Covid-19 and the road to catostrophe

The President’s Secretary has asked all public sector employees to donate their May salary, or a part of it, to reduce the Budget deficit. The Government, he beseeched, needed at least Rs.100 billion to pay State workers their salaries and allowances.

This looks like an administration in crisis. The poor are clamouring for a trifling Rs 5,000 promised to them to soften the blow of lost incomes. They are all lined up in queues falling at the feet of their local political types to receive this handout. Private donors are shovelling money into the COVID-19 Fund. The economy has come to a grinding halt and nobody, not even the most erudite experts in the world, can say what will come next. The International Monetary Fund (IMF) has called this “a crisis like no other”.

But at the Highways Ministry and the Road Development Authority (RDA), furtive negotiations have been taking place under cover of an endless, debilitating curfew. The same administration that is now pleading with their employees to give up their salaries is forging deals for billions and billions of rupees (all borrowed) worth of expressway contracts. In the annals of power, even in the midst of a raging pandemic when everyone’s attention is otherwise diverted, it’s business as usual—for a select few.

Handpicked officials are in various stages of negotiations with handpicked companies in relation to three sections of the Central Expressway (CEP I, III and IV), the Ruwanpura Expressway and the Eastern Expressway from Mattala to Pottuvil.

In March, immediately after the dissolution of Parliament, the caretaker Cabinet approved the borrowing of Rs. 31.7 billion to kick start CEP I. These are counterpart funds which the last administration failed to raise. As a result, the first stage was stuck after the signing of agreements with M/s Metallurgical Corporation of China Ltd. Since then, MCC has agreed to meet 7.5 percent of that instalment but this still leaves the Government with significant borrowings—which the caretaker Cabinet has cheerily approved.

Talks are ongoing with another Chinese company and its local agents for CEP III, which is the most complicated and expensive section of the expressway. Earlier talks with a Japanese bank and insurer failed because Sri Lanka, among other things, objected to the anti-corruption clauses they proposed.

Favoured parties have also submitted their proposals for the Ruwanpura Expressway while a feasibility study is to be commissioned for the Eastern Expressway. Despite Cabinet decisions having been taken at least twice on the matter, the public were not informed. It was only this week, after the Sunday Times exposed the story, did the caretaker Cabinet reveal it has allowed the borrowing of Rs. 15 billion to develop 105 kms of roads. The secrecy is galling, but not unfamiliar.

The question is: Why now? What is the rush? There is no oversight by Parliament; the media and the public are preoccupied with the COVID-19 pandemic, the perilous state of their livelihoods and, in many areas, hunger; and there is a serious constitutional deadlock brewing.

If there are feasibility reports for these roads—incidentally, the study for CEP III was never completed—they are no longer valid. And now is not the time for new ones. The local and global economy have changed and a new order is in the offing.

And should any Government contemplate further borrowings when Sri Lanka’s debt repayment obligations are already substantial—estimated at US$ 17 billion from 2020 to 2023?

The next Euro bond maturity of US$ 1 billion is scheduled for September this year, the Asian Development Bank (ADB) points out. Moreover, the country’s refinancing risk and borrowing cost are likely increased due to downgrading of its outlook to negative by two international rating agencies and investors retreat to safe havens in times of crisis.

The World Bank has predicted that COVID-19 will lead to a contraction in Sri Lanka’s economy. Periods of economic inactivity and disruptions will trigger jobs and earnings losses in 2020, it says. Poverty is expected to increase, especially if the outbreak is protracted.

With social infrastructure priorities stacking up and the wellbeing of citizens in serious jeopardy, how responsible is the Government taking such a course? Road connectivity is essential for economic development, but how prudent are Governments in approving some of these fancy projects? At least some of them are gleaming, wide, beautiful, with overpasses and underpasses— but still have more cows (and cow dung) than vehicles.

The paramount issue is that the Government does not have money. It says so itself. Now it is critical to prioritise projects. Transport experts say that the “post-COVID-19 normal” should be “less vehicles, less traffic, more space for people”. The expressways will require significant resettlement. And moving people into densely packed housing - like flats - is no longer viable.

And is a “transitional Cabinet” allowed to make costly decisions binding a future Parliament? Without even a Budget approved by Parliament? Are these okay?

There is no question that bids or negotiations at this time will result in uncompetitive pricing, because bidders will add risk premiums owing to the prevailing situation. Which brings us to another question: Is this really about developing roads? Or the fat commissions that come when agreements are signed and advances are paid while nobody is looking?