business

Sri Lanka scraps $1.5 bil Japan-funded light rail system

24 Comments
By Ishara S. KODIKARA

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

© 2020 AFP

©2020 GPlusMedia Inc.

24 Comments
Login to comment

Expecting Japan to give advice on road design is absurd! The roads here are terrible. Try getting in or out of any major Japanese city at rush hour. Incidentally, most Japanese think that "rush" means "congested," because that's what they see in the early morning and late afternoon.

1 ( +4 / -3 )

Why is my tax money being used to fund projects in other countries?

There are plenty of projects to waste money on in Japan. Only the other day I saw parts of the countryside that have yet to have any concrete laid on them.

11 ( +12 / -1 )

So do they return our tax money to Japan?

0 ( +2 / -2 )

Japan and China are doing way more harm than good with their developing-world infra projects.

The projects should be awarded through open tender and the winning bidders should be selected based on cost and competence, not political clout. (That would also give taxpayers in Japan a break ). The current system breeds corruption and anticompetitive practices, which so many of these nations are vulnerable to.

Private-sector multi-national consortiums are the way to go.

6 ( +6 / -0 )

The projects should be awarded through open tender and the winning bidders should be selected based on cost and competence, not political clout. (That would also give taxpayers in Japan a break ). The current system breeds corruption and anticompetitive practices, which so many of these nations are vulnerable to.

Exactly

3 ( +3 / -0 )

BertieWoosterToday 07:52 am JST

Expecting Japan to give advice on road design is absurd!"

Reading not your strong point? Let me help you out....it is a rail project, not a road project.

6 ( +7 / -1 )

The deal signed under the previous government is the largest single foreign-funded infrastructure project in Sri Lanka, and was seen as a sign of the island nation reducing its dependence on China.

China told Sri Lanka to stop being friends with Japan. Plain and simple.

2 ( +4 / -2 )

The projects should be awarded through open tender and the winning bidders should be selected based on cost and competence, not political clout. (That would also give taxpayers in Japan a break ). The current system breeds corruption and anticompetitive practices, which so many of these nations are vulnerable to.

That works for nations that have the financial wherewithall to pay for them out of tax revenues or for nations that have a good track record of paying their debts and can therefore float bonds to fund such projects. For underdeveloped nations the money isn't there. They need loans and that generally implies going hat in hand to nations to underwrite these kinds of projects at low interest rates and long repayment terms. Such nations generally cannot attract buyers for bonds so they are stuck borrowing from nations who can build the infrastructure they need or perhaps from the World Bank.

-1 ( +1 / -2 )

Private-sector multi-national consortiums are the way to go.

Until you have had first hand experience with the games such companies play. Ask Panama how a open bidding worked out on their expanded Panama Canal. The Spanish-Italian consortium was a textbook argument against your idea.

Sure some contractor will get the low bid but a couple of years into the project, suddenly their cost projections are somehow all wrong (always the contracting nations fault they will tell you and never theirs) and they whine they either need more money or they cannot complete the contract. By then much digging has occurred and much steel reinforced concrete has been poured. Now the contracting nation is in a bind. If they force the contractor to stick to the original terms, the contractor will simply walk away and then sue the contracting nation. The litigation will last years as the contractors try to blame the contracting nation for all of their screw ups (and boy do they get creative with the wild claims !). Meanwhile a major infrastructure project lays there half built and going nowhere. If the nation tries to bring in another contractor or consortium to finish the project more lawsuits fly. So often as not nations and localities roll over and pay. This is why you see 30-40% cost over runs on big public works project along with big schedule slips

Corporations reward their executives primarily for stock price and cash flow. That is clearly shown in every corporations annual report and in their securities filings. Guess what? Cost over runs and schedule slips enhance cash flow and stock price. Being on budget and on schedule is not the profit maximizing solution for them. Being late and over budget is, so they always are. It is what executives are rewarded for so they are very very good at it, and those corporations have battalions of the most aggressive and creative litigators money can buy to defend their malfeasance in court. I have callouses on my forehead from banging my head against the wall dealing with big corporations on similar big government contracts. It doesn't matter how diligent you are as a public servant, the corporations are inherently dishonest and are always actively seeking ways to skin the public agency that hired them, and by extension the hard working taxpayer. Where the public servant is bound by a code of ethics (some won't believe that but it is the case for most developed nations) contractors are not. They are motivated by the market to be dishonest at every turn, and they are. I know because I live it.

0 ( +3 / -3 )

Well it’s a shame to see that this had to happen. I mean initially was very excited about the project, not just because Japan was helping out other countries with their infrastructure, but because of the traffic problems that I heard about in Colombo.

But if there was a problem with corruption, especially with what I heard about the white elephants, then I do understand. They just have to find another way to alleviate their traffic problems though. That’s a fact.

0 ( +0 / -0 )

For underdeveloped nations the money isn't there....

So they use the assistance they receive from developed nations for funding. Japan's Shinkansen was built with US ODA money. Imagine if they asked Washington to build it for them instead. LOL.

