By Charumini de Silva in The Daily FT, Aug 16, 2023
In a decisive move, the Cabinet of Ministers approved the termination of what was once described as the ‘largest-ever foreign direct investment agreement between the Board of Investment (BOI) and Hambantota Oil Refinery after years of protracted inaction to fulfil the stipulations of the contract.
“Lack of engagement and failure to honour the commitments outlined in the agreement has prompted President Ranil Wickremesinghe in his capacity as the Investment Promotion Minister to propose the cancellation of the agreement,” Cabinet Co-Spokesman and Minister Bandula Gunawardena said at the post-Cabinet meeting media briefing yesterday.
On 17 September 2019, the project was approved by the Cabinet to form a strategic partnership to set up a petroleum refinery with a 420,000 barrels/day capacity for export markets. The envisaged investment of the project is around $4 billion over a period of 60 months in a vast expanse of 1,200 acres of land allocated on a 50-year long-term lease basis, making it the largest FDI project to date.
In November 2019, the BOI signed the agreement citing the ‘largest-ever’ FDI worth $ 24 billion by Hambantota Oil Refinery an affiliate company to Sugih Energy International which is a privately-owned petroleum and coal trading company based in Singapore.
The proposed investment in its initial phase was to involve the commissioning of the petroleum refinery with plans for the development of a petrochemical complex in subsequent phases, whilst the export revenue envisaged upon commissioning of the refinery was expected to be around $ 8-9 billion annually.
Gunawardena claimed that the project proponent has yet to obtain the designated land on the agreed-upon lease basis, whilst the project itself remains dormant.
“Repeated attempts to prompt the project proponent into action have proven futile. Written communication regarding the project’s implementation has gone unanswered, and the party responsible for the project has failed to act in accordance with the agreement’s provisions,” he added.
The Cabinet Co-Spokesman said the decision to annul the agreement serves as a reminder of the importance of upholding commitments made between public and private entities. “As Sri Lanka continues its efforts to foster economic growth and development through strategic partnerships, the Government remains committed to holding parties accountable for their obligations and contributing to the country’s progress,” he added.
https://www.ft.lk/top-story/SL-cancels-24-b-Hambantota-oil-refinery-project-by-irresponsive-Singapore-firm/26-751885
