Cabinet greenlights PM proposal to put up highways for PPPs

• Following approval for a Special Infrastructure Company Govt. to appoint procurement and negotiating committees 

By Uditha Jayasinghe 

Riding on the momentum of the Hambantota Port deal, Cabinet yesterday approved a proposal by the Prime Minister to appoint a negotiating committee and a Cabinet-appointed procurement committee to devise a mechanism to attract Public Private Partnerships (PPPs) as a mode of investment using Sri Lanka’s highways. 

The Cabinet paper, which was presented by Prime Minister Ranil Wickremesinghe, outlined that there are many ways of establishing PPPs, including on the basis of Build-Operate-Transfer (BOT), Build-Own-Operate- Transfer (BOOT) and Build-Own-Transfer (BOT) that the Government should explore. 

“It is proposed to explore the possibility of adopting such internationally accepted investment modalities to raise funds using the existing expressway network as a test case. This is expected to accelerate the country’s development by allowing major expressway infrastructure projects to attract international investments, improve operation efficiency, while running at internationally accepted standards. 

This will therefore allow such infrastructure projects to be commercially viable and used as alternative funding sources for future developments,” the Cabinet paper said. 

It then went on to recommend opening up the existing highway network comprised of the Southern Expressway, Outer Circular Highway and the Colombo-Katunayake Highway as a source of attracting FDIs into the country through PPPs.   

In the last week of February, Cabinet approved a Special Infrastructure Company (SIFCO) that will be managed by the Treasury Secretary and the Road Development Authority (RDA). Presenting a proposal to Cabinet, Minister of Finance Ravi Karunanayake said that the new public company would be used as a “transitional vehicle” to accelerate critical development projects enabling local capital market investors to provide funding “through a Takeover, Operate and Transfer basis or other internationally accepted investment modalities.” 

With the RDA holding a controlling stake in the company, the Ministers of Finance and Highways will have the authority to appoint directors to the new entity and authorise the Efficiency and Management Unit of the General Treasury to support day-to-day financing of SIFCO. 

According to the methodology proposed by the Minister, the company will own all the assets of expressways – the Southern, Outer Circular and Colombo-Katunayake which are valued at $ 1.65 billion - and undertake future development and recently commenced projects which require $ 4 billion within the next four years. 

Once incorporated, the company will also be able to raise capital from investors or arrange for financing for future projects using expressways as collateral, the Cabinet paper said. It added that SIFCO would operate as an independent agency which “will not come within the Government borrowing program.”

The revenue from the expressways earned will be channelled to repay the loans, while the Treasury will arrange guarantees to the lenders as needed. However, the Treasury will cover the shortfall in the event that the revenue of the expressways is inadequate to repay the debt taken by SIFCO. 

Cabinet in January also gave approval for a PPP division to be set up under the Treasury with specially recruited personnel to evaluate investment proposals for key public assets. 

The Cabinet paper, which was jointly presented by Finance Minister Ravi Karunanayake and Development Strategies and International Trade Minister Malik Samarawickrama, sought Cabinet approval to allocate Rs. 75 million from the financial resources already earmarked for the Finance Ministry.

In addition, “PPP cells” will be organised in the relevant ministries to handle the work as well as liaise with the PPP division. 

“The primary role of this division, to be established under the Ministry of Finance, will be to provide oversight in execution, transparency, good governance, formulation of policies and recommendations to the Cabinet Committee on Economic Management (CCEM),” it added. 

The CCEM is headed by Prime Minister Ranil Wickremesinghe. The Government has singled out a host of what it has termed non-strategic sectors for PPPs including the Hyatt and Hilton hotels, Lanka Hospitals and several loss-making public plantation companies. It has also called for an international investor for national carrier SriLankan Airlines.