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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Friday, February 17, 2006

Infrastructure issues: Road development necessary to boost growth, investment

Daily Mirror: 12/02/2006" By Sunil Karunanayake

Our columnist discusses the state of road maintenance in Sri Lanka today and calls for more government responsibility here if the country is to promote foreign investment.

Although the coverage and network of roads in Sri Lanka falls within reasonable levels, the quality and further development has fallen well below regional standards.

While the efforts of Mahaveli Development, Gam Udawa (Village Reawakening) movement and the most recent Maga Neguma has contributed in some measure, a major effort is required to meet the emerging demands of economic activities. In the absence of a strong railway network, road transport plays a key role in both goods and passenger movement. It’s no secret but a matter of regret that the entirety of the country’s main export crop tea is moved from estates to the port through a highly strained road network.

Mahaveli development which gave birth to new townships like Girandurukotte and the Gam Udawa, did reshape rural life with new hope. Maga Neguma too was able to carry out urgent repairs in the rural areas. Poor infrastructure has been clearly identified as a deficiency in the investment climate and we have repeatedly spoken of high concentration of economic activity in the western province,

The Central Bank attributes excessive delays in road construction to funding issues due to its dependence on the government budgetary process. Continuing budgetary constraints and importance attributed to other critical areas has resulted in low priority for road development.

The government needs to look beyond its own resources to accelerate the development of this vital sector. Speedy resolution of land acquisition is another issue. The Road Development Authority (RDA) maintains 11,661 km of national roads and 4429 bridges. Provincial and local governments maintain approximately 90,000 km. Despite many obstacles the southern expressway jointly funded by the Asian Development Bank (ADDB) and Japanese Bank for International cooperation (JBIC) is progressing though the original target of completion by 2006 may not be a possibility. The Colombo – Katunayake, Colombo – Kandy expressways and the Colombo outer circular highway have not commenced yet.

A very recent study carried out by the ADB, JBIC and World Bank reveals that developing countries in East Asia need to spend more than a trillion dollars over the next five years in roads, water, communications, power and other infrastructure to cope up with rapidly expanding cities, increasing populations. ADB vice president Geert van der Linden states that governments clearly have significant incentives for improving their investment climates and making sure that reliable public policies are in place to attract the right kind of investment. Infrastructure has been a key driver of economic growth and reducing poverty.

In January the World Bank announced a major development plan for the Sri Lanka Road sector through the “Road Sector Assistance Project” by providing a US$ 100 million credit to the Sri Lankan government. This project will cover a network of 630 km of national roads. The credit backed by a 10-year grace period carries a service charge of 0.75% with no interest being charged. The government is financing 30 % of the project with US $ 44 million and will also pursue to establish the much-needed Road Maintenance Trust Fund as a mechanism to progress the maintenance of national and provincial road network.

According to the World Bank, the Ministry of Highways will oversee the execution of the road sector assistance project. Both local and foreign contractors will take part in the improvement process.

The prevailing acute road congestion in the city at a tremendous cost due to fuel wastage and loss of working hours and poor productivity itself is yet another strong argument to emphasize the need for good road networks. As proposed in the budget 2003 today every road user is contributing towards a road fund by paying Rs 1 per litre of petrol and Rs 0.50 per litre of kerosene. Perhaps this source of revenue is yet retained by the government and not released for the intended purpose.

Infrastructure has been a key driver of economic growth and for reducing poverty. Governments can no longer postpone neither the importance nor priority of the road network if it is to provide a conducive investment climate to raise the level of investment. Achieving the targeted 8% growth rests heavily on the improvement of infrastructure in the whole country. Given the untapped potential in the agriculturally-based rural economy a developed road network could move many out of the poverty cycle.

Sri Lanka needs to take a leaf from the East Asian experience where electric power generation, telephone connections and paved roads have been increasing progressively. The government must be fully committed to put the World Bank aid package into good use and not let the traditional slow disbursement associated with aid usage hamper the progress.
(The writer could be contacted at suvink@eureka.lk)

Column featured in World Bank website
An article by Sunil Karunanayake, The Sunday Times FT's regular columnist on corporate and macro economic affairs titled "Role of Micro financing in Poverty Reduction & Tsunami Rebuilding" was recently featured in the web page (http://www.cgap/clear/Sri_lanka.shtml) of the Paris-based World Bank affiliate CGAP (Consultative Group to Assist the Poor).

The article appeared in The Sunday Times FT on November 6, 2005.
CGAP is a global resource center for micro finance formed by a consortium of 28 public and private development agencies. Karunanayake, a Chartered cum Management Accountant, is presently the Project Director of the Institute of Chartered Accountants of Sri Lanka.

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