The Belt and Road Initiative and SDGs: Potential Linkages, Opportunities and Challenges

IPS – UNDESA National Consultation Workshop , 8 August 2019 Background : Sustainable Development Goals (SDGs)

 At the United Nations Sustainable Development Summit held in 2015, 193 Member States of the United Nations, pledged commitment to the 2030 Agenda for Sustainable Development.

 Ambitious Agenda: includes 17 goals and 169 targets, requires balancing the 3 dimensions of sustainable development and ensuring the principle of ‘leaving no one behind’

 The implementation of SDGs presents a great challenge: requires to adopt integrated approaches to design policy, mobilize resources, build partnerships and strengthen institutions Background : The Belt and Road Initiative (BRI)

 BRI was launched by the People’s Republic of in 2013.  Five key areas of cooperation:

Policy Coordination

Facilities Connectivity

Unimpeded Trade

Financial Integration

People-to-People Bond Background: Links between BRI and SDGs

BRI -5 Priority Areas

Policy Coordination

Facilities Connectivity

Unimpeded Trade

Financial Integration

People-to- people Bond

Source: Hong (2017) Background: Links between BRI and SDGs

BRI Priority Areas SDGs with Direct Link SDGs with Indirect Link Policy Coordination SDG 17

Facilities Connectivity SDG 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 13, 17 SDG 10

Unimpeded Trade SDG 8, 9, 17, 1, 2 SDG 12, 14, 15

Financial Integration SDG 17

People-to-people Bond SDG 3, 11, 17 SDG 16

Source: Hong (2017) SDGs and BRI – Context of Sri Lanka

 Sri Lanka has pledged commitment to the 2030 Agenda on Sustainable Development

 Sri Lanka recognizes the BRI as an important initiative in strengthening cooperation along the silk road

 Sri Lanka has played a central role in the ancient Silk route due to its strategic location that connects the East and the West.

 Sri Lanka is among the 21 prospective founding members that signed the MOU on the establishment of the Asian Infrastructure Investment Bank (AIIB) in October 2014. (Ministry of Foreign Affairs – Sri Lanka, Sri Lanka signs MOU on the establishment of the Asian Infrastructure Investment Bank in Beijing, https://www.mfa.gov.lk/ta/5505-sri-lanka-signs-mou-on-the-establishment-of-the-asian-infrastructure-investment-bank-aiib- in-beijing/

 Several agreements signed between Sri Lanka and China including agreements on Chinese funded investment projects, which could help strengthen Sri Lanka’s position in the silk road (Ministry of Foreign Affairs – Sri Lanka, Sri Lanka and China sign agreements for cooperation, 2014, https://www.mfa.gov.lk/tam/sri-lanka-and-china-sign-agreements-for-cooperation/) Objective

 Explore potential impact/contribution of projects and activities related to the BRI on the achievement of SDGs

1. Facilities Connectivity Facilities Connectivity : 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 - initial investment of US$ 1.4 billion (total investment ~ US15 billion)  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  Locational advantages: half of all global container shipments and two-thirds of world’s oil cargo transportation are within 10 nautical miles from SL.

2041 2016 2018 2019 2020 Targeted Completion of Completion of phase I Commencement of Commencement of completion of port Reclamation Works and infrastructure work land reclamation development works Marine Structure city project

Source : CHEC (Pvt) Ltd., Port City, Colombo Face Sheet. (2018); CHEC Port City Colombo (Pvt) Ltd., Port City Colombo, Master Plan (2018) & IPS KIIs Facilities Connectivity : Colombo International Container Terminals (CICT)

 The First and only Deepwater terminal in South Asia capable of handling the largest vessels afloat  Constructed in the Port of Colombo, under the Colombo South Harbor expansion project, CICT has 3 million TEUs capacity  CICT has been recognized as one the most successful Chinese investment projects in Sri Lanka.  Awarded the best Container Terminal in Asia in the Under 4 million TEUs category at the 2019 Asian Freight, Logistics and Supply Chain Awards (AFLAS) for the third time.  Implemented under a 35-year Build-Operate-Transfer (BOT) agreement between CICT and Sri Lanka Ports Authority (SLPA)  Investment of USD 500 Mn.  The strategic location of the port in the center of the East/West shipping route has enabled it to act as a gateway to global trade providing the most efficient connections, especially along the silk road.

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 Facilities Connectivity : Extension of Southern Expressway Project (ESEP)

 Construction of 96km long extension of the Southern Expressway from Matara to

 It was developed in four sections: Sections 1: from Matara to Beliatta (USD 683 Mn) Section 2: from Beliatta to Wetiya (USD 360 Mn) Section 3: from Wetiya to Mattala (USD 252.5 Mn) Section 4: from Matttala to Hambantota via Andarawewa Project (USD 412 Mn)

 Project commenced in 2016 & has been completed.

