Prime Minister Ranil Wickremesinghe yesterday rejected allegations of corruption made against his Government over the construction of the Central Highway third stage by involving Japanese firms and gave a detailed explanation of the tender process and related negotiations to Parliament.
According to the Prime Minister, the Government has maintained high transparency and has awarded the project at a rate considerably lower than the initial bid and saved money as well as promoted relations with the Government of Japan.
“With the intervention of the Japanese Government, we were able to award the project to the Cabinet-approved contractor Taisei Corporation, at Rs. 25 billion less than what it has asked before. Taisei Corporation’s initial bid was for Rs. 159 billion and now it has come down to Rs. 134 billion. The price reduction has saved money for the country,” he told legislators.
“Today it takes almost six hours to go to Kandy. The fuel and the time waste are very high. The Kandy-Colombo Highway is not an isolated project, but a part of the Kandy City Development Program. Centralising the Kandy City our plans include a tourism development program, agriculture development program, and a technology city. We have selected Kandy for the development and the Japanese have come forward.”
The third stage of the Central Highway is to begin from Pothuhera and finish at Galagedara, spreading through an elevation of 300 feet to 1,200 feet. The road will cross the mountain terrain through three tunnels, 14 long bridges, and some five plus kilometres will be built on pillars.
The Government has also given prominence to conserve the environment. “We used to build highways on flat surfaces using soil fills. We haven’t used concrete pillars in necessary places on the Southern Highway. Such omissions have led to serious environmental issues now. But the Central Highway is different and costly,” he added.
Revealing the process followed in selecting the Japanese companies, the PM said: “Japan had offered to provide its services and the technical knowhow on 27 March 2015. According to this letter, the Japanese Ambassador in Colombo has offered to provide financial assistance from Tokyo Mitsubishi Bank under the guarantee of Japan Import and Investment Corporation.
This was an agreement between the two Governments and the Foreign Assets Department held the discussions. However, the discussion with Tokyo Mitsubishi Bank is still not concluded. We will need money for all stages, including for land acquisition, relocation of people, and road construction. But we are planning to borrow from local banks for land acquisition and the respective discussions are still on.”
Meeting the requirement, the Government of Sri Lanka has approached three Japanese companies on 22 June 2016 but has failed to receive a favourable reply from all.
“Only one company replied even though with technical issues. I explained the difficulties to Dr. Hirotho Isumi, the Special Envoy of the Japanese Prime Minister on 10 October 2016. Dr. Isumi assured that the Japanese Government would make sure their companies would reply accordingly. On 26 October 2016 the Cabinet decided to recall for price, which took place on 3 November 2016. All this happened with Cabinet approval and Highways Ministry and my office submitted the Cabinet papers.”
Wickremesinghe went on to explain that on 23 November 2016, Japanese Deputy Ambassador Kogi Yagi requested the Highways Ministry Secretary to invite Fujita Corporation to submit prices. With the sanction of the Cabinet, Fujita was invited and the deadline was extended by two weeks, enabling them to submit.
“We received only two bids – Rs.147 billion from Fujita and Rs. 159 billion from Taisei. Based on the lowest bid on 6 December 2016 the Cabinet decided to award the contract to Fujita,” he added.
However, a Cabinet sub-committee found that Fujita had failed to fulfil two key aspects where the company hasn’t constructed similar key road projects within the last 10 years. As a result, the next option was to discuss with the next bidder Taisei. Cabinet approval was received for this on 4 January this year. The sub-committee informed the Cabinet on 17 March that Taisei had agreed to start construction within 365 days using its own funds and also to reduce the bid price, Wickremesinghe said.
“Cabinet decided to award the contract to them. During my recent visit to Japan I met Dr. Isumi and his team. They explored the possibility of involving Fujita also for this project. As a result, Special Advisor to Cabinet of Japan and the Envoy for Economic Collaboration Shigeru Kiyama wrote to Minister Lakshman Kiriella on behalf of their Government. In his letter, he has stated that the Japanese Government would appreciate if Fijuta would also be considered along with the other Japanese company for the project,” the Prime Minister told the Parliament.
According to Wickremesinghe, the Economic Committee has evaluated the request received from the Japanese Government. “Even though Fijita hasn’t done a similar single mega project during the last 10 years, it has done a $ 750 million road project in the United States. They also said that during the last three years Fujita did three projects totalling $ 1,100 million. However, the Economic Committee informed the Japanese Ambassador in Colombo before communicating with their Government. In response, the Japanese Ambassador has asked us to act according to local regulations and laws, so we were left with two options,” he continued.
“The first option was to cancel the tender and call for fresh bids. Or to discuss with the Taisei to reduce its bid based on the engineering estimate which was Rs. 123.5 billion. If we followed the first option, the project would have to be delayed. It was practical for us to discuss with Taisei and we were able to get the price reduced to Rs. 134.9 billion. Cabinet also explored the possibility of working with both bidders. Cabinet approval was obtained on 11 July to award the construction to Taisei for Rs. 134.9 billion, with financial assistance from the Tokyo Mitsubishi Bank. We also discussed the matter with Dr. Isumi on 11 August. We also received a joint letter dated 28 August from the Taisei Managing Director and the Fijita Chief Executive Officer announcing their agreement to work together. This has become an international highway where the first stage was by the Chinese, the second stage by local companies, and the third stage by Japan, and most probably the Indians would ask to join the last stage,” explained the PM, refuting all corruption allegations.