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[Wednesday, November 21, 2007 - 5.15 GMT] Sri Lanka is now getting closer to
achieving middle income country status, said Naoko Ishii, Country
Director, World Bank, Sri Lanka delivering the key note address at the
National Business Excellence Awards held in Colombo on November 19,
2007. Full text of the Address: By Naoko Ishii, Country Director, World Bank, Sri Lanka 19 November 2007 Members of the Head Table Ladies and gentlemen, It is my pleasure to be here at the fourth National Business Excellence Awards. I would like to congratulate the National Chamber of Commerce of Sri Lanka, for organizing this event for the fourth consecutive year to recognize and reward outstanding performance in the corporate sector. From a development economist point of view, Sri Lanka remains an enigma. Sri Lanka no doubt is a country with enormous potential. During a quarter of a century of civil conflict, its GDP still grew at 5 percent a year. The Western Province, where Colombo is located, has proven its potential with growth rate close to double digits for the past couple of years and a single digit poverty rate. Compared to many countries Sri Lanka has a healthy and educated labor force, combined with its strategic location, the country is well-positioned to benefit from the globalization that is sweeping the world. The country is now getting closer to achieving middle income country status. It is a well know fact that Sri Lanka at the time of independence was one of the most promising economies in Asia. However, the past half century of development has not lived up to the original expectations. Growth has not been fully shared with rural populations, and there is widening inequalities among sectors and regions. It has not yet fully transformed its economic structure to be propelled by modern technology and knowledge. The once famous Ceylon Civil Services is in danger of losing its reputation. What are the missing factors? I have puzzled over this a lot. Confrontational politics since Independence? Decades long conflict, which may have clipped off 2-3 percentage point of growth each year? Mismanagement of policies during the early days? Is the welfare state mentality once a much admired factor turned out to be a drag on development now? You know the situation better than I do. One thing that is clear to me is that the private sector has shown tremendous resilience, and has been always the engine of growth and the driver of development despite the challenges. Among those challenges, I would like to touch upon the business climate. Every year, the World Bank carries out a global ranking of countries on the ease of doing business based on regulations affecting ten stages in the life of a business.. Sri Lanka was given 101st position out of 178 countries this year. Good news is that Sri Lanka has made progress in easing business start-up. A new company act has eliminated burdensome approvals, introduced a flat registration fee, and made company seals and notaries optional. Procedures for start-up were cut from eight to five, and the time from 50 days to 39. Sri Lanka also introduced electronic submission of customs declarations, cutting the time for trading by seven days. Although these efforts are positive much more needs to be done to improve the business climate in the country. The Investment Climate Assessment (ICA) of the World Bank and the Asian Development Bank published in 2005 concluded that beyond the conflict there were four major constraints to private businesses: The second most important constraint was macro-economic instability, where high inflation undercuts exporter’s competitiveness, and makes projections of future sales less reliable to the detriment of business planning and investments. The three other major constraints for private businesses were the cost and access to finance, unreliable and expensive electricity, and rigid labor markets where it is exceedingly costly to lay off workers. These constraints remain to be addressed by policy makers. Despite all the challenges, Sri Lanka can be proud of many enterprises in numerous fields that can be rated with the world’s best. What is now required are high value added, technology and knowledge based enterprises which can move Sri Lanka on to the next phase of development. The garment industry has been able to weather intense competition particularly after the expiry of the MFA through a combination of ethical manufacturing processes and innovative business models. Hospitality and tourism industry, despite the security concerns is now offering a luxurious mixture of boutique hotels, eco-tourism and cultural experiences, catering to niche markets. It is thus fitting that organizations such as the NCCSL recognize enterprises which have taken on the challenge to strive for excellence in a global market place and is taking Sri Lanka further along the path of progress and development. As in previous years the NCCSL has employed a broad range of evaluation criteria including value addition, technological advancement, enhanced capacity for future growth, financial stability and performance management. I am particularly pleased to learn that Corporate Governance and Corporate Social Responsibility have also been taken into consideration in evaluation process. It is a pleasure to learn that, in the modern corporate context, the emphasis on Corporate Governance and Corporate Social responsibility is fast gaining recognition. International researches show that Corporate Governance, together with other governance factors, has a clear relationship with longer term development of economies. The emphasis on Corporate Social Responsibility (or CSR) also deserves special mentioning. While it is true that most CSR programs incur a short-term financial cost on businesses, they are however investment in the future of the economy, the environment and the society in which the companies need to operate. It is well known that despite the steady development of the past several decades, Sri Lanka’s growth has not filtered to many segments of the society, thus we now witness an increase in inequality. Even through remarkable poverty reduction has been achieved in the Western Province, provinces such as Uva and Sabaragamuwa, estate sector, as well as the conflict affected North and East have been suffering from a high poverty incidence. Poverty alleviation programs have been designed and implemented by the government, development partners, and NGOs. However, any kind of poverty reduction effort requires a stronger partnership with the private sector. At the end of the day, the private sector is the engine of the growth and the people’s livelihoods and needs have to be sustained not by hands-out but by growth. So it is my belief that carefully structured CSR programs could go right into the heart of poverty reduction, decreasing the inequality gap in the country. This in turn could help Sri Lanka achieve its Millennium Development Goal (MDG) target of halving poverty incidence by 2015. In conclusion, I would like to thank once again the NCCSL for giving me this opportunity to be here today.. I sincerely hope that with due recognition, Sri Lanka enterprises would be further encouraged to strive for higher goals and in the process help the country achieve its true potential.I wish the event all success.
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