By Laksiri Fernando –
Fiasco might be a strong word, but it is fitting at least considering the Navy handling of the Journalist. For a while, because of this ‘fiasco,’ the bigger issue or the bigger Fiasco got blurred. The leasing of the Hambantota Port for 99 years at this stage of Sri Lanka’s economic development for just US$ 1.12 billion to a Chinese company (China Merchants Ports Holding Company) will have great repercussions for the country for a long period.
The most alarming is the causal way that the Prime Minister, Ranil Wickremesinghe, has talked about this deal. He told The Hindu newspaper (15 December 2016) that “We have negotiated debt-to-equity swap and industrialization.” Here we are talking about a ‘debt trap’ that Mahinda Rajapaksa has noosed around the country and Wickremesinghe enjoying it believing that he managed to swap it for equity and industrialization.
The Debt Trap
The debt on the account of building the harbour was around 1.5 billion and this swap does not obviously cover the full amount. According to the most conservative estimates, at least 38,000 million must be paid back with its interest. The government is not revealing the full details. The full amount of debt to China is reported to be around 8 billion. All these figures are in US$. If we go by the same logic of swap of debt to equity, then how many enterprises that Sri Lanka must be leased to cover the Chinese debt?
However unplanned, the purpose of building the Hambantota harbour was to make it a profit making enterprise for the country. There is no point in taking loans to build an enterprise if it were to give back to the lender for their own profit making for 99 years. Therefore, both the present government and the last government are responsible for this fiasco.
It is true that the government effort is to make the Hambantota port ostensibly a joint venture. It is also named as a public private partnership (PPP). But this is a strangest ever public private partnership. Only 20 percent to the public, and 80 percent to the private partner! In this particular case, the private partner is not a local company, but a foreign enterprise. Even for a proper local PPP, the public sector should at least keep 55 percent of shares. This should be more so, when it comes to a foreign company as the private partner.
Although this is called a PPP, it is not actually the case. It is simply a distortion of a popular notion. This is a 99-year lease agreement keeping the lease holder to give 20 shares to the Ports Authority. This may give some income to the government. But that also depends on the profit making of the enterprise. This might not be in doubt since the Chinese company will make sure that it generates necessary profits. China can make use of the port for its own ships trading with Africa and the Middle East.
China has been extremely smart in the whole deal with the present and the last government. You cannot blame for their smartness. They got the MR government to get a loan and it was spent for their own entrepreneurs (China Harbour and Sinohydro Corporation) to the build the port. Of course, there were some Sri Lankan workers and engineers working for them. China Exim Bank gave the loan. Now it is given back to the China Merchants Ports. What a nice debt trap! Only pleasure was for Mahinda Rajapaksa as it was called Mahinda Rajapaksa Port for a while. That is also gone now. There was also a big Tamasha opening with some artists also benefitting handsomely.
The recent fiasco proved how desperate the workers became when they came to know the port is going to be leased. They were casual employees who were recruited haphazardly by the last government. They however had every right to secure their employment which was neglected. If they needed further training, they should have been given.
No one can condone the way the workers held up the Japanese vessel, Hyperion Highway, for four days, risking their own lives. Whether it is an ‘act of piracy’ or not, that should not be the way for trade union struggles in my opinion. The Navy intervention nevertheless was excessive, without allowing industrial negotiations to take place. In Sri Lanka, many issues and relations are becoming increasingly chaotic. On the other hand, if not for their drastic action, the workers’ demands would not have got the government attention.
The Navy intervention also heralds the way the security at the Hambantota port would be handled in the future. The Chinese government has already expressed concerns about the increasing political instability in Sri Lanka. This could also be a bargaining chip. Although ‘communist’ by name, the Chinese partners (including the government) are tuff negotiators when it comes to money and profits. This is what has been lacking on the Sri Lankan side. The China Merchants Holding Company would ask for full security from the Navy in the future. The government may have to bear the major costs if not the full. People like Ravindra Wijegunaratne (Navy Commander) would be delighted to do so, perhaps nothing else to do in the horizon.
Parallel of Darwin Port
Leasing a port for a foreign company is not unusual in the ongoing trends in the world trade today. China excels in these ventures. Australia’s Darwin Port was leased for a half a billion Australian dollars at the beginning of this year (2016) to the Landbridge Corporation of China. It was also a 99-year lease. The Sri Lankan dealers might be delighted to hear this. In comparison to Darwin, the Hambantota deal may appear a good bargain, because it is 1.12 billion US dollars. But it is not the case.
Darwin is a small port without much traffic compared to the potential of Hambantota. Therefore, the price of the Darwin lease is considered beneficial to the country. In addition, Landbridge Corporation has agreed legally to invest around .74 billion in the project for the next 25 years. Do we have such an agreement for Hambantota? This is questionable. The lease agreement is also passed as legislation in the Northern Territory Parliament. Do we have such a legislation covering the Hambantota deal? Most of the terms except the overall figure are shrouded in secrecy. In the case of the Darwin deal it is called the Prots Management Act (9 June 2016).
Darwin deal also was done amidst controversy. This matter is still debated in the country, particularly considering its impact on national security. On the Darwin deal, the US expressed grave concerns, even under Obama, but the US also have their long-range bombers placed at the top end of the port area. Unlike Hambantota, what is leased in Darwin is a very small area totally confined to the port.
