BRI and SDGs :The Case of Sri Lanka

W O R K S H O P O N A S S E S S I N G T H E P O T E N T I A L I M P A C T O F T H E B E L T A N D R O A D I N I T I A T I V E O N S U S T A I N A B L E D E V E L O P M E N T G O A L S I N A S I A N E C O N O M I E S

B A N G K O K , 2 5 - 2 6 S E P T E M B E R 2 0 1 9

Ganga Tilakaratna

Workshop on Assessing the Potential Impact of the Belt and Road Initiative on Sustainable Development Goals in Asian Economies

Bangkok, 25-26 September 2019

Total geographical area:65,610 sq.km

Mid year population (2018) :21.7 Million

Human Development Index : 0.770 - High Human Development

Life expectancy (2017) :75.5 years

GDP per capita (2018) : 4102 USD

Level of income :Upper Middle-Income Country

Sri Lanka : Basic Facts

SDGs in Sri Lanka : Key Initiatives

Sri Lanka Sustainable Development Act

No. 19 of 2017

❖to improve institutional and policy coherence and to provide the legal framework for implementing SDGs

❖ The Sustainable Development Council to guide and oversee SDG implementation and to formulate a National Policy and Strategy on Sustainable Development

Integrating SDGs into National Policies/Plans

Sri Lanka’s strategic development framework, reflected through its:

- Long-term plan- Vision 2025: A Country Enriched

- Medium-term plan- Public Investment Programme (PIP) 2017-2020- Short –term plan - ‘Blue-Green’ Budget of 2018

… aligns with the SDGs and have integrated all three

dimensions of sustainable development: Economic, Social and

Environmental

( Sri Lanka VNR)

BRI – Context of Sri Lanka

❑ Sri Lanka recognizes the BRI as an importantinitiative in strengthening cooperation alongthe silk road

❑ In the ancient Silk route too, Sri Lanka hasplayed a central role due to its strategiclocation that connects the East and the West.

❑ No specific MOU on BRI. But, severalagreements have been signed between SriLanka and China including agreements onChinese funded investment projects

❑ Sri Lanka is among the 21 founding membersthat signed the MOU on the establishment ofthe Asian Infrastructure Investment Bank(AIIB) in October 2014

BRI and SDGs in Sri Lanka: Exploring Potential Links

❑ Identify projects and activities related to the BRI and explore their potential link/impact on

SDGs

Five Priority Areas of BRI 17 SDGs

Policy Coordination

Facilities Connectivity

Unimpeded Trade

Financial Integration

People-to-People Bond

1. Facilities Connectivity

i) Colombo Port City Project

❑ Vision : build a world-class city for South Asia, which will include high quality facilities such as healthcare, education, entertainment, hotels and restaurants and a marina

❑ Sri Lanka’s single largest FDI

❑ The project plays an important role in the BRI as Colombo port city provides a key link between Asia and Europe in the silk road, due to its strategic location

2016

Commencement of land reclamation

2018

Commencement of development works

2019

Completion of Reclamation Works and

Marine Structure

2020

Completion of phase I infrastructure work

2041

Targeted completion of port

city project

Source : CHEC Port City Colombo (Pvt) Ltd., Port City, Colombo Face Sheet. (2018); CHEC Port City Colombo (Pvt) Ltd., Port City Colombo, Master Plan (2018) & IPS KIIs

❑ The First and only Deepwater terminal in South Asiacapable of handling the largest vessels afloat

❑ It was constructed in the Port of Colombo, under theColombo South Harbor expansion project and implementedunder a 35-year Build-Operate-Transfer (BOT) agreementbetween CICT and Sri Lanka Ports Authority

❑ Investment was around USD 500 million

❑ Awarded the best Container Terminal in Asia in the Under 4million TEUs category at the 2019 Asian Freight, Logisticsand Supply Chain Awards (AFLAS) for the third time.

Source: Colombo International Container Terminals (LTD), 2019. http://www.cict.lk/Sri Lanka Ports Authority (SLPA) http://portcom.slpa.lk/colombo_south_harbour.asp?chk=4 and CICT Brochure file:///C:/Users/nipuni/Downloads/cict_corporate_brochure.pdf & IPS KIIs

ii) Colombo International Container Terminals (CICT)

iii) Extension of Southern Expressway Project

▪ 96km long extension of the Southern Expressway from Matara to Hambantota (commenced in 2016)

▪ Funded through project loans from China EXIM Bank

▪ Expected to improve connectivity betweenColombo and major economic centers (includingHambantota port and industrial zone)

iv) Hambantota Port Development Project

▪ Aims to develop Hambantota port into a global maritime Centre - to become a world-class sea port with global connectivity

▪ It is a multi-purpose port which provides port services, maritime services, port related industrial zone, integrated logistics and business incubator

Source: Department of External Resources, 2019 and Road Development Authority, 2018 (http://www.rda.gov.lk/supported/project_progress_pmu/esep/esep1.html )

v) Moragahakanda Irrigation Development Project

▪ Expects to contribute to agricultureproductivity, generate hydro power to thenational grid, provide safe drinking waterfacilities and helps flood control

▪ Directly benefits four districts

▪ Project period: 2012-2017

▪ Investment value : USD 214.2 Million

vi) Greater Kurunegala Water Supply Project

▪ Aimed at improving access to pure drinkingwater and establishing a proper waste waterdisposal system in Kurunegala area.

