Expediting key development programmes: Desperate search for dollar inflows?

By Maheesha Mudugamuwa

Trade unions (TU) last week raised concerns over the frantic attempts by the Government to attract more foreign investment for major projects in the petroleum, power generation, and ports sectors with the aim of overcoming the deepening economic crisis triggered by the Covid-19 pandemic. The Government, however, denied these charges.

The TUs warned that such reckless moves by the Government could weaken the county’s energy security and independence, its control over ports, and its natural resources. They threatened to take union action if the Government moved ahead with the projects without following a proper and transparent procedure.

TUs and Opposition political parties alleged that the Government was on a desperate mission to attract dollar investments, and as such was agreeing to various conditions put forward by foreign investors due to its lack of bargaining power amid the economic crisis.

They further alleged that the country is at risk of losing its valuable properties due to the investments that were opened to the international market as well as investments that were already approved by the Government.

Questions were raised by TUs regarding several projects the Government was allegedly promoting in a haphazard manner. Among them were investments into electricity generation projects, such as that of the Yugadanavi and Swabadanavi Power Plants at the Kerawalapitiya Power Station, petroleum development projects including oil exploration and refinery development, as well as investments into port development including a cargo service supply centre and the West Container Terminal (WCT) development projects.

Lanka Viduli Sevaka Sangamaya (LVSS) General Secretary Ranjan Jayalal alleged that the Government was now uninterested in privatising state properties and, instead, was in the process of selling those valuable properties to foreign nations.

Referring to the agreement with New Fortress Energy Inc., he said the Government sold 40% of its shares to the US company to obtain $ 300 million, and it had got the approval to hand over the country’s liquefied natural gas (LNG) supply as well as the Swabadanavi Power Plant to the same US company.

“This is the death of the country’s electricity independence, and the country would have to face the same fate that Lebanon is facing at present,” he stressed.

According to Jayalal, the unions had already planned a series of trade union actions, and if the Government failed to respond, they would resort to a stern strike action by refraining from all services.

As alleged by the TU leader, the foreign investments would be detrimental to the country, as the Government would have to depend on the US to maintain the country’s electricity requirement, as major changes were planned for the sector based on LNG power supply.

US-based New Fortress Energy recently announced that it signed a Memorandum of Understanding (MoU) with Lakdhanavi Ltd. (LTL), a private company in Sri Lanka, to jointly develop a 350 MW gas-fired power plant in the Kerawalapitiya Power Complex located in Colombo. LTL was previously awarded a 20-year power purchase agreement (PPA) with the Government of Sri Lanka through a competitive tender to provide electricity to the national grid.

On 8 July, New Fortress Energy announced the signing of a Framework Agreement with the Government of Sri Lanka to build an offshore LNG receiving, storage, and regasification terminal located off the coast of Colombo, and rights to supply gas to the existing 300 MW Yugadanavi Power Station. New Fortress Energy will utilise this same LNG terminal to also supply natural gas to the new 350 MW power plant.

These two power plants total approximately 650 MW within the Kerawalapitiya Power Complex.

As confirmed by the Ministry of Finance, cabinet approval had been given and Sri Lanka would receive around $ 300 million for 40% of the shares.

In the meantime, the All Ceylon General Ports Employees’ Union (ACGPEU) raised concerns over the Government’s plans to provide 5.3 hectares (ha) of land adjoining South Asia Gateway Terminals (SAGT) and surrounded by the Colombo Port City (CPC), Colombo International Container Terminals (CICT), and the East Container Terminal (ECT) to CICT to conduct business.

ACGPEU Deputy General Secretary G. Niroshan alleged that if the Government went ahead with the proposed plan, the Sri Lanka Ports Authority (SLPA) would lose control over the cargo service supply as a result of allowing CICT to conduct business there.

“At present, the SLPA is the sole authority that provides cargo services to all terminals, and once CICT begins operations, its cargo which we are handling at present would not come to the SLPA. CICT makes up around 70% of this share, and even others would then have the option to choose either the SLPA or CICT in the future,” he explained.

