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Developing the north

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Development in the Northern Province received additional attention recently after Prime Minister Ranil Wickremesinghe visited the region. During his visit, Wickremesinghe spoke of the need to link the Northern Province to the larger Sri Lankan economy, and focus on several key industries such as agriculture, fisheries, tourism and manufacturing, to create jobs and increase contribution to Sri Lanka’s GDP. Undoubtedly, such efforts would have significant challenges, but would go a long way to reducing the disparity between the war-affected regions and the rest of the country. 

One key Government policy was the option to link the North with the planned development corridors.  An Asian Development Bank (ADB) study released earlier this year suggested economic corridors are a viable option to take jobs to the provinces, with a Colombo-Trincomalee corridor having the potential to generate 1.2 million jobs by 2030 with the right mix of industries. The districts linked to the corridors cover 42% of Sri Lanka’s total area, accounting for 58% of the total population, and could contribute 86% to total industrial output.    

This idea outlined by the Prime Minister is to create a manufacturing zone in Paranthan and then link it to the corridor, thereby giving tradable goods market access. The idea makes sense on paper, but would ultimately need the buy-in at community level to be successful. According to the latest Central Bank breakdown on GDP contribution by province, the Northern and Eastern Provinces continued to be the lowest on the table, with the latter accounting for 5.7% of GDP and the North just 4.2%. Despite the war ending nine years ago, neither province had recorded much improvement when compared with 2015, but the Eastern Province had edged closer to North Central’s 5.8%. 

Interestingly, industry had recorded marginal growth in both North and East, but services had eased. Even though the new Inland Revenue Act has preferential taxes for investors willing to move North, many other elements such as skills, land, capital, market access and infrastructure have a role to play in attracting them. In the North, much like elsewhere in the country, the largest employer is agriculture and the Government. Releasing labour from these underproductive sectors will continue to be challenging unless attractive alternative employment opportunities are generated in the North.

Other than manufacturing, agriculture, including the dairy industry would need to be upgraded. Farmers are frequently hit by drought in the region and struggle to escape from debt. They are proficient in growing organic food, but often struggle with market access. There is much work that could be done in both agriculture and fishing, which would lift many thousands of people out of poverty and provide them with economic stability. Tourism is already flourishing in the Eastern Province, but the North could find a more sustainable way to tap into the industry.  

Yet this is just the beginning. Implementing incremental change by communicating clear policies, working to reduce the skills gap, encouraging investment, and giving labour the freedom to move up the value chain will be crucial elements in a reform process to encourage both enterprises and labour into the North.  The Northern Provincial Council will also have to join in the process, with stakeholders understanding that economic rehabilitation would be an incremental and long process.  

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