THE REIGN OF MAHINDA RAJAPAKSE (4)
Posted on March 30th, 2019

This essay carries four statements made by Mahinda Rajapaksa

STATEMENT NO 1 YAHAPALANA GOVERNMENT” (Island 9.1.18)   

In a statement issued to media on 9.1.18 the former President said: On 9 January 2018, the so-called Yahapalana government completes three years in office. During this short period they have created numerous crises running through virtually every sector in Sri Lanka. The main subject of public discussion today is the bond scam and the attempts being made by the Yahapalana leaders to sweep it under the carpet.

We are awaiting the release of the full report of the Bond Commission. The bond scam is only one of the many disasters brought upon this country by the Yahapalana government. As this government marks its third anniversary, I wish to draw the attention of the public to another danger they have brought upon this country.

During the short period of 36 months that this government has been in power, they have borrowed over USD 14.6 billion in foreign currency loans alone, the breakdown of which would be as follows – USD 7.2 billion through the issue of Sri Lanka Development Bonds from January 2015 onwards, USD 3.6 billion from sovereign bonds issued in 2015 and 2017, USD 2.2 billion through currency swap arrangements with India in 2015 and 2016, USD 1.7 billion through syndicated loans arranged through several international banks in 2016 and 2017 and USD 1.5 billion from the IMF Extended Fund Facility in 2016. No previous government has borrowed so much money through foreign currency loans in such a short period of time.

Even though 14.6 billion USD would suffice to build five Norochcholai power plants, five Hambantota harbours with enough money being left over to build two more Southern Expressways, the Yahapalana government has not built even a culvert with that money.

 I have made reference so far only to foreign currency loans. From January 2015 to date, the Yahapalana government has borrowed well over Rs. 5.7 trillion in Rupee loans as well, through the issue of treasury bills and treasury bonds. The government commissioned the Moragahakanda project and opened the Rajagiriya flyover to coincide with its third anniversary so as to answer the critics who say that the Yahapalana government has not built anything tangible despite massive foreign borrowings.

However, the Moragahakanda project was planned, financial allocations were made and construction commenced under my government way back in 2007 in accordance with the 2005 Mahinda Chintana programme. Likewise the Rajagiriya flyover was planned and money was allocated for its construction by my government. Cabinet approval was granted to call for bids to select contractors for the construction of the flyovers in Rajagiriya, Polgahawela and Ganemulla at the cabinet meeting held on 4 December 2014.

The Yahapalana government has marked its third anniversary by claiming credit for projects for which money was allocated and started by the previous government. They came into power in 2015 claiming that there was a debt crisis in the country due to the loans taken by my government to build power plants, harbours, airports, expressways etcetera. However the total cost of these major development projects were as follows: USD 1,350 million for all three phases of the Norochcholai power plant; USD 740 million for the Southern Expressway from Kottawa to Matara; USD 1,300 million for phases I and II of the Hambantota harbour and its bunkering facility; USD 292 million for the Colombo-Katunayake expressway and USD 209 for the Mattala airport.

All these development projects put together cost less than USD 3.9 billion. The claim that the present government has been forced to borrow heavily to repay the project loans taken by my government is a complete lie. With the 14.6 billion USD in foreign currency loans that this government has borrowed up to now, the loans taken for all the above mentioned development projects could have been repaid four times over.

 The debt now being incurred is used to meet the day to day expenses of the Yahapalana government and not to repay the project loans taken by my government. From January 2015, there was a massive and unplanned increase in government expenditure as a result of state funds being utilized to meet political objectives. The present debt crisis came about due to the Yahapalana government borrowing heavily in Rupees and in foreign currency in order to meet this increased expenditure.

Foreign currency loans should always be taken with the utmost care. Since it is necessary to purchase foreign currency to repay such loans, even a slight change in the exchange rate can give rise to a massive increase in a country’s indebtedness. According to the 2015 and 2016 Central Bank reports, due to the depreciation in the value of the Rupee as a result of the economic downturn that took place after the Yahapalana government took office, an extra Rs. 478 billion has been added to the national debt. It should be noted that the increase in the interest rate by about 50% due to the bond scam, has also added to the debt burden.

