By Abdul H. Azeez
Sri Lanka’s strategic placement is ideal for a marine hub, but our strategic placement with the sea is now part of the island’s lore. It is drilled into the brains of our children from their earliest history lesson. The strategic placement of Sri Lanka as a trading hub has brought numerous incentives over its 2000 year old history.
It was used lucratively by the Arabs and the Chinese to trade goods and the Sinhala kings profited immensely from these ventures. But if our unique placement has brought us benefits, it has also acted as a curse.
The island would have arguably been largely left alone had not a succession of colonial forces found it profitable to spend their resources ravaging our shores only to take advantage of our ‘unique location’. Today, more than 60 years after the last vestiges of totalitarian foreign control have left us, Sri Lanka is again looking at exploiting one of its biggest assets, its location, more aggressively in order to reap economic benefit.
Project Cost in USD (millions)
Colombo South 318
Bunkring Facility 76
Oluvil Port 60
Magampura (Hambantota) 361
The ugly threat of neocolonialism
However, today’s oppressors are no better or worse than those of old. Colonialism might be dead, but its’ devious and subversive cousin; neocolonialism, prowls about picking off its victims. Developing countries have often found themselves taking on large infrastructure projects funded by ‘benevolent’ donors from rich countries through loans and other measures. But if these countries fail to pay back these loans, they are sucked into the sphere of geopolitical influence that the larger countries control. The loans, on the surface, are free of collateral. But the borrower is often staking its political independence in making these Faustian deals.
Sri Lanka has recently borrowed heavily from the Chinese to fund its large infrastructure projects. A lot of the money borrowed is currently being sunk into the marine development arena. The most ostentatious have been the Hambantota harbour and airport projects. Both projects have cost the government in excess of Rs. 600mn. The loans for these projects have been largely granted by Exim Bank, China. The concessions involved in the loans for the ports projects will end next year and payments will have to begin by the year 2011. The Magampura harbour, the Colombo South port and other projects underway in the marine sector is costing the Government of Sri Lanka in excess of USD 800 million (see box).
The loans will be due next year and the ports are yet to be completed. The second phase of the Hambantota port was initiated by the President on November 18. This stage will see the construction of essential service provisions. Buildings and facilities that are needed in ports are being constructed to begin operations.
The ports have to start making money if the loans are to be paid off. The increase in volumes of the Colombo port alone is going to be insufficient to handle the loan payments. To add to this, widespread inefficiency that is characteristic of most government organisations plague the Ports Authority to its core. The new administration will have to look into these factors if Sri Lanka is to take that step into being an actual marine hub.
In an interview with The Sunday Leader, Deputy Minister of Ports Rohitha Abeygunewardena said that “USD 361 million has been invested in the Magampura port. This is an asset to the country. Initially, there were various criticisms about the port. Critics said that since this was an inner harbour, it would be unsuccessful. But the engineers have been very capable in getting the port off the ground. We have managed to complete operations and also bring in the Jetliner ship. We are still starting the implementation process of full operations and by next February hope to start bunkering and oil supply to ships traveling along the route.”
The Minister also spoke about the willingness of many private firms to invest in the ports. “27 companies have shown an interest in investing in various port activities. In fact we have had to restrict the number of companies coming forward due to lack of space.” The Minister further went on to reiterate that his plan is to pay off the loan for the Hambantota port solely from the revenue obtained from that port.
Colombo South: Delay in development?
The Colombo South port project, begun in April 2008, has run into repeated delays and is now scheduled to be completed by April 2012. When asked about the delays in progress in the Colombo South project, the Minister said, “There are differences in the types of harbour. Hambantota is an inner harbour while Colombo South is an outer harbour. Outer harbours are much harder to construct since the land has to be reclaimed from the sea.”
The Minister went on to add that the current heavy monsoon is slowing down activities due to the rough waves that it has caused. “For example when we start work on a terminal in Colombo South, we have to start work from about 12.5m under. This land must be reclaimed completely for the harbour to take form. But we are making all efforts to finish the port project as scheduled.”
A city at sea
The ambitious plans for Colombo South include an additional modern city that will be built completely on land reclaimed from the sea. “Stretching from Galle Face to Colombo 4, we will reclaim 500 acres of sea,” Abeygunewardena said, likening the new land to Dubai’s Palm Island. “This is a city that will be made according to a master plan.” The Ministry is currently carrying out the required feasibility studies for the project and joint public-private venture is planned to get it off the ground. Tenders and notices will be officially released next year according to the Minister.
Many economists have argued that for the five hubs concept to succeed, the necessary foundations of an open, free, stable and flexible business environment must be adopted. Whatever the situation of the country, it is clear that the ports must quickly begin to make money to pay off their seed capital.
And this will mean large scale development in many other sectors of the economy, increase in regional and local prosperity and international confidence in Sri Lanka as a stable country. The ports are only a part of the game; the bigger scenario is being played out in Sri Lanka’s overall macro economy and, like cogs in a wheel, every little part of our economy and society as a whole need to function in tandem for the country to reach true prosperity.