Chapter 3 ECONOMIC AND SOCIAL INFRASTRUCTURE 3.1 Overview n 2009, the government continued with its Expressway, Colombo Outer-Circular Road, Upper infrastructure development programme Kotmale Hydro Power Project, Norochcholai Coal Iamidst difficult fiscal conditions, since a Power Project, Colombo South Harbour Project and strong infrastructure network is essential for Hambantota Port Development Project. Several a high economic growth and enhancing the fl yovers in Colombo and suburban areas were living standards of the people. The development opened for traffi c in 2009. ‘Maga Neguma’ and of economic infrastructure across the country ‘Gama Neguma’ programmes were continued at would help to broaden the production capacity, the regional level to facilitate a regionally balanced raise economic efficiency, improve productivity economic development. and reduce regional disparity. The development of social infrastructure is imperative in building a With the end of nearly three decades of strong human capital base which is a prerequisite confl ict in May 2009 and the re-integration of of economic growth in a modern knowledge based the Northern and Eastern provinces with the economy. rest of the country, priority has been given to infrastructure development activities in these The infrastructure development programme two provinces. Under the ‘Nagenahira Navodaya’ of the government provides the basis for (Eastern Revival) programme with a total estimated economic infrastructure development under expenditure of Rs. 197 billion, as well as the ‘Wadakkil the medium term policy direction of the Wasantham’ (Northern Spring) programme with a country. In 2009, the economic infrastructure total estimated cost of Rs. 295 billion, development development programme focused mainly on the and rehabilitation activities have been expedited in development of roads, energy, water supply and the areas of construction of roads, bridges, railway sanitation, ports and aviation, transport and rural tracks, transport services, electricity transmission infrastructure. This includes national level projects lines, water supply and sanitation, housing facilities such as the Southern Expressway, Colombo-Kandy and telecommunications services. Central Bank of Sri Lanka Annual Report - 2009 considering the importance of social infrastructure Table 3.1 Government Investment in Infrastructure development in building a healthier society with an educated and productive labour force. The improvement in social indicators, such as mortality 3 Economic Social Year Total Services Services rates, life expectancy, educational attainment, Rs. bn % of Rs. bn % of Rs. bn % of access to safe drinking water, poverty indices as GDP (a) GDP (a) GDP (a) 2000 54.7 4.4 16.5 1.3 71.1 5.7 well as gender equality that Sri Lanka has achieved 2001 54.9 3.9 14.6 1.0 69.5 4.9 over the years have well positioned the country 2002 51.7 3.4 15.7 1.0 67.4 4.3 2003 58.7 3.2 19.2 1.1 77.9 4.3 towards accomplishing Millennium Development 2004 61.3 2.9 29.0 1.4 90.3 4.3 Goals (MDGs). However, these achievements are 2005 77.5 3.2 60.4 (b) 2.5 137.9 5.6 2006 106.8 3.6 48.4 1.6 155.2 5.3 jeopardised by several factors which need greater 2007 141.2 3.9 55.0 1.5 196.2 5.5 and urgent attention of the relevant authorities. 2008 168.9 3.8 60.2 1.4 229.1 5.2 2009 (c) 256.4 5.8 53.9 1.2 310.3 7.0 Emerging and re-emerging communicable diseases, (a) From 2003, data based on estimates Sources: Ministry of Finance and Planning such as dengue, high level of non-communicable compiled by the Department of Census and Central Bank of Sri Lanka Statistics diseases, relatively high incidence of malnutrition (b) Inclusive of Tsunami related capital expenditure and micro-nutrition and health fi nancing are major (c) Provisional issues which foreshadow the performance of the While the initiatives taken by the government to health sector. Meanwhile, it is satisfying to note improve the economic infrastructure development that there are several improvements being made in the country is admirable, the issues relating in the general and higher education sector with a to economic infrastructure have to be resolved view to improving the quality of education to match ECONOMIC AND SOCIAL INFRASTRUCTURE AND SOCIAL ECONOMIC urgently to place the country in the expected high the emerging demand in the labour market. In economic growth path. The state owned enterprises, this regard, though the government has already which provide key economic infrastructure services taken progressive steps towards improving general are operating below optimum level, though the education by providing English and Information majority of them function as government monopolies. Technology (IT) education, further measures should Services rendered by