Can there be national security risks in the Hambantota deal? There can be. There are growing tensions between the US and China particularly after Donald Trump became elected as the President. Although overtly appear as trade issues, there are political tensions which could escalate into military concerns. Recently, China seized a US Navy underwater drone and Trump tweeted even before officially becoming the President, ‘we don’t want it.’ He wanted to emphasize the Chinese hostility towards the US. There is an escalating Cold War between the two countries. Does Sri Lanka need to take such a risk in this context? A rational answer might be an emphatic No. In any future rift between these two giants, Hambantota port might become a controversial issue.
Leaving aside these international security issues for the future, even as a trade deal, the Hambantota lease is a bad arrangement. The payment of 1.12 billion debt to the Exim Bank by the China Merchants can be celebrated only by charlatans. Of course, the amount is huge on its face value. But the liabilities are enormous considering the lease period, the shareholding (80 percent), potential income and the terms and conditions. It is possible that the deal is a logical extent of what was agreed by the previous government with the Chinese authorities in 2010. There were some indications to this effect from the former Ports Authority Chairman, Priyanth Bandu Wickrama, in 2014.
Why didn’t Sri Lanka go for a 33-year lease instead of 99-years? There is no magic about 99! Longer the period, uncertain is the country’s future. Why couldn’t Sri Lanka hold on to 55 percent of equity, instead of keeping only 20 percent? There is no point in saying the ownership is with the government. Under these agreements, lessees are stronger than the owners. Ranil Wickremesinghe has boasted about ‘industrialization’ under the lease agreement. For that purpose, he is giving 15,000 acres on lease for the same amount of money in addition to the port.
There are two major flaws revealed behind the intended lease agreement. First is the weakness of the Sri Lankan leaders and bureaucrats to negotiate better terms for trade and other economic deals with external partners. This is the same whether it is the IMF, the World Bank, China, India or USA. In respect of ETCA (Economic and Technical Cooperation Agreement), India wants to sign it in June 2017, but Wickremesinghe wants to sign it also in January. His first preference was this year (2016). There seems to be an unusual hurry for some reason.
The most flawed seems to be the economic thinking behind all these initiatives. When the Prime Minister talked to The Hindu newspaper, he has said the following.
“We want the Indian agreement also quickly. Because, one, the Indian agreement paves the way for a tripartite [arrangement for trade and investment] by 2017 — Sri Lanka, India, and Singapore. The agreements we have between us mean that we are at the crucial entry points of the Bay of Bengal and we can work further on a closer economic union within the Bay of Bengal [region]. For that to succeed also, we require the agreement with India, because the five southern States [Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, and Kerala] and Sri Lanka — the total GDP of such an economy is over $500 billion with the possibility of doubling to a trillion dollars within a decade or so. The potential is enormous, so with our agreements with Singapore and with China, on their ‘One Belt, One Road’ initiative, it is imperative that we sign the agreement with India as fast as possible.”
There is no question that tripartite agreements or a ‘Bay of Bengal Trade Zone’ could benefit Sri Lanka in theory. But it is far-far away from the current reality. As the Hambantota fiasco has shown, Sri Lanka or the present government is not ready for that. If Sri Lanka cannot manage the Hambantota port, as the major partner of the so-called PPP, how can it benefit from other deals? Sri Lanka needs to strengthen and boost its own entrepreneur and management capacities. There is no other way to go about international deals.
Such agreements like the Hambantota lease might bring quick money or benefits to the government. It is like obtaining quick money from the Central Bank bond scams. However, the final looser would be the country and the people. At least in the bond scam, the benefits went to the local company the Perpetual Treasuries. However, this time, the beneficiary would be the China Merchants. Ranil Wickremesinghe has also outlined several other deals that they intended to unleash. Just after the above quoted statement, The Hindu interviewer, N. Ram, tried to bring some home truths by turning attention to Brexit and Trump victory in the USA. But unfortunately, our PM couldn’t get it.
It is in this context that he boasted not only about the ‘debt-to-equity swap and industrialization’ in the Hambantota deal, but also talked about leasing Trincomalee to Singapore (Surbana Jurong), India or Japan!
None of these deals are transparent. As I have pointed out in the case of Darwin, there is no such Ports Management Act for Hambantota. At least the opposition and the people still have time to stop or ask for a better deal for Hambantota. It is supposed to sign in early January. As M. A. Sumanthiran (MP) has revealed, even the deal with ArcelorMittal to build 65,000 houses in the North is also shrouded in corruption. Wickremesighe government is living in a pre-Brexit dream-world where every global or regional economic conglomeration is considered hunky-dory. That is not the case in reality. A strong national economy is important before all international deals.
Analyst / December 23, 2016
They are selling off and moving out with our looted money to foreign lands as economic migrants but looted money is SAFE in foreign Banks in the names of their children , G,children, the Friends , and crooked cohorts. Foreign Property galore!!
Who cares about Ape Lanka? The wonder of Asia??
All those Politicians and thieves in SL are not Patriots , the Politicians and their cohorts have built their Portfolios abroad Do they care about our Lanka or our Poor.
Our Srilanka TOO will be sold off BIT BY BIT FOR DIFFERENT SONGS, NOT ONLY BY THE CHINESE SONG!!
Wait and see!!
This is what we get when the whole of Srilanka is made up of INBRED SINHALA BUDDHISTS???
S.Modaya / December 24, 2016
The Chinese spent over 46 billion USD for the Gwadar Port in Balouchistan, Pakistan, but Sri Lanka is so cheap (after being looted and beggared by its greedy politicians who have looted the people, the environment, the land and the seas), that China is getting Hambantota for free almost!
