Decision taken by the Cabinet of Ministers of the Government of Sri Lanka on Cabinet Paper No. 15/1292/745/003 related to the construction of 65,000 houses under concessionary financing arrangements
In early October 2015, the Ministry of Prison Reforms, Rehabilitation, Resettlement and Hindu Religious Affairs issued a call for expressions of interest to build 65,000 houses in the Northern and Eastern Provinces over the next five years. Deadline October 28th.
Out of the 35 submissions, 15 were shortlisted
Excerpt from the RfP - Deadline for proposals – RFP shall be submitted in one (01) original and three (03) copies delivered to the address below on or before 10.00 hours on 18th of December 2015 Interested pre-qualified Bidders may obtain further information from Secretary/ Additional Secretary, and inspect the RFP documents at the address given below from 9.00 hours to 15.00 hours on working days from 23 rd November 2015 to 04th December 2015 Given the urgency, the construction should be completed within a period of four (4) years from the date of awards.
At the meeting a request was made to extend the deadline to end January (as not enough time and as nothing can happen during holiday season). The officials said they will consider after consulting the Cabinet Appointed Negotiation Committee (CANC).
Memo sent with new deadline as December 28, 2015 (between the original date & new date – only 3 additional working days).
8 RFPs were submitted by 10.00am and at 2.00pm a bid opening meeting was held.
In early January 2016 a group of concerned civil society organisations working on housing raised serious concerns through a public statement with the 65,000 houses project design and the contracting process and called for a review.
Subsequently, a group of civil society representatives raised these issues with Mr. Paskaralingam, Senior Advisor to Prime Minister, on 13th January. Mr. Paskaralingam agreed with many of our concerns and arranged a meeting on the very next day with the Secretary, Ministry of Resettlement.
Excerpt from article - "Eight proposals were submitted. Minister Swaminathan said the tender has not been awarded yet. But authoritative sources said ArcelorMittal, headquartered in Luxembourg, has won the bid. “Around August, the Minister told us about the 65,000 houses and said a French company would be getting the contract,” said M.A. Sumanthiran, Tamil National Alliance Parliamentarian. “So even back then it was known that this company would be doing it. That makes a mockery of the tender process. It makes it a sham.”
A number of concerned individuals from the North issued a public statement, which was endorsed by many others, outlining economic, social, cultural, and technical concerns with the project.
In response, Minister Swaminathan invited some who were signatories to this statement for a discussion on 29th January at which he simply reiterated the Ministry’s firm support for Arcelor Mittal and the project as it stood and dismissed all the concerns raised.
A Cabinet subcommittee appointed to study the proposal to award the contract to French steel company ArcelorMittal to build the 65,000 houses for war-affected civilians.
A group of eminent citizens and civil society organisations from the North and East issued an open letter to the Prime Minister reiterating these concerns and called for redesigning the project. While this did not evoke a direct response from the government, it was apparent that the escalating level of public concern resulted in did slow down the process of growing public pressure
Ministry of Resettlement builds two model pre-fabricated ArcelorMittal houses and also launched a media campaign in the North to drum up support for it by inviting applications. The launch of the first home was inaugurated by President Sirisena on 12th March 2016.
Excerpt from article - "The Government has decided to award a project to construct 65,000 houses for war-affected families in the North and East to local builders, abandoning earlier moves to give the lucrative deal to a foreign company. The Major Constructors of Sri Lanka (MCSL), an industry association, was notified on Friday by the Department of National Planning that the project could be implemented absorbing local contractors and local materials to give more benefits to the local construction industry and to reduce the construction cost."
Excerpt from article - "Speaking at a function at Koppai to mark the handing over of 700 acres of land to civilians by the army, Wigneswaran appealed to President Maithripala Sirisena, who was present, to give up the housing project on the grounds that it is too expensive and also unsuited to the economic condition of the displaced Tamils. “They do not suit our climate, our environment, our culture, our way of life and are exorbitantly expensive. We can build up to 2 or 3 houses with the money spent for each house. Houses with furniture, TVs, solar panels and gas cylinders would create a new elite among the IDPs being resettled,” he said.
Excerpt from article - "Sri Lankan President Maithripala Sirisena has said that the fate of ArcelorMittal’s project to build 65,000 pre-fabricated houses for the war-displaced in the Tamil-majority Northern Province, should be decided by the beneficiaries and not by the Central Minister of Rehabilitation D.M. Swaminathan, or the Chief Minister of the Northern Province C.V.Wigneswaran. After Swaminathan and Wigneswaran had a spat at a function in Kopay in Jaffna district last Saturday, Sirisena had said that the question of the houses’ suitability should be settled by the people who are going live in them and not those who are not going to."
Excerpt from article - "Meanwhile, construction industry sources allege that tender conditions — there was a bidding process –were “tailor-made to suit ArcelorMittal”. Other companies found it impossible to meet prequalification criteria such as a minimum single job of Rs. 25 billion completed in the past five years; a bid bond of Rs. 650 million; and a contractor funding letter of more than US$ 1 billion. Only ArcelorMittal’s technical and financial proposals were deemed acceptable by the CANC. Some powerful ministers, publicly fronted by Resettlement and Rehabilitation Minister D.M. Swaminathan, are still lobbying heavily for the firm whose Sri Lanka agent is Ravi Wettasinghe. A company called Kumarca has been set up at Dutugemunu Street in Kohuwala to handle local operations."
Excerpt from article - "The government is likely to award the contract relating to the construction of 65,000 houses for war-affected families in the North and East to ArcelorMittal - an international company run by Indian steel magnate Lakshmi Mittal - despite attempts by some local contractors to secure a stake in the deal. Amidst growing speculations about the future of the project, President Maithripala Sirisena along with Resettlement Minister D.M. Swaminathan, visited the area last week and observed some sample houses to get a "first-hand understanding" of the quality of the houses offered to the IDPs, authoritative government sources told the Daily News. "The President and the minister were quite happy about the quality of the sample houses.
Excerpt from article - "The mass produced, pre-packed and imported houses are totally inappropriate to human living – a bit like the American style fast food or junk food outlets, causing huge obesity problems all over the world. It is only a matter of time when people realize that they have been conned, exploiting their homeless situation. After one or two years they will realize how unsuitable these houses are but by then it is too late. Those who introduced such houses will not be around to answer. But Sri Lankan government will keep paying the loans for these houses to the foreign companies for decades to come, using hard earned US Dollars. The stakes of continuing with this project are indeed high, when something as permanent as their homes, become constant reminders of the neglect shown towards a war-affected community by this Government."
Minister Swaminathan speaking about the tender process and selection of ArcelorMittal (9.30am session, starts at 25.20 minutes). TNA MP Sumanthiran also speaks about the 65,000 housing project placing on record the importance of it and need, but that pre-fabricated steel houses was unacceptable. (1.45pm session, starts at 37.45 minutes)
Excerpt from article - "Despite the range of concerns and protestations, including those over the lack of value addition to the local and national economy coupled with the debt liability, the Arcelor Mittal project seems set to get the green light. This so-called good governance regime is showing it too lacks the gumption to prevail over narrow self-interest. Despite well over 50,000 houses being built over the past five years, minister Swaminathan has falsely claimed that the previous government was able to build only 1,000 houses in war-affected areas over the past five years. Swaminathan spoke highly of Arcelor Mittal in Parliament, but failed to mention that it has been fined for price-fixing in the US and cartelisation in the European Union, charged with breaches in share-exchange pledges in France, corruption in the Czech Republic and in Kazakhstan, and faced complaints over its dealings in Liberia."
Excerpt from article - "The Sri Lankan government and the Lankan construction industry have struck a compromise on the controversial issue of building 65,000 houses for the war displaced in the Tamil-majority Northern Province. Top sources in the Lankan builders’ consortium Major Constructors of Sri Lanka (MCSL) told Express here on Monday, that as per the compromise, Lakshmi Niwas Mittal’s ArcelorMittal will build 65,000 houses in the North as already planned, and the MCSL will build 65,000 houses elsewhere in the island. “We are happy with the arrangement as there is vast scope for house construction in Lanka which needs 500,000 new units,” said a top functionary at MCSL.
Interview with Minister Swaminathan about how ArcelorMittal would execute the project
Excerpt from article - "It is baffling as to why the Government will spend $ 1 billion and let go of an opportunity to invest in stimulating the local economy. Why does the Government continuously ignore the genuine economic upliftment of the people for jobless economic growth on debt? As with many other development initiatives, we are repeatedly faced with the same dilemma of disconnect between the Government’s economic policy decisions and the socioeconomic needs of the people. While large foreign loans are obtained for the sake of development, what is passed down to the people often fails to improve their lives in meaningful ways. Granting the project to erect 65,000 houses to Arcelor Mittal to dump prefabricated steel houses might become one of the disastrous examples of development failing the Sri Lankan people."
