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