most of these institutions are be taken to strengthen these initiatives to address below the desired level and operate on government the disparities in the school system. The existing assistance rather than functioning as commercially university education system also must target quality viable business entities. Such operations have improvement, the expansion of the availability created fiscal as well as monetary implications of opportunities for university education, and the exerting pressure on the macroeconomic stability creation of a more competitive environment by of the country. Hence, a signifi cant improvement facilitating private sector participation in the higher is needed to be implemented in the areas of education sector. electricity, petroleum, passenger transportation, air transportation, postal services and water supply. The government has declared its intention Towards this end, the objective should be to make to transform Sri Lanka into a Naval, Aviation, them fi nancially viable rather than continue their Commercial, Energy and Knowledge hub dependence on the government budget. It is also and develop the country into a strategically necessary to convert these institutions to be high important economic centre in the region. In quality service providers, and be positioned to doing so, it is imperative to complete the ongoing provide their services on cost recovery basis and mega infrastructure projects as planned, to realise implement cost effi cient production and service the full benefi ts of peace and to enable the fast delivery strategies. tracking of development activities.To fast track the implementation of infrastructure projects, and to In 2009, the government continued its efforts ensure their maintenance and management in a to improve the social infrastructure facilities sustainable manner and to reduce the burden on 56 Central Bank of Sri Lanka Annual Report - 2009 the government budget, it is important that private future growth in the mobile telecommunications sector participation is also promoted. One option industry will be driven by the introduction of 4G available for this is to encourage Public-Private technology, encompassing low cost, high speed data Partnerships (PPPs) in identified infrastructure transmission and high degree of personalisation and 3 projects. In order to attract the private sector synchronisation between various user appliances. investments towards infrastructure projects, it is Increase in mobile connections signifi cantly led essential for the government to clearly identify the to an increase in the mobile penetration (mobile specifi c projects in which the private sector can connections as a per cent of total population) to 68.2 participate and to create a conducive environment per cent in 2009 from 54.8 per cent in 2008. With for the private sector to actively engage in providing these developments, telephone density (telephones infrastructure facilities. per 100 persons including cellular phones) increased to 85 in 2009 from 71.9 in 2008. As at end 2009, the 3.2 Economic Infrastructure telecommunications sector consisted of multiple Policies, Institutional Framework telephone service providers including 4 fi xed line and Performance operators, 5 mobile operators, 33 external gateway Communications Services operators, and 22 internet service providers making the industry more competitive. Telecommunications sector registered a signifi cant growth in 2009. The number of mobile Effective regulation in telecommunications connections increased by 25.9 per cent to 13.9 industry plays a key role in enabling the country to million, while the number of fi xed telephone lines meet its national Information and Communication decreased by 0.5 per cent to 3.4 million leading Technology (ICT) development goals. Regulation INFRASTRUCTURE AND SOCIAL ECONOMIC to an overall growth of 19.6 per cent to 17.4 million should ensure fair pricing and competition leading connections in 2009 when compared to that of 2008. to a level playing fi eld for all the service providers. Expansion in coverage and introduction of improved Hence, it is important to strengthen the regulatory and value added services for comparatively framework to accommodate fast moving new lower price by mobile service providers due to severe competition in the industry brought about Table 3.2 Growth of Telecommunications and Postal Services discontinuation of existing fi xed access telephone connections which in turn led to a negative growth Growth Rate (%) of the total number of fixed access telephone Item connections during the year. New value added 2008 2009(a) 2008 2009(a) 1 Telecommunications services services, technological advancements and reduced 1.1 Fixed access services calling and connection charges resulted