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G.S.P. + Loss Will Set S.L. Back

Dhammika Perera

The impending loss of G.S.P.+ due to pressures from the European Union (E.U.) will set our nation back in terms of competitiveness of our garments trade, will cause loss of employment and to a degree will destabilize our trade, a top corporate leader said.
B.o.I. Chairman Dhammika Perera speaking at a seminar organized by the Oxford Union recently however said that Sri Lanka will regain its ability to balance the external environment merely based on the emphasis, “the investments made and the degree of sophistication of our garment industry.”
Continuing, he said, “Thus, it seems unrealistic that Sri Lanka’s economic progression will be unhindered, however, an open mind, a realistic approach and optimism will,   I believe take us there.”
Following are excerpts of his speech: “Lord Chris Patten of Barnes, Members of the Oxford University Sri Lanka Society & the Oxford Union, my colleagues on the panel, Ladies & Gentlemen.
Good Evening.
It is indeed a great honour and a pleasure for me to address this forum at the Oxford Union, on the subject of ‘Emerging Economies:  Challenges Faced and Challenges Ahead.’ In my address this evening I will focus on the subject of sustained economic growth in times of conflict and particularly on Sri Lanka’s future prospects in a post conflict scenario.
Most of you may know of me as the Head of the Investment promotion agency of the Government of Sri Lanka, however, I’m first and foremost a self-made entrepreneur. From the companies under my ownership and management, we contribute 3% to the nation’s corporate tax revenue and employ over 50,000 employees in an array of sectors that range from Banking & Finance, Manufacturing, Shipping, Plantations, Leisure to Power & Energy.
I firmly believe that I am neither the conventional corporate leader nor the conventional bureaucrat.
In life I have constantly gone against the grain and the conventional wisdom in pursuit of what I believe. As a university drop-out I used my innate abilities to steer my future.
Of these, my decision-making process stands against the norm, as in my eyes a solution to a problem or the outcome of a decision is led by a mathematical equation.

Contrary

Thus, some of the views I express here may well seem contrary to established theories and practices, but they do, I fully believe, present the key to future economic viability, especially with respect to Sri Lanka.
Having said that, let me get back to the topic at hand. Emerging economies-what are they? Essentially, the term begs a concrete definition. Over the last three decades, since it was coined in 1981, the meaning of emerging markets has “muddied” from a statistical definition that evaluated stock market performance to a broad definition for economies undergoing rapid economic change.
For the purpose of this discussion however, I will interpret the term in relation to per capita income coupled with well-defined regulatory frameworks.
In my opinion emerging economies face a great challenge posed by the global warming debate. The Copenhagen Environment and Climate Summit of December 2009   shed new light on our planet, the global warming issue and the responsibility of every nation to work towards the reduction of emissions. The per capita CO2 emission of developed markets is soaring, the shift to environmentally friendly sources is inherently associated with high investments and an appreciation in cost of manufacture.
It is accepted that global warming needs control because in the last 100 years climate change has been dramatic. CO2 levels have risen from 280 parts per million in air to 385 parts per million from pre-industrial levels, increasing global temperatures.
However, the fact remains that global poverty comes before global warming. In order to alleviate poverty, economies need to industrialize. Industrialization in turn leads to emissions. In other words the equation is that a reduction in poverty leads to an increase in emissions.
Industrialized nations believe that rapidly growing developing countries are the source of global warming.  But the fact remains that development is a critical need for emerging economies to reduce poverty.
The standard approaches of slowing growth in order to reverse the trend of global warming is always the first suggestion made by policymakers and environmentalists. However I firmly support the arguments that come from the industry and the emerging economies against slowing growth because economic growth enables economies to be self sustaining and to improve conditions for their populations.
The developing world depends on the development and availability of low cost energy in order to expand its economies.
Even first world economies still   use cheaper sources of energy.
The trade-off for emerging economies is one of short-term survival as opposed to environmental protection.
The answer is always toward immediate survival.
Despite the fact that there is a lot of discussion on human rights the world over, the global community has failed to realize that by restricting the developing world from growth, they are engaging in restricting this human right, ­ the right to live ­ now.

