Financial Times

Serious problems in road and transport infrastructure

Concerns about signals of a possible downturn in the construction industryhave brought together key players in an effort to attract greater private sector investment through new and innovative strategies. At a seminar on the importance of transport infrastructure for national development organized recently by the Chamber of Construction Industry (CCI), its CEO and Secretary General Mr. Dakshitha Thalgodapitiya said the construction industry, as a driver of infrastructure development, has to find new financial mechanisms and create a conducive environment for private sector investment.

Minister of Enterprise Development and Investment Promotion Dr. Sarath Amunugama said the government is committed to infrastructure development as a basis for growth in Sri Lanka. However while global economic giants like China have made tremendous investments in infrastructure based on the surplus of the private sector where every corporation has to give 30 % of its annual earning for infrastructure development, its methods are in stark contrast to Sri Lanka's which has followed a strategy of concessionary funding due to its inability to generate a domestic surplus. He saidChina's measures are drastic but necessary.

Foreign direct investments (FDI's) in addition to concessionary credit are the two ways in which Sri Lanka funds its infrastructure development projects. Dr. Amunugama said FDI's which increased to US$748 million in 2007 from US$400 million the year before is expected to reach US$1 billion in 2008. He said Sri Lanka has been successful in getting foreign aid from donors such as Japan and more recently from China and Iran.

However, Dr. Amunugama said roads and transport infrastructure face several problems. He said the provincial council roads are in a disastrous state and there are huge demands to increase Pradeshiya Sabha roads which require intense planning. He said those roads are currently being handled by incompetents who are running a racket where not even 50 % of the funding is actually being used for development.

Dr. Amunugama added that less than 25 % of the work planned for 2008 has yet to be completed because the funding has not been forthcoming and the high interest rates. The main roads and the provincial council and village roads have yet to be integrated. He said the government can raise the funds but there continue to be big problems with implementation.

Country Representative for the Asian Development Bank (ADB) Mr. Richard Vokes said the national and provincial roads are in poor condition. While the maintenance of road networks is a major challenge, it is also a huge priority. He pointed out that traffic levels exceed present capacity and there is limited connectivity in rural areas where 80 % of the population can be found.

Mr. Vokes did say that Sri Lanka has a substantial road network, one of the highest in the region. The ADB has granted 10 loans for road section development amounting to US$645 million since 1985. He said infrastructure development is a vital contributor to national growth and poverty reduction.

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