Who and what derailed JICA’s LRT project

Japan’s major international aid agency short-changed by parties with vested interests Auditor General says no evidence to back up factors cited for cancellation of the project Many advisors get on the gravy train; politics a key reason for project derai

Two levels of failure: One was an unfortunate ego battle between various levels of academia. The other level was the 'politics of development projects' which includes 'who gets the credit' and 'who gets to operate and control the fiefdom.

April 12, 2022: A five-page statement from Sri Lanka’s Ministry of Finance (MoF) announcing a sovereign debt default takes creditors by surprise.

Among them is the Japan International Cooperation Agency, Sri Lanka’s longstanding friend and development partner. Like others, JICA only learned the news via media and the wordy official notice on the internet.

The agency didn’t receive so much as a phone alert to flag what was being planned, political sources confirmed. The April holidays followed and phones went unanswered. A meeting with the MoF’s External Resources Department (ERD), JICA’s main contact point, was granted weeks later. Even then, not much clarity was shed.

Japan holds a massive chunk of Sri Lanka’s total bilateral debt. As the main window for official development assistance, JICA’s exposure was huge. A default was of deep concern. The humiliation of “not knowing”, however, wasn’t new to Tokyo.

Just months earlier, Japan had discovered from informal channels—i.e., rumours and the news—that the Sri Lankan Government was pulling out of a different signed-and-sealed sovereign agreement: the JICA-funded light rail transit (LRT). Official notice about the one-sided abrogation was conveyed much (much) after the media broke the story.

While it was not immediately possible to confirm whether this had ever happened before, the unilateral breaching of a bilateral Government-to-Government deal was not a familiar occurrence in the agency’s history anywhere. And especially not one as thoroughly studied and negotiated as the LRT deal.

In a special report this month, Sri Lanka’s Auditor General’s Department said it was given no documentary evidence to confirm the basis on which the initiative—identified as financially and economically feasible—was deemed “an ineffective project” and cancelled.

The origins

Japan-funded rail development took off during the “Yahapalana” administration under the newly-founded Megapolis Ministry helmed by Patali Champika Ranawaka. But it was first proposed in Mahinda Rajapaksa’s second term as President while his brother, Gotabaya, was Defence and Urban Development Ministry Secretary.

JICA had financed the Delhi Metro and P. B. Jayasundera, who was Treasury Secretary under Mahinda, demanded a similar underground network for Colombo. He threw out the idea when the agency insisted on a feasibility study, sources familiar with events said. They did not wish to be named.

(Interestingly, Mr. Jayasundera did not want a reference to the Japanese offer for a monorail to be included in the joint statement issued after the visit of late Japanese Prime Minister Shinzo Abe to Sri Lanka in September 2014).

In keeping with prevalent Sri Lanka Government policy, more than 50 percent of JICA’s portfolio was dedicated to roads (under Mahinda Rajapaksa, the largest slice of the national budget went towards defence followed by highways). But the worldview was changing and JICA wanted to ease into public transport.

Therefore, Tokyo readily consented when not long afterward the Ministry of Transport in Colombo asked for technical cooperation in this sphere. Monorail became the selected mode. And this time, there was no request to bypass crucial feasibility studies.

JICA’s counterpart for the project was named as the Transport Ministry. Businessman Dhammika Perera was its Secretary. The other two were the Ministries of Highways (of which the Secretary was R.W.R. Pemasiri) and Urban Development (under Gotabaya Rajapaksa).

Sri Lankan officials—including the three Secretaries—were hosted in Japan with JICA funds and shown monorail and light rail infrastructure. Mr. Perera settled on monorail and was backed by Mr. Gotabaya Rajapaksa. The Defence Secretary even shot down Mr. Pemasiri’s suggestions for elevated highways.

“Mr. Rajapaksa clearly said he did not want elevated highways, that the skyline should be free but for the monorail,” an official said, requesting anonymity.

The project didn’t, however, materialise because the relevant Cabinet paper was never presented (let alone approved) despite Mr. Perera’s ardent backing. It was Mahinda Rajapaksa that blocked it, political sources said. JICA had already spent around US$ 2mn in grant money on studies and other technicalities by then. The 2015 election followed and the project was forgotten.

Restarted

The new “Yahapalana” Government took a second look. Committees were formed to study outstanding initiatives. The project again came to the forefront and was shifted from the Transport to the Megapolis Ministry.

Under local expert advice, Sri Lanka’s preference now changed from monorail to light rail. It wasn’t widely known that this countered the wishes of Tokyo which (through the Japanese Embassy in Colombo) battled hard for the original concept as it would have locked Sri Lanka to Hitachi, the single Japanese monorail manufacturer.

“Major urban and metro rail systems around the world are mostly rail-based, not monorail based,” argued Nayana Mawilmada, who, as Director-General of the Urban Development Authority (UDA) from February 2015-mid 2017, avidly campaigned for the LRT.

“Monorail manufacturers are few,” he said. “LRT gave Sri Lanka different providers to work with in the future, to expand its stock and to develop a wider network via globally competitive tenders with the many suppliers of light rail.” There were also technical reasons for favouring LRT. So Colombo fought back till an agreement was reached.

But differences separately broke out among various experts, with sources close to the process alluding to “big fights”. These ideological arguments also contributed to the project’s ultimate cancellation.

A key official identified two levels of failure: “One was an unfortunate kind of ego battle between various levels of academia. You had the pros and cons of the project, and then you had personal battles among various experts. That tragedy is that what each of them was saying is correct. It just had to be done together. The problem is they couldn’t work together.”

The other level was the “politics of development projects”—which includes “who gets the credit” and “who gets to operate and control the fiefdom”.

“The problem with Sri Lanka and the reason we love roads is that politicians can start a project, finish a project, cut the ribbon and get the credit for it before the next election cycle,” one of the sources said. “The problem with something long-term— like the LRT—is that it is Government that comes afterward that gets the credit.”

This also led to feet-dragging and the belief that perhaps it was quicker and more expedient to introduce buses.

Meanwhile, there were gravy trains on the table. Various parties would turn up in offices, claiming political patronage and offering “five-page power points” to prove they could construct better, cheaper, faster rail: “That they could do a billion-dollar rail project in three years and that they have the blessing of so-and-so”.

“There was a lot of that…lots of people approaching politicians and politicians sending them to us,” this official said.

Why JICA?

Mr. Mawilmada was among those who actively fended off these overtures. And he stuck firmly with JICA. “While it may be slower, it forces you to go through some kind of procurement process and through tenders and some level of transparency,” he explained. “I’m not saying any of these donors are gold standard but there is oversight, a degree of accountability and some monitoring. The concessional funding is also helpful, as is the capacity building.”

Committing a project to an agency, Mr. Mawilmada thought, would insulate it from the “political back-and-forth”. Once a sovereign agreement was signed, he calculated, it wouldn’t matter what administration was in power.

“These projects keep going and they get completed,” he said. “It makes it a little bit politics-proof and gives you stability over the longer term. I was proven wrong. But, then, nobody thought we would back out on so many sovereign agreements. The way it works around the world is that once you sign a sovereign agreement, things typically get done.”

Implementation did roll on, initially. Feasibility studies were completed and the economic rate of return was deemed advantageous. There was a proper resettlement plan. Multiple Cabinet papers were approved for each stage. A project office worked full-time with 88 foreign and over 150 local consultants on drawings and other technicalities.

The loan had a 40-year repayment period with a grace of 12 years. The annual interest rate was 0.1 percent. The project was to be implemented first in seven packages. Consultants were hired in March 2019, the same month a credit facility agreement was signed with JICA and a project memorandum entered into between the Megapolis Ministry, ERD and the agency.

“The design was done, all the approvals were obtained, it was literally weeks away from going to tender,” said Mr. Mawilmada who had by then left the State sector.

One of the earliest public hints of the cancellation came around March 2020. Priyath Bandu Wickrema, the then Secretary to the Urban Development Ministry, told the Sunday Times the Government will float a request for proposals for the LRT despite a loan agreement already being signed with JICA. The future of the project, he maintained, would be a public-private partnership (PPP)—an option that hadn’t even been studied.

In September 2020, P.B. Jayasundera, Secretary to President Gotabaya Rajapaksa, issued instructions to the Transport Ministry to terminate the LRT as it was “very costly and not the appropriate costeffective transport solution for the urban Colombo transportation infrastructure”.

The post-mortem

Dimantha de Silva, a senior lecturer at the University of Moratuwa, was closely involved in the LRT project. He was pitted against some other experts, including his former teacher, logistics and transport expert, Prof. Amal Kumarage, whom he claims actively campaigned against the light rail initiative.

Dropping the LRT, Dr de Silva analysed, “was predominantly a political decision that was supported by officials with vested interest and the professional anti-infrastructure lobby groups who were against the LRT from the start”.

These parties not only sabotaged the LRT project but were instrumental in the cancellation of the Kelani Valley (KV) railway line, he alleged: “Their misinformation and manipulation eventually provided justification for politicians with a vested interest. Their tool was the manipulation of the cost of the LRT. This was the only reason authorities gave to cancel the project.”

In Sri Lanka, political parties often shelve projects started by an opposing party if they felt the public would support it once completed, Dr de Silva felt. The LRT was accepted by all Government agencies including the Central Bank, the Finance Ministry and the National Planning Department. But it was shelved without a review or discussion with the project management unit (PMU) or donor.

This shows the decision was made even before the Government came to power, Dr. de Silva claimed: “The proof is that President Gotabaya Rajapaksa was unreachable by the PMU or by any of the experts who worked in the project although he was ready to listen to people who were not part of it. Nor did Priyath Bandu, Secretary to the Ministry the project was under, give a chance to the PMU, consultants or experts to clear any questions he had.”

Former PMU Head Chaminda Ariyadasa confirmed that his unit was prevented from speaking to key decision-makers, including President Rajapaksa. Like several others interviewed, he felt Mr. Priyath Bandu was opposed to the project from the outset. (Mr. Bandu declined to comment on the project and said he didn’t hold a related position at the time it was canned).

The counter-view

Among those Dr. de Silva blamed for the project’s demise is Prof. Kumarage.

Prof. Kumarage told the Sunday Times that, even before the 2019 election, promised growth rates in the Megapolis Plan were found not to have been realised. Moreover, the conversion from monorail to LRT had heightened the cost.

“As any credible professional, I have spoken publicly when questioned about these facts,” he said. “Rather than opposing the LRT, I worked on bus lanes from 2017 onwards—formulating a proposal for bus reform and modernisation that was taken up for funding by the MCC (the Millennium Challenge Corporation). Post2019, however, that too was shot down for rather shameful extraneous reasons.”

“I still maintain that the LRT is only best as a long-term option and that we’ve neglected the many short-term options that should have been taken up before that,” Prof. Kumarage insisted. “The current state of transport in the Western Province is due to this grave error.”

He emphasised that the LRT should be preceded by bus and rail development; and that Sri Lanka “should negotiate with JICA to use its most attractive loan for other projects than the JICA plan recommended”. This includes railway electrification and bus rapid transit (BRT).

Prof. Lalithasiri Gunaruwan, a transport economist, is blamed for arguing against the LRT at an engineers’ meeting with President Gotabaya Rajapaksa (when it was some aspects of the KV line electrification that he had criticised in a widely-circulated video clip). While he had headed a Cabinet committee to re-review pubic investment proposals, the LRT did not come to them, he said.

The committee was informed by ERD that the LRT proposal was withdrawn and “there was no necessity for us to study it”. “Our committee (though we are—and, particularly, I am—blamed for a cancellation of the LRT) mentioned in our report that the Government should recognise the necessity of a sound public transport solution for the Colombo-Battaramulla corridor, given its traffic conditions, and should get the Department of National Planning to study alternatives,” he told the Sunday Times.

Prof. Gunaruwan, however, remains sceptical about foreign-funded projects saying it is best to use local resources without accumulating foreign debt. Even when there was no alternative, it was imperative for the Government to ensure it has the right technology at the right price through international competitive bidding. This option wasn’t usually available in bilateral loans, he said.

The conceptual fault lines—all of which came into play during the project process— are, therefore, clear. They were incredibly difficult to manage, officials confess.

The cancellation

But the decision to pull out was the Government’s. And the price was not only the LRT but a longstanding bilateral relationship that lost the crucial element of trust. The information void and the lack of explanation or accountability were stark to the Japanese.

While JICA could have taken all the remedial measures available to it against the abrogation, it didn’t. Neither did the consultants—who are still owed Rs 5.1bn for work done—opt for arbitration (something that would’ve worked against Sri Lanka).

The conversion from monorail to light rail did drive the cost up. The required infrastructure became bigger and the civil works component nearly doubled, experts said. But there was a firm belief in a longterm advantage. And the loan was “deeply concessional”.

The LRT was to have been the first step in a massive modernisation of Sri Lanka’s transportation network, Mr. Mawilmada said: “And if you put your first foot with Japanese technology and suppliers, which are among the best in the world, you know it’s going to work and keep working.”

The LRT wasn’t the be-all and end-all, he explained. It was to have been part of a systemic change for Colombo that included parallel bus modernisation under the MCC grant (70-80 percent was for public road transport) and suburban rail modernisation with Asian Development Bank funding. The last administration canceled them all.

In the end, a handful of people made decisions that they never properly explained which left Sri Lanka with nothing.

JICA refused to comment on whether the Sri Lankan Government has asked for a resumption of the LRT or whether it is willing to do so, and under what conditions.