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Viewing cable 06COLOMBO2086, SRI LANKA: HUGE PUSH TO DEVELOP THE PRESIDENT'S HOME
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 06COLOMBO2086 | 2006-12-18 03:39 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Colombo |
VZCZCXRO7239
RR RUEHLMC
DE RUEHLM #2086/01 3520339
ZNR UUUUU ZZH
R 180339Z DEC 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 4958
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 0379
RUEHKA/AMEMBASSY DHAKA 9704
RUEHIL/AMEMBASSY ISLAMABAD 6640
RUEHKT/AMEMBASSY KATHMANDU 4700
RUEHKP/AMCONSUL KARACHI 2072
RUEHCG/AMCONSUL CHENNAI 7201
RUEHGV/USMISSION GENEVA 1610
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP
UNCLAS SECTION 01 OF 05 COLOMBO 002086
SIPDIS
SENSITIVE, SIPDIS
DOL/ILAB FOR TINA MCCARTER
DRL/IL FOR LAUREN HOLT
STATE FOR SCA/INS
MCC FOR S GROFF, D NASSIRY AND E BURKE
GENEVA PASS USTR
E.O 12958: N/A
TAGS: ECON ELAB EIND ETRD EAID CE
SUBJECT: SRI LANKA: HUGE PUSH TO DEVELOP THE PRESIDENT'S HOME
DISTRICT
¶1. Summary. Since President Rajapaksa's election, there has been
renewed interest in pursuing several infrastructure projects in
Hambantota District, his home district and one of the poorest and
least developed areas in Sri Lanka. Proposed projects include an
international airport, an industrial port, a new town, a convention
center, extension of a new highway and extension of a new railway to
Hambantota. Many of these projects have been talked about for years,
and observers in Colombo and Hambantota are skeptical that they will
ever be completed. However, Government of Sri Lanka (GSL) officials
point out that this time things are actually happening: work has
started, and people are being relocated. Econoff and EconFSN
traveled to Hambantota in November to see first hand if progress was
being made. After meeting with GSL officials in Colombo and
Hambantota, it seems there is sufficient political will to push
forward, but no overall strategy for developing the area and a lack
of coordination between projects. End Summary.
------------------------------------
Rail Service to Hambantota District
------------------------------------
¶2. A rail line near the southern coast of Sri Lanka from Matara to
Kataragama, going through Hambantota, would connect Hambantota
District to Colombo by rail for the first time. According to
officials in the New Railway Ministry, the new stretch will
accommodate high speed trains at 100-110 kilometers per hour. The
new track will be farther from the sea than the existing Colombo to
Matara stretch, making it easier to maintain. Survey work has been
conducted by Korea. Several foreign investors, including China,
Malaysia, Australia and Korea, have submitted proposals for the
construction which will be completed as a 10 year Build Own Operate
Transfer (BOOT) project. A second proposed line would also go to
Hambantota from Padukka in Colombo District. According to the New
Railway Ministry, the railway will be used to transport oil once the
planned refinery is complete and will facilitate the yearly Buddhist
pilgrimage to the southern city of Kataragama.
------------------------------
Sri Lanka's First Expressway
------------------------------
¶3. A new highway, Sri Lanka's first limited access expressway, is
being constructed from Colombo to the southern city of Matara,
located 100 miles away from Colombo. This expressway will
accommodate speeds of up to 120 kilometers per hour and will cut the
commute from Colombo to Matara from 5 hours to about 1.5 hours, a
significant achievement since current travel times are often cited
as a primary cause of the Southern Province's underdevelopment. A
feasibility study is also underway for extending the new highway to
the planned new airport in Wirawila in Hambantota Province. The
Director of the Southern Transport Development Project, told Econoff
that the Asian Development Bank (ADB) recently agreed to widen the
road from two to four lanes after safety studies revealed that a two
lane expressway would be dangerous. The road will have 10
intersections between Colombo and Matara, will be fenced, and will
have a toll to cover maintenance costs. Hundreds of families have
been relocated to construct the road. They received compensation
packages including electricity, water, land, and income replacement.
Many encroachers were even given deeds to their new land, making
them more economically secure.
¶4. Econoffs were able to travel along a 10 kilometer stretch of road
from Galle to Matara, parts of which are already paved. Underpasses
are being constructed to allow people and cattle to easily cross
under the street. Drainage systems are being put in place, and
grass is being replanted where the hillside was cut away. The
highway has the appearance of any first-world highway (albeit
undivided) and, once completed, will provide an entirely new travel
experience for Sri Lankans accustomed to narrow two-lane roads full
of potholes and obstructed by pedestrian and animal traffic.
