By Maheesha Mudugamuwa
More details relating to the proposed oil refinery in Hambantota have emerged with the Board of Investment (BOI) saying that the agreement between Sri Lanka and the foreign investor had not yet been signed.
A senior BOI official said that while a Memorandum of Understanding (MOU) had been reached, the final agreement is yet to be signed for the proposed controversial $ 3.85 billion oil refinery in Hambantota.
The BOI official told The Sunday Morning that the board had sent the agreement to Silver Park International (Pvt.) Ltd. in Singapore and was expecting them to sign the agreement and send it back to the BOI within the next two weeks.
Meanwhile, Development Strategies and International Trade Deputy Minister Nalin Bandara confirmed to The Sunday Morning on Friday (5) that the draft 99-year land lease agreement of the proposed controversial $ 3.85 billion oil refinery in Hambantota had been sent to the main investor, Silver Park International (Pvt.) Ltd.
He said that the draft land lease agreement which had been sent to Silver Park last week had been referred to the company’s legal department and they hoped to sign the agreement this week.
However, Minister Malik Samarawickrama told Parliament that the Government had signed the land lease agreement last week.
As The Sunday Morning reported last week, Prime Minister Ranil Wickremesinghe had laid the foundation stone to construct the first oil refinery in Mirijjawila in Hambantota on 24 March without signing a land lease agreement. The event was graced by the Omani Minister of Oil and Gas Dr. Mohammed Hamad Al Rumhy and the Oman Oil Refineries and Petroleum Industries Co. (ORPIC) CEO Musab bin Abdullah Al-Muhrooqi.
Normal laws
During the Budget debate in Parliament last Tuesday (2), JVP MP Sunil Handunnetti raised the question of whether Cabinet approval had been granted for the oil refinery project which was trumpeted as the largest-ever Foreign Direct Investment in the country without a land lease agreement between the two parties.
However, in answering the question, Samarawickrama said Cabinet approval had been granted as there was a MoU between the two parties.
However, interested parties raised the question of whether the Government could launch a project without a proper land deal.
Therefore, the argument of whether the Government could allow a foreign company to construct a building without a land lease agreement was posed. Section 16 of BOI Law, which states that the entry of foreign investment is permitted without any fiscal concessions, also states that the projects are governed in accordance to the normal laws of the country and are subject to Inland Revenue laws, custom laws, and exchange control regulations.
According to legal provisions, under the Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended), transfers of land under freehold title in Sri Lanka to foreign persons (including foreign companies), or companies incorporated in Sri Lanka, where the foreign shareholding is 50% or more, is (except in certain limited circumstances) prohibited.
However, there are no restrictions on foreigners (including foreign companies), or companies incorporated in Sri Lanka which have 50% or more foreign shareholding, leasing land (subject to the maximum tenure of each such lease not exceeding 99 years).
Commitment issues
Cabinet approval was granted for the proposal presented by Development Strategies and International Trade Minister Samarawickrama on 7 March.
The controversial oil refinery topic broke into mainstream media after the Omani Oil Ministry denied being part of the project together with the Singaporean company as stated by the Minister. Accordingly, the Minister had informed the Cabinet that a joint commercial entity, formed by Singaporean company Silver Park International (Pvt.) Ltd. and the Ministry of Oil and Gas of the Sultanate of Oman, will manage the operations of the plant.
Even after the Omani Oil Ministry denied being part of the project, the Government reiterated that the Oman Oil Company had proposed an equity stake of up to 30% with Silver Park. The government-owned Omani company and Singapore-based Silver Park International had come to a mutual understanding and therefore, the overall project status was positive, Deputy Minister Bandara added.
Omani Oil Company is yet to announce its commitment to the project.
Meanwhile, a Sri Lankan delegation led by Ministers Kabir Hashim and Samarawickrama will leave for Oman on 4 May to hold further discussions with the Government of Oman regarding the oil refinery project.
