Role of transport in accelerated development

By Dr. Lalithasiri GUNARUWAN

[Part III]

In summary, the preceding discussion has emphasised the importance of maintaining productivity of capital at high levels, if Sri Lankan economy is to successfully grow at accelerated rates without significant sectoral and macro-economic hick-ups. Capital productivity, or in other words, reducing ICOR will be of prime importance to sustain high growth rates.

While making every possible effort to reduce under-utilisation and to further improve productivity in the existing capital stock through better management of projects and efficient transport operations, care is necessary to ensure capital efficiency of new investments. Less capital intensive transport modes, such as public bus and railway, should be promoted.

Preventing the possibility of over-expenditure in investment should be assigned policy priority, and a transparent process of bench-mark comparison should be used to prevent such possibilities in awarding all large scale State sector contracts in the field of transport, whenever competitive bidding becomes impractical for whatever reason.

It is also of importance that such investment be strategically planned so that both capital accumulation and effective demand creation effects of investment are maximally exploited.

While it may not be practical to carry out all investments through budgetary financing, there could be local enterprises in view of undertaking the contracts locally.

Possibilities may also exist to obtain sub-contracts to local companies so that at least a certain percentage of capital invested would be ploughed back to the local economy, or to encourage, by loan agreements, formation of joint-ventures with local companies and/or State enterprises to undertake the projects. Establishment of an infrastructure development fund, from which local construction companies could source their capital at competitive rates, could enable them bid for transport infrastructure related projects, thus paving the way for maximum retention of profits generated through the execution of such projects.

Such effort will not only help transport sector continuing to support economic development process, but also becoming a growth puller.

It is time that transportation in Sri Lanka step beyond being a mere service provider for other sectors to grow, but grow in to the age of being an industrial cluster of itself, internalising all peripheral activities on which the Sri Lankan national economy has not hitherto been able to optimally benefit of a value generation.

Only then could the effective demand creation by transport services be accrued to the local economy, in return providing a boost to the local enterprises with more business as well as opportunities to grow and, one fine day, to bid for transportation-related contracts off-shore! That would be when the transport sector could strongly and sustainably drive our economy forward.

Concluded