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QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 89<br />
port infrastructure which is urgently needed to increase<br />
its container-handling capacity and alleviate its depth<br />
infrastructure constraints to reverse this trend. It<br />
provides for dredging and breakwater construction<br />
sufficient to accommodate three terminals, which will<br />
be constructed sequentially. It includes the establishment<br />
of a new marine operations center, relocation of<br />
a submarine oil pipeline, provision of navigational aids,<br />
and construction of shore utilities. The project will be<br />
developed on a public-private partnership basis. The<br />
first two terminals are expected to be operational in<br />
2010 and 2015 respectively and constructed by operators<br />
chosen through open competitive bidding under a<br />
build-operate-transfer concession agreement. The<br />
Project will promote economic growth by improving<br />
Sri Lanka’s competitiveness in the ports sector by<br />
expanding Colombo Port’s capacity using PPP to maintain<br />
its status as a regional transshipment hub port.<br />
The main output is increase in container-handling<br />
capacity from 3.3 million TEU in 2006 to 5.7 million<br />
TEU by 2010, 8.1 million TEU by 2015 and 10.5<br />
million TEU by 2024. Specific project components<br />
include:<br />
• Harbour Infrastructure Works Component to<br />
accommodate vessels with an overall length of 400<br />
m, beam of 55 m, and draft of 16 m. It involves the<br />
construction of a major new breakwater to the west<br />
of the existing harbor and a smaller secondary<br />
breakwater.<br />
• Container Terminal Component: It is planned that<br />
the first container terminal will have a planned<br />
capacity of 2.4 million TEU per annum. The existing<br />
harbour is planned to be remodeled and<br />
realignment of neighbouring roads and quays is also<br />
to be carried out.<br />
• The Project is being developed as a PPP with the<br />
public sector implementing the harbor infrastructure<br />
works component, while the private sector<br />
implements the container terminal component in<br />
line with the provisions of the SLPA Act.<br />
The Project will facilitate economic growth by<br />
enhancing national competitiveness in international<br />
trade via lower costs and faster delivery times. Export<br />
container traffic handled by Colombo Port is expected<br />
to increase by 9.5% per annum starting in 2011. The<br />
additional capacity will enable Colombo Port to<br />
increase its ISC transshipment market share from 23%<br />
in 2002 to 30% by 2011. Transshipment volumes<br />
handled by Colombo Port are expected to increase by<br />
Table 9.21 Project Investment Plan<br />
$ million<br />
A. Public Sector Component<br />
1. Base cost<br />
(a) Harbor infrastructure works 366.2<br />
(b) Consulting services 14.7<br />
2. Contingencies 43.9<br />
3. Financing charges during implementation 55.2<br />
Subtotal (A) 480.0<br />
B. Private sector component<br />
1. Terminal construction works 154.0<br />
2. Equipment 147.0<br />
Subtotal (B) 301.0<br />
Total (A + B) 781.0<br />
Source: ADB, 2007<br />
8% per annum starting in 2011. Sri Lanka will thus be<br />
able to generate additional income from transshipment.<br />
The direct payments generated by transshipment traffic<br />
alone are expected to increase the contribution of the<br />
ports sector to GDP by an additional 0.1% by 2015,<br />
and attract foreign direct investment of approximately<br />
$800 million to the ports sector by 2024.<br />
The main consequence for the economy of the<br />
project is not implemented would be the loss of the<br />
frequent, fast, direct shipping services used by exporters<br />
and importers. Without investment in the project,<br />
Colombo Port would lose its transshipment traffic; and<br />
if the port no longer operates as a transshipment hub<br />
port, it would soon lose its direct calls on trunk-line<br />
routes. Local traffic is not high enough to attract direct<br />
calls by trunk-line ships. Colombo Port would eventually<br />
become a feeder port, served by a combination<br />
of feeder ships and mainline services with relatively long<br />
transit times for the ports with lower traffic volumes.<br />
The consequences for Sri Lanka’s current and future<br />
exports would be serious. The project will benefit Sri<br />
Lankan exporters by enhancing their competitiveness<br />
in international markets through lower freight costs<br />
and faster delivery times for time-sensitive exports, e.g.<br />
textiles, which account for 52% of Sri Lanka’s exports.<br />
The main costs to the Sri Lankan economy of the<br />
reversion to a feeder port would be:<br />
• Additional costs of feeder services to regional hub ports<br />
such as Singapore, to connect with trunk route<br />
services (at least 20% are estimated to switch to<br />
feeders)<br />
• Longer transit times and delays, which are injurious<br />
to export markets, especially for textiles, but also<br />
for new exports that will emerge