• Decision to cancel contract before end of leeway period conveyed to AASL 
• Restarting major project after long halt expensive for contractors: AASL  

Japan’s Taisei Corporation, the contractor of the Terminal II project of the Bandaranaike International Airport (BIA), has decided to terminate its contract before the end of the time period extended to it by the Airport and Aviation Services (Sri Lanka) Ltd. (AASL) to inform of its decision. 

Speaking to The Sunday Morning Business, AASL Chairman Maj. Gen. (Retd) G.A. Chandrasiri explained that the construction in the BIA Terminal II project had been suspended since mid-2022 because funding under the loan granted by the Japan International Cooperation Agency (JICA) for the project had been stopped following Sri Lanka’s pre-emptive default in April 2022, pending the restructuring of the Government’s debt. 

Consequently, Taisei Corporation has terminated the contract in early 2023.

Elaborating further, Chandrasiri stated: “They most likely terminated the contract because when you stop a large project like this for a long time, restarting it is a major hassle as they will have to go through several costly procedures again. This could be the reason they decided to cancel the contract.”

He explained that this cancellation of the contract by Taisei Corporation was beneficial to Sri Lanka given the massive sum being paid to the contractor monthly as fines for the suspension of the project due to Sri Lanka’s inability to make the payments.

Sri Lanka awarded the contract valued at $ 564 million for the construction of the new multi-level terminal at the BIA to Taisei Corporation in 2020.

The construction of this multi-level terminal is part of ‘Package A’ of the BIA expansion project, which is estimated to cost Rs. 133 billion and will be largely funded by the Special Term for Economic Partnership (STEP) concessionary Official Development Assistance (ODA) loan granted by JICA amounting to Rs. 131.5 billion (Yen 74.4 billion) at a 0.1% interest rate per annum. The remaining Rs. 21.5 billion is being funded by the AASL.

With regard to ‘Package A,’ the AASL entered into two agreements with JICA – the first agreement was entered into in March 2012 for Yen 29 billion and the second agreement was entered into in March 2016 for Yen 45.4 billion.

– By Shenal Fernando