The Hambantota fiasco was begun by Mahinda Jarapassa and family and cronies and is being continued by the even more corrupt and criminal Ranil-Sira Jarapalanaya govt. SLFP-UNP bi-partisan corruption is rotting Sri Lanka.
The rupee is in free fall because no one has confidence in Ranil-Sira given massive corruption.
Long live miracle of modayas!
Mallaiyuran / December 25, 2016
“that China is getting Hambantota for free almost!”
Under normal circumstances, saying a lender/developer repossessing the security of the loan for default of payment, like in your kind of statement may not hold correct. The lender/developer has already put money in that so that is the price he paid for the property. But in depth, it is more complicated. So nevertheless your statement is a good elevation, mainly because all of this Port Drama is only a political game.
Here, Chinese have got the land and the Port basically free. The basic deal now is Port + five villages spread of land (60 Square kilometers) is given in a probable 200 years lease. Always a land has its value. You get a land anywhere only if you pay for that. Now the Port is completed and it is an investment, then it has to generate income. For outside look, based Old Royals claim that they have built a prosperous Port, Chinese are going to reap the annual revenue + upfront land value too. When one think only of the Port, and If the cash flow of the Port have been positive (i.e Revenue – annual principal payment – interest Payment – annual operation cost >0), then there is an income for the owner of the Port. If the “Positive” assumption can hold, then any management company will take over and run it, in an auction. But,we need to look at how this game was played.
When Ambassador Robert Blake was working with Murali for the Jungle land for Dole, he categorized Hambantota Port Initiations as commercially not viable. Blake is not a well venture Capitalist, but I am pretty sure Lankawe embassy used American resources to evaluate the project before ambassador release that comment. India refused to undertake the contract evaluating the same way. Normally a developed will not undertake contract, if the client’s project evaluation is not show + cash flow. The banks, if they see a fault in the budget, they will decline the loan request. Because this indicates them a future difficulty in having their loan or bill paid up by the client. The communist nature of the Chinese policies, they cannot evaluate the Cost-Benefit in competitive market. So they make many mistakes. It is true that they were not able to guide Lankawe in this. Further, Old Royal offered to India to build the Port. It said it was not a good project and did not take it. But India agreed to put the Northern railway track and that is said to be the highest profitable government owned venture in Lankawe. There was not any other private evaluation of the Port Project. Further, that offer to could have been only a gimmick to China; if India had agreed to offer a price they might have used it to plug more commission from China but it was highly unlikely India getting the Contract. The reason behind that was the Oil Tanks of China Bay with India has been an irritable element for Old Royals and they attempted to nationalize them many times. The Sampur Power Plant in competition to Nuraicholai was not forth coming at all during Old Royals time. (Now Yahapalanaya stalled it by TNA’s opposition is different). Palai AirPort was claimed by Shiv Shankar Menon for immediate development to make it an International airport. . It did not come in the Old Royal time. But many Chinese Projects mushroomed. Everybody knows the explanation for that.
So, the Port, from the very beginning, was not built to use or generate income for Lankawe. Under all circumstances it cannot make any money at all. So our above positive cash flow assumption is not true. As even (Revenue – Operating Cost <0) it is loss even to keep the Port open. The current situation is, the post is better handled, leaving it closed and tax the people and pay the loan installments. This is best beneficial way to lessen the tax for taxpayers.
It is in that condition the learned professor has suggested to Pool the Capital to fool the Modayas. It is not a fixable problem. Only way is to take the loss by tightening the belts on the waist of the Modayas. So it is clear, even though we do not know the Chinese plans, China is taking that loss itself when it is taking the Port alone. So it is asking the land to balance the loss, provided the land can generate cash flow in positive numbers to balance the negative cash flow form the Port. We don't know if the proposed industrial zone can generate positive cash flow. Again, it is another prediction of the Chinese government who evaluated the Hambantota Port cash flow. (The world largest mall, South China Mall was built in 2005 by the Chinese government, still not occupied enough to make it commercially viable project) It may work or it may be additional loss for China. If China losing on that too, like in the Port loan, it will turn around and demand more Pounds of Flesh for having fooled more. That time Yahapalanaya Government will again turn back and blame the Chitanta government for having created the problem, instead of it accepting at least the part for even having it escalated the Port Fiasco for this new dimension.
So, here, there are three outcome scenarios possible.
1. China faces negative cash flow on both, Land and Port. (At this time no cash outflow for China on Land but future development will cost some money)
2. The land Development may balance the loss in the Port Loan.
3.As an unlikely miracle, Port may start to make money by better management with a bonus cash flow from Land.
As we saw the third one is not a realistic scenario. Further the Land at Hambantota is baron jungle; it will need substantial resources from mainland of Lankawe to be diverted to make this colony productive. China may have money to pay for Yahapalanaya government and buy all what it wants, but more people's resources diverted, more the people will recent.
Even the second one is only 50:50. Not a scenario with strong possibilities. At this time first is the one we think as he one has any possibility. So the question is why Chinese want to undertake this double jeopardy? Are the Chinese Modayas are below Lankawe Modayas? Is Chinese IQ is <79?
Though Chinese do not have good tools to evaluate the cost of the projects, they do know they can go wrong. So the undertaking of this double jeopardy is not purely on commercial, but as we all know, it has other motives too.
