Lessons from CATIC

Wednesday, 26 October 2011 00:02 - - {{hitsCtrl.values.hits}}

THE US$ 500 million China Aviation Technology Import-Export Corporation (CATIC) investment has been cancelled after much controversy and there are several lessons to be learnt from the incident.

After months of controversy and debate, the deal to build the CATIC Grant Skyline Hotel and Rainbow Multifunctional Complex on Galle Face land has been called off, but it was clearly a transaction that showed early signs of being problematic. For instance, the original payment dates were not fulfilled by the Chinese party and the whole transparency of the deal was circumspect.

This was clearly seen in instances when the deal came up in Parliament and the Government in most cases had inadequate justification for pursuing the deal. It was noted that even the signatories of the contract were not able to provide substantial proof of what and how they were proceeding with the investment.

The Government trying to cover up its inadequacies by terming critics as unpatriotic and against development was erroneous and misleading. The fact is, that right throughout, it showed discrepancies of transparency, good governance and accountability that eventually widened resulting in the deal collapsing.

Parliament needs to be vigilant about these deals and question them and the Government should be secure enough not to see this as an attempt to undermine it. Corruption and underhanded dealings have become the norm in Sri Lanka, emphasising the need to have consistent checks and balances to ensure that the country gets the best deal possible.

A rejected deal is not a slur on the State, but rather a warning bell of the random, archaic and politicised policies of the Government that gives power to individuals rather than the rule of law.

It must be remembered that while Sri Lanka must make the most of its post-war chances, it must also not do it in such a way as to sacrifice its future. Companies come to countries that have transparent and consistent policies. Tax holidays and other perks do play a part, but the security of their investments usually takes predominance over other concerns. Therefore, the Government and the country are better off in formulating sound, non-politicised and transparent investment mechanisms than accepting any investment at any cost.

A competent Board of Investment (BOI), cleaner Government officials and streamlined mechanisms are three key components that will ensure Sri Lanka will stay on the map of foreign investors. It’s the long term rather than the quick buck that the Government must focus on.

Another aspect is that unless contracts are competently drawn out and efficiently implemented, Sri Lanka can do more harm to its reputation as a country that does not adhere to the rule of law. If somewhere down the line, the contract is found to be unbeneficial to Sri Lanka and the Government has to pull out, then it does more harm to the country’s reputation than taking a reasonable amount of time to get the legal agreements finalised.

Economic Development Minister Basil Rajapaksa has said that renowned brands such as Sheraton, Hilton and Raffles are considering coming in Sri Lanka, which means that it is better for the Government to strengthen its investment mechanisms and make them more corruption-free rather than running after one investor, especially after a breach of contract.