The Belt and Road Initiative and SDGs: Potential Linkages, Opportunities and Challenges

IPS – UNDESA National Consultation Workshop

Colombo, Sri Lanka

8 August 2019

Background : Sustainable Development Goals (SDGs)

At the United Nations Sustainable Development Summit held in 2015, 193 Member States of the United Nations, pledged commitment to the 2030 Agenda for Sustainable Development.

Ambitious Agenda: includes 17 goals and 169 targets, requires balancing the 3 dimensions of sustainable development and ensuring the principle of ‘leaving no one behind’

The implementation of SDGs presents a great challenge: requires to adopt integrated approaches to design policy, mobilize resources, build partnerships and strengthen institutions

Background : The Belt and Road Initiative (BRI)

BRI was launched by the People’s Republic of China in 2013.

Five key areas of cooperation:

Policy Coordination

Facilities Connectivity

Unimpeded Trade

Financial Integration

People-to-People Bond

Policy

Coordination

Facilities

Connectivity

Unimpeded

Trade

Financial

Integration

People-to-

people Bond

Source: Hong (2017)

BRI -5 Priority Areas

Background: Links between BRI and SDGs

BRI Priority Areas SDGs with Direct Link SDGs with Indirect Link

Policy Coordination SDG 17

Facilities Connectivity SDG 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 13, 17 SDG 10

Unimpeded Trade SDG 8, 9, 17, 1, 2 SDG 12, 14, 15

Financial Integration SDG 17

People-to-people Bond SDG 3, 11, 17 SDG 16

Background: Links between BRI and SDGs

Source: Hong (2017)

SDGs and BRI – Context of Sri Lanka

Sri Lanka has pledged commitment to the 2030 Agenda on Sustainable Development

Sri Lanka recognizes the BRI as an important initiative in strengthening cooperation along the silk road

Sri Lanka has played a central role in the ancient Silk route due to its strategic location that connects the East and the West.

Sri Lanka is among the 21 prospective founding members that signed the MOU on the establishment of the Asian Infrastructure Investment Bank (AIIB) in October 2014. (Ministry of Foreign Affairs – Sri Lanka, Sri Lanka signs MOU on the establishment of the Asian Infrastructure Investment Bank in Beijing, https://www.mfa.gov.lk/ta/5505-sri-lanka-signs-mou-on-the-establishment-of-the-asian-infrastructure-investment-bank-aiib-in-beijing/

Several agreements signed between Sri Lanka and China including agreements on Chinese funded investment projects, which could help strengthen Sri Lanka’s position in the silk road

(Ministry of Foreign Affairs – Sri Lanka, Sri Lanka and China sign agreements for cooperation, 2014, https://www.mfa.gov.lk/tam/sri-lanka-and-china-sign-agreements-for-cooperation/)

Objective

Explore potential impact/contribution of projects and activities related to the BRI on the achievement of SDGs

1. Facilities Connectivity

Facilities Connectivity : Colombo Port City Project

Vision : build a world-class city for South Asia, which will include high quality facilities such as healthcare, education, entertainment, hotels and restaurants and a marina

Sri Lanka’s single largest FDI - initial investment of US$ 1.4 billion (total investment ~ US15 billion)

The project plays an important role in the BRI as Colombo port city provides a key link between Asia and Europe in the silk road, due to its strategic location

Locational advantages: half of all global container shipments and two-thirds of world’s oil cargo transportation are within 10 nautical miles from SL.

2016

Commencement of land reclamation

2018

Commencement of development works

2019

Completion of Reclamation Works and

Marine Structure

2020

Completion of phase I infrastructure work

2041

Targeted completion of port

city project

Source : CHEC Port City Colombo (Pvt) Ltd., Port City, Colombo Face Sheet. (2018); CHEC Port City Colombo (Pvt) Ltd., Port City Colombo, Master Plan (2018) & IPS KIIs

The First and only Deepwater terminal in South Asia capable of handling the largest vessels afloat

Constructed in the Port of Colombo, under the Colombo South Harbor expansion project, CICT has 3 million TEUs capacity

CICT has been recognized as one the most successful Chinese investment projects in Sri Lanka.

Awarded the best Container Terminal in Asia in the Under 4 million TEUs category at the 2019 Asian Freight, Logistics and Supply Chain Awards (AFLAS) for the third time.

