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Harsha clarifies on Volkswagen debacle

Deputy Foreign Minister Harsha de Silva issued a personal clarification regarding the Volkswagen deal, in which he detailed why plans with that car manufacturer did not go ahead.

In a evidence based, fact-filled message posted on Facebook the Deputy Minister said,

‘1. Given I was responsible for the initiation of this project I would like to place the following facts before the public.

2. In my new job as the Deputy Minister of Policy Planning and Economic Affairs I met with the then Ambassador of Germany HE Dr Jurgen Morhard in Early January 2015. At this meeting the Ambassador indicated that Volkswagen had attempted to set up a plant in Sri Lanka since 2008 but failed due to ‘various’ reasons.

3. I indicated to him that we would be delighted to have VW set up a plant in Sri Lanka and we initiated discussions between the Government and the company.’

Of the signing Deputy Minister de Silva said,

‘1. Having initiated the possible investment, HE the Ambassador and I moved out.

2. We were told the discussions continued among the various stakeholders locally. We were informed that Volkswagen’s local agent Senok Automobiles representing the carmaker negotiated terms with several government authorities to get necessary clearances.

3. In mid-August 2015 BOI and Senok Automobiles signed an agreement to establish an assembly plant for VW in Kuliyapitiya.’

The Deputy Minister quoted the German Embassy Deputy Head of Mission Dr. Michael Dohman as having said during the signing ceremony in August, “It is important for the German Embassy to have a big company like Volkswagen in Sri Lanka. Germany is always talking to enterprises to attract them here. People will have to be trained and educated, and many other components are needed, so it will boost the local economy,”

On why the deal did not go through, Deputy Minister Harsha de Silva offered this argument:

‘1. In just a matter of a couple of weeks after signing the agreement, on 3 September 2015, Volkswagen, after months of denial, admitted to the EPA in the US that they had cheated on emissions tests on some of their diesel models in the US. On 18 September 2015, the EPA went public with this admission of guilt.

2. Soon thereafter the VW stock crashed and the senior management was fired. Later some 30,000 jobs were cut and it has thus far cost the carmaker some US$ 18 billion in losses.’

The Deputy Minister said that in Sri Lanka,

‘1. This scandal that rocked VW was a complete shock to everyone, obviously including us in Sri Lanka. Apparently Senok Automobiles who had signed for VW had attempted to save the agreement and continue with the investment as planned.

2. However, at one point, I believe after much negotiation, the Government had decided it would be better not to go with a dedicated VW assembly plant due to possible legal issues that could crop up due to the massive fallout from their emissions scam. This we knew today when the PM explained the sequence of events to us.

3. Given the BOI agreement had still been in place with Senok Automobiles for the original VW assembly I understand that they had rescued the project by agreeing with the BOI to go ahead to establish the plant to assemble various makes of European automobiles.

4. It had been for this assembly plant, renamed Western Automobile, the foundation stone laid for an automobile assembly. At no point at the foundation laying ceremony (which I could not attend) had there been any mention of the plant being for VW.

He adds further,

‘In fact since I moved out of my earlier portfolio of Deputy Minister of Policy Planning and Economic Affairs to the new one in the Foreign Ministry in August 2015, I had no dealings with the project and was sincerely unaware of the various changes until it was explained today. I would appreciate that fact be respected.

I hope the above explains the confusion and we as a country can be satisfied that the assembly plant is being established and many jobs will be created besides thousands of training opportunities for young people.’

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