It's not for the BOI to check source of investment funds: Chairman

Sri Lanka cannot afford to reject investors merely because they did not have a public profile, Board of Investment ( BOI) Chairman Upul Jayasuriya said this week. Investors behind the proposed Al-Aman World Capital Centre (WCC) have pledged US$2.4 bn towards the project and it was for the banks to determine the source of their funds.

On June 30, the BOI entered into a preliminary agreement with two businessmen to construct in Colombo what was described as the tallest building in Asia. The signatories were the United Arab Emirates- based Asaid Ahmed ArabiMoulana and the Canada- based Vivekanandarajah Aeramba Moorthy, the BOI said.

But both are Sri Lankan or of Sri Lankan origin. Mr. Moulana’s Linkedin account states he is an alumnus of Zahira College, Maradana, and the University of Colombo. He started his career in the apparel sector. Mr. Moorthy is an alumnus of the University of Moratuwa and, according to his Linkedin profile, Senior Vice President of Oman Shapoorji Construction Co. LLC, in Dubai. He has supplied a Canadian address to the BOI.

A press report claimed WCC was “a globally renowned chain” with operations “spread across the world”. There is no record online of other international WCC operations. The Al-Aman website offers no evidence of completed ventures.

The ‘projects’ section alludes to a proposed five star hotel and apartments called Aman Royal Island to be built in Mandaitivu, Jaffna; and to a 101-story skyscraper with luxury hotel rooms, flats, retail outlets and entertainment facilities named Aman Royal Empire to be located in an unnamed location on the Colombo coastline.

The third anticipated project is the 110floor Al-Aman World Capital Centre. It attracted widespread media attention owing to the sheer scale of what is being promised. This includes 1,200 housing units, 2,000 hotel rooms, 3,000 shops, a seven-star hotel, 20 luxury swimming pools, presidential suits with gold-plated interiors, the world’s fastest double-decker elevators, the country’s first Michelinstarred restaurant (Michelin stars are usually granted after a functioning restaurant is assessed by anonymous reviewers), an observation deck and a helipad.

The signing ceremony was attended by at least six directors and the company secretary. A few other directors were absent. There is no land identified for the project which, at US$2.4 bn, is costlier than the Shangri-La developments in Colombo and Hambantota combined (US$800 mn). It is also more expensive than the Colombo Port City (US$.1.4 bn) and the Hambantota Port (US$1.4 bn).

The WCC website offered five options to anyone interested in putting money into the project. They started at US$1 mn up to US$25 mn. The highest category promised a return of four percent per month or a towering 48% per annum; the lowest category, a return of one percent per month or 12% per annum. That link http://www. wcc.lk/en/invest-in-wcc/investor.php has since been taken down.

Mr. Jayasuriya said the agreement was formulated in such a manner that Sri Lanka had nothing to lose if the investors did not deliver. They were contractually obliged to find private or State land within three months and to furnish a deed to the BOI. A request was lodged for the nineacre Chalmers Granaries property in central Colombo but the BOI instructed the parties to negotiate with the Urban Development Authority (UDA) that owned it.

The Single Window Investment Approval Committee appointed by Prime Minister Ranil Wickremesinghe also maintained, when the project came before it, that there could be no commitment given with regard to Government land. A private property in Colombo 8 is now under consideration. The extent has to be substantial, Mr Jayasuriya said: “They are talking about five to six acres in Colombo.”

In order to assure commitment towards the implementation of the project, the company is required to remit US$ 200 mn to Sri Lanka on or before December 30, 2017. The investors have already deposited US$ 2 mn into the company account at People’s Bank. In the event US$ 200 mn is not remitted as stipulated, “the project shall stand terminated ipso facto”, the BOI agreement states.

The document also states that, “If the enterprise fails to take meaningful steps in the implementation of the project within a period of three months from the date thereof, or within any extended period granted by the Board on written request of the enterprise, the Board reserves the right by notice in writing to terminate this agreement”.

The BOI signed this conditional agreement to allow the company to bring in the required funds, the Chairman said. “We did not want to sign the BOI agreement until the land was clear,” he explained. “But they cannot bring the money in until some BOI agreement exists. So we said, okay, we will sign the BOI agreement with these conditions.”

Once the title deeds are offered, the company must sign a supplementary agreement with the BOI, Mr. Jayasuriya said. In response to concerns that this was a money-laundering exercise couched as an investment, he insisted it was up to the respective banks to implement their Know Your Customer (KYC) rules; and for the Central Bank’s Financial Intelligence Unit to exercise its authority. The BOI was not a regulator but a facilitator.

It is common knowledge that, although Sri Lanka wanted to enhance the flow of foreign direct investment, the country did not offer incentives and fared poorly in the ‘Ease of Doing Business’ index. Tax holidays were suspended in April 2016 at the behest of the International Monetary Fund. Al-Aman WCC was pledging a towering sum despite this environment.

“The BOI must be proactive in getting people to invest here,” Mr. Jayasuriya said. “We have to understand that Warren Buffet or Bill Gates have not come to Sri Lanka. Those who will come are the notso-known people who, for some good reason, see Sri Lanka as a viable option.”

WCC was an attractive proposal, Mr. Jayasuriya said, leafing through a full colour, glossy booklet the company had produced. The building will be done in phases, at the rate of about US$400 mn per year. The project completion period was 72 months or six years.

“They have offered a big investment and we have given them time,” he continued. “Let the money come.” The BOI did not have Al-Aman WCC’s business plan and could not offer information about the project’s economic feasibility.

The worst that could happen is that, at the end of six months, the BOI will turn down the project. “And what has it cost the Government of Sri Lanka or the BOI?” he asked. “Nothing. At the moment, we have given the enterprise nothing other than the right to bring money in.”