CBK’s call to arms on ‘systemic corruption’ | Sunday Observer

CBK’s call to arms on ‘systemic corruption’

12 August, 2018
Former President Chandrika Kumaratunga
Former President Chandrika Kumaratunga

Former President Chandrika Kumaratunga, current Chairperson of the Office for National Unity and Reconciliation (ONUR), is up in arms against a controversial multi-million dollar water supply project in her hometown of Attanagalla, saying it was emblematic of a wide network of corruption that has afflicted every section of the public corpus. Only strong collective leadership, clear policies and an urgent plan of action can reverse the trend, President Kumaratunga told Sunday Observer in a no-holds-barred interview last week.

Q. You have worn many hats during your political career. It appears you want to wear a new one now, as a crusader against corruption. Can you explain what spurred this call for action on your part?

A. For the first time, as a senior citizen and a former president of this country, I want to talk about the extreme corruption that reigns all across the country across all segments of the population– the public service, the political authorities, and now it has seeped right down to the bottom. Nothing happens unless there is graft. And I am absolutely shocked. I believed that when we brought this Government in that we could bring about a sea change in the governance of this country. We all came in screaming against the extreme corruption of the Rajapaksa regime, and we had proposed systems and procedures to control corruption within government. But it appears that none of it is working properly and what is really frustrating and renders me desperate is that the corruption that was consciously nurtured and willfully spread right through the state structures, the public corpus by the Rajapaksas has really got hold of the whole superstructure of the state and it is now looking as if it is difficult to weed out. I still think it can be done, with a very strong collective leadership on the part of the Government – not one person but as a collective.

Q. You have raised some serious questions about a controversial water supply project awarded to a Chinese company – a proposal first brought by the Rajapaksa administration, but one which this Government has decided to continue. What is your interest in this project?

A. I found one particular project that was being done in a very corrupt fashion. It began during the Rajapksa regime in 2013, and I thought that if the correct facts were presented to the proper authorities, this could be changed. This is called the Basnagoda-Attanagalu Oya water supply project, which is supposed to supply water on tap to three whole electorates and half of two other electorates of the Gampaha District. The estimated cost is Rs 32 billion. It was given during the Rajapaksa regime at a much higher rate than the engineers of the NWSB estimate. Experts say the maximum cost of this project should be 18-19 billion. If it is done like that the Government would save 13-14 billion rupees. What is comical is that the Finance Ministry is trying to scrape together half a billion, one billion rupees. By doing this one project properly, they can save billions and billions of rupees.

When this proposal was brought in by Basil Rajapaksa, the minister concerned was Dinesh Gunawardena – so they brought it together. No questions were asked and obviously his brother who was the president got it approved. Even at that time, several queries had been raised.

Q. But why world this Govt. decide to continue with that project?

A. This project from the day it was brought to cabinet in 2013, even after this Government came in, the relevant ministry has implemented it with more than a dozen irregularities. This has been raised in five reports of the Auditor General and thereafter there is an opinion of the Attorney General, that clearly states that it is clear that many irregularities have occurred. And he even says the relevant officials should be reported to the Bribery Commission. And that the Finance Ministry should report this to Cabinet and go for a cancellation of the tender and call for a new tender, or for a renegotiation of all the unfavorable terms. The Finance Minister referred it to the AG, after I brought it to the attention of the Finance Minister.

Q. What were the major problems with the project, based on what you have studied so far?

A. The main thing is that the contract that was signed was not with the company approved by Cabinet but with a ‘ghost company’. The Auditor General has raised the issue that the Chinese company CMEC does not have the qualifications and the experience to undertake this project. They have even lied to say they have the qualifications – they have given the qualifications of another company that has nothing to do with them – named TWIEE. It is clear that for the purpose of this contract, and Norochcholai for the purpose of giving contracts and collecting commissions. Some important people in the previous Government just picked up some Chinese gentlemen and formed a company hurriedly. The evidence appears like that. They didn’t have any experience or qualifications to do a power project or a water project. They just brought a group of people, called them a company – they must have registered themselves – and gave them all the projects because they were willing to pay them all the commissions they wanted. Today, it is said that the agent in Sri Lanka for CMEC for this water project is the former Chief of Staff of Mahinda Rajapaksa.

He is supposed to be the agent of this company, collecting heavy commissions – in as much as he was Sanken agent, in as much as he was General Manager of the Insurance Corporation where there are many questions raised now as to the manner in which it was managed – and we know where the money goes.

Then, not only did the Project Assessment Committee raise issues, SEMA also strongly recommended that the contract should not be awarded to CMEC – this is all in 2012, during Rajapaksa’s time. The main reason they give is that CMEC had no experience and that the only project they constructed in Sri Lanka – Norochcholai ran into serious trouble breaking down 38 times and catching fire six times. The difference between the CMEC estimate and the Engineers Estimate is 32.5 million USD.

Q. There were reports that the Auditor General had pointed out that the estimates for this project put forward by CMEC was much higher than what was originally proposed?

A. The Auditor General’s report also states that tenders were not called for this project. There was no proper evaluation of the company or their qualifications and experience so therefore, it cannot be considered a proper agreement signed with a qualified contractor.

The Auditor General’s report states that the estimated cost of the project has been hugely bloated, and goes on to give six details of what is wrong and self-contradictory. One thing that is important is that it was awarded to the CMEC at a much higher cost than the NWSDB engineers estimated – 62 % higher than the original Ministry estimate and it was increased for no justifiable reason. For example – the supply of GI pipes and related fittings which could easily have been done by the NWSDB, was awarded to the Chinese company which has hugely bloated the prices. And also a large amount of the work of this project is going to be done by the Ministry of Irrigation. But instead of awarding that contract to the Ministry of Irrigation, and the rest of it to NWSDB they have awarded the whole project to the foreign company CMEC who then subcontracts to the Irrigation Ministry. We don’t need a foreign company to come in and take all the payment and subcontract to two government agencies – that is unheard of and that also has been raised by the Auditor General. The Chinese company has charged the Sri Lankan Government much more than the cost of the work being done by the two government agencies. The CMEC is ‘creaming off’ the rest of the excessive payments.

Q. The Government has already started paying CMEC. How much work has been completed so far?

A. According to Government regulations, the maximum advance that can be paid to a contractor is 20 %. But NWSDB has paid 50 % to CMEC before they even cut the first sod. Financial regulations as well as tender procedures of the Government specifically say that not a cent can be paid to a contractor until the credit agreements for the contract are finalised, but in this case, long before this was done they started paying advances.

In fact, NWSDB took a loan from the BOC to pay the advance. They paid massive interest on a huge loan. What did the contractor do? They took the advance and deposited it in the BOC to collect interest. Some part of the money has also been taken out of the country, violating the Money Laundering Act. This is a very serious matter.

The contractor obtained as an advance 34.4 million USD on 19 May 2017, under agreement to pay 32 million USD to the NWSDB.

They did not pay a cent. But they deposited it in a fixed deposit at the BOC on the same day! Isn’t this the height of cheek! NWSDB took this loan from BOC and in a few months – less than an year , they paid Rs 454 million rupees as interest to the BOC, while the CMEC was collecting interest from the deposit. This is enough to jail these fellows for life over this massive financial fraud. All kinds of payments were made as advances, all in violation of government regulations.

Q. You helped to bring this Government into power. Have you raised the question of these irregularities with Government authorities?

A. Sometime in October 2017, I went to the Prime Minister to inform him about the problem. But at this time I was not aware of the Auditor General’s reports. All I could tell the Prime Minister was that this company was not suitable, they had no experience, cited the bad example of Norochcholai and the PM quite rightly sent for some officials and asked them for a report on this company, their international profile and other projects.

