Millennium Challenge Corporation Compact with Government | Sunday Observer

Millennium Challenge Corporation Compact with Government

The Board of Directors of the Millennium Challenge Corporation approved a five-year, $480 million Compact with the Government aimed at reducing poverty through economic growth. The Compact seeks to assist the Government in addressing two of the country’s binding constraints to economic growth: (1) inadequate transport logistics infrastructure and planning; and (2) lack of access to land for agriculture, the services sector, and industrial investors. Recently, the Cabinet of Ministers released the final draft of the grant agreement to the public for review. Sunday Observer Business spoke to retired Central Bank Deputy Governor W. A. Wijewardene and Prof. H.D. Karunaratne of the University of Colombo to ascertain their views.

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Will lay foundation for economic growth

by Lalin Fernandoplle

The Millennium Challenge Corporation (MCC) compact will certainly help Sri Lanka to lay the foundation for high economic growth. However, there is much more that Sri Lanka has to do to accelerate economic growth.

Combined with those strategies, the MCC will help Sri Lanka to attain higher prosperity in the years to come, said former Central Bank Deputy Governor W.A. Wijewardena in an interview with Sunday Observer Business.

He said the project will not increase the country’s growth rate immediately but would help find solutions to some of the most critical constraints faced by the economy today.

It is a facilitator and not a final solution provider.

Of the US$ 480 million approved by the Board of Directors of the MCC, $350 million will be used for road development. It has three main components.

One is the easing of the traffic congestion in the Western Province which is in fact a menace.

The project doesn’t aim at eradicating the menace, but to provide relief so that the country will have a breathing space to implement a permanent solution.

Accordingly, the eight main roads that feed the city of Colombo will be improved and 132 junctions causing traffic jams will be widened to allow traffic to pass easily.

Fifty places in which there are pedestrian crossings which cause traffic to move slowly will be provided with overhead or underground crossings without impact on the vehicles passing those sections.

The CTB and privately owned bus services will be modernised by using advanced information and communication technology to issue e-tickets and for better coordination of time tables.

The third one is the development of a ring road net connecting major towns such as Dambulla-Mahiyangana-Bibile-Moneragala-Rathnapura-Kegalla-Kurunegala-Dambulla with a class A road network and connecting them to the Western Province which is the major market in the country.

In the case of land title modernisation, monies will be used to convert the present paper based title deeds to e-titles and improving the valuation capacity of the Valuation Department.

Wijewardena said Sri Lanka passed the threshold of the lower middle income country to become a higher middle income country in June 2019.

Therefore, it is no longer eligible to receive MCC support. Hence, after January 1, 2020, Sri Lanka cannot expect to receive this facility.

The present Compact is being considered by MCC because the work in connection with the Compact was started in 2016.

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Should be renegotiated

By Sanjeevi Jayasuriya

The agreement has indeed been at the heart of heated debate and political scuffle in recent months, with the former President refusing to approve the agreement before the end of his term; a fundamental rights (FR) petition against the signing of the agreement being filed in the Supreme Court, and even a protest fast staged earlier in the month.

But with the agreement out in the public with continued avenues for negotiation, Cabinet appraisal, and the Attorney General’s (AG) stamp of approval, what does Sri Lanka have left to be concerned about?

Sri Lanka needs to prioritise its development needs and ensure funds are directed to these areas to gain maximum benefits.

The authorities must point out to the USA what areas to invest. In the Sri Lankan context, development priorities are different from what the MCC agreement is focusing on, Prof. H.D. Karunaratne of the University of Colombo said.

“Sri Lanka has many issues in different sectors. The funds allocated for improving the road network is good. The problem lies in how we move forward in doing so.

“The land project focuses on creating a parcel fabric map and inventory of state lands, digitizing the deeds registry, facilitating the ongoing work to move Sri Lanka from a deed registration system to a title registration system, digitising key valuation information for properties in targeted districts, and establishing land policy councils to support the Government’s work on land policy and legislation.

“I am not sure the land project should be a priority. However, Sri Lanka land registry needs updating and a detail record of land is not available at present.

“There are more important areas that needs funding. The information collection and dissemination and social media development is one area.

It is necessary to direct more funds in the sectors such as education and health which will have more social benefits.

Sri Lanka needs to identify the development requirements and invest on these areas by strategising an action plan.

“We have not thought about our development priorities. It is necessary to re-negotiate the agreement with the USA to include our development agenda as there is a change in the development philosophy with the recent political change.

If we could obtain investment for development of infrastructure, education reforms, healthcare facilities, road network and improve efficiency in the traffic system the country stands to gain.

“We need to protect our resources from being over used though a national development agenda. We need to transfer financial literacy to the agriculture sector and rural economy which will have far reaching benefits to the country,” he said.

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