Re-commissioning the Jaffna Rail Link, Rekindling Connectivity

Today (October 13th), the President is scheduled to re-commision the Colombo-Jaffna Yal Devi rail link all the way to Jaffna – a route not travelled for decades. I have always believed that transport connectivity and the resultant people-to-people connectivity is an integral part of reaching national harmony.

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The Yal Devi re-commissioning has strong economic implications too, as I shared with Amantha Perera in an interview for his article, subsequently published here. In it I note,

“The new transport [line] can certainly boost economic connectivity of businesses in Jaffna and Mannar,” Wijesinha said. “But enterprise policies must focus on helping to grow indigenous businesses in these regions. Otherwise the enhanced connectivity might benefit businesses coming from outside into these regions more than it helps businesses that are already struggling to grow.”

“Policies that improve the business climate, access to finance, technology and business skills will be key,” Wijesinha concluded.

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Colombo’s Urban Regeneration Could Rewrite the ‘Socio-economic DNA’ of Entire Communities

As urban regeneration continues at a dizzying pace in Colombo, it was the focus of the opening technical session of a recent forum on ‘Sri Lanka’s Road to Sustainable Development’ organised by the Law and Society Trust (August 22nd 2014). I was a panelist at this event, along with Eran Wickramaratne (MP) and a consultant to the UDA, and was asked to provide a socio-economic perspective on the issue. In this post, I capture the thoughts that I shared here. My primary thought was that the Colombo urban regeneration drive could “rewrite the socio-economic DNA” of entire communities who are being resettled, and more needs to be done to help people cope with the negative consequences of the project. I also argued that, in the rush to ‘free up’ land for private investment, important aspects of governance, inclusivity, and economic security must not suffer.

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Youth and Employment in Sri Lanka – Comments on the UNDP #NHDR2014 Report

photo 2On the request of some of those who attended this morning’s launch of the UNDP’s National Human Development Report 2014 on the theme of ‘Youth and Development’ (coinciding with Int’l Youth Day today, 12th August), I am posting here my comments that I shared during the short panel discussion that followed the formal launch. I was asked to focus on the ‘Employment’ chapter of the report, while Senel Wanniarachchi focussed on the education chapter, Salma Yusuf on the reconciliation and social integration chapter, Mohammed Hisham on the political and civic participation chapter, and Kenosha Kumaresan focussed on the health chapter. My key thoughts were that the rapdily-shifting aspirations and attitudes of youg people towards types of jobs must be factored in when talking about youth employment policies; that policies to support small biz and entrepreneurship will certainly help young people; that the emerging focus on Sri Lanka as a ‘knowledge-driven economy’ will put pressure on rural youth and we must ensure they are not left out from the new growth opportunities; that youth-focussed interventions risk being incoherent and fragmented if we don’t focus on coordinated implementation; and finally that Sri Lanka must make sure that the array of youth-focussed national policies and frameworks truly work for youth and don’t suffer from “policy creep”.

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Mattala Airport Not Yet a Lost Cause? – My Interview to BBC Sandeshaya

Recent weeks have seen much controversy over the performance of the Mattala Airport, stemming from an interaction in Parliament between opposition MP Dr Harsha De Silva and Minister for Civil Aviation MP Priyankara Jayarathna. Linked to this, the BBC’s Sinhala service ‘Sandeshaya’ wanted to explore the success or failure of mega infrastructure projects like Mattala (and others coming up in Hambantota), and I was asked to provide some insights. Here is the link to the Sandeshaya interview in Sinhala, conducted with BBC’s Sri Lanka correspondent Azzam Ameen – http://www.bbc.co.uk/sinhala/sri_lanka/2014/07/140726_airport_srilanka.shtml

Screen Shot 2014-08-07 at 6.56.14 PMIn the interview, I argued that mega projects like this have not been undertaken by Sri Lanka for a long time now, and such projects are important – especially connective infrastructure – if the country is to make a steady progress through the middle-income transition. I added that the success or failure of such projects cannot be measures in a short time span, and so the accusations that Mattala is a failure may be slightly premature. However, I also point out in the interview that these were expensive projects, and now that they have been built we need strategies to maximise utilisation and this is where things seem to be coming unstuck. I noted that it may not be appropriate to have the Sri Lanka Ports Authority be the main investment driving force, and that we need a high powered agency that has the best of all agencies. I remarked that we can learn from examples like the Penang Export Hub in Malaysia in making this happen.

