A land of deals

POST-war Sri Lanka is fast improving its profile as an attractive destination for tourism and leisure. In the first half of this year the country has seen tourist arrivals increase by 37% to 381,583. The industry’s earnings have risen by 51% to $ 371 million. The high 37% growth is on the back of record full year arrivals of 655,000 in 2010, up 46% from 2009 and earnings of $ 576 million, up 65% from 2009. Though of late there are some minor rumblings within certain sections of the tourism industry that numbers are dwindling overall, the sector is certainly enjoying higher income.

 This rebound post-war and target of luring 2.5 million tourist by 2016 and the Government trying to position itself as a commercial cum shopping hub has made Sri Lanka the “happening” place in the region. The peaceful setting also makes it an envious leisure destination for competing countries. 

All this is promising and in the long term tourism can certainly become a catalyst to boost socio-economic prosperity in the country given its trickle-down and multiplier effect.

In this emerging scenario of Sri Lanka being the “darling” for leisure and entertainment, the country is also seeing several disturbing developments. One is a flood of unsolicited proposals mostly from foreign sources coming via backdoors of powers-that-be and eventually finding their favour and official blessings subsequently. To a great extent these mushrooming developments have irked the formal private sector though publicly no one dares to oppose. 

Arguments for some of these foreign parties and proposals being accepted are that the local private sector individually does not have the scale or the financial capacity. Another is that big brands or players prefer an exclusive approach because Sri Lanka is too small for all to be clamouring to vie for a slot via a competitive tender process. The other is that sector specific development and Sri Lanka’s prospects of achieving growth are rapid if certain globally and regionally renowned brands or specialists are encouraged to enter and set up shop.

Whilst attracting world renowned brands is certainly welcome as they raise the standards level, the policy of increasingly entertaining unsolicited proposals may not be the best practice in terms of transparency, accountability and good governance. 

An open and publicised invitation for a competitive process, can not only achieve desired objectives such as raising standard levels but also ensures greater confidence and faith in the system of governance. Sri Lanka’s recent past has several shining examples of how some top global giants respected an open process whereby the country was able to lure such firms.  Most argue that if an open process is adopted local private sector firms which the Government claims do not have financial muscle or the scale, could bid for large projects either collectively or in collaboration with foreign partners. 

Except for Shangri-La whose envisaged investment of US$ 500 million for two resorts in the city and Hambantota which originally was an unsolicited proposal, some of the other publicised and rumoured deals don’t  signify big brands or suggest they are renowned for their specialist expertise.  Whilst initially there was a hue and cry from the Opposition over Shangri-La deal and some reservations within the leisure industry itself; sanity has prevailed and there is less complaining. Those who support preferential treatment for select investors and brands point to past incidents or exercises involving the entry of Inter Continental, Hilton, Taj etc., who also enjoyed special access and privileges and none raised any issues. 

However the deal involving China National Aero Technology Import and Export Corporation (CATIC) also to develop a luxury hotel cum commercial complex in Galle Face continue to face the wrath of the Opposition and private sector. Thankfully President Mahinda Rajapaksa reportedly has told the Cabinet to revisit the CATIC deal. Whilst it could be argued that via unsolicited deals the Government could negotiate more favourable terms and conditions including requiring a commitment from such parties to undertake a CSR project of national importance, the flip side of backdoor deals is that some parties could also cash-in by being less accountable and transparent in their dealings. 

Another flipside is that unsolicited deals could upset the market rates of products and services. A classic case is land prices in the city. Following the Shangri-La deal ($ 12.5 per acre or over Rs. 8.5 million per perch), the price reportedly fetched in leasing land for CATIC was higher ($ 13.6 per acre or over Rs. 9.3 million per perch). The newest unsolicited deal of leasing 2 acres of land at Sir James Peiris Mawatha, Colombo 2 to India’s Indocean Developers had been done at Rs. 8 million per perch.  The market rate for commercial land which is scarce is much lower but these deals would certainly be used as a benchmark.

The Government’s decision to formalise some large deals by bringing them under the Strategic Development Projects Act is commendable as such deals could be made transparent and accountable to Parliament which houses representatives of the people. The Government needs to have greater confidence on the formal private sector of the country and open up greater opportunities for them. On its part the private sector needs to be dynamic and bold as end of the war has unfolded an unprecedented opportunity to all.