Implemented under a 35-year Build-Operate-Transfer (BOT) agreement between CICT and Sri Lanka Ports Authority (SLPA)

Investment of USD 500 Mn.

The strategic location of the port in the center of the East/West shipping route has enabled it to act as a gateway to global trade providing the most efficient connections, especially along the silk road.

Source: Colombo International Container Terminals (LTD), 2019. http://www.cict.lk/Sri Lanka Ports Authority (SLPA) http://portcom.slpa.lk/colombo_south_harbour.asp?chk=4 and CICT Brochure file:///C:/Users/nipuni/Downloads/cict_corporate_brochure.pdf & IPS KIIs

Facilities Connectivity : Colombo International Container Terminals (CICT)

Construction of 96km long extension of the Southern Expressway from Matara to Hambantota

It was developed in four sections:

Sections 1: from Matara to Beliatta (USD 683 Mn)

Section 2: from Beliatta to Wetiya (USD 360 Mn)

Section 3: from Wetiya to Mattala (USD 252.5 Mn)

Section 4: from Matttala to Hambantota via Andarawewa Project (USD 412 Mn)

Project commenced in 2016 & has been completed.

Funded through project loans from China EXIM Bank

This is expected to improve connectivity between Colombo and major economic centers (including Hambantota port and industrial zone)

Source: Department of External Resources, 2019 and Road Development Authority, 2018 (http://www.rda.gov.lk/supported/project_progress_pmu/esep/esep1.html )

Facilities Connectivity : Extension of Southern Expressway Project (ESEP)

Aims to develop Hambantota port into a global maritime Centre - to become a world-class sea port with global connectivity

It is a multi-purpose port; Services offered: port services, maritime services, port related industrial zone, integrated logistics and business incubator

Potential impact on trade, investment and employment over time: as port operations expand over time and industrial parks commence operations

Source: Sri Lanka Ports Authority, http://portcom.slpa.lk/port_hambantota.asp?chk=4, Central Bank of Sri Lanka, 2019, Annual Report 2018 https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports/annual-report-2017, China Merchants Port Holdings Co. Ltd, 2016, http://www.cmport.com.hk/EN/business/Detail.aspx?id=10007513 and IPS KIIs

Facilities Connectivity : Hambantota Port Development Project

Provides a gateway for Sri Lanka to improve its overall logistics performance & competitiveness as a logistics hub in the Silk Road

Investment in facilities connectivity will enable Sri Lanka to improve its position in logistics performance and catch up with other leading ports/cities

It may also have positive impacts on trade, investment, employment creation over time

0

1

2

3

4

Overall LPI Score Customs Infrastructure Internationalshipments

Logisticscompetence

Tracking & tracing Timeliness

Logistics Performance of Sri Lanka, World Bank, Logistics Performance Index (LPI), 2018

Sri Lanka South Asia India Upper middle income

World Bank, 2018, Logistics Performance Index 2018, https://lpi.worldbank.org/

Enhancing Facilities Connectivity : Potential opportunities

Facilities Connectivity : Potential Linkages/Impact on SDGs

Facilities Connectivity

Colombo Port City Project

Colombo International Container Terminals (CICT)

Extension of Southern Expressway Project (ESEP)

Hambantota Port Development Project

8.1, 8.3, 8.5 (employment opportunities , (e.g. Port City project is expected create new job opportunities; Also Hambantota port, with the expansion of the port and commencement of the industrial zone)

9.1 – Develop quality, reliable, sustainable and resilient infrastructure including regional and trans border infrastructure…. 9.2 - Promote inclusive and sustainable industrialization by 2030, significantly raise industry’s share of employment and GDP…

11.7 - By 2030, provide universal access to safe, inclusive and accessible, green and public spaces…. (Port City Project)

17.6- 17.7 - Building multi-stakeholder partnerships 17.3 – Mobilize additional financial resources for developing countries from multiple sources

2. Unimpeded Trade

Unimpeded Trade : Exports and Imports

1.7 2.9 2 2.2 2

0

10

20

30

40

50

60

70

2014 2015 2016 2017 2018

Sri Lanka’s largest export destinations, share of total exports (%), 2014-2018

USA UK IndiaGermany Italy Belgium-LuxembourgUAE Netherlands ChinaJapan

%

18 19.6 20.8 18.9 18.5

0

20

40

60

80

2014 2015 2016 2017 2018

Sri Lanka’s largest import origins, share of total imports ( %), 2014-2018

India China UAE Japan Singapore

Malaysia USA Thailand Germany Taiwan

CBSL Annual Report, various years

%

China is an important trading partner for Sri Lanka - the second largest import origin of Sri Lanka, accounting for 18.5 per cent of total imports in 2018

