Amunugama showcases Western Region Megapolis Project at ‘Future of Asia’ confab

Special Assignments Minister Dr. Sarath Amunugama showcased Sri Lanka’s Western Region Megapolis Project and the country’s several other projects and policies for the future at the 22nd International Conference on the ‘Future of Asia’ – ‘Asian Infrastructure Plans – Challenges and Business Opportunities’. Here are excerpts of Dr. Amunugama’s speech:

The 21st century has been called the ‘Asian Century’.This is because Asia now is the driver of global growth and has seen economic changes which would not have been emerged 50 years ago.Even so great disparities exist within Asia, particularly in the area of infrastructure development.The future will see large shifts in population which demand enhanced investment in infrastructure.

To illustrate the disparities in infrastructure within Asia, let us look at power consumption. According to World Bank figures, electricity power consumption in Japan,reflecting the total power output, was 7,836 Kilo Watt Hoursper capita in 2014. In comparison in my own country, Sri Lanka, it was only 526 kWh. Fixed broadband subscriptions, reflecting partly the availability of internet facilities, was29.31 per 100 people in Japan as against 2.65 in Sri Lanka. These figures dramatise the magnitude of the infrastructure challenge. 

Of course in certain other areas of infrastructure, the division is not that sharp. For instance in respect ofaccess to improved sources of potable water, the percentage of the population in Japan with such access is 100, while the figure for Sri Lanka is 96. Again, as is generally known, my country scores high in the Human Development Index. 

1. Asian infrastructure planning today

• Asia is home to the world’s seven largest megacities. A rising number of rural residents look towards big city life and are attracted by the promise of improved economic prospects and quality of life, including more culture, better healthcare and education.
• By 2030 it is estimated that 60% of the world’s population will live in cities. This will necessarily redirect infrastructure planning and spending. Growing wealth triggers the need for smarter and more attractive centres for living and commerce. These large populations and city governments require improved transport networks to get people to and from work; better waste management capacity and substantially more capacity in the provision of clean water, and power. 
• Demand for more sophisticated infrastructure will also increase. Cities will aim to be more attractive places for people to live and work in. There will be a need for smarter, more innovative and technologically-savvy building.
• According to the United Nations, the Asia’s urban population will increase by 650 million by 2030.In view of this rapid urbanisation, cities must get their infrastructure planning right in order to develop their economies and attract new investment.
• nThe Asian Development Bank estimates that Asia needs at least $ 800 billion a year or 6% of GDP in infrastructure spending to fund its infrastructure needs.This cannot be addressed by either the public or the private sector on its own.

2. Challenges

• Historically, infrastructure investment in Asia has been undertaken almost exclusively by large central governments with little private sector involvement.
• A number of regulatory, political and institutional challenges remain for investors wishing to take advantage of the strong demand in the developing economies of Asia.
• Although there is now greater political stability in most Asian countries, and this has reduced business risk to an extent, private sector investment still requires appropriate legal and institutional systems as well as clear and well-informed government decision-making processes.
• A number of the developing economies in Asia do not have clearly defined PPP policies, capital controls that impede withdrawal and legal regimes. 
• Despite the booming economy, South Asia has the world's largest concentration of poor people, with more than 500 million people living on less than $1.25 a day, according to The World Bank. A key cause of this systemic poverty lies with the region's infrastructure.
• In many developing economies, meeting basic human needs for portable water, wastewater treatment and electricity remains a challenge. Lack of this basic infrastructure holds back economic development, increases health problems and reduces life expectancies.
• The costs of multimodal mass transit systems — including light rail, subways and bus rapid transit — are universally steep and the alternative of car dependence merely delivers traffic gridlock. Power generation is another key priority.

3. Opportunities

• The surge in infrastructure projects will create millions of jobs, boost productivity and facilitate international trade, and will also create opportunities for global investors to fund the projects and for construction and services firms to build and operate them. The Asian Development Bank estimates the demand at $ 730 billion each year for the next decade for infrastructure development.
• In South East Asia alone an estimated $2.5 trillion in investment will be needed over the next 10 years, with one-third to be spent on transport, one-third on electricity, and the remainder on water supply and sanitation, solid waste management, telecommunications and irrigation.

4. Sri Lanka

• Good quality infrastructure is vital for the economic development of any country. Recognising the growing demand for infrastructure arising from the growth and transformation of the Sri Lankan economy, infrastructure development strategies of the government are to expand infrastructure facilities to keep abreast of the demand.
• The Sri Lankan Government has launched an ambitious program of physical infrastructure development to completely upgrade the sea, air, road, power and telecom backbone of the country. The following are the main features of this program:

I. Sea port and airport development

The Sri Lankan Government has declared its intention to develop the country as a leading regional aviation, navigation and trading hub in South Asia. Therefore, the development of maritime and aviation transportation is at the forefront of the Government's infrastructure development agenda. The focus of these developments is to expand the capacity and improve the efficiency of existing ports through modernisation and construction of new ports and airports in strategic locations.

