‘Today’s self-employed, wealth generators of tomorrow’
Sri Lanka is an inland nation of 65,610 square kilometres and
estimated population of 20.869 million, with density of 333 persons per
square kilometre, which is one of the highest in the world. Sri Lanka's
economy has indicated a growth of 8.3 percent in 2011 compared to 8
percent in 2010. Sri Lanka's social indicators such as life expectancy,
literacy and mortality rates are well above those in comparable
developing countries and are on par with many developed countries.
Sri Lanka’s main livelihood from ancient times is agriculture
The declining tax to GDP ratio, lower level of public investment and
a relatively high level of debt to GDP ratio have been the major
challenges in the fiscal sector in the recent past. Poverty still
remains as issue affecting nearly one in four Sri Lankan in average.
The government has introduced series of measures to increase tax
revenue, which include Simplified Value Added Tax System, expanding the
tax base, rationalizing tax exemptions and improving tax administration.
The government is committed to raising the revenue/GDP ratio and
supporting a higher public investment programme with a view to providing
a wide range of infrastructure facilities, developing human resources,
undertaking capacity building and reconstruction of the North and East
Inadequate infrastructure facilities remain one of the biggest
impediments to Sri Lanka's progress. Reliable infrastructure is a
paramount need for further economic development, especially for
export-oriented activities such as manufacturing and tourism. In order
to fast track reduction in poverty and rural development, it is
important to improve rural infrastructure through public investment. The
need for a reliable power supply, road network, transport system,
telecommunication capacity, urban infrastructure and port and aviation
facilities is strong.
The growing urban-rural gap is largely due to concentrated economic
growth in Western province which is 45.1 percent in 2010. The largest
cash transfer programme, Samurdhi still misses a large proportion of the
poor even though it covers more than 40 percent of the population. In
addition to disparities in growth between the Western province and the
rest of the country, the slow pace of poverty reduction in Sri Lanka is
also linked to rising inequality among income groups.
The sectoral composition of the economy has changed from that of an
agriculture base economy to one dominated by the services sector. The
services sector has been the highest contributor to Gross Domestic
Production (GDP) at 59.5 percent, followed by the industrial sector 29.3
percent and the agricultural sector at 11.2 percent in 2011.
Liberalization, private sector participation and increased
competition have contributed to the expansion of the service sector with
buoyant performance in transportation, communication, financial
services, trade and tourism.
Sri Lanka's main livelihood from ancient times is agriculture. The
performance in the agricultural sector is an important determination of
GDP, as this sector directly accounts for around one-nine of national
output and employs over one-third of the workforce. Fragmented land use,
poor farming practices, insufficient availability of water, credit,
seed, technical know-how, marketing, storage, and transportation
continue to weaken productivity in agriculture.
Rice is the staple food for more Sri Lankans, and government policy
has been making the country self-sufficient, which is now almost
achieved. A total of 70 percent of paddy lands are irrigated. While
production has increased, the average yields are lower than average in
Asia, and production costs relatively high. Therefore, rapid sustainable
development in food production while protecting the atmosphere, water
resources, forests, biodiversity need to be given high priority in the
The plantation sector produces three export crops, tea, rubber and
coconut and accounts for approximately 20 percent of export revenue. The
highest ever tourist arrival of 855,975 was recorded in 2011. Most
tourists are relatively low spenders, however and the tourism industry
has expanded its capacity for a considerable future increase.
More than 23 percent of the population is self-employed. As the
economy is likely to grow, self-employment will undoubtedly increase and
it is vital that government provides the right conditions for people to
start and run own business. Self-employment is a key driver to achieving
economic growth in the rural areas. A culture change is needed to ensure
that people are encouraged to start a business. In the current climate,
government must ensure that self-employment and the concerns of small
businesses are given the same status as high-grown businesses. It is
essential to make the connection between the self-employed people of
today and the wealth generators and job creators of tomorrow.
