News
65,000 houses project may be re-tendered in small packages
View(s):By Namini Wijedasa
French steel giant ArcelorMittal’s US$1 billion (Rs.146 billion at today’s exchange rate) bid to singly erect 65,000 prefab dwellings in Sri Lanka for the war-affected in the North and East has suffered a blow. The Cabinet Committee on Economic Management (CCEM) headed by the Prime Minister recommended this week for the project to be re-tendered in smaller packages.
The decision–which will be put to the Cabinet on Tuesday–will enable wider participation by the construction industry, particularly domestic companies which have been critical of the proposed ArcelorMittal deal. The bid bond which was earlier set at Rs. 650 million will now be much lower. However, the prospective bidders will have to come forward with financing.
An independent expert team had also proposed that the tender be floated again. Prime Minister Ranil Wickremesinghe was also of the same opinion, the Sunday Times learns. Senior officials of the Ministry of Resettlement were not available for comment,
However, Minister Swaminathan confirmed that there were moves to re-tender the project to ensure better participation. “But nothing is decided,” he added. “I am going to submit the papers to the Cabinet.” On September 27, 2016, the Jaffna District Coordinating Committee unanimously agreed that it will not support these prefab housing structures for war-affected people in areas under its purview. Support these prefab housing structures for war-affected people in areas under its purview.
“We agreed that we need the houses but not steel ones,” said Vijayakala Maheswaran, Jaffna District UNP MP. She was backed up by Angajan Ramanatha, the SLFP Jaffna District Organiser. Both had attended the meeting. The Northern Provincial Council had earlier adopted a similar position.
The ArcelorMittal project ran into issues from the time it first emerged as an unsolicited proposal in early 2015. As the Government’s declared policy was to eschew unsolicited proposals, the Cabinet decided tenders should be called. Twelve days later, the Resettlement Ministry publicly invited expressions of interest. Thirty-five companies responded; 15 companies prequalified.
Only two–ArcelorMittal and EPI-OCPL Consortium–passed the technical evaluation. The latter is a joint venture between an Indian company and Olympus Construction (Pvt) Ltd which is headed by the son of Primary Industries Minister Daya Gamage. The conditions stipulated by the ministry proved too difficult for other ventures to meet. Among these was a minimum single job of Rs. 25 billion completed in the last five years; a bid bond of Rs. 650 million; and a contractor funding letter of over US$ 1 billion.
Only ArcelorMittal’s financial proposal was considered. But once the details emerged, there were widespread protests. The houses were to cost Rs. 2.1 million each, pushing the total contract price up to US$ 1 billion. They were to have sandwich panels for walls made up of polyurethane foam and sandwich panels for roofs made of polyisocyanurate foam. Much of the raw material was to be imported.
For such a massive project, there has been no consultation at the community level, a statement signed by more than 100 civil society groups, community leaders and activists in the Northern Province said. “We call upon the Government to keep the project on hold until the respective war-affected communities of various localities are consulted,” the statement urged.
An independent, multi-disciplinary group comprising members from Colombo and Jaffna presented the Government with a strong alternative proposal for brick-and-mortar housing, complete with a financing proposal. It was supported by organisations and networks working on housing.
The proposal envisaged the construction of traditional cement or brick houses; a mixed approach that allowed home-owners and community organisations to lead the way; and a financing proposal, including a term sheet from a consortium of banks raising domestic resources through a rupee bond in four tranches of Rs. 16.25 billion each.
“Apart from reducing foreign debt, the extra cost to the Government to settle each tranche of rupee bond in 10 years time under the bullet payment will be only a fraction of the then GDP of the country,” the proposal now with the Government said.
The ArcelorMittal project has the strong backing of the Ministry of Resettlement. Local agents for the French company refused to speak to the Sunday Times this week.