Meanwhile in the closing part of the interview (which hasn’t been included in the voice clip but is paraphrased by Ameen), I recommended that instead of chasing passenger airlines to stop at Mattala, we should attract global air cargo players like FedEx, DHL, UPS, etc., to set up there taking advantage of the huge land availability, and make Mattala a cargo hub, linking the sea port and industrial zone nearby. My overall message was that we need to think through the Hambantota hub much more strategically and fine-tune the policies of investment attraction, if these projects are to be a true success. Do listen to the interview and let me know what you think.

 

Less Rainfall, More Losses for You and I

A dry Kotmale Reservoir. (Pic courtesy Sunday Times)

A dry Kotmale Reservoir. (Pic courtesy Sunday Times)

Sri Lanka’s electricity sector is in perpetual crisis – either a malfunctioning coal power plant built with costly funding, or severe contractions in hydropower generation. Despite all this, electricity supply to people and businesses has by and large been steady and predictable, unlike, say, 15 years ago. (of course bearing in mind the random blackouts and brownouts that occur). The cost, then, of ensuring steady power even during times of generational-crisis, is that the power utility – the CEB – bears the brunt of it. Most folks are quick to assume that the CEB’s losses are due to downright inefficiency. This is not always so. The culprit is often, simply, the rain. Why? Problems in Sri Lanka’s power generation mix.

Latest numbers from the CEB indicate that the power sector is facing severe losses due to the delay in anticipated rainfall to the catchment areas – the reservoirs (here’s a useful infographic by the CEB on where they are located). According to this news report citing the CEB, the utility is now making a Rs. 7.65 loss per unit. This is because the CEB is having to turn to expensive power generation, in the absence of sufficient hydropower. Hydropower generation, which costs just Rs. 2.50 per unit,  has fallen to record low levels, due to the lack of rainfall. It is currently meeting only 12% of the national requirement, while 85% is being met by thermal power, which is far more expensive. Over 40% of this thermal power is being generated by “high cost fuel oil plants”. Hence, the heavy losses incurred by the CEB (in Q1 2014 alone, it was Rs. 24 bn).

This situation isn’t new. Problems with the ‘generation mix’ have been going on for some time. They were expected to abate as more of the coal power plants (cheaper than fuel-powered) come on stream. But as we can see with the Norochcholai plant, the prospects on this seem rather bleak too.

The 2012 edition of the State of the Economy report by the IPS had an entire chapter dedicated to the power sector, reiterating that Sri Lanka cannot sustain rapid growth over a longer term without tackling the problems of this sector. This policy brief is a good quick read to get an overall understanding of the sector and how the issues in it impact on households and firms. Meanwhile, as this article argued, problems in the electricity sector are continuing to be felt disproportionately on the very sector that generates jobs and growth – the industry sector.

Despite the folly Sri Lanka faces in hydropower each time the rains are delayed, some experts argue that there still is potential for Sri Lanka to still maximise it’s hydropower capacity, by adopting better management of water resources and new technology. As this article by my colleagues posits,

“…it is still too early for Sri Lanka to focus overwhelmingly on coal energy for the future. Even though hydro will not be sufficient to cater to the growing electricity demand in Sri Lanka, there is additional potential that can be explored. With focused research on better management practices and innovations, the contribution from hydro could well be more than the 19.5% by 2020 as currently predicted by energy planners”.

Nevertheless, the electricity generation mix continues to cause problems for Sri Lanka. The symptoms due to the lack of rain may not be obvious to you and I, the average user – we haven’t, and probably unlikely to see, see power cuts. But we do pay indirectly, and here’s the summary of it:

As the rains delay → hydropower reduces → expensive thermal power must increase to bridge the supply gap → the higher costs are not passed on to consumer, prices remain the same → CEB bears the cost difference → CEB makes losses → loss is a fiscal burden on the Treasury → this is paid for by your taxes and mine. 

Construction Bias in Sri Lanka’s Recent Growth

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A new office building coming up off Union Place in Colombo, Sri Lanka. Image by author, April 2014.