Excerpt from article - "Among the local contractors who tried to secure a stake were MTD Walkers headed by businessman Jehan amaratunga and Daya Gamage Constructions, owned by Primary Industries Minister Daya Gamage. It was widely speculated that MTD Walkers was heavily backed by an influential Cabinet minister who had close links with the Prime Minister. To arrive at a 'compromise agreement' with local contractors, the government even promised local bidders that they would be given a chance to build 65000 houses elsewhere."
A protest was organised by the Mass Movement for Social Justice focusing on three issues - the 65,000 steel houses, Chunnakam water pollution issue and the Sampur power plant. Many other groups (political parties and other civil groups) also joined the protest.
A team of experts, all faculty members from the University of Moratuwa released a preliminary report of their comparison of the proposed steel houses by ArcelorMittal to constructed block wall houses, following a two day independent visit to Jaffna in April 2016. The three experts are engineers Prof. Priyan Dias and Dr Rangika Halwatura, and Architect Varuna de Silva. Commenting on the structural and non structural aspects, the report states that when compared to the block wall houses, the steel houses suffer from several key drawbacks (at at least double the cost) including inadequate foundations, insufficient roof support, risk of steel corrosion despite the coatings provided, poor ventilation, poor or non-existent capacity for extension or repair, much shorter lifespan, unlikely to create a sense of ownership, very unlikely to foster the local economy and generate employment. The report concludes that “the way forward is to construct block wall houses, while finding ways to overcome any disadvantages they may have (e.g. finding new sources of natural resources; alternative technologies to reduce natural resource usage; arranging financing).
Excerpt - "Hon. D.M. Swaminathan , Minister of Prison Reforms, Rehabilitation, Resettlement and Hindu Religious Affairs responding to the allegation said that the northern Provincial has not done anything substantially since the end of conflict in 2009. It is reported the money provided by the Central Government for the development of the Northern Province is not being spent despite the fact that there is a serious need for development in the Northern Province for housing, livelihood, infrastructure, agriculture, fisheries and industrial economic activities."
Excerpt from article - "Sri Lanka’s main Opposition Tamil National Alliance (TNA) leader R. Sampanthan on Monday strongly criticised the government’s post-war housing project in the North and the East and demanded the ruling party leaders to review the multi-million dollar project with immediate effect. In similar letters to President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, questioned how the project to build 65,000 houses was awarded to the foreign company, “Arcellor – Mittal”, well before the tenders were called in August 2015. Reflecting the views of the building experts, environmentalist and social activists, Sampanthan these pre-fabricated houses lacked durability with some model houses already started falling apart and would not environmentally suitable."
Following a request from the Resettlement Ministry, the Department of Civil Engineering of the Engineering Faculty of Peradeniya University conducting a study about the technical implications of the 65000 housing project in the North, stated that the pre- fabricated houses are a fair and acceptable option to meet the high demand for housing in the war affected Northern and Eastern provinces.
Statement gives information regarding how ArcelorMittal was selected through the tender process and how the housing project will be implemented.
Excerpt from article - "The second reason touted in favour of the steel-house initiative is that metal houses will not require scarce materials such as timber and sand that are integral ingredients for masonry houses. This argument is even worse, because steel is not something you can peel off palmyrah trees in the plains of Jaffna, despite the karpaha fecundity of the Borassus genus! For the amount of $1 billion that is going to be used to import prefabricated metal, you can import more than enough timber if necessary. And it will not take quarries of sand to build modest houses like what you will need to fill the waterhole for the Port City."
Excerpt from article - "Tamil National Alliance (TNA) chief R. Sampanthan and Northern Province Chief Minister C.V. Wigneswaran have both argued that at least two houses could be constructed under the given unit cost of over Rs.2 million. In its detailed response, the Ministry stated that the unit cost of the latest project — Rs.2.18 million — had been arrived at after taking into account the cost of various components and without including taxes. Each prefabricated house would have facilities like kitchen with pantry cupboard; a dining table and four chairs; a television set along with a stand; a laptop with Wi-Fi facility; a tube well and a 500-litre water tank."
A comprehensive alternative proposal was developed by us, a multi-disciplinary group of professionals in Sri Lanka, and it was submitted to Minister Malik Samarawickrama on the 19th of May, along with a request to share the same with the Minister for Resettlement. The same was subsequently also shared with Mr. Charitha Ratwatte, Senior Advisor to Prime Minister. Additional information and details regarding the proposed implementation modality were also provided. This alternative included a domestic financing option that would fund 102,000 masonry houses at the same cost as ArcelorMittal’s 65,000 pre-fabricated houses.
The alternative proposal, updated to include a more detailed implementation modality, was submitted to Mr. Paskaralingam in the Prime Minister’s Office and also shared with Minister Samarawickrama.
Media reports that ArcelorMittal sent a team to Sri Lanka to continue lobbying the Government for the US$1 billion project to build 65,000 houses.
The Cabinet Committee on Economic Management (CCEM) headed by the Prime Minister recommends the 65,000 housing project to be re-tendered in smaller packages.
Following reports of Government decision to re-tender the project, this group issued a public statement regarding our engagement on this issue with the Government thus far, as well as a summary of the alternative concept proposed. The proposal was also re-submitted to the Ministry of Resettlement.
Excerpt from article - "The Ministry of Resettlement has sought Cabinet approval to call fresh tenders for a massive housing project in the North and East. It is also learnt that the number of houses for which the green light is being sought has been significantly increased."
Signed by 16 TNA MPs, the letter stated that all the members of the TNA were “totally opposed” to pre-fabricated steel houses and that they seek immediate remedial action from the government.
Excerpt from article: "In a recent letter to President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, leaders of the Tamil National Alliance (TNA) — a coalition of political parties representing the island’s Northern Tamils — said they “strongly oppose” the project. They pointed to “climatic unsuitability, flimsy construction, lack of durability and unjustifiable high costs” as reasons."
Despite CANC rejecting ArcelorMittal and recommending fresh bids, and following the strong opposition made by the TNA to the President and Prime Minster earlier this morning, on Thursday Minister Swaminathan informed journalists that the Government will soon start building prefabricated steel houses for war-affected people in Mullaitivu, Kilinochchi and Vavuniya.
The main opposition Tamil National Alliance pitched into Resettlement Minister D.M. Swaminathan in Parliament yesterday, demanding his resignation over the controversial Government proposal to build 65,000 prefabricated steel houses for war affected families of the North and East. TNA Jaffna District Parliamentarian and party Spokesman M.A. Sumanthiran used his time during the committee stage debate of the vote on the Ministry of Prison Reforms, Rehabilitation and Rehabilitation to issue a scathing criticism of the Minister, who he said was adamant to go ahead with the controversial housing project, even after Tamil representatives from the region had informed him that it was riddled with fraud.
Finance Minister Ravi Karunanayake and Resettlement Minister Swaminathan visit model houses set up in Urumpirai, Jaffna
The Cabinet has granted conditional approval to French steel giant ArcelorMittal to build 10,000 prefabricated houses for the war-affected in Mullaitivu and Kilinochchi districts, a senior official said. “It was decided that 10,000 houses could be erected in the two districts, provided that the people wanted them,” the official explained. Resettlement Minister D.M. Swaminathan confirmed to the Sunday Times that the specified number of 10,000 dwellings had been sanctioned but this newspaper learns the approval is conditional.
The Cabinet Committee on Economic Management (CCEM) grants approval for the construction of 6,000 prefabricated steel houses in the North and East by ArcelorMittal despite opposition by civil society groups and the Tamil National Alliance. The proposal will now go back to the Cabinet for ratification, authoritative sources told the Sunday Times.
Cabinet approval on a Resettlement Ministry paper to award 6,000 prefabricated houses to the war-affected of the North and East, was held up this week, after President Maithripala Sirisena sought further clarification. The Cabinet paper submitted on Tuesday by Minister Swaminathan mooted setting up 6,000 prefabricated steel frame houses, down from the initial 65,000 houses. Despite sustained opposition from civil society groups and the TNA, the Cabinet Committee on Economic Affairs (CCEM) recently approved the amended proposal. When it came before Cabinet on Tuesday, however, President Sirisena wanted to see the report of a Cabinet Appointed Negotiating Committee (CANC) that examined the terms and conditions of the project. The CANC, as previously published in the Sunday Times, has rejected the ArcelorMittal proposal and recommended that fresh tenders be called.
Cabinet has approved a proposal to build 6,000 prefabricated (prefab) houses for the war-displaced in the North and East, on condition, the beneficiaries prefer them to masonry houses–an option the Ministry of Resettlement, ironically, never afforded them. Representatives of international steel giant ArcelorMittal–including a technical team–were in Sri Lanka over the weekend for discussions in this regard, authoritative official sources said. But the TNA has once again lodged strong opposition to the proposal, eliciting a promise from Prime Minister Ranil Wickremesinghe that people would be given a clear choice between prefab and masonry dwellings.
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