Why the Education City project was controversial from the start

The Education City project unknown to most Bhutanese originally was thought up and planned by the Royal Education Council as early as 2007.

The newly formed REC underwent a lot of consternation when its mega project idea was not accepted by the new government in 2008.

Coincidentally a year later in December 2009 the project hit the public spotlight when the former Prime Minister’s nephew who represented Infinity in Bhutan said that the Calcutta based company Infinity wanted to start a USD 1 bn Education City project in Bhutan. In the interview with the same reporter and in response to a question the nephew revealed that the Prime Minister’s son was also working in the project.

He said that in June 2009 the company had already approached the Ministry of Economic Affairs. The government had already authorized the setting up of an inter-ministerial committee under the MoEA Secretary Dasho Sonam Tshering.

On February 17, 2010 a cabinet website press release said, “The cabinet has approved giving about 1,000 acres of land to DHI to be used as equity grant in the proposal to build a knowledge city in Bhutan by the Indian-based company, Infinity Techno Parks.”

This announcement went against the government’s own plans to come up with a Public Private Infrastructure (PPI) framework and then allot land as per the framework. Later when the PPI framework was put up in cabinet a backdoor entry was given to Education City where some project proposals could be green lighted without going through tendering if the

cabinet though them to be very good.

Infinity after this writer’s investigation in another private paper was found to be just a Nu 10b company and their experience was is in information technology with no experience in education city or even colleges. Infinity’s 12 commercial projects mostly comprised of single or double multistory buildings in different locations mainly in and around Kolkata.

Soon after controversies followed the project as questions were raised over transparency in the project, the inherent conflict of interests, the capacity of the Infinity and the potential impact of the project. The Opposition leader who is now the Prime Minister also openly questioned the project and its conflict of interest with the former PM.

The government then announced that DHI would go on a ‘road show’ to attract possible bidders for the project. According to DHI Infar officials many international companies were interested but only on the condition that the existing 30 percent commercial area be increased to 40 to 50 percent. DHI following government guidelines flatly refused. As a result it was left to only ILFS and Infinity to bid together and take the project.

However, the concessional agreement signed between the ILFS/ Infinity consortium and the former government gives space to the Bhutan Education City Board headed by the former MoWHS minister to increase the commercial space in the future.

This got highlighted in the recent DPR report on Education City which proposes building 699 luxury villas each with a size of 0.5 acres to 1 acre coming to 350 acres to 699 acres leaving hardly any land or no land for the Education City turning it from an Education project to a real estate project. These properties were to be built for rich tourists wanting to stay in Bhutan. The original project planned to have a built up area of 500 acres and 500 acres of green area.

After the bid the government was no longer taking a 30 percent equity stake in return for 1,000 acres as originally planned. Instead a 2.01 percent of the revenue and a Nu 10 mn annual land lease fee were agreed too along with 50 acres of land to be given to the government as space.

The government also allocated around Nu 470 mn to be spent over the next three years in providing facilities like road connectivity and water facility for the project. Of this Nu 130 mn has already been spent so far.

The project and the institutions in it have been granted a 100 percent tax holiday till 2030. By contrast Special Economic Zones in India give only a five year complete tax holiday with a 50% tax holiday for the next 10 years.

Project Viability

The failure of the IT Park, a project similar to the Education City, to attract investors and generate profit has generated concerns on the viability of the Education City project.

The project which is aimed at attracting numerous top notch universities and schools till date has not even been able to attract a medium grade college or school to commit to the project.

As evidence that there is interest in the project the government has pointed to and cited Memorandums of Understanding (MoU) signed with IIM Ahemdabad, Columbia University, Rafels Institution and TERI.

However, these two or three page MoUs are not legally binding documents and focus mainly on establishing short term courses in Bhutan.

For example as per the MoU IIM Ahemdabad will have annual two week management training programs in Bhutan.

As regards to the Education City the MoU with IIM Ahemdabad says, “ IIM Ahemdabad and DHI Infra are to consider collaborating in setting up a program/college or an IIMA branch institute in the upcoming Bhutan Education City.”