China had a humongous trade surplus before 2010s. Still it has a lot. It can pay for anything in cash. So it can take these minor losses lightly or ignore it. But it has its plans to deal these commercial projects, in noncommercial ways. When other private contractors undertake a capital project, they have to buy the material form the cheapest market and hire labor from locally that is usually cheaper. In Lankawe projects, Lankawe media reported China did otherwise. They gave the loan at a higher interest rate unusual capital project. This technique has secretly pulled back a certain percentage of the principal of the loan. Further it brought its material for the project. So that money went back to China and restored the Principle equivalent to that part. Those materials had no internal cost to China as said in Nuraicholai, it was only a dismantled second hand machinery. It in labor, it is said, China did the best trick. If it had brought really talented workers from China, it may have only restored the Principal for China. But it was said it brought even prisoners to work here in Lankawe. So taking prisoners was profitable venture for China while it is costly operation of taxpayers money for other countries. Even on the Commission paid to Old Royals, it did not go wasted. It was like hiring the Lankan government like a consulting firm to a PR job to manage American politics. In turn Lankawe hired American PR firms and defeated Susan Rice, she was viewed as more thorny Secretary of State than Hillary Clinton by China and Lankawe.
The borrowed loan is $1.5 Billion. It has no connection to any kind of costs related to the Port. There may be an estimated cost, based on accounting and budgetary principles, to build the Port. There may be actual or real cost for China to build the Port. The accounting evaluation of how much of the loan China can write off is mainly based on (Loan + Agency charge to defeat Susan Rice – actual cost to China – Commission to Old Royal). If this is pretty close loan then the China is getting the Land and the Port Free of charge. Of cause we cannot include the other political benefits like defense purpose for China in monetary unit based formulae like this. So they have to be left as only bonus to China.
The above formula is indicating that your statement has a high probability of being correct.
The Chinese Contractors are not like other private contractors. Especially, when the contract is being done in a third world, poor country. There are more of political elements than commercial elements in those contracts. They attempt to build an image as saviors of these poors and buy them thought bribing the government officials. This is in contrast to Western contractors where if they are caught in bribing a client country government official, they can be sued in their own country and the in third world client country. So in economic sense, doing business China is a big loss for the client country.
The EU’s GSP+ and America’s MCC payment are attached with political objects too. But it is not in form of Blackmailing or as secret element. These dome with open negotiation the beneficiary. Further Western countries market these as benefits for all societies rather than a political influence gathering action for China.
We saw earlier that even before the Port was built, the International opinion about the Port’s viability was not enthusiastic. There will not be any private management firms will be ready under take this Port operation. The Communist Guru who has no respect to private firms, simply suggesting UNP Yahapalanaya did not do hard bargain, irrelevant of the Lankawe computers can be hacked too. His essay is not worth for penny, but your statement has a high probability of being correct.
Dinuk / December 24, 2016
Good article Prof.!
Bond scam Ranil Wickramasinghe’s economic team is a bunch of half-baked jokers who are enabling the Chinese to loot the people of Lanka while destroying the environment and livelihoods of farmers and fishing communities.
Amarasiri / December 23, 2016
Dr. Laksiri Fernando
RE: Hambantota Fiasco & Implications For Future
“Fiasco might be a strong word, but it is fitting at least considering the Navy handling of the Journalist. For a while, because of this ‘fiasco,’ the bigger issue or the bigger Fiasco got blurred. The leasing of the Hambantota Port for 99 years at this stage of Sri Lanka’s economic development for just US$ 1.12 billion to a Chinese company (China Merchants Ports Holding Company) will have great repercussions for the country for a long period.”
“The most alarming is the causal way that the Prime Minister, Ranil Wickremesinghe, has talked about this deal. He told The Hindu newspaper (15 December 2016) that “We have negotiated debt-to-equity swap and industrialization.” Here we are talking about a ‘debt trap’ that Mahinda Rajapaksa has noosed around the country and Wickremesinghe enjoying it believing that he managed to swap it for equity and industrialization.”
Yes. Thank you for bring this fiasco, courtesy of Mahinda Rajapaksa, to the surface and exposing it. Will the populace with the average IQ of 79 understand it? However, they will certainly feel it.
Given the trap Mahinda set the country in, did we have a better alternate option? Was this the best option we could have?
Given the what Sri Lankan Airlines was managed and losing money, this action makes sense. Then how come the Colombo poer is “Profitable”.
Will the Chinese take business away from the Colombo Port? Or will it enhance it?
The Chines have the port city as well.
What a disaster.
When will they try Mahinda Rajapaksa and make him answerable?
Dr. Rajasingham Narendran / December 23, 2016
Is there any alternative? The Chinese will demand their pound of flesh! We are small minnows in the ocean full of big sharks. It is a shame that we try to box above our weightweight and get fleeced and then battered.
Why should this government also handing over 350 acres in Hambantota to the Chinese? Will the ‘ White Elephant’ airport’ in the vicinity also go to the Chinese soon?
It seems we have been as a nation mortgaged to the Chinese by MR and co,
What will be the Indian response to these developments? What will be the US response?Are we in
boiling water ? Are we losing our much proclaimed sovereinty?
Dr. Rajasingham Narendran,
Dr Laksiri Fernando / December 23, 2016
Is there any alternative?
Yes, I think there is. Firs thing is to differ the signing of the lease agreement. It can be renegotiated. It is not correct to say that Sri Lanka cannot handle the new Hambantota port. Colombo port is in the 30th place among the leading ports in the world. That experience is a base. Even the Navy can play a role. What is the point in having our universities if we cannot produce graduates who cannot handle this kind of a venture? We even have an Ocean University!
