26th October 1997

From Hambantota harbour will rise port city of Ruhuna

The Southern Region of Sri Lanka constitutes a vast untapped resource base covering over 12,000 sq.km. of the country. Blessed with diverse natural resources and a literate, enterprising and highly trainable workforce, the Southern Region of Sri Lanka offers a range of viable investment opportunities which, when coupled with the country's comprehensive incentives package assures excellent returns on any investment, says an SDA news release.

Given the potential of this region the President commissioned a task force in 1995 which was to pay special attention to formulating development strategies for, and directing investment to the Southern Region of the country. One year ago, an Act of Parliament created the Southern Development Authority of Sri Lanka (SDA) which has made the development of a port city central to its efforts.

Ruhunupura - The Port City of the next millennium.

The natural bay of Hambantota at the Southern tip of Sri Lanka is the most strategic location for a port. Directly intersecting trade routes between East and West . Hambantota is perfectly placed to cater to the 200 ships which bypass Sri Lanka daily during the 3700 nautical mile long voyage between Aden and Singapore.

With bunkering transhipment break-bulking, warehousing and redistribution requirements constantly increasing, the establishment of such a strategic harbour has been proved viable through initial studies of the Lanka Hydraulics Institute as well as an independent team of foreign consultants.

The harbour will give rise to the Port City of Ruhunupura spaning 68,000 ha of land (the present size of Singapore) . With its own airport, industrial parks etc., this city will be connected to the capital Colombo through a fast lane expressway and an electrified railway alongside which 17 urban centres will be developed.

In April 1997, the SDA advertised the development of the Port City and received responses from 84 companies from around the world. Short listing has now taken place and final bids are expected at the end of October for the port, the airport, power generation, an oil refinery, road and rail construction as well as water supply and other required amenities.

All these projects are to be developed in joint venture between the SDA (the state) and private investors/developers. A dual joint venture structure has been proposed where one will relate to a services company (i.e., port airport etc) while a related joint venture will deal with real Estate Development thereby assuring speedier returns to both parties.

Other projects

Besides promoting large scale infrastructure development associated with the port city, the SDA also actively promotes foreign investment within a wide spectrum of opportunity available in the Region. These span the plantation sector, fisheries, eco tourism and other industries.

With the world facing a shortage of various key minerals Sri Lanka's deposits of high grade Silica quartz at 99.8% purity is sufficient for the next 100 years. The deposits in the South have already attracted companies from the USA and the Far East. The processing of the Silica and the manufacture of microchips and other electronic devices for the world market. This will give rise to a Silicon valley similar to that in the USA.

At the local level, the SDA promotes entrepreneurial activity especially those of the young graduates of the area and has already assisted over 40 of these graduates to commence their own projects . Skills enhancement and technical training of the potential workforce has already commenced in lieu of the demands of future industries and other developments projected for the South.

The Southern Development Authority of Sri Lanka offers a novel multifaceted development and investment programme surrounding a strategically located undoubtedly viable Port City which will in turn generate economic gain and advancement for all those associated with the programme.

The unprecedented level of interest expressed by potential investors has required acceleration of the planned infrastructure programme. This will result in the rapid establishment of the new hub for Asia, Ruhunupura, the Port City in Southern Sri Lanka, says the press release.

G24 stresses on good governance

Following are extracts of the text (published in the IMF Survey) of the press communique issued after the meeting of ministers of the Intergovernmental Group of 24 (G24) International Monetary Affairs on September 20 in Hong Kong The Group of 24 was formed in February 1972 to represent the interest of the developing countries in negotiations on international monetary matters. The Group, which is not an organ of the International Monetary Fund develops positions to assist developing member countries in discussing agenda terms of the Interim Committee of the Board of Governors of the Fund on the International Monetary System. The Group's meetings usually take place before those of the Interim Committee:

Developments in recent years confirm the leading role assumed by the developing world in the growth of the global economy and its significant input to the expansion of world trade.

This increasing contribution reflects the stabilization and reform efforts that many countries have pursued in order to maintain sustainable growth with price stability.

Ministers consider that this trend of faster growth of the developing world, relative to the industrial countries, should be appropriately reflected in the decision-making processes of the Bretton Woods institutions.

Growth prospects in Asia are being affected by the adverse shock to the dynamic Southeast Asian region resulting from the recent turmoil in financial markets and by the effects of this turmoil on Japan's recovery, given that this region provides large markets for Japan's exports and capital.

While recognizing that domestic policy weakness contributed to this crisis, Ministers emphasize the need to acknowledge the role of speculative activities and other factors in the external environment that provided the backdrop against which the financial crisis spread, through contagion effects, to a number of countries both within and outside the region, including those with sound macroeconomic fundamentals.

Ministers underline the need to explore the interplay of domestic and external factors in the onset and containment of crises.

Ministers welcome the timely response of the IMF to the immediate problem in Southeast Asia and the substantial support package mobilized by Thailand's neighboring countries as a demonstration of regional solidarity.

The Emergency Financing Mechanism, established in the wake of the Mexican crisis, was activated to contain the crisis and underscore the need to set up complementary and coordinating mechanisms within the World Bank Group and regional institutions to expedite the processes for the provision of financial support.

