Following its competitive selection by the US Millennium Challenge Corporation (MCC) for grant assistance, the Government of Sri Lanka (GoSL) is now focusing on improving transport infrastructure and land administration in the country, consistent with the government’s Vision 2025.

Investing in these sectors will help create the foundation for economic growth with equity. After reviewing the GoSL proposal, MCC agreed to proceed with further due diligence to develop a compact with Sri Lanka by the end of this year.

MCC is a US Government development agency dedicated to reducing poverty through economic growth. Sri Lanka became eligible for MCC funding in December 2016, having met its criteria for the protection of democratic rights, economic freedom, and investing in its people. In March 2017, the GoSL recruited a compact development team in the Policy Development Office at the Prime Minister’s Office.

Working with MCC counterparts, the compact development team completed an analysis of potential activities in the transport and land sectors that could promote economic growth, while consulting a broad array of stakeholders in government, the private sector and civil society. Potential project ideas were evaluated against several factors, including likely economic impact, ability to implement within five years, sustainability, and poverty profile of expected beneficiaries.

In November 2017, the government submitted a funding proposal to MCC. Subsequently, the GoSL and MCC launched in-depth due diligence to determine if the activities would meet MCC’s investment criteria.

In the transport sector, GoSL and MCC are considering a two-prong strategy. The first component would reduce traffic congestion in major urban areas and improve transport connectivity between provinces, particularly between lagging regions and markets and ports in the Western Province. Activities under consideration include initiatives to modernise bus services and improve traffic management along heavily congested corridors in Colombo Metropolitan Area. The second component would rehabilitate national roads in lagging regions and catalyse private investment in agricultural logistics facilities. In the land sector, GoSL and MCC are considering activities to improve land administration.

MCC approved the allocation of $ 2.6 million in compact development funds to support technical feasibility studies on the activities under consideration for the compact. This amount is in addition to the $ 7.4 million that MCC approved and provided to Sri Lanka in June 2017.

Barring any significant changes to the current slate of proposed activities, GoSL hopes to complete the compact development process and sign a compact agreement with MCC by the end of the year. This is a significant achievement. In 2004, though Sri Lanka qualified for a MCC compact, it lost the opportunity due to the subsequent deteriorating country ranking against many global indices. Sri Lanka only qualified again as eligible to be selected for a compact in late 2016 due to the gains it made on democratic rights.