Infrastructure Sector in Sri Lanka

An Expert's View about Airports in Sri Lanka

Posted on: 8 Sep 2010

Many opportunities in the infrastructure sector have arisen in Sri Lanka

[Infrastructure] ? [Sri Lanka] Sector Report Infrastructure Sri Lanka Produced by: Michael Jefferson, Commercial Attaché, British High Commission Colombo Last revised June 2010 Whereas every effort has been made to ensure that the information given herein is accurate, UK Trade & Investment or its sponsoring Departments, the Departments of Trade & Industry and Foreign & Commonwealth Office, accept no responsibility for any errors, omissions or misleading statements in that information and no warranty is given or responsibility is accepted as to the standing of any firm, company or individual mentioned. [Infrastructure] ? [Sri Lanka] Table of Contents OVERVIEW 3  CHARACTERISTICS OF MARKET   OPPORTUNITIES 4  KEY METHODS OF DOING BUSINESS 5  CONTACT LISTS 6 Page 2 of 7 [Infrastructure] ? [Sri Lanka] OVERVIEW Many opportunities in the infrastructure sector have arisen in Sri Lanka, following the end of the three decade internal conflict between the Sri Lankan Government and Liberation Tigers of Tamil Eelam (LTTE), in May 2009. At first sight, opportunities may appear to be focussed on reconstruction activity in the North and East, the areas most affected by the conflict. But closer examination of the country?s needs, post-conflict; reveal opportunities right across the Island. The recent re-election of President Mahinda Rajapaksa, for a second 5 year term, and a convincing general election victory for his party the United Freedom People?s Alliance (UFPA), has given his Government a strong platform on which to pursue their agenda priority of strong and sustainable economic development. Furthermore, the Government of Sri Lanka [GoSL] is seeking to develop Sri Lanka as a South Asian business hub, to service the South Asian region, and is looking closely at economic models used by neighbours such as Singapore and Malaysia for guidance. The GoSL clearly understands the need for rapid reconstruction and further development of its infrastructure across the island, in order to achieve its economic goals. To this end, the Administration is in the process of identifying and prioritising a range of infrastructure projects at every level, from basic water pumps in rural villages, to ambitious plans for a comprehensive High Mobility Road network. Much of the infrastructure in the country is not only outdated but has not been upgraded for many years. A prime example of this is the rail network, which has remained largely unchanged since it was built, over a century ago. Specific areas of most opportunity in the immediate future are in: Construction (particularly Highways and Tourism infrastructure); Ports & Logistics; Water and Waste Management. In the medium term, there are also due to be significant opportunities in: Airports; Power; Railways; Sports and Leisure Sectors. Opportunities in these areas will come onstream over the coming months and years as the GoSL further develops and makes known its longer term investment plans. CHARACTERISTICS OF MARKET Sri Lanka is an island in the Indian Ocean with a population of approximately 21 million and a GDP of US$41 billion (2009 estimate). It is classed as a lower-middle income developing nation. Despite the internal conflict, the economy has shown consistent growth over the past decade, averaging 5% GDP pa. The consensus on growth in 2010, is 6.0% GDP, rising to 7.0% in 1 2011 . A large number of infrastructure projects are funded by loans from international aid agencies, including Asian Development Bank (ADB), World Bank (WB) and Japan International Cooperation Agency (JICA), who all have an established presence in the country. Sectors in which these agencies are currently assessing project viability are in the transport (road and rail), water & waste management and power (including power generation and the upgrade of the transmission network). Most large projects provide opportunities in a range of service and supply areas for International Competitive Bidding (ICB). The GoSL is keen to attract more international companies into the market, and will provide firm contract guarantees if companies are able to organise funding packages upfront, to deliver the work. Although it is relatively 1  Asian Development Bank?s Asian Development Outlook 2010  ( Page 3 of 7 [Infrastructure] ? [Sri