 Funded through project loans from China EXIM Bank

 This is expected to improve connectivity between Colombo and major economic centers (including Hambantota port and industrial zone)

Source: Department of External Resources, 2019 and Road Development Authority, 2018 (http://www.rda.gov.lk/supported/project_progress_pmu/esep/esep1.html ) Facilities Connectivity : 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; Services offered: port services, maritime services, port related industrial zone, integrated logistics and business incubator

 Potential impact on trade, investment and employment over time: as port operations expand over time and industrial parks commence operations

Source: Sri Lanka Ports Authority, http://portcom.slpa.lk/port_hambantota.asp?chk=4, Central Bank of Sri Lanka, 2019, Annual Report 2018 https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports/annual-report-2017, China Merchants Port Holdings Co. Ltd, 2016, http://www.cmport.com.hk/EN/business/Detail.aspx?id=10007513 and IPS KIIs Enhancing Facilities Connectivity : Potential opportunities

 Provides a gateway for Sri Lanka to improve its overall logistics performance & competitiveness as a logistics hub in the Silk Road

Logistics Performance of Sri Lanka, World Bank, Logistics Performance Index (LPI), 2018 4 3 2 1 0 Overall LPI Score Customs Infrastructure International Logistics Tracking & tracing Timeliness shipments competence Sri Lanka South Asia Upper middle income

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

 Investment in facilities connectivity will enable Sri Lanka to improve its position in logistics performance and catch up with other leading ports/cities

 It may also have positive impacts on trade, investment, employment creation over time

Facilities Connectivity : Potential Linkages/Impact on SDGs

Facilities Connectivity 8.1, 8.3, 8.5 (employment opportunities , (e.g. Port City project is expected create new job opportunities; Also Hambantota port, with the expansion of the port and commencement of the industrial zone) Colombo Port City Project 9.1 – Develop quality, reliable, sustainable and resilient infrastructure including regional and trans border infrastructure…. 9.2 - Promote inclusive and sustainable industrialization Colombo International by 2030, significantly raise industry’s share of Container Terminals (CICT) employment and GDP…

11.7 - By 2030, provide universal access to safe, inclusive Extension of Southern and accessible, green and public spaces…. (Port City Project) Expressway Project (ESEP) 17.6- 17.7 - Building multi-stakeholder partnerships 17.3 – Mobilize additional financial resources for developing countries from multiple sources Hambantota Port Development Project

2. Unimpeded Trade

Unimpeded Trade : Exports and Imports

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

80 70 60 1.7 2.9 2 2.2 2 60 50 40 40 30 19.6 20.8 18.9 18 18.5 20 20 10 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 USA UK India India China UAE Japan Singapore Italy Belgium-Luxembourg UAE China Malaysia USA Thailand Germany Taiwan Japan

 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, China accounts for only about 2 of Sri Lanka’s total exports (in 2018). It is the 9th largest export destination for Sri Lanka

CBSL Annual Report, various years

Unimpeded Trade : CHSLFTA

 There is potential for expanding trade between Sri Lanka & China 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 - , rubber products, fish and fisheries products, textile and clothing, coconut products, gems and jewelry, fruits and vegetables, machinery and electronics

 China-Sri Lanka Free Trade Agreement (CHSLFTA)  6 rounds of negotiations held so far  Consensus is yet to be reached on tariff liberalization schedule and phasing out period

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

Unimpeded Trade : ODA and FDI

Total ODA commitments made in 2017 (USD Million) FDI by Country (Cumulative FDI 2005-2017) - Korea Top 25 (USD Mn.) Saudi Arabia Kuwait Norway OPEC Thailand USA Korea Switzerland Netherlands Italy Germany Austria Belgium European Community British Virgin Islands European Investment… Sweden Saudi Arabia Luxembourg UN Agencies Japan USA Indian Exim Bank UAE Mauritious ADB Singapore World Bank Netherlands UK JICA India Hong Kong Chinese Lending… Malaysia China 0 100 200 300 400 500 600 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

Department of External Resources, 2018, Annual Report 2018

China has merged 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 . Trade & investment under the BRI: Opportunities and Challenges

 Potential to improve trade and internment activities along the BRI goes beyond the bilateral trade and investment cooperation with china  Opportunity to capitalize on improved trade and investment activities along the silk road Estimates 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) ; BRI transport projects could increase trade between 1.7 and 6.2 percent for the world (World Bank, 2019, Belt and Road Economics: Opportunities and Risks of Transport Corridors)