Leaving that aside for the future, why not government sponsoring setting up of a company like China Merchants Ports Holding Company? It can be ‘Sri Lanka Ports Holding Company.’ It means we can ask other companies and banks to pool money in terms of shares. I think it can be done. We may have to pool expertise and capital. Expatriates might be able to help. There can be an agreement between Sri Lanka Merchants and China Merchants without giving a lease. The technical aspects of handling the construction, maintenance, handling of required services and even some aspects of management can be subcontracted (if necessary) even to overseas companies (China, India or Singapore). However, major handling could be from Sri Lanka Merchants and the Sri Lanka Ports Authority. Minimum 55 equity should be Sri Lankan.
Of course, the termination of the lease could affect the debt. This should be renegotiated and there should be other ways of debt servicing. The government is going for the easy way. The government should cut down political expenditure (not social spending), promote tourism for foreign currency and immediately promote Hambantota port services to cargo ships passing the Island. Of course, the fiascos like the last strike should be avoided/stopped. I also think whatever the fraud in Avant Garde operations, while they should be stopped, maritime security is a venture that can bring income to the country.
The Minister for Ports and Shipping should attend to these matters without building the tallest Christmas Tree in the world! What a dereliction of duties!
Dr. Gnana Sankaralingam / December 24, 2016
Hambantota port was a disaster right from the beginning. The only advantage it has over Colombo port is that it is closer to main shipping lanes than Colombo. Other than that it has no benefit, being in an outpost in Srilanka with no facilities to back up.
It was told that Hambantota port will compete with Singapore and Dubai ports for transshipment cargo. Only transshipment cargoes handled by Colombo port are for eastern India and Bangladesh. To expect business from cargoes going to other countries is foolish.
When Tamil Nadu was trying to get Sethu Samudram deepened for big ships and develop Tuticorin port as a major transshipment hub to handle cargoes to eastern India and beyond, Srilanka protested to India not to go ahead as that will end business in Colombo port.
Is Hambantota port a divine punishment for sabotaging Tamil Nadu. Srilanka may have expertise to Handle Hambantota port, but what is the use when ships do not use it. Ultimately ships calling at Colombo port have to be diverted to make Hambantota port viable.
As I have been telling, Chinese are not in Srilanka to develop Srilanka, but to destabilize India through southern front, and India knows about it. Chinese are not interested in economic benefit from Hambantota port which they know is a dead loss.
Hambantota port is going to be used by Chinese for only military purposes to keep ships using the area under surveillance. This is a sure recipe for disaster as India is not going to wait looking on, especially with an unsettled Tamil agitation for autonomy.
Mahinda had put Srilanka in this debt ridden situation for his personal political and financial benefit. China read the riot act to MS/RW who talked big that they will cancel this deal, and had to eat the humble Kavung and agree to give the pound of flesh.
Dr,Rajasingham Narendran / December 24, 2016
Thanks . You have discussed poissibilities. However,
1. When do the interest payments fall due?
2. Why have we not attracted merchant ships to this ‘ Rajapakse’ port?
3. Is its location a problem that cannot be overcome ?
4. Why do the Chinese think they can operate it and profit?
5.Why do they want it for 99 years?
6. Why are we ready to hand it over for 99 years?
7. Would the Chinese make it part of the ‘Ring of Pearls’ project ‘?
8. Can the Chinese navy berth in this port under the lease?
9. Who will be responsible for the security of this port? Sri Lankan armed forces?
10. Will ships of all nations be permitted to enter.
11. Prone as we are to bribery, how effective would our participattion in controlling key Sri Lankan elements in this port.?
12. Is there an escape clause in this agreement and what would be the penalty, if we trigger it?
I smell a dead bandicoot and feel the Chinese Tiger right behind me !
Dr Laksiri Fernando / December 25, 2016
Thanks for probing the issues further. I might not be able to answer all the questions. You must be raising them for other readers as well. However, following are my answers. They are also for common consumption and for my clarity.
1. When do the interest payments fall due? Answer: I believe it is already due for the first phase (of around $650m) from 2007 with a grace period of 4 years. However, the interest of the first phase was 2 percent.
2. Why have we not attracted merchant ships to this ‘Rajapaksa’ port? Answer: This has to be further investigated. My information is that it is not due to lack of potential, but for lack of initiative to promote the port services and facilities. Lack of marketing so to say. It is also understandable that it takes time for the shipping lines to reschedule their itineraries.
3. Is its location a problem that cannot be overcome? Answer: Location is one of the best I believe except high cost for many artificial creations unlike Trincomalee.
4. Why do the Chinese think they can operate it and profit? Answer: Answer is similar to 4.
5.Why do they want it for 99 years? Answer: Longer period is beneficial for the lessee. This period is also common in such leases (i.e. Darwin).
6. Why are we ready to hand it over for 99 years? Answer: This is a question that the government should answer. But I think it emerges from the UNPs economic thinking not to undertake major projects.
7. Would the Chinese make it part of the ‘Ring of Pearls’ project ‘? Answer: It is quite possible. I would be surprised if they don’t.
8. Can the Chinese navy berth in this port under the lease? Answer: I frankly don’t know whether they can do permanently or long term basis since no one has revealed the terms and conditions. However, any power would do so under the compulsion of circumstances. This is the danger.
9. Who will be responsible for the security of this port? Sri Lankan armed forces? Answer: This is also not clear. But it would be the SL Navy I believe. This is also can become a controversy.