Lanka] inexperienced in this area, GoSL is also interested in developing projects on a Public Private Partnership (PPP) basis. As may be noted, Sri Lanka is in a strategic location next to the busy Indian Ocean shipping lanes that connect Europe and Africa to East Asia. GoSL is keen to access and exploit the economic opportunity this represents. To this end they are developing a major new port at the closest point to the shipping lanes (Hambantota) and are further expanding existing capacity at their current principle port in Colombo. OPPORTUNITIES Development of the Road Network ? the opportunities in this area come in two major categories: the rehabilitation of roads (particularly in the North and East of the island) to improve road condition, capacity and connectivity of the network; and the Development of a High Mobility Road Network which includes the construction of a new expressways and of ring roads to by-pass major urban areas. Loans have been committed by the ADB to assist the Sri Lankan government deliver these projects and the aid agencies are committed to continuing this over the coming years. Ports ? Sri Lanka is looking to develop its ports capacity for both commercial and leisure use. At the current time port projects that are either under development or in advanced stages of planning include Hambantota, Galle and Trincomalee as well as an expansion to the Colombo port facility with the Colombo South Harbour project. Aid agency loans were secured for the expansion of the Colombo port and there will be particular opportunities for international companies to develop new terminals at this facility. Aviation ? Mattalla International Airport is currently under construction and will be Sri Lanka?s second international airport. The aims of the government to increase tourism numbers from the current levels of around 500,000 per year to 2 million a year by 2016 means the expansion of the current capacity for aircraft is essential. On top of this development careful consideration is being given to how best to develop a countrywide network of regional airports which would include an upgrade to the air traffic control network. Rail ? Sri Lanka is looking to upgrade and electrify its rail network which for the most part is over a century old. It is also the key to the development of a Multi Modal Transport System which the ADB has included in its Business Plan for Sri Lanka for 2009-2012 so will make loans available for. The first stage of this network is a Sri Lankan Rupees 300 billion (£1.8billion) overhaul of the Colombo network including the complete redevelopment of 12 stations. Water including Waste Water Management ? The current water network in Sri Lanka has a direct coverage of about 30% of the population with a further 30% covered by community facilities such as wells. The government is developing this capacity as well as investing in treatment and disposal facilities particularly in urban areas. Current projects include the development of integrated water and disposal facilities in Colombo, Negombo, Galle and Kandy. Loans from the ADB and JICA have been secured for these projects and these agencies are committed to helping the Sri Lankan Government develop this sector by assistance in the form of loans over the coming years. Tourism Infrastructure ? There is a significant push to increase the numbers of Tourist coming to Sri Lanka to 2 million by 2016 and to facilitate this there will need to be an increase in the number of hotel rooms from the current level of 14,000 to 50,000. The aim is to develop high end tourism focussing on the country?s natural assets including beaches, wildlife and historical locations. Currently two towns on the East coast Kuchchaveli and Passikudah have Page 4 of 7 [Infrastructure] ? [Sri Lanka] land available for hotel development in beach front locations, but there are also opportunities in areas across the island. Sports Infrastructure ? Hambantota in the South of the island has bid for the 2018 Commonwealth Games and it is being developed as a sports hub in the region. Success in the bidding process for the 2018 Games will provide business opportunities for international companies to develop facilities from scratch to enable the location to deliver the Games. Power ? projects to upgrade the transmission line network in order to improve efficiency as well as to ensure 100% penetration of the network (currently at around 