Author: Branita

Sri Lanka is expecting to wrap up a staff level agreement with the International Monetary Fund (IMF) when a team visits the country at the end of August, Central Bank Governor Nandalal Weerasinghe said.

“The IMF mission is coming to Sri Lanka by the end of the month with the intention of reaching staff level agreement on the policy package.

“We are making good progress with the IMF mission and we’re hoping to reach staff level agreement,” Weerasinghe said at a monthly policy review meeting held on Thursday August 18.

“We have achieved our policy level targets so we hope to reach staff level agreement. This will certainly improve our situation,” he said.

At the moment, the Central Bank is in the process analysing its creditors before it reaches out to them.

“Once the staff level agreements with the IMF are concluded, the country hopes to reach out to its external creditors. Once the IMF agreements are in place, we will reach out to all our bilateral and commercial creditors,” he said.

Weerasinghe said a staff level agreement with the IMF will give the country a “clear picture on debt sustainability and debt targets for the country to achieve in the next 10 years and an overall macro-fiscal programme.”

He said using these programmes endorsed by the IMF they will be able to reach out to the external creditors including first party commercial creditors and International Sovereign Bond (ISB) holders, the Paris club including Japan (which is a major partner of the Paris club) and non-Paris club creditors like China and India.

“All [creditors] will be officially approached and we will present our overall macro programme that has been endorsed by the IMF and also the debt targets we have to achieve going forward.

“So, with that information we will approach different groups and the process will commence from there with the assistance of France-based Lazard and Clifford Chance legal advisors as well as the other agents.”

Weerasinghe said the government is confident that debt can be made sustainable without restructuring domestic debt.

Source: Economy Next

Former President Gotabaya Rajapaksa who fled the country last month amidst public protests calling for his resignation, is awaiting to obtain a US Green Card to return back to the United States and settle there with his wife and son, the Daily Mirror learns.

Highly placed sources said that Rajapaksa’s lawyers in the United States had already begun the procedure last month for his application to obtain the Green Card as he was eligible to apply due to his wife Ioma Rajapaksa being a US citizen.

The procedure will also now involve his lawyers in Colombo submitting the additional documents here in order to go ahead with the procedure.

The former President who is presently in a hotel in Thailand along with his wife will return back to Sri Lanka on Aug. 25, cancelling his initial plan to remain in Thailand at least till November.

Sources said that two days ago, Rajapaksa had consulted his lawyers and had decided to return back to Sri Lanka later this month as he was not allowed the freedom to move in Thailand as initially expected, due to security concerns.

Upon his arrival in Bangkok, Thai police had advised the ousted President to remain indoors for security reasons.

Foreign Media reports said that at the hotel, the location of which has not been disclosed, plainclothes police officers from the Special Branch Bureau had been deployed to ensure the safety of Rajapaksa. Officials had asked the former Sri Lankan president to remain within the hotel during his stay in the country.

Upon his arrival back to Sri Lanka this month, the cabinet will discuss to provide Rajapaksa a state house and security accorded to a former President.

Rajapaksa fled for Maldives last month and thereafter to Singapore. He entered Singapore on a medical visa and had it extended twice to remain there as much as possible. As his visa could not be extended further, Rajapaksa and his wife left for Thailand and was assured he could remain there till he finalizes his third destination.

However with his movements now restricted in Thailand, he will return back to the country.

Source: Daily Mirror Online

An office will be established to look into the issues and aspirations of the diaspora, President Ranil Wickremesinghe said.

“We must sort out the problems among the ethnic groups and special focus should be given to the diaspora as it is a strength and source of investment,” Wickremesinghe said addressing the 2022 awards ceremony of the Organisation of Professional Associations (OPA) of Sri Lanka.

Further he spoke of the need to establish an export oriented economy to overcome the economic crisis, noting that the country should no longer be heavily reliant on imports.

He added that the country should now prepare for a fourth industrial revolution while the economy must be completely restructured. The President noted that when the public sector collapses, the country should have sufficient funds to meet basic needs like education, health and housing.

“We need an attitude change, failing which the country will become another Lebanon. This is the stark choice before you. Whether we like it or not, we have no choices in the solutions,” he said.

Emphasising on electoral procedures, he noted that the preferential voting system has caused immense damage and that electoral reforms should be introduced through this Parliament.

He further said, the State of Emergency that is due to lapse by the end of the week will not be extended as there is a hint of a return of stability.

