World News | Sri Lanka’s weak regulatory framework leads to China’s debt crisis: report

Colombo [Sri Lanka]Sept 5 (ANI): As the debt crisis continues to engulf the island nation of Sri Lanka, the root cause of the problems behind Chinese lending is the country’s weak regulatory framework and politicians and public officials providing a research outlet, said a release.

A press release from Verite Research Media said media reports blamed China and its lending practices in part for Sri Lanka’s debt crisis.

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It said: The publication titled: “The Temptation of Chinese Loans: An Experiment in Sri Lanka’s Ad Hoc Framework for Infrastructure Financing” reveals the dangers of creating frameworks to facilitate deviating bids to take advantage of preferential export credits from emerging economies, such as China, Sri Lanka’s local daily “The Island” reported the news.

In addition, the report highlights that the root cause of the lending problems associated with financing infrastructure is the country’s weak regulatory framework, and that repairing the country’s procurement regulatory framework and improving independent oversight of the procurement process is essential to preventing irresponsible borrowing, cost overruns critical, and poor project selection.

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The report, cited by the Island Mirror, revealed that in 2010 Sri Lanka introduced a framework to allow the Cabinet to approve the processing of projects initiated as unsolicited proposals (USPs) outside of the normal competitive tendering process.

The report also analyzes the design and implementation of the special framework, finding that the lack of rigour in the assessment process and the ability of policymakers to exercise excessive discretion make the framework vulnerable to abuse and misuse. An analysis of the SCARC-approved Gampaha, Attanagalla and Minuwangoda Water Supply Projects (GAMWS) shows that this particular framework is flawed in practice. The project originated under the USP of China Machinery Engineering Corporation (CMEC) and was awarded to the same company despite a lack of experience and expertise in similar water projects.

2010-2016 can be said to be the golden period of Chinese financing, Sri Lanka received 5.895 billion US dollars in loans from China. More than half (53%) of these loans were realized through SCARC-approved projects.

The report’s analysis further revealed insufficient oversight procedures to detect and prevent misconduct, with a lack of accountability as a key factor in the recurrence of such problems.

Considering Sri Lanka’s fragility as a small country, the Chinese government built ties with the Rajapaksa family by offering expensive face programs earlier. Some of those projects are the Mattala Rajapaksa International Airport in southern Sri Lanka, which is largely funded by a high-interest loan from a Chinese bank and has been in the red since it opened. In addition, Chinese investment in the island nation has soared under the Belt and Road Initiative. (ANI)

(This is an unedited and auto-generated story from the Syndicated News feed, the body of the content may not have been modified or edited by LatestLY staff)