Shangri La – for whose benefit?

by Lasanda Kurukulasuriya

(February 13, Colombo, Sri Lanka Guardian) The government’s sale of several acres of land currently occupied by the Defence Ministry and Army Headquarters across the road from the Galle Face Green to a foreign hotel venture has not aroused much debate in either media or Opposition circles, as might have been expected.

The Hong Kong based Shangri La leisure group has bought 10 acres of the prime seafront property for $125 million for the purpose of constructing a luxury hotel. It appears that another foreign hotel project is also envisaged in this location. An Information Department statement in January said the “Ministry of Defence, Office of the Chief of Defence Staff and Army Headquarters along with Headquarters of other Armed Forces with residential facilities” would be relocating to Battaramulla to make way for “two giant foreign projects that will bring FDI of USD 1000 million.” It is not clear whether the sale includes the Air Force Headquarters facing Sir Chittampalam Gardiner Mawatha.

Deputy Economic Development Minister Mahinda Yapa Abeywardena has said the deal was done outside of tender procedures. When UNP MP Ravi Karunanayake raised a question in Parliament in this regard on Tuesday, Minister Yapa defended the transaction arguing that the company in question was a “reputable” one and that the land, sold at $12.5 million per acre, was given at “three times the value” and therefore there was no cause for complaint.

Nevertheless several questions arise that are of public concern. What is the accepted procedure with regard to the disposal of state assets? Why was the tender process not followed? If there has been a departure from standard procedure what is the rationale, and shouldn’t there be parliamentary debate on it? What are the criteria being applied here? Perhaps they are perfectly good ones, but if they are not spelled out and subjected to public discussion the government leaves room for suspicions of some irregularity or fraud.

In the matter of corruption relating to public property a case that comes to mind is that of the privatization of Lanka Marine Services Ltd. In a landmark 2008 ruling against the John Keells group the Supreme Court held that several aspects of the transaction were illegal, including the transfer of eight acres of land belonging to the Colombo Port. The transaction was among the privatizations initiated during the previous UNP regime.

Another question that needs clarification in the light of the Shangri La deal is the government’s stand regarding the sale of property to foreigners. Doesn’t the fact that it is state property that is being traded to foreigners warrant some explanation? If the guiding principle is that state property may be sold to any “reputable” foreign buyer, may Sinharaja then be parcelled out to the highest bidders? What will go next? Could it be Trincomalee Harbour?

It was an SLFP-led government that in 2004 introduced a 100% tax on land sales to foreigners, presumably in a bid to discourage such sales. It is well known that many foreigners have got around this obstacle by effecting their purchase through the mechanism of 99-year lease to a ‘company’ they set up with the help of local lawyers. In the case of the Shangri La deal it appears the government itself is allowing the use of this mechanism to circumvent its own law. There is a need for straightforwardness by the government with regard to its priorities on these several issues.

It is common knowledge that many of Sri Lanka’s prime beachfront properties have been bought privately by foreigners, particularly in Galle. It is argued that these properties, developed as hotel ventures, help boost the tourist industry and hence the local economy. Of necessity they would generate some local employment. But seeing that they are foreign-owned, the benefit to the economy would need to be weighed against the probability that the profits generated will be taken out of the country.

The consideration that gains may not be retained for the country’s economic benefit would also apply to tourist events associated with these properties, however ‘literary’ they may claim to be.

Such events may be hailed as the best thing since sliced bread by sections of Colombo’s entertainment-starved smart set, who will happily fork out for the overpriced tickets. But shouldn’t claims made on the basis of ‘cultural enrichment of the country’ be assessed in relation to the event’s accessibility, and benefit to the wider community (which there is, for example, at the Jaipur Literary Festival which is ‘Free and open to all’)?

Sri Lanka needs to retain its customary hospitality towards foreign visitors and residents, and there is much to be learnt from the entrepreneurship of the business people among them. But in the light of recent events there does seem to be a need for a better sense of priorities and perspective in evaluating their contribution. And when it comes to business transactions, it would be ridiculous, to say the least, to expect foreigners to abide by the rules if those in government are themselves found guilty of flouting them.