Currently, with the assistance in the form of foreign monopolistic contracts, the extra costs they incur through proprietary systems, compromised sovereignty, opaque administration, etc. are much greater over the long term.

3 ( +3 / -0 )

Shame on Japanese government for throwing taxpayers money on these countries. There are a significant amount of problems regarding young children’s child care, health and malnutrition among kids. Yet the government goes to these ungrateful countries and loaning them at 0.1% with a decade long grace period. It's a shame. If the government arranges a program for kids' child care and health, at least after 18 years they will start paying taxes. The slowing birth rate would be decline. It's a shame.

Ps : I'm a Sri lankan. Tax payer in Japan.

-1 ( +0 / -1 )

@7000, your mother nation became 'these countries' wow!

1 ( +1 / -0 )

Sri Lanka is being charged to build a 1st world infrastructure project on a third world budget!

That is the problem-no money ...

0 ( +1 / -1 )

@ Desert Tortoise

So, any customer needs to place penalty clauses in the contract for breaches regarding time and cost.

Are people so desperate or bribable that this is impossible?

0 ( +0 / -0 )

One of the worst decision taken up by the present government.

As a resident from area (malabe) where project supposed to commenced ,have been experiencing the enormous traffic conjunction since early 90s.I firmly believe only solution to the issue is light railway which is completely new to most of the Sri Lankans.

Also I have personally seen & experienced how dubai handled it's traffic problem by introducing Metro system(driverless train) underground & over the bridges. Infact Sri Lanka should build LRT from all the major cities like Nagambo,Nittabuwa,panadura,homagama,kaduwela to the capital as it the best viable solution for never ending traffic conjunction

Thanks Japan & Jica for your support

0 ( +1 / -1 )

So, any customer needs to place penalty clauses in the contract for breaches regarding time and cost.

Are people so desperate or bribable that this is impossible?

It's not a matter of bribery. The contractors in my experience do not even try bribery with us. They don't need to. It seems that no matter what terms you write into the contract at some point part way into the project they will find some reason to cry for more money and will blame the public agency for their need for more money. Then the litigation and the delays start.

Also from experience if the contract clauses are too restrictive nobody bids. This happens. Or only one company bids, forcing the public agency to make a decision to accept this one bid or to cancel, change the contract in some way and hold a new bidding process. While superficially the bidding process appears competitive it isn't really. Firms knowingly underbid to get on contract after which they can behave more like monopolists because in a way they are. It's not like buying groceries where you can simply shop in a different store. Once you are on contract you are legally tied to this one company for the duration. Public agencies do their own cost estimates as a reality check against the wishful thinking the contractors throw at you, but try to disqualify a bid because your cost estimators say the contractor cannot possibly do what they claim for as little as they claim. Sometimes that happens but it always ends up in court with the contractor crying they were denied the contract illegally. And contractors write their bids in ways to give themselves all kinds of ways to weasel out of their duties afterwards, or to give them some excuse to file protest if they are not the winner. Every step of the process results in litigation and delays, which incidentally enhance their cash flow and stock price, the two things that compromise about 85% of what executive pay is based on.

-1 ( +0 / -1 )

One of the funniest experiences in a project I worked was calling a contractor out over billing. They had three big projects going for our agency. They were claiming a total of 600 man years of engineering labor across all three of these projects. The problem was we determined they had maybe 200 engineers on staff. They had 200 engineers splitting their time on all three projects but they were attempting to bill us for a full man year for each engineer on each project instead of a third of a man year for each engineer for each project they worked. I wasn't at the meeting where they were called out but I was told suddenly all the corporate bubbas were staring at their navels as our leadership pointed out we were on to their games. These contractors are more adept and financial games than at producing their product.

The other game is to bid a project claiming they need to add several hundred engineers. The problem is there is no way they are going to bring on staff, oh, 400 engineers in one year and get them up to speed on this project. So you know going in the contractor will be late for lack of qualified staff. But try to challenge this, especially if it goes to court. The games are endless. Contractors are almost never honest.

0 ( +0 / -0 )

Until you have had first hand experience with the games such companies play. Ask Panama how a open bidding worked out on their expanded Panama Canal. The Spanish-Italian consortium was a textbook argument against your idea.Sure some contractor will get the low bid but a couple of years into the project, suddenly their cost projections are somehow all wrong (always the contracting nations fault they will tell you and never theirs) and they whine they either need more money or they cannot complete the contract. By then much digging has occurred and much steel reinforced concrete has been poured. Now the contracting nation is in a bind. If they force the contractor to stick to the original terms, the contractor will simply walk away and then sue the contracting nation. The litigation will last years as the contractors try to blame the contracting nation for all of their screw ups (and boy do they get creative with the wild claims !). Meanwhile a major infrastructure project lays there half built and going nowhere. If the nation tries to bring in another contractor or consortium to finish the project more lawsuits fly. So often as not nations and localities roll over and pay. This is why you see 30-40% cost over runs on big public works project along with big schedule slipsCorporations reward their executives primarily for stock price and cash flow. That is clearly shown in every corporations annual report and in their securities filings. Guess what? Cost over runs and schedule slips enhance cash flow and stock price. Being on budget and on schedule is not the profit maximizing solution for them. Being late and over budget is, so they always are. It is what executives are rewarded for so they are very very good at it, and those corporations have battalions of the most aggressive and creative litigators money can buy to defend their malfeasance in court. I have callouses on my forehead from banging my head against the wall dealing with big corporations on similar big government contracts. It doesn't matter how diligent you are as a public servant, the corporations are inherently dishonest and are always actively seeking ways to skin the public agency that hired them, and by extension the hard working taxpayer. Where the public servant is bound by a code of ethics (some won't believe that but it is the case for most developed nations) contractors are not. They are motivated by the market to be dishonest at every turn, and they are. I know because I live it.

weird you'd think it would be in the best interest for firms not to do this for reputational purposes. furthermore it would dissuade projects from being financed by private entities which is something companies wouldn't want. you would think a competent company would enter into the market and not engage in such practices. having strong litigators and winning cases would hurt their reputation even more and discourage it even more. you would think executives would be bound by a code of ethics even stronger than the public servant due to it being driven by and perpetuated by these interests and incentives. are you sure about that?

0 ( +0 / -0 )

weird you'd think it would be in the best interest for firms not to do this for reputational purposes. furthermore it would dissuade projects from being financed by private entities which is something companies wouldn't want. you would think a competent company would enter into the market and not engage in such practices. having strong litigators and winning cases would hurt their reputation even more and discourage it even more. you would think executives would be bound by a code of ethics even stronger than the public servant due to it being driven by and perpetuated by these interests and incentives. are you sure about that?

0 ( +0 / -0 )

weird you'd think it would be in the best interest for firms not to do this for reputational purposes. furthermore it would dissuade projects from being financed by private entities which is something companies wouldn't want. you would think a competent company would enter into the market and not engage in such practices. having strong litigators and winning cases would hurt their reputation even more and discourage it even more. you would think executives would be bound by a code of ethics even stronger than the public servant due to it being driven by and perpetuated by these interests and incentives. are you sure about that

The big contractors know you cannot disqualify them for past bad performance. The nanosecond you try you end up in a lengthy litigation that stops the bidding process for all the rest, and by extension your project. Read the history of Tudor Saliba. In addition there are usually only two or maybe sometimes three firms who are qualified to bid if they even want to bother, and they all play the same games. You would have to disqualify them all if you wanted to strictly adhere to the rules. Fact is there isn't close to enough qualified firms to have genuine competition. I saw one project where, right in the middle of the selection process the two firms competing for the job merged. Why compete against each other when you can merge and become a monopoly. Oligopoly wasn't good enough for them. And then as soon as they merged they raised their overhead rates through the moon. The project was eventually cancelled and now the public agency is doing it on their own with in house government labor. It wasn't the first time either of those companies failed big so no love lost. More like a big middle finger and a chance to prove less costly government labor (yes our burdened labor rates are actually lower than private industry) has the brains and the resources to get the job done.

-1 ( +0 / -1 )

Here is an example. According to the Federal Acquisition Regulations firms on cost plus contracts must have a DCAA (Defense Contract Auditing Agency) qualified EVM (Earned Value Managenemt) system. Lockheed-Martin hasn't had a qualified EVM system for years, maybe over a decade. Is the DoD going to say L-M is no longer qualified to build the F-35 or any of the several missiles they build? And if L-M was disqualified who would build what they build now? Nobody for a very long time because they will argue they have proprietary rights to the designs and nobody but they can build them. You might win that battle in court but don't count on it.

Also read the history of the A-12 Avenger II stealth bomber the Navy having designed for them. A firm fixed price contract ended up meaning nothing. The two contractors failed to deliver, the DoD demanded its money back and after 20+ years of litigation including a trip to the US Supreme Court who sent it back to the lower courts, the Navy ended up with a small number of F/A-18s and some money back from Boeing, who earlier had bought McDonnell Douglas who was one of the contractors involved in the A-12 originally. Based on data I have access to firm fixed price contracts end up over running cost as much as cost plus contracts, on the order of 40% when the last invoice is paid. Counter-intuitively sole source contracts seldom have cost increases. They average under 10% increases over time. Why? Probably because sole source contract negotiations are more detailed and the contractors are not hiding their cards for competitive reasons as they are in a, cough, cough, "competitive" down select.

-1 ( +0 / -1 )

@Desert Tortoise

If you have been to Asia (and the article is about Sri Lanka) then you would know that life is all about the ‘back-hander’

0 ( +0 / -0 )

Sri Lanka owes lot to Japanese generosity and investment throughout the decades since the 70’s. Unlike certain loan sharks that have recently emerged in the region, Japanese genericity has helped to bring in decent level of technology, health care and industry to the whole of the reagion Sadly countries such as Sri Lanka are too corrupt to take advantage of any of this. I have no doubt the cancelation Japanese funded rail is due to utter corruption forced by certail loan sharks – shame on you muppets Rajapakses.

And thanks to these muppets, SL is one of the most indebted countries in the world

-1 ( +0 / -1 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites