark that he would ask the two ministers (Jayasekera and Weerakkody) to meet with Indian Foreign Secretary Subrahmanyam Shivshanker when he is in Colombo that Tuesday. In fact, Shivshanker was in Colombo though the visit was devoid of publicity. The main purpose was to take part in a Colombo discussion of regional issues by German envoys in the Asian region. He was a panellist. Shivshankar met President Sirisena and later discussed the MoU with Premier Wickremesinghe. It became clear that Premier Wickremesinghe wanted the MoU to be approved by the Cabinet of Ministers ahead of his meeting with the Indian Foreign Secretary. Despite the heated arguments, he did win approval of the ministers.

Shivshankar also met Foreign Minister Mangala Samaraweera, Development Strtategies and International Trade Minister Malik Samarawickrema and his counterpart Esala Weerakoon. The Sunday Times learnt that Shivshanker re-iterated India’s serious concerns over the deal with China on the Hambantota Port.

During the ministerial discussion on Premier Wickremesinghe’s MoU with India, there was one occasion when President Sirisena intervened. He was to point out that issues arose only when line ministers (or the minister in charge of the subject) were not consulted. He said it was always advisable to ensure those ministers were kept informed and matters relating to their ministries discussed with them. He said matters should not be viewed as coming from one political party. He was clearly indicating that SLFP ministers in the Cabinet were kept out of the loop by UNP ministers in control of the Government and said the matter should be looked at from the perspective of a National Government. Development Strategies and International Trade Minister Malik Samarawickrema, the key figure behind the Hambantota Port deal, interjected to say that the line minister responsible for the project (Arjuna Ranatunga) had been consulted. However, the claim sounded hollow in the light of Minister Ranatunga forwarding different Cabinet memoranda and notes to his ministerial colleagues complaining that he had not been consulted. Most of such material has appeared in these columns.

There was an exchange of words between Finance Minister Ravi Karunanayake and Social Empowerment and Welfare Minister S.B. Dissanayake. Karunanayake was to ask the latter not to raise his voice, for he would not be frightened. Dissanayake replied; “I am not doing so.” The issue was over the recruitment of graduate officers. It was decided to recruit 570 of them, particularly from the North and East. President Sirisena observed that a larger number of unemployed graduates were from those two provinces.
Details of the Hambantota Port project, which entered the public domain in instalments, were to generate heated controversies. It dogged the Framework Agreement with the China Harbour Port Holdings Company (CMPort) until it was later signed with amendments. Similarly, the Concession Agreement, though approved by the Cabinet of Ministers, is still the subject of negotiations in Colombo. Thus the signing has been delayed further. More details of this aspect appear in the later paragraphs.

What was relegated to the backburner in the resultant developments were foreign policy and national interest considerations. As weeks and months went by, with financial assistance expected from the West not forthcoming, the inevitable need to raise funds became the key factor. Accelerating the issue was the debt crisis. The International Monetary Fund (IMF) has been assured, more than once, that the Chinese money was on the pipeline. Thus, the Hambantota Port deal was fast tracked with only slowdowns at the weekly ministerial meetings when queries were raised. It was mostly from none other than Ports and Shipping Minister Arjuna Ranatunga, who is in charge of the subject. Joining in was the Sri Lanka Ports Authority (SLPA) which is headed by his brother Dammika Ranatunga (and not Sanjiva Ranatunga as erroneously reported last week).

In tackling all these issues, there has been a lot of ad hocism with ‘patch work’ solutions being carried out. Little or no attention was paid to how these issues were resonating in neighbouring India. It is no nuclear secret that there has been mounting concerns in the Indian Government over the Hambantota Port deal. These concerns were not new. During former President Rajapaksa’s regime such concerns heightened, especially with the expansion of the Colombo port under Chinese auspices. There were diplomatic protests from India when a Chinese submarine docked at the International Container Terminal in the Colombo Port in November 2014. They complained that the Colombo Government had then sanctioned many such visits and the very first docking was found out. Similarly, in this backdrop, New Delhi’s concerns began to mount over the Hambantota Port as well as the Port City in Colombo.

Shashi Tharoor who heads the Indian Parliament’s Foreign Affairs Committee giving the keynote speech at a ceremony to mark the launch of the book ‘Ranil Wickremesighe. A Political Biography’ this week in Colombo. Tharoor expressed India’s concern over China’s growing role in the region.Pic by Indika Handuwala

That was the cue for the Sri Lanka Freedom Party (SLFP – Maithripala faction) and the United National Party (UNP) – to campaign vociferously against China’s economic role at both the presidential and parliamentary elections. Both vowed vociferously to undo them. They won both elections. Paradoxical enough, after the victory, they now find themselves following the Rajapaksa policies vis-à-vis China. Embarrassing but true, financial factors have over ridden foreign policy and national considerations. The MoU with India, a relatively belated move, seems the result of a hurried damage-control exercise. Whether it would satisfy New Delhi altogether remains a question. More so when India’s Foreign Secretary re-iterated his country’s concerns only this week.