10. Will ships of all nations be permitted to enter. Answer: I believe it is a case as this is considered a commercial port.
11. Prone as we are to bribery, how effective would our participation in controlling key Sri Lankan elements in this port.? Answer: While bribery and corruption are major problems in any management in SL at present, we also need to rely on and generate best elements for development management without bribery and corruption.
12. Is there an escape clause in this agreement and what would be the penalty, if we trigger it? Answer: Lease agreement is not yet signed. Therefore, the question of escape or penalty does not arise as far as I understand.
Please consider my answers are tentative. I also don’t think we need to be excessively fear about China. It has to be resolved diplomatically and for the best interest of the country.
Mallaiyuran / December 25, 2016
Ananda – Buddha dialog Continue….
Ananda PhD is asking: My Blessed Load, this small sinful has not knowledge to understand Why have we not attracted merchant ships to this ‘Rajapaksa’ port? this puny begs thy grace to clarify me this.
Buddha PhD is answering: Ananda, My beloved child,listen carefully to my words, “My information is that it is not due to lack of potential, but for lack of initiative to promote the port services and facilities. “
This is the classic example of why the Sinhala Intellectualism will not change and cannot be fixed to allow any power devolution to Tamils and the Paramilitary going to go for destroying Tamil working with Sinhala government.
China is achieving this, legal threats, economy squeeze, sabotage through acolytes or better word “Coollie Pattaalam”, extensive bribes for high ministerial position who are shuttling between Peking and Colombo and other unethical methods.
Recently the Chinese ambassador go out to the road and kicked on the butt of the Lankawe finance minister in front of the Colombo Media, and when Yahapalanaya complained about to China, they said he was correct in doing that.
Did these guy went to schools any time. Entire polution in Lankawe knows that this is Chinese government retaliation for Ranil Mahata challenging he will cancel Colombo “Pong Cing” project and defeated communist Chinese favorite acolyte Old King.
The News is suggesting the Four-Five village spread Hambantota land may not enough to even 10% of the Chinese preparation. They say Lankawe government is preparing to issue a Million Visas. To populate 250,000 Chinese the Five Villages may be barely enough. So how to explain where the rest going to go and where the future visa people are going to go? This is a possible 200 years agreement. This must have been a past news in Lankawe, if that is correct.
China is not doing this because the people in China is dying so it has to have the interest collected and go to moon and buy some rice to feed them and Yahapalanaya is not voluntarily surrendering without any means of influence to obtain it.
We have to wait and see how $200 billion spent on the war to kill 500,000 Tamils is working out.
Mallaiyuran / December 24, 2016
This is what they call convoluting or enlightening Guru – Shishya dialog
For that purpose, he is giving 15,000 acres on lease for the same amount of money in addition to the port. – Guru
Why should this government also handing over 350 acres in Hambantota to the Chinese? -Shishya
Did the Guru corrected the Shishya? He will not becuase i will spoil the joint drama.
The problem is they both worked with the Old Royals until they robbed 18 Billions on loans to send to foreign Banks and conferred even PhD for these robberies and war crime. They at the end died hard to install another crooks team under a war crime and white flag murder accused CC. None of them stood up and asked if he was clean man. Now they are playing this Guru-Shishya drama. Why? They want the power shifted back there, then they can go there and redo what they have been doing.
Again here we go
China has been extremely smart in the whole deal with the present and the last government. You cannot blame for their smartness. Guru
Is there any alternative? The Chinese will demand their pound of flesh! – Shishya
What an attentive and an obedient disciple? Absolutely an interesting dialog, a Drama, a comedy show!
Only one another conversation as good as this I heard when I was in high school, the other boys acted. Two deafs lived together. One took up his bath towel and walked across the room and then ………here it goes:
First Deaf: “I guess you are going to take a bath, Am I right?”
Second Deaf: ” OOOOOOh No No, I am sorry, I am only going to take a bath!”
First Deaf: “Well it is stupid of me, I thought you are going to take a bath”
Let me answer the question of the disciple: Only one other way possible way exist! “Put the buglers in prison and recover the looted $18 billion, give it on the hand of Mr.JinkPink give kick on the butt to fall in the Hambantota Ocean and wipe off the boots”. If somebody tell Hakeem in the proper way won’t he go and the $3 billion of the Dubai Bank. Didn’t he sell the LLRC to America? It is two time more to pay the Hambantota loan.
Well Guru who died hard to install the Yahapalanaya, New Royal and cannot think about imprisoning the National Hero who won the LTTE.
His answer is “It can be renegotiated. It is not correct to say that Sri Lanka cannot handle the new Hambantota port” If that is possible then why the Old Royals did not negotiate in the blah blah way rather than taking loan and have added interest to that now? Truth is, Hambantota is a white elephant project. Even China cannot put pirate on the sea and have the ships hijacked to Hambantota port if they don’t want to come. Now, they are interested in 15,000 acres land, that is larger than about four or five villages spread. If they make the Port extremely sophisticated and have the Ships stop at Hambantota, Colombo no longer going to the one with in the 10 best ports. Remember, it is 200 years deal. If Indian Ports get hurt by ultra-modernizing the Hambantota, even BJP will cut the Ramar Paalam and create Sethu Canal to keep ships occupying their ports. It will be the Colombo Port will be paying for that.