Recognizing the potentially adverse impact of large fluctuations among the major international currencies on developing countries, Ministers consider it imperative that the IMF fully exercise its powers to ensure effective surveillance over the macroeconomic policies of the countries involved in the management of these currencies.

Capital Account

While recognizing the benefits for the world economy of greater freedom of capital movements ministers emphasize that the capital account liberalization process could put additional stress on the economies that are already straining to adjust to globalization.

Ministers agree that, in particular circumstance, precautionary and price-based measures could help countries protect economic stability and .sound macroeconomic management.

Ministers agree to support further work on that orderly liberalization of capital movements as prelude to any amendment of the IMF's Articles.

They emphsize the need for a progressive and flexible approach even under any transitional arrangements, to enable members to adjust the pace and sequencing of the liberalization of their capital account, in light of their policy, institutional, and financial conditions.

While reiterating that the IMF should play the leading role among international organizations in promoting capital account liberalization, Ministers call attention to the need for the IMF to avoid institutional overstretch, as well as duplication and potential conflicts with other relevant agencies and agreements.

They also emphasize the need for adequate technical assitance and financing assurances to help countries to move toward capital account convertibilitv.In addition, they stress that:

1) The liberalization of the capital account should not be made a condition for the use of IMF resources;
2) restrictions arising from measures taken by members for prudential and financial market development purposes should benefit from flexible approval policies; and
3) the treatment of foreign direct investment and restrictions for security reasons should be outside IMF jurisdiction.

Governance

Ministers reiterate their commitment to the principles of good governance, which include transparency, accountability, and the rule of law.

While noting the recent efforts of the IMF and the World Bank to clarify their potential roles within their respective mandates in the strengthening of governance and reduction of corruption at the national and international levels, they re-emphasize the need to avoid the application of conditionalities based upon subjective judgments in these areas and to ensure uniformity of treatment of members based on objective criteria.

SDRs and IMF Quotas

Ministers welcome the agreement reached on a common benchmark ratio of net cumulative allocations to Ninth General Review of Quotas of about 29.32 percent, designed to address the equity issue.

They emphasize that this one-time measure does not diminish or preclude the need for a general allocation.

In this context, they also welcome the automatic allocation mechanism for new participants and note the treatment of countries in arrears with the IMF. Furthermore, Ministers stress the need to strengthen the role of the SDR in the international monetary system and intend to explore proposals to this end.

Noting the rapid action by the IMF in relation to the financial crisis in Thailand, Ministers stress the need, as in the earlier case of Mexico, for IMF support involving exceptional access in terms of quota.

Ministers reiterate the need for a meaningful increase in quota, which should be predominantly equiproportional. In this context, Ministers endorse assurances regarding the maintenance of representaton of developing countries on the IMF's Executive Board and the modernization of the formulae for determining quotas in future reveiws.

Resources and Debt Issues

Negative developments occurred with respect to official development assistance (ODA), as evidenced by the proposed reduction in the level of commitments in Japan's aid budget, once the largest donor.

The percentage of combined donor GNP devoted to ODA has continuously declined over the past 50 years and in 1996 fell to its nadir.

Ministers emphasize the need to reverse this declining trend in order to help recipient countries alleviate proverty and reach sustainable growth.

In this regard, they commend Denmark's ODA efforts and welcome the recent initiatives by the United Kingdom to embrace the 0.7 precent of GNP target.

Ministers urge that intensive efforts should continue to secure adequate funding for (IDA International Development Association.).

Looking to the future, Ministers reiterate their request for an in-depth exploration of complementary funding mechanisms. They call upon the donor community to support the Partnership for Capacity Building in Africa Initiative in order to optimize the use of IDA resources.

Ministers urge that a consensus be reached without delay in the MIGA Board on additional operating and callable capital for enlarging its resources to support a ten-year underwriting strategy.

This would enable MIGA to continue to diversify its guarantee activities at a pace that responds to the growing involvement of the private sector in infrastructure and other projects in the developing countries.

Ministers express concern about the slow progress made to date in implementing the debt initiative for the heavily indebted poor countries (HIPCs)

While they note the preliminary agreements to implement the HIPC Initiative, they call for a timely finalization of those agreements in order to allow eligible countries to benefit from the initiative.

They appreciate the World Bank Board's recommendation to allocate an additional $ 250 million from the IBRD surplus to the HIPC Trust Fund to meet the Bank's share of debt relief, as well as the authorization by the IMF's Board of a transfer of up to SDR 180 million from the Enhanced Structural Adjustment Facility (ESAF) Trust Reserve Account to finance special ESAF operations under the HIPC Initiative.

Ministers reiterate their strong support for the continuation of ESAF operations and express serious concern about the lack of consensus on its funding modalities in the interim period (2001-2004).

They stress the urgent need for additional financing from the sale of a portion of the IMF's gold as a valuable supplement to existing resources.

UN, IMF and IBRD

Ministers note the recent adoption by the General Assembly and the Economic and Social Council of the United Nations of several resolutions relating to the need to strengthen the relationship and collaboration between the UN and the Bretton Woods institutions, at both intergovernmental and secretariat levels.

Ministers express the view that the idea of organizing an international conference with a broad agenda on the financing of development is timely, and to assure its success, this should be a joint endeavor of the United Nations and the Bretton Woods institutions.

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