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D.A. Rajapaksa Memorial Lecture:
Bigger contribution from North - East for national development
The D.A. Rajapaksa Memorial Lecture was presented last week in
Colombo by Dr. Laksiri Fernando, former Senior Professor in Political
Science and Public Policy at the University of Colombo.
Following is the full text of the lecture:
 National
development is not merely about the economy, but the economy is central.
It entails economic, social, political, cultural and even moral aspects.
The contribution of the North and the East during the last three decades
or so was hampered in all these spheres by the separatist and terrorist
war.
It is necessary to emphasise not only the terrorist character of the
war, but also the separatist aspect. One cannot be separated from the
other. If terrorism was the symptom, as some people argue, separatism
was the cause.
However, as the war is over and peace is established, prospects are
high for the people, the institutions and organisations of these
provinces to participate in the processes of national development and
contribute to its progress.
This Memorial Oration of D.A. Rajapaksa, one of the most illustrious
and committed national leaders of Sri Lanka, highlights both prospects
and challenges of the North and East participation in the national
development. It takes the Mahinda Chinthana as the main framework of
analysis which outlines not only the directions, but also various
projects and plans for the national development in the ongoing future.
Present context
Sri Lanka has entered the category of middle income countries with
over a Rs. 42 billion economy and a population of 20 million people.
This means that the country is still at the lower level of the middle
income countries with a per capita income of around US $2,085.
There are vast disparities in the income distribution in the world
today and Sri Lanka's per capita income is 17 times lower than that of
the United Kingdom, the country's former colonial master. When Britain
left Sri Lanka in 1948, the gap was wider. Sri Lanka has managed to
catch up to an extent, but not to the extent of people's aspirations or
the country's capacity.
Sri Lanka was a typical 'export-import' economy at the beginning of
independence with the agricultural sector contributing to over half of
the GDP.
TABLE 1
Sectoral contribution to GDP
1950 2010
Agriculture 50.1 11.9
Industry 11.2 28.1
Services 38.7 60.0
(Source: Snodgrass and Central Bank |
The exports and thus foreign exchange earnings depended primarily on
the three main products - tea, rubber and coconut. The situation has
drastically changed by now and the present sectoral composition is in
contrast to 1950 (as shown in Table 1).
It is mainly the expansion of services and industries that has
changed the composition. Although the plantation agriculture has
contracted, the food producing domestic agriculture has expanded and
increased. It is believed that the present composition is akin to a
'modern economy,' the services sector taking the lead in the economy.
While the spread of infrastructure and services is uneven between the
provinces and districts, the overall availability of facilities is
conducive to domestic development and foreign direct investment (FDI).
The most important is the growth that Sri Lanka could sustain during
the last five years irrespective of the war, Asian Tsunami and the
international economic and financial crisis. Sri Lanka could maintain
7.6, 6.8, 4.2 and 3.5 percent growth rates in 2006, 2007, 2008 and 2009.
While the growth rates were only 1.6 and 2.1 percent for the first two
quarters of 2009, when the war culminated, after the defeat of the LTTE
in May that year the growth picked up by 4.2 and 6.2 percent in the last
two quarters. The growth rate rose to 7.1 percent in the first quarter
of this year followed by 8.5 percent in the second quarter. This figure
is higher than what prevailed before the Eelam War IV that broke out in
mid-2006.
The other main index of economic performance after the conflict is
the stock market. There are two indices - All Shares Price Index (ASPI)
for all stocks listed in the market and the Milanka Price Index (MPI)
for blue chip companies. The market was extremely sluggish throughout
the war. In May 2009, both indices were just above the 2,000 mark. By
the end of the year the ASPI exceeded the 3,000 mark while the MPI
recorded 3,500. Together this was over a 50 percent growth; since then
the MPI has been performing always better than the ASPI as could be
anticipated.
So far, since the beginning of this year, growth has been around 100
percent. By the end of 2009 Sri Lanka was considered to be one of the
best performing stock markets.
There are other economic fundamentals that indicate that Sri Lanka
could 'take off' for a higher growth and development, making the economy
elevated to the upper range of the middle income countries. One
objective of Mahinda Chinthana is to increase the present per capita
income to the level of around US $ 4,000 by 2016. Sri Lanka appears well
into that direction.
