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Multibillion dollar projects, procurements and contracts on hold as power struggle continues
Negotiations on or finalisation of several of multibillion dollar projects, procurements and contracts are held up owing to the ongoing power struggle, including an initiative effort to build houses for the war-displaced which is overdue since 2015.
After months of delay, a contract for 25,000 houses was to be signed in the first week of November between the Government and a consortium of humanitarian organisations led by UN-Habitat and UNOPS. The dwellings were an alternative to a heavily-criticised attempt to introduce prefabricated steel houses to the war displaced in the North and East.
“We drafted the agreement, it went to the Attorney General’s Department for verification of the memorandum of understanding and we were hoping to have it signed in the first week of November,” said Roshan Mendis, Chief Executive Officer (CEO) of Leads, a consortium partner.
Construction of 15,000 houses was to begin before the end of this year and be completed in eight months. The rest were to be finished in 2019. Also held up is an effort financed by India to build a further 28,000 houses in the North and East. Cabinet recently sanctioned the Ministry of Resettlement to award the contract to ND Enterprises (India) and Sri Lankan partners Yapka Developers (Pvt) Ltd and Archedium (Pvt) Ltd.
Meanwhile, the Millennium Challenge Corporation, which approved a five-year grant of approximately US$ 460mn for Sri Lanka’s land and transport sectors, said last week that, “No actions are being taken either to move the compact forward or to suspend it while we assess the situation in country.” The agreement was to have been signed in December this year following months of appraisal.
Many other projects on which progress was reported over the past few months are held up due to the administrative paralysis caused by the political uncertainty, public sector sources said. For instance, work on a US$ 1.4bn loan from the Japan International Cooperation Agency (JICA) for a light rail project has also stopped due to delays on the borrower’s (Sri Lanka Government) side.
No further discussions on loans had been scheduled at the time the political crisis erupted and nothing has been pencilled in since then, a spokesman for the External Resources Department (ERD) of the Finance Ministry said. “We recently negotiated a loan with the ADB (Asian Development Bank) and there are pending negotiations with AIIB (Asian Infrastructure Investment Bank) and JICA,” he said.
The AIIB mission was due to arrive in Sri Lanka for talks on the Colombo Urban Regeneration Project–which envisages land redevelopment and the building of affordable housing for low-income communities. “They have not indicated timing of the visit yet,” the ERD source said.
The Netherlands Embassy said, too, that there is “no decision yet either to stop or carry on” ongoing Dutch-funded projects. “We are watching the developing situation,” a spokesman said.
Cabinet recently approved the awarding of a contract to establish a Euro 35mn national vocational training institute at Hingurakgoda to a Dutch company. Also on the cards is the construction of 200 rural bridges, awarded to another entity from the Netherlands for a sum of Euro 50.68mn.
Several German businesses have also applied for and received Cabinet approval for local projects. The German Embassy in Sri Lanka said, while it cannot speak for private companies, effects on development cooperation “remain to be seen”.
“However, it is crucial to resolve the current political crisis as soon as possible in order to limit its negative impact on Sri Lanka’s economy and foreign investment,” a spokesperson stressed. Among other things, Cabinet has approved the evaluation of a proposal by a Germany company to develop the ear, nose and throat facilities in several hospitals.
The European Union said there has been no impact so far on projects funded by them, in response to a question from the Sunday Times. But a statement by the EU Delegation in Colombo warned that any further delay in summoning Parliament for a vote “could damage Sri Lanka’s international reputation and deter investors”.
“We consider it essential that Parliament be allowed to demonstrate its confidence by voting immediately when reconvened, in order to resolve the serious uncertainties currently facing the country,” it said. “Respect by all stakeholders for the provisions of the constitution will be important to maintain the confidence of the Sri Lankan people in democratic governance and the rule of law.”
The ADB said all loan negotiations for 2018 have been completed. “There is no change in the ADB project line-up for 2019 or beyond,” a spokesperson said. “ADB’s three-year rolling pipeline for projects for 2019-2021 was published in August 2018. As is our practice, ADB works with government to adjust the pipeline as necessary to respond to development priorities.”
The World Bank, which has numerous projects in the pipeline, maintained that it was an apolitical and nonpartisan development institution that has been in Sri Lanka since 1953. “The World Bank is committed to ending poverty and promoting shared prosperity in our client countries through technical support. The government agencies are responsible for the implementation of ongoing projects and we will review progress as per planned mission schedule. We do not speculate on political developments.”