How we can develop our infrastructure

Due to its location, Sri Lanka’s ports are vital assets that can determine the economic development of the country

By M.G. Hemachandra 

Infrastructure is vital for any economy as it is the foundation and catalyst of an economy. Nowadays many governments struggle to afford to build infrastructure due to its huge cost. Not just building it, but maintaining it has also been a challenge for government bodies that display inefficiencies, corruption, politicised decision-making, etc. Therefore, fixing problems, easing the Government burden, increasing efficiency and getting rid of political interference while creating new modalities of infrastructure financing, provision, operation and maintenance have been taking placed in many parts of the world e.g. through Public-Private Partnerships. 

The synergy of both public and private parties is being used for these interventions. Either party’s strengths or weaknesses can be harmonised in a reciprocal way while deriving the new synergies. 

Regulatory environment 

When the private sector is engaging the public sector, both parties’ obligations, rights and motives have to be safeguarded. To do this, different options are available as the existence of a regulator or regulation by contract for ensuring the above requirements. The existence of an independent regulator is a good perquisite for private sector engagement in the infrastructure.

Where we are in this context 

The South Asia Gateway Terminal and Colombo South Container Terminal are examples of PPP in Sri Lanka. They are examples of regulation by contract as there is no regulator in the Port sector. The opening of the telephone industry to the private sector with the establishment of the Telecommunication Regulation Commission is another instance where private sector investment was attracted for the expansion of service coverage under different operators by creating competition and improving the quality of service at affordable prices for customers. 

Sri Lanka to grow its economy as hub nation 

Seeing how to exploit Sri Lanka’s strategic location as a hub economy is very important. The presence of quality infrastructure and making strategic business partnerships, improving the ease of doing business and improving the efficiency and effectiveness of all systems are some of the ways to use its location. 

As a country, we don’t have the capacity in a number of ways to develop this infrastructure and exploit it in the way necessary to compete in the regional business context. We need to find the right partners. The question is whether we can find the best partners through a geopolitical basis. Why are our choices only between China and India? Our politicians are going to put this country into a big trap. Maintaining a neutral position, finding partners for investment and development of our strategic infrastructure on a competitive basis from across the world is vital for the development of this country. 

It is then not a matter of nationality but we are finding the best business partners for our economic development. However, our politicians have been failing to find the best business partners based on a competitive basis in a transparent manner.  

Port Development in Sri Lanka

Due to its location, Sri Lanka’s ports are vital assets that can determine the economic development of the country. The use of the three main ports of Colombo, Hambantota and Trincomalee with the correct vision is necessary for banking on the country’s location advantage. 

Having a port sector regulator or the means of regulation by contract and finding the best private players is essential. The terms and conditions of the partnership are a very important part of it for both sides. At the negotiation table, the location advantage, considering supply chains as well as gaining the logistical capability of this country, is immense. 

The construction of the Kra Canal, also known as the Thai Canal, was proposed a long time ago, though it has not yet materialised. Recently there was news that the construction of the Kra Canal may soon commence. If the Kra Canal is there, all the ships passing straight through Malakka could avoid Malakka straight and go through the Kara Canal as it is shorter in distance. In that case some of the shipping lines may not call port at Singapore and then Sri Lankan ports could get the opportunity to emerge as a major hub. 

However, we cannot expect it in simple terms because of Singapore’s logistical capability and the status of Singapore as a one-stop shop for all kinds of port activities that cannot be gained from Sri Lanka in a short period. Then it shall be a gradual shift from the existing status.  

If we are headed in that direction, the development of the port sector in this country shall be a thoughtful exercise. The development of policies, programs and projects is needed for the development of the port sector with the best private sector partners irrespective of geopolitical basis. If we are proceeding in the direction we are now moving in, Sri Lanka can become a hub in the battle for big powers.

Energy as the lifeblood of the economy

There was the big controversy over the development of the long-abandoned tank farm in Trincomalee together with an Indian party. Every Government shall be blamed, as it has not been developed yet. There are many questions about the presently proposed deal. Does the existing Indian operator have a proper agreement with Sri Lanka for operating the assets that it is operating now? Does the agreement have a proper regulatory mechanism, competitive price and the required technical regulations? What is the proposed JV for operating additional tanks, their terms and conditions, etc.? Are they in line with the country’s macroeconomic objectives in the big picture rather than making decisions in isolated silos? Is there any possibility that additional tank operation could lead this Indian firm to create a monopoly in the sector? 

Energy is the critical factor of production which can even control FDI flow into this country by controlling energy prices. Moreover, energy can control many of the competitive advantage areas of this country. As many are aware, India controls several regional neighbours in a major way by using their monopolistic powers. If things are not rolling in the right direction then at the end of the day we will also be in the same kind of trap. Therefore, the development of these assets is crucial and finding the right partners through a competitive basis using transparent procedures is better than a geopolitical basis. 

As Robert D. Caplan explained in his book ‘Monsoon: The Indian Ocean and the Future of American Power’, the balance in global geopolitical powers will be decided by the Indian Ocean region. Therefore, doing business as a business and not based on a geopolitical base is vital. Instead of finding an investment partner while signing an agreement between countries, Sri Lanka should adopt a transparent business procedure for finding the right business partners having a regulatory framework. 

We should pray that our politicians gain the wisdom and courage to do this.

The people of this country will not object to the development of these assets. Their concern is the way things

are done. Not putting future generations in trouble while entering into the right business deal is essential. 

(The writer is a Chartered Civil Engineer, Member of the Council of the Institution of Engineers Sri Lanka. He possesses an MBA in Intrastate, Dip. in Mgt and, Dip. Com. Arb. He can be reached at [email protected]).