ADB investment set to boost Sri Lankan rail system

The Asian Development Bank (ADB) is lending state-owned Sri Lanka Railways (SLR) $160m, geared towards reducing the country’s transport bottlenecks and unleashing more FDI by upgrading both infrastructure and technical capacity.

This is the ADB’s first project loan in Sri Lanka’s railway sector. With a focus on what the bank calls “high-impact” projects, the goal is to modernise SLR “by improving the operational efficiency, maintenance capacity, safety management, skills development and implementation capacity”. If successful, the project should increase the efficiency and attractiveness of the railway system, thereby removing one of Sri Lanka’s barriers to greater trade and investment competitiveness.

Government and the private sector now agree that, by and large, Sri Lanka’s big challenges cannot be overcome without major FDI growth. One major barrier to trade flows – that of inadequate transport infrastructure and services delivery – is hindering the development of both industry and services, which account for 91.8% of GDP. This has prevented Sri Lanka from leveraging its advantageous geographical position to increase competitiveness and promote inclusive economic growth. Exports increased by only 2.7% between 2007 and 2017, while imports increased by 7.3% in the same period.

After a strong post-civil war recovery period, with annual GDP growth averaging 8.5% during 2009 to 2012, growth moderated to 4.1% during 2012 to 2018, and is forecast to continue at 4.1% in 2019. With a per capita gross national income of $3840 in 2017, Sri Lanka is on the path to achieving upper middle-income status. The country’s poverty headcount ratio decreased from 22.7% in 2002, to 4.1% in 2016.

The largest city, Colombo, is the central node of the railway, road, air and seaport infrastructure networks. Established in 1858, SLR owns and operates the railway network, and is administratively set up as a department of the Ministry of Transport and Civil Aviation. The company connects 343 stations along 1568 kilometres of broad-gauge tracks, operating about 351 passenger trains and 19 freight trains daily, and transporting 136.7 million passengers and 2 million tonnes of goods annually.

The project’s main components include modernisation of the ticketing, telecommunication, operations headquarters, and train control centre systems. The project will pay for an upgrade of the Ratmalana railway workshop, while also procuring rolling stock and track maintenance equipment.