Friday, 14 November 2014 02:13
First investment forum in commercial capital in 18 years puts new opportunities in high-potential southern hub under spotlight
By Shabiya Ali Ahlam
Hambantota was once popular for its salt, kalu dodol, curd and kithul honey, but its recent progress has brought it to the forefront for a whole new set of reasons.
Despite harsh criticism in the recent past about the greater emphasis placed by the Government on Hambantota over other cities, this has had no impact on the region’s goal and ability to become a significant hub supporting the nation’s positive growth trajectory.
While much is being done towards making it the next Colombo, authorities in Hambantota are determined to ensure its potential is fully recognised and utilised by bringing in the required investments that would uplift that region.
Flaunting the growth story of what could be called one of Sri Lanka’s most happening places, the Hambantota District Chamber of Commerce facilitated a business and investment forum titled ‘Invest in Hambantota – 2014’ in Colombo earlier this week. Incidentally it was the first forum on Hambantota in Colombo in 18 years. The inaugural one was held in 1996 at the BMICH with around 200 participants.
Attempting to involve the private sector in the development process, the forum was aimed at increasing awareness of the local, national and international business communities on the prevailing opportunities and ways of maximising them.
Furthermore, it was also aimed at bridging the gap between the demand for and supply of information of the development process and creating a platform for private public partnership to gain maximum benefits from the development projects.
The fully-packed audience received a comprehensive briefing from Government officials and relevant authorities.
Snapshot of the growth story
With Sri Lanka aspiring to be a commercial hub in the region, Central Bank Deputy Governor Dr. P. Nandalal Weerasinghe delivering the keynote address stressed on the need to develop other cities, and not Colombo alone, if this aim is to be materialised.
“To reach middle income status, the economic diversification program would need to continue based on the 5 +1 hub concept. For that, why do we need to have a commercial hub only in Colombo? It is imperative that we develop other cities as well so there will be greater economic opportunities which will help place Sri Lanka as a commercial hub,” said Weerasinghe, while delivering the keynote address.
While previously the Western Province was the major contributor to GDP, the broader situation remains the same although the proportion is observed to be contracting, with the Southern Province growing at a faster pace.
In 2006 the Western Province contributed 50.1% to the country’s GDP while the Southern and the North Western Province contributed 10% and 9.1% respectively. In 2012 a significant change was observed with the support of the Western Province having reduced to 43.4% while contribution by Southern and the North Western Provinces increased to 11.5% and 9.6%.
From 2010 onwards all sectors in the Southern Province showed positive growth, with agriculture recording a growth rate of 1.9%, and industry recording a 37.8% increase in 2012 from 3.1% in 2010, and growing by 18%.
Socio economic indicators also improved, which are close to national levels. The mean household income, as of 2010, stands at Rs. 32, 514 compared to the national level of Rs. 36, 451.
The poverty headcount index is at 9.8 comparing to the national level of 8.9. With the increase in commercial activities in the region, the unemployment rate has dropped to 4.8, close to the national level of 4.0.
The Central Bank’s Prosperity Index ranked the Southern Province second in 2010, one notch above its position in 2007 for having improved from 51.5 to 60.0. The Western Province continues to lead, having improved from 66.1 in 2007 to 76.1 in 2010.
Opportunities yet to be tapped through new seaport and airport
With the Hambantota Port being the key highlight of that region, Weerasinghe urged domestic investors to integrate with the value chain of the international investors of the Free Port.
Pointing out that the port has vast bare land available for large- and small-scale industries, he opined that investors could set up manufacturing, warehousing, headquarter operations, off-shore operations and many other value-adding businesses as Cabinet approval has being granted for a sugar refinery plant, fertiliser storage, processing and bagging plant, petroleum, petrochemicals and chemicals manufacturing plant, LPG storage and distribution plant, lubricants blending plant, LNG hub terminal, petrochemical storage and transhipment facility.
Turning the spotlight on the next big thing in the region, the Mattala Rajapaksa International Airport (MRIA), Weerasinghe expressed confidence in the entity helping to convert the nation into an aviation hub.
“The new state-of-the-art Mattala Rajapaksa International Airport (MRIA) is set to transform the fast-changing southern region. It will help foster a new tourism product, boosting investment in the surrounding areas, and agriculture-related industries in the region can largely benefit due to improvement of cargo.
“While many opportunities prevail by way of additional business ventures as a result of airport operations, the establishment of MRIA Free Zone provides the opportunities to local and international investors in aviation, logistics, cargo, freight services and hospitality industry,” he expressed.
Facilities yet to be effectively utilised by biz community
Highlighting that the Government investments in transportation provide many opportunities for the private sector to capitalise on, he noted that the investment promotion zones in the region also need to be effectively utilised.
With the Koggala Export Processing Zone, Mirijjawila Industrial Park and Hambantota Free Port noted as key investment promotion zones in the area, the three new investment promotion zones that are to be established in Hambantota – the Sooriyawewa Information Technology Village, Sooriyawewa Investment Promotion Zone and the Mirijjawila Investment Zone – will help boost commercial activities.