85%) are planned. Current projects have secured loans on a case by case basis from the ADB but the government is still developing concrete plans in this area. There are also plans to improve the generation capacity, with a focus on expanding the renewable energy sector. KEY METHODS OF DOING BUSINESS Some key advantages of Sri Lanka's Business Environment for UK companies are: ? English is widely used and is the language of business ? Commercial Law is based on UK Laws ? Visa on arrival service for UK nationals and regular flights to Colombo (both direct and via hub airports) ? Total foreign ownership and joint ventures are encouraged ? No restrictions on repatriations of earnings ? Tax holidays & duty exemptions provided [] ? Free Trade Agreements with both India and Pakistan give easy access to a huge market place ? Investment protection guaranteed by the constitution ? Double taxation agreements entered into with several countries including the UK The GoSL?s commitment to transparency in project tendering should enable reputable international contractors and investors to deal directly with the Ministry or Government agency involved, when responding to tenders, or investment opportunities. However, while, not essential or required by law, local contacts are always useful to help navigate Government bureaucracy. If appropriate, UKTI can provide help in identifying potential business partners through its chargeable service regime. UK companies who are interested in developing business in Sri Lanka are advised to: ? View Sri Lanka as a long-term business prospect ? Research the market before visiting. The UKTI Commercial Team at the British High Commission, Colombo and UK Trade & Investment, London can undertake an Overseas Market Introduction Service (OMIS), which offers pre-visit research, pre-visit and in- market support. ? Have patience and perseverance. ? Understand the local business culture and local political scene Board of Investment Sri Lanka actively promotes foreign investment through the Board of Investment of Sri Lanka (BOI), an autonomous statutory agency. The BOI acts as a facilitator for investment and is structured to provide ?one-stop-shop? services for foreign investors, including approval of projects, granting licenses, establishing tax incentives and assisting in procurement. Page 5 of 7 [Infrastructure] ? [Sri Lanka] Legal Advice When considering doing business in Sri Lanka, it is essential to obtain appropriate legal, financial and taxation advice. A useful contact list of lawyers and other relevant professional bodies as well as further information on the fire, police & security sector in the country is available from the High Commission. For further details on any of the information contained in this sector report or on more general commercial opportunities in Sri Lanka, please contact the UKTI Sri Lanka team: In Sri Lanka: Michael Jefferson Commercial Attaché British High Commission 389 Bauddhaloka Mawatha Colombo 00700 Sri Lanka Tel: +94 11 539 0664 Fax: +94 11 539 0697 Email: In UK: Usha Modha UK Trade and Investment Kingsgate House 66-74 Victoria Street London SW1E 6SW Tel: +44 207 215 4809 Fax: +44 207 215 4075 Email: CONTACT LISTS Board of Investment of Sri Lanka Level 26 West Tower World Trade Centre Colombo 00100 Sri Lanka Tel: +94 11 2427060 Fax: +94 11 2422407 E-Mail: Website: Road Development Authority No 756 B/1 Parliament Road Pelawatta Battaramulla Sri Lanka Web: Page 6 of 7 [Infrastructure] ? [Sri Lanka] Sri Lanka Ports Authority No 19 Chaithya Road Colombo 00100 Sri Lanka Tel: +94 11 2421201 Fax: +94 11 2440651 Website: Civil Aviation Authority of Sri Lanka Supreme Building No 64 Galle Road Colombo 00300 Tel: +94 11 2433213 Fax: +94 11 2440231 Email: Website: Ministry of Transport No 1 D R Wijewardana Mawatha Colombo 01000 Sri Lanka Tel: +94 11 2687105 Fax: +94 11 2684930 Email: Website: Sri Lanka Railways Sri Lanka Railway Headquarters, Colombo 01000 Sri Lanka Tel: +94 11 2430080 Website: National Water Supply & Drainage Board Galle Road Ratmalana Sri Lanka Tel: +94 11 2638999 Fax: +94 11 2636449 Email: Website: Ministry of Construction and Engineering Services nd 2 Floor Sethsiripaya Battaramulla Sri Lanka Tel: +94 11 2882413 Website: The Council for Business with Britain C/O The Ceylon Chamber of Commerce 50 Navam Mawatha Colombo 00200 Sri Lanka Tel: +94 11 2421745 Fax: +94 11 2449352 Email: Website: Page 7 of 7
Posted: 08 September 2010