The Ceylon Electricity Board (CEB) General Manager has forwarded a draft agreement to the Ministry of Finance recommending that exclusive rights be granted to a Chinese company for supplying natural gas (regasified LNG) to power plants at Kerawalapitiya and Kelanitissa.

The CEB invited international bids in February 2021 for the development of a floating storage and regasification unit (FSRU) at Kerawalapitiya on build, own and operate (BOO) basis on a 10-year contract.

Under this tender, the FSRU stationed offshore at Kerawalapitiya will regasify the natural gas delivered by ship in liquid form (LNG) and then deliver it to power plants at Kerawalapitiya and Kelanitissa through gas delivery pipelines to be constructed under a separate tender floated by the Ceylon Petroleum Corporation.

The CEB has engaged an Indian consulting firm using funds provided by the Asian Development Bank (ADB) to prepare the request for proposal (RFP) documents of this tender, which includes the FSRU agreement and the implementation agreement (IA).

The FSRU agreement is to be signed between the CEB and the project company that would be set up by the selected bidder. The IA is an agreement signed between the project company and the Sri Lankan government, which sets out terms on which the government will provide incentives (such as tax concessions) and assistance (for obtaining statutory approvals such as environmental permits) to the prospective project company.

Under the IA, the GOSL will guarantee the payment due to the project company from the CEB under the FSRU agreement. The IA published with the RFP in February 2021 has not offered exclusivity to bidders, as it is unnecessary to offer such a guarantee since the FSRU agreement will ensure that the project company will operate the FSRU for 10 years.

The bids were closed on 25 June 2021, and the CEB has received only two bids despite some 18 companies purchasing the bidding documents.

The CEB Engineers’ Union (CEBEU) at the time claimed that potential investors had been discouraged by the government’s decision to entertain an unsolicited proposal by the US Company New Fortress Energy (NFE) to supply LNG to two private power plants in Kerawalapitiya including the FSRU and delivery pipeline.

However, according to a senior CEB engineer, this allegation was baseless because another international tender for a combined cycle power plant at Kerawalapitiya published around the same time attracted only a single bid. Industry experts blame international developers’ lack of interest in the dire financial situation in the country that existed at the time.

Out of the two bids received, the offer submitted by a leading US firm that owns and operates a large fleet of FSRUs was rejected by the technical evaluation committee (TEC) because the bidder had sought to conduct on its own expense a complete hydrological study of the offshore location assigned for the FSRU.

Some experts, contacted by The Island agreed that such studies were required for designing the offshore mooring system of the FSRU, which is one of the most critical items in the FSRU operation.

They were of the opinion that it was not usual for FSRU developers to rely on preliminary studies conducted by a third party because mooring system design is a highly specialised job that was not entrusted to unknown parties. However, the CEB has refused the bidder’s request, citing the urgency of implementing this project as the proposed study would take approximately two months. Accordingly, the bid has been rejected without further consideration.

However, despite CEB’s claim of urgency, the TEC is yet to complete the evaluation of the single bid and award the tender, 14 months after the bids were closed. The then CEBEU President Saumya Kumarawadu told The Island in September 2021 that the CEB’s tender was based on a comprehensive feasibility study carried out by experts and the tender was in its final stage of evaluation.

He expressed confidence that the CEB would soon select a suitable investor through a transparent and competitive bidding process, to procure the LNG infrastructure to supply LNG for all existing and future power plants in the country at the most competitive prices.

The TEC has accepted the only remaining offer received from a Chinese company, which is already engaged in road construction contracts in Sri Lanka, submitted in partnership with the Pakistani supplier of the FSRU. It is understood that this “qualifying offer” had quoted a price that is nearly twice that of the offer rejected by the TEC.

Based on the prices offered in the two bids received and the total LNG throughput guaranteed by the CEB in the RFP for the FSRU operation (443 million MMBtu for the 10-year period), the Chinese offer would cost around USD 560 million more than the offer of the US company over the 10-year contract term.

Because of the substantially high price quoted by the selected bidder, it has been decided to negotiate with the bidder with a view to reducing the price. Although the government tender guidelines allow negotiating the price with the selected bidder, they do not permit amendments to original commercial conditions or technical specifications during price negotiations in BOO/BOT projects. However, it is understood that the TEC has agreed to several material changes to the bid conditions including the bidder’s demand to change the designated location of the FSRU, a request adamantly rejected by the CEB during tendering.

