By Uditha Jayasinghe 

Cash starved Canwill Holdings is to regain Rs. 4 billion worth of public funds previously earmarked for the Hyatt hotel project in Hambantota for construction of Hyatt Colombo after Cabinet approval was given yesterday.   

Canwill Holdings Ltd. is a fully state-owned public enterprise that was initiated under former President Mahinda Rajapaksa’s tenure. It was entrusted with Rs. 18.5 billion in equity sourced from its key shareholders Sri Lanka Insurance Corporation, which contributed Rs. 8.5 billion as well as Litro Gas and the Employees Provident Fund (EPF) that provided Rs. 5 billion respectively. 

Forty-six percent of the shares were held by Sri Lanka Insurance while the rest was divided between Litro Gas and the EPF. Canwill Holdings then invested its equity in two subsidiaries, Sinolanka Hotel and Spa, which was behind the Hyatt hotel in Colpetty and Helanco Hotels and Spa that backed the proposed Hyatt in Hambantota. 

However, since the Hambantota Hyatt was cancelled by the new Government after it came into power in 2015, Public Enterprise Development Minister Kabir Hashim had submitted a proposal to the Cabinet to revert Rs.4 billion in funds idling with Helanco Hotels and Spa back to Canwill Holdings to invest in the Hyatt Colombo project. 

In May, President Maithripala Sirisena requested the Ministry of Public Enterprise Development to issue bids for sale of three state-owned hotels, including Hyatt and Hilton to attract potential investors.  

“A request was made to the Treasury as the owner of Golden shares of Helanco Hotels seeking his approval, but the Treasury Secretary was of the opinion that since the decision involves public funds it needs Cabinet approval to reserve the decision of the previous Board of Directors,” the Cabinet paper seen by Daily FT said. 

“It has also been decided to investigate investments made by public enterprises in commercial ventures that are out of their basic objectives,” Cabinet spokesman Dr. Rajitha Senaratne told reporters at the weekly Cabinet briefing. 

Helanco Hotels and Spa had spent Rs. 315 million but an audit done by the Government in 2015 showed massive mismanagement and wastage. Both projects in Colombo and Hambantota were unprofessionally managed with funds extensively used for extraneous purposes, according to the audit committee that was chaired by Hemaka Amarasuriya. 

Amarasuriya told the media in June last year the forensic audit into the Hyatt hotels in Colpetty and Hambantota had uncovered mass fraud resulting in initial cost estimates more than doubling from Rs. 13 billion to Rs. 27 billion and the company facing a shortfall of nearly Rs. 9 billion to complete the project.

 Canwill Holdings was previously managed by former Chairman Gamini Senerath and former Managing Director Piyadasa Kudabalage, and the audit report found no regular board meetings had been held with major decisions taken via email, tenders granted to loyalists and land procured as values higher than recommended by the Government valuer.  

 Among the host of irregularities and mismanagement highlighted by the audit were payments of Rs. 10 million to a lawyer with no agreement, Rs. 16 million losses in steel purchases, fittings supplier given Rs. 80 million without board approval, international tender for $ 37 million signed with an international contractor the day before the presidential elections and Rs. 12.8 million spent on a signing ceremony.  

Cabinet revises export remittance deadline from 90 days to 120 days

Cabinet yesterday approved the extension of export remittances from 90 days to 120 under a proposal made by Finance Minister Ravi Karunanayake with an additional 30 days as a grace period. 

The new decision which is made under Section 22(4) of the Exchange Control Act for the Remittance of Export Proceeds would repeal the Gazette notification made on 1 April and came into effect from 1 August, which made it mandatory for exporters to remit any money earned from exports to Sri Lanka within 90 days.  The move was seen by many as one made by the Finance Ministry to meet the country’s need for foreign exchange ahead of the International Monetary Fund (IMF) approving a $1.5 billion Extend Fund Facility (EFF). 

The Gazette came into strong criticism from the export community, which insisted that the Central Bank had no cause to place restrictions of its earnings as there was little evidence to support the premise that exporters were intentionally keeping their revenue out of Sri Lanka.

Under the new provisions, exporters would also receive a grace period of 30 days from the completion of 120 days as stated in the proposal by the Central Bank prior to institute action against any violation of this regulation, the Cabinet paper submitted by the Finance Minister said. 

“During the review of this decision with stakeholders it has been pointed out that any such delay in remittance of export proceeds in the present context of the external reserve position may cause adverse effects to the economy. Considering the same it has been proposed to seek Cabinet approval to revise the earlier proposal,” it said.