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Sunday, August 03, 2014 - 4.00 GMT

SUCCESS IN ECONOMICS AND HUMAN DEVELOPMENT

President Rajapaksa underscores the record of achievement

By Lucien Rajakarunanayake

 

Sri Lanka's progress both in economics and human development have been recognized by the United Nations, and major international financial institutions as being one of the most successful both in South Asia and the wider Asian continent, in their recent assessments. These range from the measure of Human Development by the United Nations, to the particular aspects of the economy by the International Monetary Fund (IMF) and the Asian Development Bank (ADB).

President Mahinda Rajapaksa more than confirmed this story of success in his address to the Ceylon Chamber of Commerce at its 175th anniversary celebrations last Tuesday, when he spoke of the successes achieved in diverse sectors of the economy and the overall planning of development since this government was elected in December 2005, and after the defeat of terrorism in 2009. He made it clear to the audience, made up of members of the oldest and largest business chamber in the country and invitees, that the government was committed to taking a long-term view on its development strategies, and the investments it has made and continues to make for the country's progress.

"When taking political decisions we always took a very long-term view of issues, and did not focus merely on the immediate and short term horizon, the President said, in an address that clearly demonstrated the government's strategies and record of success in a manner not done to such good effect earlier.

"When we developed the infrastructure of our country we were not thinking of the next five years or the next election, but about the next one hundred years and beyond", he said.

"When we built ports, airports, highways, roads, and power plants, we were not thinking only about you and your children, but also about the unborn generations of all Sri Lankans.

21st Century challenges

"When we made massive investments in education and health, we were not only thinking of our present generation of young persons, but also about the future work force, that is needed to face the challenging 21st century.

"When we rescued our country from terrorism through the supreme sacrifices of thousands of our people and billions of rupees worth of resources, we were not only thinking of the need to protect our people at present, but also about providing our future generations with the political and economic stability that is needed to lead safe and happy lives.

"When we took firm measures, to steer the macro-fundamentals of our economy to healthy levels, we were not only thinking of making it easier for you to do business now, but also about making our economic growth sustainable, inclusive and long lasting," the President added.

It was an address that covered economic development in the country from the time of independence in 1948, through all its ups and downs, through the worst period of the battle against separatist terror; and the rise of the country from a period of negative growth to the 7 per cent plus growth that we now have and the target of a Per Capita Income of US 4,000 by the year 2016, and even more soon after that.

Focusing on the economic aspects of progress since 2005, President Rajapaksa said: "From an economic point of view... there were many who did not believe that Sri Lanka would be able to develop on a sustained basis with nearly 7.5 per cent average growth, for more than five years, in a world that is rocked with turmoil, crisis and uncertainty. There were many who did not believe that we would have highways of an international standard, carpeted roads linking the whole of Sri Lanka, and thousands of kilometres of concrete roads in the rural areas, in our lifetime. There were many who predicted that, with the massive development, we were carrying out, we would provoke a high level of inflation, get into a debt trap, and have a fiscal deficit that was out of control. Some even shouted every few weeks that the economy would crash!

"But, on the other hand," he said, "we have now established the longest-ever period, of stable and low inflation in our post-liberalization history; a stable exchange rate; decreasing debt ratios; shrinking fiscal deficits; and a large number of new and exciting business opportunities through our five-hubs strategy. If you carefully look at your Annual Reports of about 10 years back and compare the balance sheets, then and now, you yourselves will realize the enormous positive change that has come about." For full text of address by President Rajapaksa visit: http://www.info.gov.lk/news_update/Current_Affairs/ca201407/20140730our_...

UN - HDI

The recent reports of human and economic development in Sri Lanka showed that the President's assessment of the new reality in Sri Lanka was being understood by those who have made genuine studies of the diverse aspects of progress in the country. The report of the United Nations Human Development Index (HDI) gives Sri Lanka's new 73rd position in the HDI ranking and most importantly highest in all of South Asia.

