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.
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).