National Chamber concerns on the Sri Lankan economy

World Bank impression of Sri Lanka

As per the World Bank information, Sri Lanka is focusing on long-term strategic and structural development challenges as it strives to transit to an upper middle-income country, by attracting investment, heightening human capital, enhancing the role of the private sector, including the provision of an appropriate environment for increasing productivity; exports are among the key challenges.

Economic growth in Sri Lanka has been among the fastest in South Asia in recent years. Growth averaged 6.3% between 2002 and 2013, and Sri Lanka should try her level best to keep the same momentum. While the national unemployment level is around at 4.4%, there are many districts that report unemployment rates that are higher than the national average.

As a part of Sri Lanka’s structural and economic transformation, employment in primary agriculture will likely continue to decline, from its present share of 30% of the labour force, as other sectors of higher productivity will absorb rural surplus labour. At the same time, along with productivity increases, agriculture is likely to become more capital intensive and technology-driven as labour shortages emerge. This was also addressed at the Sri Lanka Economic Forum held last week.

The National Chamber pointed out many instances

As indicated by the National Chamber on many occasions, improving the quality of human capital through effective education and skills development is essential for Sri Lanka’s economic growth and competitiveness. Continued growth will also depend largely on encouragement of private sector development and private investment, especially increased FDIs. Sri Lanka has better prospects in getting technology and innovation through FDIs.

Economic Policy outline of the present Government

The National Chamber appreciates the measures taken by the Government on sustainable economic policies which would be beneficial for the country. Even with unfavourable global economic conditions, the Government’s determination in strengthening the local economic growth and stability is much appreciated. 

Promoting innovation and productive growth, efforts in generating of one million job opportunities in the private sector, enhancing income levels, development of rural economy, ensuring land ownership to rural and estate sectors, creating a wide and a strong middle class, creating the background needed to enter the global value system are much appreciated. 

Encouraging small and medium and large scale farmers and entrepreneurs to participate in the global economy, encouraging competitive international organisations to invest in Sri Lanka, promoting the digitisation of the economy and encouraging local investments are also commendable.

Tea, rubber and paddy are considered to be critical agri products in our economy and the National Chamber welcomes quick measures to be taken to solve problems faced by these sectors, and developing these sectors will have greater positive impact on our economy.

The need for export development

It is a fact that our country is import-dependent and we always have a negative trade balance, mainly due to high oil import bill. It is mainly through the private remittances that we manage to ease out the situation to an extent. We will have difficulties on private remittances as well, mainly due to unfavourable economic situations in Middle Eastern countries. We are hopeful that low oil prices should have a positive effect and the administrators should manage this advantageous situation for the benefit of the country.

In order to develop exports in the country more and more incentives should be provided for export oriented manufacturing. Further, export friendly freight charges would also be helpful to boost the sector. We should study what the competing countries are offering to strengthen their export markets and take proactive action to compete. 

Indo-Sri Lanka CEPA and ETCA

The National Chamber took considerable initiatives with regard to CEPA agreement which was to be signed between India and Sri Lanka. We organised a debate among business leaders with the intention of giving equal opportunity to businessmen who are supporting and opposing the CEPA. We went to the extent of inviting economists like Dr. Harsha De Silva for the deliberation. 

In the same way we would like to discuss the business aspects of the Economic and Technology Cooperation Agreement (ETCA) between India and Sri Lanka.

The present status of the Indo-Sri Lanka Free Trade Agreement and the impact of the same to the economy of Sri Lanka should be carefully evaluated. It is now very clear that the Indo-Sri Lanka FTA signed on 28 December 1998 will be part and parcel of the new agreement (ETCA) that is to be signed soon.

The National Chamber is seriously concerned about the tariff liberalisation programme and the preparation of the negative list of the parties under this Agreement.

No anti-dumping regulations in Sri Lanka

We would like to draw the attention to the fact that Sri Lanka does not have anti-dumping regulations implemented in this country. Under this situation, the Sri Lankan economy can face serious difficulties and even cause serious damages which we believe cannot be recovered easily. Additionally, Sri Lanka should be more concerned about the application of preferential safeguard measures in order to protect Sri Lankan investors.

Furthermore, the National Chamber believes that the authorities should pay considerable attention to trade in services and take measure to protect the economy from possible large-scale interventions into the Sri Lankan economy by Indian companies which have the advantage of economies of scale. 

 Global competitiveness and doing business environment

Under the Global Competiveness Report, economic aspects such as Institutions, Infrastructure, Macroeconomic Environment and Health and Primary Education are considered Basic requirements of an economy.

Higher Education and Training, Labour Market Efficiency, Financial Market Development, Technological Readiness and Market Size are recognised as the Efficiency enhancers of an economy. Innovation and Sophistication are also considered to be key for further development of the economy. 

Whilst concentrating on all the aspects mentioned above, Sri Lanka should consider paying more attention to efficiency enhancers, innovation and business sophistication with the view of further developing the economy.

Responsibility of the Government

It is important to note that governments have a vital responsibility in providing a vibrant and sustainable environment for private sector to grow. Without good rules that are consistently and equally enforced, entrepreneurs have a harder time starting and growing the small and medium-size firms that are the engines of growth and job creation for most economies around the world.

When we look at in a broader manner, starting a business and employing workers, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency should have very efficient processors so that businesses could start and function smoothly. Thereby the ranking of Sri Lanka’s Doing Business Index could go up in the world ranking and Sri Lanka would be an attractive place for investment.

The efforts taken by Minister of Finance Ravi Karunanayake in resolving doing business related problems faced by the business community at large are commendable. It is noteworthy that many of our business leaders have faith in the said process.

 Competing in Asia

As a country, we should not forget the fact that we have to compete with neighbouring countries like Myanmar, Vietnam, Bangladesh and India in attracting FDIs to the country. 

Climate and the environment

Due to climatic changes, our country experienced excessive rain during last year and it is predicted that we will have to face our worst drought this year. Therefore I propose that we start rain water harvesting. To do this, I believe that the Government should financially help house-owners by providing at least 50% of the capital for such efforts and encourage the private sector by offering soft loans. Such a practice was adopted by the Queensland Government during their drought in 2007, and it was a success.

Climate change will be a bigger issue for the whole world in the ensuing years and the participating countries agreed at the Paris Conference (COP21) to collectively curtail global temperature increase, while urging efforts to limit the increase to 1.5 degrees. In this respect our President, who was also a participant at the conference, inaugurated a program called ‘Sri Lanka Next, The Blue Green Era’. More awareness of this program is needed. We will do our best to take this program to all our members. As an initiative we have printed our entire Annual Report on environmentally-friendly recycled green concept paper which complies with all European standards. 

In conclusion, what is unique about our chamber is that it still has as its primary focus the development and upliftment of truly Sri Lankan businesses in Sri Lanka. This was the primary objective of our founding fathers and will continue to be so.

(The writer is President, National Chamber of Commerce of Sri Lanka.)