Way forward in developing Sri Lanka’s infrastructure
Infrastructure is a vital component and the foundation and catalyst of any economy. Nowadays most of the governments, by themselves, cannot afford building infrastructure due to its huge cost. Not only building it but also maintaining it is a challenge for government bodies that have been showing inefficiencies, corruption, political decision-making, etc. Therefore, fixing the problems, easing the government burden, improving efficiency and getting rid of political engagement, new modalities of infrastructure financing, provision, operation and maintenance has been taking place in many parts of the world e.g. public-private partnerships (PPP). The synergy of both public and private parties is being used for these interventions. Both parties’ strengths and weakness could be harmonised in a reciprocal way while deriving the new synergies.
File picture of cars at Hambantota port
When the private sector is engaging with public sector, both parties’ obligations, rights and motives have to be safeguarded. To do this, different options are available as the existence of a regulator or regulation by contract for ensuring the above requirements. The existence of an independent regulator is a good prerequisite for private sector engagement in infrastructure.
The South Asia Gateway Terminal and Colombo International Container Terminal are examples of PPP in Sri Lanka. They are examples for regulation by contract as there is no regulator in the port sector. The opening of the telecom industry to the private sector with the establishment of the Telecommunication Regulatory Commission is another instance which attracted private sector investment for expansion of service coverage under different operators by creating competition and improving the quality of service at affordable prices to the customers.
Strategic location
How to exploit Sri Lanka’s strategic location as a hub economy must be a very concise exercise. Presence of quality infrastructure and making strategic business partnerships, improving ease of doing business, improvement of efficiency and effectiveness in all the systems are some areas which help in seeking the right location. As a country, we don’t have capacity for developing these infrastructures and exploit them in a way as they need to be for competing in the regional business context and for this we need to find the right partners. The question is, can we find the best business partners by going on a geopolitical basis the way we are proceeding now? Why are we choosing only between China and India? Are our politicians going to put this country into a big trap? Maintaining a neutral position, finding partners for investment and development of our strategic infrastructure on a competitive basis from among the world is very vital need for the development of this country. It is not a matter of nationality, but of finding the best business partners for our economic development.However, our politicians have failed to find the best business partners, irrespective of geopolitics, but on a competitive basis and in a transparent manner.
Ports and Kra canal
Because of its location, Sri Lankan ports are very important assets which can determine the economic development of the country to a great extent.
The development of the main three ports Colombo, Hambantota and Trincomalee will need the right vision towards achieving its location advantage. Having a port sector regulator or means of regulation and finding the best and most suitable private players are essential. Terms and condition of these partnerships are very important aspects for both sides. In the negotiation process, the power of location advantage considering the supply chains as well as gaining logistic capability of this country is immense and which should not be forgotten for any other thing.
The construction of the “Kra Canal”, also known as “Thai Canal” had been proposed a long time ago, though it has not up to now materialised. Recently there were reports that construction of the Kra Canal might begin soon. If this happens all ships passing through the Malacca Strait could avoid this stretch and go through the Kra Canal as it is shorter in distance.
In that case some of the shipping lines may not call at the port of Singapore and then Sri Lankan ports could get opportunity to emerge as a big hub. However, we cannot expect it in simple terms, because of Singapore’s logistic capability and status of Singapore as a one stop shop for all kinds of port activities which cannot be gained by Sri Lanka in a short period. In such a case it has to be a gradual shift from the existing status.
If we are in that direction, the development of the port sector in this country should be a thoughtful exercise. Development of policies, programmes and projects are needed to develop the port sector with the best private sector partners irrespective of geopolitics. If we are proceeding the way we are moving now, Sri Lanka could become a hub of the battle for big powers.
Oil tanks
Recently there was a big controversy over the development of the long-abandoned tank farm at Trincomalee with an Indian party. Every government should be blamed for its non-development. There are many questions on the presently proposed deal, as one sees it on the surface. Does the existing Indian operator have a proper agreement with Sri Lanka for operating the assets that it is operating now? Does it have the proper regulatory mechanism, competitive price and required technical regulations, etc built in to the existing agreement? What is the proposed JV for operating additional tanks, their terms and conditions, etc? Are they in line with the country’s macroeconomic objectives and considering the bigger picture than taking decisions in isolation? Isn’t there any possibility that additional tank operations could lead this Indian firm to become a monopoly in the sector? Energy is the critical ingredient, as it is a factor of production which could even control FDI flows into this country by controlling energy prices.
Moreover energy could control many competitive advantage areas of this country. As we are aware, India is controlling some regional neighbours in a big way through monopolistic powers. If things are not rolling in the right way, then at the end of the day, we will also be in the same kind of trap.
Therefore, development of these assets is very crucial and finding the right partners should be on a competitive basis using transparent procedures than geopolitics.
As Robert D. Caplan explained in his book “The Monsoon”, the balance in the global geopolitical powers will be decided by the Indian Ocean region.
Therefore, doing business as a business and not based on the geopolitical base is very vital. Instead of finding just investment partners while signing an agreement between countries, Sri Lanka must adopt transparent business procedure for finding the right business partners under regulatory frameworks.
We trust our politicians have such wisdom and courage. The people of this country will not object to the development of these assets. Their concern however is, the way of doing things and ensuring that future generations won’t be put into trouble by entering into dubious contracts and agreements.
| IESL contribution to development | |
| This is part of a continuing series in the Business Times by the Institution of Engineers of Sri Lanka (IESL) where its members share their thoughts and views on matters of national importance. The writer is a Chartered Civil Engineer and member of the IESL Council. He can be reached at mg_hdra@yahoo.com. |