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Message: <blockquote data-quote="rocat90" data-source="post: 19928983" data-attributes="member: 452168">Project costs and project loans      Now, let us turn to the costs that Rajapaksa has provided for some of  the large white elephant projects that were started during his period.  The objective here is not to discuss whether the costs were competitive  or whether they were inflated, but to show the amounts shown and the  actuals spent are vastly different and that they were funded by project  loans.     For instance, he says the Magampura Mahinda Rajapaksa Port cost $ 426  million to construct, but the actual cost thus far has been over $ 1,300  million and it is not yet complete. This figure is without the  associated costs including $ 130 million on oil storage tanks that have  never been used.      In fact, almost all of the funds that were utilised to build these  infrastructure projects came from project specific loans be it from  China or elsewhere. This includes the rest of the projects in his list;  Mahinda Rajapaksa International Airport in Mattala included.     So, even though Rajapaksa attempts to make it seem that the various  loans that were taken by the present Government could have been used to  build infrastructure, including culverts, the facts are totally opposite  to that.      Government-owned infrastructure is built using long-term project loans  unless governments have surpluses or are public private partnerships. No  infrastructure has ever been built using swap agreements anywhere in  the world and short tenor ISBs are not suited for assets that take a  fairly long time to start generating revenue. As mentioned earlier, SLDB  is a misnomer and is not suited for development projects.      For example, the first $ 306 million for the MMRP was from China EXIM  Bank, originally agreed upon at LIBOR + 0.90%, or today’s rate of 1.78%  but subsequently changed to fixed rate of 6.30% on a Cabinet paper  presented by Rajapaksa himself; the next $ 140 million again from the  same bank including the $ 45 million to blast a ‘rock’ that created much  discussion and a further $ 808 million also from China EXIM Bank for  Phase II. The Phase I loan, signed in 2007, has a 15-year tenor with a  four-year grace. This is already 2016.     Of the $ 130 million spent for the unused oil tanks at the port $ 76.5  was also a loan from the same bank while the rest came from local banks.     MRIA was also similar. The original cost was $ 208 million funded by  China EXIM Bank and a further $ 100 million for improvements later and  some $ 40 million for oil storage facility; in excess of the said $ 190  million and from sources not divulged by him but in fact from project  loans.      So, it is clear that the money for the seaport and airport named after  Rajapaksa was funded by a series of project specific loans and not by  the ISBs, swaps, or SLDBs. This was the case with respect to all other  developments in Hambantota; be it expressway-like roads, railways,  overpasses, huge cricket stadium, tele-village, etc.            Repaying project loans     Before a project is financed thorough assessments are carried out to  determine if the project to be undertaken will have revenue streams to  repay the loan. In the case of the huge loans taken for the  infrastructure that bears Rajapaksa’s name, the question is if  feasibility studies were done. In fact, the details available at the  Department of National Planning indicates no proper feasibility studies  were ever conducted on any of the projects that have now become ‘white  elephants’.      So, in such situations the government has no choice but to borrow in  the international markets using various types of instruments to make  payments that are becoming due.     In 2011 Rajapaksa said that $ 650 million investments by foreign  investors at the first stage of the port had “strengthened the  confidence of global industrial and commercial giants regarding the  success of this innovative project in southern Sri Lanka.”     The country was told that 27 investment proposals had been received and  the Cabinet had approved seven of them. They were a sugar refinery  plant, a cement grinding and bagging plant, a fertiliser plant, a  petro-chemical plant and three warehouse complexes.      His top port expert, the then Chairman of the nation’s Port Authority,  boasted that “effective intervention of President Mahinda Rajapaksa to  lure the international community to commence business in sustainably  peaceful environs in the country has brought about the dawn of an era of  prosperity for all Sri Lankans” and that at the second stage of the  investment, 11 more investors were to arrive with investments of $ 1.15  billion, which would increase the total investment at the port to $ 1.8  billion by 2013.     The unfortunate truth is none of that has happened and the meagre  income from the seaport itself is based on the roll-on roll-off business  created through a combination of deep discounts and effective banning  of unloading vehicles at Colombo. The airport has no regular income.     Therefore, as mentioned earlier, the present Government has no option  but to obtain dollar funds from further borrowings to repay the high  cost loan payments coming due now.            The truth behind the use of proceeds of loans     What I wished to clarify from this short explanation is that the story  that is being spread that the present Government is taking huge loans  but is not utilising the same for any productive purpose is totally  inaccurate. The truth is that the loans taken on project basis to build  most of the infrastructure cannot be serviced as the infrastructure is  unutilised or underutilised and has hardly any revenue, forcing the  Treasury to make payments on the due dates by finding money from other  sources.     Therefore, the ‘story’ that the present Government is so inept that it  is just borrowing large amounts without using the funds for any  productive purposes, even to build a culvert, has been carefully crafted  to mislead the people. So, whoever fabricated it did so fully aware of  the fact that he or she was doing so purely to deceive the people of Sri  Lanka for cheap political advantage.  </blockquote>

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