Being blind to the Indian factor, there is little doubt, has prevented the Government’s present day international economic strategists from considering that aspect. They were more preoccupied with finalising the deal. Did not the Foreign Affairs Ministry or for that matter the Sri Lanka High Commission in New Delhi, reflect on the many developments in New Delhi? They were highlighted very often in the India media? If they did, were they ignored? This is by no means to say a deal with China should have been rejected at all costs. It is to make the simple point that the hurry to conclude a deal had made the Government oblivious to a variety of issues including the national interest. It raised further suspicions as to what the ‘indecent hurry’ was. If concerns of New Delhi were factored in, worldwide proposals could have been called to develop the Hambantota Port. A successful bidder could then have been chosen. Instead, China’s ambassador was invited to the CCEM meeting and asked to submit proposals. He forwarded the names of two companies from his country and one has been chosen.

An insight into India’s thinking was reflected by Shashi Tharoor MP who heads the Lok Sabha Committee on foreign affairs. He was the keynote speaker at the launch of a book this week titled “Ranil Wickremesinghe – A Political Biography.” Tharoor was a former diplomat. He made some harsh criticism of China. An excerpt:

“China’s ambitions in the South China Sea have extended well into the Indian Ocean, and the prospect of an emerging superpower casting its shadow has roused anxiety in a number of littoral states, which look to India as an alternative security provider. So far India – which has long been known for being better at projecting soft power in the region than exercising hard power – has not always been found up to the task, leading some observers to suggest that we are gradually being strangled by a Chinese ‘string of pearls’ around our oceanic neck. New Delhi is conscious of the danger of being outrun in its own neighbourhood – though as our neck is thick enough I am not too worried – and Prime Minister Modi’s trip to the Indian Ocean littoral was evidence that its awakening is being translated into action. The brotherhood of man is a tired cliché; the neighbourhood of an ocean is a refreshing new idea. And what we offer is not the roar of a super power, but certainly something better than being one among several jewels – pearls or otherwise – in another country’s geopolitical calculations.”

Tharoor, speaking before President Sirisena and Premier Wickremesinghe said Premier Modi has set the “seal on a dramatic reorientation of Indian strategic thinking, creating new alliances and reinforcing old ties. Under President Rajapaksa, he noted, Colombo “seemed, from India’s perspective, to be distinctly warmer to China and Pakistan.”

Talks over the Hambantota Port deal, now under way in Colombo, focus on two main issues. One is the period of lease which now stands at 99 years. The other relates to matters regarding how the joint venture shares should be held. At the ministerial meeting on March 28, it was decided that the “signing of the Concession Agreement” will “take place only after the Chairman of the Cabinet Sub-Committee” briefs ministers on “matters highlighted” by Ports and Shipping Minister, Arjuna Ranatunga. Thus, there will be a delay in the signing of the Concession Agreement.

At a recent meeting of the Cabinet Committee on Economic Management (CCEM), there was a detailed discussion on lands required for the Hambantota Port and industrial zone. The requirements listed were: Port Terminal 1926 acres, Port Logistics 1250 acres, LNG Terminal 89 Acres and Industrial Zone 2500 acres. These alone add to 5765 acres. It was noted that two billion rupees have been paid out as compensation for private lands taken over through the Government Agent, Hambantota. A balance of a further two billion rupees, it was pointed out, would be needed to meet remaining payments.

A three-member ministerial team was appointed to “discuss and finalise the total amount of compensation to be paid for relocating.” It comprises the Finance Minister, the Ports and Shipping Minister and the Law and Order and Southern Development Minister. The Finance Ministry’s Investment Approval Committee has also been invited for deliberations. This was after complaints that “Chinese investors are encountering difficulties as they need to work with several institutes and this has delayed the process.”

The CCEM has noted that the original amount due from the Hambantota Port project which is US$ 1.089 billion has risen in valuation to US $ 1.4 billion. Special Assignments Minister Sarath Amunugama was asked to justify the valuation of US$ 1.4 billion when he reports to the Cabinet of Ministers.

At the same meeting, Premier Wickremesinghe briefed CCEM members on the outcome of his talks with a visiting delegation from the International Monetary Fund (IMF). According to the IMF, he said, “Sri Lanka is doing well on the fiscal side. However, some other benchmarks are to be fulfilled. The IMF delegation has expressed concern over the delay in the enactment of the new Inland Revenue Act, he said.