Focus

We need to focus more on development because it has the potential to lead emerging economies to be more concerned about the environment. Only when people are rich enough to feed themselves do they worry about the environment and future generations. Development has the advantage of helping people today for a better tomorrow.
So it is obvious that there is a correlation between per capita income and per capita green house gas emissions.
Given this relationship, we need to recognize that learning from the experiences of the developed world, emerging economies too can accelerate their economic growth by harnessing the appropriate technologies for sustainable development. Therefore you can balance development with concern for the environment.
Let me now focus on Sri Lanka, a nation that till mid last year was ridden by terrorism and conflict for over three decades. Now as she stands on a new threshold of economic recovery and accelerated development, our nation looks to a future where all her people will prosper.
However, this is not to say that Sri Lanka has been economically crippled in the past by the conflict,   but constrained. Sri Lanka has demonstrated economic resilience and has been unique in that her G.D.P. growth rates have over the past four years been consistently in the range of 5 to 6%.
Our country has witnessed several additional adverse shocks including a tsunami, direct effects of the commodity crisis and the pervasive effects of the ongoing financial crisis.
The resources committed towards safeguarding Sri Lanka’s sovereignty, the safety of her people and the prevention of terrorism, needless to say, did weigh an enormous stress on the nation’s economy.
When viewing the overall economic conditions through a conflict lens, there are clear signs that the conflict has, to varying degrees retarded growth, impaired progress on poverty reduction and accentuated regional and sector disparities.
Yet at the macro level, the economy has maintained a remarkable growth in the face of these challenges.
At this point you may question as to how an economy can withstand and overcome such an array of persistent challenges?
There is no specific answer,  but for the fact that Sri Lanka is a nation of people who are characterized by their positivism,  resilience  and patience.
Firstly, I personally feel that our culture that extends in excess of 2,500 years and the Buddhist philosophy that is ingrained in the Sri Lankan way of life have moulded us to look beyond problems and challenges   and given us the determination to carry on.
Secondly, a pragmatic economic approach has delivered sound returns.  Policies that are reflective of an open minded approach and which are contingent to global and local challenges have been the key to Sri Lanka’s ability to sustain economic momentum. Likewise, the nation’s corporate community has rallied around and worked in tandem with national priorities especially over the last four years.
In 2005 President Mahinda Rajapakse envisioned an end to the conflict and the resurgence of the Sri Lankan economy. Towards this end, Sri Lanka adopted a series of policy reforms aimed at accelerating economic growth with special consideration given to pro-poor growth strategies which would actively favour agricultural production and manufacturing. Agricultural productivity has been a key area of focus to empower the rural economy where 90% of low-income populations reside.
The industrial development policy has aimed to achieve a gradual but a definite shift towards high value added domestic resource based production activities with a concerted focus on strengthening the export orientation of the country’s manufacturing sector. Programmes aimed at regional industrial development have strived to infuse the benefits of industrial activity to the rural hinterland as well as the Northern and Eastern provinces.
A rejuvenated effort to promote F.D.I. has been a priority since 2005.  Sri Lanka’s business environment favours foreign investment.  There are no restrictions on entry to FDI and the repatriation of earnings.   Moreover, the safety of foreign investments is guaranteed by the Constitution. In addition, Sri Lanka has investment protection agreements with over 25 countries and double taxation relief for over 37 countries. Restructuring of the Board of Investment Sri Lanka’s focal facilitation agency for investment promotion-has made it more proactive, focused, devoid of red tape and corruption free.
Testimony to this is that the B.o.I. attracted the total F.D.I. attracted over 26 years in a mere four years from 2005 to 2009. The report on Global Investment Promotion Benchmarking published by the World Bank ranked B.o.I. as the No. 1 Promotion & Facilitation Agency in South Asia for 2009.

