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88 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA The Potential The potential for Colombo Port comes not from increased Indo-Sri Lanka trade but from its potential as being a hub for trade from South Asian countries to the rest of the world. The Sri Lanka port authority (SLPA) aims for the Colombo Port to become a significant international player providing market-driven facilities and services to shipping lines. ADB (2007) estimates Colombo saw rapid growth in the early 1990s which averaged 20% per annum until 1998 when the growth stopped and the overall traffic volume remained static at about 1.7 million TEU per year despite India’s accelerated GDP growth. It was only in 2003 that growth resumed at 11%. The main reasons for stagnation of container traffic are attributed to increased direct calls JNPT; competition from the new ports of Salalah, Aden, Tanjung Pelepas and Port Klang; high tariff levels at Colombo compared with competing ports, and failure to respond to falling prices; civil strife; low operational efficiency: low productivity, congestion and ship delay at the port. ADB (2007) forecasts a positive business climate for Colombo Port. The container traffic forecast for container traffic both from domestic and Indian subcontinent (i.e. Bangladesh, India, and Pakistan) sources is shown in Table 9.20. It is noted that the economic growth of Indian subcontinent economies and the resulting growth in their import and export trades is the fundamental determinant of container transshipment volumes originating from these economies and hence Colombo Port’s traffic opportunity. Table 9.20 Forecast of Traffic at Colombo Port (000’ TEU) Indian Sub-Continent Container Transshipments Domestic Forecast % Trans- TEU (000) Container shipped via Trans- Growth Colombo, shipped Forecast Singapore, Salalah, etc. 2002 546* 4,739* 45* 2,133* 2005 727 6,658 39 2,597 2010 1,118 11,219 35 3,927 2015 1,643 17,262 33 5,696 2020 2,414 24,211 30 7,263 2030 4,975 47,626 26 12,383 2040 9,786 93,688 16 14,990 Note: * represents actuals which was used as the base for projections. 2040 forecast assumes unconstrained by port capacity limitations (000 TEU). Source: ADB (2007) It is expected that the potential transshipment share of the Indian subcontinent market will decline over time due to increased direct calls. ADB’s Colombo South Harbor project represents a landmark in project procurement and inward investment as well as recognising necessary reform. The impacts upon Colombo are expected to be significant, not only to the port users but to the entire community. The Colombo port also needs to cater to the increase in domestic exports. Overall, Sri Lanka’s exports accounted for 28% of GDP and imports for 37% in 2005. Almost all national imports and exports are containerised. Most exports are destined for Europe and the US. However, imports are often materials for use in export industry and they come from the Far East and significantly from the Indian sub-continent. Hence potential to expand the Colombo port needs to consider the following points (ADB 2007): • Significant volumes of Bay of Bengal container cargo are transshipping across Singapore or Port Klang for Europe and North America which is probably more expensive and longer than transshipment at Colombo. Colombo needs to investigate ways of supporting and encouraging more frequent and more regular feeder services, notably to Chittagong by offering other special deals. • Capacity limitations at JNPT are prompting carriers to seek alternatives. Colombo offers a real alternative for European and Far Eastern cargoes and current users of JNPT should be targeted. • The potential for partnering with a range of small ports, of which Vizag could be a key example, to modify cargo flows for joint benefit requires investigation. This must be done in a way that does not adversely affect other significant port relationships. • The port is a national asset which should promote contacts with local exporters, importers and development agencies by demonstrating to them how the port is able to assist them. The growth of national cargo base is an important objective and direct foreign investment in local industrial exportoriented business is to be encouraged The Project ADB’s Colombo Port Expansion Project aims at the enhancement of operational efficiency at all of Colombo port’s container terminals and investment in
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 89 port infrastructure which is urgently needed to increase its container-handling capacity and alleviate its depth infrastructure constraints to reverse this trend. It provides for dredging and breakwater construction sufficient to accommodate three terminals, which will be constructed sequentially. It includes the establishment of a new marine operations center, relocation of a submarine oil pipeline, provision of navigational aids, and construction of shore utilities. The project will be developed on a public-private partnership basis. The first two terminals are expected to be operational in 2010 and 2015 respectively and constructed by operators chosen through open competitive bidding under a build-operate-transfer concession agreement. The Project will promote economic growth by improving Sri Lanka’s competitiveness in the ports sector by expanding Colombo Port’s capacity using PPP to maintain its status as a regional transshipment hub port. The main output is increase in container-handling capacity from 3.3 million TEU in 2006 to 5.7 million TEU by 2010, 8.1 million TEU by 2015 and 10.5 million TEU by 2024. Specific project components include: • Harbour Infrastructure Works Component to accommodate vessels with an overall length of 400 m, beam of 55 m, and draft of 16 m. It involves the construction of a major new breakwater to the west of the existing harbor and a smaller secondary breakwater. • Container Terminal Component: It is planned that the first container terminal will have a planned capacity of 2.4 million TEU per annum. The existing harbour is planned to be remodeled and realignment of neighbouring roads and quays is also to be carried out. • The Project is being developed as a PPP with the public sector implementing the harbor infrastructure works component, while the private sector implements the container terminal component in line with the provisions of the SLPA Act. The Project will facilitate economic growth by enhancing national competitiveness in international trade via lower costs and faster delivery times. Export container traffic handled by Colombo Port is expected to increase by 9.5% per annum starting in 2011. The additional capacity will enable Colombo Port to increase its ISC transshipment market share from 23% in 2002 to 30% by 2011. Transshipment volumes handled by Colombo Port are expected to increase by Table 9.21 Project Investment Plan $ million A. Public Sector Component 1. Base cost (a) Harbor infrastructure works 366.2 (b) Consulting services 14.7 2. Contingencies 43.9 3. Financing charges during implementation 55.2 Subtotal (A) 480.0 B. Private sector component 1. Terminal construction works 154.0 2. Equipment 147.0 Subtotal (B) 301.0 Total (A + B) 781.0 Source: ADB, 2007 8% per annum starting in 2011. Sri Lanka will thus be able to generate additional income from transshipment. The direct payments generated by transshipment traffic alone are expected to increase the contribution of the ports sector to GDP by an additional 0.1% by 2015, and attract foreign direct investment of approximately $800 million to the ports sector by 2024. The main consequence for the economy of the project is not implemented would be the loss of the frequent, fast, direct shipping services used by exporters and importers. Without investment in the project, Colombo Port would lose its transshipment traffic; and if the port no longer operates as a transshipment hub port, it would soon lose its direct calls on trunk-line routes. Local traffic is not high enough to attract direct calls by trunk-line ships. Colombo Port would eventually become a feeder port, served by a combination of feeder ships and mainline services with relatively long transit times for the ports with lower traffic volumes. The consequences for Sri Lanka’s current and future exports would be serious. The project will benefit Sri Lankan exporters by enhancing their competitiveness in international markets through lower freight costs and faster delivery times for time-sensitive exports, e.g. textiles, which account for 52% of Sri Lanka’s exports. The main costs to the Sri Lankan economy of the reversion to a feeder port would be: • Additional costs of feeder services to regional hub ports such as Singapore, to connect with trunk route services (at least 20% are estimated to switch to feeders) • Longer transit times and delays, which are injurious to export markets, especially for textiles, but also for new exports that will emerge
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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2 Literature Review and Rationale f
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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