End secrecy on FDI deals

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

THE Government’s decision to pass massive tax concessions for a whopping US$ 4 billion project in Trincomalee without disclosing the parent company is yet another in a long line of transgressions on good governance and transparency that speaks volumes on the level of prevailing corruption. Parliament was in uproar on Tuesday when Democratic National Alliance MP Sunil Handunnetti charged that a new company, Sri Lanka Gateway Ltd., has been floated to invest $ 4 billion equal to Rs. 520 billion but the directors of the company in question remain a mystery. Given that projects under the Strategic Development Program enjoy extensive tax breaks for 25 years including the withholding taxes for foreign borrowings for the project, it is essential that the Government reveals the parties behind the venture, Opposition MPs had said, pointing out that crucial revenue for public expenditure would be lost otherwise. Early this week Investment Promotion Minister Lakshman Yapa was quoted as saying Singapore Gateway, a Singapore-based institution, would be investing $ 4 billion in various development projects in the Trincomalee District. They would set up a heavy industrial zone to provide infrastructure. Subsequently this facility on an 818-acre land site on 50-year lease would be given to Singaporean investors. Investments by the Singapore firm are to be on a staggered basis of $ 700 million within the first year, followed by $ 1.3 billion and $ 2 billion thereafter. Clearly, the allure of Sri Lanka is the main draw behind FDI rather than clear policies, adherence to law and order, minimised corruption or reduced red tape. Many of the tangles that beset the country since 2009 have not yet been adequately straightened out but have rather been bypassed by a system of political patronage that can be seen in the way investment offers are handled. From the infamous CATIC deal to delayed payments on the Krrish project, not to mention rushing legal amendments through Parliament to facilitate the setting up of casinos in Sri Lanka with Australian gaming mogul Kerry Packer, the Sri Lankan Government has chosen to largely ignore the checks and balances put in place for corruption-free, transparent and profitable investment for the country. In fact the Board of Investment (BOI), which was initially tasked with attracting FDI, has been all but sidelined with prominent ministers heading the way. Numerous attempts to make Government institutions such as Customs, the Inland Revenue Department and the Urban Development Authority (UDA) support the BOI to speed up projects have fallen by the wayside, with more and more personalised involvement replacing a streamlined process. This latest move shows that the Government has no interest in changing this trend. Good governance activist and former Ceylon Chamber of Commerce President Chandra Jayaratne in a column to the Daily FT noted that the perceived high level of policy capture, corruption, nepotism and rule of raw challenges, especially from politically-exposed persons, will need the immediate attention of all stakeholders. Further, focused strategies must effectively be in place to promote Foreign Direct Investments, especially those with sustainable national economic and social value adding potential. He went on to say that the impartiality and lack of transparency in the work of the Central Bank, Securities Exchange, price control authorities and Public Utilities Commission need to be questioned. FDI as a political appendage needs to end if publically beneficial investments are to be become a sustainable reality.