PM goes to China :

Port City project balances India, China

The final preparations were being made for signing the tripartite agreement between the Colombo Port City, the Megapolis authority and, the Urban Development Authority with legal, operational and management teams going over the nitty-gritty of this bulky document with a fine tooth comb; but, the Chief Marketing and Sales officer for Colombo Port City was a thousand miles away attending the 16th National Convention of the Confederation of Real Estate Developers Association of India (CREDAI), Shanghai, China.

The conference had over 800 member developers, experts from the real estate sector and senior professionals from the world of finance attending. Participants from ancillary industries included CEOs from the Prestige Group, Magarapatta, Rustomjees, Vascon, and Sigmaone; while well known celebrity, Bollywood actor Sanjay Dutt had also been present to lend some colour to the event.

The three-day convention had an apt theme, ‘Embracing Change’ and a press release from the Consulate General of India in Shanghai said “it was aimed at facilitating knowledge and learning global best practices in the industry against the backdrop of the largest developing and competitive economies - China and India.”

The Indian Consulate further said that the Chinese experience of real estate and infrastructure development was a key learning objective for the participating delegates.

Construction work on the Colombo Port City project will be relaunched soon.

An exclusive international business forum for a business-to-business interaction was part of the Conference, where Indian companies were given the opportunity of interacting with 50 Chinese vendors. On the other side of the coin, Marketing Chief Liang Thow Ming had got the opportunity to promote the Colombo Port City to approximately 800 top real estate developers in India.

Liang was also a part of an elite panel which discussed the topic ‘India and China – Economic Adversaries or Allies’. The debate, which was the main highlight on the 2nd day of the conference, had been based on current social economic conditions of the two nations, which were unfolding powers holding the key to the future.

Whilst promoting the Colombo Port City, Liang had shared insights into the rapid growth achieved by China’s real estate fraternity. The decision to participate in NATCON is especially significant as CHEC Colombo Port City had made it clear that the Port City was an international project and the Chief Sales and Marketing Officer had also made a visit to India in May this year to scout for investors in the Indian real estate industry.

The special session which was moderated by Irfan Razak, Chairman of CREDAI, had taken a comparative look at the growth of the two largest economies, their achievements, potential for growth in the next few years and the lessons each had learnt from one another to reach new heights in economic growth, while creating real estate that is complementary to the economic future of the two countries.

This clearly shows that although we might be getting various signals from the Indian quarter in Colombo, the case was not the same in the city of Shanghai, where India seemed to be very much in the mode of cozying up to China. The two largest nations in the world had sat down to talk business and their theme was more of a beacon for embracing change together.

Counter-arguments

This signal is of particular importance to Sri Lanka since the Chinese company had clearly stated that the Colombo Port City was not a Chinese cantonment but was going to be an international city. In line with this thinking, one of first nations, the Port City looked towards to market, their not yet reclaimed land, was India.

While their massive plans to make it into an international financial city takes priority; the second layer of marketing is to create a livable city within a 269 hectare block of land, which would be home to local as well as international residents, attractively packaged with all their needs and amenities.

Of course, from the local point of view, there was always the question of why one needs to develop a fresh block of land by claiming from the ocean, when there is so much available land, especially in the suburbs of the city.

One of the strongest counter arguments put forward was that there is a premium attached to living on the waterfront especially when it is next to the business district. The best examples of this are in Philippines and Dubai where land had been reclaimed from the sea, even though there was land elsewhere in the country.

Another factor is that for a long time now Sri Lanka has depended on exporting labour to the Middle East who in fact fall amongst the top earners in the country. With certain parts of Saudi Arabia becoming unsafe for our domestic labour market it is important to take a closer look at our service sector and the obvious direction to take as the Prime Minister and his team appear to think is the financial sector – and thus the metamorphosis of the Port City to a Financial City.

Therefore, the entire vision for the Port City is to be a magnet for attracting financial services, insurance companies, various banking institutions and along with that, people who are involved in these industries who can live and work in the Financial City.

However, going beyond the financial aspect of this new city, the Port City plans are drawn to be inclusive to attract a new brand of residents who will look at Colombo as a very livable city; and this, experts say would include the diaspora. The very wealthy is not what is being looked at here but the middle to upper middle income groups in western countries who should also have sufficient resources to own an apartment in the port city.

Coal tender

The controversial coal tender which was much hyped in the media in the last few months took a sharp turn this past week when the Minister of Power and Renewable Energy presented in parliament, the findings of a committee headed by Prof. K.K.Y.W. Perera, a veteran in the field of electronic engineering and former Professor of Engineering/former Dean of the Faculty of Engineering and Architecture at the University of Moratuwa.

He has also held the positions Chairman, Sri Lankan branch of the Institution of Electrical Engineers UK, General President of the Sri Lanka Association of Advancement of Science and President of the Institute of Engineers.

He has served tenures as Chairman of the Ceylon Electricity Board and Chairman of Sri Lanka Telecom and was a former Secretary of the Ministry of Power and Energy, a position he held for around 10 years. Other members of the Committee are Professor Lakshman R. Watawala and Professor Janaka B. Ekanayake.

The Terms of Reference (TOR) for this committee were to investigate and report whether, due to the decision on the purchase of coal, there was a loss or damage to the Government; as well as the economic dynamics of long term and spot tenders.

The committee members’ impeccable credentials, looks like an all-out attempt by the Ministry to take the moral high ground on this issue.

