Colombo Lotus Tower and the Case for Transparency

The opening to the public of the Colombo Lotus Tower, the tallest structure in South Asia, on September 15, has revived the focus on the nature of Chinese lending practices in Sri Lanka.

Constructed at an estimated cost of $113 million, the Colombo Lotus Tower project was built in a $88 million loan from EXIM Bank of China, with the government of Sri Lanka foot the rest of the costs.

Often portrayed as a symbol of the excesses of the Mahinda Rajapaksa administration, the tower project underscores the importance of transparency in development financing.

Work on the project began in 2012 and was plagued by delays. The Rajapaksa administration said the purpose of the project was to improve Sri Lanka’s telecommunications infrastructure and provide entertainment for the public.

From now on, the tower is mainly used as a leisure center.

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In the first fortnight of its opening to the public, more than 100,000 people visited the tower. The average daily income from ticket sales has been around $5,500 and the annual expectation income is around $8.2 million.

Chief Executive Officer of the newly formed Colombo Lotus Tower Management Company, Major General (retired), Prasad Samarasinghe, said most of this revenue would come from entertainment businesses. A Singaporean company will start the world’s highest bungee jump in January 2023 with an expected 130 jumps per day. Around 17,000 tourists are expected next year just to go bungee jumping.

It should be remembered that initially the plan was to build the Lotus Tower in Peliyagoda, the border between the districts of Colombo and Gampaha (the most populous districts in Sri Lanka). However, it was eventually built in the center of Colombo, in an area dedicated to gaming and entertainment. That decision alone should have underlined the fact that the Tower was part of the Rajapaksa government’s plan for economic development based on tourism.

Considering that the construction of the tower project has cost Sri Lanka $113 million and maintenance costs”they are huge”, as Samarasinghe described to the Indian media without providing figures, and since we do not have enough data on the net profits that the Tower will generate, it seems that it will take a long time for Sri Lanka to recover the expense unless the country figures out a way to increase revenue.

When Sri Lanka announced the construction of the Lotus Tower, the government said that this would improve Sri Lanka’s telecommunications and information technology networks. People started talking about Sri Lanka becoming a hub for information technology and telecommunications in the region. Like on cue, India insisted that China would use the tower’s telecommunications capabilities to spy on Indian defense installations. However, 10 years later, the Lotus Tower is simply an entertainment center and Place of the event.

like me before wrote, Chinese lending practices, especially before 2018, made projects vulnerable to political capture, corruption, and artificially inflated costs. The Lotus Tower, financed by the Chinese EXIM Bank, was controversial from the beginning due to accusations on these grounds.

During the 2014 presidential election campaign, the opposition group Maithripala Sirisena used alleged corruption in Chinese-funded projects to attack incumbent Mahinda Rajapaksa. The Colombo Lotus Tower featured prominently during the election campaign.

In 2019, then-President Sirisena repeated the same accusations about the Chinese companies involved. indian commentators insisted that two companies involved in the tower’s construction had connections to China’s People’s Liberation Army (PLA). Meanwhile, a 2019 report from the Auditor General’s Department stated that construction delays on the Tower resulted in a loss of revenue of more than $15 million to the government, which is almost two years of expected revenue from Lotus Tower. The report highlighted that the delays, for the most part, were the result of corruption and inefficiency on the part of the Sri Lankan stakeholders involved.

However, it is easier to blame China than it is to blame Sri Lanka’s political and business leadership. Although the Auditor General had obtained a financial feasibility report from a major Sri Lankan university on the expected revenue from the Tower, it had not been widely disseminated. The same university was also involved in the design and construction of the Tower.

Perhaps now is the time for a new financial viability report by an independent institution, giving Sri Lankans an opportunity to paint a clearer picture of the Tower’s financial viability. As it is, the Tower, as well as other Chinese-funded projects in Sri Lanka, are used for political propaganda purposes.

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Transparency in development aid will do wonders for China’s credibility in Sri Lanka. It is vital to improve the results of the project. A study 2020 by Johns Hopkins SAIS professor, Dan Honig, found that projects carried out by aid agencies and development banks that had better access to policy and institutional information performed substantially better.

The lack of transparency in Chinese-funded projects is one of the main reasons why it has been easy for its critics to make China the scapegoat for everything from corruption to the sovereign debt crisis. As China tries to multilateralize the Belt and Road Initiative by attracting collaborators from among OECD countries, it may be time for it to adopt more transparent lending practices, so that corrupt political dynasties cannot misuse its funding. .

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