sri lanka's economy - what's going right and what's going wrong

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  • 7/31/2019 Sri Lanka's Economy - What's Going Right and What's Going Wrong

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    Sri Lankas Economy in 2012 -Whats Going Right and Whats

    Going Wrong?

    Prepared for the Colombo Club Luncheon Meeting

    Anila Dias Bandaranaike

    28 June 2012

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    Our World -Then and Now

    Post World War II development targetedconsumption to rebuild after war

    Then, resources served 2.5 billion peoples needs Technology, populations, incomes, wants grew Fresh water, forest cover, ozone layer depleted Now, falling resources serve 7bn peoples wants Widening gap between Haves and Have-nots Global paradigm shift in development focus

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    Our World -Then and Now

    Then Development was measured byOutput (GDP), material wealth, profits,

    consumer and business confidence

    Now Development is measured by

    Human Development Index (per capitaGDP, longevity, education), human

    rights, governance

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    Basic Premise

    Na#onsstrivetoimprovethequalityoflifeofall

    ci#zensthroughsustainabledevelopmentwithsocialjus#cethat

    upli

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    What do we understand by

    Sustainable Development lastingprogress towards human well-being

    Social Justice impartiality in access andopportunities for all citizens, regardless ofethnic, religious or political affiliation

    Human well-being material, intellectualand emotional contentment

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    Sri Lankas Current Development Model Targets infrastructure for regionally balanced

    development and economic access Focuses on Hubs in Services sector for growth Promotes home-grown strategies and self-

    sufficiency for development

    Desires private participation in development Advocates state presence in economic activities Uses idle armed forces in development efforts Encourages migrant employment to earn $ and

    reduce unemployment

    Basically sound but needs to address inconsistencies

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    Recent Economic Performance

    Indicator 2009 2010 2011 2012

    Target

    2015

    TargetPer Capita GDP-$ 2,057 2,400 2,836 2,939 4,574

    Investment: GDP 24.4 27.6 29.9 30.5 32.3

    National Savings: GDP 23.7 25.4 22.1 26.7 32.5

    Inflation 5.9 7.3 7.8 7.0 5.0

    GDP Growth 3.5 8.0 8.3 7.2 8.5

    Budget Deficit 9.9 8.0 6.9 6.2 5.0

    Debt :GDP 86 82 79 78 65

    External Debt Servicing 19.0 15.9 12.6 16.1 16.6

    Most Macro-economic indicators improved in the last 3 years.Recent growth reflected post-conflict pent-up demand and existing capacity.Targets presume infrastructure-led development will generate revenue to

    meet governments expenditure and debt-servicingTargets were down-sized due to lower than expected performance

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    (a) Share of Households with access In 2011, 1.8 mn migrant workers remitted USD 5 bn to Sri

    Lanka, equivalent to Rs. 30,000/ worker/ month Poverty Line in April 2012 - Rs. 13,692/ Household/ month

    Material Well-Being in Sri Lanka (a)

    Category 2011 - %

    Housing-owned or rent-free 89Housing-permanent floor, walls, roof 86-92

    Electricity 91

    Safe water 88

    Sanitation 90TV 80

    Telephone 77

    Non-Poor Headcount (74% in 1996) 91

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    Household Expenditure Shares

    Category 1996/97 2009/10

    Food, Clothing, Housing 75 64

    Other (Transport, Communication,Education, Health, Recreation &Culture, Miscellaneous Goods &

    Services

    25 36

    Shift from basic needs to expenditure of choice with risingdisposable incomes

    Significant recent improvements in material well-being

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    Intellectual Well-Being in Sri Lanka

    Category 1970 2011

    Population growth rate-% 2.1 1.0Dependency ratio-% 88 48

    Life expectancy-yrs 66 75

    Infant mortality/ 000 48 9

    Secondary Education or higher 34 71LFPR-% 35 48

    Unemployment-% 19 4

    Free Statepreventiveand curativehealthservices

    Privatehealth care

    expanding.