Premier Wickremesinghe notes, “With regard to the following structural benchmarks, instructions were given to communicate that they are virtually on the verge of completion.” Listed in this regard are:

Approval by Cabinet of a time-bound strategy agreed with the IMF staff to reduce or eliminate tax expenditure.
Establishment of a commitment record system and quarterly expenditure commitment ceilings by the Ministry of Finance.
Cabinet to approve a resolution strategy for SriLankan Airlines.

Ministry of Finance, line ministries and SOEs (State Owned Enterprises) to sign and publish Statements of Corporate Intent for the six largest SOEs.

Ministry of Finance to introduce automatic fuel pricing mechanism for Ceylon Petroleum Corporation capable of covering debt service.

Cabinet to introduce automatic electricity pricing.
It is pertinent to note that the IMF requirements deal with some key areas. One is the privatisation of non-strategic state assets, revision of fuel prices as and when they rise or drop in the world market and a review of electricity pricing.

Premier Wickremesinghe has declared that President Sirisena would soon be presented with an Economic Development Agenda for the coming years. He had said that discussions have been held with the World Bank, the IMF, the Centre for International Development at Harvard University and the Private Sector regarding the fiscal policy and the monetary policy. He noted that the country could not run on the present model of depending on Commercial Infrastructure funded either by commercial debt or foreign bank loans of several countries. He has noted that the country will be at the peak of repayment of domestic debts in 2017 and 2018. In 2019, the country needs to start repaying the foreign debt. For economic growth, the country cannot rely on the Government budget and the Middle East for employment. On the other hand, Premier Wickremesinghe has observed that the revenue collection is low and the Balance of Payment is deteriorating. Traditional exports, apparel and tourism will not be sufficient and the pressure on the rupee will increase as the country needs to buy more fuel and rice due to the drought situation.

It is in this rather gloomy economic backdrop that the Maithripala Sirisena–Ranil Wickremesinghe Government is preparing itself for a renewed public campaign. For Sirisena, it is midway through his term. He had an unusually large turnout at the Sugathadasa Indoor Stadium for the youth rally. One of the key elements in his speech to the youth was about fighting corruption. Yet, on the ground, despite the election promises, none of the high profile cases has moved forward. The exception seems to be the Commission of Inquiry into the continuing Central Bank bond scams, an issue that surfaced only after Sirisena was voted to office.

On the other hand, Premier Wickremesinghe, who leads the UNP is to embark on a reorganisation programme of his party. The party’s Working Committee met on Wednesday. In what appears to be a significant move, it adopted a resolution which said that all members should speak in one voice when it came to important issues. The resolution was prompted by remarks Justice Minister Wijeyadasa Rajapakshe had made in the past weeks. One was criticism over the Hambantota Port project. Another was over the UN Human Rights Council sessions in Geneva.

When the matter came up for discussion, several Working Committee members raised their hands to be recognised to speak. One such case was that of Foreign Minister Mangala Samaraweera. Though he did not refer to Rajapakshe by name, he said that party members should speak in one voice when it came to key issues. He said the economic situation was worrying. The Government was facing a challenge. He said individual viewpoints should not override party policies.

Though changes in the party’s office-bearer structure were to be announced last Wednesday, leader Wickremesinghe had now decided that it should take place only after May Day. He has asked Working Committee members to ensure there was a large turnout at Campbell Park for the UNP’s rally. The changes are to be thus announced at the next Working Committee meeting.
There were international developments, too. The Trump administration’s bombing of the Shayrat airfield in Syria from where President Bashe al Assad’s Air Force had flown sorties to drop sarin gas on their own people, men, women and children figured in a demarche handed over at the Foreign Ministry in Colombo. Minister Mangala Samaraweera was away in Matara.

His deputy Harsha de Silva received the demarche from the Charge d’ Affairs of the US Embassy in Colombo, Robert Hilton. US Ambassador Atul Keshap was away in the US on leave. A demarche is defined as a course of action; move; countermove; manoeuvre or related matters in diplomatic relations. Hilton explained that the strike was to incapacitate Assad from using the airfield in such horrific acts against his own people. The Deputy Foreign Minister was to endorse the United States’ move.

There is sure to be a lull in the manifold issues facing the Sirisena-Wickremesinghe Government in the coming week or two on account of the national New Year holidays. With that behind, there are a number of priority issues for the Government to resolve. One is the conclusion of the Concession Agreement over the Hambantota Port which is now expected to yield US$ 1.4 billion.

Then comes the MoU with India to develop the Trincomalee Port and engage in joint ventures. As Premier Wickremesinghe has noted, the issue of debt servicing is becoming a crucial issue and would necessitate many a change on the economic front. Sirisena has re-ignited the prospects of a ministerial re-shuffle. Sources close to him say it has now been pushed to the end of April. These are just a few from a long list. It will be an uphill task as the Government battles on those fronts not only to improve things but also regain its credibility.

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