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Suspension of BIA Terminal II: Sri Lanka pays Rs. 2 b a month to Taisei Corp.

30 Oct 2022

  • AASL to review contract with Taisei if unable to secure JICA funds 
  • Decision on whether to suspend contract to follow review 
  • Optimistic about JICA fund resumption after restructuring external debt 
By Shenal Fernando Sri Lanka is required to pay around Rs. 2 billion per month to Japan’s Taisei Corporation as a result of the suspension of the Bandaranaike International Airport (BIA) Terminal II project, according to the contractual agreement it had entered into with Taisei, the project’s contractor.  Airport and Aviation Services (Sri Lanka) (Pvt) Ltd. (AASL) Chairman Maj. Gen. (Retd) G.A. Chandrasiri told The Sunday Morning Business that the contract with Taisei would be reviewed in six months to determine whether it should be terminated, if Sri Lanka was unable to secure the required funding from the Japan International Cooperation Agency (JICA). This is due to an enormous sum being paid to the contractor monthly despite the suspension of the project.  Chandrasiri explained that when JICA had decided in July 2022 to halt its funding for the project, Taisei Corporation had decided to suspend all work until JICA funding recommenced, which would most likely be when Sri Lanka’s external debt was restructured.  “As per the contractual agreement, in the event of a sudden suspension of the project, Sri Lanka is required to pay Taisei Corporation because the suspension of the project is not due to a problem on their part, but ours,” Chandrasiri revealed.  He pointed out that due to the excessive fee, Sri Lanka was forced to pay the contractor despite no work being done. Accordingly, a decision will have to be made in six months to cancel the current contract and enter into a fresh contract with a new contractor. 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 Assistant (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 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.  


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