The education system is playing a vital role in creating productive
workforce, possessing competent knowledge and appropriate skills. In
order to achieve these goals a comprehensive education programme,
together with the process of transformation, to be in force. Education
at all levels contributes to economic growth through imparting general
attitudes and discipline and specific skills necessary for a variety of
It contributes to economic growth by improving health, reducing
fertility and possibly by contributing to political stability.
The major importance of the education system to any labour market
would depend majorly in its ability to produce a literate, disciplined,
flexible labour force via high quality education. Consequently, with
economic development, new technology is applied to production, which
results in an increase in the demand for technically qualified workers
and better education.
Women constitute nearly 50 percent of the population of Sri Lanka and
they should be made to contribute meaningfully to the development
Women's empowerment and economic development are closely
interrelated. While development itself will bring about women's
empowerment, empowering women will bring about changes in
decision-making, which will have a direct impact on development.
On the other hand, women's empowerment leads to improvement in some
aspects of children's welfare (health and nutrition, in particular) but
at the expense of some others (education).
The unemployment rate has nevertheless gone down, from 5.2 percent in
2008 to 4.2 percent in 2011. A substantial number of the unemployed are
educated, and more than 40 percent of them have obtained the GCE
Ordinary Level exams or higher. Many of them are therefore not among the
very poorest, but can afford to wait for some time for entry in to
future education, or for a more suitable job opportunity.
It's remarkable, however, that the unemployment rate among females is
more than double the rate of males. This is important to keep in mind
for policy-makers because the job market is still strongly segmented
alone gender lines. The falling rate of unemployment therefore is an
indicator of slightly better job opportunities for educated youth.
According to Central Bank, key areas of employment generation were
manufacturing, construction, trade and hotels and personal services. The
share of public sector employment is 14 percent. The total number of
migrant workers from Sri Lanka employed abroad was 1.9 million in 2010.
Total foreign remittances amounting to Rupees 5,145 million received
from migrant workers in 2011.
High value-added domestic resource based manufacturing activities
offer opportunity for product diversification, competitive advantage and
productivity increases. The export-oriented manufacturing industry
dominated by textile, wearing apparel and leather products which
contribute approximately 57 percent of export earnings while chemicals,
petroleum, coal, rubber and plastic products contribute 15 percent and
food, beverages and tobacco products contribute approximately 5 percent.
The structure of exports has changed over the years from a few
traditional plantation crops to several industrial exports.
Compliance with standards such as health, environment, labour and
safety to comply with international best practices assist Sri Lanka not
only to meet the challenges of modern trade initiatives but will also
ensure that the rights of global consumers are protected.
As a developing country a salient feature is the relative shortage of
capital for developing the economy. An important way to overcome such a
‘capital constraint’ is through Foreign Direct Investment (FDI), which
while bridging the financial gap, can simultaneously bring with it new
technology and management skills, and also provide the country inroads
into regional or global market and supply chains.
FDI, in a productive enterprise in a country by foreign corporations,
is an increasingly widespread economic phenomenon of the present times.
Multinational corporations, which only a few decades ago were
regarded as exploitative and ideologically opposed by many developing
countries, are no longer taboo.
FDI are largely influenced by exchange rate, inflation, labour
population, per capita gross domestic product, merchandise trade
balance, current account balance and long-term debt outstanding.
The lack of stability of same may affect the FDI inflows in the
economy. In fact, developing countries themselves now have an increasing
number of multinational corporations of their own, many of which match
the world's best enterprises in terms of technological sophistication,
global outreach and profitability. FDI through public-private
partnership arrangements such as Hambantota port project, Southern
highway, promote large-scale infrastructure development.
FDI is to be further promoted to strategic sectors and export
industries, and those of that use high local value-addition, generate
employment, use advanced technological methods and undertake high
research and development methods.
A comprehensive economic development strategy must combine an
emphasis on economic sectors with growth potential, with an emphasis on
geographical areas where there are grater needs of growth. This will
make better use of the human resources in the country and reduce the
tensions that follow from unequal and unbalanced development.