CATIC causes chaos!

The Government’s deal with China National Aero Technology Import and Export Corporation (CATIC) caused some degree of chaos in Parliament yesterday with verbal clashes between some of those in the Opposition and ruling party benches.

During the debate on supplementary allocation of Rs. 20 billion to build a new headquarters for the Defence Ministry in Battaramulla, UNP MP and party’s Chief spokesman on economy Dr. Harsha de Silva alleged that there was lack of transparency and accountability over the Government’s deal with CATIC involving the sale of 10 acres of land in Galle Face to build a luxury hotel and shopping complex. The price at which this 10 acres were sold was $ 136 million.

He said that Cabinet on 12 January had approved the deal under the Strategic Development Act (SDA) but even after six months there was no gazette providing details to Parliament as per the Act.

“We are not against investments be it from Shangri-La, CATIC or anyone else but the Government must follow proper procedure with transparency and disclosure to the Parliament as enshrined in the SDA Act,” Dr. De Silva said.

“Lack of disclosure and transparency leads to natural suspicion about the deal among people,” he added.

He also said that as per Article 148 of the Constitution the Parliament bears the responsibility over public finance hence proper disclosure was paramount.

Focusing on the debate, Dr. de Silva said whilst the Government was planning to build a new Defence Ministry headquarters at Rs. 20 billion cost, the voted budget for Ministry of Resettlement which has an important role in post-war phase was less than Rs. 2 billion.

The venture estimated to involve $ 500 million by CATIC is called CATIC Grant Skyline Hotel and Rainbow Multifunctional Complex in Colombo. On the recommendation by the Minister of Economic Development Basil Rajapaksa, the Cabinet had approved CATIC’s project proposal to be proceeded on the basis of agreement concluded with the earlier investor Shangri-La Hotels Lanka Ltd.

The 10 acre land for Shangri-La venture (a luxury hotel cum shopping complex) in Galle Face as well as a luxury resort in Hambantota with over $ 600 million investment) was sold for $ 125 million. The necessary gazette notification on Shangri-La deal also approved under the SDA Act was issued in April 2011.

JVP MP Anura Kumara Dissanayake speaking at the debate said that during first term of UPFA Government regulations were introduced to tax foreigners for outright purchase of land in cash but that policy was no more. He lamented over the U-turn in the Government’s stance.

Economic Development Deputy Minister Lakshman Yapa Abeywardena last month in Parliament disclosed that the Government was successful in selling the 10 acre land to CATIC for $ 136 million ($ 13.6 million per acre) in less than a year after a similar plot was sold to Shangri-La for $ 125 million ($ 12.5 million per acre).  

With regard to Shangri-La deal he said it via a Sri Lanka incorporated company it first bought six acres for $ 75 million in December 2010 and in March 2011 the balance 4 acres were bought $ 50 million.

In his response to Opposition remarks at yesterday’s debate, Yapa Abeywardena denied allegations and emphasised all proper procedures had been followed. He also said that both projects will have unprecedented benefits to the economy apart from changing the landscape and profile of Colombo and Sri Lanka.

Senior Minister for International Monetary Co-operation Dr. Sarath Amunugama said that following investments by Shangri-La, there has been strong interest by other global players to build luxury hotels in Sri Lanka. “At least seven more world renowned hotel brands have expressed interest including building seven star class luxury hotels in Sri Lanka,” Dr. Amunugama said.

The Daily FT on 14 January issue reported on the Cabinet approval of CATIC deal.

CATIC is a leading trading corporation of China, its core business is aviation defence product, both import and export. Headquartered in Beijing, CATIC has 7 specialised companies and 10 regional subsidiaries in China and 56 overseas branches worldwide. With its total assets of up to RMB 24 billion and accumulated import and export volume of US $24 billion thus far, CATIC ranks among the first 20 of China’s top 500 enterprises for import and export.

No specific details of CATIC project are publicly available.

Shangri-La under its deal has said it will build be a multi-use complex with high end retailing, deluxe apartments and a 500-key luxury hotel to open in early 2014.

Shangri-La is also planning to develop a second property, a 300-key city resort on approximately 100 acres of land in Hambantota, on the southern coast of Sri Lanka.

Hong Kong-based Shangri-La Asia Limited, one of the world’s premier hotel companies, currently owns and/or manages 70 hotels under the Shangri-La and Traders brands, with a room inventory of over 30,000. Over almost four decades, the group has established its brand hallmark of ‘hospitality from the heart.’ The group has a substantial development pipeline with upcoming projects in Austria, Canada, mainland China, India, Macau, Malaysia, Philippines, Mongolia, Russia, Qatar, Turkey and United Kingdom.