• Timeline: 2013-2018

▪ Investment value: USD 77 Million

Source: Department of External Resources (ERD), 2019, Resource Mobilization. Retrieved from http://www.erd.gov.lk/index.php?option=com_rmobilization&view=resource_project&category_id=1&sub_category_id=1&searchby=donor_type&Itemid=321&lang=en &

ERD, 2017, Performance Report 2017.

Photo sources: www.waterboard.lk

❑ Provide a gateway for Sri Lanka to improve its overall logistics performance & competitivenessas a logistics hub in the Silk Road

❑ As per the LPI, Sri Lanka has fared well compared to South Asian averages but has scope forimprovement compared to the upper-middle income category.

❑ These projects may have potential impacts on trade, investment, employment creation overtime thereby contributing to a number of SDGs (e.g. SDG 8, 9, 11)

❑ Further, the Moragahakanda Irrigation Development project and Greater Kurunegala WaterSupply Project could have potential contribution to SDGs like SDG 1, 6 and 7

0

1

2

3

4

Overall LPI Score Customs Infrastructure Internationalshipments

Logisticscompetence

Tracking & tracing Timeliness

Logistics Performance of Sri Lanka, World Bank, Logistics Performance Index (LPI), 2018

Sri Lanka South Asia India Upper middle income

World Bank, 2018, Logistics Performance Index 2018, https://lpi.worldbank.org/

Facilities Connectivity : Potential Benefits and Opportunities

2. Unimpeded Trade

Unimpeded Trade : Exports and Imports

1.7 2.9 2 2.2 2

0

10

20

30

40

50

60

70

2014 2015 2016 2017 2018

Sri Lanka’s largest export destinations, share of total exports (%), 2014-2018

USA UK IndiaGermany Italy Belgium-LuxembourgUAE Netherlands ChinaJapan

%

18 19.6 20.8 18.9 18.5

0

20

40

60

80

2014 2015 2016 2017 2018

Sri Lanka’s largest import origins, share of total imports ( %), 2014-2018

India China UAE Japan Singapore

Malaysia USA Thailand Germany Taiwan

Source: CBSL Annual Report, various years

%

❑ China is an important trading partner for Sri Lanka - the second largest import origin of Sri Lanka, accounting for 18.5 per cent of total imports in 2018

❑ However, with regard to Exports, China accounts for only about 2 of Sri Lanka’s total exports (in 2018). It is the 9th largest export destination for Sri Lanka

0 100 200 300 400 500 600

Chinese Lending…

JICA

World Bank

ADB

Indian Exim Bank

UN Agencies

Saudi Arabia

European Investment…

European Community

Austria

Netherlands

USA

OPEC

Kuwait

Korea

Total ODA commitments made in 2017 (USD Million)

Source: Department of External Resources, 2017, Performance Report 2017

0 500 1,000 1,500 2,000

China

Malaysia

Hong Kong

India

UK

Netherlands

Singapore

Mauritious

UAE

USA

Japan

Luxembourg

Sweden

Australia

Canada

British Virgin…

Belgium

Germany

Italy

Switzerland

Korea

Thailand

France

Norway

Saudi Arabia

FDI by Country (Cumulative FDI 2005-2017) -Top 25 (USD Mn.)

China has also emerged as a a major development partner and an investor for Sri Lanka. During 2005-2017, China accounted for the highest amount of FDI in Sri Lanka .

Unimpeded Trade : ODA and FDI

Source: Board of Investment of Sri Lanka (BOI), 2019, Sri Lanka Investment Guide 2019

❑ There is potential for further expanding trade between Sri Lanka &

China under the proposed FTA - China-Sri Lanka Free Trade Agreement

- The Joint Feasibility Study on a China-Sri Lanka Free Trade Agreement, 2014: finds that

the proposed FTA will increase trade in certain product sectors of interest to Sri Lanka

including, but not limited to - tea, rubber products, fish and fisheries products, textile and

clothing, coconut products, gems and jewelry, fruits and vegetables, machinery and

electronics

❑ However, potential to improve trade and investment activities along the

BRI goes beyond the bilateral cooperation with China. There is

opportunity to capitalize on improved trade and investment activities

along the silk road

- Studies reveal that BRI increases trade flows by: 4.1 per cent among participating countries (Baniya,S, Rocha,N & Ruta, M, 2019, Trade Effects of the New Silk Road : A Gravity Analysis)

Trade & investment under the BRI: Opportunities and Challenges

3. People- to- People Bond

People- to- People Bond : Tourism

0

100,000

200,000

300,000

400,000

500,000

2012 2013 2014 2015 2016 2017

Tourist arrivals of Sri Lanka's top three source markets, 2012-2017

India China UK

050,000100,000150,000200,000250,000300,000350,000400,000450,000

Tourists arrivals - Top ten source markets - 2017

Sri Lanka Tourism Development Authority, Sri Lanka Tourism Development SATATS, 2018.

