Business

Govt. gets tough with Japan on new BIA terminal

– Prasanna sets Wednesday deadline

– Says willing to look beyond JICA

By Charindra Chandrasena

Photo caption:  Minister of Industrial Exports and Investment Promotions, Tourism, and Aviation Prasanna Ranatunga

The Government has given the Japan International Co-operation Agency (JICA) time till Wednesday (15) to agree to renegotiate the cost of construction of the second terminal of the Bandaranaike International Airport (BIA).

This is following a deadlock of several years, in which JICA refused to budge from the original quotations submitted by two Japanese contractors, which were 46% and 96% higher than the engineer’s estimate.

This deadline has been imposed by Minister of Industrial Exports and Investment Promotions, Tourism, and Aviation Prasanna Ranatunga following a discussion with the Embassy of Japan in Sri Lanka.

Speaking to The Sunday Morning Business, Minister Ranatunga said that in case of a failure by JICA to bring down the quoted prices of its contractors before Wednesday, the Sri Lankan Government would cancel the loan agreement with JICA.

“If they don’t negotiate the prices, we will look for new funding sources,” Ranatunga noted, adding that the negotiations would carry on till Wednesday.

JICA is the concessionary loan provider of the long-delayed new terminal at BIA. The loan agreement of Rs. 56 billion was signed almost four years ago on 24 March 2016 between Airport and Aviation Services (Sri Lanka) Ltd. (AASL)
and JICA.

However, the Minister indicated that the Government would still prefer to proceed with JICA as significant time and effort has been invested into this project on the understanding that the funding would come from JICA. A change at this stage would push back the timelines considerably, further intensifying the issues around congestion and lack of facilities at BIA.

The JICA loan came with a number of conditions, most notably that the terminal project must be awarded only to a Japanese contractor. However, Sri Lanka received only two proposals from Japanese bidders which had put forward quotes 46% and 96% higher than the engineer’s estimate, airport sources told us.

We understand that the current negotiations revolve only around the bidder who quoted 46% higher than the estimate. This is because it is unlikely that the other bidder, who quoted 96% higher, would be able to bring it down to an affordable level.

All attempts to reach AASL for comment proved futile.

Delays

The second terminal was initially scheduled to come into operation by 2020 and the subsequent delays led the Sri Lankan Government to plan for an interim terminal until the bidding issues were resolved. Subsequently, bids to the $ 19 million interim terminal were announced in November 2017.

Nevertheless, as exclusively reported by The Sunday Morning Business on 1 March 2019 under the headline “Interim Terminal at BIA abandoned”, the project was abandoned due to a protracted legal battle between a bidder and the procurement committee.

The BIA has more than 170 aircraft movements per day, including an average of more than 60 movements of heavy aircraft per day. The existing six million-passenger terminal handled 10 million passengers in 2018, resulting in hours of delays – particularly as passengers were trying to collect their baggage.

According to the annual reports of AASL, the airport experiences heavy congestion in both arrival and departure zones, as well as vehicular traffic, particularly during peak hours, and passenger arrivals grow 5-6% year-on-year.

The new terminal is expected to handle a passenger capacity of nine million as initially planned, bringing BIA terminals’ total capacity to 15 million.

The new terminal building would feature the addition of 96 check-in counters, eight baggage claim belts, seven baggage make-up carousels, 16 contact boarding gates with 28 passenger boarding bridges, and six bus gates. The scope also includes a capacity enhancement of the incinerator, water treatment plant, and sewerage treatment plant.

JICA loan

The loan agreement is JICA’s 45th loan package to Sri Lanka. JICA is the executing agency for Official Development Assistance (ODA) of the Government of Japan, and is one of the largest contributors for development assistance in Sri Lanka.

The project would be developed based on the concept of eco airports with the utilisation of Japanese advanced technology and knowhow. In order to promote technology transfer and economic co-operation between Sri Lanka and Japan, JICA’s loan is provided under the Special Terms for Economic Partnership (STEP), with 0.1% p.a. interest and a 40-year repayment period.