Despite protests, Arcelor Mittal seems set to secure a $1 billion housing contract in Sri Lanka

The year 2015 was not a good one for steel magnate Lakshmi Mittal. His namesake in the Hindu pantheon, the goddess of wealth, frowned on him – leaving Arcelor Mittal, his flagship company, $8 billion in the red. But Mittal’s fortunes in South Asia may just be beginning to turn because the world’s largest steel-maker seems set to secure a $1 billion contract to supply 65,000 pre-fabricated houses to Sri Lanka’s war-affected North and East.

Sri Lanka’s decades-long civil war ended in 2009 when the Army defeated separatist Tamil tiger rebels. Large areas of the North and East, which saw some of the heaviest fighting in the final months of the war, were devastated.

Post-war reconstruction is as profitable as war itself. From Afghanistan to Iraq to Sri Lanka, contractors, corporate houses and politicians have profited far more from it than war-ravaged communities. Indeed, the central campaign of the incumbent Sri Lankan regime of President Maithripala Sirisena and Prime Minister Ranil Wickramasinghe against the decade-long reign of former President Mahinda Rajapakse – who was voted out of power in January 2015 – was grandiose corruption, lack of accountability and transparency, and concentration of power, especially in the post-war years.

But the one-year-old yahapalanya or good governance regime has to answer to many of the same allegations over the 65,000 houses project. The man at the centre of the controversy is DM Swaminathan, the minister who presides over resettlement (as well as prison reforms and Hindu) affairs.

Corruption allegations?

Despite the construction of thousands of houses since the end of the war, Sri Lanka’s North and the East face a significant shortage of permanent houses – 137,000 according to one official estimate. The people still in camps in the North due to the continued military occupation of lands, landlessness, and the challenges of return after years of displacement during which time families expanded, are among many pertinent issues that need to be discussed when considering the question of housing.

In reality, post-disaster or post-war housing is not simply about building permanent shelters but rebuilding communities as well as the local economy. It is now axiomatic that a high level of participation, community mobilisation, socially and environmentally sensitive innovation and design, and maximising local economic integration are key to sustainable and successful post-crisis housing and reconstruction.

None of these principles are reflected in the 65,000 houses programme. In fact, there is no programme or scheme at all – though it seems elements of it are being made up in the face of public outcry. It is not clear how the number 65,000 was arrived at in the first place or exactly which sections of the population it targets.

There was however a bidding process. A call for expressions of interest was issued on October 4, 2015 and final bids were opened on December 28, 2015 – a very small timeframe for a project of this magnitude. But local construction industry sources said that process and all the bid pre-qualification requirements were “designed to prevent open transparent bidding” and “earmarked for a company of its [the ministry’s] choice”.

Most parties shortlisted for the final bid process, including China-backed companies, appealed for an extension of the December 18, 2015 deadline for the submission of final bids to late January 2016, to allow them to submit the financing proposals. But the deadline was extended only up until December 28, effectively only by three working days. Somewhat unsurprisingly, it turned out that Arcelor Mittal’s was the only bid that satisfied all the criteria.

But even before the final bids were opened, the resettlement minister had openly come out in favour of Arcelor Mittal. Company officials were rolled out the red carpet when they visited the North – so much so that one diplomat told this correspondent that he had mistaken the Arcelor Mittal delegation for an official European Union delegation. Civil society groups and experts noted that minister Swaminathan had referred to Arcelor Mittal’s pre-fabricated houses as the best solution in meetings with them even while the tender process was on.

MA Sumanthiran, a Tamil National Alliance member of parliament, went on record to say that as early as August, the minister had told them “a French company would be getting the contract”. It was “a mockery of the tender process”, “a sham”, he said.

A recent media report alleged that Ravi Wettasinghe, who was arrested early last year on charges of fraud, is acting as Arcelor Mittal’s agent in Sri Lanka.

Selling a lifestyle

Faced with criticism, minister Swaminathan, Arcelor Mittal and their backers came up with the idea of installing two model houses in Jaffna, the capital of the Northern Province. The houses – complete with pantry fittings, a gas cooker, furniture, solar panels, a computer and Wi-Fi – have been widely advertised by the resettlement ministry. But rather than an appropriate housing solution, what is being sold is a lifestyle.

Solicitous full-page newspaper advertisements (like the one above) have been taken out and application forms are being distributed. It is ironic that those who, while in Opposition, were cynical of the Rajapakse regime’s relentless packaging of development as theatre are now resorting to the very same strategy of show-and-sell. Lost are many crucial facts, including that:

• Contrary to assumptions of every other traditional technique being slower, 44,000 houses have been constructed in Lanka’s North and East under an Indian Housing Project alone since mid-2012. That project uses a range of different techniques, has multiple implementation partners and, most importantly, an owner-driven approach. Of course there were problems and shortcomings but rather than learn from them, the government of Sri Lanka has chosen to embrace Arcelor Mittal.
• Arcelor Mittal’s houses are priced at Rs 21 lakh (Sri Lankan rupees) while every other estimate for a similar-sized basic house, kitchen and toilet included, do not exceed Rs 10 lakh per house. To justify the cost, various extras, including the provision of furniture as part of corporate philanthropy, are being thrown in. No detailed cost estimates or bill of quantities is available for the houses Arcelor Mittal will construct. 
• 0 0 1 64 365 Braganza 3 1 428 14.0 Normal 0 false false false EN-US JA X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin; mso-ansi-language:EN-US;}  The latest freebie on offer is a tube-well with each house. Digging 65,000 tube-wells could be disastrous, especially in the Jaffna peninsula. Ground water reserves are so fragile that excessive drawing of ground water has already resulted in over 30% of wells becoming saline and unusable. But none of this is being considered. 
• Slicing up the project into smaller sub-projects could have attracted domestic companies and also ensured healthy competition between different providers offering different housing solutions. Doing so would also open different avenues for financing while also spreading risk. 

As a group of eminent citizens pointed out in an open letter to Prime Minister Wickramasinghe, relying on the one-size-fits-all approach and “a single contractor privileged through what appears to be a questionable procurement process poses significant social, political and economic risks”.

Good governance belied

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.

One engineer, reflecting on the model houses, asked why the people the houses were being constructed for weren’t part of the discussions in this housing project. “Could we have discussed the alternative options available with all those concerned, in particular the homeless people?” said the engineer.

The very questions that were asked of the previous Rajapakse government have re-surfaced. For war-affected communities in Sri Lanka, the more things change the more they seem to remain the same.