By Frederica Jansz
In an unprecedented move China has given President Mahinda Rajapaksa 9 million USD (approx. one billion rupees) as a grant in March this year to President Mahinda Rajapaksa to use at his discretion. According to highly places sources at the External Resources Department of the Treasury these monies were part of a grant amounting to a total USD 12 million for “enhancing friendly relations and bilateral economic and technical cooperation.” Of which USD 2.0 million was set aside for the flood affected and USD 1.0 million for the Bandaranayake Centre for International Studies.
China made another similar payment in June last year amounting to USD 500,000 to Namal Rajapaksa to promote IT technology among the youth in Sri Lanka.
This is the first time in the history of the country that a foreign government has given grants to the country’s leader and his son money to be used “at their discretion.”
Repeated attempts to contact Presidential Secretary Lalith Weeratunge to get a reaction failed while Namal Rajapaksa also failed to answer repeated phone calls.
We spoke to Bandula Jayasekera Director General of the President’s Media Unit and followed it up with an email giving a fifteen hour deadline to respond before going to print. One hour before the deadline Jayasekera called to say Lalith Weeratunge needed one week to respond to our questions. We will publish his response next week.
According to the External Resources Department by 2009, 54% of a total USD 2.2 billion that Sri Lanka received in the form of loans and credit came from China. In 2010, disbursement from China amounted to about 40%, its nearest rival were the Asian Development Bank and Japan at 15% each. In the same year, loan/credit commitments from China were even higher. Since November 2010, the Chinese loans (being discussed/finalized have increased by nearly USD 3.4 billion.
China’s investments have been mostly in the form of loans at an interest rate which is far higher than from other countries and multilateral agencies.
Chinese loans can be broadly divided into three categories. Buyers Credit, preferential buyers credit and Concessional loan. Soft loans and grants from China are minimal.
Buyers credit is usually at 6.5% to 7% interest rate, Preferential buyers credit is at about 5.0 percent. Concessional loan is at 2-3 percent. The cost of insurance premium and processing cost adds up to an additional 1.5 – 2.0 percent. China also stipulates that its companies should be selected as the project contractor and for procurement projects, equipment supply shall in principle come from a Chinese exporter. In project procurement, priority shall be given to equipment, materials, technology or services from China. Even the labour has to be supplied from China. Overall, this helps China in further multiplying its profits.
In comparison, multilateral donor agencies such as the World Bank, and the Asian Development Bank provide soft loans at a very low interest rate ranging from 0.25%, 2% or 3%. But these agencies stipulate strict conditions.