Financial Times

Senga described the Southern Transport Development Project (STDP) as enormous in magnitude and importance. The STDP will be the country’s first major expressway being constructed from Colombo to Matara, stretching to a length of 128 km. It is expected to cut travelling time to under two hours from the current five hours. The expressway is set to be built in three stages and due for completion in 2010.

The Asian Development Bank (ADB) has streamlined its Sri Lankan portfolio following the visit of a high level mission led by ADB’s Director General for South Asia, Kunio Senga.

“With the decisions made during this mission, $41 million of our concessional funds have been reallocated, primarily to cover the requirements of the expansion of water supply and sanitation systems in Polonnaruwa, Muttur, Batticaloa and Hambantota,” Senga told reporters last week.

The visiting team worked closely with the Sri Lankan government to identify close to $71 million of projects which were cancelled or reallocated in an attempt to upgrade its portfolio. The delegation which included Alessandro Pio, ADB’s Country Director for the Sri Lankan Mission worked with Treasury Secretary Dr. P.B.Jayasundera on restructuring its projects.

The organization’s portfolio includes several projects in the areas of tsunami reconstruction and rehabilitation, housing and community development and reconstruction, water supply, road reconstruction, southern coastal resource development, northeast coastal community development, rural finance, legal assistance and governance, and income generating opportunities for the poor. Senga said the ADB’s active portfolio in Sri Lanka stands at 51 loans and grants totalling $1.6 billion. The mission identified valuable savings and resources which would be reallocated within the projects or to other sectors identified as priority areas by the government.

The ADB has several ongoing rehabilitation projects in the northeast and Senga expressed concern about the recent intensification of violence and the challenges in implementing projects there. But he said there was no correlation between the current situation and the allocation of funds for projects.

The northeast is a priority area set by the government and the ADB and so far, no projects have been altered or cancelled.

The ADB is currently spending a considerable amount of time on the implementation and design of a Jaffna water supply project which the mission hopes can be completed expeditiously.

Pio said the nature of most of the projects in the North and East are small scale community projects such as the construction of healthcare centres and schools.

He emphasized the importance of the continuation of these projects as they contribute to maintaining a sense of normalcy in the region by minimizing displacement and employing local contractors and workers. Any disruptions or cancellations of these projects would leave them unemployed.

Speaking on the power sector development, Treasury Secretary Jayasundera said considerable improvement has been made by ensuring that the country has an active and cost effective portfolio.

“We have created an enabling environment for projects that are manageable and we want to build projects, particularly in the area of infrastructure,” he said. The Secretary said the expected power shortages forecasted for 2009, 2011 and 2012 has created the pressing need to concentrate on the immediate challenges in the power sector plan.

There are several issues pertaining to the distribution and transmission of power which needs to be addressed but the Secretary said he wants to primarily focus on generating reliable electricity.

“We don’t want to impose reforms unless they are workable,” he added.

A significant development is the cancellation of a $30 million second tranche of the Power Sector Reform Program. Director of South Asia Energy, Thevakumar Kandiah said this decision had been postponed several times. “We remain convinced that increasing the power generation capacity, addressing institutional reforms and restructuring the finances of Ceylon Electricity Board (CEB) are much needed for the financial sustainability of the sector.” Kandiah said that because of the importance of the sector and the commitment of the government to reforms, the ADB is ready to continue their discussion with the government on the way forward that will allow all three issues to be addressed.

It is expected to cut travelling time to under two hours from the current five hours. The expressway is set to be built in three stages and due for completion in 2010.

The expansion of the Kurundugahahetekma to Matara section to four lanes from the current two lanes is now under review. Director of South Asia Transport and Communication, Kazuhiko Higuchi said they are assessing the technical, financial and economical aspects of expanding the expressway to four lanes through the deployment of a fact finding mission, the results which should be available in September.