Infrastructure is a vital component which is the foundation and catalyst of any economy. Nowadays most of the governments, by themselves, cannot afford to building infrastructure due to its huge sunk cost. Not only building it but also maintaining it will be a challenge for government bodies that has been showing inefficiencies, corruption, political decision making etc. Therefore, fixing the problems, easing the government burden, influx the efficiency and getting rid of political engagement, new modalities of infrastructure financing, provision, operation, and maintenance has been taking place in many parts of the world. E.g. Public - Private Partnerships. The synergy of both public and private parties is being used for these interventions. Both party’s strengths and weakness could be harmonized in a reciprocal way while deriving the new synergies.

Regulatory Environment as prerequisite

When the private sector is engaging with public sector, both parties’ obligations, rights and motives have to be safeguarded. To do this, different options are available such as the existence of a regulator or regulation by contract for ensuring above requirements. The existence of independent regulator is a good perquisite for private sector engagement in infrastructure development.

Where we are in this context

South Asia Gateway Terminal and Colombo South Container Terminal are examples of PPP in Sri Lanka. They are examples for regulation by contract as there is no regulator in the Port sector. The opening of Telephone Industry to the Private sector with the establishment of telecommunication regulation commission is another instance which attracted private sector investment for expansion of service coverage under different operators by creating competition and improving the quality of service at affordable prices to the customers.

Sri Lanka to grow its Economy as hub nation

How to exploit Sri Lanka's strategic location as a hub economy shall be a very concise exercise. Presence of quality infrastructure and making strategic business partnerships, improving ease of doing business, improvement of efficiency and effectiveness in all the systems are some of them for paving the way for using its location. As a country, we don’t have capacity in many terms for developing these infrastructures and to exploit them in a way as they needed to be for competing in the regional business context, we need to find right partners. The question is whether we can find the best business partners by going on geopolitical basis the way we are doing now. Why are we choosing only between China and India? Are our politicians going to put this country into the big trap? Maintaining neutral position, finding partners for investment and development of our strategic infrastructure in a competitive basis from among the world’s countries is very vital need for the development of this country. It is then not the matter of nationality, but of finding the best business partners for our economic development. However, our politicians have been failing to find best business partners irrespective of geopolitical base but on competitive basis in a transparent manner.

Port Development in Sri Lanka

Because of its location, ports of Sri Lanka's are very important assets which can determine the economic development of the country to a greater extent. Development of main three ports Colombo, Hambantota, and Trincomalee will need right vision for achieving its location advantage. Having port sector regulator or means of regulation by contract, finding suitable best private players are essential. Terms and condition of these partnerships are very important aspects for both sides. At the negotiation table, the power of location advantage considering the supply chains as well as gaining logistic capability of this country is immense which shall not be betrayed for any other thing.

The construction of “Kra Canal”, also known as “Thai Canal”, had been proposed a long time ago, though it has not up to now materialized. Recently there was news that construction of "Kra Cannel” may be commenced soon. If Kra canal is there, all the ships now passing through Malacca strait could avoid Malacca strait and go through Kara Cannel as it is shorter in distance. In that case some of the shipping lines may not call on the port of Singapore and then Sri Lankan ports could get the opportunity to emerge as a big hub. However, we cannot expect it to happen in simple terms, because of Singapore's logistic capability and status of Singapore as a one-stop-shop for all kinds of port activities which cannot be gained by Sri Lanka in a short period. Then it shall be a gradual shift from the existing status.

If we are in that direction, development of the port sector in this country shall be a thoughtful exercise. Development of policies, programs and projects are needed for development of port sector with best private sector partners irrespective of geopolitical basis. If we are proceeding the way we are moving now, Sri Lanka could become a hub of the battle for big powers.

Energy as a life blood of the of the economy

There was a big controversy over the development of long abandoned tank farms at Trincomalee with an Indian party. Every government shall be blamed, as it has not been developed yet. There could be many questions on the presently proposed deal, as its details come to the surface. Does the existing Indian operator have a proper agreement with Sri Lanka for operating the assets that he is already operating now?, does it have the proper regulatory mechanism, competitive price and required technical regulations etc. built in to the existing agreement?, what is the proposed Joint Venture for operating additional tanks, their terms and conditions etc.?, are they in line with country macroeconomic objectives in the big picture rather than decisions taken in isolated silos?, Isn't there any possibility that additional tank operations could lead this Indian firm to become a monopoly in the sector. Energy is the critical ingredient, as it is a factor of production which could even control FDI flow into this country by controlling energy prices. Moreover, energy could control many competitive advantage areas of this country. As we are aware, India is controlling some regional neighbors in a big way by taking their monopolistic powers. If things are not rolling in the right way, then at the end of the day, we will also be in the same kind of trap. Therefore, development of these assets is very crucial and finding right partners is to be in competitive basis using transparent procedures than geopolitical basis.

As Robert D Caplan explained in his book “The Monsoon”, the balance in global geopolitical powers will be decided by the Indian Ocean region. Therefore, doing business as a business and not based on geopolitical base is very vital. Instead of finding just investment partners while signing an agreement between countries, Sri Lanka shall adopt transparent business procedures for finding right business partners having regulatory frameworks.

We could pray our politicians could get wisdom and courage

People of this country will not object for the development of these assets. Their concern is, the way of doing things. Not to put the future generations into trouble while entering into right business deals is essential.

Eng. M. G. Hemachandra
Chartered Civil Engineer
Member of the Council, Institution of Engineers Sri Lanka.
MBA in Intrastate, Dip. in Mgt., Dip. Com.Arb.
mg_hdra@yahoo.com