Monday, April 7, 2014

With open season on “unsolicited investments” there is NO limit on Foreign Direct Investment! (FDI)

The investment by the CHEC Port City Co (Pvt) Ltd is the largest single FDI project in Sri Lanka at US$1.3B. I have noted in my previous blog entry about this method of foreign direct investment, and why I do not believe it comes under the normal rules of FDI. CHEC is a subsidiary of CCCC (China Communication Construction Company Ltd) which is listed in the HK and Shanghai Stock Exchanges. The GOVT of China is the majority owner of the company.

Firstly the amount invested is NOT subject to audit, but it is easy to see the US$1.3B investment coming through the banking system. The  money will be spent on development and reclaiming 233 hectares of land, and 125 hectares will belong to the Govt. a further 88 hectares will be leased on 99 year lease to CHEC and 20 hectares will be given to CHEC on a FREEHOLD basis as part of the investment benefit.

It is this 125 hectare carrot that the GOSL is drunk with that it was signed off, without any real evaluation of what is it in for SL and what is the true benefit to China in this investment. I have highlighted in the previous post why it is a no brainer for China as they expect to make windfall profits. What Sri Lanka will do with their 125 acres is as usual open to question, and it is the Govt. of the day that will determine how this is divvied up.

Further there is a policy that under Chinese law, it is a crime to make payment to non PRC (People’s Republic of China) Govt. officials and to officials of International Public Organizations, for any ILLEGITMATE commercial benefits.

The word illegitimate being the operative word. So the money paid to fixers who promise that the deal will be rubber stamped by the GOSL is part of normal commercial transactions and therefore perfectly above board.

From the above case it can be clearly seen what constitutes foreign investment. It is not necessary to provide employment, but some spurious benefit like the GOSL getting 125 hectares is sufficient reason to allow this. There is NO evaluation mechanism to work out how beneficial it is to the Country and in what manner.

It is time there are more people with common sense to evaluate the public benefit if any of these investments, and what public cost. It cannot be undone once approvals are given and therefore it is important that this takes place prior to approval.

1 comment:

Anonymous said...

do you seriously believe in this case that the $1.3 billion investment will not bring economic benefits to SL? Are you so blinded by your need to criticize that this apparent fact is not clear to you?

just think about all of the economic activity that will commence once 200 hectares of bare land in the middle of the city is created!!!! how much construction and engineering labor will be required? lawyers? how much brokerage? how much material required for building? landscaping and gardeners? doctors for the hospitals? school teachers for the schools? office workers for the offices? maids for the facilities? etc etc etc etc etc etc etc etc

come on, man. Kalpanakaranna!!!! we, your readership, expect better analysis