Development

The service sector development has been critical to Sri Lanka’s overall growth momentum.   Of specific interest has been the growth of the communications sector which has demonstrated a growth that has placed Sri Lanka on top of the region for mobile telephony penetration.  Sri Lanka’s telecoms sector remains one on par with global standards. Encouragingly,   moves to enhance I.T. literacy has seen the country’s I.T. literacy rate rise sharply from 5% in 2005 to 25% in 2009.
For over 60 years our nation’s per capita income has remained below or on par with U.S.$ 1,000.   In the last four years, as a cumulative outcome of the prudent pro-poor development strategies, the national economy has grown expanding per capita income to U.S.$ 2,000.  Our nation is also on track to achieve the majority of the Millennium Development Goals by 2015.  Thus Sri Lanka has grasped the historic opportunity to evolve from a lower-income country mired in conflict to a middle-income country in lasting peace.
As we look to the future, prospects for future growth are high.   The reintegration of the Northern and Eastern provinces with the rest of the economy provides an opportunity for Sri Lanka to embark on further policy reforms where private-public partnerships will define the creation of a more dynamic and vibrant economy.

Conflict

Due to the conflict, both the Northern and Eastern provinces were unable to contribute significantly to the nations G.D.P. Their integration opens 2/3rd of the nation’s maritime and coastal resources and 1/3rd of untapped fertile land for productive use.
They are home to 15% of the country’s population.
Thus, the rehabilitation of human capital and the outcomes of comprehensive regional development programmes together with public and private investments will, without doubt position these provinces as economic catalysts for Sri Lanka in the long term.
As a nation dependent on tourism, the acceleration of the tourism sector development plan will directly contribute not only to a growth in foreign exchange earnings, but also for the development of air cargo dependent trade sectors such as export-oriented horti and aquaculture. Each additional visitor to Sri Lanka provides 75 Kgs. of enhanced cargo capacity for exports. Thus this symbiotic relationship will aid in the further development of export sectors.
Tourism infrastructure development places emphasis on the development of 50,000 rooms across Sri Lanka as capacity building for the expected surge in tourism activity by 2016.
From historic times Sri Lanka has benefited from its strategic geographic location.  In the future, our nation will leverage this to act as a hub for international trade.  The development of five ports, a second international airport and fourteen domestic airports will place Sri Lanka with a competitive advantage.
Education remains a key to the future prosperity of Sri Lanka. As a nation focused on creating an investor friendly climate, the quality of our nation’s human resources is vital to its attractiveness as a viable destination for F.D.I.
Currently Sri Lanka stands as a nation with a high rate of literacy from a regional and global perspective. However, the real intention for the nation is to develop human resources with skills that are in line with the expectations of potential investors.  Towards this end the economy has taken numerous initiatives to curtail the movement of foreign exchange by bringing reputed international institutes of higher education to operate in Sri Lanka.  In addition the government’s invitation to the Sri Lankan diaspora to return and add value to Sri Lanka’s economic development will no doubt place the nation in good stead.However, despite the promising outlook for Sri Lanka,   it is indeed pertinent, for us to be aware of the fact that the world economy and other external factors will determine and shape Sri Lanka’s forward path.
The worrying signs of an increase in trade protection by developed nations despite the fact that revival of trade is key to supporting global economic recovery, will push emerging economies into further difficulties.
Finally, let me leave with you a quote from the Buddha; ‘Not the fault of others, nor what others have done or undone, but one’s own deeds, done and left undone,   should one consider.’
Thank you ladies & gentlemen.”

6 Comments for “G.S.P. + Loss Will Set S.L. Back”

  1. Jane Warrant

    Most of the growth was due to 2 things. The first was tsunami aid which was spent elsewhere. The second source was Tamil diaspora money from relatives. This money was used to bribe people so Tamils can leave. Actual growth has been dismal. Extortion of Tamils also very useful source of money.

    I suggest that Lanka fix its ethnic problem first before any other. I don’t think there are too many left anyway. The north probably has less than 500,000 Tamils.

    • For some time now, Tamils have been demanding to divide Sri Lanka on the grounds that Tamils in Sri Lanka have a problem, but none explains what it is.

      LTTE leader, Piripaharan tried to solve that problem with an Eelam for Tamils that live in North and East of Sri Lanka. But majority of Tamils live among Sinhalese and outside the North and East. Piripaharan didn’t say how Eelam would bring about any solution to them.

      Anyway, both LTTE and Piripaharan are now been wiped out. And, the Diaspora Tamils are looking for a new Piripaharan to revive their fight for Eelam. Now that Rajapakse won the Presidency he will not reduce our forces and allow LTTE rumps to regroup and bring back their suicide bombers on our trains and buses.