Even the project management earlier admitted that the MoUs so far only showed potential interest with no concrete assurances. They management said that would see how the City comes up, maybe do a few pilots and then decide.

Recently even the project management said that there were expressions of interests from Universities in USA, Australia, Japan and India.

However, here again the expressions of interests are not legal or financial commitments to build or invest but an exploratory interest in a project.

For example DHI Infra had approached around 18 major companies like HCC, Tata, Lanco Infrastructure, Ambuja, Mahindra, Everon, Simplex, Gammon, L&T, Jaypee, Kapel, ILFS many of whom had shown initial ‘interest’.

In the end it was only a consortium bidder of ILFS and Infinity which took up the Education City project.

Location Controversy

The Bhutanese in an earlier investigation also found that several ministers and key government officials involved in the project would indirectly benefit from the current location of the Bhutan Education City project.

The former Education Minister’s wife had bought a 50 decimal land with the full knowledge of the former minister just near the project site in June 2012. The former PM owned under seven acres of dry land in Selekha which is opposite the Education City site. He had brought the land in 1978 from a local farmer.

A few meters below the Ex-Prime Minister’s land, the former Works and Human Settlement Minister’s wife owned 14 acres of apple orchard land. The land in question was her own ancestral property inherited from her parents who were a prominent family in the area.

The former Speaker owns 7.40 acres of dry land next to the Education City site which he had bought in 1978.

The Education Secretary owns 2.70 acres of land right opposite the site with the bridge to the City starting from near her land. In her case too as the sister of the MoWHS minister’s wife the Education Secretary inherited the property from her parents.

The Bhutanese, found that except in the case of the Speaker all other landowners in the site have had major roles in approving the project, finalizing the Education City site and also the Nu 479 mn government budget for infrastructure works.

Many possible areas had been looked at in Punakha, Wangdue Phodrang, Bumthang, Paro, Thimphu Dzongkhag and Tsirang.

The empowered group headed by the former MoWHS Minister settled on the current site.

Land legality Controversy

The issue over the legality of the Education City project land cropped up only around September 2013 when the National Land Commission said that the project land was illegal and could thus not be allotted.

Following this media controversy the new BEC Board Chairperson officially enquired with the NLC on behalf of the BEC Board. The NLC responded with a detailed letter on 9th January 2012 addressed to the government saying why the land was illegal and could not be allotted to the project.

Despite another enquiry from the government this stand was reiterated by the NLC on 14th February forcing the cabinet’s hand to cancel the project (see main story).

The NLC letter says that the project directly contravenes Section 308 of the Land Act 2007 which states that the duration of the lease shall not exceed 30 years. It says the provision to aggregate three consecutive terms of 30 years lease period also pre-empts Section 310 of the Land Act and Section 38 of the Rules and Regulations for Lease of Government Reserved Forest Land and Government Land.

The letter also says that the Commission has been informed by the MoWHS Minister via a letter dated on October 4, 2013 that the project would be given on lease to the developers who would further sublease it to the operators. It says this contradicts Section 251 and 265 (a) of the Land Act 2007 as no sub-leasing is permitted.

The letter says talks about commercial activities including the proposed construction of luxury villas and resorts within the proposed Education City where 30 percent or more of the land is a commercial area. The letter goes on to states, “This deviation from the core businesses contradicts the Land Act 2007 which promulgates allotment or lease of land for specific purposes.”

The letter also says that the project does not have the authority to keep 500 acres green area which under the Land Act is government property.

The letter also says that the preliminary approval given by the NLC in November 2011 for processing formal land allotment to the MoE cannot be misconstrued as approval for the registration as it entails preparations of a detailed report as per Sections 201 and 202 of the Land Rules and Regulations.

It accuses the MoE of trying to go against the spirit of the land laws by proposing freehold allotment, primarily with the intention of bypassing the restrictions of leasing and subleasing.

The letter says the Chairman of the BEC, the former MoWHS Minister, requested the NLC via a letter in December 2012 to register 1,000 acres of land for the Education City in the name of the BEC board instead of the MoE. It says, “Therefore, the preliminary approval accorded for the Ministry of Education as highlighted above and thereof any commitments stand null and void.”

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