By Frederica Jansz
Twenty acres of prime crown land used by the Sri Lanka Army Headquarters since the 19th Century and fronting the Galle Road at Colombo 1, has been sold by the Government to Shangri- La Hotels and Resorts and a Chinese Aero manufacturing firm, China Aviation Technology Import – Export Corporation (CATIC).
No tenders were called but ten acres each of a total 20 acre block have been sold by the Ministry of Finance and Planning to the two companies for 12.5 and 13.6 million US Dollars per acre respectively.
The sale being touted by the government as one of the best deals in terms of boosting tourism for Sri Lanka is nothing short of a sell-out. The government has sold 20 acres of prime crown land bordering the Galle Road opposite the Galle Face Green for a total of Rs. 28.8 billion.
If Economic Development Minister Basil Rajapaksa was to be believed going by what he told Parliament in March this year, then the country should have got Rs. 28.8 billion by way of taxes as 100% land taxes equivalent to the value of the 20 acres sold.
But now the truth is out and Rajapaksa it would appear lied to Parliament when he said otherwise in March this year.
In effect, as a result of a tax exemption subsequently admitted by Rajapaksa’s deputy minister Lakshman Yapa Abeywardena the country only secured Rs 28.8 billion by way of the sale. Of these monies the government has already announced that Rs. 20 billion is to be allocated for the building of a new complex at Battaramulla to house the Ministry of Defence. So, therefore, Sri Lanka has outright sold (not leased) 20 acres of prime land for which she has benefited by a paltry Rs. 8.8 billion. So where then is the benefit for Sri Lanka in having sold 20 acres of prime land to the Chinese? If this is not highway robbery do tell us what is.
The Chinese are building ports, infrastructure and public spaces. Remember who did that last time? It was the British. The British colonial regime built roads, railways, infrastructure and the artificial port of Colombo. They imported docile labourers from India and paid off Sri Lankan elites to serve the regime. They also introduced legislation to allow for the outright sale of land.
There is no doubt that the British pillaged the country and poisoned race relations. The price for casting off that colonial hangover, however, seems to be another stiff drink from the same wretched quaff.
That colonialism, consisted of Sri Lankas elite’s selling off the country’s resources to make the British Empire colossally wealthy and secure. Chinese colonialism consists of the Rajapaksa family selling off Sri Lanka’s resources with the added innovation of doing most of it through loans, thus making Sri Lankan taxpayers foot the bill for their own subjugation.
Details surrounding this sale are shrouded in secrecy with top officials at the Board of Investment for Sri Lanka confiding to The Sunday Leader that even they have been kept out of the loop with only a very “select few” having been chosen by the Government to be privy to the details of this multi billion rupee transaction which with ad hoc tax exemptions, no tenders called and an outright sale of prime land in Colombo’s commercial hub is one more convoluted deal hatched and sealed behind closed doors with transparency and accountability booted.
Every rule in the book has been broken while Economic Development Minister Basil Rajapaksa is on record lying to his colleagues in Parliament when he claimed on March 9, this year that 100% by way of taxes equivalent to the full value of the land had indeed been secured from both Shangri-la and CATIC.
Rajapaksa was responding to oral questions raised by UNP MP Dr. Harsha de Silva. Asked to clarify if indeed 100% taxes had been got from the sale of these lands to Shangri-la and CATIC Basil Rajapaksa responded with a very positive “yes.” The Hansard proceedings of March 9, 2011 detail his answer in Sinhala saying “Yes, from both these institutions we have already received 100% by way of taxes.”
Subsequently, however, on June 22, when UNP MP Ravi Karunanayake moved an adjournment motion on the issue of the sale of land belonging to army headquarters, Deputy Minister of Economic Development Lakshman Yapa Abeywardena admitted that there had been a tax exemption granted to both Shangri-la and CATIC while also stating that no tenders were called.
“There was no need for calling tenders. For what?,” he asked, asserting that given that the investment exceeds US$ 50 million the calling of tenders was not a requirement.
In this continuing tragicomedy this Deputy Minister informed Parliament last week that the government obtained three times the value of the Government Valuer for the said land. If this is true, then a large amount of money has vanished! If on the other hand his statement is not true, then why did he mislead the House? What was the motive for such a grave falsehood?
The government via its Economic Development Minister Basil Rajapaksa ordered the Board of Investment (BOI) to take required action to declare this project, a Strategic Development Project (SDP) under Act No. 14 of 2008 which entitles the project to be permitted tax exemptions and concessions.
A Strategic Development Project is a project identified as being one in the national interest, a project that is likely to bring economic and social benefit to the country, which is also likely to change the landscape of the country primarily through the provision of goods and services which will be of benefit to the public, bring in a substantial flow of foreign exchange to the country and generate considerable employment and income earning opportunities. An SDP would further envisage transformation in terms of technology.
There is a stipulated procedure that has to be followed to identify a SDP. The BOI relevant to the Line Ministry identifies a project as an SDP. Once a project is identified, the Minister in charge of the subject of Investment must publish a notice in the Gazette, stating the relevant information relating to each proposed project and the exemptions to be granted in respect of the same. This brings the identification to the public domain.
