EconomyNext – Sri Lanka’s latest expressways are among the world’s costliest, a top logistics professional and former head of the national transport body has declared, voicing doubts whether these projects are economically viable.
The award of road building contracts without competitive bidding reached a peak in 2014 with projects reportedly worth 333 billion rupees awarded over the last 12 months alone, said Amal Kumarage, Senior Professor in the Department of Transport & Logistics Management at the University of Moratuwa.
"In these projects, costs are higher by around 135 percent. The losses arising from them alone are estimated at 200.5 billion rupees," he declared.
"Notably, all these projects have been funded with Chinese sources and awarded to Chinese contractors. This approach is spreading, with contracts worth 110 billion rupees funded with borrowings from local banks also being awarded on the same basis this year to local contractors.
The comments by Kumarage, a Chartered Civil Engineer and former Chairman, National Transport Commission, came in an article published in the Sunday Times newspaper which he said was written to provide "professional insight" to the continuing debate on the costs and benefits of highway development in Sri Lanka.
"Expressway construction contracts awarded over the last 12 months in Sri Lanka ranging from 19 to 72 million US dollars per km appear to be in a cost class of their own, raising questions about the economic viability of new expressway projects in the country."
The per kilometre cost of the island’s expressway programme has steeply increased from seven million dollars million a kilometre for the Southern Expressway financed by Japan and the Asian Development Bank to 72 million dollars a kilometre for a section of the Outer Circular Highway, going around the capital Colombo recently awarded to the Metallurgical Corporation of China.
"(This) section of the Outer Circular Highway between Kadawatha and Kerawelapitiya comes close to being the world’s costliest suburban expressway, outside of Japan, known to the author," Kumarage said.
He estimated the Kadawatha-Kerawalapitya section to be over priced by at least 68 percent, while the Northern Highway which was launched last month appears to be over priced by 126 percent.
There have been huge cost overruns on extensions to the island’s Southern Expressway with an alarming difference of six to seven times between the recently concluded Galle-Matara section and the recently awarded extension to Beliatta at a cost of 26 million dollars a kilometre.
"The extension of the Southern Highway from Matara to Beliatta, however, appears to be in a class of its own. It is overpriced by an astounding 545 percent," declared Kumarage, who is also the current International Vice President of the global body of the Chartered Institute of Logistics & Transport.
"The common denominator of all these projects is that they were funded with Chinese borrowings and contracts have all been awarded in 2014 without calling for competitive bids."
While some cost overruns were legitimate, Kumarage said the most alarming reason for high cost is the possibility of corruption.
Given that the investment on road reconstruction was well below par for several decades, the high expenditure is justified if these roads will result in the envisaged benefits, he noted. "But if we have indeed spent more than is warranted on a road, it becomes that much more difficult to make it economically viable. A multiplicity of such roads can bankrupt an economy."
He recommended a return forthwith to competitive bidding and conduct of proper feasibility studies with private funding sought for road projects that have revenue potential along with an integrated master plan to ensure benefits from roads reach the masses.