As we near the 5 year mark since the end of the war in 2009, I’ve been reflecting on Sri Lanka’s economic journey since then. A discernible trend in post-war growth is that it has been led largely by growth in what economists’ call the ‘domestic non-tradable sector’ – construction, domestic transport, utilities and wholesale and retail trade. These are products that aren’t internationally traded (i.e., exported) and for which valuable foreign exchange is earned to support a country’s import bill and foreign debt payments.

Within these non-tradables, the construction boom is especially notable, whether it’s the high-rises, new office buildings and apartment blocks in the city, or the hotels, roads and highways outside it. The role of construction in recent GDP growth also no doubt is reflective of the domineering role of the ongoing public sector infrastructure development drive.  Manufacturing has not been a notable driver of recent growth. While construction’s share of GDP rose from 6.65% in 2009 to 8.70% in 2013, manufacturing’s share of GDP has even slightly declined from 17.45% in 2009 to 17.10% in in 2013.

T2 vs. Toll Gate – Incredible India

India truly is a place of incredible contrasts and it was strikingly noticeable to me on a recent visit there, which took me from the heart of glitzy Mumbai to dusty Nagpur. Both Mumbai and Nagpur are in the same state of Maharashtra, separated by a 1.5 hour plane ride or a 8-10 hour road journey. Pictured here, in the photo above, is the architecturally-stunning Terminal 2 at Mumbai’s Chattrapathi Shivaji International Airport and in the photo below is a key toll gate on the main NH7 highway to Nagpur airport.

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The Himalayan capital, cursed by a failure of governance?

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Driving through the Nepali capital Kathmandu is an open exhibit of what happens when there is a failure of governance. Endless stretches of city roads broken up for repair but stalled for years, kids stepping over overflowing sewers as they walk back home from school, canals brimming with waste winding through residential neighbourhoods, vans and motorbikes vying for supremacy on derelict roads – you will see them all in just a half an hour drive through the city. As we travelled from the airport to our hotel in a seemingly new ‘Hiace’ van, I thought to myself “how long will the shock absorbers on this last?”. The combined wear and tear on all Kathmandu’s vehicles must be running into billions of Nepali rupees each year.

photo4To travel from the hotel to a nearby market we caught the only “public” transport that’s widely available – privately run mini-vans (or locally called micro buses) in terrible condition that shuttle people across the city for a nominal 50-60 rupees. Nepali citizens don’t have reliable public transport, and have to pay these private operations – essentially para-transport – to get to where they need to go.  A recent study by the World Bank showed that while the city has seen a 60% rise in its population in the last decade, the transport system hasn’t kept pace, and this is causing severe difficulties for women and children especially (‘Gender and Public Transport in Nepal’). The report noted that, “Major problems include overcrowding, personal insecurity, reckless & unsafe driving, increased insecurity after dark and problems travelling with children”. I asked one of the passengers, a young woman, what she thought of the situation and she replied, “I wish there was a better way, but there isn’t. It’s not comfortable and sometimes I feel unsafe. But the government buses are not reliable – instead of waiting and waiting I rather take this uncomfortable micro bus”.

photo1As we whizzed around the city, all of us in the van were caked in a layer of brown – the roads are enveloped in a continuous whirl of dust. It’s not unusual to see motorcyclists and pedestrians alike covering their noses with whatever they had – motorcyclists wearing proper face masks, and women walking on the street using the end of their sarees. I wondered what the prevalence of respiratory illnesses must be.

Stuck in political gridlock for years, unable to pass a national constitution, and a systemically unstable government, has left the Nepali people severely in the lurch.

photo3As I opened up to read the Kathmandu Post on the second morning of our meetings, I began to have some hope. It announced that a new Prime Minister had finally been sworn in, two months after the general elections and after much political wrangling. Sushil Koirala was a man with no prior experience in public office and from the well-known political dynasty that has ruled Nepal before. What had clinched the deal, apparently, had been his offer of granting the Home Ministry to the opposition political party. The next day, just two days after being sworn in, I heard that Koirala had backtracked on his offer and had refused to give up the Home Ministry. I don’t know what the final outcome was. But as our plane left Kathmandu and flew over the snow-capped Himalayas, my only thoughts were – “A beautiful country, with beautiful people, cursed by a failure of governance”.