Finance Ministry issues clarifications on divestiture of Hotel Developers Lanka and SLT

In response to recent claims circulating in newspaper articles and on social media regarding the divestiture of Hotel Developers Lanka Ltd., (HDL) and Sri Lanka Telecom PLC (SLT), the Finance Ministry issued the following clarifications to address inaccuracies and provide accurate information.

1. The divestiture of Hotel Developers Lanka Ltd. (HDL, the owning company of the Colombo Hilton) will include 7 acres of land: 

This is incorrect. The land involved in the transaction amounts to 4.61 acres and is available for use by HDL on a leasehold basis until 2111. Subject to approval by the Cabinet of Ministers, a further 1.875 acres of land will be made available to HDL on a lease basis until 2111 at a price of Rs. 4.4 billion (in addition to the price for HDL). Two of the hotel’s restaurants, its swimming pool, gymnasium and some of its parking is situated on this land. 

This transaction is based on a decision of the Cabinet of Ministers dated 21 March 2022 whereby it was decided to allocate this land at this price to HDL at the time of its divestiture. 

Since its recent refurbishment, the Colombo Hilton has received a 7-star classification: 

This is incorrect. The hotel’s classification has been and remains 5-star. 

In 2023, the Government Chief Valuer (GCV) has valued HDL at $ 124 million, a value higher than its valuation released in July 2024: 

This is incorrect. (A) As confirmed by the GCV, the previous valuation of HDL was dated 19 November 2022. (B) It was lower than the valuation released in July 2024. (C) The valuation was stated in Sri Lanka rupees and not in USD. 

The financial offer for HDL has been accepted: 

This is incorrect. Whilst an offer has been received, negotiations are not yet concluded and the price not yet finalised. 

There was political interference brought to bear on the divestiture of HDL: 

This is incorrect. A transparent, price discovery process has been followed with respect to the divestiture of HDL. Further at no stage has a politician and/or public officer attempted to influence or interfere with the work of the SOERU with respect to the divestiture of HDL or any other state-owned enterprise. 

There have been serious financial irregularities with respect to the asset valuation of Sri Lanka Telecom PLC: 

This is incorrect. The valuations of SLT are still on-going and are yet to be finalised as of 26 July 2024. 

The divestiture process is not transparent: 

This is incorrect. Divestiture are carried out under the Divestiture Guidelines approved by the Cabinet of Ministers. These guidelines are available in the public domain and can be accessed at treasury.gov.lk/web/circular-gazette-acts/section/guidelines. A study of these guidelines will reveal that there are sufficient checks and balances to ensure a transparent and credible process. 

The financial results of SLT have been manipulated to reduce its value: 

The accounts of SLT are audited annually and the auditors are mandated to report on serious financial malpractices and irregularities. 

As a listed entity, SLT must abide by the continuous listing rules of the Colombo Stock Exchange. These rules require a Board Audit Committee chaired by a director who is not the Chairperson of the company. One of the key responsibilities of the Audit Committee is to ensure the integrity of the company’s financial statements. At SLT, the Audit Committee is chaired by a former senior partner of PwC Southeast Asia Peninsula who is a member of the Institute of Chartered Accountants of England and Wales. Further, as a listed entity, SLT is constantly under the scrutiny of investment professionals. 

A foreign investor with exposure to the telecom sector is a major shareholder of SLT (approx. 45%). They have a significant presence on the Board of SLT and it is unlikely that they would agree to manipulate the value of SLT downwards. 

The SOERU together with the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) worked with all sector entities to resolve a long-standing spectrum issue that was negatively impacting the performance of SLT. The new spectrum allocation will in fact help increase the value of SLT significantly. 

The SOERU is unable to comment further since it has no involvement in the management of SLT. 

The SOERU further states that: 

Offers and bids received on account of divestitures are evaluated by two Cabinet appointed committees that are independent of the SOERU. These are the Special Project Committee (SPC) and the Special Cabinet Appointed Negotiation Committee (SpCANC). 

The SOERU acts as an implementing agency and facilitates and coordinates the work of the two committees. This segregation of responsibilities together with other features of the Divestiture Guidelines ensures the transparency and credibility of the divestiture process. The mandates and composition of the two committees and the SOERU are detailed in the Divestiture Guidelines referred to above. 

The SOERU was not contacted to clarify the concerns mentioned above. 

At the very outset, the SOERU met and discussed the SOE reform program with senior members – and in some instances, leaders – of three major political parties. 

At every important stage of the divestiture process, the SOERU has released statements to the press in order to keep the public informed. 

The SOERU remains committed and available to clarify any issues and concerns that any political party may have with respect to the SOE reform program – including divestitures– being carried out at present.