The Millennium Challenge Corporation Compact with Sri Lanka


By Neville Ladduwahetty

There is uncertainty as to the current status of the Compact between the U.S. Millennium Challenge Corporation (MCC) and Sri Lanka as to whether it has been signed by the President, as the Chairman of the National Physical Planning Council, and whether it has been Gazetted or not. On August 13, 2018, the MCC is reported to have delivered to the U.S. Congress a congressional notification (CN) of its intent to negotiate a Millennium Challenge Corporation Compact with the Government of Sri Lanka. On April 25, 2019, the MCC approved a five-year Compact with Sri Lanka. However, there is uncertainty as to how the U.S. Congress would respond to the request for such a Compact.


"What the Board of Directors of the Millennium Challenge Corporation has approved is a five-year, $480 million Compact with the Government of Sri Lanka aimed at reducing poverty, through economic growth. The Compact seeks to assist the Sri Lanka 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".

"The Compact will be composed of two projects: a Transport Project and a Land Project. The Transport Project ($350 M) aims to increase the relative efficiency and capacity of the road network and bus system in the Colombo Metropolitan Region and to reduce the cost of transporting passengers and goods between the central region of the country and ports and markets in the rest of the country. The goal of the Land Project is to increase the availability of information on private land and underutilized state lands or all land in Sri Lanka to which the Government is lawfully entitled or which may be disposed of by the Government ("State Lands") in order to increase land market activity. The Land Project would increase tenure security and tradability of land for smallholders, women, and firms through policy and legal reforms" (

"This is a grant that Sri Lanka has been applying for many years. Even during the previous government, former PM, D. M. Jayaratne’s Secretary, Sirisena Amarasekara, to discuss this among other matters, in Washington. They were unsuccessful," an official told the Sunday Observer.

"After considering fresh applications made in December 2015, the MCC board of directors selected Sri Lanka for the threshold programme which is the lower programme of the two that is made available by MCC".

"However, after reviewing the scorecard and observing continued improvements in performance, as measured by the MCC scorecard, the country has been selected for the Compact programme.

"Since early 2017, we have been working with the MCC collaboratively and closely, to develop a dual-sector compact programme in grant funding. This project would have ideally kicked off in December last year, however due to the constitutional instability that took place, it resulted in a major setback in the implementation of the project," he said.


The Compact is based on a National Physical Plan prepared under the Town and Country Planning (Amendment) Act (No. 49 of 2000). The current Physical Plan (2018 – 2050) is a revision of an earlier Physical Plan (2011 – 2030) prepared in 2011. The earlier Physical Plan had followed all the procedures required by the Act. The question is whether the revised Physical Plan has followed the due process as required by the Act.

Such procedures should include preparing a Draft Physical Plan and conducting hearings with experts, professionals and general public and obtaining provisional approval of the Minister concerned after which it is Gazetted with maps and plans, etc., for inspection and scrutiny by the public for them to propose revisions to be incorporated in the Draft Plan, to mention a few. It is after following such procedures that the final version of the National Physical Plan is submitted to the National Physical Planning Council for approval. The question is: If the final Physical Plan had not followed the required procedures prior to the approval of the National Physical Planning Council, how legitimate would be the final version of the Plan, even if it was approved by the President and the Council, and consequently, the status of the Compact negotiated with MCC?

While the earlier Physical Plan addressed development over the entire territory of Sri Lanka, the revised Physical Plane has deviated from this holistic approach and focused development along "growth corridors". This approach has resulted in carving out an economic corridor from Colombo to Trincomalee, which is reported to cover 1.2 Million acres in a manner that physically divides the territory of Sri Lanka into two distinct parts.


Since the stated aim of the MCC is to "reduce poverty through economic growth" it is necessary to explore whether the Compact aims to benefit areas that are in fact currently classified as those that qualify for assistance on the basis of the National Poverty headcount index of 4.1, as determined by the Census and Statistics Dept. of Sri Lanka, for overcoming the poverty trap.

"Under the land administration project, preparation of parcel fabric map and inventory of state land, improvements of deeds registry, improvements in the land valuation system, land grants registration and deed conversion activities and land policy and legal governance improvement activities will be implemented in Kegalle, Kandy, Matale, Kurunegala, Anuradhapura, Polonnaruwa and Trincomalee, along the identified Colombo-Trincomalee economic corridor. Parties are currently negotiating to include the Gampaha district under the said category as well" (The Sunday Observer, May 12, 2019).

Of the eight Districts listed above, the poverty headcount index of five of them, namely, Matale (3.5), Kurunegala (2.9), Anuradhapura (3.8), Polonnaruwa (2.2) and Gampaha (2.0) are below the national headcount index of 4.1. Therefore, only three Districts, Kandy (5.5), Kegalle (7.1) and Trincomalee (10.0) qualify, since their poverty indices are high and well above the national average of 4.1.

The strategy of "growth corridors" have left out several Districts where the poverty headcount index is considerably higher than the national average, and therefore requiring of attention. For instance, Districts such as Ratnapura (6.5), Monaragala (5.8), Badulla (6.8), Batticoloa (11.3), Kilinochchi (18.2), Mullativu (12.7), Jaffna (7.7), Nuwara-Eliya (6.3) are well above the national poverty index. These Districts with higher levels of poverty than the national average are located on either side of the Colombo-Trincomalee economic corridor. Under the circumstances, it would be inevitable for existing disparities to exacerbate as a consequence of the economic growth within the corridor, thus setting in place social imbalances that could become a cause for social unrest on ethnic lines.

Commenting on the impact of the Compact within the economic corridor, Emeritus Professor Nimal Gunatilleke of the Peradeniya University states: "Some of the districts in which the MCC and the National Plan Corridor project earmarked for development are located in areas where the Mahaweli Development Project influence has been in existence for over several decades….Some sections of the proposed economic corridor seem to cross the paths of the ecological corridors established for facilitating elephant migration during the USAID funded environmental component of the Mahaweli Project" ( The Island, May 4, 2019). It is evident that the Planners of the economic corridor have shamefully ignored the ground breaking legacies left behind by their predecessors.


A National Physical Plan has to undergo certain procedures for it to be accepted as an official document. The public is uncertain as to the current status of the National Physical Plan in this process, and in particular, whether the President as the Head of the National Physical Planning Council has approved the Plan. Even if the Physical Plan had received all the required approvals, the burning question is whether the 2018 – 2050 Physical Plan could be justified on the claimed basis of reducing poverty when in fact the majority of the Districts within the economic corridor do not qualify on grounds of poverty because they are below the national poverty headcount index of 4.1 and furthermore, that a larger number of Districts with considerably higher levels of poverty are outside the proposed corridor.

This stark reality brings into serious question the real motivations for revising the National Physical Plan of 2011 – 2030 in order to create the current Plan that bifurcates Sri Lanka into two distinct parts. Since the current Plan does not address poverty in deserving Districts per se, speculation is rife that the so called economic corridor is to serve the interests of the U.S. that has upgraded the status of Sri Lanka to that of a Military Logistics Hub, to justify the grant of $ 480 Million for implementation of the Millennium Challenge Corporation Compact.

The story attributed to Rev. Desmond Tutu might be appropriate in this context:

‘When the missionaries came to Africa they had the Bible and we had the land. They said 'Let us pray.' We closed our eyes. When we opened them we had the Bible and they had the land’.

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