      To date, there are over seventy million Tamils that live in India, Sri Lanka and Malaysia. Also, there are more than one million Tamil Diasporas that live in the developed world. If you talk to a few of them, you feel that they are at a loss of something that Sinhalese have taken for granted. They are disappointed because they have no separate country anywhere. That is the Tamil dilemma.

      If we go by the Tamil web sites, you will see that Tamils of Tamil Nadu, India are not happy about Hindis and Hindi language. They point out that the central government of India compels Tamils to learn Hindi for central government jobs even in Tamil Nadu. Being chauvinists as they are, Tamils do not see the benefit of learning the language of the majority or being a part of a big power, India.

      But Tamils have more rights here than anywhere else in the world. It is a lie to say Tamils are victimized in Sri Lanka. Regardless where they live, Tamils are encouraged to educate their children in Tamil language from kindergarten to the University for free. In Padukka where I live, 99.5% of the population is Sinhalese. However, there is a Tamil medium government school for that 0.5% of children with Tamil mother tong. Do the Tamils in Delhi in India or Penang in Malaysia or Durban in South Africa have similar rights?

      If the problem of Tamils is that they do not have a country that may be a problem for Tamils, but that should not be a problem for Sinhala people. They demarcate their Eelam in Norway or Canada or Iceland or anywhere they want but never in Sri Lanka. Sooner they understand it better for everyone.

    • Asoka P

      Jane Warrant’s comment is not worth commenting, except to say that it is “Just a bit of Tamilnet rubbish”.

      Why should such nonsense be thrown by ‘Jane’ at this well balanced and well researched disposition by the BOI chief?? What value is gained??

  2. best option for tamils would be to study as much english as possible and leave srilanka as soon as they can as refugees.when srilanka changed the name language ,reduce the standard of education kicked the indian by DS,the burgers,malays,non sinhalese and non budist they lost all the advantage and there is no sihalese seaking country in the world.so with the broken english the the srilankans are ecomic refugees all over the world.it may too late to stop the bleeding .good job our great statesmen olitition from the biginning to end.

    • I couldn’t understand what you are moaning about. Is it the type of English writing that you have written above that we have to learn as correct English?

  3. Asoka P

    I commend the Sunday Leader for publishing this excellent speech by BOI chief.
    Over the decades, the western powers have amply demonstrated that they would rather keep a lid on the aspirations of their former colonies to develop into industrialised economies. Just a few Asian nations were allowed to enter this developed ‘western’ nations club (Japan, South Korea and Taiwan), clearly as a reward for being allies in their China containment policy.
    Foreign policies of western powers were short sighted to the extent that they did not realise weak economies do not offer markets for their high value products. India and China broke through this ceiling, and now are emerging as technological and industrial giants.
    Perhaps the attempt to impose ‘emissions reduction targets’ on emerging economies, is just a continuation of those failed policies, rather than as BOI chief says “…..the global community has failed to realize that by restricting the developing world from growth….”
    Australia has realised long ago that its economic future is tied to the growth of emerging economies; hence Australia maintained an excellent economic relationship with these nations -China in particular. As a result, Australia is the first among developed nations to emerge relatively unscathed from the Global Financial Crisis.
    Likewise, as a long term strategy Sri Lanka should focus on the needs of the major emerging economies in Asia, not only India and China but also Indonesia. In this regard, Sri Lanka is able to offer educated youths to fill shortages in many fields (science, technology, engineering, medicine and commerce). As India is virtually self sufficient in this regard, the focus should be on other nations. This strategy would see the acquisition of industrial knowhow by our youth, who on return to Sri Lanka, would be in a position to help establish high value industries within Sri Lanka.

    When offering opportunities of strategic significance to India and China (eg., port development and oil exploration), Sri Lanka should seek a contribution to above strategy from these nations. This contribution should not only be within the specific developments mentioned, but also as ‘opening doors’ to our youths to participate in technolgical and industrial activity in their soil.

    To execute such a strategy, proficiency in relevant languages, especially English, is paramount.
    Such a strategy should bring welcome relief from vagaries of low value exports such as the garments and domestic help. Hopefully, begging for GSP+ would be a thing of the past.
    .

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