Development must have direction

When the war ended in 2009, the Government of former President Mahinda Rajapaksa set in motion a massive infrastructure drive that aimed to develop the region, but 10 years later, the results have been unimpressive with large segments of the population failing to see a significant reversal in their living standards. Clearly, the Government has to realign its strategy to the unique challenges presented by the region to provide realistic and practical solutions.   

The Northern Province has one million people of the island’s total population of 21 million with the percentage living below the poverty line estimated at 7.7%, almost double the national average of 4.1%.  The region also has high levels of unemployment.

According to a new development framework that was launched by the Finance Ministry, the Province was host to the lowest number of industrial enterprises in the country as of 2017. This is despite tax concessions and other measures provided by the Government to attract investment to the Province. The infrastructure development also failed to attract investment to the region.  

Of 5,332 industrial enterprises across the country, only 34 (0.6%) are situated in the north. Of the 23 enterprises registered under the Board of Investment, only one has been funded by the minority Tamil diaspora. The northern industrial sector continues to expand at far lower levels than the national average, and employment creation has not satisfied demand.

The report has pointed out a perfect storm of challenges faced by the north. It argues that rapid reintegration of the economy of the north with the rest of the country after the end of the conflict resulted in many small businesses suffering as they would not be competitive. This together with expansion of credit, self-employment schemes financed by loans, and reliance on meagre assets, ultimately resulted in widespread indebtedness and a rural economic crisis. Lack of financial literacy did not help. 

Since 2009, development initiatives had failed to systematically invest in transforming the productivity of ‘small-sized’ producers and organisations who dominate the Province’s economic base. Forthcoming investment did not appropriately build on the existing skills and capacity within the region. The continuing fragility of a population coming out of a protracted war has not been adequately addressed to enable them to meaningfully participate in development. In addition, the reconstruction strategy itself lacked a clear direction, was not holistic in nature, and together with insufficient coordination, was carried out with a ‘project-based’ mindset which led to sub-optimal outcomes.

Policymakers now have to concentrate on a two-pronged strategy of focusing on strengthening the economic base while supporting initiatives for export development to create a stronger, more resilient economic foundation in the north, from which growth can be accelerated in the long-term. 

Furthermore, in future planning and implementation, challenges specific to the North’s post-war legacy must be considered from the outset. These include the need for leadership to take forward a new economic development agenda, re-orientation towards development programing by implementing actors, greater community participation, workforce development, and planning for uncertainties such as climate change. 

The former Government was content to simply create shiny roads while the current administration has spent more time talking about political solutions rather than economic ones. Clearly a broad re-think is necessary to integrate the northern economy with the larger Sri Lankan economy and empower its people.