The finances required to complete the controversy-ridden Grand Hyatt hotel in Colombo are not receiving approval, and the government may even end up selling the project which was built using public retirement funds, at a loss in mid-construction, Mirror Business learns.
A contractor involved in the construction under the condition of anonymity said that construction is now going at a slower pace than before and that discussions have taken place with Canwill Holdings (Pvt) Ltd—the state-owned holding company of the hotel—to further slow down the pace of construction, due to financial difficulties.
Two other contractors, which included one of the six international contractors involved in the project, refused to discuss the situation, noting that the owner of the hotel should be commenting on these matters.
However, attempts to reach Canwill Holdings Chairman Hemaka Amarasuriya, who is also the Chairman of the Sri Lanka Insurance Corporation (SLIC), which is the top shareholder of Canwill Holdings, were unsuccessful.
The government in two successive budgets for the years 2016 and 2017 had said that it would dispose of non-strategic enterprises, including the Grand Hyatt, via the stock market, while the 2018 budget too had mentioned in general that non-strategic state-owned enterprises (SOEs) would be disposed through the stock exchange.
However, just days after the 2018 budget which was read out last month, the government had taken a stance that both the Grand Hyatt and the Colombo Hilton would be divested through the National Agency for Public Private Partnerships (NAPPP) in the Finance Ministry, and that finding partners for these two hotels would be the agency’s top priority.
Mirror Business attempted to reach out to Finance State Minister Eran Wickremaratne multiple times both personally and through his media secretary to request information, but these attempts were unsuccessful.
Several attempts to reach Public Enterprise Development Minister Kabir Hashim also failed. However, an official at the Public Enterprise Development Ministry—to which Canwill and SLIC belong to—requesting anonymity, said even requests for proposals have not been so far called for the disposal of the hotels.
He said the government might divest the hotel, even at a loss in mid-construction, since government finances are too tight, and are being scrutinized by the International Monetary Fund—which has listed SOE reforms as a key condition under the US$ 1.5 billion extended fund facility Sri Lanka has with the multilateral lender.
The hotel, financed using money from the country’s largest retirement fund, the Employees’ Provident Fund, started construction in 2012 to be ready by 2013 for the Commonwealth Heads of Government Meeting, after the government acquired the hotel in 2012 from the Ceylinco Group after the project had gone through years of dormancy.
Mismanagement of financial resources during the past regime resulted in the hotel, which could have been completed for Rs. 18.5 billion nearly doubling in cost, even after taking into account the more prudent decisions which were taken after the change of government in January 2015.
Around two thirds of the hotel has been completed, and the most crucial question now is what is the best course of action to recover the public money invested in the project—whether to divest now, at a time when publicly listed hotel share prices are struggling, or after completion of the project.
The official meanwhile said that the government has the option of selling off the 100 apartments in the property to finance the remaining construction instead of keeping them as long-stay serviced apartments, although discussions with Grand Hyatt are required to move forward in such a direction. (Chandeepa Wettasinghe)