Sad Saga

With peace comes progress and with progress comes pros­per­ity. There is a slight aber­ra­tion in this story where the div­i­dends of pros­per­ity have also brought cor­rup­tion.

Southasia - - CONTENTS - By Huza­ima Bukhari and Dr. Ikra­mul Haq

The un­wanted div­i­dends of pros­per­ity.

Cor­rup­tion and pol­i­tics are not so strange bed­fel­lows. This was proven in Sri Lanka in the case of the con­tro­ver­sial US$ 650 mil­lion Kr­rish Tran­sworks Tower pro­ject. It is planned around four high-rise build­ings in Colombo, com­pris­ing a lux­ury ho­tel, apart­ments, malls and of­fice space, on a 4.3-acre piece of land leased for 99-years from Sri Lanka's Ur­ban De­vel­op­ment Au­thor­ity (UDA). It was ini­ti­ated dur­ing the regime un­der Mahinda Ra­japaksa.

The Fi­nan­cial Crimes In­ves­ti­ga­tions Divi­sion (FCID) of Sri Lanka Po­lice has re­cently started a probe into the al­leged fi­nan­cial mis­ap­pro­pri­a­tions in the pro­ject owned by In­dia's Kr­rish Group — its web­site claimed that it started op­er­a­tions in 1983 and af­ter three decades “has made a rep­u­ta­tion

out of de­liv­er­ing un­flinch­ing stan­dards of qual­ity in all its un­der­tak­ings.” The al­le­ga­tions about the Kr­rish Tran­sworks Tower pro­ject in Sri Lanka speak oth­er­wise.

Ac­cord­ing to a me­dia re­port, the FCID will “in­ter­ro­gate sev­eral big shots of the for­mer regime re­gard­ing al­le­ga­tions of se­cret pay­offs to keep the win­dow open for pay­ments and for var­i­ous ap­provals, which ended with some un­for­tu­nate in­ci­dents.” The re­port claims that names of sev­eral pow­er­ful mem­bers of the for­mer regime in Sri Lanka fig­ured in the al­le­ga­tion of se­cret pay­offs by the Kr­rish Group.

In Oc­to­ber 2012, Sri Lanka’s Min­istry of In­vest­ment Pro­mo­tions through a gazette no­ti­fi­ca­tion sug­gested a 25-year tax ben­e­fit for the Kr­rish Square Colombo pro­ject. Ac­cord­ing to the gazette, the pro­ject was to be granted a 10-year in­come tax hol­i­day and a con­ces­sion­ary 6 per cent tax rate for the fol­low­ing 15 years. Fur­ther, the firm was to be ex­empted from with­hold­ing tax on in­ter­est on for­eign loans and cap­i­tal ex­pen­di­ture and tech­ni­cal fees paid.

Since March 2013, the pro­ject, launched in Septem­ber 2012, has been halted as the com­pany had not hon­oured its pay­ments to the UDA. It is al­leged that the In­dian com­pany failed to make the fi­nal lease pay­ments on the prop­erty de­spite get­ting many ex­ten­sions. It is re­ported that the In­dian in­vestor ig­nored five dead­lines for the bal­ance pay­ment of Rs. 589.7 mil­lion which has now bal­looned to over Rs. 800 mil­lion with in­ter­est.

Ac­cord­ing to The Sun­day Leader, the names of sev­eral pow­er­ful mem­bers of the for­mer regime were high­lighted in the con­tro­ver­sial Kr­rish pro­ject while draft­ing of the agree­ment was un­der­taken by a le­gal firm that was owned by the son of a VVIP of the for­mer regime. Kr­rish is yet to make a fi­nal pay­ment of Rs.589. 7 mil­lion to close the land lease deal. The to­tal pay­ment made by them up to now is Rs. 4.4 bil­lion while the to­tal pay­ment to the lo­cal au­thor­i­ties to com­mence the pro­ject is Rs. 4.995 bil­lion.

