Harsha exposes booms and busts!

Thursday, 5 December 2013 00:10 -     - {{hitsCtrl.values.hits}}

  • Sheraton, Shangri-La, ITC and KRRISH all stalled development projects; raises issues over other projects; hails Cairn oil exploration project as
  • Basil, Lakshman Yapa asked in Parliament: “What happens now?”
  • Shangri-La tax breaks set to expire mid-2014 as hotel project has to commence operations within 42 months to be eligible for tax concessions
  • Warns that Govt.’s Expropriation Act may have jittered big investors most successful
By Ashwin Hemmathagama Our Lobby orrespondent Massive tax concessions for the project approved under the Strategic Development Act are set to legally expire by mid 2014, the main opposition United National Party warned yesterday, after the Hong Kong-based Shangri-La resorts deferred its Colombo opening till 2017. Speaking during the debate on the Economic Development Ministry in Parliament yesterday, UNP Economic Affairs Spokesman and Parliamentarian Harsha De Silva said the 25-year tax break for the resort project lapses if it is not operational 42 months after they were awarded. “Shangri-La, the first project approved under the SDA, was granted the tax concessions in the latter part of 2010,” Dr De Silva said. He said that Shangri-La had first announced in 2010 that the hotel would be operational by 2014. “What’s the plan now, with the tax breaks expiring?” the UNP MP asked Economic Development Minister Basil Rajapaksa and Investment Promotion Minister Lakshman Yapa Abeywardane. De Silva warned that the lack of progress on this and several other property development projects in Colombo might be an indictment of a creeping lack of confidence on the part of big investors. “As Sheraton was coming to Sri Lanka, what did the Government do? It expropriated the Hilton. Couldn’t there be a link between the expropriation of Hilton and other private businesses and the lack of confidence on the part of big developers?” he asked the Ministers. The Government had passed the Expropriation Act against all saner counsel and furthermore had failed to pay compensation to business owners whose companies were acquired within the legally stipulated 12 month period. “Some company owners filed their compensation request in mid 2012 after expropriation. The appointment to meet the Compensation Committee has been given for mid-2014,” he charged. The precedents set do not inspire faith in the Government’s policies for foreign investors, the UNP MP warned. It was mysterious why most development projects had stalled after commencing with much fanfare, he said. MP Dr. de Silva emphasised the Expropriation Bill was the key reason preventing fresh investments coming into Sri Lanka as most of the approved projects have either violated or not met terms and conditions. “Foreign investor confidence has declined with the Expropriation Bill. We have explained this before and the Government disregarded the advice,” UNP MP said. “The Strategic Development Act of the Ministry of Economic Development brought wins as well as losses. The Government points the finger at the Opposition for criticising the selected projects. But let me elaborate on all that was being brought under the Strategic Development Act,” Dr. Harsha said. He said Cairn Lanka Ltd. was the first project signed under the Strategic Development Act. “This project expects to bring in US$ 113 million but has received investments over US$ 226 million. This is good sign. Cairn India has signed for oil explorations in Sri Lanka and was expecting to upstream crude oil in Mannar Basin in 2010. According to this agreement, the Government was to receive a 10% royalty. So, Cairn invested more. Last month tenders were called for 13 blocks, but received interest for two blocks by ONGC and another firm from Canada. Although the initial interest was there, apparently the global companies have reduced. “When a company is taken over, the Government has to compensate within 12 months. Let us take Colombo Hilton as an example. Main shareholder Cornel Perera wanted a compensation of Rs. 3.5 billion in March 2012. But his letter was not responded to until July 2013, so this delay has broken the law of compensation. How can you bring more investments to Sri Lanka when existing businesses are treated badly?” “Ceylon Steel Corporation was privatised in 1996 to a Korean company. By 2011 it was given to Sri Lanka Onyx Group for US$ 38 million. But the investment expected was US$ 80 million on par with the Strategic Development Act. Nandana Jayadewa Lokuwithana, a Sri Lankan living in Dubai, has done this US$ 77 million investment. But he has renamed this as Ceylon Steel Corporation even though it is private company. “Colombo International Container Terminal is the third in the list, which was expecting an investment of US$ 500 million but got only US$ 351 million. China Merchant Holdings, Aitken Spence and the Port Authority jointly ventured in this investment, so China Merchant Holdings had 55% and Aitken Spence held a 30% stake. They had a fight and it was in the newspapers. What I found was that China Merchant Holdings took a loan from China Development Bank for this turnkey project. China Development Bank had an issue with the money due for China Merchant Holdings. Now China Merchant Holdings has also obtained the stake of Aitken Spence, which exited from this project with concern. The total stake held by China Merchant Holdings comes to 85%. The income of this project will be entirely collected by China Merchant Holdings for the next 35 years. After that it is a question who will get the ownership. We believe the local investors will have an advantage using this port. “Trincomalee Power Company Sampur Coal Power Plant is the next. Investments are not received for this although we are expecting US$ 500 million. I know there are a lot of political interventions here. Shangri-La is the next and they expected to invest US$ 283 million here. But as at today the investment stands at US$ 143 million. This is not an investment but a privatisation that sold six acres on one occasion, followed by another four acres. Our expectation from them was that this project should be at commercial stage in 42 months, mid-2014. They haven’t put built the foundation. How can they meet this deadline? What prevents them from continuing with the project?” “Cino Lanka Hotel and Spa is the next. Rs. 9.2 billion was stated in the media but the bidding was made for Rs. 4.2 billion for a company that has three shares totalling Rs. 30. They were expecting FDI of US$ 159 million but nothing was received. Sri Lanka Gateway Industries is the next which expects US$ 4,000 but received only US$ 1,000. Who owns this company?” asked Dr. de Silva in Parliament.