Public investment, lost markets and 'The big push' for recovery: The case of port infrastructure development in Sri Lanka

In the era of globalization, the seaport sector plays a pivotal role in promoting international trade and economic development. Thus investment in the sector is necessary to accommodate increasing demand that is driven by international trade and ports becoming the logistics role in production and distribution. On the other hand, port operations are highly capital intensive with limited financing options especially for the developing countries. Port investment in developing countries is even more critical given a relatively low level of infrastructure development but higher growth rate of international trade and production and consumption expansion. Sri Lanka is no exception as an island country depending on the maritime sector for its exports and imports and coastal trade; the country has the average GDP growth rate of 7% for the 2008-14 periods, along with a 3% growth of maritime throughput with 3667 vessels arrivals in 2014. This paper presents a review of the current strategic issues facing the Sri Lankan seaport sector and provides a critique on how the sector can overcome those issues. To do this, we analyse various port development scenarios to identify the issues facing the sector and draw implications for the government and port management. For example, the paper shows that, while investments in port infrastructure will help to gain market position in the industry (Colombo South harbour expansion), in some cases they may not be able to provide good returns for many years due to indivisibilities (Hambantota port development).