The Sri Lankan economy has transformed to a service economy and services that can be sustained in the future will be knowledge-based, said the Secretary to the Treasury Dr. P.B. Jayasundera.
Delivering the keynote address on “Sri Lanka beyond 2011 - The role of the industry to support the knowledge economy” at CIO Council meeting of SLASSCOM in Colombo last week Dr. Jayasundera said that the government is doing its best as the facilitator of the economy. The corporate sector should take the lead and engage more aggressively in its role as the key player of the economy.
Dr. Jayasundera who compared pre and post-war economic statistics expressed his doubt over the trickling down of benefits of peace dividends to all segments of society. However, he said that corporate profits have increased significantly in many industries.
The corporate sector has recovered and they are earning huge profits. Banking, insurance and finance companies are performing well. Banks are recording a less than 4 percent NPL ratio reflecting low risk of lending, he said. In the 1990s the size of the economy was $20 billion, international trade was $ 5 billion and the service sector was 40 percent of the GDP. Throughout the period Sri Lanka faced internal and external shocks.Most of the time we were in a conflict. The economic crisis in many regions, oil shock and global economic crisis in 2008 and 2009 hardly hit the Sri Lankan economy. However, we sustained, survived, grew and achieved. Today the size of the economy is $50 billion. International trade has passed $ 20 billion. The service sector has evolved to two thirds of the economy. The unemployment rate has dropped to 5 percent. Poverty has dropped from 21.2 percent in the 1990s to 7.2 percent.
The Exchange Rates and interest rates are market driven. The financial system, and trade are liberalised and exchange control relaxed. Apart from a few areas the capital account is open. Value addition in Sri Lankan exports is high and now we have our own tea brands. We export value added high branded rubber instead of raw rubber.
The $ 3 billion apparel industry is competitive and resilient without protected markets in USA are concessions from the EU.
The tourism industry is booming and tourist arrivals have reached 700,000. Hotels are operating to their full capacity after 20 years.
The average spending of tourists too is increasing and new investments are coming in. Foreign remittances have reached $4.5 billion.
Not only in numbers but in the changed composition of the jobs from unskilled, semi skilled and skilled in the expatriated workforce who contribute to the increased foreign remittence.
Knowledge-based services may increase further and it will reach $10 billion. With investment on power generation and shifting from thermal to coal and other alternative energy sources and consolidation in the hydro power, oil imports will reduce further. It will ease pressure on the balance of payments. By the next year all households in Sri Lanka may have electricity and with this Sri Lanka will be the only emerging country where 100 percent of the households have electricity, Dr. Jayasundera said.