Prudent financial decisions

By the end of the year, the Sri Lanka Ports Authority is planning to start a Port City, in what will be one of the largest projects ever undertaken, and will change the familiar coastline of Colombo. The proposed Port City Development Project at a cost of US$ 15 billion will be implemented on schedule, with construction work to commence during the latter part of this year, the SLPA had said in a statement.

It pointed out that whilst the SLPA has invested over US$ 3 billion on all present port development projects, including the Colombo Port Expansion Project, Magam Ruhunupura Mahinda Rajapaksa Port in Hambantota, Galle Port Development, Oluvil Port Project, Trincomalee, and KKS Port Development Project, which would create ample investment opportunities for both local and foreign investors, the private sector has already committed to invest approximately US$ 3 billion in the Colombo Port City Development Project, South Terminal, Hambantota Free Zone and Trincomalee Industrial Zone.

Accordingly, approximately 230 hectares, that is nearly 575 acres, of water front sheltered by the new breakwater will be reclaimed at an investment of approximately US$ 900 million by a foreign investor. The plan has been given approval by the Standing Cabinet Appointed Review Committee (SCARC).

At the recently-concluded international Seatrade Conference and Exhibition at the Hilton in Colombo, SLPA Chairman Dr. Priyath B. Wickrama had emphasised that the area would be developed as a port city with roads, water, electricity and communication facilities to set up shopping areas, a water sports area, a mini golf course, hotels, apartments, recreation areas, marinas and with a lot more additions that would develop the area as a modern city.

It is also to be the venue for Sri Lanka’s own Formula One track. The statement fails to mention the “private sector investor,” but there is wide belief that the contract will be given to a Chinese company. While the expense is of concern, there are also several other points to be considered.

When the project was first revealed, there was a significant hue and cry from environmentalists, who pointed out the massive degradation of the coastline that could result from such a step. Even though this proposal has reached the Cabinet, it is yet unclear whether a credible environmental evaluation has been done and if there is any possibility of mishaps that could affect the area.

Such a project would change the much-loved coastline of Colombo, but sentimentality aside, it would be prudent to question whether such a massive project is necessary at this juncture and if the country’s economy is capable of dealing with the added responsibility of repaying even more loans.

To put the US$ 15 billion into perspective, one can take a look at a document that was recently tabled in Parliament. According to the document, Sri Lanka owes US$ 15 billion on foreign borrowing since 1997. The sheer magnitude of the amount is further enhanced when one considers that Sri Lanka owes China a total $ 4.9 billion including interest payments in respect of loans worth $ 2.96 billion obtained since 1997, while it must repay $ 4.64 billion to the ADB after borrowing $ 3.35 billion over the same period.

While development is essential for Sri Lanka, it must go hand in hand with transparency, good governance and prudent decision making. Hopefully those aspects will also feature in the proposed port city.