Murky Expressway Deals: Sri Lanka Rejects CHEC Claim, Probe Sought as MCC Project Woes Deepen Governance Questions
COLOMBO – A controversial multi-billion rupee claim by China Harbour Engineering Company (CHEC) against Sri Lanka’s Road Development Authority (RDA) has been abruptly rejected by the new administration, triggering calls for a criminal investigation. This move comes amid mounting concerns over another major Chinese state-affiliated firm, Metallurgical Corporation of China (MCC), whose flagship Central Expressway project is plagued by delays, soaring costs, and questionable contract management, further highlighting systemic issues in Sri Lanka’s handling of large infrastructure deals.
The immediate flashpoint involves CHEC’s Rs. 7.91 billion (approx. USD 26 million) demand for work on the Southern Expressway’s Kottawa-Dodangoda section, completed back in 2011. The RDA, under new leadership, has flatly refused payment for the long-dormant claim and seeks a probe into its dubious history and a controversial pre-election settlement attempt last year.
While this specific CHEC-linked section was funded by Japan (JBIC), not Beijing, CHEC’s persistent pursuit despite alleged procedural failings – notably bypassing the contractually required Dispute Adjudication Board (DAB) back in 2011 – raises red flags. Why CHEC pursued decade-long direct negotiations remains unanswered.
The handling by previous Sri Lankan administrations adds layers of concern. A pre-election Cabinet approval in 2024, followed by a hastily signed settlement agreement (later prompting corruption complaints), was dramatically reversed by the current government, suggesting potential past irregularities and fueling questions about due diligence.
MCC’s Stalled Expressway Fuels Wider Concerns
Compounding concerns over dealings with Chinese state-linked firms, the critical Central Expressway project is also mired in controversy involving MCC. The vital Kadawatha-Mirigama section (CEP Section 1), awarded to MCC in 2015 via a non-competitive unsolicited proposal at a reportedly inflated price compared to locally built sections, remains less than 40% complete after nearly a decade.
Work ground to a halt following Sri Lanka’s 2022 economic crisis. The massive USD 989 million China Exim Bank loan facility, signed in 2019, dried up after only minimal disbursement (approx. USD 51 million), leaving the project in limbo. Recent reports detail physical degradation of the partially built structures, including a collapsed concrete beam necessitating urgent safety work costing billions of rupees – footed by the cash-strapped Sri Lankan government.
Furthermore, serious questions arose when MCC reportedly failed to renew expired bank guarantees (Advance Payment Guarantee and Performance Bond). Interestingly, Sri Lanka’s Finance Ministry intervened, requesting the RDA withdraw demand letters seeking to collect on these guarantees to avoid upsetting China Exim Bank, citing “serious confusion” and potential damage to bilateral relations. The guarantees were eventually extended, post-expiry, via another bank. MCC was also embroiled in a separate controversy over alleged bidding irregularities for the Central Expressway’s Section 3 (Pothuhera-Galagedara), where its lower bid was disqualified under contested circumstances.
Deepening Crisis of Confidence
These instances – the murky CHEC claim and the stalled, costly MCC project – fuel wider criticisms regarding transparency, costs, project execution, and Sri Lanka’s vulnerability in deals involving powerful state-linked foreign entities. Was adequate oversight exercised when awarding these multi-billion-rupee contracts?
The entanglement occurs as Sri Lanka desperately tries to recover from economic collapse, heavily reliant on international goodwill and navigating complex debt restructuring, including significant sums owed directly to China. While the CHEC dispute isn’t direct Chinese debt, a contentious battle, alongside the MCC fiasco, could strain diplomatic ties and complicate already fraught negotiations with Beijing – a relationship often shadowed by accusations of “debt-trap diplomacy.”
The potential fallout is severe: diversion of scarce resources, damage to fragile investor confidence, and a potential drain on critical foreign reserves if payment to CHEC is enforced. The government now faces the dual challenge of resolving these specific disputes while addressing the systemic governance failures they appear to represent, crucial steps if Sri Lanka hopes to restore international credibility and achieve sustainable economic recovery.