Fast-tracking Sri Lanka’s economic development

Thursday, 19 June 2014 00:22 -     - {{hitsCtrl.values.hits}}

Sri Lanka has made steady progress and achieved economic growth rates that are higher than the regional average, but while it boasts of its success, it is imperative to keep up the momentum. As the nation graduates to middle income status, the importance of Foreign Direct Investment (FDI), Public-Private Partnership (PPP) and active participation of the public sector is higher now than ever before to take forward the economy and provide equitable economic development. The banking and the financial sector will have to play a lead role in private sector projects. Cost control and management accounting principles and practices will further enhance the success of these projects and is a vital role played by management accountants To help understand what Sri Lanka needs to move to the next level, the Institute of Certified Management Accountants of Sri Lanka (CMA) yesterday kicked off its annual conference under the theme ‘Sri Lanka 2.0 and Beyond: Fast-tracking Economic Development 2020’. The event which featured as Chief Guest Senior Minister Human Resources D. E. W. Gunasekera, Guest of Honour Chairman Ceylon Chamber of Commerce (CCC) and Ceylon Beverage Holdings and Lion Brewery Director/ Chief Executive Officer Suresh Kumar Shah, and as keynote speaker National University of Singapore (NUS) Department of Accounting Head Prof. Ho. Yew Kee, will present a total of 36 speakers to share their views at the two day conference. At the inauguration session held yesterday, CMA President Professor Lakshman R. Watawala pointed out that in the education sector, while universities are much sought after by Advanced Level qualified students, not all are able to get a place in the system. Noting that only a fraction of students obtain entry to universities, he stressed on the need to seriously consider models similar to those in the neighbouring countries which have put them far ahead of Sri Lanka by setting up institutes affiliated to State universities. “This will double the intake over a short period. Professional education enables graduates, undergraduates and A/L students to be trained for a job environment providing an attitudinal change and making them employable,” he said. Prof. Watawala shared that the timely theme of the conference aims at discussing how Sri Lanka could be taken forward and reap the benefits of an upcoming nation.   Private sector role in fast-tracking economic development Opining that when speaking about economic development, accountants tend to measure by number-crunching, CCC Chairman Shah noted that the subject should be looked at in two ways – in terms of wealth creation and quality of life – since sustainability cannot be achieved one without another. To reach the minimum standard of living, he noted that three key segments need to work together – the Government, the public sector and the private sector. Shah emphasised that if they do not come together, have similar objectives and be on board on a common way forward, sustaining economic development is unlikely. He explained this has to be achieved with the Government setting a good policy framework, the public sector in terms of a regulatory framework and the private sector in terms of investment and creation of jobs. “In the local context the policy framework has been well set by the Government since it has an objective to reach an 8% growth rate through the ‘5+1’ hub strategy. While the strategy is based on making the maximum of the nation’s geographic location and being in close proximity to the world’s busiest sea route, it needs to leverage that strength. Moreover, being in close proximity to India, it should leverage on this aspect as well, although it is not specified in the concept, he said. “Sri Lanka as a nation needs to trade with the world to build a strong economy. Sri Lanka has a population of 21 million people and we are too small to reach economic prosperity by trading amongst ourselves. Therefore it is imperative that the country trades and exposes itself to the rest of the world. It should not be limited to the five hub concept. All businesses need to focus on operating in overseas markets at some point or the other,” advised Shah, Listing out six key areas the country needs to focus on to move forward, he noted the first as market access. For this, the private sector needs to encourage the Government to look at possible Free Trade Agreements (FTAs). With the India and China FTA combined, Sri Lanka will have access to about 2.5 billion people. “This can be a game-changer. This can also be achieved by working with companies that already have access to foreign markets,” he said. The second noted was technology. If the nation aspires to compete with market overseas, in addition to market access it also needs access to technology. Since the country will be competing with superior technologies overseas, it always has the option of partnering with companies that already have such technologies. The third required is innovation. Over the last few years, technology has not only changed the business environment but it has also changed the way of life. With new technology constantly emerging, the pace of change has been even more rapid in the recent past. “When we are dealing in the international market, we must have products and services in the pipeline that we can bring out easily. In Sri Lanka the lack is less partnership with universities and private sector. We need to establish much closer cooperation with the university system than we have today,” he advised. The fourth is better talent management. Noting that although in terms of people Sri Lanka has wonderful free education, the system today it is not geared to meet the needs of the future. For this the private sector needs to find its own way of training and cannot relax with what is available. The fifth he noted is linking with Small and Medium Enterprises (SMEs). According to Shah, if wealth creation is needed to be moved down, the private sector needs to build these linkages. “We need to get them (SMEs) involved in the supply chain. It is absolutely imperative,” stressed Shah. The sixth and the most controversial point he noted was that local bushiness must not be afraid of competition. “It was after we played test cricket that we started winning matches. We need to get into that competitive frame of mind. If we are to compete, we need to win against the best in our own country. We should not be scared to open our company to competition. That will make us efficient. As a private sector we must not ask for protection. We must use our skills to build a strong sector,” he said.       What will it take for Sri Lanka to become an economic powerhouse like Singapore? NUS Prof. Kee started with a quip that if Sri Lanka is looked at as a small nation when taking into account its size, Singapore in that same view will be non-existent. While the latter has a GDP of $ 276,520 comparing to Sri Lanka’s GDP of $ 59,423, he noted that the nation, which has been through three decades of war, is now growing at a much faster economic growth rate. “The point I want to make is that Singapore is much smaller, so it is much easier to manage compared to Sri Lanka, which is larger; the economic miracle we had was very specific. We (Singapore) are small,” he said. To follow in the steps of Singapore, Prof. Kee opined that Sri Lanka needs to open up and exploit the international market. Sharing what Singapore was some decades ago, he said: “Singapore was a fishing village and a land with no natural resources. We had to innovate in order to survive. It was essential. It was a land that had many immigrants. We are a multi-ethnic country and we acknowledge that we need harmony and cooperation. It was the immigrants who brought the best of ideas for us to develop.” “When I look at Sri Lanka, I note there is tremendous optimism since the country has immense opportunities. You are where Singapore was at some point in time. The future depends on how you crop your destiny. As long as Sri Lanka has the right passion, it will reach for success,” he told audience. Highlighting the possible causes of Singapore’s success, Prof. Kee noted that the prime reason was the country having a stable and efficient government very early on. The second possible cause he said was that advancement and promotion was based on meritocracy. “This means that if you are smart, good and capable, it doesn’t matter what your colour, religion, and who your parents are, it depends on what you have done with yourself and education,” he said. Another cause he said was having a market-driven economy. At one time Singapore was considered a hot house for production in the South East Asia since it was cheap. Today it hardly has any manufacturing plants since it has moved away from low tech to higher tech and value-adding industries. He noted that pursuit of excellence was another reason. “We gave everyone the chance to do their very best. Looking at Singapore, we were nothing but a piece of rock. If we had no excellence, we would not have been able to reach where we are today,” noted Prof. Kee. Moving on to lessons learnt over the years, Prof. Kee pointed out that Singapore learnt a great deal from international experience. Also, when adapting international lessons to local context, it ensured that only the best practices, knowledge and technology were selected. Furthermore, it ensured that there is continuous improvement and international benchmarking. “We must set excellence as the benchmark. We teach our younger generation to never settle for a ‘no’ or ‘cannot be done’. This helps us to think out of the box and push the boundaries continuously. We keep asking ourselves if we are a timekeeper or a clock builder. We aspire to be the latter. This we inculcate in our young people and aim for the system to remain,” shared Kee. While stressing on the need to invest in local talent, Kee said that as a developing economy, Sri Lanka will lose the best of its young people. To retain them, he emphasised on the need to create opportunities and train locals. “Send them overseas and give them a good education. Create opportunities for them to contribute to the local economy and manage local talent. You have to identify the best of the young people. If they are overseas, make sure they come back. The world understands talent and they will keep them away from you. The system has to be patient and must make them leaders,” said Kee.     Government’s role in fast-tracking economic development Senior Minister Human Resources Gunasekera observed that when looking back at the times since independence, in keeping with ground realities and also in conformity with prevalent economic thinking, Sri Lanka has passed through various models of economic development. Although it had five-year, six-year and 10-year plans, none of them saw fruition. “During the period since 1977, we, under the leadership of five executive presidents, geared our national economy on the rails of the open economic policies in keeping with the times. Despite various upheavals, both natural and man-made, national and international, both within our control and out, we have entered the middle income level status today in the realm of the world economy,” he said. Gunasekera stated that although Sri Lanka was a small national economy of $ 67 billion, it had registered a growth rate of 6-8% during 2006 to 2013, as compared with the rest of the neighbouring countries in the South Asian region. Sharing positive features, he listed the unprecedented and unparalleled level of investments on physical resources or infrastructure which is reflected in both the GDP and per capita income. While there are complaints or charges of corruption, he opined this was an inherent feature of modern economic models. However, he stressed that the fact remains that there was an upward trend in the national economy. Another positive feature of the nation’s economic development is regional development. During the 30-year war, growth was concentrated in the Western Province, which contributed 54% to national GDP. Today it has come down to 43%. “Even though some economists dispute it, our poverty rate has reduced. However, inequality has widened,” he noted. Turning to the negative features, one of many is dwindling Government revenue, which is reaching an unprecedented level of 12-13% of GDP. Also noted as negative were the decline in exports, which he attributed to international factors, and the high rate of debts, though he said this is at manageable levels as a percentage of GDP. “Despite these negative features, our economic fundamentals are under control. However, taking into account international economic factors, we must acknowledge the fact that our economy is interdependent, interrelated and integral and thus tends to be vulnerable.” He said some immediate and short-term corrective measures are necessary. “If the growth is to be sustainable, it should be inclusive. We must bear in mind the fact that despite growth, there is a growing trend of widening disparity of income. The immediate corrective measure is to increase Government revenue through rational fiscal and necessary taxation policies. Otherwise, the present trend of social tension is bound to escalate,” noted Gunasekera. Stating that the informal economy accounts for 62% of the workforce whose purchasing power is low and bargaining power is almost nil, Gunasekera pointed out this is the restive vote bank and privileges and patronage will have no bearing. He said that with growth being restricted to the service sector, there is a crying demand for a shift to manufacturing. With regard to exports, he stressed on the need to embark on value-added exports, which he said “has not adequately penetrated the heads of policymakers”. “We must bear in mind that Asia leads the world economy. There are new emerging economies. New markets are opening. The economic geography is changing,” he added.   Pix by Upul Abayasekara