However, China accounts for only about 2 of Sri Lanka’s total exports (in 2018). It is the 9th largest export destination for Sri Lanka

There is potential for expanding trade between Sri Lanka & China

The Joint Feasibility Study on a China-Sri Lanka Free Trade Agreement, 2014: finds that

the proposed FTA will increase trade in certain product sectors of interest to Sri Lanka

including, but not limited to - tea, rubber products, fish and fisheries products, textile

and clothing, coconut products, gems and jewelry, fruits and vegetables, machinery and

electronics

China-Sri Lanka Free Trade Agreement (CHSLFTA)

6 rounds of negotiations held so far

Consensus is yet to be reached on tariff liberalization schedule and phasing out

period

Unimpeded Trade : CHSLFTA

0 100 200 300 400 500 600

Chinese Lending…

JICA

World Bank

ADB

Indian Exim Bank

UN Agencies

Saudi Arabia

European Investment…

European Community

Austria

Netherlands

USA

OPEC

Kuwait

Korea

Total ODA commitments made in 2017 (USD Million)

Board of Investment of Sri Lanka (BOI), 2019, Sri Lanka Investment Guide 2019

Department of External Resources, 2018, Annual Report 2018

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

China

Malaysia

Hong Kong

India

UK

Netherlands

Singapore

Mauritious

UAE

USA

Japan

Luxembourg

Sweden

Australia

Canada

British Virgin Islands

Belgium

Germany

Italy

Switzerland

Korea

Thailand

France

Norway

Saudi Arabia

FDI by Country (Cumulative FDI 2005-2017) - Top 25 (USD Mn.)

China has merged as a a major development partner and an investor for Sri Lanka. During 2005-2017, China accounted for the highest amount of FDI in Sri Lanka .

Unimpeded Trade : ODA and FDI

Trade & investment under the BRI: Opportunities and Challenges

Potential to improve trade and internment activities along the BRI goes beyond the bilateral trade and investment cooperation with china

Opportunity to capitalize on improved trade and investment activities along the silk road

Estimates reveal that BRI increases trade flows by: 4.1 per cent among participating countries (Baniya,S, Rocha,N & Ruta, M, 2019, Trade Effects of the New Silk Road : A Gravity Analysis) ; BRI transport projects could increase trade between 1.7 and 6.2 percent for the world (World Bank, 2019, Belt and Road Economics: Opportunities and Risks of Transport Corridors)

In order to benefit from the expanded economic activities along the silk road, there are certain areas we need to improve on :

Creating an enabling environment for trade and investment by improving efficiency of administrative and regulatory processes

Ensuring policy consistency is key to strengthening investor confidence

Assisting local SMEs to integrate into value chains along the silk road

Source: World Bank, 2019, Ease of Doing Business Rankings, https://www.doingbusiness.org/en/rankings?region=south-asia

Unimpeded Trade: Potential Linkages/Impact on SDGs

Link to SDGs

Some Targets

8.1 and 8.3 (improved trade and investment can have a potential impact on economic growth and employment of the country)

17.3 – Mobilize additional financial resources for

developing countries from multiple sources 17.11 Significantly increase the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports by 2030.

Bulk of ODA from China is for infrastructure

3. People- to- People Bond

People- to- People Bond : Tourism

0

100,000

200,000

300,000

400,000

500,000

2012 2013 2014 2015 2016 2017

Tourist arrivals of Sri Lanka's top three source markets, 2012-2017

India China UK

050,000

100,000150,000200,000250,000300,000350,000400,000450,000

Tourists arrivals - Top ten source markets - 2017

Sri Lanka Tourism Development Authority, Sri Lanka Tourism Development SATATS, 2018.

Sri Lanka Tourism Development Authority, Sri Lanka Tourism Development SATATS, 2018.

Tourism Industry:

- A major source of foreign exchange for Sri Lanka

- China, as the second major source of tourists in Sri Lanka, accounts for 12.7% of total tourist arrivals (2017).

- The number of tourist from China has increased significantly in recent years.

There is greater potential to improve tourism through enhanced connectivity along the silk road.

