Stéphanie Magalage participated in the
French-Sri Lankan Diaspora Youth Workshop “Post-War Reconciliation Dialogue for
a Sustainable Peace”, which took place in Paris, on October 27th,
2012, as a panelist on the theme “Towards an effective and sustainable
economic development”. The event was organized by What’s Next!,
an independent forum comprising of post-graduates and young professionals of
Sri Lankan origin residing in France. What’s Next! seeks to
promote a sustainable peace in Sri Lanka through intellectual exchange and
multicultural dialogue.
| by Stéphanie Magalage
( November 19, 2012, Paris, Sri Lanka Guardian) Let me introduce you all to our economic
theme, by informing you about one major event that took place two years ago:
In January 2010, Sri Lanka was upgraded,
from the IMF’s list of Poverty Reduction and Growth Trust, to that of Middle
Income Emerging Markets. This represents a major recognition of Sri Lanka’s
economic development. In order to be upgraded this way, you need to meet few
requirements that evidently Sri Lanka has successfully fulfilled. Here are some
examples of the criteria that Sri Lanka met: Sri Lanka’s GDP never stopped
increasing, going well above the prevailing International Development
Association threshold, projection of optimistic outlooks on the country’s
external debt, allowing resilience to shocks (despite of global financial crisis,
GDP remained around 8% in 2010 and 2011), presence of fiscal consolidation and
the ability to access international capital markets, were among other criteria.
According to the Global Economic
Prospects of the World Bank, published in January 2012, when it comes to real
GDP growth outlook for 2013, 7.1% is expected for South Asia, and 7,8% for
South East Asia, whereas 1,1% is expected for the Euro Zone. This clearly
demonstrates that Sri Lanka is in the heart of a very dynamic economic area of
the world. With such an opportune framework, it really has to play a key role.
One other factor that supports Sri
Lanka’s economic expansion, among many other elements, is the end of its bloody
civil war that started in the 1980s, and eventually ended in 2009. This war
context did not reassure investors, and it certainly did not help the
government to focus on the economic development of the country.
At the end of the war in 2009, the Sri
Lankan President Mahinda Rajapakse promised to have a strong leadership for the
country’s economic expansion and so he did. One main sector in which the
government decided to invest was the infrastructures, its development being of
paramount importance in the country’s reconstruction-phase. Resurfacing roads,
improving their conditions and reducing average vehicle operating costs have
much more value than simply making every-day life easier: it also is vital for
economic growth, and also ultimately reducing poverty. Investments in that area
means the spread of economic growth outside the Colombo Metropolitan Area; new
conditions and standards of roads more adequate to meet the growing freight and
passenger traffic. New highways connected major growth centers. One
simple example of how lowering transportation costs and travel times can play a
major role in the economy, especially when it comes to exports: the
improvements would help farmers to transport their products to markets on time,
increase export competitiveness, accelerate export-led growth, and also
contribute to sustained economic development.
Speaking of exports: exports of goods
and services represented 29% of annual growth in 2011. The benefits of exports
for the economy are now well considered by most countries, but they also must
remember that in order to maintain their added value, their competitiveness,
they always need new incentives and innovative products and ways of doing. This
means that Sri Lanka must also invest in the field of Research and Development.
Sri Lanka should assist Small and Medium Enterprises to develop, by supporting
domestic competition in order to help its businesses. It will help their
expansion in the domestic market and also them defend themselves on an
international scale.
An example of that would be the presence
of a few Sri Lanka businesses at the latest SIAL fair, the biggest fair of
innovative global food that took place in Paris a few days ago. This is very
positive for Sri Lanka’s businesses, to be present at such events in the
Western part of the world: it means they have a certain weight, and are
recognized.
Speaking of which, the added value of
agriculture in percentage of GDP is up to 14%, whereas it is about 28% for the
industry, and 58% for services. The service sector plays a major role in the
economic development scheme of Sri Lanka. The strengths of the country are
quite diverse; the service sector has the greatest keys to economic
development, notably with tourism, but also financial and insurance services.
As we noted, the industry, with its investments in infrastructures, is also a
leading sector. When it comes to agriculture, it supports with no doubt Sri
Lanka’s economic expansion, especially abroad with raw materials. Since the end
of the war, the country attracted a lot of Foreign Direct Investments,
especially from China and India that supports the tourism industry, education,
energy, and information and communications technologies.
However, the government suffers from
trade deficit, fiscal deficit and even corruption. There is an evident lack of
support from the State to support private incentives and SMEs, that represent
about 90% of the 18 000 companies operating in Sri Lanka. Impacts of the global
financial crisis remain as Sri Lanka’s main ‘customers’, UE & USA, are
lowering their import.
However, Sri Lanka must not forget the
opportunities it has: its strategic position in the most dynamic
economic region of the world and its strong support of its financial
partners - the World Bank, the IMF, but also the Asian Development Bank, the
Japan Bank for International Cooperation. Moreover, we must also consider
sustainable growth in order to have responsible approaches that can have
long-term benefits for Sri Lanka.
[Stéphanie Magalage holds a Master in
International Economic Relations from Sorbonne University (Paris).She is
currently preparing a Master in Advertising at Weller International Business
School. She also works as an international coordinator at the BNP Paribas
Personal Finance.]
