New economic development strategy:

Ten over $ 1 b industries, double digit growth - PBJ

Sri Lanka is no longer a place where cheap labour is available. Therefore the comparative advantage for Sri Lanka in the future will be an educated and skilled high-end labour market, said Treasury Secretary Dr. P.B. Jayasundara. Dr.Jayasundara was addressing a seminar on ‘IT BPO- an enabler in the resurgence of Sri Lankan economy’ organised by SLASSCOM, the IT BPO industry chamber.

Sri Lanka is now formulating an economic development strategy to go ahead in the new peaceful environment after thirty years of conflict. In our new economic development strategy, IT BPO is a very important sector and in this year’s budget too we have recognised it as one of the key growth sectors in our economy. As stated in the budget speech it will be an enabler.

The Government wants enablers to achieve an 8% growth rate in the next two years and double digit growth rates thereafter.

Several years ago when the IT BPO industry brought in $60-70 million export revenue, some experts questioned how the software exports were to be measured. Today the industry earns US$300-400 export revenue and the industry has a $1 billion export revenue target.

In the past we have focused on many areas as key growth sectors and formulated strategies. One is the tea industry. It has occupied huge land extent of the country and provides few employment opportunities. If we consider the composition of tea exports, we mainly export bulk tea, while Value added and branded tea is very limited.

Dr.Jayasundara said that the Sri Lankan economy is totally different. We have targeted to develop 10 industries to the level that export earnings is over US$ 1 billion. IT BPO and clinical trial and research industry are two knowledge based sectors that we have targeted. The tea industry should be developed to increase the export of value added and branded products.

Despite political disturbances we expect the textile and apparel industry will be a US$ 5 billion industry in the future.

Tourism is another industry that will earn over US$ 1 billion revenue. The telecommunication sector is also considered as a potential growth sector and the Government is working with stakeholders in the telecommunication cluster.

Sri Lanka will immediately stop exporting raw materials. All exports should be value added products and industrial development will be focused on these objectives. Mineral, rubber and all other raw material exports will be stopped and this has been well articulated in this budget. However, these policies do not violate WTO conditions.

He said that although there were policies and development plans in the past most of them did not materialise due to war and low investment on infrastructure.

Hambantota port was on the development plan for over 30 years. Colombo port is 10 years behind its implementation plan.

The Moragahakanda irrigation project was a part of the Mahaweli Development Program. Power generation projects are 30 years behind.

By implementing all these lagging infrastructure projects we have enabled investors to look 10 years ahead. Availability of power, roads, ports irrigation and drinking water has been ensured with those projects.

However, Dr.Jayasundara said that the Government investment will not be increased beyond the 6-7% range. Today total investment is around 25% of the GDP and private sector investments account for 19%. We have targeted to increase investments to 35% and expect private sector investments to be increased to 29%. He said that this was a realistic target because the war is over, while infrastructure and political stability is there.

The unity of the stakeholders in the apparel industry was a key to success. Initially it was only a labour value addition industry and today it has developed to design, production of accessories and many other areas. However, the apparel industry has to diversify its markets, especially in emerging economies.

The Government’s monitory policies have been successful and inflation has been curtailed.

This year inflation will not increase above 6-7%. This will help Sri Lanka to maintain its exchange rate, Dr.Jayasundara said.

Referring to the tax reforms proposed by the budget, Dr.Jayasundara said that the present tax system is counter productive and discourages all economic sectors.

This should be replaced by a simple and broad-based tax system. We have given meaningful, practical action to every paragraph of the budget. This will be the policy framework of the future, he said.

GW