Rs.21 bn spent so far; uncertainty looms over Grand Hyatt Colombo
Grand Hyatt Colombo (GHC), a 47 level skyscraper that will house an iconic 5 star luxury class hotel and serviced apartments marred with corruption and controversies during the previous Rajapaksa regime, is an incomplete building even after spending a staggering Rs. 21.6 billion, official statistics showed.
The project was earlier estimated to cost around Rs. 9 billion but was readjusted to US$302 million (Rs. 45.3 billion) excluding interest cost, CESS and NBT, owing to cost escalation, purchase of extra land and alleged malpractices.
The physical progress of the project as it stands now is around 61.67 per cent work done but the expected date of completion is uncertain as construction has been halted owing to ongoing legal issues and shortage of funds.
Finance Minister Mangala Samaraweera told parliament on Wednesday that the Hyatt hotel has already eaten into public money to a great extent under the previous regime but still the building cannot be used for any commercial activity.
The cost for the completion of a room at this hotel was Rs. 82 million whereas a similar room at the Shangri-La hotel had been completed at around half the cost, at Rs. 42 million, he said.
Minister Samaraweera made these revelations when he presented the Vote on Account for the first four months of 2020 in Parliament on Wednesday.
Since the Presidential poll is scheduled for November 16, the full budget for 2020 has been postponed to early 2020.
The government had earlier planned to operate the Grand Hyatt project as a five-star hotel with 458 rooms and 100 serviced apartments, once completed. The hotel occupies a land extent of 2.32 acres, a majority of which is leased from Government.
The management contract entered into with the Hyatt Group expires 20 years after the start of operation.
In an attempt to restructure the project ownership of Canwill Holdings Ltd, owner of the project, and divest the Government stake in the company, action has been taken to find a suitable investor by calling Request for Proposals.
A forensic audit into the Hyatt hotel project has detected details of a massive fraud of overspending and irregular tenders for construction and procurement as well as waste and corruption during the previous regime.
Canwill Holdings Ltd was a state-owned public enterprise set up by the former regime with Rs. 18.5 billion in equity secured from its major shareholders – Sri Lanka Insurance Corporation (SLI) which has put Rs. 8.5 billion, and Litro Gas and the Employees’ Provident Fund (EPF) with Rs. 5 billion each.
Forty-six per cent of the shares were held by SLI and the balance shared by Litro Gas and EPF.
Canwill Holdings had formed a subsidiary, Sinolanka Hotel and Spa, which was implementing the Hyatt hotel project in Kollupitiya.
Sinolanka Hotels and Spa (Pvt) Ltd was formed with an initial capital of just Rs. 40 by four top officials of the then government with close connections to former President Mahinda Rajapaksa.
The re-construction work of the partly build Celestial Residencies building of the failed Ceylinco was then transformed, during the past three years under the present regime to build the Hyatt hotel in Colombo.
According to findings of the forensic audit, three additional properties were acquired for the project by paying over Rs. 1 billion much higher than the estimated value of the Government Valuer during that period.
The audit report highlighted the alleged fraudulent methodology followed when acquiring three properties; Ranmuthu Hotels Ltd, No: 112, Galle Road; J.C. Ramanayake of 108, Galle Road and Ceylinco Insurance PLC of 134, Galle Road for the expansion of Grand Hyatt Regency in 2013.
The main land was leased for 99 years from the Urban Development Authority (UDA) after the former Ceylinco property was expropriated by the previous government in 2011 in terms of the provisions in the Revival of Underperforming Enterprises and Underutilised Assets Act No.43 of 2011.
Among the irregularities detected by the audit were payments of Rs. 10 million to a lawyer with no agreement, Rs. 16 million losses in steel purchases, fittings supplier given Rs. 80 million without board approval, international tender for US$37 million signed with an international contractor the day before the (2015) presidential elections and Rs. 12.8 million spent on a signing ceremony.
Several foreign consultants were appointed to carry out the interior design, restaurants, food services, laundry, lighting, lifts, landscape and facade.
Action has been taken terminate the services of a foreign engineering consultant who was getting a salary of Rs. 16 million a month, a senior Treasury official said.
A corporate credit card with a limit of Rs.1.5 million was issued to the former managing director and both his children were employed by Canwill Holdings with special perks, he alleged.
As a result of another malpractice, an arbitration tribunal in Singapore has ordered Sino Lanka Hotels and Spa to pay a staggering 7,432,062.72 Euros to an Italian contractor Interna Contract Spa for unlawfully terminating the contract they had entered into on January 7, 2015- the day before the change of Government.
Interna Contract Spa was awarded the interior package 2 contract of the Grand Hyatt Project and the arbitration tribunal delivered the order in favour of the company on October 6, 2017 against Sino Lanka Hotels and Spa.