COLOMBO 00002086 002 OF 005
-----------------------------------
An Industrial Port for the Future
-----------------------------------
¶5. The biggest of the planned new projects is an industrial port in
Hambantota. The proposed port will process coal, cement and oil,
and is intended to become a container port in 30 to 40 years when
Sri Lanka's main Colombo Port reaches capacity. Sri Lankan Port
Authority (SLPA) officials say it would currently be too difficult
and politically sensitive to shift container traffic away from
Colombo since the business district is in Colombo. GSL port
planners argue that Hambantota is a highly strategic location for a
port because it is less than one hour from the major shipping lanes
that run just south of Sri Lanka, while Colombo is nearly 8 hours
travel time from these shipping lanes. Planners argue that this
proximity, as well as the natural harbor depth of 20 meters, makes
Hambantota ideal for a deepwater port handling transshipment,
industry and refueling. SLPA officials admit, however, that Colombo
may always be the best location for a container port in Sri Lanka
since it is closer to India, Sri Lanka's biggest shipping customer.
¶6. According to the Deputy District Secretary in Hambantota, nearly
2,500 acres of land have been set aside for the port project.
Feasibility studies for the overall basic design were conducted by
the Danish firm Ramboll, and detailed designs of the breakwater are
being provided by a Chinese firm recommended by the Chinese Embassy.
An MOU was signed agreeing that Sri Lanka and China would produce
the detailed plans together, that there would be joint ownership of
the plans, and that the Chinese government would provide funding for
the project as long as the recommended Chinese firm was used to
build it. The SLPA is hoping that China will offer the initial $300
million at a concessionary 3 percent interest for 5 years. If the
Chinese funding does not come through, the SLPA will have to buy out
the Chinese portion of the plans and find alternate funding.
¶7. The plans for the port are scheduled to be completed in early
¶2007. Environmental studies have been submitted and a public
hearing will be scheduled. The $300 million for Phase 1 will cover
three berths, the breakwater and several small tugs. Phase 1 could
start as early as April 2007 and will take two and a half years to
complete. Once construction starts, the SLPA will launch a campaign
to attract private investors for the next phases. The final size of
the planned port will accommodate 20 million containers. In
contrast, Colombo Port currently accommodates only 3 million.
¶8. Since President Rajapaksa's election, the focus of the Hambantota
port project has shifted from only bunkering to a full industrial
port. The SLPA is currently looking for interested investors. SLPA
officials say there has been interest from the cement and power
industries as well as commodity storage and bunkering. Tillak
Collure, Secretary of Ports and Aviation, told Econoff that Indian
companies have been coming to look into the new port and are
interested in investing. Part of the port project includes an oil
tank farm connected to the port. These tanks will store oil, gas,
and aviation fuel. The oil tank project will be completed through an
MOU with a separate Chinese company. The Board of Investment is
also considering a proposal for a new oil refinery near the new
port.
¶9. According to the Deputy District Secretary, there has been no
opposition to the port. Nearly 400 families are being relocated and
compensated. When asked, local officials say there have been no
studies conducted on employment generation of the project. One
official offered that there would probably be some indirect
employment generated since there would be more people around to stay
in hotels and eat in restaurants.
--------------------------------------
An International Airport for the South
COLOMBO 00002086 003 OF 005
--------------------------------------
¶10. A project that has received extensive media coverage recently
is the new airport planned in Wirawila in Hambantota District.
Secretary Collure justified the new airport to Econoff by explaining
SIPDIS
that Sri Lankan planes currently have to carry extra fuel called a
safety load to get them to Chennai in case of an emergency landing.
Once Wirawila is up and running they will be able to use that
location in emergencies, requiring a much smaller safety load of
fuel and saving the airlines fuel costs. Collure also argued that
the airport will be a necessity once the port and highway are
completed and more people are coming to Hambantota. The airport is
also intended to promote tourism in the South; Wirawila is close to
Yala National Park and Kataragama, a religious tourism destination.
Collure explained that the new airport will be small in size like
the Cochin airport in India and will be low cost and environmentally
friendly. It will be rustic in appearance, but big and modern enough
to accommodate full size commercial aircraft including the new
Airbus A380. The airport project was competed through an open
bidding process and is expected to take 4 years to complete. It
will be entirely government funded and will cost between USD 60 and
70 million. On November 19, a foundation stone laying ceremony was
held in the rice paddy fields that are designated to become the new
airport.
¶11. The Deputy District Secretary told Econoff that more than 2800
acres of land have been designated for the airport. Three hundred
families will have to be relocated. The government is building new
homes for them and working to determine compensation packages. The
little opposition there has been to the project has come mostly from
encroachers lacking proper title to the land.