The CEB has turned down repeated requests from potential bidders during the pre-bid meetings to change the location of the FSRU specified in the RFP. These parties have claimed that the location specified in the RFP did not have sufficient depth of water needed to float the FSRU.

Industry experts contacted by The Island believed that the CEB’s refusal to change the location may have resulted in the CEB ending up with only two bids. In any event, changing the assigned location of the FSRU is a material deviation from the original tender conditions, especially since the CEB has been clear from the beginning that this change could not be allowed.

The amended IA forwarded by the CEB General Manger is believed to contain several other unfavourable conditions not included in the original IA published with the RFP.

One such amendment is the GOSL’s undertaking to grant exclusive rights to the Chinese company for FSRU operation and delivery of gas to power plants for 10 years. Such a condition will effectively give this company full control of gas supply to nearly 2000 MW of generation capacity in the country, regardless of who supplies LNG.

Ironically, the strong opposition by the CEBEU to the proposal by the US company NFE was based on the allegation that NFE would be given a five-year monopoly for LNG supply in the country under that proposal.

It is also understood that the amended IA has added a new section that will effectively prevent the proposed restructuring of the CEB. Some question whether this is a clever ploy by the CEB engineers, who are opposed to the government’s restructuring of the CEB, to force the GOSL to abandon its reform process.

It is also understood that the amended IA has shifted the burden of obtaining numerous governmental and statutory approvals to the GOSL and CEB. Obtaining such approval is the Project Company’s obligation and the government generally agrees in the IA to provide reasonable assistance.

A senior CEB official contacted by The Island agreed that changing mandatory tender conditions after the award was made would be unlawful and likely to be challenged in court. He stated further that it would be most unlikely that the Ministry of Finance would agree to the changes proposed in the amended IA forwarded by the CEB, as some of these conditions may impinge on the rights of the government.

Source: The Island Online

Amid fears of a growing cold war between India and China within the country, Sri Lanka President Ranil Wickremesinghe wants to avoid any trade integration with India or any other South Asian nation after some bitter lessons in the past.

When he was in power in the past two decades, he attempted to have greater trade and comprehensive economic partnership with India, However, his attempts met with strong opposition by politically motivated trade unions and center-left political-party led oppositions amid false propaganda.

Since the end of a nearly three-decade war in 2009, Sri Lankan leaders have struggled to balance between India and China.

Beijing’s willingness to invest in Sri Lanka’s infrastructure has been frowned upon by India amid an intensifying cold war with India in Sri Lankan territory as China’s influence in Sri Lanka is seen as a security threat to the Indian Ocean.

Colombo-based political analysts say India is increasingly agitated over rising Chinese presence in the South Asian island nation just a few miles from the World’s second largest democracy.

“Unfortunately, I don’t think you will see trade integration with South Asian region,” Wickremesinghe told an economic forum on Friday.

“There will have to be bilateral agreement with whoever we want. There is too much of politics involved for there to be a regional trade agreement in South Asia,” he said without naming India which has encouraged Colombo for broader economic corporation deals including Comprehensive Economic Partnership Agreement (CEPA) and Economic And Technology Cooperation Agreement (ETCA) in the past.

His efforts to go for such greater economic partnership have brought him political defeat at elections in the past.

“So we can keep that aside. We can have integration in dancing, we can have integration in cooking. but certainly we are not going to have integration as far as the economy is concerned.”

Instead, President Wickremesinghe wants other countries including nations from Association of Southeast Asian Nations (ASEAN) or Regional Comprehensive Economic Partnership (RCEP) as well as the West and Africa.

“We have to look at ASEAN and RCEP. That’s a growing market. It’s a big market and the income levels are much higher. So let’s look at it,” he told an audience including the country’s top corporate leaders.

“Later on you can look at Africa – East Africa specially. We must keep our economic relationship with Europe and UK that is looking for a role as a Global Britain. So I think Sri Lanka can easily get closer and better relationship with UK. Then we get on to the US itself.”

Wickremesinghe’s latest comments come as India has raised security concerns over an arrival of a Chinese military ship to Sri Lanka’s Chinese-controlled Hambantota port.

Since coming to power through a parliament vote, Wickremesinghe is in the process of formulating a new foreign policy to avoid geopolitical issues from both India and China, his close allies have told EconomyNext.

Source: Economy Next