Growth corridors

An Asian Development Bank (ADB) study has 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 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 industrial output. Provided the right mix of industries can be established it is an idea with much merit and would make inroads to Sri Lanka’s chronic problem of lagging provinces.  

According to the latest statistics by the Central Bank the Western Province accounted for 39.7% of Sri Lanka’s GDP in 2016. In contrast the second and third largest values that were recorded from North Western and Central Provinces accounted for only 10.7% and 10.5% of growth. The Southern province retained the fourth position but all these regions are growing at less than four times the rate of the Western Province. 

Understandably this gap is reflected in per capita income levels where a person living in the Western Province earns about 1.3 times the national per capita income. This means that when it comes to basic needs and wellbeing indicators such as healthcare, education, housing and purchasing power the Western Province leads the crowd. This is largely because industries and services sectors are concentrated in the Western Province while most other provinces rely on low productivity based agriculture.

Considerable variations in the structure of Provincial GDP can be observed across provinces. The agriculture sector accounted for only about 2.1% of the GDP in the Western Province, whereas it accounted in the range of 7% to 13.5% of the GDP in other provinces. North and East Provinces continued to be the lowest on the table with the latter accounting for 5.7% of GDP and the north just 4.2%. 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. Both services and industry had dipped slightly in the Western Province suggesting that investors are moving towards provinces but perhaps not fast enough. Even though the Inland Revenue Act has preferential taxes for investors willing to move to less developed parts of Sri Lanka many other elements such as skills, land, capital, market access and infrastructure have a role to play in attracting them. Releasing labour from underproductive sectors such as agriculture and the public service will continue to be challenging unless attractive alternative employment opportunities are generated in the provinces.

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 economic corridors. 

The provinces have been left out of Sri Lanka’s growth story for far too long. Economic policy should be underpinned by governance reforms that push the provincial councils and other political layers to be accountable for achieving more growth and attracting investment. They have to become viable contributors to the economy if disparity between the Western and other provinces are to be bridged and Sri Lanka is to grow sustainably.