Transport corridors and elephant corridors
View(s):I was in the audience, participating at a public seminar on “Evaluating Millennium Challenge Corporation (MCC) Compact grant to Sri Lanka”, organised by the Pathfinder Foundation. A few participants from the audience expressed their concern, commenting on the MCC Compact grant.
One of the participants gave his reasons to oppose: “The proposed Colombo – Trinco transport corridor is going to cut across our elephant corridors, disturbing the country’s wildlife”. There was laughter in the audience.
Another participant expressed his dissatisfaction over the same: “This corridor with an ‘electric fence on either sides’ is going to divide the country physically into two pieces”. According to another comment, this is more than a transport corridor with which people will lose their land rights from Colombo to Trincomalee along the corridor.
The allegations against the Colombo – Trinco transport corridor has been one of the influential comments over the MCC Compact grant that has gone viral during the past few months in our local media, including social media and political forums: “The country is divided between South and North with a proposed Colombo – Trinco high-speed railway link”. According to one of the social media remarks, which has gone even beyond that, “Sri Lanka has to offer 1.2 million acres of land along the Colombo – Trinco economic corridor to the US for a lease period of 200 years and that the US law must prevail within this corridor”.
No connection
A few weeks later, I had an opportunity to sit with Jenner Edelman, Sri Lanka Resident Country Director of the MCC. We had lots of time to talk freely about the MCC agreement.
I told her: “I don’t understand this ‘Colombo – Trinco transport corridor’ and the MCC agreement. Is there a connection between the two?”
“Absolutely, no!” She laughed and replied: “Neither did I understand this connection, because any Colombo – Trinco transport corridor is not part of the MCC Compact agreement. I later came to know that a transport corridor as such has been there in Sri Lanka’s National Physical Plan, which has nothing to do with the MCC Compact.”
MCC Compact is a bilateral grant of $480 million from the US to be utilised for two projects within a period of five years. Out of the total grant, $350 million is for the first project to modernise the public transport system and infrastructure in the Colombo metropolitan area, while $67 million is for the other project to modernise and computerise spatial data and land titles of the entire country.
The balance is for the project administration. According to the estimates, both projects are intended to derive sizable economic returns too. After all, it is a “grant” that Sri Lanka does not have to worry about paying back.
There is also concern about the condition of international law over-ruling the domestic law. There is nothing new about this condition.
International businesses and transactions including foreign investment, foreign loans and grants, are all usually governed by the international law, and not the domestic law. And this is also not the first time that Sri Lanka has the issue of complying with international law.
Two bullet trains, interchanging at Urasa on Tokyo – Niigata electric railway track. Pic by Jay Rajasekera.
Morning tea on track
Before we turn to the MCC and its Compact grants, I need to say a few words on the Colombo – Trinco transport corridor. I remembered that one day, I had to answer the same question asked by a student during one of my lectures: The issue of dividing the country into two sides by the Colombo – Trinco railway link!
I answered with an example, which I was familiar with: Tokyo is located on the Eastern coast of Japan, and Niigata – another Prefectural city with a port, on its Western coast; probably the distance between the two cities must be about 500 km. There is a high-speed railway line between the two cities, on which the bullet train takes less than two hours to complete the journey; no one has access to the bullet train track. And the point I wanted to emphasise was that, this train track has not divided the country or the people, but actually connected them with a fast and safe mode of transportation!
If there is a high-speed railway link between Colombo and Trinco, it would accelerate income growth and job creation, bringing about economic benefits to people. The lack of connectivity is one important bottleneck that has kept regions and people divided in Sri Lanka.
Obviously, you can’t sit on a railway track as such and enjoy your morning tea, or gather in between the two tracks for your evening gossip – the trains might be running at 200 km an hour to complete one journey in two hours between Colombo and Trincomalee
The National Physical Plan of Sri Lanka (2010-2030) portrays the development of five metro regions in the country, where half of the people would concentrate by 2030. Apart from Colombo, the emerging metro regions have been identified as Hambantota, Batticaloa, Trincomalee and Jaffna.
Even though there is no economic explanation underlying the formation of these metro regions, they are planned to be well-connected with transport corridors; the Colombo – Trinco transport corridor has been one of them too, but it has nothing to do with the MCC Compact grant.
MCC Compact grants
Throughout its 15-year old history, the MCC has provided $13,000 million Compact grants to 30 countries worldwide – Africa, Asia, Europe, and Latin America. The average size of a Compact grant is about $500 so that what has been approved for Sri Lanka is considered to be one of the biggest grants by size. The objectives of the Compact grant is related to poverty reduction through economic growth.
The first Asian country to receive the MCC Compact grant was the Philippines, which received $434 million in 2010. The second country was Indonesia which received $588 million in 2011; after the successful conclusion of the project, Indonesia has applied again for a second Compact grant in last December 2018. The third Asian country was Nepal which has received the Compact grant of $500 million in 2017.
The applying countries are selected for the grant on the basis of their score over a set of indicators under three headings: Economic freedom, ruling justly, and investing in people.
(1) Economic freedom is evaluated on the indicators related to access to credit, business start-up, fiscal policy, gender in the economy, inflation, land rights, quality of regulations, and trade policy.
(2) Ruling just is based on indicators showing rule of law, political rights, government effectiveness, freedom of information, control of corruption, and civil liberty.
(3) Investing in people is based on the indicators of child health, female education, primary education, health expenditure, immunisation, and natural resource protection.
Last opportunity
The MCC Compact grant agreement is, however, not yet signed by Sri Lanka. If the signing of the agreement does not take place before the due time, the Compact grant will be cancelled too – not temporarily, but permanently.
The upper-middle income countries are not eligible to receive the MCC Compact grants. As of July 1 this year, the World Bank classified Sri Lanka as an “upper-middle income” country, because the country has surpassed the threshold of $4000 per capita income level. By that time, however, the Compact grant has already been approved by the MCC.
What this upper-middle income threshold really tells us about the “prosperity” of the country or the people, is entirely a different issue. It, however, means that Sri Lanka is no longer eligible for the grant, making it the “last opportunity” for Sri Lanka.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk).