Lanka’s largest ever development grant in political crosshairs | Sunday Observer

Lanka’s largest ever development grant in political crosshairs

14 July, 2019

The intensity of the Joint Opposition propaganda cycle on the Status of Forces Agreement (SOFA) and the Acquisition and Cross Servicing Agreement first signed in 2007 during Gotabaya Rajapaksa’s tenure as Defence Secretary, has inadvertently placed Sri Lanka’s largest ever development grant in the political crosshairs.

Last week, the Ceylon Chamber of Commerce and the Bar Association of Sri Lanka, both professional bodies filled with academics and economic experts, raised serious concerns about the two military agreements with the United States. The “concerns” also flagged the Millennium Challenge Corporation (MCC) Compact, a development assistance grant that Sri Lanka has been pursuing since the tenure of former President Mahinda Rajapaksa.

During President Rajapaksa’s second presidential term, Secretary to the then Prime Minister D.M. Jayaratne, Sirisena Amarasekera travelled to Washington to discuss obtaining this grant from the MCC, officials familiar with the negotiations told the Sunday Observer. These efforts were unsuccessful, probably because Sri Lanka would have failed to meet MCC eligibility criteria, which include healthy democratic rights and corruption control indicators. When he served as Foreign Minister in former President Rajapaka’s Cabinet, Minister Mangala Samaraweera said he had also led a delegation to negotiate funding through the MCC.

Now, with the Rajapaksa faction in Opposition, the tables have turned, and the MCC Compact which the current Government recently secured, is being denounced as a sovereignty-stealing conspiracy by neo-imperialist America.

In April 2019, the Government announced its intent to sign the Millennium Challenge Corporation Compact, a USD 480 million grant to be disbursed over five years. The process to obtain the development aid has been in the works since 2016, senior officials involved in the negotiations told the Sunday Observer. The contract was due to be signed at the end of June 2019.

In its justification to the US Congress, which had to approve the grant funding to Sri Lanka, the MCC Board said that the country’s performance on key eligibility indicators had steadily improved in parallel with reforms undertaken by the Government since January 2015. In the financial year, 2017, Sri Lanka fulfilled more than half of the indicators, including both democratic rights indicators—political rights and civil liberties—and the control of corruption indicator, the MCC noted in its justification to the US Congress.

Once the MCC decided Sri Lanka was eligible to receive the development funding, the Government of Sri Lanka and MCC together identified weak transport infrastructure and weak land administration practices as two binding constraints to economic growth in Sri Lanka. To address these constraints, the proposed compact consists of two projects: a transportation project and a land project. The total budget for the compact is $480 million.

The transport project will receive the bulk of the funding under the MCC compact, with USD 350 million due to be disbursed for transport modernisation and advanced traffic management systems in the Greater Colombo area. The Land Project budgeted at USD 67 million aims to expand and improve existing Government of Sri Lanka initiatives to increase the availability of spatial data and land rights information. The project will help the Government identify under-utilised state land that can be put to more productive use and maximise rents from lands that the Government leases. It would also increase tenure security and tradability of land for smallholders, women and firms by digitising deed records so that they are less vulnerable to damage, theft, and loss and moving properties from the Deeds System to the Title Registration System.

The MCC Compact was due to be signed in December 2018, but due to the political instability prevailing since October last year, resulted in a major setback in the implementation of the project, an official of the local office for implementation told the Sunday Observer.

The US Government suspended the decision to award the MCC grant during the October 2018 political crisis, but the final negotiations were back on once the crisis ended.

Several times since he assumed office, President Maithripala Sirisena and other Government officials held discussions with MCC representatives in Washington DC, to obtain the grant funding which will develop two specific priority sectors.

The GoSL and MCC representatives consulted hundreds of persons from the Government, private sector and civil society in small group discussions and one-on-one meetings to understand the root causes of the transport and land bidding constraints and potential activities that would address the root causes.

Initially, after considering fresh applications made back in December 2015, the MCC board of directors had selected Sri Lanka for the threshold program which is the lower program of the two made available by the MCC. However, after reviewing the scorecard in 2016 and observing continued improvements in performance as measured by the MCC scorecard, the country has been selected for the Compact program. (See infographic for MCC eligibility indicators)

The grant will fund projects that will help achieve the Government’s objective of strengthening transport infrastructure and land administration.

Under the land administration project, the preparation of parcel fabric map and inventory of state land, improvements of deeds registry, improvements in the land valuation system, land grants registration and deed conversion activities and land policy and legal governance improvement activities will be implemented in the districts of Kegalle, Kandy, Matale, Kurunegala, Anuradhapura, Polonnaruwa and Trincomalee, along the identified Colombo - Trincomalee economic corridor.

Parties are negotiating to include the Gampaha district under the said category, officials familiar with the discussions told the Sunday Observer.

Colombo officials handling the project told the Sunday Observer that recent claims by JO Parliamentarian Wimal Weerawansa that under the land administration program, “the US has demanded an ‘economic corridor’ of 1.2 million acres of land from Trincomalee” were totally baseless.

“According to what Weerawansa stated, the US has offered $ 400 million for the corridor which works out at Rs. 24 per acre per month. The amount allocated for the land administration program is only $ 67.3 million,” the official said.

An advanced Traffic Management System (ATMS) covering the metropolitan area will be developed under the transport development project which has been allocated a budget of USD 350 million under the MCC Compact.