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Faster reforms

Comments / {{hitsCtrl.values.hits}} Views / Friday, 22 March 2019 00:00



Last year Sri Lanka grew only by 3.2%, in 2017 it was 3.4% and projections are not much better for 2019 with the World Bank predicting 3.5% growth. Solutions for Sri Lanka’s slow growth are many, but implementing them will require efficiency and better governance from stakeholders, especially the Government. 

During the same year India grew by 7.5% and Bangladesh 7.9%. So impressive has Bangladesh’s growth record been that Sri Lankan companies are investing there due to its younger workforce, better investment opportunities and easier business environment. In contrast Sri Lanka has an aging population, difficult political environment, limited transparency and high levels of bureaucratic red tape. 

Some economists and experts have pointed out that Bangladesh’s economic growth actually comes from technology infusion into agriculture that has revolutionized their farming, boosting new exports and allowing large numbers of farmers to beat decades of poverty. This is a dire need in Sri Lanka as well because even though agriculture only contributes 7% to GDP it employs about 27% of the labour force, mostly in informal work that has limited social security, education opportunities or social mobility.  

One way forward for Sri Lanka is to invest in its population as it would both foster growth and improve standards of life across all social strata. But in order to do that Sri Lanka’s economy has to improve its competitiveness, which includes transparency, adherence to law and order, reduce losses of State Owned Enterprises (SOEs) and improve the quality of the services they provide, reduce red tape, increase investment in skills and create a clear economic policy. Granted these are difficult changes but without them Sri Lanka cannot improve its growth. 

The first Labour Demand Survey (LDS) conducted by the Census and Statistics Department (CSD) in 2018 showed nearly half a million vacancies in the private sector. A large portion of these jobs were found to be in the routine and non-routine manual jobs, but most of Sri Lanka’s jobseekers prefer white-collar or professional jobs. This situation has given rise to a sectoral mismatch between labour demand and supply. 

The LDS found that of 497,302 vacancies in the first half of 2017, the highest job availability was for sewing machine operators, security guards, and shop assistants. These vacancies showed a demand for middle- and low-skilled jobs involving manual tasks that are perceived as unattractive by the general public as they usually combine long hours with limited salaries. Workers in Sri Lanka are increasingly focused on career progress and non-financial rewards. Unfortunately, only 7.2% of private sector vacancies are in high-skilled occupations, according to LDS data. This is compounded by a shortage of critical soft skills such as English and IT knowledge that hamper recruitments to high-skilled jobs. This desire for aspirational services sector jobs could also be a driver for demand of public sector jobs.

Policies clearly need to look at automation for low-skilled, labour-intensive work in factories with the possibility of migration for these kinds of jobs allowing labour to move up the value chain. This shift is harder for Sri Lanka as R&D driven, innovation-based job creation is the domain of more developed countries. Yet some of these reforms do need to happen and with the Government focused more on politics than the economy slow growth is likely to remain Sri Lanka’s reality for the foreseeable future.

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