On Sri Lanka’s infrastructure development through bilateral loans
Esha Srivastava, First Secretary (Press, Information & Culture) at the Indian High Commission has sent the following response to the Business Times feature last week titled “Sri Lanka’s infrastructure development on bilateral loans: Who is helping whom?” authored by Dr. T. Lalithasiri Gunaruwan, economist and a former Transport Ministry Secretary.
The letter said:
While the author, who appears to have some experience of handling transportation issues, may have his own perspectives about railway development models that Sri Lanka should pursue, the article fails to convey the correct picture about India’s involvement in the reconstruction of the northern railway line. The author claims that the railway track could have been built indigenously, at lesser cost, using local expertise.
He has not substantiated this in any way. The reconstruction of the northern railway, along with creation of a modern signalling and communication network, is a very complex project, particularly given, the complete destruction and the earlier railway infrastructure during the war.
Given that Sri Lankan railways has not undertaken such a project in the past, it is not clear on what basis the author feels that the project could have been undertaken indigenously, and that too at lower cost. IRCON International has vast experience in building railway networks in various countries, and this is what perhaps motivated the Government of Sri Lanka to seek India’s assistance.
Another aspect is the proven ability to execute a project on time, and IRCON has consistently demonstrated this, including in the northern railway project In fact, the rehabilitation of the Kalutara – Matara coastal railway line was completed six months before schedule by IRCON. It is another matter that the rest of the track to Colombo, being executed by another agency, is yet to be completed. To presume that indigenous efforts, without commensurate experience, would be able to produce the same level, of output as IRCON, is fallacious.
As regards the issue of foreign capital, it is the prerogative of the Government of Sri Lanka whether to seek external funds. Insofar as India is concerned, we were happy to respond to Sri Lanka’s request and provide concessional credit at a time when Sri Lanka had limited access to International credit. It is highlighted that the Indian credit was made available at only 0.5% interest rate over LIBOT (with a cap in case interest rates rise in future) and the repayment period is 20 years, including a 5 year moratorium. This certainly is not the cause of increase in Sri Lanka’s debt obligations.
The author’s concerns regarding lack of technology absorption by Sri Lankan engineers and technicians are unfounded. IRCON brought from India only the top technical personnel and some specialised labour, while the rest of the project was manned by Sri Lankans. To illustrate, of the nearly 885 personnel deployed by IRCON, around 600 are from Sri Lanka. This gave the Sri Lankans working on the project a unique opportunity to gain from IRCON’S experience and technology, apart from generating local employment opportunities. May it be emphasised that this approach by IRCON is in line with India’s emphasis on capacity building in partner countries.
It is most distressing that the learned author has made baseless claims that IRCON’s costs are very high. IRCON is known for being competitive across the world, and as the author himself admits, the cost for the Matara-Beliatta sector being constructed by another agency is much higher. Claims that the Sri Lankan railway could have undertaken a project at one fourth the cost quoted by IRCON are false and misleading. While the author correctly notes that it was originally envisaged that Sri Lankan Railway would undertake work on the PaIlai-Kankesanturai sector, presumably IRCON’s proven track record led the Government of Sri Lanka to finally award this contract also to IRCON. It may be noted that other sectors, which were to have been completed indigenously remain incomplete, and may require foreign assistance.
India has been a steadfast friend and partner of Sri Lanka. India is not seeking gratitude or thanks. We are truly delighted that the reconstruction of the northern railway is contributing to greater connectivity amongst all Sri Lankans. In future, we hope that such connectivity will extend to India itself, and a Sri Lankan will be able to travel from Kataragama to Bodh Gaya in India on a common ticket. The High Commissioner’s statement at the Anagarika Dharmapala commemoration event was made in a specific context (the trial run of the Yal Devi from Pallai to Jaffna), wherein no mention had been made on how the railway track suddenly reappeared on that stretch. Subsequently, during and before the formal inauguration of the railway track the Government of Sri Lanka and the media acknowledged that this had been constructed as part of the Northern Railway Reconstruction Project under a concessional credit line amounting to about US$ 800 million provided by the Government of India. The cooperation received from the Government of Sri Lanka during the construction of the track was exemplary, for which the Government of India is extremely appreciative. India’s development partnership with Sri Lanka is guided by the priorities set by the people and Government of Sri Lanka and entails cooperative implementation by working together with agencies of the Government of Sri Lanka.
