Bridging regional disparities

Tuesday, 9 August 2016 00:01 - - {{hitsCtrl.values.hits}}

The Western Province made the highest contribution to GDP in 2015, according to Central Bank data released over the weekend, showing the building blocks of Sri Lanka’s economy remain fundamentally unchanged despite increases in infrastructure development. This is predictable but underscores how difficult and important it is for the Government to encourage investment to be disbursed around the country.

Despite having a higher population, largely through migration, the Western Province is one of the smallest areas in the country. In terms of size the North Central Province and Northern Provinces have larger land areas while Southern, Eastern and Sabaragamuwa Provinces, arguably, have more resources. Yet the Western Province’s contribution to the economy is four times more than that of any other region.

According to data, the Western Province contributed Rs.4.6 trillion while the Southern Province trailed behind in second place with Rs. 1.16 trillion, the Northern Province understandably came in last with just Rs. 391 billion though it had improved on its performance in 2014. In terms of growth percentage the North and North Central Provinces recorded the highest rates of 12.1% followed by the Eastern Province that had actually seen a slowdown in growth from 2014.

Predictably agriculture made the lowest contribution to GDP in all the provinces, even though as much as 70% of Sri Lanka’s population is directly or indirectly linked to the sector. Agriculture accounted for 1.7% of the GDP in the Western Province in 2015, whereas it accounted in the range of 9% to 16.3% of the GDP in other provinces. This shows the Western Province’s indomitable hold on GDP contribution is based on industry and services, which outperform its compatriots.

The Northern, Eastern, North Western and Uva Provinces’ contribution to the industrial sector decreased, while that of all other provinces increased in 2015. The services sector was the most dominant sector in 2015 accounting for between 49% and 60.6% of the provincial GDP across the provinces. The contribution from the services sector increased in the Southern, Eastern, North Western and Uva Provinces while that of all other provinces decreased in 2015.

Regardless of their existence for nearly three decades Sri Lanka’s provincial system is deeply flawed as it does not encourage economic competitiveness between regions. Provincial councils are independent of the Central Government to a certain extend on political and administrative fronts, but the Chief Ministers use the powers to create fiefdoms rather than attract investment. The situation is complicated by the Government holding powers of taxation and other key approvals needed to regulate and define competitiveness between regions. Broadly the voters of these regions rely on the Central Government to deliver economic growth with the provincial councils flitting under the radar and bearing no such responsibility.

Whatever the detractors of the provincial council system may believe, it is imperative to make the system work so people living in these provinces can have access to jobs that can increase their living standards. At a fundamental level GDP will remain limited to numbers unless people outside of the Western Province also have a stake in the economy and have the opportunity to lead better lives.