Central Expressway: Japan imposes tough conditions for big loan

Threatens to cancel project if bribery is involved, but tough Govt. official says terms too severe

Japan has imposed tough conditions, including the cancellation of the project, if bribery or corruption is involved, to award the US$ 1 billion commercial loan for the third phase of the Central Expressway project to build the 32 km Pothuhera-Galagedara stretch, a senior official said.

The conditions include cancellation of the project and repayment of the loan, if any of the contracting parties is found guilty of bribery charges. In the event of an instance of arbitration, the matter is to be taken up under Japanese laws and in the event of the International Monetary Fund loan facility being withheld or cancelled, the project loan will also be cancelled.

The Treasury's External Resources Department Director General, Priyantha Rathnayake, told the Sunday Times the government was not agreeable to such conditions as it was difficult to negotiate on these terms.

He said the loan under negotiation had no link with the IMF facility and the government could not be held responsible if a third party got involved in a bribery issue.

Mr Rathnayake said the proposal that Sri Lanka should follow Japanese arbitration laws was also not acceptable, as usually it should be a neutral country like Singapore or Britain where matters should be taken up.

“The loan was proposed by Japan. The contractor and the consultant were proposed by Japan. Therefore, there should be flexibility in approving the loan. We will be forced to look for other options if there is no flexibility," he said.

The senior Treasury official said that agreeing to such conditions would also have implications on other loans.

He said that if the project had to be called off midway, it would be a major loss for the government.

Meanwhile, the Highways Ministry also has sought an opinion from the Attorney General’s Department over a request from Japan to seek the services of the former Japanese Consultant of the project at a new rate.