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Monday, 17 March 2014 00:00 - - {{hitsCtrl.values.hits}}
Experience has shown that soliciting bids is no guarantee of honesty. Many a time the tender procedures are fixed before hand in order to select one particular tender. Just because a project wins a contractor on the basis of an unsolicited offer, it does not mean it is a corrupt deal. We must look at the entire procedure and also the outcome before coming to any conclusions.
For example, if a government department has to call for tenders every time in very small matters like procuring their tea or sugar , the paper work and the work hours involved in the process will soon make the exercise an utter waste.
On the other hand, in a mega projects which involve millions of dollars it is very unlikely that tenders would meet the requirements of our development needs. Very often the funding is on account of negotiations or are a friendly gesture from a supportive country or institution. It is very unlikely, even impossible for there to be other interested parties wanting to invest in a project like the Colombo Port City project.
Sometime back our National Carrier, SriLankan Airlines, went into a joint venture with the Emirates. I am sure it was an unsolicited project. It is not as if there were several airlines clamouring to partner SriLankan Airlines. The fact that it did not end well does not mean that solicited bids would have worked better. It failed for other reasons.
A bad case of an unsolicited bid was the infamous Hilton Hotel which happened during the UNP Government of J.R. Jayewardene. Why the Government of Sri Lanka gave away about six-and-a-half acres in the heart of Colombo to a private company in an unsolicited bid to build a 5-star hotel has never been convincingly explained by any government.
The five-star hotel was obviously to serve the high-end tourists who wish to spend time in Colombo and the very rich in the country. As for the larger industry of tourism, it served no purpose in that the industry continued to be in the doldrums for the two decades after the hotel was opened. Even today the other five-star hotels in Colombo such as the Cinnamons hotels and The Kingsbury fare much better that the Hilton.
But it is common knowledge that some of the business people behind the unsolicited Hilton bid are manoeuvring to claim compensation on the basis of the unsolicited lease given to them by the Government of that time.
They did not invest any money in the project. All the money came from Japan, for which the Government of Sri Lanka stood as guarantor. The loan was repaid with operational profits. The so-called facilitators only obtained the original lease from the Government on an unsolicited bid. It is also alleged that even the lease terms (99 years) were not followed and especially the rents were unpaid and therefore the lease is now null and void.
The Government as the major shareholder not only has given their valuable land, but also guaranteed the loan payment. Now even compensation is being demanded of it by interested parties who in fact brought nothing to the table. It is shocking that no investment was made in the whole project by the facilitators save for obtaining the land from the Government in an unsolicited bid.
It is also pointed out by industry specialists that the standard fee for Hilton management is about 10% of the operating profit. But in this particular case we are paying about 30% of profits to the Hilton Group! Whoever negotiated this arrangement cared more for the Hilton Group than Sri Lanka’s interest. It is a matter of concern that Hilton Residences is only paying 12% of its profits to the Hilton Group. The whole story is both mystifying and depressing. As we see in the Hilton story, sometimes unsolicited bids can work against the interest of the country.
However, in the case of the Port City Project, a project that can transform the Sri Lankan economy, the Leader of the Opposition should point out other alternatives that the Government could have followed. Perhaps there are none. In that case he should help the Government to develop the country without petty politics dictating the theme.
Feroze Hamid (MBA-Sydney University)