Sri Lanka Tourism Development Authority, Sri Lanka Tourism Development SATATS, 2018.

❑ Tourism Industry is a majorsource of foreign exchange for SriLanka

❑ China is the second major source of tourists in Sri Lanka, accounting for 12.7% of total tourist arrivals (2017).

❑ The number of tourist from Chinahas increased significantly inrecent years.

❑ Greater potential to improvetourism through enhancedconnectivity along the silk road

0

10

20

30

40

2013 2014 2015 2016 2017 2018

Nu

mb

er

of

Aw

ard

s

YearUndergraduate Masters PhD

People- to-People Bond: Education

Source: Ministry of City Planning, Water Supply & Higher Education

Number of Scholarships awarded by the Chinese Government (2013 to 2018)

❑ There have been student exchanges between China and Sri Lanka for several years and various scholarships have been awarded by the Chinese Government for Sri Lankan students to study in China as well as in local universities

0

20

40

60

80

100

120

140

0

1000

2000

3000

4000

5000

6000

2016 2017 2018 2019

Nu

mb

er o

f st

ud

ents

All

oca

ted

Fu

nd

s R

s.(0

00)

YearNumber of Students Allocated funds Rs.(000)

Chinese Ambassador Scholarship Programme – 2016-2019

4. Financial Integration

❑ Sri Lanka is among the 21 founding members that signed the MOU on the establishment of the Asian Infrastructure Investment Bank (AIIB) in October 2014

❑ Two development projects approved by the AIIB in April 2019

1) Colombo Urban Regeneration Project (US$ 200 million)

- Objective is to improve housing conditions of low-income communities through investments in the construction of affordable housing and the redevelopment of land

- Implemented by the UDA under the Ministry of Megapolis and Western Development.

2) Reduction of Landslide Vulnerability by Mitigation Measures Project (US$ 80 million)

- Objective is to reduce risk and damage from landslides through the implementation of physical mitigation measures and enhancement of policy and regulation associated with landslide management

- implemented by National Building Research Organization (NBRO) under the supervision of Ministry of Public Administration and Disaster Management.

Source: ERD and AIIB

5. Policy Coordination

❑ High-level exchanges and visits between Sri Lanka and China

❑ MOUs signed between Sri Lanka and China include:• “Comprehensive Implementation of Investment, Economic and Technological Cooperation”

(07.04. 2016): objectives - enhance Investment, economic and technological cooperation and

improve cooperation on enterprises between both countries

• “Promotion of Investment and Economic Cooperation” (16.05. 2017): objectives - promote

sustainable social and economic development, expansion of export & increase employment

opportunities.

• “The Outline of the Medium and Long-term Development Plan for Investment, Economic and

Technological Cooperation” (16.05.2017): objectives - promote rapid, stable and orderly

development of the bilateral investment, economic and technological cooperation, to improve the level andquality of bilateral investment and promote social, economic and friendly cooperation.

Source: Ministry of Development Strategies and International Trade , Ministry of Foreign Affairs (https://www.mfa.gov.lk/)

BRI and SDGs : Potential Linkages

Five Priority Areas of BRI 17 SDGs

Policy Coordination

Facilities Connectivity

Unimpeded Trade

Financial Integration

People-to-People Bond

BRI Facilities Connectivity : Potential Linkages to SDGs

Facilities Connectivity Direct Link Indirect Link

1.Colombo Port City Project

2. Colombo International Container Terminals (CICT)

3. Extension of Southern Expressway Project

4. Hambantota Port Development Project

5. Moragahakanda Irrigation Development Project

6. Greater Kurunegala Water Supply Project

BRI PriorityDirect Link Indirect Link

Unimpeded Trade

People-to-people Bond

Financial Integration

Policy Coordination

BRI - Potential Linkages to SDGs

Some Concluding Remarks…

❑ Preliminary findings reveal potential contribution of BRI related projects/activities on severalSDGs

❑ Measures needed to maximize the potential impact on SDGs. E.g. creating an enablingenvironment for trade and investment by improving efficiency of administrative and regulatoryprocesses and ensuring policy consistency is key to successful implementation of someinfrastructure projects.

❑ Despite the potential benefits, there could also be some concerns such as environmental impacts.

❑ BRI related activities have to be complemented with other national, sectoral and regionalpolicies/strategies

❑ Important ensure that the benefits are received by all groups including vulnerable/marginalized communities. This is key to ensure that ‘no one is left behind’

Thank you For more information contact: ganga@ips.lk