Sri Lanka’s MCC Compact unpacks in its final stages

The Millennium Challenge Corporation (MCC) agreement is currently a topic of contention in the public domain. Misinformation is widespread, and many valid concerns about the agreement have gone with the wind.

Sri Lanka still has a chance of gaining the largest ever American grant of US$480 million offered by MCC to improve transport infrastructure and streamline land administration as the board of directors of MCC referred their final decision to their December meeting.

The Board of Directors which met on September 17 has focused its attention on the Sri Lanka government’s delay in signing the agreement and its failure to arrive at a decision on the future of the MCC grant project.

The board will meet again in December for its annual selection process and will take a final decision on the MCC grant which was requested by the government way back in 2016.

“Nothing can be done by the MCC at this juncture as the government will have to arrive at a consensus on signing the agreement before December,” MCC Resident Country Director Jenner Edelman told the Business Times on the sidelines of a ‘Foreign policy’ round table in Colombo on Tuesday.

This was the first time that this kind of situation has arisen in the final stages of signing the agreement, she said, adding that it will be very difficult for her management to convince the MCC board in December that they should continue with the deal as the government is yet to arrive at a concrete decision on this matter.

“I don’t know what to do as there is not much we can do now,” she said responding to a question raised by the Business Times.

The Cabinet approval for the MCC compact grant was held up following objections raised by President Maithripala Sirisena.

It was earlier suspended in October last year soon after the political impasse instigated by the President and negotiations to resume the grant programme restarted after the Supreme Court ruling in December 2018.

The government’s defence of the agreement was presented to the Cabinet after President Maithripala Sirisena further delayed approval for the proposed agreement.

A document submitted to the Cabinet in response to objections raised over the MCC agreement revealed there was no issue of any “overriding domestic laws”.

Ms. Edelman noted that, under this MCC compact Sri Lanka will retain oversight and control of all aspects of the proposed projects, all roads undergoing improvements and every aspect of the effort to digitise land records and to produce accurate land surveys.

The US and the MCC will not buy or own any land under this agreement, she said adding that the transport project aims to increase the relative efficiency and capacity of the road network and bus system in the Colombo Metropolitan Region.

At the round table discussion on ‘Unpacking Sri Lanka’s MCC Compact’, Prof. Herath M. Gunathilake, former ADB director, said that it is essential to address deficiencies in economic institutions in the country during the transformation to middle income group from the lower middle income country level.

There was a doubt as to whether the MCC or Harvard University had conducted a study on the weakness of economic institutions in the country which were very important for the successful implementation of the programme, he said.

He noted that the MCC has prioritised two constraints, transportation and lands without considering the impact of other binding constrains.

Dr. Asanga Gunawansa , Head of the Colombo Law Alliance, pointed out that Sri Lanka needs Foreign Direct Investments for isolated projects and grants are normally being utilised for support infrastructure as the government finds it difficult find its own funding for this purpose.

Government officials are earmarking support for infrastructure projects after careful consideration preventing the overlapping of ongoing foreign aided projects.

It is unclear as to whether this MCC compact has studied this aspect in their project proposal, he said, adding that improving bus service is a timely need as 50 per cent of commuters travel in buses.

He welcomed the MCC land project that seek to improve access to private and state land, provide more uniform valuation of land, and assist the government in improving the land policy and governance framework under which land is managed and administered.

He said that although it is a sensitive issue a proper land registration is essential for the country’s development process.