Friday, 6 March 2015 00:00
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Controversy can come at a cost. The $ 1.5 billion Port City project, which has been at the centre of a vortex of dispute, took a new turn when Cabinet decide to suspend the project for two weeks and ordered the Chinese company to submit all approvals obtained within that period of time.
The interim report submitted to Cabinet by Prime Minister Ranil Wickremesinghe had noted due process had not been followed when signing the deal, opening up huge questions of corruption and mismanagement. Wickremesinghe’s statements ahead of the 8 January vote to cancel the project as it would cause massive environmental damage to a coastal belt supporting thousands of fishermen and the tourism industry has backed the Government into a corner. With over half of the 100-day plan done, the Government is increasingly under pressure to make good its pledges towards good governance with the Port City becoming a symbol of sorts in this endeavour.
The clear involvement of former President Mahinda Rajapaksa’s Government in the project and its deep links to China also make it a hypersensitive topic. In fact it was flagged off by Chinese President Xi Jingping during his visit in September and the same company is involved in the Colombo Port expansion project. The Government has to steer a careful path in making sure the project does not have negative consequences for its relations with China that has lent Sri Lanka an estimated $ 5 billion for massive infrastructure projects over the last seven years.
With many of the Rajapaksa regime’s projects such as the Mattala Airport failing to earn their keep, the Government is faced with the challenge of tough fiscal consolidation to manage its medium-term debt repayment obligations. As the world’s fastest growing economy, engagement with China is also crucial for Sri Lanka to expand its exports and grow economically in the long-term, responsibilities that hinge on good relations with China.
While the suspension can be viewed in a prudent light as it allows multinational China Communications Construction Company (CCCC) subsidiary China Harbour Engineering Company (CHEC) to submit its side of the story, the point remains that they signed a contract with the Sri Lankan State. The company could well be within its rights to seek arbitration if the project is cancelled without due cause, leaving the Government to tread a landmine-filled track. Such a move could also send the wrong signals to other foreign companies but could well lift the country’s profile for having a zero-tolerance policy towards corruption.
But it is essential that such regulations should be applied across the board. Finance Minister Ravi Karunanayake has insisted loans with other countries would be probed as well with a previous Cabinet meeting deciding to investigate the $ 430 million TATA project, as reported last week in the Daily FT. Reviewing all loans could bog the country down as it tries to handle Pandora’s Box. This also has to be done in a way that does not dampen business and State relations.
Allegations of kickbacks from Chinese projects, especially regarding roads, lead right to the top of the previous administration, making it a heady challenge for the coalition Government to tackle in the short time left. Yet voters are unlikely to be impressed with its efforts so far and could well exact a heavy price from both the main parties at the upcoming general elections.
