Columns

• SLFP ministers say MOU likely to be renewed from December, despite rumblings over various issues
• Heavy criticism over delays in probing high profile cases of corruption, killings and attacks on the media
• Deep concern over skyrocketing cost of living also, minister wants increase in price of LP gas
• SriLankan board continues to be under heavy cloud; President to meet board of directors

By Our Political Editor

The Joint Council of the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP) will begin talks next week to renew their Memorandum of Understanding (MoU) for the remaining tenure of the “National Government.”

These talks, expected to take place this week, have been moved for the coming week on days when Parliament is in session. The first MoU was signed on August 21, 2015 by Duminda Dissanayake, then acting General Secretary of the SLFP and Kabir Hashim, General Secretary of the UNP. It came minutes after Prime Minister Ranil Wickremesinghe was sworn in. Also on the agenda is the conduct of local government elections.

Though no specific reason is attributed, senior SLFPers say they have time till December this year to reach accord on a new MoU. This position was confirmed to the Sunday Times by the United People’s Freedom Alliance (UPFA) General Secretary and Minister Mahinda Amaraweera and Minister Anura Priyadarshana Yapa who once served as SLFP General Secretary. His successor Duminda Dissanayake was not available.

“We have a few months to decide on the MOU between the SLFP and the UNP. The SLFP members have already met President Maithripala Sirisena and held a discussion on this issue,” Amaraweera said. Yapa added, “There was a meeting scheduled for this week of the Joint Council, but at the last minute we were informed that it was postponed. However, reasons were not given. We have time till December to decide.” No formal reason has been given so far by the SLFP on the December deadline.

The Joint Council is made up of: SLFP – Mahinda Amaraweera, Duminda Dissanayaka, Anura Priyadharshana Yapa, Susil Premjayantha, S.B. Dissanayake, Lasantha Alagiyawanna. UNP – Kabir Hashim, Malik Samarawickrema, Mangala Samaraweera, Ravi Karunanayake, Harin Fernando, Akila Viraj Kariyawasam, Ranjith Madduma Bandara, Ravindra Samaraweera and Thalatha Athukorale.

There is little doubt that the two sides would eventually reach finality on an MoU. However, it is by no means a political cake walk. Firstly, the new MoU would have to encompass a programme of work as the coalition crosses the mid-term mark. In doing so, they will have to do stock taking on the existing MoU to determine what has been achieved and what are outstanding. They would have to then build on that as well as agree on other programmes. Secondly, they would have to be mindful of the next elections. Here, particular attention would be required when it comes to the next presidential election in the highly unlikely event of the Executive Presidential system is abolished. The other is the parliamentary elections due in 2020.

There have been rumblings within both the SLFP and the UNP over the two elections that are due. On both sides of the divide, there is growing opinion, that each should contest separately and re-establish their respective identities. That represents the majority. There are also rumblings within the SLFP. A few ministers, unhappy over different issues involving the coalition, speak privately of functioning as an independent group with no links to the ‘Joint Opposition.’ However, their colleagues dub them as those who are not happy with their current portfolios and claim they were using “pressure tactics.”

Indications on how the UNP will set about with its agenda will emerge when the planned re-organisation of the party structure by party leader and Premier Ranil Wickremesinghe. He is known to have put off the move until the ministerial re-shuffle was over. “We are prepared to work towards national goals. It all depends on the SLFP,” UNP General Secretary Kabir Hashim said yesterday. He, however, did not elaborate.

The current SLFP-UNP Memorandum of Understanding, which is essentially a marriage of convenience, prohibits members from one party crossing over to the other and centres on ten points. The first was to develop the economy. Among the steps to be taken towards this was a state-administered system where prices will be regulated. Another highlight was the decision to establish an independent commission to crackdown on corruption “in accordance with internationally accepted anti-corruption norms whilst calling for a review on regulations on financial crimes and money laundering.”