For an efficient market economy, supervised by the State, both the
inflation rate and the interest rates are maintained low. Low interest
rates are an inducement for the Small and Medium Scale Enterprises (SME);
which is mainly the nature of the Sri Lankan economy.
The unemployment rate is at an all time low within the range of five
to six percent of the labour force. The gross official reserves now
stand at their highest level of US $ 6.1 billion, which is equivalent to
six months of imports. Following the successful completion of the fourth
review of the Stand-by-Arrangement, the International Monetary Fund (IMF)
has released the fifth tranche to the value of US $212.5 million. This
shows the confidence that the IMF has placed on the Sri Lankan economy.
Three rating agencies, Standard and Poor's, Fitch and Moody's
upgraded Sri Lanka's rating standards primarily in capital markets from
B to B+, from Stable to Positive and from B to B1 in September. When Sri
Lanka made its third global debt issue, aiming at US $ 1 billion, it was
oversubscribed by more than six times within 14 hours.
Between January and June this year, Sri Lanka's exports improved by
13.7 percent and internal remittances by 13.5 percent compared to the
same period last year. The balance of trade, however, shows a 108
percent deficit due to the heavy import of investment and infrastructure
material including motor vehicles.
Although the FDI inflows are still sluggish, due mainly to the world
decline by 29 percent in 2009, for example, it is estimated that the
situation would improve after the favourable international ratings and
confidence. So far this year, US $ 124.2 million flowed into the
infrastructure sector, US $55.6 million to the manufacturing sector and
US $ 25.9 million to the services sector. A reason for the FDI
reluctance into the country could be the prevailing fiscal deficit which
might be improved or corrected after the new Budget for 2011.
North and East
Traditionally, the East was considered the granary of the country.
The North and the East are two distinct and important portions of Sri
Lanka's national economy that became obliterated by the war for nearly
three decades. As the Governor of the Eastern Province Mohan
Wijewickrama stated at the inauguration of the new Provincial Assembly
in June 2008, "The Eastern Province contributed around 14 percent to the
national GDP in the early eighties which declined to about eight percent
thereafter because of the unsettled conditions in the Province."
The above is to highlight the essence of this oration before going
into some description of the two provinces under discussion.
Provincial demarcations were first devised by the British for revenue
and administrative purposes in 1883 and later abandoned, considering the
importance of the district for both purposes. As a result, the district
was the main focus of analysis before the provinces again became a major
unit under devolution of governance in 1987.
In terms of total area, the Eastern Province is the second largest
province (9,996 sq.km) after the North Central (10,472 sq.km); and the
North is the third largest (8,884 sq.km) in the country. However, in
terms of land area, the North becomes third to Uva because of high
inland water areas (594 sq.km). When considering the population
percentage or population density, the North and the East stand as two of
the lowest in the country with North Central and Uva.
The relative land area of the East constitutes 15.2 percent of Sri
Lanka's total and the North 13.5 percent. In contrast, while the
Northern population is 5.8 percent of the country's total, the East
constitutes 7.5 percent. These population figures and land areas should
be taken into consideration in estimating and generating possible
contribution by these provinces to the national economy in the
foreseeable future.
The disparity between the area size and the population perhaps is one
major factor why these provinces were relatively under-developed with
similar provinces like the North Central and Uva. These are the
predicaments of uneven development linked to climatic and other
conditions which could also give rise to social unrest again and again.
All these provinces, by and large, constitute the dry zone of Sri
Lanka. Unless these areas are planned, irrigated and taken care of by
proper national policies in coordination with provincial
administrations, disregarding ethnic or political considerations, the
lives of the people inhabiting in these provinces may remain largely
destitute.
The North and the East in Sri Lanka is not unique in
under-development. Like in the world at large, there are many countries
where there are 'centres and growth poles as well as peripheries and
under-developed regions.
The objective of sustainable development is to avoid them. There is
the Ministry of development of North Eastern Region in India,
established in 2001 by the central government, to take care of
development planning and projects in eight states of the North-East
India covering Arunachal, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Tripura and Sikkim. Even in England, the North-East is considered
relatively under-developed and special attention is made to develop the
areas from Northumberland to Durham and from Tyne to Middlesborough.
