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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2403

A poor house and a poorer economy: The real cost of ArcelorMittal Steel Houses for War Affected Communities

Colombo, 28 May, (Asiantribune.com):

On 9 May 2017, the Cabinet approved the construction of 6,000 pre-fabricated houses for war-affected communities in the North and East. It also approved the construction of 10,000 to 15,000 brick and mortar houses per year.

All available information suggests that the construction of the 6,000 pre-fabricated houses will be awarded to ArcelorMittal and raises many disturbing questions:

The many limitations and unsuitability of ArcelorMittal’s prefabricated houses have been well highlighted. Yet, why does the government insist on these houses for war-affected communities?

The cabinet decision notes that each house will cost 1.5 million rupees each (without import duties and taxes). Why is the government committing to excessive cost when only last year the Ministry of Resettlement initiated a scheme to build 550 sq. feet brick and mortar houses in the North and East for 800,000 to 900,000 rupees each?

Why is the Government opting for imported prefab houses, when brick houses built locally will generate employment, boost local enterprises and benefit the economy?

How are the 6,000 ArcelorMittal houses going to be financed and on what terms? Given the present economic and external debt situation and the depreciation in exchange rate, contracting any foreign debt, which was how ArcelorMittal was going to finance its project originally, is contrary to national interest.

On what basis has the cabinet decided to award 6,000 houses to ArcelorMittal without a tender? Many domestic construction companies did not qualify for the initial tender owing to the scale of the original project (to build 65,000 houses in 5 years). Why are these 6,000 houses not being re-tendered?

The cost of ArcelorMittal houses will increase substantially if import related duties and taxes are added. Is the government going to waive duties and taxes for ArcelorMittal, effectively subsidising them? Will it also do the same for import of cement for construction of the masonry houses, which will further reduce their costs?

It is now almost two years since the government of Sri Lanka announced its intention to construct 65,000 houses for war-affected communities in the North and East. It is regrettable that this project has yet to commence. The primary reason for this delay is the deeply misguided decision in early 2016 on the part the Ministry of Resettlement to award the entire project to the steel multinational ArcelorMittal to import 65,000 pre-fabricated houses. Significant public outcry and concern amongst a range of experts, officials, and political leaders over the adverse financial, economic, technical, social, and cultural implications of this decision led to several reviews and eventual withdrawal.

On 19 May 2016, we—a multi-disciplinary group of independent professionals and social activists—proposed a detailed, viable and comprehensive alternative proposal to the government. This 50-page proposal would allow the building of 65,000 brick and mortar houses at half the cost of the ArcelorMittal houses with domestic financing options. Despite this, the government did not take decisive steps to change course and initiate a much-needed housing for the war-affected through a socially empowering, financially equitable, and locally appropriate project.

We now call on the government to:

Features/Aspects

ArcelorMittal Proposal

Our Alternative Proposal

Cost per house

1.5 million per house (original proposal 2.1 million per house including tube well, solar panel & furniture)

1 million per house including water tank/rain water harvesting; grid connectivity; community infrastructure – common wells, access roads, etc.

Financing

Increasing foreign debt; significant balance of payment and forex reserve concerns.

Domestic financing and at half the total debt burden. For the same cost as AcelorMittal’s 65,000 houses 102,000 masonry houses could be built with local financing.

Local multiplier effects on economy

Total reliance on imports and minimum potential for local employment

Extensive use of local labour and boost to construction industry and economy in N&E.

Social mobilization and community strengthening

No provisions

Extensive investment in strengthening social capital, community organization; furthering social cohesion and reconciliation

Sustainability

Uses imported material; reduced consumption of natural resources – sand and timber

Uses locally produced material, e.g. bricks or cement blocks; allows for alternative materials to reduce sand/timber use

Adaptability, suitability and longevity

Standardised design – alien material, not culturally adaptable, lack of expandability/modifiability; 30 years warranty

Customised to suit localities and families – locally available material enables modifications and incremental development; longer lifespan and inter-generational asset.

Speed of construction

65,000 in 4 years

65,000 in 4 years

Our proposal included a domestic financing option—a formal term sheet from a leading local investment Bank has been secured, which demonstrates that raising domestic resources through a Rupee bond in four tranches of LKR 16.25 billion each is more beneficial and indeed a viable option. Apart from reducing foreign debt, for the same cost as AcelorMittal’s 65,000 houses our proposal illustrated that 102,000 masonry houses can be built with local financing.

Statement issued issued by Chandra Jeyaratne, Former Chairman of the Ceylon Chamber of Commerce, at public and media briefing held on Friday, 26 May 2017 on behalf of a collective of independent professionals and social activists at public and media briefing on Friday, 26 May 2017 on behalf of a collective of independent professionals and social activists.

- Asian Tribune -

Chandra Jeyaratne - Former Chairman of the Ceylon Chamber of Commerce
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