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19th April 1998

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BJP top defence adviser here

A former Indian Envoy who is now a top defence and foreign policy adviser to the ruling BJP coalition in India is scheduled to arrive in Colombo on Tuesday.

Nagendranath Jha, outspoken ambassador in Colombo during the Premadasa era, is expected to meet top officials here and give a talk on Friday on Indo-Lanka ties.

In a recent interview Mr. Jha said the BJP Government was opposed to any separation of Sri Lanka, but supported a merger of the North East.

AirLanka-Emirates deal: summary of transactions

By Frederica Jansz

The AirLanka-Emirates deal, signed recently midst controversy and stiff opposition, is still stirring political storms with the main opposition UNP threatening to abrogate the deal when it comes to office and Emirates taking insurance cover premium being paid by the government against such threats.

In the interest of the general public, The Sunday Times today publishes a summary of principal transaction documents.


There are two principal transaction documents between the Government of Sri Lanka ("GOSL") and Emirates, the International Airline of the U. A. E. ("Emirates"), relating to the sale of shares in AirLanka Limited ("AirLanka") and the post-privatization governance of AirLanka.

The first is the Share Sale and Purchase Agreement ("Sale Agreement") and the second is the Shareholders' Agreement ("Shareholders' Agreements"), to which AirLanka is also a party. The following is an executive summary of such agreements and is qualified by the actual, detailed provisions of such agreements themselves.

Sale Agreement

Under the Sale Agreement, the GOSL has agreed to sell, and Emirates has agreed to purchase, in two instalments, 40% of the share capital of AirLanka. In the first instalment, Emirates will pay $45,000,000 for a 26% interest in AirLanka.

In the second instalment, Emirates will pay $25,000,000 for a 14% interest in AirLanka. The first instalment was completed on 31 March, 1998. The second instalment is due to be completed not later than 31 March, 2000, with Emirates having the option to accelerate the completion date.

The GOSL has, in the Sale Agreement, provided to Emirates certain warranties with respect to AirLanka. These warranties are limited in scope (and do not, for instance, cover the financial statements of AirLanka). In addition the warranties are subject to various qualifications and limitations and, with certain limited exceptions, expire in one year.

If Emirates does not complete the second instalment by 31 December, 2000, the GOSL has the right to terminate the Sale Agreement (as well as the Shareholdres' Agreement).

Shareholders' Agreements

The Shareholders' Agreement provides that AirLanka will have a seven-member board, of which four members will be nominated by the GOSL and three members will be nominated by Emirates. Board decisions require the approval of at least two directors nominated by the GOSL and two directors nominated by Emirates. The Shareholders' Agreement has a term of ten years.

The Shareholders' Agreement vests in Emirates management authority and responsibility to implement a business plan approved by the Cabinet of Ministers (and any subsequent plan approved by the Board of Directors). Because of the need to respond to changing business circumstances, Emirates is provided with the flexibility to make changes to the business plan, subject to the limitations on its authority described below.

The Shareholders' Agreement sets forth standards by which Emirates shall exercise its management powers and provides that Emirates shall use its relationships with third party vendors and service providers to obtain competitive or preferential terms and conditions for AirLanka.

The following actions may not be taken by Emirates without the prior consent of the GOSL or its nominees on the Board of Directors: (1) dismissals of pre-privatization employees (other than for cause); (2) merger of AirLanka or any sale of a substantial portion of its assets; (3) establishment of committees of the Board; (4) approval of annual accounts; (5) establishment or termination of subsidiaries or joint ventures; (6) legal proceedings involving the GOSL as a related party; (7) winding up of AirLanka or any subsidiary; (8) any increase; decrease or other alteration of share capital; (9) approval of dividend policy; (10) appointment of directors to any subsidiaries or joint ventures; (11) adoption or amendment of procurement policies; (12) any public listing of shares of AirLanka; (13) approval of auditors; and (14) approval of related party arrangements in which Emirates or any affiliate has an interest.

In addition, Emirates may not, without the prior consent of the GOSL, effect any change from the business plan if such change involves (1) a fundamental alteration of the commercial objectives of the business plan, (2) a comprehensive restatement of the business plan, (3) a commitment which results in the level of debt service exceeding by more than 10% the level of debt service for such fiscal year as provided in the business plan or (4) beyond certain limits, an increase in capital expenditure or a commitment to increase debt service after such time that the level of retained earnings for any two consecutive fiscal years is lower than the level of retained earnings for such fiscal years as provided in the business plan.

