1 October, 2020

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Preventing Magapolis Being A Mega Blunder

By Hema Senanayake

Hema Senanayake

Hema Senanayake

Global Economic Revolution Is Overdue: Part 7

With the Western Region Megapolis Development project one important economic factor is going to be changed. That factor will be the land use regulations. “Poor land use in the world’s greatest cities carries a huge cost.” This is true and this quote is the subtitle of an enlightening article which is titled “Space and the City” published in The Economist magazine in April this year. Will our own Western Region Megapolis do the same mistake? I hope we can avoid it now but not in the future.

In the said article it argues that “in fact land is not really scares.” I like that argument because I too argue in this series of articles that if we remove the systemic push for extreme consumerism, in fact with continuing inventions and the development of technology, human civilization can create abundance in goods and services for the wellbeing of its all members. The market mechanism is the conduit through which we can reach that goal. Upon reaching there, it requires unprecedented adjustments for the market mechanism because it is common sense that with having abundance in goods and services the normal market mechanism cannot prevail. Let us leave it there for the time being and let us get back to our topic.

However, even though land is not really scares, the land use policy and land use regulations can make land scares and make prices skyrocketing. When this happens the economic effect is that much of the gains of economic activity would not flow to workers and entrepreneurs/investors. Rather more of the gains of economic activity would flow to land and property owners. Why is this bad? It is because that most of the cost of doing businesses would be to pay for building cost. For workers who live in rented houses or apartments, the major component of their income would be eaten up by the house rent. For people who live in their own houses or apartments, much of their income would be ended up paying mortgage cost. These things have to be changed from the beginning of our much anticipated first Megapolis.

I like the concepts of Megapolises and Mega-regions. They increase economic efficiency but not by default but by careful conscious planning. When it is planned properly, for example, it must reduce the relative cost of office space utilized by a business, it must reduce the relative cost of house rent or house mortgage rent of working families. So should be for any productive business ventures including factories. Will our first Megapolis do it? The planners of the project must answer to these questions.

I have observed that the government and some Ministers sometimes say that Megapolis project is similar to Mahaweli River Development Project. By definition and scope Mahaweli project was a massive infrastructure project but I do not think that Megapolis project has the same characteristics. Let us investigate about it.

Any infrastructure project should basically have the character of an intermediate product. Second, it should have the character of increasing productive power of the nation and third, it should have the character of improving the economic standard of living of the population. Let me explain these matters a little further.

The value of an intermediate product is truly appeared in the final product. This equally applies to infrastructure projects. Accordingly, it is in the final product, of which infrastructural development becomes an intermediate component, the benefit of infrastructure project to national economy could be found. With this definition you may now analyze the Mahaweli-river development project. It’s one of the main objective was to provide irrigation water to many farmlands. Hence, it is in the recurring final harvest that we could see the benefit of Mahaweli project. In that sense therefore, Mahaweli project is truly a good infrastructure project.

Also, in the above, I mentioned that infrastructure project should have the character of increasing productive power of the nation. Another important objective of the project was to generate electricity. The electrical power facilitates the use of machinery and as a result the productive power of the nation in general is increased. Again, by this criterion, Mahaweli project is a good infrastructure project. Thirdly, I mentioned that a good infrastructure project would increase the living standard of the population. Mahaweli project did it by providing water for drinking and irrigation, by providing electricity to businesses and houses and other places etc. Hence, Mahaweli project was a good infrastructure project identified and facilitated by the UNDP/FAO as far back as 1969.

Now, what would you think about the Mattala airport? You may make your own judgment about it. But what is certain is that if any infrastructure cannot increase the productive potential of the nation and if it cannot reasonably increase the economic standard of living of people, then such a project would turn into a so called project of “white elephant.” We do not want the Megapolis project be that kind of one. Hence alternative plans, designs must be looked into. Perhaps, the concept of Mega-regions could be a competitive one. Whatever the case is, when it comes to economics the most important measure is the “comparative advantage.” It means alternative plans must be studied.

So far, we have been discussing the importance of megapolises, how megapolises can effectively remove the land scarcity and whether Sri Lanka’s first megapolis project is truly an infrastructure project by definition and scope. Yet, we, as people of this country, should be interested most not only about the megapolis plan. What we should be interested most is about financing of the different components of the project. It means we need to know about the components which are to be undertaken by the government. Why?

It is because Sri Lanka is not a country that runs with a surplus in its “current account.” Sri Lanka has been posting a current account deficit for a long time. Also, its current account deficit is not balanced out from the non-credit inflow of foreign currencies such as U.S. dollars. This means the country’s Balance of Payment (BoP) is maintained with continuing borrowed money from foreign sources. Under such circumstances I particularly concern about the financing of Megalopolis project and how it is going to affect the country’s current account and BoP in the medium to long term. Project planners must explain elaborately on this point.

