Sunday, March 17, 2013

Is the Defense budget of Rs280B also for Forces Restaurants and Resorts?

The allocation in the Budget for Defense Ministry is by far the largest and amounts to 5 times that for health or education, there was some debate as to what it is for! Now that the UDA or Urban Development Authority is also under the Ministry was it for developments there? No only 5% of the budget is for that, and all the beautifying that is going on around Colombo and the suburbs. It seems that the World Bank and other financing agencies are funding some under other projects!

What is not clear is, how the host of hotels and restaurants that open almost on a monthly basis is funded using the facilities of the defense ministry. Are they also being funded from this public money or from borrowings? It is all from the defense

How do the economics of this work? Is it run on normal profit lines? After all when a project is costed and a master plan made, it evaluates costs and benefits, and looks at ROI and profitability. That is how the pricing of rooms, and meals are done. Of course there is an element of supply and demand and pricing is often upped to cater to that balance, NOT reduced, and therein some super profits result.

I have serious doubts if this kind of calculation process have taken place in all these Army (Laya Brand) and Navy and even Air Force hotels. There is a golf course that is open to the paying public in China Bay run by the Air Force.

Are they or under charging and undercutting the private sector? Where is the revenue going? Is it going back to defense, like other revenues from the sale of cultural triangle tickets that go to the Treasury or is it going to the pockets of the defense ministry officials? There is NO transparency in this activity AT ALL.

The labor provided for this operation, as well as most of the equipment is NOT part of the costing of the project as it is assumed it is already a sunk cost of the defense ministry and therefore does not require to be recorded in the fixed asset cost. So a hotel that normally will cost Rs50M to build, will have cost the defense ministry only Rs25M with much of the costs provided FREE. Of course this is also open to corruption, as the tenders for the provision of outside services and goods and construction do not follow normal government protocols in their procurement.

It is therefore clear from the examples above, that there is no proper accounting for costs, and revenue and much of this business can be scammed by the people running it. If there is under charging then entrepreneurs big and small suffer badly.

I was told by a source that the profits go to forces welfare societies and NOT the relevant Ministry, and so that funds there can be used in ways that could be questionable as they do not conform to any enforceable contracts, and can easily be misused for private or personal use, by whoever commands or is in authority. It is time that Parliament questions this and comes to the bottom of its implications.

No comments: