Volkswagen affair: German embassy played significant role until project went awry

German car maker never planned to invest here


By Shamindra Ferdinando

Board of Investment (BoI) chief attorney-at-law Upul Jayasuriya has said that German embassy in Colombo had been directly involved in abortive bid to bring in German car maker Volkswagen, though the diplomatic mission sought to distance itself from the project.

Appearing on ‘Face the Nation’ on TV 1 Monday night, Jayasuriya said both German Ambassador Dr Jurgen Morhand and deputy head of mission Dr Michael Dohmen had been involved in talks beginning early 2015. German Ambassador Morhand had been personally involved.

In fact, Dohmen had been present when the agreement on the Volkswagen’s entry into Sri Lanka was finalis ed on Aug 13, 2015, Jay, asuriya said.

Jayasuriya made available a picture of himself with Noel Selvanayagam of Senok Trade Combine (Pvt) Limited and Dr Dohmen taken immediately after signing of the agreement.

Jayasuriya said that as Senok had represented Volkswagen in Sri Lanka and entire investment was to be made by it, the BoI hadn’t been in direct touch with the European car maker.

Jayasuriya asserted that Volkswagen abandoned the project after being found guilty of cheating in emission tests and having to pay massive damages.

Responding to questions from the TV 1 team, Jayasuriya acknowledged several weeks before the laying of the foundation stone for the new factory at Kuliyapitiya on January 3, 2017. The BoI had entered into what he called a supplementary agreement with Senok now named Western Automobile.

Jayasuriya said that that those involved in the project were the same though the name had been changed.

The former President of the Bar Association of Sri Lanka (BASL) said that the local investor had made USD 25.5 mn investment though it couldn’t be considered foreign direct investment.

Jayasuriya told The Island that even if Volkswagen hadn’t been embroiled in controversy and suffered severe losses, the investment would have been made by Senok.

TV1 team repeatedly pointed out that the BoI had conveniently failed to tell the public of the signing of a supplementary agreement with Western Automobile. Interviewers also repeatedly asked Jayasuriya to explain how the investor had raised USD 25.5 mn, though the BoI chief emphasized that they were only interested in receiving investments. Jayasuriya asserted that the BoI couldn’t be expected to take up the responsibility of the Central Bank in checking origins of funds.

Jayasuriya denied 100 acres had been handed over to Western Automobile. Acknowledging that only 25 acres had been given to the investor, Jayasuriya said that initially vehicles would be assembled for the local market. The attorney-at-law compared the proposed operation with the on-going Micro project as both catered to the local market.

Jayasuriya expressed the belief that Western Automobile could export vehicles assembled here. The TV I team pointed out that a major plant in Pune, India produced Volkswagen vehicles, therefore foreign buyers were unlikely to seek cars assembled here.

Urging the media and people with vested interests not to undermine the government efforts, Jayasuriya said that AMW, local agents of Suzuki, too, had indicated interest in setting up a plant here.

Responding to further questions, Jayasuriya said that Western Automobile had been given tax holiday as it was considered a Section 17 project.

However, the TV1 team pressed Jayasuriya over the BoI’s failure to secure a fresh agreement sans tax holiday in the wake of amendment to the original agreement. Jayasuriya insisted that the new arrangement would produce desired results. However, in case the investor couldn’t go ahead with the project there was provision for cancellation of the agreement, the BOI Chairman said.

According to him, the German embassy closely worked and collaborated with the Volkswagen project until it went awry due to reasons beyond Sri Lanka’s control.

Deputy Foreign Affairs Minister Dr Harsha de Silva is on record as saying that the Volkswagen project had got underway following him meeting Ambassador Morhand shortly after last presidential polls in January 2015 (during yahapalana government’s 100-day project). The UNPer quoted the German ambassador as having told him that Volkswagen had been trying to secure land in Sri Lanka since 2008.

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