Sri Lanka joins top emerging economies

Following is the statement by Senior Minister and Minister of International Monetary Cooperation Dr. Sarath Amunugama at the 67th Session of the ESCAP in Bangkok, held last month:

May I begin by thanking the Government of Thailand Executive Secretary of ESCAP and her staff for the excellent arrangements made for this conference. At the same time I would like to express the deepest sympathies of the Sri Lankan Government to the Government and people of Japan over the recent earthquake and tsunami.

Japan has been a close friend of my country from the time when Sri Lanka was the only country that did not ask for war reparations at the end of the World War II. Since then Japan has been our generous and continuous development partner. At this time of her need we are confident that Japan will recover from this tragedy with its characteristic resilience and emerge even stronger in the future.

Economic situation

This conference is being held at a time when there is great turbulence in the world in political, economic and social spheres. I like to focus on the economic situation facing us as a result of the global economic down turn which though starting in the West has now affected all of us represented here.

While the Western economies are still struggling to recover, countries in our region have made a remarkable recovery last year. The Asia Pacific region improved its growth performance from 4.7% to 8.8%. Sri Lanka has succeeded in recording a GDP growth of 8% in 2010, marking the highest annual rate of growth reported in the last three decades.

Our inflation has been reduced to around 7%. We are no longer an LDC having now reached middle income country status with a per capita income of approximately US$ 2,400. There has been a remarkable growth in the agricultural, manufacturing and service sectors. Our external reserves are at an all time high of US$ 7 billion, fuelled by the growth of exports, tourism and remittances of our workers abroad.

This growth trajectory has been made possible by the comprehensive defeat of terrorism. The Sri Lankan economy suffered a setback for close on 30 years due to separatist violence. One of the most vicious terrorist organisations, the LITE that we overcame had the dubious distinction of introducing suicide bombing, as a common feature of global terrorism.

The LITE was militarily defeated two years ago. As a result the Northern and Eastern Provinces of Sri Lanka were reintegrated into the national economy. These two provinces were centres of agricultural development, small scale industries and tourism and with their return to production they have contributed significantly to GDP growth.

Democratic traditions

It is accepted today that peace and good Government is a necessary condition for rapid economic growth. Sri Lanka is a country which can boast of long democratic traditions, having enjoyed adult universal franchise since 1931. We have had free and regular elections, multiparty democracy and have maintained the freedom of the press and other basic freedoms.

It is this democratic environment that has enabled Sri Lanka to be now recognised as an important emerging economy in our region. A lesson that we have learnt regarding economic growth is that a country must capitalise on its comparative advantages and to structure a growth plan based on the best utilisation of local assets.

In our case we are strategically placed between the Far East and Middle East. Sri Lanka is only a few kilometres south of our giant and friendly neighbour India which is one of the largest emerging economies of the world.

Hub status

Our growth strategy is therefore, to capitalise on our hub status. We plan to make Sri Lanka a communication, education and service hub for the region.

Accordingly the Government has invested in an extensive infrastructure development programme which includes the building of a new port in Hambantota in the deep south, expanding and modernising of the Colombo port and commissioning of several other sea ports including one in the northern tip of the country. A wide network of road and railway connections have already been established including the Southern Highway, the highway from Colombo to the international Airport at Katunayake and the A 9 highway to Jaffna in the North.

All these investments however cannot be maximised unless Sri Lanka, like any other country in the region, can ensure a steady supply of power and energy. Therefore, a new coal power plant, several hydro-electricity schemes and new ventures in small and middle scale hydro-power have ensured a steady supply of energy. Sri Lanka is one of the few countries in the region which can guarantee uninterrupted power supplies to both its population and investors.

Development plan

Our development plan envisages the participation of both public and private sectors. The public sector has expanded largely in the power and transportation sectors. However, there are many more opportunities for the private sector to expand.

It is the wish of the Sri Lankan Government that both local and foreign private enterprises will make use of the return to peace and the availability of modern infrastructure facilities, to invest in the country with a new confidence.

For example, Sri Lanka tourism is exhibiting a phenomenal growth. Last year tourist arrivals grew by over 50% to reach 700,000. We hope to increase this to one million arrivals in the short term and two million in the middle term. In the context of large scale tourism in the region which amounts to over 10 to 15 million arrivals per country, there are tremendous possibilities for Sri Lanka to make rapid strides in this field.

It is also our hope that given the youthful and well-educated population, Sri Lanka could benefit from the new economic developments in the South Asian sub-continent which is technology-based. Sri Lanka is only now beginning to capitalise on its educational and strategic hub assets to enter into the rapidly growing new technology economy which is fast becoming a characteristic of our region.

Even so the Sri Lankan economy is still vulnerable to exogenous shocks, particularly the increase of fuel and food prices. We therefore, strongly endorsed the attempts of the World Bank and ESCAP to contribute to research and training in the field of agriculture. We also request the IMF to examine possibilities of setting up a fund to help non oil producing countries to meet the rising cost of oil.

Millennium Development Goals

Let me conclude by making a reference to Sri Lanka’s achievements in reaching Millennium Development Goals. We have been committed to these goals for the last 70 years. As a commentator has said, Sri Lanka is “a third world country with first world social protection”.

MDG targets such as universal health and education facilities gender equality, expanded livelihood opportunities, social protection for the poor and the disadvantage are already in place in my country. Therefore, Sri Lanka will be one of the countries which could justly be proud of achieving the MDG targets set by the global community.

Thank you.