Niroshan further alleged that the Government was attempting to rent out the 5.3 ha of land situated at a prime location in Colombo to the CICT at a monthly rental of Rs. 800,000.

“They have not done a proper valuation and the plot of land is being given at a much cheaper rate than the adjoining lands. The valuation was done by a valuation officer at the SLPA, but this should be done by a government valuation officer and not by an internal officer,” he stressed, urging the Government to, thereby, cancel the project and do a proper risk assessment.

The unions alleged that going ahead with the proposal could cause an annual loss of nearly Rs. 2.8 billion to the SLPA.

Disregarding opposition from unions, the Government had appointed a negotiation committee, and it is now in the process of negotiating the deal with CICT.

Speaking to The Sunday Morning, Ministry of Ports and Shipping Secretary U.D.C. Jayalal said the committee was currently negotiating with the investors and that the final report would be submitted to the Cabinet.

A seven-member negotiation committee headed by Ministry Secretary Jayalal had been appointed to evaluate China’s proposal.

Further, commenting on the developments in the petroleum sector, Petroleum Common Workers’ Union (PCWU) President Asoka Ranwala told The Sunday Morning that the Government was attempting to sell the Ceylon Petroleum Corporation (CPC) by opening up the fuel market to private players.

Alleging that the new legislative measures to enable private companies to enter the country’s petroleum oil market were being planned by the CPC, Ranwala stressed that two legislative reforms, including amendments to the CPC Act and the new Petroleum Resources Bill, were already proposed by the Government.

He further alleged that the Ministry was planning to establish a joint company with Lanka Indian Oil Company (Lanka IOC) to manage the Trincomalee Oil Tank Farm.

“As per these plans, the CPC will hold 51% of the shares while Lanka IOC will hold 49%, and the tanks would be divided based on the shares. This is a joke, because we are going to purchase our own tanks and share them with Lanka IOC, with whom there is no proper agreement,” he stressed.

However, Minister of Energy Udaya Gammanpila denied allegations made by the CPC, saying that there were no such plans to sell the CPC or privatise any institution under his Ministry.

In such a backdrop, Urban Development Authority (UDA) Director General N.P.K. Ranaweera said there were around 15 development projects that were already opened up for foreign investment and several inquiries had been received, adding that none of those investments have been finalised yet.

“We expect to raise $ 2 billion through these projects. We had earlier planned for a mega awareness campaign, but all those campaigns were halted due to the quarantine curfew imposed recently. Once the curfew is lifted, we will go ahead with those plans,” he said.

Referring to the projects promoted by the UDA, Ranaweera noted that the projects were planned for Colombo, Galle, and Kandy, and most of these projects were mixed development projects.

When contacted, Deputy Secretary to the Treasury R.M.P. Rathnayake told The Sunday Morning that there were no targets set by the Ministry of Finance to raise a certain amount of dollars through investment in development projects.

Instead, the investments the Government thinks is best for the country would be approved, he said, adding that the Ministry was encouraging debt-free development projects within the country.

Concerns were also raised by TUs and Opposition parties over the mixed development projects being promoted by the UDA, especially in the heart of Colombo. More concerns were raised on the legitimacy of state-owned property development entity Selendiva Investment (Pvt.) Ltd., too, which was established last year to revive underperforming state-owned ventures as public-private partnerships (PPPs).

Properties including Grand Oriental Hotel, the York Building, the Gafoor Building, the General Post Office, Cey Nor Seafood Restaurant (near the Lotus Tower), the Waters Edge mixed development, Hilton Colombo, and Grand Hyatt Colombo (located in the vicinity of the Colombo Port City), as well as the International Co-ordination Centre in Kankesanthurai, Jaffna were earmarked for development purposes under Selendiva Investment.

The properties would be developed under three investment portfolios: Heritage Square in Colombo Fort, Real Estate Development, and State-owned Hospitality Sector.