Sri Lanka Economic Association to launch book on ‘Export Growth for Sustainable Development’
Tuesday, 9 July 2013 00:05
The Sri Lanka Economic Association will launch its publication ‘Export Growth for Sustainable Development’ – a collection of papers presented at its last Annual Sessions. A.S. Jayewardene, Former Governor of the Central Bank, will speak at the launch of the book at the Organisation of Professional Associations on 12 July at 5.00 p.m.
In Chapter 1, Professor Indraratna gives an overview of the performance of the economy in recent years which is a convenient summary of the present state of the economy. The important fact is that the country has been unable to sustain the high growth rates of 8% enjoyed in 2010 and 2011 because imports have been rising much faster relatively to exports.
The question raised by him is whether a small open economy where the domestic market is small can have high growth without export growth, which will enable economies of scale to be harnessed by domestic manufacturers.
Sarath Rajapathirana, in the second chapter, has analysed the reasons for the present impasse, placing the blame on macroeconomic imbalances, the fixed exchange rate and excessive levels of protection for domestic import substitutes for the fall in exports growth. He says there was a failure in maintaining macroeconomic balances by policymakers which caused this debacle for export growth.
He refers to the appreciation of the real exchange rate owing to the policy of pegging the rupee to a fixed value of the US dollar, the higher real wages and the higher real interest rates as damaging export growth. He points out that export growth depends on macroeconomic policies that avoid inflation and unsustainable balance of payments deficits over the trade cycle.
He has analysed the performance of these macroeconomic variables over three demarcated periods: 1960 to 1977, 1978 to 2003 and 2004 to 2011. He argues that the desirable relationship between export growth and macro-economic variables prevailed only during the first period but that period had its own problems which require much greater attention than he has devoted. The writer concludes that more open trade policies should be adopted by reducing the over-all import protection, by reducing the bias against exports.
Anushka Wijesinghe comments on the paper by Sarath Rajapathirana and points out the need for diversification of export markets. Sri Lanka exports 55% of its exports to the USA and the EU and both areas are still in recession. If the country diversifies its market, there will be less exposure to the trade cycle in the developed countries in the West. He refers to the several Free Trade Agreements which have not borne the desired results. He stresses on the need for innovation and for developing greater skills in the workforce.
Eran Wickremaratne, Member of Parliament, is one of the contributors to the publication. He discusses the need for good governance, the rule of law and the need for law and order. He is sceptical about the much touted growth in per capita income to US$ 4,000 in six years and points out that it would require a much higher growth rate than 8% to achieve such target.
He also points out that foreign direct investment is below expectations, being 1.52% of GDP in 2011, a figure much lower than in the previous three years of the war when it was 1.6 to 1.7% of GDP. He also criticises the State-driven model of development where the numbers employed in the state has increased from 999,895 in 2005 to 1.22 million in 2011. So, the 8% growth has come about with an increase of employment only in the State sector and not the private sector.
He refers to studies by economists which show a strong correlation between GDP per capita growth and the quality of governance. He also refers to the need for balance between the three organs of the State – the Legislature, the Executive and the Judiciary, which has been disturbed in recent years.
Rohan Masakorala’s paper discusses the institutions that have a bearing on export growth and refers to the Customs, the labour laws and other rules and procedures which are a serious drawback to export growth. He also refers to the supply chains and the need for exports to be linked to regional supply chains.
He refers to various indexes like the Doing Business Index, the logistics index, the institutional performance index and the labour laws. They all affect the speed with which trade transactions are carried out. Exporters have to deliver on time and these indexes measure how efficiently they can do so. He concludes that the country must improve on these indexes to develop exports.
Lloyd Yapa has made useful comments with his background as a former Director General of the Export Development Board. These institutions linked to export growth must be streamlined.
The next chapter is on the business processing and knowledge services industry by Sujiva Dewaraja. He points out that the global off shoring market is worth US$ 200 billion and that Sri Lanka’s exports are less than US$ 5 million. The industry has a vision to increase it to $ 1 billion by 2016 and create 80,000 jobs.
Greater attention needs to be paid to this industry since the jobs it creates are those that could accommodate the job market where educated unemployed numbers are high.
There are chapters on tourism development and the commercialisation of agriculture. The country has good potential to develop both these sectors. Commercial agriculture is required to produce more from less labour in agriculture. The numbers in agriculture are declining and this trend can be promoted by commercialisation of agriculture rather than depend on peasant farming.
B.R.L Fernando, the Chairman of CIC, has explained in detail what is required to do so. He outlines the impressive results achieved by CIC with its modern research oriented agriculture. The issue of commercialising agriculture must be faced fairly and squarely by policymakers for social stability arguments are trotted out in favour of peasant agriculture, particularly in rice farming.
The publication discusses very urgent and timely issues which policymakers should take note of. The review by A.S. Jayewardene will shed further light on this timely publication.