My government was always very careful in taking foreign currency loans. According to the Finance Ministry, the repayment of foreign loan installments plus interest during the period 2008-2014 was as follows:

2008 – USD 881 million

2009 – USD 1,041 million

2010 – USD 826 million

2011 – USD 971 million

2012 – USD 1,620 million

2013 – USD 1,160 million

2014 – USD 1,306 million

Since these are not unmanageable amounts, my government never had a problem with foreign loan repayments. The present crisis is entirely a creation of the Yahapalana government. The foreign loan installments and interest thereon that have to be paid after 2015 is as follows:

2015 –  USD 1,828 million

2016 – USD 1,604 million

2017 –  USD 2,132 million

2018 –  USD 2,891 million

2019 –  USD 4,217 million

2020 –  USD 3,699 million

2021 –  USD 3,344 million

2022 –  USD 3,743 million

2023 –  USD 2,120 million

2024 –  USD 2,067 million

2025 – USD 4,155 million

2026 – USD 2,758 million

2027 – USD 3,448 million

These figures amply explain the difference before and after the change of government in 2015. The immediate increase in repayments from 2015 onwards is due to the huge short term commercial loans taken by the Yahapalana government to be repaid in a few months or one or two years.

 What Sri Lanka experienced in 2015 was a borrowing frenzy. Central Bank records indicate that before the Yahapalana government came into power, Sri Lanka Development Bonds were issued only twice a year with the amount borrowed per year not averaging even USD 350 million between 2010 and 2014. It should be borne in mind that this was at the height of the biggest infrastructure building programme in recent history.

 But in the year 2015 without a single new infrastructure project being initiated, the Yahapalana government issued Sri Lanka Development Bonds on no less than nine occasions. The number of SLDB issues made in 2016 were six, with four being made in 2017.

The government has now obtained cabinet approval to borrow a further USD 5 billion in foreign currency commercial loans in 2018 as well. In order to repay these loans taken for consumption purposes, the government has increased the tax burden on the people to an unbearable level by increasing the VAT, vehicle import duties, commodity import taxes, various levies and fines and stamp duties etcetera. From April 2018 onwards, the government will commence a programme to bring virtually every adult in the country into the income tax net.    

Since the massive loans taken by the Yahapalana government cannot be repaid simply by increasing taxes, they have now started selling off all available national assets ranging from government owned hotels to harbours, expressways to power plants. Though the government claims that the Hambantota port was sold off because the loan taken to build it could not be repaid, the proceeds of the sale have not been used to repay the project loan but is to be sent instead to the Treasury to be spent on consumption – which reveals the actual motive in selling off these assets. Since the Hambantota harbour was built with long term loans at concessionary rates of interest, the government is in no hurry to repay the loan taken to build it.

However there is an urgent need to repay the short term foreign currency commercial loans taken by this government for consumption purposes even if the payment has to be made with the money realised through the sale of national assets. If such commitments are not met on time, Sri Lanka will get locked out of the international financial markets. I request all voters to use the opportunity that will come their way on 10 February to register their protest at the disaster brought upon the financial system of this country by this corrupt, incompetent government.   END

STATEMENT NO 2.  HAMBANTOTA”( Island 11.1.17)

Former President Mahinda Rajapaksa     issued a statement in January 2017 regarding his much maligned Hambantota project. Since the future of the Hambantota port is now under discussion, I wish to explain to the public, my position on this matter. The loans taken for the construction of this harbour were 450 million USD for the first phase, 70 million USD for the bunkering facility and 802 million USD for the second phase bringing the total to around 1,322 million USD. When complete the harbour would have four terminals and 12 berths. This was meant to be a free port covering an area of 2,000 hectares where goods could be manufactured or value added and shipped overseas. All the necessary feasibility studies were done before these loans were taken and the annual interest plus capital repayments would amount to about 111 million USD. My government had planned to raise that money through the Ports Authority itself.

The first phase of the Hambantota harbour became partially operational in 2011. The transshipment of vehicles began in 2012 with 70% of the vehicles coming into Hambantota being transshipped to other countries. In 2014, 335 vessels called at the Hambantota harbour followed by 295 in 2015. The port made an operating profit of Rs. 900 million in 2014 and Rs 1.2 billion in 2015. These are investments that last centuries and a new harbour cannot be expected to produce large profits in the first few years. Our plan was to break even within ten years.

