|Project Rationale and Linkage to Country/Regional Strategy
After the end of its 3-decade civil conflict in May 2009, Sri Lanka achieved an over-8.0% growth of the economy in both 2010 and 2011. The growth slowed to 6.4% in 2012 on weak external demand, drought, and floods, but is expected to edge up in 2013 and 2014. Sri Lanka's strategic location at the crossroads of regional maritime trading routes has contributed to its growth as a trading center. In 2011, the transport sector contributed 12 percent to the country's GDP, compared to 7.9% in 2005. With the function of international hubs being developed in Colombo and Hambantota, the country's future sustainable growth demands an integrated inland transport system to efficiently move people and.
The current inland transport system is dominated by the road network. Road transport now accounts for 95% of passenger-km and 98% of freight ton-km. With a comprehensive road network comprising about 96 km of expressway, 11,922 km of national roads, 15,975 km of provincial roads, and 80,000km of local roads, the country's population and centers of economic activity are well covered. The average vehicle ownership rate (VOR) for Sri Lanka is estimated at about 152 vehicles per 1000 persons in 2011 after an average growth of 11.4% since 2007. It is estimated that to maintain the current levels of transport services, road capacity would need to be doubled every 8-10 years.
The government envisages the Western Province as a regional center hub and the Southern Province as a strategic area complementary to the Western Province on the international trade corridor with its rich natural and human resources. Western Province drives the performance of country economy with a contribution of over 45% of national gross domestic product in 2010. It is also is the most densely populated province in Sri Lanka and has the highest VOR. The Southern Province, with the second highest VOR of the country, is closely integrated with Western Province through the physical and economic connection improved in the last two decades.
The most significant accomplishment of transport sector in connecting the two provinces is the opening of Southern Expressway on 27th November 2011. The Southern Transport Development Project laid the foundations for modernizing the country's transport sector by completing a 96 km expressway, the first of its kind in Sri Lanka. After the road was open, the travel time between Kottawa and Galle is reduced from 5 hours to 1.5 hour. The Southern Expressway is the first major milestone achieved by the government on its way to establish a trunk road network comprising well-connected expressways and national roads. Besides the Southern Expressway, three projects are ongoing to develop the expressway network and all in south region, including (i) Outer Circular Highway, (ii) Colombo-Katunayaka Expressway, and (iii) Pinnaduwa-Gagodama Expressway. In a long term, the government plans to gradually extend the expressway network towards the north and east regions.
Despite the success of Southern Expressway, a number of challenges are emerging on the road transport system in south region, including (i) the low capacity of national highways linking the expressway network, particularly in the Western Province, (ii) the poor condition of national highways, and (iii) the lack of a long-term program for system-wide connectivity improvement. The access routes in Western Province to the Southern Expressway are usually congested. The roads connecting to the interchanges do not have the capacity to absorb and distribute the expressway traffic throughput. To address the expressway connectivity challenge, the flow of passengers and freight need to be facilitated in an efficient and cost-effective manner. This requires immediate actions on two prongs, (i) improving the capacity and condition of the access routes connecting the expressway network, and (ii) preparing a long-term connectivity improvement plan including expressway extensions, national highway improvement, traffic management, and public transport systems. To implement the actions, the Government of Sri Lanka requested ADB to provide loans to finance the proposed Southern Road Connectivity Project through an official letter on 19 April 2013.
ADB and the government agreed in the country partnership strategy 2012-2016 that ADB's assistance in transport sector will contribute to the sector outcome: improved nationwide connectivity for the movement of people and goods. To achieve the sector outcome, ADB is financing four road projects but most of them in the north and east regions. The proposed project, although not included in the current country operations business plan, will compliment the ongoing projects in supporting the sector outcome. Furthermore, its objective is fully in line with the government's sector strategy: establishing a modern transport system that will enable acceleration of economic growth, with reduced travel time, cost, and improved safety. A project loan is considered as the appropriate financing modality because of the clearly defined project scope and the required loan amount.