Unfortunately, attempts made by The Sunday Morning to contact the Omani Oil Company failed.
Money laundering risks
The project became more controversial after it was revealed that the main investor – Silver Park – is owned by the family of Indian politician Dr. S. Jagathrakshakan, a senior DMK leader.
Transparency International Sri Lanka (TISL) alleged that the project could have a negative impact on Sri Lanka’s efforts to remove itself from the Financial Action Task Force’s (FATF) “Grey List” of countries vulnerable to money laundering and terrorism financing as the main investor in the project, Singapore-based “investment vehicle” Silver Park International (Pvt.) Ltd., is a company controlled by the family of Tamil Nadu politician and former Indian Union Minister Dr. S. Jagathrakshakan, whose business interests have been previously implicated by Indian authorities and the media in several alleged corruption scandals.
It also revealed that of the 40 FATF recommendations which set the international standards on combating money laundering, the 12th recommendation requires that reasonable measures be taken to ascertain the source of wealth and funds in transactions involving politically-exposed persons.
However, the BOI denied the allegations and claimed that the Foreign Direct Investment (FDI) brought into Sri Lanka, including the oil refinery project in Hambantota, was channelled through the approved local banking system through Inward Investment Accounts (IIA) as per the Foreign Exchange Act and its regulations in Sri Lanka.
In the case of the project, all financial transactions by the investor are routed through a reputed commercial bank in Sri Lanka. All commercial banks have their own AML/CFT regulations, which are also carefully monitored by the Financial Intelligence Unit of the Central Bank of Sri Lanka, the BOI said.
However, the Ministry confirmed that the Government had already received 10% of the total investment of $ 3.85 billion, he said.
Attempts made by The Sunday Morning to contact former Indian Union Minister Dr. Jagathrakshakan failed and one of his personal assistants informed that they were busy with election work.
Meanwhile, a few weeks ago, Deputy Minister Bandara said the second oil refinery, with an investment of $ 14 billion would be constructed by another Singaporean company, Sugih Energy International.
More details relating to the proposed oil refinery in Hambantota have emerged with the Board of Investment (BOI) saying that the agreement between Sri Lanka and the foreign investor had not yet been signed.
A senior BOI official said that while a Memorandum of Understanding (MOU) had been reached, the final agreement is yet to be signed for the proposed controversial $ 3.85 billion oil refinery in Hambantota.
The BOI official told The Sunday Morning that the board had sent the agreement to Silver Park International (Pvt.) Ltd. in Singapore and was expecting them to sign the agreement and send it back to the BOI within the next two weeks.
Meanwhile, Development Strategies and International Trade Deputy Minister Nalin Bandara confirmed to The Sunday Morning on Friday (5) that the draft 99-year land lease agreement of the proposed controversial $ 3.85 billion oil refinery in Hambantota had been sent to the main investor, Silver Park International (Pvt.) Ltd.
He said that the draft land lease agreement which had been sent to Silver Park last week had been referred to the company’s legal department and they hoped to sign the agreement this week.
However, Minister Malik Samarawickrama told Parliament that the Government had signed the land lease agreement last week.
As The Sunday Morning reported last week, Prime Minister Ranil Wickremesinghe had laid the foundation stone to construct the first oil refinery in Mirijjawila in Hambantota on 24 March without signing a land lease agreement. The event was graced by the Omani Minister of Oil and Gas Dr. Mohammed Hamad Al Rumhy and the Oman Oil Refineries and Petroleum Industries Co. (ORPIC) CEO Musab bin Abdullah Al-Muhrooqi.
Normal laws
During the Budget debate in Parliament last Tuesday (2), JVP MP Sunil Handunnetti raised the question of whether Cabinet approval had been granted for the oil refinery project which was trumpeted as the largest-ever Foreign Direct Investment in the country without a land lease agreement between the two parties.
However, in answering the question, Samarawickrama said Cabinet approval had been granted as there was a MoU between the two parties.