My government had signed a Supply Operate and Transfer (SOT) management contract with a joint venture between China Harbour Co and China Merchant Co to supply equipment such as cranes and operate the Hambantota container terminal for 40 years. The Ports Authority was to receive a rental of 35,000 USD per hectare per year for the 56 hectares in the container terminal (a total of 1.96 million USD per year), a royalty of 2.5 USD on every container loaded or unloaded, warfrage of 30 USD per container for cargo coming into Sri Lanka and all other usual harbour charges for navigation, piloting, tonnage, etc.  Other than the container terminal, all other terminals in the harbour and the 2,000 hectare industrial zone was to be controlled by the Ports Authority and they would have derived the income from the cargo of the free port passing through their terminals.

The new government made some unwise decisions. Firstly, they disregarded the management contract for the Hambantota container terminal entered into by my government with China Harbour Co and China Merchant Co. Secondly, the Ports Authority had developed the Colombo East container terminal and upon its completion by 2016, this terminal would have produced a revenue of more than 100 million USD a year which the Ports Authority had earmarked to pay off the Hambantota loan until the latter generated sufficient income. The Yahapalana government halted the Colombo East terminal development. Thirdly, by the end of 2014, my government had signed agreements with several foreign and local companies to lease out about 80 hectares in the Hambantota port industrial zone at the minimum rate of 50,000 USD per year per hectare with minimum guaranteed volumes of cargo and minimum guaranteed royalties. All those agreements were disregarded by the new government.

Then the government said the Hambantota port was a white elephant and that it had to be privatized to raise the money to pay off the loans taken to build it. They called for bids, not just for harbour operations but for the rights of the landlord over the entire 2,000 hectare free port so that whoever takes the long lease will operate the entire harbour and have complete control over the industrial zone as well. The two companies China Harbour Co and China Merchant Co which made a joint proposal to lease out the Hambantota container terminal for 40 years during my government are the same companies that have made rival bids to lease the entire free port under the present government.

A framework agreement has been signed by the govt. with China Merchant Co to lease out the entire free port for 99 years for a payment of 1.08 billion USD on an 80%-20% equity sharing basis. No other income will accrue to the Ports Authority for 15 years, after which they will receive dividends for their 20% stake only if dividends are declared. The lease will be extendable for another 99 years and a 44 hectare artificial island outside the port has been included in the deal. There is provision for the construction of another 20+ berths and the rights over these too have been given to the lessee.

 The amount of the lease seems to have been based only on the construction cost of the port without an accredited international valuation reflecting the strategic location value of the port, the value of the 99 year period, its 2,000 hectare land, the oil tank farm and the value of its present commercial operations.

This bid has been accepted in a situation where the other company China Harbour Co. had (according to information available to us) put in a much more favorable bid to lease the free port on a 65-35 equity sharing basis for 50 years with an upfront payment of 750 million USD plus the payment of all the charges they had earlier agreed to with regard to the container terminal management contract. The government has chosen the least favorable bid despite (according to information available to us) the Ports Authority having recommended the other bidder. Details of how the two proposals were evaluated have not been disclosed.

A 99 year lease impinges on Sri Lanka’s sovereign rights because a foreign company will enjoy the rights of the landlord over the 2,000 hectare free port while operating the entire harbour as well. This is not an issue with China or with foreign investors. It is about getting the best deal for Sri Lanka. The agreement that my government negotiated with both China Harbour Co and China Merchant Co to manage the Hambantota container terminal for 40 years is the best deal yet. The bid made by China Harbour Co for a 50 year lease is obviously more favorable than the bid made by the other company.

 As a matter of principle, I am against the leasing of the entire harbour for 99 years and giving the rights of the landlord over the industrial zone to a foreign private company. The industrial zone and the harbour should be controlled by the Ports Authority while harbour operations may be given on management contracts to the private sector. For example, the Colombo port is run by the Ports Authority and two private operators. The Ports Authority has full control over the Colombo harbour as well as equity in the two privately run terminals. I believe this should be the approach to the Hambantota port as well.

Apart from the entire Hambantota free port, the government has decided to lease a further 15,000 acres outside the free port to a foreign company for 99 years. In a situation where even the 2,000 hectares within the free port have not been utilized yet, on what grounds can we justify the leasing of another 15,000 acres to a foreign company?