At least on these key aspects, the coalition’s report card seems to be poor. Though not altogether its fault, a rapid turnaround in the economy became difficult. It virtually put paid to the plans to provide a million jobs. Rising prices of essential consumer goods skyrocketed the cost of living. Just last week, an increase in cess for imported sugar led to retail prices of sugar and sugar-based products going up. This is in marked contrast to claims by the Finance Ministry that the increase in cess by ten rupees would not lead to the rise of retail sugar prices.

Another area which has drawn heavy criticism against the coalition is over investigations into high profile cases involving bribery, corruption, alleged murders and even assaults on media personnel. Barring a handful of cases, the game of buck passing continues with the investigators pointing the finger at the Attorney General’s Department while the latter in turn saying the material gathered is hardly adequate for an indictment.

SLFP General Secretary Duminda Dissanayake and his UNP Counterpart Kabir Hashim signing the MoU in August 2015. President Maithipala Sirisena and Prime Minster Ranil Wickremesinghe are seen with them.

Just this week, Public Enterprise Development Minister Kabir Hashim warned his ministerial colleagues that an upward revision of LP Gas (Liquefied Petroleum Gas or commonly known as Cooking Gas) prices would be inevitable. This is how he explained the situation: “The Litro and Laugfs are the only two LPG suppliers in the market and 72 percent of the market share is dominated by Litro. If the price of LPG domestic cylinder is not increased with the current global trend, Litro Gas Company will come into a crisis situation. Further, it is predicted that the control price (CP) will be on a rising trend. Therefore, if the company continues at current retail selling price without attending to an immediate price revision, the company could end up making a billion rupees loss for 2017. The Litro Gas Company was performing a profitable business until the end of January 2017 (according to the draft accounts) and has paid more than six billion rupees dividend within 2015 and 2016.” Litro Gas is fully owned by the Government of Sri Lanka.

Hashim says he has sought an increase since the company loses Rs 109.53 per cylinder. In the alternative he has recommended that the Treasury makes available financial assistance to cover up the actual financial loss to the company. This, in effect, is a call to subsidise the sale of LPG which the Government’s lenders like the International Monetary Fund (IMF) would not be in favour. Hence, a price increase has become inevitable. Such a move would snowball into price increases in a whole variety of consumer items.

These developments come in the backdrop of mounting concerns over Public Debt. Government debt could be categorised as internal debt (owed to lenders within the country) and external debt (owed to foreign lenders). This matter has come under close scrutiny by the Cabinet Committee on Economic Management (CCEM). At a recent meeting, Premier Wickremesinghe pointed out that the World Bank was willing to give technical assistance on debt management and will send a team to Sri Lanka.

The CCEM has already identified 25 different ventures as “national priority projects.” They include the Hambantota Port, the Mattala Airport, the Ruhuna Economic Development Area and the Mattala Tourism Zone, the Hambantota Pipeline Investments (Refinery, LNG Gas, Dockyard, Cement, Steel Billets), the Financial City, the Colombo Port (East and West Terminal), the Kerawalapitiya LNG Projects and the Floating Terminal, the Trincomalee Economic Development Area, the Pipeline Tourist Projects (Heritage buildings in Galle Fort, Deduwa Canal and Akurala, Additional buildings in Galle, Galle Prisons, Galle marina, Koggala Sea plane museum, Koggala Golf course, Matara Golf Course, Heritage building in Matara Fort, Tangalle Fort, Yachts and cruises).

With regard to projects for which MoUs have been signed with India, China and Australia, a four-member ministerial team has been tasked to follow up implementation. They are Malik Samarawickrema, Sarath Amunugama, Rauff Hakeem and Anura Priyadarshana Yapa. Premier Wickremesinghe has also requested Thilak Marapana, Minister of Development Assignments, to discuss legal issues of the Hambantota Port Agreement with the Attorney General. At present, the only document which is under re-negotiation is the Concession Agreement with a Chinese firm.

Another public enterprise over which the Government has been forced to give priority consideration is Srilankan Airlines, the national carrier, which is haemorrhaging public funds. A routine joint Cabinet Memorandum dated April 19 by Ministers Ravi Karunanayake (then Finance Minister) and Public Enterprise Development Minister Kabir Hashim was to spark off some strong exchanges at last Tuesday’s weekly Cabinet meeting.