During the term of the Shareholders' Agreement there are various restrictions on transfers of shares by Emirates and the GOSL and Emirates is not permitted to transfer its management rights to any party. The GOSL may, but is not required to, transfer up to 9% of the shares to employees of AirLanka. The Shareholders' Agreement also contain certain concessions from the GOSL for the benefit of Emirates and/or AirLanka.

Police await "damning dossier" on Clarke

By Arshad M. Hadjirin

The row over alleged child sex by space visionary Arthur C. Clarke is continuing, with a London newspaper claiming it has handed over a "damning dossier" on the affair to the international police Interpol.

Deputy Inspector General M.S.M. Nizam, who is leading investigations here, told The Sunday Times he was awaiting a copy of this dossier from Interpol before taking further action.

Dr. Clarke recently said matters had now been cleared and he would be going to Buckingham Palace in London soon to receive a knighthood from the queen. But D.I.G. Nizam said the case had not yet been closed and action would be taken after studying the new dossier.

The world famous prophet of space science has flatly denied the charges and threatened to take legal action against the newspaper.

Strike victims on May Day fast

It will be a black May Day for victims of the July strike who will launch a protest march and a death fast in Colombo to dramatically spotlight their plight.

An official of an association organising the fast said no one had a right to celebrate May Day while some 7000 victims of the July 1980 strike were still abandoned and suffering.

He said the PA government had promised much but produced little in terms of relief for some 5500 public servants and 1500 private sector employees who were thrown out of their jobs 18 years ago.

The protest march and death fast opposite the Public Library in Colombo on May 1, is being organised by two associations representing the strike victims.

Lanka's 'dole' bill tops Rs. 21 billion

By Dilrukshi Handunnetti

Sri Lanka has provided 'dole' amounting to a staggering Rs. 21,239 million in 1996, with Samurdhi recipients getting the highest Rs. 6,728 million, closely followed by a flour subsidy amounting to Rs. 4,815 million, Central Bank statistics have revealed.

In order to operate buses on uneconomical routes, the state provided a subsidy of Rs. 200 million in 1994, Rs. 490 million in 1995 and Rs. 518 million in 1996.

However, the Janasaviya relief has shown a downward trend with the 1994 subsidy being Rs. 3,848 million and decreasing to Rs. 2,793 million in 1995. The subsequent year it further decreased to Rs. 1,250 million.

In contrast, the poor relief subsidy has shot up from the 1994 figures of Rs. 5,091 million to a staggering Rs. 7,386 million in 1996.

The government also provides student season tickets, school uniforms, free books, free midday meals and similar facilities to the student population. According to the CB statistics, these doles have increased from Rs. 1,376 million in 1994 to Rs. 1,695 million in 1995 and Rs. 2,418 million in the following year.

With the escalation of war, the various government assistance programmes designed to improve the economic standards of the disabled military and police personnel have shot up from Rs. 536 million in 1994 to Rs. 689 million in 1996. For other rehabilitation programmes of civilians undertaken by the Social Services Ministry, there has been a marginal increase of Rs. 1 million in 1996.

For various handouts to assist victims of war and their rehabilitation, the grants have been increased from the 1994 figure of Rs. 2,445 million upto Rs. 4,290 million the following year. In 1996, the amount has dropped to Rs. 3,398 million.

While the Central Bank sources do not indicate any flour subsidy in 1994, the monies spent during the subsequent years were Rs. 1,344 million and Rs. 1,499 million respectively.

However, the government's subsidy on 'Thriposha' to eradicate malnutrition among poorer sections has decreased from Rs. 179 million in 1994 to Rs. 144 million in 1996.

The government has also spent the colossal amount of Rs. 13, 697 million, Rs. 14,817 million and Rs. 21,239 million respectively over the three preceding years.

Madiwela project in legal muddle

By Chamintha Thilakarathna

The controversial plan to build a vast presidential complex at Madiwela in Kotte has run into further muddle and mystery with the UDA withdrawing the project report it had submitted to the Central Environmental Authority.

Environmentalists who have strongly objected to the project told The Sunday Times yesterday they feared the planners might try to come through the back door without getting CEA approval as required by the law. They said the UDA probably felt the project covering some ten acres would not be approved by the CEA as it could threaten the bird sanctuary and green belt nearby.

According to UDA officials the presidential complex alone will require three acres while security posts would also take up a large extent.

The proposed golf course in Kotte is also facing a legal tussle. Lawyers say land acquired from residents can be used only for public purposes and not for private projects.

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