However, interested parties raised the question of whether the Government could launch a project without a proper land deal.
Therefore, the argument of whether the Government could allow a foreign company to construct a building without a land lease agreement was posed. Section 16 of BOI Law, which states that the entry of foreign investment is permitted without any fiscal concessions, also states that the projects are governed in accordance to the normal laws of the country and are subject to Inland Revenue laws, custom laws, and exchange control regulations.
According to legal provisions, under the Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended), transfers of land under freehold title in Sri Lanka to foreign persons (including foreign companies), or companies incorporated in Sri Lanka, where the foreign shareholding is 50% or more, is (except in certain limited circumstances) prohibited.
However, there are no restrictions on foreigners (including foreign companies), or companies incorporated in Sri Lanka which have 50% or more foreign shareholding, leasing land (subject to the maximum tenure of each such lease not exceeding 99 years).
Commitment issues
Cabinet approval was granted for the proposal presented by Development Strategies and International Trade Minister Samarawickrama on 7 March.
The controversial oil refinery topic broke into mainstream media after the Omani Oil Ministry denied being part of the project together with the Singaporean company as stated by the Minister. Accordingly, the Minister had informed the Cabinet that a joint commercial entity, formed by Singaporean company Silver Park International (Pvt.) Ltd. and the Ministry of Oil and Gas of the Sultanate of Oman, will manage the operations of the plant.
Even after the Omani Oil Ministry denied being part of the project, the Government reiterated that the Oman Oil Company had proposed an equity stake of up to 30% with Silver Park. The government-owned Omani company and Singapore-based Silver Park International had come to a mutual understanding and therefore, the overall project status was positive, Deputy Minister Bandara added.
Omani Oil Company is yet to announce its commitment to the project.
Meanwhile, a Sri Lankan delegation led by Ministers Kabir Hashim and Samarawickrama will leave for Oman on 4 May to hold further discussions with the Government of Oman regarding the oil refinery project.
Unfortunately, attempts made by The Sunday Morning to contact the Omani Oil Company failed.
Money laundering risks
The project became more controversial after it was revealed that the main investor – Silver Park – is owned by the family of Indian politician Dr. S. Jagathrakshakan, a senior DMK leader.
Transparency International Sri Lanka (TISL) alleged that the project could have a negative impact on Sri Lanka’s efforts to remove itself from the Financial Action Task Force’s (FATF) “Grey List” of countries vulnerable to money laundering and terrorism financing as the main investor in the project, Singapore-based “investment vehicle” Silver Park International (Pvt.) Ltd., is a company controlled by the family of Tamil Nadu politician and former Indian Union Minister Dr. S. Jagathrakshakan, whose business interests have been previously implicated by Indian authorities and the media in several alleged corruption scandals.
It also revealed that of the 40 FATF recommendations which set the international standards on combating money laundering, the 12th recommendation requires that reasonable measures be taken to ascertain the source of wealth and funds in transactions involving politically-exposed persons.
However, the BOI denied the allegations and claimed that the Foreign Direct Investment (FDI) brought into Sri Lanka, including the oil refinery project in Hambantota, was channelled through the approved local banking system through Inward Investment Accounts (IIA) as per the Foreign Exchange Act and its regulations in Sri Lanka.
In the case of the project, all financial transactions by the investor are routed through a reputed commercial bank in Sri Lanka. All commercial banks have their own AML/CFT regulations, which are also carefully monitored by the Financial Intelligence Unit of the Central Bank of Sri Lanka, the BOI said.
However, the Ministry confirmed that the Government had already received 10% of the total investment of $ 3.85 billion, he said.
Attempts made by The Sunday Morning to contact former Indian Union Minister Dr. Jagathrakshakan failed and one of his personal assistants informed that they were busy with election work.
Meanwhile, a few weeks ago, Deputy Minister Bandara said the second oil refinery, with an investment of $ 14 billion would be constructed by another Singaporean company, Sugih Energy International.