“Regional business community can benefit by integrating with the value chain of the industries in operation. This includes provision of raw materials, semi-finished goods and services,” observed Weerasinghe.
While a strong nexus needs to be built between the universities and the private sector, it was highlighted that the University of Ruhuna needs to play a very special role in the regional development of Ruhuna as a strong link is required between the university and the business community such as agriculturists, agribusinesses and industrialists in the region.
According to him, the link will be further complemented by the establishment of campuses by several foreign universities in the region.
“The southern region, especially the Hambantota district, is blessed with enormous business opportunities. It is the duty of you all, the business community of the region, to effectively capitalise on these opportunities and contribute towards national development,” he said.
Biz and investment climate
Once considered one of the poorest districts in the county, it has now transformed to accommodate new investment initiatives, assured HDCC Consultant Azmi Thassim.
“A few decades ago, Hambantota was not attractive enough for businesses to venture into, but much has changed in the recent years and now it is moving fast. The change is evident as economic indicators are showing positive growth, living standards are improving, and this has resulted in investors to turn their attention to Hambantota,” he said.
Making the region viable and attractive for business ventures is the availability of land, said Thassim. Noting that in Colombo further expansion of projects would be challenging, in Hambantota the same could be achieved hassle-free due to the availability of underutilised land. Thassim stated the Government and relevant authorities would provide interested businesses with the necessary facilities to obtain approvals, registrations and certification in a seamless manner.
“We encourage people to go into joint ventures with the local people so that the small and medium enterprises will have connection with the larger business and investors. The chamber will help to introduce and recommend business that can come up with the necessary contribution to venture,” said Thassim.
He elaborated that while the Government has expressed keenness in providing the infrastructure and necessary facilities, the Chamber encourages working in partnerships to develop the region.
“We will facilitate inward investment. I am sure the investor will like to come into an area that is welcoming and supportive and this can be achieved by working together,” he said.
Thassim also emphasised that the development activities in Hambantota were well-planned, unlike the plans of Colombo and Kandy.
Comprehensive development plan
UDA Director Southern Province Ananda Samarasingha noted that the authority had launched a development plan for the Hambantota area having analysed the present day context. “It is not just a development plan. It is a comprehensive one. The UDA introduced it after taking into account a number of key factors,” assured Samarasingha.
Outlining the plan laid out by the UDA for the current and future development of the region, he shared that identified first was the development area for which the boundary from the south is the sea, Walawa river from the west, Kirindi Oya from the east and Udawalawa road from the north.
According to the National Physical Planning Department’s (NPPD) policy and plan, Hambantota is one of the metro regions identified for future development. The region comprises of 113, 000 hectares, a population density of 1.8% and has eight local authorities.
The vision set for the region is to be a gateway to Asia, which is economically prosperous, ecologically sustainable and culturally vibrant.
Considered factors for the zoning according to Samarasingha are compatibility with existing land use pattern, settlement pattern of the area, population density, future development trends, availability of infrastructure, development of surrounding areas, disaster prone areas and future risk factors and terrain.
Ongoing development projects
In establishing the road network and transportation hub, a transport terminal with combined rail and bus terminal has been planned, which will be developed with an estimated cost of Rs. 1.7 billion.
Samarasingha shared that the UDA is involved in preparation of the master and detailed plans for the combined rail and bus terminal that would connect the Southern Expressway, Mattala Airport and Hambantota Sea Port. The design is yet to be finalised.
The Hambantota New Hospital which will be constructed on 25 acres will consist of 850 beds with state-of-the-art facilities. It will have eight operations theatres, laboratory facilities, emergency treatment facilities and residential facilities. The vertical development is proposed to suit the changing skyline of new Hambantota City.
Furthermore, the hospital will be designed to comply with the Green Rating System and will be the first green hospital in Sri Lanka.
Currently under construction for an estimated cost of Rs. 191 million is the Street Market. Circular shops are to be constructed by private sector investors whereas individual shops will be constructed by selected shop owners. The construction of the road network is carried out under the ‘Maga Neguma’ project by the Road Development Authority.
The Town Hill area development is taking place at an estimated cost of Rs. 185 million. The master plan was prepared by the UDA in consultation with the Hambantota Municipal Council, Department of Archaeology and Department of Museums. Project proposals have been received by the Citrus Hotel Plc to put up a 150-room hotel within 12 acres of land.
On commercial area development, 80% of the block would be used for commercial uses and the balance may be utilised for departmental stores, housing, apartments, amusements and entertainment parks and the establishment places for public assembly. Single storey buildings up to 10 floors are allowed to be constructed. The projects are expected to enhance the viability of the CBD to cater business and commence activity.
Also coming in is a Banking Square that will be stretched across 22 acres. While it will be concentrated with banking and financial institutions, apartments, professional offices and open spaces will also permitted in the area. A maximum of 10 floors will be allowed.
MRIA and associated biz opportunities
In operation for almost 19 months, Mattala International Airport CEO Derick Karunarathne assured the entity will progress so its potential is fully utilised.