Guru can say anything but, China will not take the loss of the white elephant projects and the looted commission money. They want the Land. They are getting it. So they are writing off the port Cost for the Land. At the current economic situation, they have no commercial use for the port. They are holding it as collateral for the land they are requesting. It is a security on the land, so it can watch from the sea that Lankawe is not playing any game on the land lease. If no land, they won’t take the port-they will use international mechanisms to take away the foreign reserves Lankawe has on foreign Banks. Then Lankake will have to go to moon, this time not for free rice, but to look around for some IQ and add it with Amare’s IQ index 79 and make it as 79.001
I think it can be done. We may have to pool expertise and capital I wonder with $8 Billion loan if the Guru knows the meaning of the word Capital. Where is that sneaky thing “Capital” is hiding in Lankawe? He wants to pool the Capital but Old King did a much larger deed, he ocean-ed in the Hambantota the precise capital.
What is the point in having our universities if we cannot produce graduates who cannot handle this kind of a venture? The standardized Tamils are not fit to answer that question, still let me take that risk. Isn’t our Doctorates are for war crime murders and Thero De Silva’s Zero casualty Appa Diplomacy? Aren’t we did exel anybody in the world on these fields. Then why oceanography PhDs?
The government is going for the easy way. We did very hard bargain to jack up to $540 million, the contract Chandrika made for Nuraicholai for $250 million. After knowing that we still gave them PhDs. Now the question is why the Yahapalanaya New Royals also not doing same and get a double PhD from us instead of going for this easy way? If Ranil can make the 15,000 as 30,000 then he too would deserve a national hero PhD.
Chandrika is not not looking for a easy way, she is saying it will take 20 generations for the Sinhala Buddhists to pay out these loans.
These essay are just talks. They write these fool the Sinhala Modayas. There are no contents in them. These Left, right, centre, bottom, up, inside, outside back and front communist have been praising as the China angel and the one gives out easy loans. Now they are twisting and saying China playing Smart and asking for their pound flesh. If Lankawe’s Sinhala Intellectuals borrow the New King’s Thirukkaivaal and whip them 100 times religiously at all five prayer times then the Sinhala Buddhists will know how to vote.
First they came for Indian Coolies,
I did not speak out, Because I am not a coolie.
Then they came for North-east Kallaththonies,
I did not speak out, Because I am not a Kallaththony.
Then they came for the Kaaththankudy Kalu Thambia,
I did not speak out, Because I am not a Kalu Thambia.
Then they came for me—and there was no one left to speak for me.
-a poem by a Sinhala Buddhist double crossed by Sinhala intellectuals
kumaran / December 23, 2016
Best is to really tighten our belts. That include ALL politicians, State employees of high position, doctors and engineers, company execs etc.
1) NO duty free cars etc. In fact, introduce a moratorium on imports of ALL cars, including for the forces, State etc.
2) NO foreign jaunts for all State officers including ministers for any reason.
3) De-monetize. Do it like Dr. N.M.Perera did in 1970/71.
4) Remove all bank-notes of Rs. 5000/ and have only the Rs. 1000s/, 500/, 100/, 50/ 20/, 10/ and 2/
6) Introduce longer banking hours, like many other countries. Open banks at 8 AM and close at 5 PM, and have shorter hours even on week-ends.
7) Remove 55% of the Public Holidays.
That should be a first step.
If not, the nation is lost.
PS. And dont waste time and money going to temples in foreign lands. Instead, visit all hospitals, government departments,public transport, ministries etc
Sri -Krish / December 23, 2016
Dr Laksiri Fernando,
Thanks for an excellent article giving a lot of lttle known fcts in the process
However Some questions for clarification?
“We have negotiated debt-to-equity swap and industrialization.”
Is it not a positive outcome?
Let us take the Industrialization part!
How much China is going to invest?
This is a form of Foreign Direct Investment. Isn’t it!- benefits of
FDI?, begging, borrowing promoting
We are chasing for FDI Giving all kind of facilities for foreign investors
Why grumble now?
You want the cake and eat it too!
Sri -Krish / December 23, 2016
Dear Diaspora Tamils
This is a golden opportunity,-Better than armed struggle or endless messy negotiations for federalism.
The better option is to go for 99 years lease of Northern and Eastern Provinces of Sri Lanka.
I believe you have all the money at your disposal,
Why not make a tempting offer?
Ranil may be delighted!
Douglas / December 23, 2016
This “LEASE AGREEMENT” of Hambantota Port is nothing but a “DEAL and an AGREEMENT” between Mahinda Rajapakse and Ranil Wickramasinghe. There could come very many of such “Lease Agreements” covering all the “Loans” taken from China and perhaps India too. The “Common Candidate” elected President is CLUELESS and shunned aside and he will only be confined to perform “Rituals” (opening ceremonies, lecturing etc.) This “Programme” will be further protected and fortified with the introduction of the “Super Ministerial Portfolio” and Mahinda Rajapakse will get what he NEEDS. Have no doubts about it.
Mallaiyuran / December 23, 2016
As per very close ally of Lankawe military, $200 billion cost of the war. My estimate is more 500,000 Tamils. But there are some estimates says 300,000 Tamils were murdered. So let’s go for comprise of 500,000 Tamils were murdered on the war of Tamil genocide. Sinhala Government’s cost ($200B*150 R/500,000) is about 60 billion rupees per head of a Tamil it murdered. It sounds like a worth war to have fought.
But this is not the last auction of Lankawe to China. News suggesting many area more to come including parts in the North. This will certainly provoke Indian and America for the next 100 years. But the lease agreement, ae per some news, is China will renew the lease provided it is making profit, but Lankawe can not reject it. So the lease for 200 years.