The Index released recently in Tokyo as a measure derived from life expectancy, education levels and incomes had a small rise from 0.745 in 2012 to 0.750 in 2013. But covering 187 countries from all continents, Sri Lanka has much cause for satisfaction by this recognition of a good ranking in human development, in keeping with the UN standards for such progress. Sri Lanka's ranking above all South Asian countries gives an interesting insight into regional conditions and realities. Our closest neighbour India, a 'medium development country', is ranked 135, while Pakistan stands at 146, Nepal at 145, and Bhutan, Maldives, Afghanistan and Bangladesh ranks at 136, 103, 169 and 142 respectively in the 'low development' category, and Sri Lanka, stands at 73, is in the 'high development' category.

ADB

Another important recognition of success came from the ADB, when its President, Tekehito Nakao said that despite three decades of conflict, Sri Lanka has managed to become one of the most successful countries in Asia in terms of social development indicators - especially health and education.

Delivering the eminent speaker's address at the recent Miloda - Academy of Financial Studies, Training Institute of the Finance and Planning Ministry, on "Chance of Sri Lanka to be the Next Asian Miracle", the ADB President said Sri Lanka can and should become another Asian economic success story, and is on the path to achieving this.

Pointing out that since the end of civil war in May 2009, Sri Lanka has been recording solid rates of growth and is on course to surpassing last year's rate of 7.3 per cent in 2014, the ADB Chief said the expansion of the economic activity in the conflict-affected Northern and Eastern Provinces almost twice as fast as in the rest of the country is striking.

"What is especially striking is that economic activity in post-conflict Northern and Eastern Provinces expanded almost twice as fast as in the rest of the country. This is a remarkable sign of reconstruction and rehabilitation - a means to securing jobs and income, and to delivering reconciliation in the conflict-affected regions."

He was happy to see that a major tax reform program has been under way since 2011, which included broadening the VAT base and improving administration.

He said the government's goal of reaching $ 4,000 per capita income by 2016 and making the transition from a lower middle income country to an upper middle income country is realistic and Sri Lanka has the potential to be the first country in South Asia to break through the middle income trap and achieve high income status.

Highlighting the challenges ahead, the ADB President said it is imperative to maintain a sound macro economic policy and keep investing in physical infrastructure, and that the government needs to reform state-owned enterprises. Several strategic enterprises may remain publicly owned, but they must be streamlined and reformed to ensure much greater operational, managerial and financial efficiencies.

His concluding view was a strong belief is that Sri Lanka can and should become another Asian economic success story, and in this sense the next Asian Miracle.

IMF

Another commendation came this week from the IMF, which stated that Sri Lanka's economic growth has been one of the fastest among Asia's developing economies in recent years.

Releasing its report after the conclusion of Article IV consultations with Sri Lanka, the IMF Executive Board said this week that the country's recent economic performance has been better than expected, particularly, given some head winds from chronic market turbulence and climatic shocks.

Under IMF's Articles of Agreement, usually every year an IMF staff team visits the country to hold bilateral discussions with officials on the country's economic developments and policies and upon return, they prepare a report, which is the basis for discussion by the Executive Board.

According to the report released Tuesday, Sri Lanka's short-term outlook appears broadly positive, as the country is well positioned to benefit from the global economic recovery, and particularly, stronger growth in advanced economies.

Real GDP growth is expected to remain robust at about 7 per cent in 2014, while inflation is likely to remain in the mid-single digits.

The government's target of further reducing the fiscal deficit to 5.2 per cent of GDP should allow for even more reduction of public debt, the IMF said. With a continued robust export performance, the current account deficit is expected to narrow further and allow for some additional accumulation of international reserves.

Sri Lanka's inflation has remained low, falling to 3.2 per cent year-on-year in May 2014 while fiscal consolidation has continued, with the overall fiscal deficit falling to 5.9 per cent of GDP in 2013.

The IMF Executive Board said monetary policy has been accommodative, but private credit growth has been slow. Given rising economic growth, the IMF observed that the fiscal stance for 2014 as appropriate, but raised concern about the composition of further consolidation.

These reports on Sri Lanka's success in the economic and human development factors, while commending government policy, are also indicators that the private sector has to play a larger and more impactful role in advancing the economic and social conditions. This is a good reminder to organizations such as the Ceylon Chamber of Commerce, with its long history in business activity and other such organizations to see how Public - Private Sector participation could further improve to achieve these goals. 

 

 

 

 
 
   
   
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Last modified: August 03, 2014.

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