By Chandra Jayaratne –
On 9 May 2017, the Cabinet approved the construction of 6,000 pre-fabricated houses for war-affected communities in the North and East. It also approved the construction of 10,000 to 15,000 brick and mortar houses per year.
All available information suggests that the construction of the 6,000 pre-fabricated houses will be awarded to ArcelorMittal and raises many disturbing questions:
- The many limitations and unsuitability of ArcelorMittal’s prefabricated houses have been well highlighted. Yet, why does the government insist on these houses for war-affected communities?
- The cabinet decision notes that each house will cost 1.5 million rupees each (without import duties and taxes). Why is the government committing to excessive cost when only last year the Ministry of Resettlement initiated a scheme to build 550 sq. feet brick and mortar houses in the North and East for 800,000 to 900,000 rupees each?
- Why is the Government opting for imported prefab houses, when brick houses built locally will generate employment, boost local enterprises and benefit the economy?
- How are the 6,000 ArcelorMittal houses going to be financed and on what terms? Given the present economic and external debt situation and the depreciation in exchange rate, contracting any foreign debt, which was how ArcelorMittal was going to finance its project originally, is contrary to national interest.
- On what basis has the cabinet decided to award 6,000 houses to ArcelorMittal without a tender? Many domestic construction companies did not qualify for the initial tender owing to the scale of the original project (to build 65,000 houses in 5 years). Why are these 6,000 houses not being retendered?
- The cost of ArcelorMittal houses will increase substantially if import related duties and taxes are added. Is the government going to waive duties and taxes for ArcelorMittal, effectively subsidising them? Will it also do the same for import of cement for construction of the masonry houses, which will further reduce their costs?
It is now almost two years since the government of Sri Lanka announced its intention to construct 65,000 houses for war-affected communities in the North and East. It is regrettable that this project has yet to commence. The primary reason for this delay is the deeply misguided decision in early 2016 on the part the Ministry of Resettlement to award the entire project to the steel multinational ArcelorMittal to import 65,000 pre-fabricated houses. Significant public outcry and concern amongst a range of experts, officials, and political leaders over the adverse financial, economic, technical, social, and cultural implications of this decision led to several reviews and eventual withdrawal.
On 19 May 2016, we—a multi-disciplinary group of independent professionals and social activists—proposed a detailed, viable and comprehensive alternative proposal to the government. This 50-page proposal would allow the building of 65,000 brick and mortar houses at half the cost of the ArcelorMittal houses with domestic financing options. Despite this, the government did not take decisive steps to change course and initiate a much-needed housing for the war-affected through a socially empowering, financially equitable, and locally appropriate project.
We now call on the government to:
- Immediately review the decision to award the construction of 6,000 pre-fabricated houses to ArcelorMittal.
- Take urgent steps to initiate the construction of the proposed 10,000 to 15,000 brick and mortar houses per year in the North and East including by committing the necessary financial resources and initiating a procurement process that is transparent and in national economic interest.
- Ensure that housing projects are participatory and include social mobilisation, maximise local and national economic benefits and avoid creating indebtedness and other problems associated with previous housing projects.
Our Alternative, in Summary:
Our proposal included a domestic financing option—a formal term sheet from a leading local investment Bank has been secured, which demonstrates that raising domestic resources through a Rupee bond in four tranches of LKR 16.25 billion each is more beneficial and indeed a viable option. Apart from reducing foreign debt, for the same cost as AcelorMittal’s 65,000 houses our proposal illustrated that 102,000 masonry houses can be built with local financing.
For a detailed timeline of events please see: http://bit.ly/2dp9eWk
*Issued by Chandra Jayaratne, on behalf of a group of professionals with expertise in engineering, architecture, planning, community housing, financing, economics, development planning, law, community organisation, and project management.