II. Development of high mobility road network

Road development in the country, which was left behind last few decades due to the war, has been given prominence by the government. The National Road Master Plan has already been prepared, which focuses on the construction of highways, widening of highways, reduction of traffic congestion, road maintenance and rehabilitation and bridge rehabilitation and reconstruction.

It has become an urgent necessity for further investment in road network, thus the development of road network has become a major determinant factor in attracting new investments to the country.

III. Power and energy

Development of the power and energy sector is a key aspect of the Government's infrastructure development agenda and long-term strategies have been introduced with active participation of the private sector, as a key component.

IV. Telecommunication infrastructure development

SEA-ME-WEIV: Sri Lanka is connected to the South East Asia-Middle East-West Europe 4 (SEA-ME-WE IV) project, the submarine cable system linking South East Asia to Europe via the Indian Sub-Continent and Middle East. The project aims to take these regions to the forefront of global communication by significantly increasing the bandwidth and global connectivity of users along its route between Singapore and France.

SEA-ME-WE 4 fibre optic cables provide a bandwidth capacity of 1.28 terabits per second, with a 25-year guaranteed lifespan for the technology. This revolutionary submarine cable system offers Sri Lanka an immense bandwidth advantage, and paves the way to make Sri Lanka a globally competitive business hub.

V. Megapolis

One of our major projects is what we call the Western Region Megapolis Project. This involves the development of an entire geographical region centred round our commercial capital, Colombo, into a modern sophisticated industrial, financial and logistical hub and which will also accommodate advanced research and development centres for modern technology, including ICT and nanotechnology. This project also involves the reclamation of 380 hectares of land from the sea at Colombo. That component of the project is already on stream. 

Our second major project isa similar regional development project at the South-Eastern extremity of our country, centred round a new harbour and a new airport that were built just a couple of years ago. The harbour, we expect will be the new mid-way bunkering point for ships in the long and busy shipping lane between Dubai and Singapore. Additionally, the harbour and the airport will provide the logistical support for the planned industrial and tourism development of the surrounding region. It is not difficult to visualise the very large number of infrastructure development activities that these two major projects will generate.

I have already mentioned the massive infrastructure rehabilitation needed in the conflict affected areas in the north and east of Sri Lanka. Beginning with the provision of permanent housing for the final re-settlement of the many who were displaced during the conflict, there is the need for the restoration of all facilities for community living.

As in all our neighbouring countries, we have lagging regions, at a distance from the metropolises, where a special effort is needed to ensure the equitable spread of development benefits. The key to the development of these backward areas is the provision of the basic infrastructure. Therefore in all our countries the development of the lagging regions will provide plentiful opportunities for infrastructure investment.

In a situation where our governments find it impossible to finance infrastructure projects out of public revenue and in the context of donor funding no longer being available, it is obvious that we have to turn to the private sector.We now have the methodology of the Private Public Partnership or the PPP.

PPP itself can take various forms but the essential feature is that it relieves governments from the upfront burden of large financial outlays whether out of its own revenue or out of loan funds at commercial rates of interest. Many PPP ventures such as toll roads can be launched on the basis of full cost recovery from the users. However even where such direct cost recovery is not possible, such as for example, in a solid waste management project where there are no identifiable individual users, it is possible for the government to be the client of such a facility paying fees to the private sector owner of the facility for the service provided. Depending on how well the contract is structured for the mutual benefit of the parties, the public interest will be served, by the government deriving a long term cash flow benefit, while an essential public service is performed.

Foreign investment in PPP ventures or in any kind of investment for that matter will come in only if there is a conducive environment for such investment inflows. Sri Lanka recognised this early. Article 157 of our Constitution enacted in 1978 stipulates that any agreement or treaty with a foreign government securing the protection of foreign investment, when approved by Parliament with a two thirds majority will have the effect of domestic law and any legislation, executive action or administrative action repugnant to the provisions of such agreement will be invalid, except on the grounds of national security.

Generaleconomic growth and infrastructure development

Before I conclude I wish to point out that while we talk of infrastructure investment, it is general economic growth which must simultaneously occur, that will make infrastructure development affordable. The two are mutually interdependent. Leading from that, allow me one last word.

For general economic growth in developing countries to be possible, they must be able to harness to the full, the resources that are legitimately theirs. In this connection the international community must focus attention on the subject of global illicit financial flows, the prevalence of which was highlighted recently.

 On this subject the organisationGlobal Financial Integrityhas this to say: “Developing countries and emerging economies lost in illicit financial flows $ 7.8 trillion from 2004 through 2013, with illicit outflows increasing at an average rate of 6.5 % per year,nearly twice as fast as global GDP.” The international community must focus its energies on stoppingthis massive haemorrhage of the developing world’s legitimate resources, which should rightly go to better the lives of the millions living in want.