Upon expiration of 30 days from the date of such gazette notification, the Minister in charge of the subject of Investment – in consultation with the Minister of Finance, takes necessary steps to inform the Cabinet of Ministers the rationale for considering such a project as an SDP and the period of exemption proposed to be granted.
The approval of the Cabinet of Ministers is required for the identification of the project as an SDP and for the granting of exemptions.
Once approved by the Cabinet of Ministers the Minister in charge of the subject of Investment must within 6 weeks from the date of the approval by Order published in the Gazette specify the name of the SDP, the date of commencement of such a project and the date on which the exemptions granted will become operative and cease to be operative. All this will bring the identification to the public domain. Every such order published by the Minister in charge of Investment should be placed before Parliament within three months from the date of publication of such Order in the Gazette.
An Order we are told was published and gazetted only in relation to the ten acres sold to Shangri-la. No Order has yet been published or gazetted in relation to the sale of ten acres to CATIC. And we are not holding our breath that it will be any time soon. For government minister’s themselves appeared confused when the sale of ten acres of land to CATIC was first mentioned in the House on June 22 at the adjournment debate. Apart from the Order and gazette on Shangri-la none of the other requirements as stated above have been followed.
In terms of the Finance Act No. 8 of 2004 which was amended from the Finance Act No 11 of 1963, states that 100% land tax must be charged as equivalent to the value of the related property in the case of a sale of property to a person who is not a citizen of this country. The intention was to discourage the acquisition of land by non citizens at a low value, in the national interest.
However, in the case of the sale of crown land to Shangri-la and CATIC, tax exemptions have been granted on an ad hoc basis contrary and in violation of the Finance Act No. 8 of 2004.
The Cabinet of Ministers approved a total extent of ten acres of land sold to Shangri-la. The total sale proceed is US$ 125 million in accordance with the valuation given by the Government Chief Valuer P. W. Senaratne who valued the land at US$ 12.5 million per acre.
Out of US$ 125 million, an amount of US $ 75 million (for 6 acres of land) was received in December 2010. This receipt has been disclosed in the Financial Statement of the Government under Code No: 6000/000/00/ 0006/00/0083/000.
The point here is that instead of the monies being credited as they should have been to the government’s consolidated fund they have been deposited in a Bank of Ceylon account which according to Deputy Minister Lakshman Yapa Abeywardena is to the credit of Deputy Secretary to the Treasury of the Urban Development Authority (UDA).
Meanwhile, the balance of US $ 50 million for 4 acres of land was received in March 2011.
The land alienation was in the name of Shangri-la Hotels Lanka (Private) Limited, which is a company duly incorporated in Sri Lanka under the Companies Act No. 7 of 2007 on November 24, last year.
CATIC was incorporated under the same act as Avic International Hotels Lanka Limited on April 1, this year.
With the approval of cabinet the total extent of land proposed to CATIC/AVIC is 10 acres. The expected total sale proceeds is US$ 136 million in accordance with the valuation given by the Chief Valuer Senaratne at US $ 13.6 million per acre.
Out of US $ 136 million only an amount of US $ 54.4 million for 4 acres of land was received in April this year and deposited in the UDA fund under Code No. 6000/000/00/0006/00/0083/000.
While the Shangri -la is a well renowned global hotel chain the CATIC Group, based in Beijing, China is a subsidiary organisation of the former Aviation Industries Corporation of China (AVIC) which oversees the production and sale of all military and civilian aircraft in China. The CATIC Group is not a production entity but rather sells military and civilian aircraft, engines, missiles and other airborne equipment.
Over the past two decades, CATIC has been responsible for the export of F-6 and F-7 light fighters, K-8/FT-7 jet trainers, F-8II fighter-bombers and A-5 ground attack aircraft. These systems have been sold to countries such as Iran, Pakistan, Myanmar, Egypt and Sri Lanka.
In recent years AVIC and CATIC have not fared well economically due to a significant drop in the demand for their products, within and outside China. The Chinese government has preferred to buy civilian aircraft from Boeing and Airbus rather than from its domestic manufacturers. Given AVIC’s systemic difficulties producing military aircraft and the resulting decline in domestic orders for Chinese fighters, it is likely that CATIC will increasingly look to the international market to sell its military aircraft.
Make no mistake, Mahinda Rajapaksa is selling out the country to the Chinese in order to enrich himself and his family. How else does one explain why his brother Basil Rajapaksa told Parliament 100% by way of taxes had already been collected from both Shangri-la and CATIC when in effect it had not? Are we to believe that Mahinda Rajapaksa as Minister for Finance is unaware of what is happening in his own backyard? The infrastructure is needed, but the loans and debt are not. And the Sri Lankan people would be wise to question the intentions of the people giving us ‘free money’. From Africa to Asia, the Chinese have shown no compunction about destroying foreign environments or lives to further their own interests. They simply pay off elites and take what they need. And they don’t really need you.
So, welcome to your new colonial masters, and enjoy the new infrastructure.