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Latest comments

  • 1
    0

    Hema, how is it you totally ignore the environmental implications in your assessment of the possibilities of the “mega-blunder”?

    Consideration for pollution of the air and water must take precedence over the “abundance in goods and services for the wellbeing of its all members”, as the Chinese are finding out. Discharge of effluents and sewage would be prime factors for consideration.

    You will have to rethink your views if you want to be taken seriously!

    • 1
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      Sri Lanka needs a development policy that is based on solar energy and investment in CLEAN ENERGY, but the govt. is full of idiotic Ministers with Mega Egoes and little expertise in PEOPLE-CENTERED, Environmentally appropriate development policy making.

      The Port City Environmental Assessment does not refer to Sea Level rise and its implications.

      The Colombo Port City is going to be a MEGA DISASTER – both financial and environmental and if it goes ahead Sri Lanka’s economy will DEFAULT, the rupee will crash, and we will be in a Greece like situation, caught between the IMF and the Chinese Dragon.

      There seems to be no Green Development Policy and no mainstreaming of Climate Change issues into development as apparent from the budget when Electric cars that are environmentally friendly and pollute less were taxed hugely.
      Meanwhile the corrupt clown and insider trader has invited the Saudis to set up oil refining in Hambantota. Arjuna Mahendran at the CB has done this even though Hambantota is in the midst of a Health Disaster – with rise in respiratory illnesses and Kidney disease, due to increased water and air pollution due to the useless white elephant Chinese port and airport – also in the name of development.

  • 1
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    Thank you Dr. Hema!

    Sri Lanka does not need yet another Chinese White Elephant in the name of development and EXTREME CONSUMPTION for a class of corrupt super rich political cronies of Mahinda Jarapassa and Chinese.

    Has Lanka learned nothing from the expensive white elephants in Hambantota – the Chinese airport and sea port which is one of the reasons for the massive national debt, the tanking rupee and the IMF bailout?

    The so called port for Pathala Champika’s mega ego mega city will be a massive environmental disaster given sea level rise and coastal erosion which will add to the national debt.

    Colombo needs GOOD PUBLIC TRANSPORT – decent trains and buses and rapid transport. Mega ego Minister of the mega city should first focus on decent rapid transport for COLOMBO RESIDENTS AND COMMUTERS, rather than building Chinese White Elephants.

    Also there is huge corruption in the Colombo Municipality which is systematically cutting down the old high canopy trees in Colombo city.

    Look and Viharamahadevi Park and you see that there are practically no high canopy trees on lots of small trees and all old large trees have disappeared. They claim that the trees fall. today in Colombo only in the Military Cantonment of Bullars road area the big trees are standing because the timber robbers in Colombo Municipality are afraid to cut down those trees in the military big wig areas.

  • 0
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    Hema,

    You have asked the question relating to the “financing of Megalopolis project and how it is going to affect the country’s current account and BoP in the medium to long term”

    Recently the Central Bank Governor said in the future the Port City land will be the most valuable land. How much did the government spend on this development? There is no direct investment! The cost of the services will be covered by the payments by the developers and by the sale of land for high rise buildings at astronomical prices.

    For many years the major source of revenue for Hong Kong was the sale of land for construction of high rise buildings. Even the connecting road between Borella & Kaduwela and the mono rail project are BOT projects.

    What is the impact of these foreign direct investments? It will be a favourable BOP surplus. As for the current account deficit, this is likely to be minimised by the economic development committee, probably by adjusting the income tax rates and gradually reducing the income tax rate to 15%, which is the rate in other island economies i.e. Singapore & Hong Kong. If the Temasek type company is allowed to remove the political misfits and convert them to well run Public Companies, it will also reduce the current account deficit.

    • 1
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      Central Bank Governor is a corrupt and insider trader who knows nothing about environmentally and SOCIALLY RESPONSIBLE development!

      Hong kong and Singapore model is irrelevant at this time of global economic DOWNTURN.

      The EIA for so called port city does not fact in Climate change and sea level rise.

      China will leave behind a half built environmental, financial and social disaster – just like port at Hambantota where the people are suffering from all sorts of health disasters due to pollution as the Health Ministry shows..

  • 1
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    Previous govt’s decision to get shanties out of Colombo was a very good decision. govt cancelled it simply because of political decisions.

    Megapolis will be another blunder, if they do it without proper planning. But, Sri lankana are also very dishonest and are very destructive. They always ruin the country for their benefit.

    If it goes to the wrong minister, his only objective will be to steal from it. If it is excessive stealing, then make it another Norocholai.

    Then the second reason, Opposition and Trade unionists who are not from the same political party always are destructive.

    The contractors are working with political help from the back. they earn money just by ruining the project.

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