The joint memorandum was the result of both President Sirisena and Premier Wickremesinghe urging the two ministers to jointly place facts before the Cabinet vis-à-vis the Airbus A350-900 deal. This was after Hashim, in a previous memorandum, complained that he was not consulted by the SriLankan Airlines management on matters relating to moves by the previous Government to procure Airbus A350-900 aircraft. The coalition was forced to pay a huge termination fee in the light of a contract signed by the previous board of directors. This was revealed exclusively in the Sunday Times (Political Commentary) of February 26.

In terms of the joint memorandum, negotiations with the lessor of the aircraft began at the end of October 2015. It adds: “SriLankan Airlines managed to negotiate a termination of the lease on the fourth aircraft (three were ordered for delivery later)) due for delivery in November 2017 for a termination fee of US $ 17.7 million. The Cabinet Committee on Economic Management (CCEM) was given a detailed update on the status of the negotiations on August 24, 2016 by SriLankan Airlines. SriLankan Airlines was subsequently authorised by CCEM to negotiate a termination fee for the three aircraft within the range of US$ 75 million to US$ 85 million. After further negotiations, SriLankan Airlines reported to the CCEM on September 21 2016 that:

The termination fee had been re-negotiated.
The termination fee had been reduced from US$ 154 million to US$ 98 million.
The reduction in the termination fee was conditional upon (i) leasing of a used A 330-200 aircraft, (ii) the extension of a lease on an aircraft already leased and (iii) SriLankan Airlines takes over the lease of two narrow bodied aircraft owned by Aercap and leased to Mihin Lanka.
“The CCEM instructed the Minister of Finance to obtain a written statement from the lessor stating these conditions. The CCEM also instructed the Minister of Finance to verify with the IMF on whether these payments were compliant with IMF conditions. If they were compliant, the agreement was to be accepted. If, however, the payment terms were incongruent with the IMF conditions, the lessor was to be informed and the matter was to be negotiated further.

“In view of the imminent delivery of the aircraft, based on the discussion and agreement reached at the Finance Ministry on October 1, 2016, the “No Objection” received from the Ministry of Finance and approval from the Prime Minister, SriLankan Airlines signed the Termination Agreement in line with the terms agreed by the Ministry of Finance, as follows (for a payment of US $ 154 million which would be reduced to US$ 98 million on SriLankan Airlines meeting the terms and conditions…).”

“Termination Fee for the 3 Airbus A350-900 aircraft,” the joint memorandum said is “US$ 154 million. It added, “Reduced termination fee US$ 98 million. Forfeiture of security deposit (already paid) US$ 7.5 million. Cash payment made by SriLankan US$ 90.5 million” The joint memorandum added, “If SriLankan fails to fulfil any or all of the conditions (by AerCap), the termination fee of US$ 98 million (termination fee US$ 146.5 million plus security deposit of US $ 7.5 million). In addition, any delay in payments to accrue an annual interest rate of 3 percent plus J.P. Morgan Chase, New York published interest rate.”

Last week, the Sunday Times (Café Spectator) revealed the highlights of the “Termination and Amendment Agreement” where the amount payable has been mentioned as US$ 146.5 million “payable in eight instalments.” This was after an upfront payment of US$ 10.5 million in October last year, soon after the agreement was concluded. This is what the agreement says dealing with “Termination Fee and Payments”: “In consideration of LESSOR’s agreement to terminate the Lease Agreements subject to and in accordance with Articles 3 and 4 below, LESSEE hereby agrees to pay LESSOR an amount of US$ 146,500,000 (one hundred and forty six million five hundred thousand dollars….” There is provision in the agreement for the reduction of the termination fee “provided each of the conditions” has been satisfied in full. Aercap has agreed. Such conditions include payment of compensation on time, extend the current lease on A330-200 MSN 627 aircraft for ten years by November 30, 2016 and SriLankan Airlines takes over the lease of two narrow bodied aircraft owned by AerCap and leased to Mihin Lanka.”