- A study by World Tourism Organization (UNWTO) 2019 highlights that there is opportunity for tourism growth under BRI over time due to enhanced air and maritime connectivity and greater economic and trade integration along the silk road

(World Tourism Organization (UNWTO) 2019, The 21st Century Maritime Silk Road Tourism Opportunities and Impacts)

Prioritize on bridging gaps in the tourism industry in catering to rapidly growing demand

- Need to improve industry capacity and address gaps in human resources

Improving Tourism in Sri Lanka : Opportunities and Challenges relating to BRI

0

5

10

15

20

25

30

35

40

2013 2014 2015 2016 2017 2018

Nu

mb

er

of

Aw

ard

s

Year

Undergraduate Masters PhD

People- to-People Bond: Education

Source: Ministry of City Planning, Water Supply & Higher Education

About 70% of the scholarships for undergraduate studies have been for Medicine.

The number of Undergraduate & Postgraduate Scholarships awarded by the Chinese Government (2013 to 2018)

People-to People Bond: Potential Linkages/Impact on SDGs

People- People Bond

Link to SDGs

Some Targets

Tourism

8.9 – By 2030, devise and implement policies to

promote sustainable tourism that creates jobs and promotes local culture and products

Education

4.3 By 2030, ensure equal access for all women and

men to affordable and quality technical vocational and tertiary education, including university 4b By 2020, substantially expand globally the number of scholarships available to developing countries….

4. Financial Integration

• Sri Lanka is among the 21 founding members that signed the MOU on the establishment of the Asian Infrastructure Investment Bank (AIIB) in October 2014

• Two development projects were approved by the Asian Infrastructure Investment Bank (AIIB) in April 2019

1) Colombo Urban Regeneration Project (US$ 200 million)

- Implemented by the UDA under the Ministry of Megapolis and Western Development.

- Objective is to improve housing conditions of low-income communities through investments in the construction of affordable housing and the redevelopment of land

2) Reduction of Landslide Vulnerability by Mitigation Measures Project (US$ 80 million)

- Objective is to reduce risk and damage from landslides through the implementation of physical mitigation measures and enhancement of policy and regulation associated with landslide management

- implemented by National Building Research Organization (NBRO) under the supervision of Ministry of Public Administration and Disaster Management.

Source: ERD and AIIB

Financial Integration : Potential Linkages/Impact to SDGs

Financial Integration

Link to SDGs

Some Targets

17.3 – Mobilize additional financial resources for

developing countries from multiple sources

Projects approved by AIIB Urban Regeneration Project

11.1 – By 2030, ensure access for all to adequate, safe

and affordable housing and basic services and upgrade slums

Reduction of Landslide Vulnerability by Mitigation Measures Project

13.1 - Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries 1.5 By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events. and other economic, social and environmental shocks and disasters 15.3 By 2030, combat desertification and restore degraded land and soil including land affected by desertification and floods….

5. Policy Coordination

High-level exchanges and visits between Sri Lanka and China

MOUs signed between Sri Lanka and China include:

• “Comprehensive Implementation of Investment, Economic and Technological Cooperation”

(07.04. 2016): objectives - enhance Investment, economic and technological cooperation and

improve cooperation on enterprises between both countries

• “Promotion of Investment and Economic Cooperation” (16.05. 2017): objectives - promote

sustainable social and economic development, expansion of export & increase employment

opportunities.

• “The Outline of the Medium and Long-term Development Plan for Investment, Economic and

Technological Cooperation” (16.05.2017): objectives - promote rapid, stable and orderly

development of the bilateral investment, economic and technological cooperation, to improve the level and quality of bilateral investment and promote social, economic and friendly cooperation.

Source: Ministry of Development Strategies and International Trade , Ministry of Foreign Affairs (https://www.mfa.gov.lk/)

Potential Links to SDGs : SDG 17

Some concluding remarks…

Potential contribution/ impact of BRI on several SDGs

Several measures needed to maximize the potential impact of BRI related projects/activities on SDGs. e.g. creating an enabling environment and ensuring policy consistency is key to successful implementation of projects.

BRI related activities have to be complemented with other national, sectoral and regional policies/strategies

Benefits to vulnerable/ marginalized communities - to ensure that no one is left behind

Thank you For more information contact: ganga@ips.lk

BRI Priority SDGs

Facilities Connectivity

Unimpeded Trade

People-to-people Bond

Financial Integration

Policy Coordination