{"id":154935,"date":"2026-02-27T16:50:56","date_gmt":"2026-02-27T23:50:56","guid":{"rendered":"https:\/\/www.lankaweb.com\/news\/items\/?p=154935"},"modified":"2026-02-27T16:50:56","modified_gmt":"2026-02-27T23:50:56","slug":"when-corporate-power-meets-political-patronage-the-hidden-cost-of-corruption-in-sri-lankas-infrastructure-sector","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2026\/02\/27\/when-corporate-power-meets-political-patronage-the-hidden-cost-of-corruption-in-sri-lankas-infrastructure-sector\/","title":{"rendered":"When Corporate Power Meets Political Patronage: The Hidden Cost of Corruption in Sri Lanka\u2019s Infrastructure Sector"},"content":{"rendered":"

Dr Sarath Obeysekera<\/em><\/span><\/h2>\n\n\n

Sri Lanka\u2019s recent history of corporate collapses \u2014 particularly in civil construction and marine engineering \u2014 raises uncomfortable but unavoidable questions.<\/p>\n\n\n\n

Why do once-celebrated conglomerates, entrusted with billion-rupee public projects, end up under restructuring or liquidation?<\/p>\n\n\n\n

Why do banks absorb massive losses while corporate leaders often appear insulated?<\/p>\n\n\n\n

And why does the cycle repeat?<\/p>\n\n\n\n

The answers lie not merely in financial miscalculation \u2014 but in the dangerous intersection between corporate ambition and political patronage.<\/p>\n\n\n\n

The Infrastructure\u2013Political Nexus<\/h2>\n\n\n\n

Infrastructure in Sri Lanka has long been politically powerful:<\/p>\n\n\n\n

    \n
  • Highways<\/li>\n\n\n\n
  • Ports<\/li>\n\n\n\n
  • Marine facilities<\/li>\n\n\n\n
  • Irrigation systems<\/li>\n\n\n\n
  • Urban megaprojects<\/li>\n<\/ul>\n\n\n\n

    These projects carry enormous budgets and discretionary authority. Where discretion is high and transparency is weak, corruption risk rises.<\/p>\n\n\n\n

    Across developing economies, a familiar pattern emerges:<\/p>\n\n\n\n

      \n
    1. Corporate heads cultivate political proximity.<\/li>\n\n\n\n
    2. Politicians influence project allocation.<\/li>\n\n\n\n
    3. Contracts are accelerated or expanded.<\/li>\n\n\n\n
    4. Banks extend credit based on project visibility.<\/li>\n\n\n\n
    5. Cash flows depend on uninterrupted political goodwill.<\/li>\n<\/ol>\n\n\n\n

      When political leadership changes, so does protection.<\/p>\n\n\n\n

      And when protection disappears, financial fragility is exposed.<\/p>\n\n\n\n

      The Culture of Kickbacks<\/h2>\n\n\n\n

      It is an open secret in many emerging economies that some infrastructure contracts carry informal facilitation expectations.\u201d<\/p>\n\n\n\n

      Whether labeled as commissions, consultancy fees, or political contributions, such arrangements distort pricing structures and inflate project costs.<\/p>\n\n\n\n

      The consequences are severe:<\/p>\n\n\n\n

        \n
      • Projects become overpriced.<\/li>\n\n\n\n
      • Debt burdens increase.<\/li>\n\n\n\n
      • Companies overextend.<\/li>\n\n\n\n
      • Banks finance inflated valuations.<\/li>\n<\/ul>\n\n\n\n

        When economic downturns occur, inflated structures collapse first.<\/p>\n\n\n\n

        Corruption is not merely immoral \u2014 it is financially destabilizing.<\/p>\n\n\n\n

        Offshore Asset Diversification: A Governance Red Flag<\/p>\n\n\n\n

        Another troubling pattern frequently observed in emerging markets is the quiet externalization of wealth.<\/p>\n\n\n\n

        When corporate leaders accumulate substantial assets abroad \u2014 often through layered ownership structures \u2014 questions arise:<\/p>\n\n\n\n

          \n
        • Was wealth accumulation proportional to declared earnings?<\/li>\n\n\n\n
        • Were related-party transactions properly disclosed?<\/li>\n\n\n\n
        • Were shareholder interests protected?<\/li>\n<\/ul>\n\n\n\n

          The issue is not foreign investment itself. It is opacity.<\/p>\n\n\n\n

          When companies enter liquidation while executives retain private offshore assets, public trust erodes dramatically.<\/p>\n\n\n\n