The purpose of the joint memorandum, ministers Karunanayake and Hashim said was “to authorise the Secretary of Treasury and Secretary of Public Enterprises Development to note the contents of the agreement and facilitate any actions that may be required by the Ministry of Finance and the Ministry of Public Enterprise Development to ensure compliance with the terms of the agreement.”

When the matter came up for discussion at Tuesday’s weekly ministerial meeting, Patali Champika Ranawaka was to raise issue. He charged that SriLankan had suffered a loss of Rs 22 billion and said the national carrier was in “a mess.” He said that the board of directors were not paying heed to the minister and the latter was not kept informed of developments. Rajitha Senaratne was to claim that the directorate was not following instructions. Also joining in the criticism were Navin Dissanayake and Dayasiri Jayasekera. Premier Wickremesinghe defended the board of directors and noted that they have done substantial work. He said contacts were under way with Emirates Airlines for a partnership deal. When such a deal with them or the others materialises, a new board of directors would have to be appointed, he said.

Enterprise Development Minister Kabir Hashim, under whose portfolio SriLankan is placed, was to confirm claims that he was not being consulted by the board of directors. He said at least they should now report to the three-member ministerial subcommittee examining the restructuring of SriLankan. He charged that some 1,250 persons had been given employment in the national carrier. Asked to comment on his accusations that the board of directors was not reporting to him, Hashim said, “I can only say there are some issues. We will sort them out. I cannot comment on what transpired before the Cabinet.” However, Hashim told a member of the UNP Working Committee that he had not been successful in registering his party’s trade union, the Jathika Sevaka Sangamaya, with the SriLankan management.

The heated exchanges at the Cabinet prompted President Sirisena to say that he would invite the SriLankan board of directors for a meeting. He would discuss with them the issues raised by the ministers and the future plans of the national carrier.

As for the Premier Wickremesinghe’s remarks about talking to Emirates, the Sunday Times learnt that there is no finality. In fact, the Cabinet Committee on Economic Management (CCEM) at its last meeting cast doubts on a possible deal. This is what CCEM minutes said after a discussion on a report by the Restructuring Committee on SriLankan: “A lengthy discussion took place with regard to the restructuring process of SriLankan Airlines. It was reported that the Ministerial Committee which was appointed had detailed discussions with Emirates and it was reported that Emirates will submit their Business Plan on Sri Lankan within next 2 – 3 days and the Committee was instructed to continue the discussions with regard to three scenarios considering downsizing as the central issue. (1) Possible partner scenario (2) No partner scenario, and (3) liquidity. It was finally instructed to have a concrete report on restructuring process and the Emirates Business Plan by the end of July to be discussed with the International Monetary Fund (IMF).”

In the days that followed the weekly Cabinet meeting, SriLankan Airlines rebutted the claims that were made at the Cabinet meeting and later reported in the Media. Responding to what they called “inaccurate reports in the press,” SriLankan said, “The airline continues to pay a heavy price for the extremely high lease rental agreements entered into by the previous Government. The cost of terminating the leases on four A350-900 aircraft that were grossly overpriced and completely unsuitable for the national carrier….” Yet, there has been no governmental action so far to probe who was behind the Airbus A350-900 deal and whether anyone made fat commissions. However, the statement from SriLankan said that during the year 2016-2017, the draft loss has been Rs 27.7 billion. The amount is Rs 5.7 billion more than the amount of Rs 22 billion which Minister Ranawaka claimed.

In a second statement, this time “referring to recent media reports,” SriLankan contradicted its own minister. Rebutting the claims made by Minister Hashim at the Cabinet meeting that some 1,250 had been recruited by the national carrier without reference to him, SriLankan said the number was only 126.

It said this number includes the Management Trainees, cadet pilots, airport service delivery and additional security personnel “recruited due to the increased number of flights and the statutory requirement stipulated by the Civil Aviation Authority (CAASL) to enhance airside security for catering.”

The upcoming talks to renew their MoU come in the backdrop of the government’s achievements, failures and mismanagement. Thus, each of these factors will weigh in, more particularly the shortcomings in yahapalanaya or good governance. Hence, it is not an easy road to another MoU.