The total land area of all the Board of Investment economic zones in the country at present put together do not amount to 2,000 hectares. A 15,000 acre zone in Hambantota will be disproportionate to our country’s economy. Furthermore, the disruption caused to the people of the area will be immense if 15,000 acres of land were to be acquired for this purpose.

 The government should fill the free port with investments first before opening more zones. Furthermore the government should have supervision over the kind of factories that will be opened in these industrial zones, the fuel they use and the waste they produce. My government agreed only to the use of LNG gas, even though some potential investors wanted to use coal.

The Hambantota dispute is not an issue that can be resolved by baton-charging or tear gassing protesters or having them assaulted by thugs and remanded. There are real issues relating to the financial benefits that will accrue to the country from this deal, and issues of control and sovereignty over the free port and possible environmental issues that need to be addressed said Mahinda Rajapaksa concluding his statement. END

 STATEMENT NO 3. HAMBANTOTA” ( Island 2.8.17)

Former President Mahinda Rajapaksa, condemning the way Hambantota port had been handed over to a Chinese company, said  the incumbent administration was selling of what his government had built.

The manner in which the government privatised the Hambantota port has shocked the nation. Parliament was not allowed to debate the Agreement to privatise one of Sri Lanka’s most important strategic assets. No one knows who did the valuation of this asset. No one appears to have seen any technical/financial evaluation report. The government has also not explained to the public on what criteria they selected the company that won the bid when there was clear evidence that the other bid was much more favourable.

This headlong quest to sell state assets is a direct result of the economic crisis that the government has plunged this country into. After the yahapalakayas lied their way to the presidency in January 2015, they knew it would not be possible to win the parliamentary election that was soon due by the same means, so they increased the salaries of government servants, reduced the price of fuel, gas and certain foodstuffs in order to bamboozle the people in a different way.

Thereby, they increased government expenditure while simultaneously reducing revenue, creating the present financial crisis. According to the Auditor General’s reports, the Budget deficit which was 5.7% of the GDP in 2014, had almost doubled to 10.5% in 2015 in just one calendar year. The lack of money to meet day to day expenses including the salaries and pensions of state sector employees resulted in massive foreign currency borrowings.

In just two and a half years, the Yahapalana government has taken foreign currency loans amounting to over USD 13.7 billion. All this money has been spent on consumption. USD 13.7 billion is the equivalent of ten Norochcholai power plants or ten Hambantota Ports, or more than twenty Southern Highways. But the government has nothing to show for all this money that has been borrowed and spent.

Under IMF instructions, the value added tax and other taxes were increased in 2016 to raise money to repay these debts. After imposing taxes even on terminally ill patients, the government was still not able to raise enough money to repay the USD 13.7 billion they borrowed and they have now resorted to increasing non-tax revenue through the sale of state owned assets.

The Budget proposals of the Yahapalana government make it clear that they intend privatising all state owned assets ranging from non-strategic business establishments like the Colombo Hilton to strategic assets like the Norochcholai power plant. The sale of the Hambantota port was just the beginning.

 The Prime Minister has already announced that the Mattala airport would be next. Other assets like the Colombo -Katunayake Highway, Southern Highway, Water Board and Electricity Board are also due to be privatised.

In their desperation to justify the sale of government owned assets, the government has been deliberately running down the enterprises they want to sell, as for instance by stopping bunkering operations in the Hambantota port. The total amount that has to be paid for the Hambantota port is USD 1,266 million capital + USD 495 million in interest – a total of USD 1,761 million by 2036. By the end of 2016, nearly USD 500 million of this total amount had already been repaid.

 There was never any problem about meeting the payments for the Hambantota port because it was paid out of the profits of the Ports Authority. With its privatisation however, the loan taken to build the Hambantota port will be transferred from the Ports Authority to the Treasury to be paid by the tax payer.  

The government has been trying to justify the privatisation of the Hambantota port  on the grounds that the land for the Shangri La hotel was sold outright by my government. The few acres on which a non-strategic asset like a hotel is built cannot be compared to a strategically important port with four terminals, 12 berths and a 5,000 acre industrial park. The Shangri La land moreover was given on the specific condition that it can be used only for a hotel in accordance with the government’s urban development plan.