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Countless New Changes for Hambantota
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¶12. The big infrastructure projects planned for Hambantota bring
with them other smaller projects and changes. As a result of the
new port, the road from Matara to Hambantota will have to be
rerouted up and around the port, away from the sea. The actual town
of Hambantota will also be moved 2.5 kilometers north of its current
location to the new road. The nearly 6,000 houses constructed after
the December 2004 Tsunami are also located north of the current city
and will be close to the new town once it is built. Plans are in the
works for a new commercial district, new hotels and a stadium. The
Urban Development Council told Econoff that the Korean International
Cooperation Agency (KOICA) gave a grant of USD 25.5 million for a
convention center in Hambantota. Funding is still needed for the
new town center and 26 families must still be relocated. A new
administrative complex is also being provided through a Korean loan.
The existing town will be converted to a tourism area. A water
supply scheme is planned to meet consumption needs. According to the
Deputy District Secretary, the Ministry of Promotion of Botanical
and Zoological Gardens is also proposing a new botanical garden in
the district.
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Business Community Remains Doubtful
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¶13. Econoff met with the Hambantota District Chamber of Commerce
where members were eager to share their views with the U.S. Embassy.
They expressed concern that the business community has not been
consulted about the many development projects. They said they would
be happy to see some of the projects come to pass, but suspected
that it was all just talk. The Chamber recently sent a
representative to meet with President Rajapaksa to request that the
government conduct regional development in partnership with the
Chamber, but have received no response. There was a sense among the
Chamber members that if the port was not built now, business
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opportunities would be grabbed by other ports in the region.
¶14. One of the main concerns of the business community is the state
of Hambantota's agricultural sector. Farmers get low prices for
produce because they can not get it to market in a timely manner.
The district needs transportation facilities like the planned rail
and roads. They also said that Hambantota offers no value addition
in agriculture and that farmers need better seeds for their crops.
According to the Chamber members, the Minister of Agriculture is
from Hambantota and wants to help, but is not sure how. The Chamber
hopes to work with the National Agribusiness Council to improve
marketing.
¶15. The Chamber members are concerned that even if these major
development projects come about, they will not generate jobs for the
average resident of Hambantota. Locals do not have the skills
needed to work in these new industries and there are no programs in
place to train them. Even local technical colleges teach outdated
skills. They said they took this message to Colombo, but so far
they have received no response from the GSL.
¶16. There is a lack of coordination and information dissemination
concerning these development projects. The various government
agencies are not communicating with each other, much less with the
business community or the general public. For example, the Urban
Development Authority has not told the business community much about
the plan to move the city, leaving a lot of uncertainty surrounding
the move. A planned water supply scheme would probably not be big
enough to supply all of the new projects with water. The two
proposed water lines would run through the same area where the port
is planned. The businessmen viewed this as evidence that neither
project would actually ever be completed. The airport is being
built on lands that were only recently converted into paddy fields.
The Chamber members claimed that the government is still repaying
the loan they took out to create those paddy fields and now they are
destroying them, leaving the taxpayers to bear the cost of this lack
of planning.
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Comment
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¶17. After meeting with GSL officials in Colombo and in Hambantota,
it seems that there is genuine political will to make these projects
happen this time. While most projects are still in the planning
phases, significant money has already been spent on their
development, on acquiring land and resources, and on relocating
people who live in the project areas. The government also seems to
want to do things the right way and is taking great care to conduct
environmental studies, compensate relocated people, and bring in
experts for technical advice.
¶18. The problem, however, is that the projects are being driven from
the top down. President Rajapaksa wants big improvements to happen
quickly and has chosen large projects that will attract a lot of
attention and praise for him and his party. Unfortunately, little
thought has been put into what Hambantota District actually needs,
what types of projects would provide jobs that locals can fill, and
what would raise standards of living. There is no strategic
approach to developing the region and no coordination between the
agencies responsible for the different projects. There also seems
to be a lack of understanding, even within the business community,
that a certain level of demand and investor interest is necessary
for some of these projects to be successful. An empty port, an
empty airport, and an empty vast convention center would not
generate the benefits that Hambantota needs, and may, if
constructed, be considered the President's folly.
¶19. There are practical hurdles as well. This is the first time the
GSL has undertaken so many large projects simultaneously, and it is
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not clear where all of the funding will come from. Given Sri
Lanka's poor track record for implementation, the completion of
these projects in a timely, efficient manner is doubtful. It is
also unlikely that the GSL will have the resources to dedicate to
coordinating, planning and funding these projects while also
managing the ongoing ethnic conflict.
BLAKE