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No debt-to-equity swap for Hambantota port

No debt-to-equity swap for Hambantota port

COLOMBO : This Sunday Times claims that there was no debt to equity swap with regard to the Hambantota port.

The government has always implied the Hambantota port deal as a debt-to-equity swap. A debt/equity swap is an arrangement whereby the debts of a company are exchanged for stock or equity. In this instance, it would mean that China Merchants Port agreed to take over the debt incurred for the building of the Hambantota port in exchange for shares. The Sunday Times mentions that such an agreement never took place. It adds that the debt was merely transferred out of the books of the Sri Lanka Port Authority and taken over by the Treasury.

Since 2014, the Sri Lanka government has been settling both the loan principal and the interest in addition to handing over Hambantota port to Chinese management.

Quoting a senior official, the paper says “There was no debt/equity swap,”. “The Chinese always wanted the loan to be treated as separate and did not want it to be repaid with the lease of the Hambantota port.”

At the time the transaction took place, Mangala Yapa who was a director at the state-run Board of Investment spoke extensively about the Hambantota port deal. Mahinda Samarasinghe was the Minister of Ports and Shipping at the time.

The former Chairman of the Sri Lanka Ports Authority, Dr. Prakrama Dissanayake during whose tenure the transaction took place, refused to comment as he is now a part of a private company in the country. It should be noted that both the negotiations as well as the transaction took place during the tenure of Dr. Parakrama Dissanayake.

Meanwhile, a sum of US$ 146mn, a part of the funds which China Merchant Port Holdings Company Ltd (CMPort) paid for the Hambantota port is lying unused in an account with the risk of being repatriated by June this year, if the Sri Lanka Ports Authority (SLPA) does not float a proposal to spend it.

The annual reports of the China Merchant Port Holdings Company Limited stated: “The Company also agreed to deposit an amount of US$ 146mn into a bank account under its name in Sri Lanka within one year which will be utilized for port and marine-related activities in Hambantota as may be agreed with the GOSL.”

The document further states “The Company shall be entitled to repatriate any amounts in the bank account at the expiration of such one-year period if no agreement has been reached with GOSL for the use of such funds.”

This last tranche (US$ 584mn) was paid by CMPort in June 2018. However, sources close to the SLPA, noted the money was available for use from December 2017. This was when CMPort officially moved into Hambantota port. The deadline for repatriation was, therefore, December 2018.

But a Cabinet paper was put up to extend the deadline by a further six months and to also permit the use of the funds for projects around the country including Hambantota.

That deadline is renewed for June 2019. Sri Lanka’s media and various good governance advocates have expended effort time and real money in highlighting state departures from due process. All such concerns have been backed by bona fide facts and figures.

Unfortunately, the current government continues to ignore these real concerns and progresses with its wavered ways in the process ignoring best principles and processes. Those with authority and responsibility indulging in the despicable practice of robbing the public monies must be held accountable and must face the full penalties as envisaged by law. There could be no mitigating for corruption.