Analysing passenger arrival data over the past four decades, in the early ’80s passenger arrivals amounted to 1.2 million at Bandaranaike International Airport (BIA). In the ’90s it increased to 1.8 million and in 2003 it further improved to 2.3 million. In 2013 it shot up to 7.3 million. However, the BIA, designed in the early ’60s can accommodate up to six million passengers.
“The BIA is now functioning over and above its capacity. A new pattern in arrivals is emerging and with Mattala being the second gateway to this country, we are going to help absorb part of this impact,” expressed Karunarathne confidently.
With the top three overseas markets for Sri Lanka being the UK, India and China, he stressed the need for out-of-the-box thinking so Hambantota can capture a fair share of the market.
Karunarathne professed that one way to bring tourists to Hambantota is to get them to arrive at BIA and depart from Mattala. “That will allow tourists to experience all the flavours in the country. It is observed that some agencies are planning their tours with the Chinese companies in a manner in which they can take off from Mattala,” he shared.
Stating that the aim is to cater a resort atmosphere, he said it is possible to do so as Sri Lanka is blessed with nature and beaches and Hambantota captures a good portion. “With zero marketing we had surfers coming to Mattala from Europe and other destinations. They were coming to Arugambay for the surfing season. We should identity such opportunities,” he said.
MRIA currently offers 35 weekly direct international flights, of which Flydubai does a daily run and Rotana Jet has flights thrice a week. Furthermore, Helitours operates domestic flights twice a week.
“On the development of the airport, now that we have the infrastructure, we need to build the destination since airlines don’t come for airports, they come for destinations. That makes perfect sense,” said Karunarathne.
Stating the authorities are on the lookout to develop the airport, ample business opportunities exist as the entity is now a zoned area gazetted as duty free, thus has the potential to improve to become a premier regional hub.
While it also has the potential to expand as an Airport City Model, it can also grow as a economic driver for Sri Lanka’s development in tourism, commerce and trade while attracting potential investors to the Free Zone in aviation, industries, agriculture, manufacturing and academics.
“In January the Maintenance, Repair and Overhaul facilities (MRO) will break ground for SriLankan Airlines. There is scope to have facilities such as aircraft painting workshops, flying schools and aerospace engineering schools,” opined Karunarathne.
Pointing out that the aim is to make Hambantota all about events in the future, he shared that plans were underway to construct a city within the airport since while currently MRIA is on 800 hectares of land and it consists of another 1,200 hectares that would be utilised for future development.
Not a port without ships
Stating that in the past several years the most controversial project has been the Hambantota Port, Ports Authority Southern Port Development Director P.A. Agil Hewageegana said it certainly was not a facility that had no ships.
Justifying the viability of the port, he compared it to the facility in Colombo. The Colombo Port has only 300 hectares and with the new extension it has a further 500 hectares, limiting its expansion. Hambantota Port on the other hand has been allocated 2,000 hectares of land.
According to Hewageegana, currently in the Colombo Port there are insufficient facilities for general cargo, in addition to the lack of space for port-related industries, bunkering services, ship repair and building facilities and RO-RO services.
“The Hambantota Port is viable because deeper contours are close to the shore, it is the closest point to main shipping line and there is availability of ample land for expansion,” he said.
Touching on the key features of the Phase I development that took place at a cost of $ 507 million, he pointed out it has two general purpose berths of 600 metres, two oil terminals of 610 metres, two breakwaters of 1,300 metres and a service terminal of 1.5 metres.
The key features of the Phase II development which is under construction with a cost of $ 808 million is that it has seven berths, a public service terminal and an artificial island of 42.6 hectares. With duration of 36 months, Phase II development is expected to reach completion by November 2015.
As of October 2014, the Hambantota Port had 639 RO-RO ship arrivals, 160,457 transhipments and 59,863 domestic shipments. Meanwhile, the bunker operation that commenced on 22 June 2014 has supplied 39,628 MT of fuel.
To highlight the present status of establishment of large-scale industries within the port area, Hewageegana shared the Initial Environmental Examination (IEE) study for the industrial zone. “As Hambantota Port is declared as a Green Port, it is obligatory for all investors to obtain environmental clearance before commencement of their projects. The University of Moratuwa (UOM) in collaboration with the SLPA is carrying out a Common Initial Environmental Examination (IEE) study covering the entire proposed industrial zone at Hambantota Port and the draft IEE has been submitted. Investors are allowed to commence construction of the above industries after the successful completion of the IEE study,” he shared.
Following the detailed briefing on investing in Hambantota, the audience was presented with two case studies on 'New Investments in Hambantota' delivered by Lanka Fishing Flies CEO Suresh De Mel and Micro Holdings Chairman and CEO Dr. Lawrence Perera.
The audience was also given the opportunity to interact with the authorities at a panel discussion that featured UDA Director Samarasingha, Mattala International Airport CEO Karunarathne, Southern Port Development Director Hewageegana, Lanka Fishing Flies CEO Mel, Micro Holdings Chairman Perera, Sri Lanka Tourism Director Planning P. Upali Ratnayake and BOI Senior Deputy Director Investment Rajan Ratnayake.
Pix by Lasantha Kumara