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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2676

Actions of some state agencies, seems detrimental to Foreign Investment

By Quintus Perera – Asian Tribune

Colombo, 26 March, ( The Government of SriIngemar Nilsson -  Swedish  InvestorIngemar Nilsson - Swedish Investor Lanka is desperate to overcome a huge financial crisis and have been seeking Foreign Direct Investments (FDIs) for quite sometimes and in this regard the government has been proclaiming that these investors are facilitated to set up their businesses without any hindrances once the formalities are met.

The task of handling the foreign investors has been the usual business of the Board of Investment. But in actual fact the conditions faced by some of these foreign investors are far from that rosy atmosphere that is predicted by the authorities. It is proved that actions of some of the authorities in handling these investors, actually distracts the investor.

Though various promises and assurances are made for the prospective foreign investors that they would be provided with all the necessary assistance and has proclaimed that BOI operates as one-stop shop, in practice it is quite contrary, things to get formalized would take much time and it would not be one-stop-shop, but several-stops-shop.

Ingemar Nilsson, a Swede has been in Sri Lanka for more than 10 years involved in a development project funded by the Sweden Government. So, he is no stranger to this country.Nilssonya Hotel nearing completion at IranawilaNilssonya Hotel nearing completion at Iranawila

During his stay he has been able to grasp a fair knowledge of the conditions in Sri Lanka and visualized the potential in investing in the country and thought to be involved in a tourism project where he would be able to channel some of his countrymen to come to Sri Lanka and holiday in the hotel that he intended to construct, as those people in his country loved the tropical climate, the exotic natural beauty, blue seas and the golden sand..

Once the development project he was involved was over, he bought a land in Iranawila along the beach front. Mr Nilsson and his wife have decided to make Sri Lanka their home.

He also got few of his countrymen from Sweden to support his investment effort. He obtained the approval of the Board of Investment in 2004 for his hotel project and BOI while approving his project by their letter of 11.11.2004 of EC/4/7800/0, he was required to obtain the approval of the Sri Lanka Tourist Board.

Sri Lanka Tourist Board granted its approval by their letter of Dev/04/1057 dated 27/9/2006. Tourist Board indicated that Mr Nilsson gets clearance from Urban Development Authority; Provincial Environmental Authority (North Western Province) and the Naththandiya Pradeshiya Sabha.

He obtained necessary clearance from all the agencies. But he was not required obtain clearance from the Coast Conservation Department.

Before he commenced his project as he was worried of his investment and wanted some security on it. He had to pay the contractor in advance and thus, while paying the contractor Mr Nilsson obtained an "Advance Payment Bond" , properly executed with the Sri Lanka Insurance Corporation.

In signing the Bond Mr Nilsson believed that the Insurance Corporation was safe and reliable to partner the Bond.

Though the Bond effective period was extended a few times, it was noted that the contractor has failed to complete the contracted quantities of work even by the last extended date of 31st May 2008 and therefore, the claim of rupees six million has to be honored by the Insurance Corporation Ltd.

The advance payment made to the Contractor was rupees seven million. Mr Nilsson brought to the notice of the Insurance Corporation the breach of the Bond conditions by the contractor and consequent to Mr Nilsson’s complaints, the Corporation got an assessor to evaluate the status of construction. Mr Nilsson says that the assessor agreed that the required construction quota has not been done and therefore the terms of the Bond should be honored.

Though, Mr Nilsson shuttles to and from the Insurance Corporation, he says the Corporation now keeps mums. He has notified the incident to the Insurance Ombudsman of Sri Lanka.

The Ombudsman has concluded that "An independent Consultant Engineer appointed by the Sri Lanka Insurance Corporation Mr Bandula Amarasekera conducted an evaluation and agreed on the correctness of the claim/request to pay the Bond. In all the above circumstances, I kindly direct SLIC to pay Rs 5 million due on the above Bond to Mr Ingemar Nilsson."

In an indirect way the Insurance Ombudsman warned the SLIC that litigation would end up Insurance Corporation paying the dues as stipulated in the Bond and quoted the Court of Appeal judgment in the Hemas case reported in (1994) volume 2 Sri Lanka Law Reports at page 181. The communication of the Ombudsman is dated 22/12/2008 addressed to Mr Suren Galaboda, CEO/General Insurance, Sri Lanka Insurance Corporation.

Mr Nilsson has now written to the Insurance Board of Sri Lanka to intervene in the matter prior to going for litigation as the last resort. He also has got a letter of Demand addressed to the Insurance Corporation through his lawyers.

Mr Nilsson said that he was pushed around to the extent that he preferred to abandon the project, but he was precluded of doing so because of the large investment he has already made.

He felt that application of various regulations applied to foreign investments appears to be inconsistent, and the discretions are left with certain state officials, who tend to apply them haphazardly, which would be detrimental to the very cause of persuading foreign investments.

Mr Nilsson has now written to the Insurance Board of Sri Lanka to intervene in the matter prior to going for litigation as the last resort. He also has got a letter of Demand addressed to the Insurance Corporation through his lawyers.

He happened to be in a situation like "Frying pan to the Fire" when he was suddenly confronted by the Coast Conservation Department with a notice DC/2007/856 dated 23/3/2007 from engineer H N R Perera, Director, Coast Conservation Department indicating that no building should be constructed after 1/10/1983 and before the expiry of two weeks of the notice, any building if constructed should be demolished.

He was flabbergasted to receive this directive as nowhere he was asked to obtain the clearance from Coast Conservation Department and Mr Nilsson says that he has already obtained all the approvals and clearances which he was required to obtain in writing.

It was really a shock for him as when he received this directive, he has already dumped a large sum of money on the project and there was no way of turning back.– his total investment now is around Rs 50 million. So, he had to run in circles in making appeals and seeking legal advice etc. to prevent the building getting demolished.

The same Coast Conservation Department by its letter of PA/12/HT/06/153 of 19/6/2007 under the signature of Engineer H N R Perera, Director, Coast Conservation, withdraws the earlier demolition order of DO/2007/856 of 23/3/2007 with no reasons given of any violation.

The point in issue is not the discretion of the officials to threaten to demolish a building that has been constructed adhering to proper procedure, but it is their failure in not checking why such projects are cleared by other government agencies. Thus not obtaining the clearance from the Coast Conservation is no fault of Mr Nilsson.

From the date of demolition order to the withdrawal of the same order has taken around three months and one would wonder how the two weeks order getting stretched to three months without adducing reasons or suspending the order. This also raises another issue that whether certain state officials act beyond their mandate and nullify the government’s spelled out intentions – in this case the foreign direct investments.

Mr Nilsson’s two storied hotel "Nilssonya" is now nearing completion and stands out along the road little beyond Voice of America Iranawila.. This hotel will have 10 rooms and will have all the facilities for conferences and other activities that an average tourist hotel could provide.

Mr Nilsson said that if the construction work went on, on schedule, the hotel would have been ready well ahead to take in the winter travelers during last December, from his country. But, now things are somewhat settled he hopes to it by May or June 2009.

Nilssonya would be the first such tourist hotel in the area, though there are also few other hotels coming up. With these activities there is substantial improvements and development in the area and with more and more activities like tourist hotels there bound to be further development, specially infrastructure.

- Asian Tribune -

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