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Economic growth with a human face

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President Maithripala Sirisena, who has a good understanding of what is happening on a daily basis in a rural Sri Lanka where the majority of our people live, has asked for greater support for Small and Medium Enterprises (SME) as their development would directly improve the livelihoods of our lower middle class Sri Lankans and wants his Government to actively create avenues to Untitled-1support private sector investment, including providing tax concessions where possible. 

Credit for SMEs from banks have largely been in short supply, where loans and other long-term funds have generally been hard to come by for many reasons. Therefore, support for SME agriculture, healthcare and education has to be bumped up if the Government is looking to promote sustainable development and reconciliation among all communities. 

Education and skills training is another key sector that needs new investments. Technological innovation in the educational sector will produce ‘bots’ or robots who can teach and answer questions in real time, as automated student advisors, this will take place within the next 10 years. The country is not geared to support such innovations. Therefore the specific sustainable development goals to be adopted must be made clear. 

Sustainable development requires sound economic governance and a focused domestic policy framework to facilitate inclusive growth and there by advance the economic, environmental and social welfare of all our people and also the planet we live in. The benefits of economic growth have to be more widely distributed, because inclusive growth is the cornerstone of sustainable development. Mainstreaming sustainability considerations in policymaking will, in turn, support inclusiveness. 

Economic growth of over 5% in the last 10 years has effectively reduced extreme poverty in many of our regions, along with broader development. But much work remains to be done because better growth is contingent on strong and sustained domestic reforms. Structural weaknesses, such as poor infrastructure, low investment in education, low savings, low productivity and huge social deficits unless addressed, will prevent us from realising our full growth potential.

Important lesson

The important lesson of recent decades is that, although economic growth is vital and necessary, it is not enough to create shared and sustainable prosperity. That requires shifting the focus of development policies to address not only “inequalities of income” but also “inequalities of opportunity”. This distinction is important, because different kinds of deprivation reinforce each other.

Lack of access to adequate healthcare, basic nutrition, clean drinking water, better sanitation and quality education, for example, can harm people’s employment prospects, widening the gap even further between haves and have-nots, and creating a vicious spiral of inequality. For sustainable development to succeed, growth must be made more inclusive, by addressing social and environmental deficits. 

It is essential for the Government to launch integrated and well-designed packages of inclusive policies to boost opportunities for productive employment and job security, equitable access to finance and to provide adequate access to basic services, such as education, healthcare, energy and water. 

Addressing the shortcomings of inclusive growth, together with prudent and consistent management of risk to growth, has to be a key part of our country’s transformation for the real sustainable future the people want.

Way forward

From now on the package of social and economic reforms needs to be very clear. There should be no room for playing with taxpayers’ money. Wasteful and unproductive public expenditure has to be curtailed; public institutions have to be more efficient and demand-driven; public enterprises have to be on equal-footing with private enterprises and our debt burden has to be reduced and be manageable. Tax collection has to be fair and efficient. 

Then for years we have lived on a fragile exchange rate. Weak external finances clearly show the vulnerability of our exchange rate. In the current account of our Balance of Payments (BOP), it should be the export potential that reflects the country’s productive strength. But, our net exports, shows a $ 6+ billion deficit in 2014, which is covered by over $ 6.5 billion worker remittance. 

In the financial account of our BOP, Foreign Direct Investment is less than $ 1 billion, but net debt liabilities are over $ 1.8 billion, this is our debt either directly or indirectly. This has continued into 2015 and 2016. These are surely not signs of economic and social prosperity, but to many outsiders as sheer incompetence and mismanagement. All this needs to change and happening slowly to achieve any form of sustainable development and for us to cross the $ 100 billion GDP target before 2020.

(The writer is a senior company director.)

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