In order to benefit from the expanded economic activities along the silk road, there are certain areas we need to improve on :  Creating an enabling environment for trade and investment by improving efficiency of administrative and regulatory processes  Ensuring policy consistency is key to strengthening investor confidence  Assisting local SMEs to integrate into value chains along the silk road

Source: World Bank, 2019, Ease of Doing Business Rankings, https://www.doingbusiness.org/en/rankings?region=south-asia Unimpeded Trade: Potential Linkages/Impact on SDGs

Link to SDGs Some Targets

8.1 and 8.3 (improved trade and investment can have a potential impact on economic growth and employment of the country)

17.3 – Mobilize additional financial resources for developing countries from multiple sources

17.11 Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports by 2030.

Bulk of ODA from China is for infrastructure 3. People- to- People Bond People- to- People Bond :

Tourists arrivals - Top ten source markets - 2017 450,000 400,000 350,000 Tourism Industry: 300,000 250,000 - A major source of foreign 200,000 150,000 exchange for Sri Lanka 100,000 50,000 0 - China, as the second major source of tourists in Sri Lanka, accounts for 12.7% of total tourist arrivals (2017). Sri Lanka Tourism Development Authority, Sri Lanka Tourism Development SATATS, 2018. - The number of tourist from China Tourist arrivals of Sri Lanka's top three source has increased significantly in markets, 2012-2017 recent years. 500,000 400,000 300,000 200,000 100,000 0 2012 2013 2014 2015 2016 2017

India China UK

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

Improving Tourism in Sri Lanka : Opportunities and Challenges relating to BRI

 There is greater potential to improve tourism through enhanced connectivity along the silk road. - A study by World Tourism Organization (UNWTO) 2019 highlights that there is opportunity for tourism growth under BRI over time due to enhanced air and maritime connectivity and greater economic and trade integration along the silk road

(World Tourism Organization (UNWTO) 2019, The 21st Century Maritime Silk Road Tourism Opportunities and Impacts)

Prioritize on bridging gaps in the tourism industry in catering to rapidly growing demand - Need to improve industry capacity and address gaps in human resources

People- to-People Bond: Education

The number of Undergraduate & Postgraduate Scholarships awarded by the Chinese Government (2013 to 2018)

40 35 30 About 70% of the 25 scholarships for 20 undergraduate 15 studies have been 10 for Medicine. 5 0 2013 2014 2015 2016 2017 2018

Number of of Number Awards Year Undergraduate Masters PhD

Source: Ministry of City Planning, Water Supply & Higher Education People-to People Bond: Potential Linkages/Impact on SDGs

People- People Bond Link to SDGs Some Targets

Tourism 8.9 – By 2030, devise and implement policies to promote that creates jobs and promotes local culture and products

4.3 By 2030, ensure equal access for all women and Education men to affordable and quality technical vocational and tertiary education, including university

4b By 2020, substantially expand globally the number of scholarships available to developing countries…. 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 were approved by the Asian Infrastructure Investment Bank (AIIB) in April 2019

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

- Implemented by the UDA under the Ministry of Megapolis and Western Development. - Objective is to improve housing conditions of low-income communities through investments in the construction of affordable housing and the redevelopment of land

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

Financial Integration : Potential Linkages/Impact to SDGs

Financial Integration Link to SDGs Some Targets

17.3 – Mobilize additional financial resources for developing countries from multiple sources

Projects approved by AIIB 11.1 – By 2030, ensure access for all to adequate, safe and affordable housing and basic services and Urban Regeneration Project upgrade slums

Reduction of Landslide 13.1 - Strengthen resilience and adaptive capacity to Vulnerability by Mitigation climate-related hazards and natural disasters in all Measures Project countries 1.5 By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events. and other economic, social and environmental shocks and disasters 15.3 By 2030, combat desertification and restore degraded land and soil including land affected by desertification and floods…. 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 and quality 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/)

 Potential Links to SDGs : SDG 17

Some concluding remarks…

 Potential contribution/ impact of BRI on several SDGs

 Several measures needed to maximize the potential impact of BRI related projects/activities on SDGs. e.g. creating an enabling environment and ensuring policy consistency is key to successful implementation of projects.

 BRI related activities have to be complemented with other national, sectoral and regional policies/strategies

 Benefits to vulnerable/ marginalized communities - to ensure that no one is left behind

Thank you

For more information contact: [email protected]

BRI Priority SDGs

Facilities Connectivity

Unimpeded Trade

People-to-people Bond

Financial Integration

Policy Coordination