 The government has also been saying that my government gave land to a Chinese company in the Port City. The Port City is new land that is being reclaimed from the sea. This land has commercial value but is not of strategic importance like a major harbour.

Once the new land mass was created, the company carrying out the construction was to have the use of a very small part of it subject to Sri Lankan law, in lieu of payment. The entire project would not have cost the Sri Lankan government anything.

 It should also be borne in mind that my government enacted the Land (Restrictions on Alienation) Act No: 38 of 2014 which restricts the ability of foreigners and foreign owned companies to buy land in Sri Lanka but the present government removed all such restrictions by Land (Restrictions on Alienation) (Amendment) Act No 3 of 2017.

 My government built or created new things. The present government is making a living by selling what my government built. The government will not be using the 1.12 billion USD that comes from the lease of the port to pay the loan taken to build the port. Instead the money is to go to the treasury to meet the day to day expenditure of the government.

 The USD 1.12 billion raised from the privatisation of the Hambantota port is small change for this government and will soon vanish just like the USD 13.7 billion they raised earlier.

 As public indignation mounts at the manner in which the Hambantota port was privatised, Yahapalana ministers are now going around saying that my government too had planned to sell the entire Hambantota port to the  Chinese. This is a diabolical lie. Everyone knows that my government had an explicit anti-privatisation policy. Not only did my government refrain from privatising any State assets, we reacquired several important assets that had been privatised by previous governments.

 STATEMENT NO 4.   UMA OYA”  (Island 11.1.17)

Former President Mahinda Rajapaksa says he would like to remind those who are blaming his government for implementing the Uma Oya project that successive governments since 1959 had tried to launch it. 

The Uma Oya project has come in for much criticism in recent times. A few days ago it was reported in the media that the Kirindi Oya tributary which flows past Bandarawela had suddenly gone dry as a result of this project. The leader of the JVP stated in Parliament some weeks ago that as a result of ground water seeping into a tunnel being constructed as part of the Uma Oya project, 2,333 wells, streams and springs in the Bandarawela area had run dry, and cracks had appeared in 4,625 houses, six temples, one mosque and three schools in the area due to the change in ground conditions, and further that thousands of acres of agricultural land have been affected.

 After things started going wrong, members of the JVP, ministers in the Yahapalana government and various NGO activists have been making statements aimed at laying the blame for all this on me and my government. One minister said that this situation had come about because I had wanted to divert water to Hambantota to irrigate land in my village. The President also stated that this project had been carried out due to ‘political requirements’.

 The Uma Oya project consists of constructing a dam and reservoir across the Uma Oya at Puhulpola from where water would be diverted via a 4 km tunnel to another dam and reservoir constructed across the Mahatotilla Oya in Dyraaba. Water from this second reservoir would be channeled through a 15.3 km tunnel to a hydroelectricity powerhouse. The outflow from the powerhouse is to be diverted via a 4 km tunnel into the Kirindi Oya, to provide water to parts of the Moneragala and Hambantota districts.

 The diversion of the Uma Oya has been under discussion for well over sixty years. The idea was first mooted in 1959 in a study carried out by the United States Operations Mission and the Canadian Hunting Survey Corporation. It also featured in the United Nations Development Programme/Food and Agriculture Organisation Master Plan (1968-1969) for the Mahaweli project. Studies regarding the Uma Oya diversion project were also carried out by the Lahmeyer International Company of Germany in 1989, by the Central Engineering Consultancy Bureau (CECB) in 1991 and by SNC Lavalin Inc of Canada in collaboration with the CECB in 2000.

 During the UNP led government of 2001-2004, at inter-ministerial meetings held in December 2003 and February 2004, chaired by the then ministers of power and energy and irrigation Karu Jayasuriya and Jayawickrema Perera with the participation of all the ministers and MPs of the Uva province, it was decided to implement the proposed Uma Oya scheme as a high priority project.  On 26 January 2005, under the Chandrika Kumaratunga government, Cabinet approval was granted to proceed with the Uma Oya project, based on a cabinet paper submitted by the then Minister of Agriculture, Livestock, Land and Irrigation, Anura Kumara Dissanayake. The Deputy Minister of this ministry at that time was Bimal Ratnayake.