It is hard to imagine that buying coal could be such a complicated process. But now, as we come closer to the season when stocking up on this chunky fuel at the Norochcholai power plant becomes a necessity, this matter needs to be resolved sooner rather than later. Due to monsoon whether coal shipments can only be unloaded between September and April as discharging from vessel to barge is done on open sea.

The expert team were appointed to find out if there was any hanky panky going on in relation to the last long-term contract the government signed for the supply of coal - more specifically whether that contract had through its process of purchase caused a loss to the country. The committee came up with a simple answer to this dilemma, clearly stating that there was a net saving of US $ 287,029.73 to the country.

Interestingly enough, the good professor and his team went even further to discuss the properties of coal, the calorific value, moisture content, ash content, volatile matter as well as the size of coal which they said had a bearing on the operation of the Lakvijaya Power plant.

However, unlike the other parameters which have a significant influence on output and efficiency, the size of coal plays only a minor role in plant efficiency. What they said became significant because the contentious point was the size of the coal particle supplied by Swiss Singapore, who currently holds the long term contract which has been stalled due to a dispute.

The report also pointed out the environmental impact that powdery coal would have and the committee suggested that a study be undertaken to modify specifications / penalties to overcome these adverse implications for future supplies of coal.

Be that as it may, coal power experts point out that a solution for this coal dust dispersement to be controlled is to have this material stored in the open to be continuously wetted by sprinklers. This is a standard international practice.

As per the terms of reference, the committee also concluded that the Ministry had taken the initiative to introduce Spot Tenders for the procurement of coal.

This has resulted in a saving of US$ 7,596,676.03 for coal purchases compared to purchases through long term tenders. A mix of procurement through long term as well as spot tenders had been implemented without completely relying on spot tenders.

A balance between long term and spot procurement should be maintained in view of changes in market conditions.

The committee has also concluded that it is important to introduce technical specification clauses in future, to penalize oversized and undersized coal after carrying out a detailed study on their impact to the environment as well as increased cost of crushing larger particles.

VAT predicament

According to the committee Sri Lanka has gained financially, even if only the long term contract was considered and the penalty for size specified in the bidding document was applied in the majority of shipments.

The committee has also suggested that a composite index be considered, since the payment price for coal is based on the index at the time of shipment, and because the shipments may come from different countries such as Indonesia, South Africa, Australia and Russia etc.

The expert committee’s conclusions also state that the combination of long term tenders and spot tenders, are a definitive advantage in terms of the total price paid.

It seems like almost six years after coal fired power generation began in Sri Lanka, the Government has finally come to understand and implement a fool proof method of purchasing coal which would save millions of dollars for the country.

Whilst two long standing problems like the purchase of coal and the Port City have come almost to an end, the coalition government faces yet another challenge as the VAT bill has gone into limbo.

This bill which was in fact an amendment to the previous law, would have hiked up the value-added taxes; creating further hardship for the consumer.

The new VAT bill would have seen an increase from 11% to 15% bringing small, medium and wholesale traders as well as private healthcare services under the net. While the exchequer might need all the money it can get, the decision to increase VAT was not seen as a popular move.

The process of how the bill was presented however, was challenged in parliament and the Supreme Court had nullified the entire process, saying that due constitutional procedure and standing orders had not been followed.

The Government’s defense was that this procedure had been used in the past in previous parliaments; but the Prime Minister backed down, saying that he wouldn’t hold this against the Chief Justice. His point however, was that the proposals were made according to a previous ruling by former speaker Anura Bandaranaike, who said that the parliament was supreme.

Be that as it may, for the Government it is a case of going back to the drawing board and drawing up fresh legislation in conformity with the Supreme Court ruling.

To China

As the week ended the Prime Minister flew to China accompanied by his wife Maithree Wickremasinghe and a delegation of Ministers which included Anura Priyadarshana Yapa and Patali Champika Ranawaka. According to reports the delegation would be visiting several economic hubs in China.

The visit seems timely as China now seems like the only answer to our medium and long term plans. Although India for a while, appeared to be our great ally and partner, It is now clear that Sri Lanka is considering China as a partner with great investment potential.

This is the time our economy needs people who can deliver. The Chinese have shown that they are flexible enough to work with any government.

The massive infrastructure projects from roads to public utilities are pushing the economy forward. Yes all this comes at a price and it looks like that is the new mission of the Prime Minister and the Government.

The premier’s visit to China can be construed as a signal to the world at large and more specifically to our neighbor – if you can cozy up to China Why Can’t we?

The Prime Minister and his ministerial delegation, on Friday night, left for Guanzhou, the capital and the largest city of Guandong province, in southeastern China.

Located on the Pearl River about 120 km (75 mi) north-northwest of Hong Kong and 145 km (90 mi) north of Macau. It was a major terminus of the maritime Silk road and still serves as a port and transportation hub.

Guangzhou is the third largest city in China, after Beijing and Shanghai, with a population of 13,080,500 and it forms part of one of the most populous metropolitan agglomerations in the world.

Guangzhou is also identified as a Beta+ global city, speaking volumes of his sophisticated city planning and economic growth.

The Prime Minister’s visit to China takes places in a context where Sri Lanka is making grand plans for the western province megapolis programme.

Before leaving for China, Western region megapolis planning project Chairman Ajita de Costa said, during the visit, they would closely observe the manner in which China had planned and developed the Guanzhou city.

He said it would obviously help Sri Lanka’s plans for the much talked about Western region megapolis. Another important aspect would be how Sri Lanka wants to integrate the Colombo Port (Financial) City into the much larger megapolis plan.

Against this backdrop, the Prime Minister’s five-day visit to China has drawn a lot of attention from business and financial circles.