          This perception \u2014 whether legally proven or not \u2014 damages the credibility of the entire corporate sector.<\/p>\n\n\n\n

          Banks as Silent Enablers?<\/h2>\n\n\n\n

          Large lending institutions, including People\u2019s Bank and Commercial Bank of Ceylon, have historically financed infrastructure expansion.<\/p>\n\n\n\n

          Key questions must be asked:<\/p>\n\n\n\n

            \n
          • Were loans stress-tested against political risk?<\/li>\n\n\n\n
          • Were related-party exposures fully transparent?<\/li>\n\n\n\n
          • Did concentration risk exceed prudential thresholds?<\/li>\n\n\n\n
          • Were independent risk committees empowered to override political pressure?<\/li>\n<\/ul>\n\n\n\n

            When politically connected conglomerates receive disproportionate credit exposure, systemic risk builds quietly.<\/p>\n\n\n\n

            Liquidation Is Not an Accident<\/h2>\n\n\n\n

            The fact that several civil and marine engineering firms now operate under liquidators or court-supervised restructuring is not random.<\/p>\n\n\n\n

            Liquidation is typically the end-stage of:<\/p>\n\n\n\n

              \n
            • Excessive leverage<\/li>\n\n\n\n
            • Poor governance<\/li>\n\n\n\n
            • Cash-flow mismatches<\/li>\n\n\n\n
            • Political overexposure<\/li>\n\n\n\n
            • Weak regulatory oversight<\/li>\n<\/ul>\n\n\n\n

              If corruption or kickback cultures were embedded in project allocation, liquidation becomes almost inevitable once economic stress tests the system.<\/p>\n\n\n\n

              The National Cost<\/h2>\n\n\n\n

              Corporate collapse does not punish only executives.<\/p>\n\n\n\n

              It affects:<\/p>\n\n\n\n

                \n
              • Employees<\/li>\n\n\n\n
              • Subcontractors<\/li>\n\n\n\n
              • Pension funds<\/li>\n\n\n\n
              • Bank depositors<\/li>\n\n\n\n
              • Taxpayers<\/li>\n<\/ul>\n\n\n\n

                When banks restructure bad loans, the public indirectly absorbs the cost.Corruption in infrastructure is therefore not a private crime.<\/p>\n\n\n\n

                It is a public tax.<\/p>\n\n\n\n

                The Reform Imperative<\/h2>\n\n\n\n

                If Sri Lanka is serious about rebuilding investor confidence, several steps are essential:<\/p>\n\n\n\n

                  \n
                1. Mandatory forensic audits for large public contractors.<\/li>\n\n\n\n
                2. Public disclosure of beneficial ownership structures.<\/li>\n\n\n\n
                3. Strict enforcement of related-party transaction rules.<\/li>\n\n\n\n
                4. Transparent digital procurement systems.<\/li>\n\n\n\n
                5. Political finance reform to reduce hidden commissions.\u201d<\/li>\n\n\n\n
                6. Independent oversight insulated from ministerial interference.<\/li>\n<\/ol>\n\n\n\n

                  Most importantly, asset declaration regimes must extend beyond politicians to include directors of major state-dependent contractors.<\/p>\n\n\n\n

                  Transparency must be universal \u2014 not selective.<\/p>\n\n\n\n

                  Conclusion<\/h2>\n\n\n\n

                  Sri Lanka cannot afford another cycle of:<\/p>\n\n\n\n

                  Political proximity \u2192 Contract expansion \u2192 Debt accumulation \u2192 Collapse \u2192 Public loss.<\/p>\n\n\n\n

                  If corruption and kickbacks distort the corporate sector, the entire economic system weakens.<\/p>\n\n\n\n

                  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.<\/p>\n\n\n\n

                  Until transparency replaces patronage, liquidation will remain the final chapter of many ambitious corporate stories.<\/p>\n\n\n\n

                  And the bill will continue to be paid by the nation.<\/p>\n\n\n\n

                  Regards

                  Dr Sarath Obeysekera<\/p>\n\n\n\n

                  <\/p>\n","protected":false},"excerpt":{"rendered":"

                  Dr Sarath Obeysekera Sri Lanka\u2019s recent history of corporate collapses \u2014 particularly in civil construction and marine engineering \u2014 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[116],"tags":[],"class_list":["post-154935","post","type-post","status-publish","format-standard","hentry","category-dr-sarath-obeysekera"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/154935","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=154935"}],"version-history":[{"count":1,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/154935\/revisions"}],"predecessor-version":[{"id":154936,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/154935\/revisions\/154936"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=154935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=154935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=154935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}