When Corporate Power Meets Political Patronage: The Hidden Cost of Corruption in Sri Lanka’s Infrastructure Sector
Posted on February 27th, 2026
Dr Sarath Obeysekera
Sri Lanka’s recent history of corporate collapses — particularly in civil construction and marine engineering — raises uncomfortable but unavoidable questions.
Why do once-celebrated conglomerates, entrusted with billion-rupee public projects, end up under restructuring or liquidation?
Why do banks absorb massive losses while corporate leaders often appear insulated?
And why does the cycle repeat?
The answers lie not merely in financial miscalculation — but in the dangerous intersection between corporate ambition and political patronage.
The Infrastructure–Political Nexus
Infrastructure in Sri Lanka has long been politically powerful:
- Highways
- Ports
- Marine facilities
- Irrigation systems
- Urban megaprojects
These projects carry enormous budgets and discretionary authority. Where discretion is high and transparency is weak, corruption risk rises.
Across developing economies, a familiar pattern emerges:
- Corporate heads cultivate political proximity.
- Politicians influence project allocation.
- Contracts are accelerated or expanded.
- Banks extend credit based on project visibility.
- Cash flows depend on uninterrupted political goodwill.
When political leadership changes, so does protection.
And when protection disappears, financial fragility is exposed.
The Culture of Kickbacks
It is an open secret in many emerging economies that some infrastructure contracts carry informal facilitation expectations.”
Whether labeled as commissions, consultancy fees, or political contributions, such arrangements distort pricing structures and inflate project costs.
The consequences are severe:
- Projects become overpriced.
- Debt burdens increase.
- Companies overextend.
- Banks finance inflated valuations.
When economic downturns occur, inflated structures collapse first.
Corruption is not merely immoral — it is financially destabilizing.
Offshore Asset Diversification: A Governance Red Flag
Another troubling pattern frequently observed in emerging markets is the quiet externalization of wealth.
When corporate leaders accumulate substantial assets abroad — often through layered ownership structures — questions arise:
- Was wealth accumulation proportional to declared earnings?
- Were related-party transactions properly disclosed?
- Were shareholder interests protected?
The issue is not foreign investment itself. It is opacity.
When companies enter liquidation while executives retain private offshore assets, public trust erodes dramatically.
This perception — whether legally proven or not — damages the credibility of the entire corporate sector.
Banks as Silent Enablers?
Large lending institutions, including People’s Bank and Commercial Bank of Ceylon, have historically financed infrastructure expansion.
Key questions must be asked:
- Were loans stress-tested against political risk?
- Were related-party exposures fully transparent?
- Did concentration risk exceed prudential thresholds?
- Were independent risk committees empowered to override political pressure?
When politically connected conglomerates receive disproportionate credit exposure, systemic risk builds quietly.
Liquidation Is Not an Accident
The fact that several civil and marine engineering firms now operate under liquidators or court-supervised restructuring is not random.
Liquidation is typically the end-stage of:
- Excessive leverage
- Poor governance
- Cash-flow mismatches
- Political overexposure
- Weak regulatory oversight
If corruption or kickback cultures were embedded in project allocation, liquidation becomes almost inevitable once economic stress tests the system.
The National Cost
Corporate collapse does not punish only executives.
It affects:
- Employees
- Subcontractors
- Pension funds
- Bank depositors
- Taxpayers
When banks restructure bad loans, the public indirectly absorbs the cost.Corruption in infrastructure is therefore not a private crime.
It is a public tax.
The Reform Imperative
If Sri Lanka is serious about rebuilding investor confidence, several steps are essential:
- Mandatory forensic audits for large public contractors.
- Public disclosure of beneficial ownership structures.
- Strict enforcement of related-party transaction rules.
- Transparent digital procurement systems.
- Political finance reform to reduce hidden commissions.”
- Independent oversight insulated from ministerial interference.
Most importantly, asset declaration regimes must extend beyond politicians to include directors of major state-dependent contractors.
Transparency must be universal — not selective.
Conclusion
Sri Lanka cannot afford another cycle of:
Political proximity → Contract expansion → Debt accumulation → Collapse → Public loss.
If corruption and kickbacks distort the corporate sector, the entire economic system weakens.
The fall of major civil and marine engineering conglomerates should not be viewed as isolated business failures. They are warning signals about governance, accountability, and political culture.
Until transparency replaces patronage, liquidation will remain the final chapter of many ambitious corporate stories.
And the bill will continue to be paid by the nation.
Regards
Dr Sarath Obeysekera