So for 200 Appa Diplomacy has to fool sleeplessly the coming Modis, Trumps, Hillaris……
DS’s initiation, after 70 years and spending 60 billion per for 500,000
sinhalese buddhist / December 23, 2016
NOt just Sri Lanka, but India, Bangladesh and Pakistan need to get their act together in the face of competition between the US and China for nautical primacy in the world. Otherwise, we’ll ALL get screwed over by BOTH the US AND China!!
So SOuth Asia should cooperate and come to the bargaining table as one cohesive unit to negotiate from a position of strength with China and the US. The old axiom “united will stand, divided we’ll fall” is true in this situation.
The question is can our 4 countries put aside ethnic animosity amongst us to unite and face this dual threat of US and China?
Are our politicians (on both sides of the Palk straits, and the Gangetic plains), smart enough to see the advantage of a united front?
Time will tell.
Rajash / December 24, 2016
Dr. Laksiri Fernando Thanks for the excellent article.
The question I want to ask is what sort of people are there working in the various ministries and advising the PM and the Ministers of the various portfolio.
The PMs and the Presidents come and go but normally the Civil Service stays intact. It seems to me that this is not the case. It seems to me that the civil service is like merry go round.
Unqualified and unsuitable uneducated who cab barley speak English are In the civil service.
Do they understand NPV and breaking even discounted cash flow never mind all that can they add up?
The politicians and their hangers on are too busy playing numbers game in places like Batticaloa and the Chinese are screwing the country
Dr Laksiri Fernando / December 27, 2016
It is a pertinent question. In this case, it might not be the bureaucracy (public servants) who have advised the PM and the Minister. It must be the close economic/political advisors above the normal public servants. They are political appointees. However, the public servants are made ‘political servants’ in addition to the deterioration of standards. Both must be corrected. (1) There should be an effort to recruit public servants through strict professional criteria. Political appointments should be completely eliminated. University standards should be uplifted to produce qualified graduates. After recruitment, they should be trained and re-trained. (2) Ministers should depend on the regular public servants as much as possible in decision making. Professional appointments can be made for retired public servants or similar professionals but not on a political basis. Freeing the public service from politics is a must to avoid fiascos such as the present.
K A Sumanasekera / December 24, 2016
I think the good Professor should stick to Yahapalana politics.
Because he seems to know nothing about good debt and bad debt in Econo0mic terms.
Yahapalana PM Batalanda Ranil made so many deals to re jig our National debt not for the good of the nation, but to fill the UNP coffers which have been empty for 20 years under the steward ship of Batalanada Ranil himself.
Chinese loans were all low interest and on long term .
Magamapura Harbour was earning valuable FX through transshipping and providing facilities to Avante Guard.
Yahapalana Partner and the Yahapalana President Bodi Sira’s guard dog Abiththaya’s own party the JHuU announced yesterday that Malik Samare and Batalanada Ranil made a cool USD 100 Million commission by doing the deal with this Chinese PC in Hong Kong…
Is Malik taking the JHU boss to Court to, claim damages for dinting his reputation?.
Obviously not.. Malik is the bag man.
He even fixed the CB Heist which generated enough commission for the UNP buddies to buy their own Media Outfit soon.
Native Vedda / December 24, 2016
KASmaalam K A Sumanasekera
“I think the good Professor should stick to Yahapalana politics.”
You stupid Sumana, Dr Laksiri Fernando was the proposer of the motion conferring of honorary doctorates to both war criminals MR and GR by the University of Colombo.
You are being very ungrateful him. Say sorry to him.
“Because he seems to know nothing about good debt and bad debt in Econo0mic terms.”
Could you expand on your rantonomics. What is a good debt and what is a bad debt. What are differences between the two. What are the implication on Economy.
Lal De Mel / December 24, 2016
Preventing the departure of two ships by a group of indented workers was viewed as Piracy. The cost of the delay caused by these workers is of the order of $400,000/day. The damage to the reputation of Hambantota is the best way to kill this promising venture. The alleged issue with a reporter has been blown out of proportion.
This is a project to develop Hambantota as a significant Industrial & Commercial hub. The project is financially sound. The government of a country that has consistently changed the goal post and harassed major international investors such as Shell Gas and the Port City project, cannot dictate terms to major investors. Most investors require an equity of about 80% to make the venture a worthwhile investment, at a time when major international investors are rationalizing the number of locations they operate.
This is the first major project undertaken by the present government and it will have a dramatic impact on the living standards of the people in the Southern Province. I hope the government will give high priority to the Indian & Japanese Investment zones in Trincomalee, to balance the big power rivalry.
sekara / December 26, 2016
Selling land to foreign businesses is bad policy.
The Chinese proposal is not in Sri Lankan interests and should be thrown out.
But those who oppose this one should also oppose transfer of land and other national assets to other foreign businesses on various pretexts.
R.P. Perera / December 28, 2016
The debt swap entails that all interest payments and paybacks are taken care of by the new investor. Therefore, the very essence of the arguments against the debt to equity swap is flawed.
An example of the positives of the present agreement are the great strides take by the Mahaweli investments done through a short term programme, but, with a long term vision, has paid dividends even today. If the learned Prof. Dr Laksiri Fernando who conferred PHDs to both MR and GR can provide the way forward to get over the massive debt burden put on the citizens by way of high interest loans, without merely criticizing the new agreement, then this article can hold water. I do not wish to go further.
I wish the readers good luck in ascertaining the real situation wrt the way forward.