Sri Lanka can and needs to Leverage #Belt and Road Initiative

(Follow up to How can the Belt and Road Initiative (BRI) be used by our Leaders in Sri Lanka)

Pakistan is touted as an important ally of the BRI with a US$57 billion investment in the second phase of the China-Pakistan Economic Corridor (CPEC) – to integrate sea and land routes across Eurasia. If we look at the large 4 projects committed under BRI in Pakistan one can identify similar projects already completed in Sri Lanka even before the announcement of BRI ambitions.
1) Gwadar Port vs Hambantota Port
Gwadar Port is a main element of the CPEC because it could provide an alternative shipping route for transporting oil into China. Hambantota port was constructed at a USD 1.5 bn, using debt, by the Chinese in Sri Lanka as far back as 2010, and recently in 2017 the good governance government took concrete steps to leverage the asset, with Chinese investments, by leasing it for 99 years along with an industrial zone to Chinese state owned entities.
2) Karot power station vs Norachcholai coal power
The 720 megawatt Karot hydro-project is backed by the state-owned China Three Gorges Corp South Asia Investment Limited in Pakistan. However, the 300 MW Norochcholai Coal Power plant commissioned in 2011 at an estimated cost of USD 1.3bn, was funded by China’s EXIM bank as part of a preferential loan. Despite many teething issues it meets the energy requirements of the country, but due to efficiency issues the full benefit is not realized.
3) Karachi Circular Railway vs Southern coastal railway
The Karachi Circular Railway (KCR) in the city of Karachi with a budget of US$2.07 bn was expected to be completed by September 2020,. In Sri Lanka the construction of a US$272m southern coastal railway project is being financed through an EXIM Bank of China loan to. Construction by China National Machinery Import & Export Corp (CNMIEC) of Phase 1 was kicked off in late 2013.
4) Karakoram Highway vs Central highway
Beijing announced in 2015 that it would finance the 1,300-kilometer Karakoram Highway that is currently the only overland cross border connection between China and Pakistan. China has shown interest in highway projects and been involved in construction in the south. However the central highway was launched and is ongoing to connect Kandy to Colombo.

Though the quantum of investments are lower than in Pakistan, we have already benefited from the completed projects. There is also the multi billion dollar port city being funded and constructed by the Chinese. These projects did result in a build up of debt due to mismanagement by politicians or fraud. But there’s not much that can be done about the past. It’s time to leverage these assets and synergies arising from them to plan for better economic growth and debt repayment. This is what highly leveraged corporates do. They exploit a risk or accept, transfer, avoid or mitigate a risk. Accept, avoid and transfer we did with the Hambantota port. We can mitigate some with the actions planned for the Mattala Airport in the Deep South. It’s time to now exploit any residual risk to make a positive impact on our economy with just 7 simple ideas:

▶️ Attract more FDI in real estate, hospitality and energy (wind and solar) sectors to power economic growth.
▶️ Make it easy for manufacturers to capitalize on the industrial zone around the Hambantota port. If required provide short term concessions that will have a trickle down affect to the people of the area.
▶️ Promote manufacturing in the industrial zones to increase revenue from exports.
▶️ Position to export more products to China and their BRI partner countries in South and Southeast Asia. It could be from tea, rubber or many other agricultural products.
▶️ Lower the cost of electric power by using more renewable energy to be attractive for manufacturers to transfer operations to Sri lanka.
▶️ Proactively improve service levels, automate and eliminate bribery & corruption at ports to handle high container traffic and more vessels.
▶️ Most of the local tourist attractions need to be renovated and refurbished to improve customer experience. Convenience factor also has to be reviewed strategically to make the attractions easily accessible.

These ideas are like Nike sports shoes. They may facilitate success for an athlete who possesses them, but on their own they are nothing but an overpriced pair of sneakers. Sports shoes don’t win races. Athletes do. I need good athletes to run with ideas!


About surenraj

“Views expressed are my own”
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