Lotus Tower: ALIT claims Rs 2 billion paid to CEIEC | Sunday Observer

Lotus Tower: ALIT claims Rs 2 billion paid to CEIEC

A storm of controversy surrounds the much anticipated opening of the Lotus Tower, after President Maithripala Sirisena made startling allegations that an advance worth almost Rs. 2 billion had been paid out to an alleged shell company in China at the outset of the project in 2012.

Aerospace Long-March International Trade Co. Ltd (ALIT), the company concerned finally responded to the allegations last Friday (20) saying the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) had paid USD 15.64 million to China National Electronics Import and Export Corporation (CEIEC) account at the EXIM bank in China, in October 2012 for the project purpose only. CEIEC was part of the Chinese consortium involved in the Lotus Tower project and was tasked with its construction.

The contract between the TRCSL and the consortium was signed in 2011 and construction on the 356-meter communications tower began in 2012. For seven years, the project has been riddled with delays and bureaucratic tangles. The total cost of the Lotus Tower is USD 104.3 million or nearly Rs 19 billion, with 80 percent financed by China’s Exim Bank and the rest by TRCSL.

According to President Sirisena, the Government of Sri Lanka has only repaid Rs 1.3 billion of Rs 15.2 billion, the total amount due to EXIM bank in China. The loan is to be repaid over 14 years. Sri Lanka will incur a cost of Rs 2.4 billion a year (Rs 200 million per month) to service this debt over another 10 years.

In his speech at the launch, President Sirisena said a two billion rupee advance had been paid to the company called ALIT, which apparently did not exist. “Investigations done in 2015 found no information on the company ALIT that was party to the agreement,” President Sirisena had said while opening the tower last week. According to a statement from the President’s Office, the Sri Lankan Embassy in Beijing had not been able to locate any information about ALIT.

Sri Lanka’s embassy in Beijing also had not been able to find any information on ALIT. Investigations could not find any such company either in China or elsewhere, a statement from his office said.

According to President Sirisena, by 2016, the company had vanished into thin air. “Its whereabouts remain a mystery. No one could account for the lost money. After we uncovered this, we launched an inquiry. We asked Sri Lankan ambassador for China Dr. Karunasena Kodituwakku to determine the existence of ALIT. The findings were that there was no such company”, he said.

Kodituwakku, issuing an interim statement last week, stated that, although initial efforts to locate the company ALIT had not been successful, the Embassy had ultimately been able to establish contact and learnt that ALIT was no longer involved in the project.

“After much effort, the embassy found that the company had moved to a different location, as well as withdrawn from the Lotus Tower project, without informing the TRCSL. Once the company’s new premises were located, we visited it and met the officials who were present there at that time. They informed us that their company was no longer involved in the Lotus Tower,” Kodituwakku’s statement said.

It remains unclear why ALIT exited the consortium tasked with building the Lotus Tower. ALIT however, in its statement, maintains that it entrusted CEIEC to act “solely on its behalf” to fulfil the contract in August 2015.

Subsequent to a cabinet decision, TRCSL entered into an agreement in January 2012 with CEIEC and ALIT. TRCSL had further signed two different MOUs with the two companies, one which was dated July 2011 and another that did not have a date on which the MOUs were signed, according to highly placed sources in the Presidential Secretariat. The initial agreed cost of the project was USD 86 million but the final numbers agreed upon was USD 104.3 million for construction, the sources said.

The allegations seem to have struck a nerve with the former regime that signed the contract with the Chinese consortium.

Former Director General of the TRCSL, Anusha Palpita and former President and the current Opposition Leader, Mahinda Rajapaksa were quick to defend the project and the Chinese companies involved.

Palpita, who was convicted by the High Court for misappropriation of state funds during the 2015 election and is currently enlarged on bail while his appeal is being considered, denied the allegations against the TRCSL project on his official Facebook page.

Speaking to Sunday Observer, former CEO of Information and Communication Technology Agency, Muhunthan Canagey questioned the value of the telecommunications tower.

“If you look at the Eiffel Tower and all other major towers around the world, all those were done to transmit messaging long distance. Because of the curvature of the earth, towers allow for long range transmission,” Canagey explained.

But the world has since moved away from the use of UHF and VHF frequencies and towards satellites and under sea fiber optic cables that carry signals around the globe,” he said. “You don’t make a USD 104 million investment to build 19th Century infrastructure,” Canagey insisted.

Professor Samitha Manawadu, who worked as an Engineer on the Lotus Tower project, pushed back against President Sirisena’s allegations about the disappearing Rs. 2 billion. “This is erroneous.

The Rs. 2 billion was an advance of the total USD 15 million. Rs. 2 billion was the 15% advance.

That was paid and recovered in full through instalments,” Prof. Manawadu told Sunday Observer. He said he believed the President had been misled, but TRCSL had since clarified matters with him. 

 

Opposition Leader calls allegations an “insult to China”

Strongly opposing the line of allegation taken, the Opposition leader’s office issued a statement last Wednesday (18) with a stoic rebuttal that questioned the possibility of a Chinese government owned conglomerate vanishing into thin air with two billion rupees while calling such allegations to be “a horrendous insult to China”.

Excerpts of the statement:

At the time that this payment was made in 2012, the TRC which was in charge of this project was directly under me as the President. Therefore, I wish to make a clarification regarding this matter. In 2012, the total cost of the Lotus Tower project was estimated at 104.3 million US Dollars. The Exim Bank of China agreed to provide a loan facility of 88.6 million USD or up to 85% of the total project cost. The remaining 15% of the cost had to be borne by the TRC. The contractors for projects financed by the Exim Bank of China are nominated by the Chinese government. Accordingly, the China National Electronics Corporation and ALIT were nominated by the Chinese government.

In projects of this nature the 15% ‘local component’ has to be paid to the contractor upfront as an advance payment. Documents confirm that on 9 October 2012, the TRC had credited 15 million USD (Rs. two billion) to the account of the main contractor China National Electronics Corporation. The latter company is still the main contractor of the project. The advance payment of Rs. two billion was never paid to the other contractor ALIT. The relevant documentation will show that from day one all payments had been made to the account of China National Electronics Corporation.

The two contractors recommended for the Lotus Tower projects are 100% Chinese government owned conglomerates. The active party doing the contract was always the China National Electronics Corporation and not ALIT. To say that a major Chinese government owned conglomerate had disappeared with Rs. two billion belonging to the Sri Lankan government, is a horrendous insult to China. This insulting statement was moreover made in the presence of the Chinese Ambassador.

We can understand why the government would want to sling mud at the political opposition on the eve of a decisive presidential election. But to publicly insult a major world power that has always been friendly and helpful to Sri Lanka, is unconscionable.

In April 2019, the Auditor General published a 670 page special report on the Lotus Tower project, but it makes no mention at all of a Chinese contractor who disappeared with Rs. two billion.What this indicates is the remarkable ability that the yahapalana leaders have to concoct complete falsehoods in a manner that suits the occasion. If this statement was made due to wrong information being conveyed, I expect the relevant individuals to move quickly to issue a correction.

Since all documents pertaining to the Lotus Tower project are available with the TRC and the Auditor General, ascertaining the truth with regard to this matter is not a difficult task at all.

 

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