QUEST FOR BALANCE- Our Country-

Vanity, Sanity and Reality

Prepared for the 32nd National Conference of the Institute of Chartered Accountants (ICASL), Sri Lanka

Anila Dias Bandaranaike21 October 2011

Basic Premise

A Nation strives to improve the quality of life of all its citizens through sustainable development that uplifts human well-being

As Sri Lanka strives, how do we “balance” our development?

What is Human Well-being? • Material Well-being - food, clothing, housing,

economic services, physical health, clean environment

• Intellectual Well-being - educational, professional, aesthetic, cultural pursuits

• Emotional Well-being - freedom of thought, speech and beliefs, family, community, personal safety, mental healthHuman well-being requires material needs as well as intellectual stimulation and emotional security.

4

Reality - Sri Lanka’s Resourcesfor Physical , Intellectual, Emotional Well-being

• Island: national security, beautiful beaches, harbours, ocean resources, strategic location

• Land: mostly arable, mostly flat, accessible mountains, plentiful water, nutrition, easy road/air/sea access

• Cultural: rich, diverse traditions of Sinhala, Tamil, Muslim, Burgher heritage

• Religious: teachings of 4 great religions - Buddhism, Hinduism, Islam, Christianity

• Communication: 2 ancient languages (Sinhala, Tamil) and global business language (English)New Era - end of 30 years of terrorism and conflict

National Priorities in our Quest for Balance

• Achieve – our potential by ethical means• Safeguard – our rich multicultural heritage• Maintain – unity in our diversity• Preserve – our natural environment• Share – leisure with family and community• Enjoy – living in harmony and health

Our Country’s potential is unlimited – Develop it with wisdom and balance!

(a) Share of Households with access In 2010, Samurdhi provided 1.6 mn families Rs.9.2 bn , while 1.8 mn

migrant workers remitted USD 4.1 bn (Rs. 465 bn) to Sri Lanka

Current Reality – Material Well-being(a)

Category 1973 2010

Housing-owned/rent freeHousing-permanent floor, walls, roof

nana

8986-92

Electricity 8 85

Safe water 46 88

Sanitation 59 90

TV 0 80

Telephone 1 77

Poverty Headcount (26% in 1996) na 8.9

Current Reality – Regional Disparities Province We

stern

North Western

Central

Southern

Sabaragamuwa

North Central

Eastern

Uva

Northern

Share of GDP 45 10 10 10 6 5 6 5 3

Share of Households 27 13 13 13 10 6 7 6 5

Monthly Household Expenditure-Rs,000

42 26 28 29 26 29 25 24 26

Poverty Headcount 4 11 10 10 11 7 15 14 13•Strongest disparity between WP and others Source: DCS HIES 2009/10

Current Reality – Intellectual Well-BeingCategory 1970 2010

Population growth rate-% 2.1 1.0

Dependency ratio-% (a) 88 61

Life expectancy-yrs 66 73

Infant mortality/ ‘000 48 10

Secondary Education or higher 34 71

LFPR-% 35 49

Unemployment-% 19 5

• Free preventive and curative health services

• Needs of aging population rising. Private health care expanding.

• In 2010, 61% eligible, but only 10% could enter Free State Universities. Opinion divided on Private Universities• State provided 14 % of employment in 2010. • 1.8 mn migrant workers equal about 20% of labour force

• Terrorism no longer a threat, but inadequate trained professionals to treat post conflict mental trauma

• Rising political thuggery, gun culture, underworld violence – do police, courts protect citizens?

• Balanced language policy, but no minority rights in practice – for official letters, notices, court proceedings

• perceived apathy on reconciliation issues – e.g. excessive army presence , weak inclusivity in North development

• Self-defeating attitude to criticism – attacks on local media personnel and offices, poor diplomacy to counter international hypocrisy

Current Reality – Emotional Well-being

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Current Reality – Summary• Material Well-being? - Sri Lanka a lower-middle income

country with national socio-economic indicators at upper income levels. But regional disparities high, aging burden rising

• Intellectual Well-being - Good basic indicators. But mismatch between education and labour market with poor access to tertiary education

• Emotional Well-being? - Significantly improved when conflict ended. But, inadequate resources to address post-conflict trauma and minority rights in practice, while freedom of speech and personal security questionable

Good progress on economy and material well-being, but need to balance with intellectual and emotional well-being

Current Reality - Structure of Economy Sector 1970 2010

Agriculture 28 12

Industry 24 29

Services 48 59

Total 100 100

• Agriculture share declining, Services increasing, as economy develops• Minimal change in Industry share •Efficient services needed to fuel growth in other sectors•More and better services required as household needs expand with higher incomes

Our Country Today – The RealityDevelopment model targets material well-being• Provides for infrastructure to improve regional

economic access • Focuses on “Hubs” in Services sector to grow• Advocates private participation in development • Encourages foreign employment to raise foreign

earnings and reduce unemployment• Overlooks environmental implications of chosen path• Pushes chosen path by discouraging alternate views

Sri Lanka’s Economy Past Reality vs. Future Vanity or Sanity?