Business Editor’s note: Since this article was written By Dr. Gunaruwan, we asked for his comments on the response sent by the Indian High Commission. This is his response:
Comments by the author:
I am glad that my article has had a significant impact on the readership, which becomes implicit in the Indian High Commission’s decision to respond to it.
I am also happy to note that some of the facts I presented in my article have been further substantiated by the official response of the High Commission of India. For instance, it implicitly admits that nearly 300 or 30 per cent of the employees deployed in the Northern railway reconstruction project by Indian contractors were non-Sri Lankans, clearly demonstrating the job creation opportunity the Sri Lankan economy has lost in getting the project implemented through a foreign firm, even if one ignores the multiplier effect on the domestic economy such earnings of local labour would have generated.
The main question raised in the official response of the Indian High Commission appears to be on the capability of the Sri Lanka Railway to indigenously implement this project. Sri Lanka Railway’s engineering and technical cadres, I believe, do not have a superiority complex to compare their skills and capabilities against any other company or country, and would certainly need from time to time to acquire appropriate new technology developing internationally; but would surely want the rest of the world to perceive their humble capabilities through railway track rehabilitation and reconstruction undertaken by the SLR in the recent past. For example, the Tsunami devastated Southern railway track was rehabilitated by the Sri Lanka Railway engineers, technical staff and workers, in a record 56 days at a cost of less than US$1000 a kilometre. If my recollection is correct, the Southern railway rehabilitation project between Kalutara and Matara, implemented through the Indian contractor, on the contrary, cost the Sri Lanka Railway nearly $100 million or an average cost per kilometre of around $800,000, and took nearly a full year to complete even after compelling the SLR to close down the track sections for train traffic. Further, the 13 kilometre section between Vavuniya and Omanthai was reconstructed entirely by the Sri Lanka Railway engineers and technical staff, during my tenures as the General Manager Railway and Secretary to the Ministry of Transport in 2009 and 2010, and the cost per kilometre was less than $400,000 kilometre. Besides, SLR engineers submitted an estimate for the reconstruction of Pallai-KKS track section at a cost of Rs. 5 billion, amounting to an average cost of less than $600,000 a kilometre, inclusive of costs of imported material, a bridge of a sizable span, reasonable remuneration for local labour, and a handy surplus ear-marked for the SLR. Indian High Commission could easily ascertain the amount contracted for the construction of Northern railway by their own contractor, which, to my understanding is not less than $2 million a kilometre on average, excluding the cost of the signalling component.
The competence of the Sri Lanka Railway in doing a quality job also seems to be a concern raised by the High Commission of India. This is apparent in the statement expressing that it would be fallacious to presume the capability of indigenous efforts in producing the same level of output as the Indian contractor. While acknowledging that the quality appraisal is a complex task which would resquire examination of a multitude of performance indicators, and should be considered in relation to the costs incurred, it could be stated with confidence that almost all projects implemented by the SLR track staff attained the intended and designed performance levels depending on the resource availability. No record of any significant necessity to replace failed concrete sleepers within a short period of time after project completion, no bridges newly done were ever found of inadequate quality, no records to my knowledge of settlement of newly done bridge approaches, or no tunnel ever became impassable owing to inadequate structure gauge clearance when the new tracks were laid through such tunnels.
How could Sri Lankan engineers, technical staff and workers demonstrate such performance? We have been engineers and innovators throughout the history, and made giant tanks and irrigation systems which astonish even the present day engineers and scientists for their scale and perfection. It is pathetic that the policy makers in this country do not recognise this indigenous strength, and appear to fail in exploiting the local development opportunities for national economic benefit and for further improvement of technical, scientific and engineering knowledge and skills of our future generations. Learning by doing is the best method of technical progress, much more effective than any technology transfer intended through foreign executed projects, however genuine such intentions might be.