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Sri Lanka warns on $500 mln hotel deal with China firm

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COLOMBO | Thu Oct 20, 2011 9:23am EDT
Oct 20 (Reuters) - Sri Lanka's economic development minister on Thursday warned a $500 million deal to build a hotel, shopping and entertainment complex would be abolished if the Chinese state firm involved did not meet the government's terms.

The deal, one of the largest single investments announced since the end of a long civil war in 2009, has been delayed by an internal government row over whether to sell or lease on a long-term basis the prime land involved.

Economic Development Minister Basil Rajapaksa, President Mahinda Rajapaksa's younger brother, told parliament discussions with the China National Aero Technology Import and Export Corporation (CATIC) were ongoing.

"The deal will go through, if (CATIC) agrees to the government conditions. Otherwise the deal will be abolished," Basil Rajapaksa told the legislature.

The plan, as announced and approved by the cabinet in January, was originally to sell the land just off the historic Galle Face Green in Colombo to CATIC.

The land is part of the current army headquarters, and adjacent to a plot where Hong Kong-based Shangri-La Asia Ltd plans to open a luxury hotel in 2015.

Local media in July reported that President Rajapaksa ordered the deal be reviewed after expressing concern such prime land was being sold and not leased.

An opposition legislator said the deal highlighted the lack of transparency and infighting over large foreign direct investments.

"From the start, this has been a stealthy deal," United National Party parliamentarian Ravi Karunanayaka told Reuters. "The government should do things that shouldn't upset the investment."

While Sri Lanka has seen foreign direct investment nearly double to $413 million in the first half of the year, on a year-on-year basis, it has been less than forecast since the end of a 25-year war in May 2009.

Sri Lanka warns on $500 mln hotel deal with China firm | Reuters
 
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