Colombo: Sri Lanka is probably witnessing the worst ever economic crisis in its history. It has been besieged by recurring deficits, virtually non-existent forex reserves, high inflation and sharply declining currency apart from other challenges. Difficulties in undertaking essential imports have led to severe shortages of fuel, medicines, food and other essential items.
The island nation has now engaged with the IMF to secure the required assistance in the form of a programme that will enable it to come out of this crisis. This has been a recurring phenomenon in Sri Lankan history and often Sri Lanka has chosen to ignore the reform aspect of IMF programmes after having implemented the stabilisation component.
Given the severity of the crisis, the country needs to make a conscious choice this time to fully implement the reform component of an expected IMF programme with the same seriousness as it would implement the stabilization part.
An important component of any future economic recovery or reform would be to ensure investment based growth and utilization of national resources. This would require a departure from established practices and also overcoming resistance by vested interests that are focused upon retaining status quo.
One of the most promising areas for attracting investment and generating revenue is the maritime sector due to Sri Lanka’s favourable location near sea trade routes. While the Colombo Port is a well-developed transshipment hub with a plan for future expansion, there exists considerable potential for a similar maritime hub on Sri Lanka’s eastern coast in the form of Trincomalee Harbour and the Port.
Blessed with one of the best natural harbours in the world, Trincomalee can emerge as a major maritime hub catering to trade and commerce connected with India’s eastern coast. However, this will require the development of adequate terminals which are equipped with suitable equipment for handling various kinds of cargo.
The Sri Lankan government has already announced its desire to develop Trincomalee as an energy hub and an industrial port.
The energy hub concept could be especially useful in view of the pre existing tank farm facility located there. Lanka IOC and CPC have already concluded an arrangement for the development of unutilised tanks in the tank farm through a joint venture, apart from developing/maintaining their own tanks. This storage facility can be used for fuel as well as petroleum products. This could be supplemented by establishing a pipeline from India’s eastern coast till Trincomalee.
An oil or gas pipeline connecting India with Sri Lanka will play a massive role in enhancing Sri Lanka’s energy security while promoting trade and commerce in fuel and petroleum products. Nepal already has a fuel pipeline with India and another pipeline between Bangladesh and India is under construction. Pipelines increase efficiency, decrease wastage and are a good way to transport petroleum products.
The establishment of a refinery at Trincomalee could be planned in a way where it meets the domestic demand as well as manages to undertake exports to India and South East Asia. This would help complete the energy package in context of the Trincomalee Port while ensuring complete energy independence for Sri Lanka.
There is also considerable potential for the development of an industrial zone near the Port, where manufacturing based industries could be setup. This will further enhance the attractiveness of the Trincomalee Port. There is enough land available near the Port for a special zone where foreign investors could establish themselves.
India would appear to be the most natural partner for all these initiative due to its deep economic ties with Sri Lanka, its proximity and the fact that the feasibility of all the proposed initiatives would depend primarily on engagement with India.
Moreover, Indian entities have already established their presence in Trincomalee with more investments in the pipeline. Lanka IOC is good example of a successful Indian investment at Trincomalee while NTPC is working with CEB to fast track a 50 MW solar power project at Sampur (near Trincomalee).
Sri Lanka should ensure that it engages in a meaningful way to make Trincomalee a viable and attractive destination for Indian investments. Making effective use of India’s capabilities and interest in Trincomalee would be key for the success of any large scale project including the development of Trincomalee as a manufacturing and industrial hub. If required a broad framework for facilitating such development should be developed in consultation with India.
Investment based development would be key to overcoming the deficiencies created by credit based models such as the Hambantota Port. The time is ripe of deepening investment relations with India, which is inherently linked with the future prosperity of Sri Lanka.
–IANS