Business Times

Hambantota EPZ needs further study

When a port was suggested in the southern, impoverished town of Hambantota some decades back to take advantage of a large number of ships that ply this vital shipping lane, not much attention was paid to it until Mahinda Rajapaksa came along.

Apart from the economic benefit to go ahead and construct a port, the President also had a personal reason for doing since the region is his home base and where the Rajapaksa family has built their political base and fortunes.

Thus a port seemed the right thing. But when plans expanded to a mega development project – which is what it is now – with a state-of-the-art international airport, cricket stadium, convention centre, hotels and other facilities positioning it similar to Singapore --, then questions began surfacing as to whether this is more an ego project than one that would benefit the country’s economy.

There is little doubt the Rajapaksa clan would benefit from the shift of Hambantota from the backwaters of being, once the poorest region in Sri Lanka to possibly the wealthiest, at least in terms of infrastructure.

And, there is little doubt that the President is a doer, similar to the late President Ranasinghe Premadasa who was also involved in similar grand projects, at a huge cost however. Ironically Premadasa’s son, politician Sajith also operates from Hambantota.

Ego can be a very costly exercise going by the huge spend on developing Hambantota at the expense of an equitable distribution of development across Sri Lanka, particularly the North. One example -- the government is spending Rs. 100 million to promote its bid to host an upcoming Commonwealth Games in Hambantota, a risk because it may or may not work.

On the other hand this southern port has already overrun its costs owing to blasting a rock that is blocking the passage of ships to the new harbour. Sri Lanka Ports Authority Chairman Dr. Priyath Bandu Wickrama acknowledges that they were aware of this unforeseen problem (much before a newspaper highlighted it). However if not for exposure in the media, this would have been another hidden factor in the many problems the government seems to hide under the carpet. So much for transparency!
Our main story today is the planned acquisition of more than 1,000 hectares of land by the Ports Authority to set up an investment zone alongside the harbour. This area is equal to all the 12 investment zones put together across the country that are managed by the Board of Investment (BOI) which is yet to fill up with over 50 lots still available to investors.

For the past 30 years, the BOI and Sri Lanka have been trying to attract investments to these zones – an initiative that was however negated by the conflict. Now in one go, the government is having a giant zone to bring in investment, spending a lot of money on infrastructure and other needs. This is in addition to a 140-hectare investment zone that already exists in the Hambantota port.

The Ports Authority chairman says the zone is being set up as a logistics hub to invite industries that need the services of a port. Yet will this be a viable investment or end up as a white elephant?
As long as the Rajapaksa family is in power, a lot of resources will go to make this development work. What after that? We have seen many projects promoted as ego trips like the Gam Udawa, Mahapola, etc which have collapsed once their architects went out of power or faded from the scene, illustrating the need for national projects (that we have stated over and over again) that enlist the support of all communities and groups without any political biases.

The total area of the port and its proposed investment zone will be in excess of 2,000 hectares or more than 5,000 acres. Is Sri Lanka capable of attracting hundreds of investors to these zones in a single location?

On the other hand have the authorities considered the environmental impact and done a compulsory Environmental Impact Assessment (EIA)? The airport site was shifted after residents complained but the new site is also said to be an elephant-crossing. Nowadays investors are cautious of issues like climate change, global warming and environmental degradation in locating investments because ‘deeply perceptive’ consumers demand these plus worker rights.

Furthermore Sri Lanka is yet to get sizable foreign investments after the war ended in May 2009 and this is unlikely to roll in (as the government pleases) in the near term with the country on a roller-coaster ride with the US and its allies.

According to some experts, the US and the West together control 40% of world GDP and thus the government hobnobbing with the likes of China, India, Russia, Iran or Libya won’t turn into long-term investment gains.

The latest report by a UN panel slamming the government on alleged human rights abuses due to the war is another setback in any warming of relations with the West. Thus instead of following the route taken by the Pensions Bill and other, hurriedly-thought up schemes that have backfired, the mega Hambantota zone needs a more detailed study and consultations before proceeding.

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