Prime Min­is­ter Ranil Wick­re­mas­inghe, Fi­nance Min­is­ter Ravi Karunanayake, Deputy Min­is­ters Dr. Har­sha de Silva, Su­jeewa Se­nas­inghe and sev­eral United Na­tional Party (UNP) MPs were highly vo­cif­er­ous in and out­side par­lia­ment when they were in the op­po­si­tion dur­ing 2013-14 against the com­plete lack of trans­parency in the ‘Kr­rish deal.’ A state­ment by Ranil Wick­remesinghe in Novem­ber 2012, then the op­po­si­tion leader, was given wide pub­lic­ity in lo­cal me­dia. It quoted him as say­ing “even though Kr­rish Group was to have made a 20 per cent down pay­ment of the to­tal sum within seven days of es­tab­lish­ing the com­pany in Sri Lanka and the re­main­ing 80 per cent on sign­ing the lease agree­ment, th­ese monies had not been de­posited in any bank ac­count of the Govern­ment.”

Fi­nance Min­is­ter Ravi Karunanayake, when he was an MP, had called for a high level in­ves­ti­ga­tion into a com­plaint by an of­fi­cial that his life was un­der threat for ac­cept­ing US$4 mil­lion on be­half of two pow­er­ful per­sons in the govern­ment in con­nec­tion with the Kr­rish deal. Deputy Min­is­ter Dr. Har­sha de Silva, mak­ing a state­ment in Par­lia­ment in Au­gust 2013, noted that names of sev­eral key fig­ures, in­clud­ing that of the then Chair­man of the Se­cu­ri­ties and Ex­change Com­mis­sion, Dr. Nalaka Go­da­hewa, had been linked

A res­o­lu­tion to the Kr­rish saga is long due and se­cur­ing de­vel­op­ers who would ac­tu­ally fol­low through on their prom­ises would be a wel­come move.

with se­cret pay­ments that have been al­legedly made to se­cure le­gal rights to de­velop the land. Dr. Go­da­hewa’s Ex­ec­u­tive Sec­re­tary at the SEC, Janssi Kuhane­san, was also a con­sul­tant at Kr­rish, ac­cord­ing to her pro­file on LinkedIn.

Ac­cord­ing to The Sun­day Times in June 2015, the new govern­ment, largely con­trolled by the UNP, whose par­lia­men­tar­i­ans were stri­dent against the Kr­rish deal when they were in the op­po­si­tion, gave the go ahead to the In­dian com­pany to com­mence the long de­layed and con­tro­ver­sial Kr­rish Square pro­ject.

Re­cently, rep­re­sen­ta­tives of the Kr­rish Group vis­ited Sri Lanka to dis­cuss the pos­si­bil­ity of re­sum­ing the stalled pro­ject. Ne­go­ti­a­tions were held be­tween the Kr­rish of­fi­cials and the Chair­man of the Board of In­vest­ment (BoI). The BoI Chair­man said that the Kr­rish rep­re­sen­ta­tives had as­sured to pay the due Rs.589.7 mil­lion with ac­cu­mu­lated in­ter­est at 12 per­cent and com­mence con­struc­tion work within two months. The Kr­rish Group, how­ever, has yet not ful­filled this com­mit­ment.

The govern­ment in the mean­time is look­ing for a new in­vestor who would be will­ing to pay the lease amount up­front, al­low­ing the money Kr­rish had al­ready paid to be re­funded. Two in­vestors, one Chi­nese and one Saudi Ara­bian, are said to be in­ter­ested par­ties. The Chi­nese in­vestor, who is linked to a casino group in Las Ve­gas, wants to build a lux­ury ho­tel/apart­ment com­plex with casi­nos at­tached. It is re­ported that the “last sug­ges­tion raises the pos­si­bil­ity of fur­ther con­tro­versy, with ex­ist­ing casino de­vel­op­ments such as James Packer’s Crown Casino.“

But a res­o­lu­tion to the Kr­rish saga is long past due and se­cur­ing de­vel­op­ers who would ac­tu­ally fol­low through on their prom­ises would be a wel­come move. This con­cludes the sad story of a mega pro­ject that was a non-starter from the be­gin­ning, in­volv­ing al­leged mega cor­rup­tion. This is a les­son for many de­vel­op­ing coun­tries where greedy rulers de­stroy fu­ture hopes of their na­tions.

The writ­ers, part­ners in law firm HUZA­IMA & IKRAM, are Ad­junct Fac­ulty Mem­bers at La­hore Univer­sity of Man­age­ment Sci­ences (LUMS).

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