    In 2010, 61% eligible, but only 10% could enter Free StateUniversities. Opinion divided on Private Universities

    In 2011, over half working age population choose not to work State provided 14 % of employment in 2011 20% equivalent of labour force (1.8 mn) are migrant workersRecent improvements in intellectual well-being but way to go

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    Terrorism not a threat, but perceived apathy on reconciliation issues is excessive army presence counter-productive? Are developmentdecisions perceived as inclusive?

    Rising thuggery, gun culture, violence do police, courts protectcitizens?

    Balanced language policy, but slow implementation do schools haveteachers for English and link language? Are minority rights observed

    for official letters, notices, court proceedings? No access to consistent information Can households and businesses

    take informed decisions based on oft-contradictory officialcommunications?

    Long way to go!

    What is our countrys commitment to improving

    Emotional well-being?

    Emotional Well-being in Sri Lanka

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    Whats Going Right? Land: mostly arable, plentiful water, nutrition, mostly flat,

    accessible mountains, easy road/air/sea access Strategic location: next to India and on key trade routes to

    China, both rising economic powers with massive markets

    Conducive living conditions: beautiful country with lots tooffer for a high quality of life

    Work Force: healthy, educated, aware, living better Political and economic stability: With end to terrorism, safer

    and more stable for investment than many countries

    Conducive business climate: Government needs privateparticipation

    Infrastructure: Policy focused on reducing regionaldisparities, so can invest anywhere in Sri Lanka

    Macro- economic conditions: considerably improved

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    Trends vs. Targets

    Indicator 2010

    (Target)

    2011

    (Target)

    Mid-2012

    (Target)

    Investment - % GDP 27.6 (27.8) 29.9 (29.5) (30.5)

    GDP Deflator - % chg 7.3 (6.0) 7.8 (6.0) (7.0)

    Budget Deficit - % GDP 8.0 (7.5) 6.9 (6.8) (6.2)

    Credit to Private Sector - % chg 24.9 (13.2) 34.5 (18.8) 34.0 (19.0)

    Money Supply (M2b) - % chg 15.8 (13.5) 19.1 (14.5) 22.9 (15.0)

    Official Reserves - $ Mn 6,610

    (5,728)

    5,958

    (8,004)

    5,835

    (7,945)

    Trade Deficit -$ Mn 4,825

    (4,874)

    9,710

    (6,762)

    3,320(9,183)

    Exchange Rate - Rs/$ 113.06 110.57 132.09

    Interest Rate (3M Tbills) - % 7.24 8.68 10.95

    When direction went off-target, policy action was too little, too late.

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    Whats the Buzz in Colombo? Whos accountable for

    (mis?)management of UN resolutions?exchange rate and debt (mis?)management?EPF (mis?)investments?funding sports tamashas and others?

    Who calls the shots in private commercial banks? Whose assets were underperforming? Who killed cock robin at the JVP rally? Who abducts dissidents in white vans?Whats happening to Economic and Foreign policy?

    Whats happened to governance and public opinion?14

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    Whats Going Wrong?

    Credibility of Government Economy, Devolution,Reconciliation, Foreign Affairs, Education Reforms

    Inept Political System Cannot deliver Ineffective Regulatory Framework undermined Weakening Systems and Procedures politicised

    Non-cohesive Corporate Sector cannot influence reform Expectant, Confused Citizens know not what to expect Accountability sadly lacking Opinions - Polarised

    Government terrified of alternate viewsCitizens guarding their own interests

    Insecure government, insincere citizens

    No collective effort for greater good of the country

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    Current Challenges

    To Raise Sri Lankas Credibility

    Space for non-confrontational dialogueConsistent, professional Government

    communication of timely, relevant information

    Pro-active, vocal public opinion from a cohesivecitizenry (Corporates, NGOs, individuals)

    To improve Overall Human Well-Being

    Reduce focus on material wealth, income, profitsRaise focus on environmental protection and

    freedom of speech and human rights

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    In conclusion,

    Sri Lankas potential is unlimited,

    We need to buy into and exploit it

    for sustainable

    development.So, lets get our act together!

    Thank you