 The JVP Minister’s Cabinet Paper bearing No: 05/0036/039/002 dated 4 January 2005 stated the following: “For the development of the South East Dry Zone in Sri Lanka, (particularly Hambantota and Moneragala districts) there is no other alternative unless water is diverted from Uma Oya to the South East Dry Zone.” “Strategy for economic development of both Hambantota and Moneragala districts changed during the recent past and diversion of Uma Oya to Kirindi Oya is now seen in the perspective of recently conceived Ruhunupura development.

The infrastructure of Ruhunupura development consists of the development of the Hambantota harbour into one of the modern harbours in the region, international airport in the Moneragala district, and an oil refinery. It is expected that the Hambantota harbour will attract a large number of ships sailing in the Indian Ocean. Also a large number of industrial activities are expected to take place in and around Hambantota including tourism. For all these new developments, projected water requirement has been estimated as 100 MCM in the year 2030.

In the absence of a reliable source of water in the area, water from Uma Oya is seen as the only alternative to supplement this requirement.””Therefore high priority should be given for this project.”   It was only after all of the above had taken place under previous governments that the Uma Oya project appeared in my 2005 presidential election manifesto as a priority project.

The JVP supported my candidacy at the 2005 presidential elections and Uma Oya was made a priority project of my government. From winning the war against terrorism to building highways, harbours and power plants, my government did many things that previous governments had only been able to dream about, but never implement. Uma Oya was one such project.

 On 27 November 2007, consequent to consultations held earlier that year by the then Minister for Enterprises Development Sarath Amunugama and the then Minister for Power and Energy John Seneviratne with the Export Development Board of Iran (EDBI) and Farab Company of Iran, an MOU was signed with the Iranian government under the terms of which the EDBI would finance the project and Farab Company, would prepare the detailed engineering design and carry out the physical construction. 

The contractor Farab Company is owned by the Iranian government and a team of engineers from the Irrigation Ministry, CEB and CECB had checked the credentials of this company and its experience in handling similar projects. In 2008 a Cabinet Appointed Negotiating Committee got the contract price fixed at USD 514 million. Though the contract was signed in 2008, construction did not commence until 29 November 2011 until the Central Environmental Authority gave it clearance and a full feasibility report acceptable to the engineers of the Irrigation Ministry, Ceylon Electricity Board and the Central Engineering Consultancy Bureau had been received.

 Ground water seepage is inevitable when drilling tunnels and measures have to be taken to prevent it. According to information available to me, the water seepage has taken place because the German manufactured drilling machine did not have the additional components to fully seal the tunnel as it moved forward. This was apparently due to the project consultants failing to provide the correct advice.

The first seepage of water had taken place only in late December 2014 just days before the present government came into power. The environmental harm it has caused could have been averted if remedial measures had been taken in time. However the new government took no action because they were too busy persecuting the opposition.

The JVP was also too busy persecuting the Rajapaksas and helping the UNP to run the FCID to make representations to the government to rectify a problem that had arisen in the only major project ever initiated by a JVP Minister.  I now learn that the necessary equipment has been obtained from Germany. 

 Whenever a large scale infrastructure project is implemented, there will be communities that are adversely affected. When the accelerated Mahaweli project was implemented, the entire Maskeliya town had to be shifted to make way for the Maussakele reservoir and the Teldeniya town had to be shifted to make way for the Victoria reservoir.

The extent of water seepage during the drilling of the Uma Oya tunnel may not have been anticipated. But in projects of this magnitude, even unanticipated contingencies have to be provided for. Many large projects were implemented during the nine year tenure of my government, and some displacement of people did take place, but there was no public unrest because problems were identified early on, and compensation packages provided to the satisfaction of those

of the affected. Such alertness and efficiency is however lacking under the present government.

Today, the situation is such that if a citizen loses his house in a landslide or flood or some man-made disaster, he will be living in a tent or a school until the next government comes into power. There is now agitation over issues that have emerged in the construction of the Central Highway which have not been resolved by the government. Those affected by the unforeseen problems that have emerged in the implementation of the Uma Oya project have had to endure the consequences inherent inefficiency of the present government.[1]  (continued)


[1] Island 29.9.17 p 4 Modern used no 18 .

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