Indicator 1983- 2008 2009 2010 2011 Target

2014Target

Per Capita GDP-$ 335 – 2,014 2,057

2,399

2,794 4,190

Investment: GDP 22 – 29 24.4 27.8 29.5 34.0

National Savings: GDP 14 – 24 23.7 24.7 25.8 32.3

Inflation 0.9 -17.1 5.9 7.3 6.0 5.0

GDP Growth 5.2 3.5 8.0 8.5 9.5

Budget Deficit 6.1 -12.7 9.9 7.9 7.2 4.8

Debt :GDP 68-109 86 82 80 67

External Debt Servicing 11.6 - 28.6 19.0 15.2 13.5 14.3

Targets based on post-conflict optimism that investment-led, infrastructure-led, consumption-led development will generate revenue to meet government’s expenditure and debt-servicing

Current Focus – Vanity or Sanity?1. National Policy Targets and Performance• Can we expect private investment with expanding role

o f state and armed forces in economy?• Can we achieve investment and growth targets on low

credibility with investors?• Can we boast of high external reserves built on rising

market borrowings?• Can we reduce budget deficit and maintain debt, debt-

servicing targets with rising state employment and current borrowing trends?

• Can CBSL intervene to maintain current interest and exchange rates and also sustain growth targets?

Current Focus - Vanity or Sanity?Following on positive developments, – Are we on a balanced path to our medium-term development goals?– Can sanity overcome vanity to rectify perceived policy inconsistencies? – Will Sanity overcome Vanity to gain credibility with investors and other stakeholders? – Will Vanity prevent the Sanity of realistic performance evaluation and public pronouncements?– Does Sri Lanka balance attitude, nationally and internationally?

Current Trends – Vanity or Sanity?2. Emphasis on foreign employment

• End to civil conflict, but no end to out-migration, brain and skills drain

• Retirees returning, but middle management and young skilled workers leaving

• Government policy encourages migration

• Inadequate options, incomes and challenges to retain trained and untrained Sri Lankans

• Declining HR capacity to deliver on Sri Lanka’s post-conflict development targets

Current Trends – Vanity or Sanity?

Do state and citizens balance options for and against living in Sri Lanka today?

Will Vanity prevent the Sanity of recognising the inconsistency between meeting Sri Lanka’s HR needs and pushing foreign employment?

Current Focus – Vanity or Sanity?3.Show-casing Sri Lanka as “Emerging Wonder of Asia” • Can 20 million people and environment cope with 2.5

million tourists? Why target numbers – not $ earnings?

• At current migration, labour force entry rates, are 500,000 jobs in tourism by 2016 realistic; also, targets for BPO, IT sectors, as envisaged?

• 2nd international airport, Hambantota seaport, International sports venues - True benefits vs. colossal costs to Sri Lanka?

• “Hype” vs. performance (e.g. Gas) – “Walk the talk”?

Current Focus – Vanity or Sanity?

Is there balance in our show-casing of Sri Lanka’s potential as the “Emerging Wonder of Asia”?

Will Vanity prevent the Sanity of clarity, consistency and credibility, when show-casing our future?

Current Trends – Vanity or Sanity?4. Emphasis on money and material well-being• What money can buy drives lifestyles• Monetary gains, not professional standards, drive most

businesses• Non-communicable diseases linked to stress rising• Globalisation and unrestrained marketing, not facts,

influence food habits; also lifestyles• Energy, water and waste disposal under strain with

“development”• Rising noise, water, air pollution, traffic congestion with

“development”• Do those who make “big bucks” enjoy optimal well-being?

Current Trends – Vanity or Sanity?

Is there balance in our use (and abuse) of resources for “development”?

Will Vanity prevent the Sanity of valuing our non-material advantages and conserving our resources?

Despite improvements in material well-being, is there balance towards achieving total human well-being?

How do we regain our Balance?

• Recognise Reality

•Avoid Vanity

•Maintain Sanity ……

to ensure that Sri Lanka’s development will be sustainable and uplift human well-being

Thank You