Look beyond infrastructure

The Government has launched the ‘Palmyrah Fund’ worth Rs. 5 billion to develop the North and East Provinces with funds to be used on construction of roads, bridges, drainage systems, and other forms of infrastructure. It is reminiscent of the large infrastructure projects done by the former Government, which had limited impact in genuinely improving lives in that region and led to high levels of indebtedness because the money was not used focusing on people’s key needs. . 

In fact the results from the former development program were so unimpressive that earlier this year the Central Bank and the Finance Ministry released a study that looked at the earlier projects and attempted to find better ways to help the Northern Province. That development framework found the Province was host to the lowest number of industrial enterprises in the country as of 2017. This is despite tax concessions and other measures provided by the Government to attract investment to the Province. The infrastructure development also failed to attract investment to the region. 

Of 5,332 industrial enterprises across the country, only 34 (0.6%) are situated in the North. Of the 23 enterprises registered under the Board of Investment, only one has been funded by the minority Tamil diaspora. The Northern industrial sector continues to expand at far lower levels than the national average, and employment creation has not satisfied demand.

The report has pointed out a perfect storm of challenges faced by the North. It argues that rapid reintegration of the economy of the North with the rest of the country after the end of the conflict resulted in many small businesses suffering as they would not be competitive. This together with expansion of credit, self-employment schemes financed by loans, and reliance on meagre assets, ultimately resulted in widespread indebtedness and a rural economic crisis. Lack of financial literacy did not help. 

Since 2009, development initiatives had failed to systematically invest in transforming the productivity of ‘small-sized’ producers and organisations who dominate the Province’s economic base. Forthcoming investment did not appropriately build on the existing skills and capacity within the region. The continuing fragility of a population coming out of a protracted war has not been adequately addressed to enable them to meaningfully participate in development. In addition, the reconstruction strategy itself lacked a clear direction, was not holistic in nature, and together with insufficient coordination, was carried out with a ‘project-based’ mindset which led to sub-optimal outcomes.

Allocating Rs. 5 billion of tax payer funds for more infrastructure development simply because elections are around the corner could be another exercise in throwing away more good money that could have be used to genuinely improve people’s lives. Policymakers have to concentrate on a two-pronged strategy of focusing on strengthening the economic base while supporting initiatives for export development to create a stronger, more resilient economic foundation in the North, from which growth can be accelerated in the long-term. 

Furthermore, in future planning and implementation, challenges specific to the North’s post-war legacy must be considered from the outset. These include the need for leadership to take forward a new economic development agenda, re-orientation towards development programing by implementing actors, greater community participation, workforce development, and planning for uncertainties such as climate change. 

The Government needs to stop rolling out development programs simply to win votes and direct funds to solve specific social and economic issues to integrate the Northern economy with the larger Sri Lankan economy and empower its people.