The report gave incorrect information to the Prime Minister stating that they are a very good company and that they have done big projects all over the world, without citing a single example.

It is said that the high officials who wrote the report were heavily influenced by CMEC. The NWSDB kept paying the Chinese company after the Secretary to the Treasury directed them to halt payments until the matter was resolved, when less than 30 percent had been paid. But they continued to pay violating the Treasury Secretary’s instructions. Now they are saying so much money has been paid, we cannot cancel the contract. Thereafter, when CMEC heard that the Government was examining the irregularities of the project, they hurriedly got the NWSDB and Irrigation Ministry to start some work.

I wrote again to the Prime Minister, saying the report had not taken into account any of the issues raised and the queries raised by the Auditor General. But soon afterwards everyone was thrown pell mell into campaigning for the local government elections. I was out of circulation in the field for about three months. But some very honest officials kept sending me the Auditor General’s reports. I used to come back home dead tired but managed to study it all carefully. I wrote a few notes, taking the extracts of five lengthy reports by the Auditor General.

I went to the Finance Minister – the PM was too busy, the President was too busy and as it is the Finance Minister who is ultimately responsible for monetary management. I presented the whole case to him and his officials. Then they asked for an opinion from the Attorney General. That is the proper way to go. Even though the Auditor General raises issues, you can’t act on that alone. Unless you give the report to the police investigating authorities or obtain a legal opinion from the Attorney General.

Q. Do you know what the response from the Attorney General was?

A. The Attorney General gave a very strong opinion in his letter of 17 May 2018. Giving five points that Secretary Finance should investigate vis-à-vis this contract, and then report to Cabinet. The Attorney General’s report also states that since it is evident colossal amounts of public funds have been squandered with knowledge of officials of the Ministry of Water Supply, an inquiry should be held to initiate disciplinary proceedings. He further states that it appears that there has been corruption and a complaint should be made to the Bribery Commission.

Q. Has the Treasury complied?

A. With all this, the Treasury also has finally written a very diluted Cabinet paper. It has not been mentioned that there have been Five Auditor General’s reports, it has not been mentioned that the Attorney General gave a very strong opinion. It only said we recommend that since a lot of money has been spent this should be renegotiated.

And the Minister says nothing can be renegotiated, this project must go on. Now Cabinet has not been briefed, by the relevant authorities about the horrendous irregularities that have happened in this project, under the last government and continues to happen under this government. This project was initiated and established by the former government but has continued under this Government by default, which has let things pass. Everyone was willing to do something about it, but the officials have not done their bit.

I know the CMEC has laid a wide net of corruption, bribing anyone they think will object to this project. The most important thing is that the former Secretary of this Ministry, pleaded with me three times – ‘madam please, let the Chinese company come and see you, they will do anything you want.’

Q. Is Chinese involvement part of the problem when it comes to graft?

A. I am not against the Chinese doing projects here. I myself and my parents have had excellent relations with Chinese Governments. I still admire the Chinese people and what they have achieved. But I cannot condone anybody whether they be red, white, yellow, or blue, of whatever race or nationality, taking the Sri Lankan Government and the Sri Lankan people for a ride.

When I was President I have had many strong words with ambassadors of several countries on this very subject of contracts and tenders when they tried to influence me or my government, to award contracts to companies of their country. In fact I once wrote a very strong letter to a foreign minister of one of the world’s most powerful countries.

The Chinese were not into contracts at all in Sri Lanka. Once the ambassador came and asked why they don’t get contracts, and I said to him “Excellency, the other countries get contracts because they give us aid or credit on easy terms”.

The accepted practice all over the world is that if a certain country gives credit, the contract should go to the contractors of that country. I don’t like this, but little Sri Lanka alone can’t change this, so we insist on transparent tender procedures. So I told him, why doesn’t China also offer us a credit line for some projects and we can consider giving it to you.

