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World Bank funds cancelled: Small hoteliers eat the dust
The World Bank has cancelled a Rs. 2 billion (US$ 16 million) tourism development project at the Government’s request, leaving bewildered smalltime hoteliers — many of whom went through an application and a selection process.Funds from the much-publicised “World Bank Matching Grant for Small and Medium Enterprises (SME) in Tourism” have now been diverted to a dam safety project in the North and East. But representatives for hundreds of smalltime tourist entrepreneurs said they had no idea the proposed funding had been cancelled.
“We don’t know what has happened and that’s part of the problem,” said Suresh de Mel, Immediate Past President of the Association of Small and Medium Tourism Enterprises (ASMET). “We need some information on the status of the project.” Mr. de Mel was not aware that the initiative had been cancelled. “We did a campaign around the country,” he said. “We had 17 meetings and there were about 900 participants. This has been a big blow to our Association because its credibility is at stake. Many people don’t even talk to us anymore. I must have had more than 100 phone calls.”
Entrepreneurs were promised “matching grants” under the project. That is, if a hotelier invested Rs 1 million in his business, a corresponding Rs. 1 million would be disbursed to him as a grant. The figure could go up to a maximum of Rs. 10 million. The funds’ terms and conditions had been negotiated by the Ministry of Economic Development.
Information available on the World Bank website now states, “The Government has requested that the remaining unutilized project funds be cancelled as the priorities of the Government have changed”. The funds have subsequently been reallocated to the Dam Safety Project. Lack of information about the project has angered the industry. A copy of a letter addressed to World Bank Country Director Francoise Clottes was received in the post by the Sunday Times. It said that based on the World Bank’s assurance of a matching grant, entrepreneurs had borrowed money from banks, financial institutions and money lenders in villages. Some had mortgaged houses and properties.
“This was done in order to fulfil certain requirements to qualify for the grant,” it states. “Two people have already committed suicide, some have gone bankrupt and others wait hopelessly. When business collapses family and children suffer and the World Bank is aware of this situation.” The Sunday Times was unable to independently verify the claim that anybody committed suicide over this issue.
The letterhead of the two-page complaint contained names of three industry associations: The Association of Small and Medium Tourism Enterprises, the Association of Informal Tourism Business Enterprises and the Association of Provincial Tourism Business Enterprises. The writer, who went as “a concerned stakeholder”, said that the World Bank had deposited the money in the People’s Bank through the Treasury. The funds were to be released in stages and the final payment was to be made before December 31, 2013.
“People’s Bank, being the disbursing bank, was requested by the Treasury to scrutinise and evaluate the applications, interview the applicants and visit their business premises before selecting the stakeholders for the matching grant,” the letter states. “After selecting for the grant we were asked to submit the quotations, supplier names, bank details, etc, in order to remit funds within a month.”
“After two months we were informed (verbally) by People’s Bank staff that the matching grant has been ‘put on hold indefinitely’ by the Treasury due to various reasons and some are obvious,” the letter asserts. The last he had heard was that the matching grant initiative had been held up at the Sri Lanka Tourism Development Authority (SLTDA), said Mr. de Mel.
But the Authority’s Chairman Bashwara Gunarathna said there was no question of it being stuck there. Instead, the Government had decided it could provide matching grants with the SLTDA’s own funds. “At a certain point in the process, we realised that we can continue with the project and fulfil our objectives without getting a huge loan,” Mr. Gunarathna claimed. “We amicably terminated the (World Bank) project and we are now allocating funds from our own matching programme.”
He said the Government had adequate funds, collected via the Tourism Development Levy and other fees. Each grant could go up to a maximum of Rs. 1 million, as opposed to the Rs. 10 million promised under the World Bank initiative. “We have more than 1,000 applications which we are processing,” the SLTDA chief said. “We recruited four teams of young people, we have trained them and they are doing a physical verification, district by district.”
Mr. Gunarathna also said industry associations knew about the cancellation of the World Bank matching grant project because their representatives were on the SLTDA’s board of management. But associations still question the “pointlessness” of the World Bank matching grant project that the Government had promoted.
“We worked according to the Mahinda Chinthana which is the heart and soul of the SME industry and now we are biting the dust,” said Siri de Silva, a founding member and past president of ASMET and a former director of the SLTDA.
“A lot of our members spent money doing project reports to get this grant,” he said. “I know a person in Anuradhapura who spent more than Rs. 200,000 on it because he wanted the best.”