Shangri La deal no mystery says Govt.

By Cheranka Mendis

The Government denied allegations of misappropriation in the sale of land for the US$ 500 million Shangri La property, which has been a hot topic in the business world since of late.

Deputy Minister of Economic Development Laxman Yapa Abeywardena yesterday told the media that all legal and transparent procedures had been followed in conducting the transactions and that the issue was tabled before Parliament. All monetary transactions with regard to the land deal have been deposited in the Treasury under the general account No. 6000.  Abeywardena dismissed all allegations on the sale of public land illegally and said that the land was exempted from tax according to the 2005 amendment to the Act. He assured that the Government did not need to come up with new laws to carry forth the transaction due to the 2005 regulations, which give space for such projects to be exempt from tax.

 Claiming that this is no privatisation of public property, Abayawardena stated that the investment was a direct one.

His justification was that other projects of equal calibre had taken place previously within the country.

“The transfer of ownership of this land for Shangri La followed State legislation and was only valued and conducted after obtaining approval from the cabinet of ministers and the Government Valuer’s future commercial valuation,” he said.

The Minister stated that the 10 acres given over to Shangri La fetched US$ 125 million to the country, which was soon followed by an investment of US$ 136 million by the China Aviation Technology Import Export Cooperation (CATIC) for another 10 acres of land next to the Shangri La property.

“The Government sold an acre for US$ 12.5 million to Shangri La and before a year passed, its adjoining land for US$ 13.6 million per acre,” Abayawardena said. “We have been successful in securing the trust of the Shangri La group to adhere to the rules and regulations of Sri Lanka. The agreement to sell the land was signed only after Shangri La consented to register as a local company. From now on it will conduct business in the country as Shangri La Sri Lanka Ltd.”

The company needs to start operations within 42 months, he said.  According to the agreement with the local Government, Shangri La will construct a hotel, a shopping complex and an apartment complex within the property. He said the State announced the Shangri La construction to the public on 5 April this year through a Gazette notification.

According to Abayawardena, Shangri La initially invested US$ 75 million to purchase six acres of the said property in December 2010. Under phase two, Shangri La purchased the remaining four acres in March this year for a cost of US$ 50 million.

Yapa also alleged that that politicians and their political parties are making baseless allegations about the activities of this government when they have a history of selling 13 acres of the Wellawatte Textile Mills with all buildings just for a song amounting to Rs. 170 Million, to the Mireka Capital Private Limited without any valuation.

He said that these politicians have forgotten about their past in which they sold many valuable public properties and institutions for a song to their political cronies.

Mr. Yapa said that under the financial regulation No. 11 of 1963 a tax of 100% should be charged when selling lands to foreigners and the UNP government of Ranil Wickremasinghe removed these conditions and made it possible to sell land to foreigners without tax.  He pointed out that it was due to such facilities offered, almost all heritage and historically important land in Gall Fort and many other places were acquired by foreigners.

This situation was only changed in 2005 by re-imposing the taxes.

“Hong Kong-based Shangri La is one of the top five hotel chains in the world with 30,000 rooms in 72 countries in its portfolio. The importance of attracting such big names would not just create a positive impression of the country in the international market but would also attract high spending tourists to the country.”

Abeywardena stated that at present the high spending tourists come from USA, spending some US$ 1,400 per day. Sri Lanka now needs to attract high spenders from the likes of China and Russia. Today, with the development seen in China, it is estimated that an average Chinese tourist spends US$ 1,730 per day while for an average trip the spending is valued at US$ 900.

 The Minister stated that equal attention and concessions would be given to local investors showing interest in investing in projects of this calibre. As at now certain equipment and machinery needed for hotels are being given with a tax concession, he said. If the investments are worth more than US$ 50 million, investors are allowed a general concession.