That is why for the first time the Chinese came in on private contractor basis, for six major projects that I wanted to leave as my legacy to the country – Colombo Katunayake highway, Nelum Pokuna (which was supposed to be very different), Norochcholai, an electric rail from Katunayake airport to Colombo port– that was to facilitate one of my visions of an air sea cargo hub like Dubai or Seattle.

One of the reasons why I brought in Emirates was because they were running a successful air sea cargo hub in Dubai. Mahinda came and cancelled all that. Including Norochcholai – which was on very easy terms – 1 % above LIBOR, 30 years to pay back and we looked for the best companies. Mahinda cancelled several agreements and eventually got it at 7 % above LIBOR, brought in small companies with questionable qualifications and re signed for double the amounts signed by my Government. We signed for Norochcholai at USD 240 million, Mahinda signed for USD 510.

Q. But then with all these problems, the Attanagalla water project is set to continue?

A. I was president till 2005. It was nothing like this –the corruption. In nine years, the Rajapaksa regime massively succeeded in corrupting every fibre of government. And I thought it could be changed. But when I didn’t see things change, I thought I will come in on at least one project that concerns my village, my people and which is also a very good project to ascertain if I could promote good governance in at least one instance.

It is not just Chandrika, but it is a former president of this country who has at great cost to herself fought for transparency and honesty in this country. I have a good knowledge of how government works and I thought that with my commitment to honesty, the knowledge and acumen that I have, I could change it at least in one project. But now it appears that it is almost impossible. This is why I am desperate about this. And I want the country to know. I am not blaming individuals, but this Government also seems incapable of changing the unstoppable momentum of corruption that was begun by the Rajapaksas. I have done almost everything that anyone could do to attempt to ensure transparency and halt corruption in government.

Q. So with regard to this water project, what is it that you are asking the Government to do? Cancel and re tender the contract to CMEC?

A. Honest governance dictates that this project should be seriously re negotiated to reduce bloated costs to correct the irregularities raised by the Auditor General. The Ministry of Finance has proposed this to Cabinet but the Ministry of Water Supply has objected, insisting that the project should continue without any changes. I understand this Ministry proposes to implement nine other projects with this same CMEC company! This must stop. The Government must take a serious look at contracts it awards to foreign companies. A large number of these can be undertaken by the Sri Lankan Government and or Sri Lankan companies, for almost half the cost quoted by CMEC and other similar companies. But then the excess sum of money cannot be “creamed off” by some persons.

A large majority are awarded as unsolicited proposals. This is the best recipe for corruption. Even if Government wishes to award a contract to an unsolicited proposal, there is an accepted procedure for this. This was established by me when I was Finance Minister and adhered to by my Government – why can’t the present Government follow these same procedures? This is truly tragic.

The Rajapaksa regime left the country bankrupt due entirely to their corrupt practices. This Government seems incapable of changing this situation. The country continues to suffer, drowning in the filth of graft, corruption and inefficiency.

Q. If corruption is so deeply entrenched as you say, is there any hope for the future? Is corruption-free governance just a dream?

A. The truth is that this was one of the major driving forces for me to re-enter the fray. I was sick of politics and the Lankan brand of politicians. I refused steadfastly to return to politics, despite continuous and insistent calls from people.

But then the corruption of the Rajapaksa regime was so extreme and the way they were curtailing freedoms and raping and destroying democracy –I couldn’t bear it anymore. So, I decided that I would help. I am very disappointed now. But I still believe that strong, collective leadership by the leaders of both parties in this Government, together with all those in the country who care, can bring about change.

For this, governance structures must change radically. Able citizens, especially the young and enthusiastic, must be brought into governance structures – not into Government – but to new initiatives. Like the NCED and SEMA which I created, where the Government private sector and citizens work together in planning and monitoring development strategies, and programmes of Government. But I feel I am a lonely crusader, and I fear I may be fighting a losing battle.