However, before the separatist war began, the conditions could not be
considered singularly unsatisfactory in the North or the East in overall
terms compared with many other regions or provinces. For this period,
national accounts or survey data was not available for provinces.
Most of the data was compiled on the basis of agro-climatic zones and
all the districts in the North and the East except Ampara came under
Zone 3.
Consumer Finance Survey
One month Income as Index of Different
Agro-Climatic Zones
1973 1978 1982 1986
Zone 1 262 627 1,126 2,001
Zone 2 262 654 1,183 1,989
Zone 3 273 742 1,133 -
Zone 4 178 445 983 1,400
Zone 5 275 972 1,979 3,846
(Source: W.D. Lakshman, Dilemmas, p. 192) |
Table 2 gives consumer finance survey (CFS) data for four years
between 1973 and 1986, presented in index form compiled taking Zone 5 or
the Colombo Municipality area as the base (100) at a previous year.
While the above data corroborates with many other data available for
the period, what can be seen is the common predicament that Sri Lanka
has been facing in respect of centre-periphery dichotomy.
This dichotomy was significantly enlarging particularly after the
districts of Jaffna, Mannar, Vavuniya, Mullaitivu, Trincomalee and
Batticaloa. This zone did not have any special disadvantage in overall
terms before 1978, and by 1986 it was virtually impossible to conduct
any reasonable survey to gauge the socio- economic conditions of these
areas.
However, there were clear indications of significant disparities
between districts within the zone, before and after, perhaps which led
to unrest among the people who lived in these marginal districts. One
implication of the situation is that even in the future, the allocation
of resources and funding should be primarily on the basis of districts
and not merely on the basis of provinces.
Prospects for development
The major premise for the North and East contribution to the national
development is peace. An extremely volatile region before, the provinces
have not reported any type of disturbing violence since May 2009 and
even the crime rates have gone down with the establishment of law and
order.
The economic cost of the war has been estimated to be around US $ 200
billion in the last decade only. This is around five times of the annual
GDP estimated from the present amount. Now the 'cost of war' has stopped
except for the maintenance and payments for the Armed Forces.
As the most successful section of the public sector in recent times,
the Armed Forces are contributing immensely for the resettlement,
rehabilitation and reconstruction. Development will be one outcome.
There was no doubt that even the 'illusive peace' during the
Ceasefire Agreement (CFA) in 2002-2004 also resurrected the economy to
an extent until the Asian tsunami. However, the economy was kept apart
from the national economy for the benefit of the war efforts of the LTTE.
Many of the foreign-funded projects and their monies also were
channelled for war purposes than peace of the people's benefit.
The contribution of the North to the national GDP has been the lowest
for a very long period. It was around 2.5 percent in 1999 which went
only up to 2.9 percent in 2004. While the contribution of the East has
been double that of the North, it was only around five percent in 1999,
gain up to 5.4 percent in 2004.
One reason attributed to the low contribution was the informal or the
LTTE war economy which has completely ended with the end of the conflict
in May, 2009. In 2009, the contribution of the East was around eight
percent and hope that it would go up to at least 14 percent this year as
it was the pre-war contribution in the early 1980s. Likewise, the
contribution from the North is expected to be at least around five
percent this year.
What would matter is not so much the percentage contribution in the
short-term. Since some of the other provinces (particularly the Western
Province) are on a rapid growth path, obviously the contribution of the
North or the East might be depressed for some time until regional
imbalances are corrected. When sectoral composition of the North and the
East is compared with each other and with the national economy, there
are interesting revelations.
While the Northern economy is predominantly service dominated (65
percent), the East is basically an agricultural economy (39 percent)
according to 2004 figures. It might be the case that the services sector
in the North appeared bigger because of the war conditions. What are
clearly resuscitated at present are agriculture, fisheries and the
services sector. An author from a Tamil anti nationalist point of view
nevertheless reported the resurrection of the economy in the following
terms.
As for the Tamil Homeland, there is already some signs of increased
economic activity in the North and the East with trade booming between
the North and the East and the rest of the country while tourism is
another thriving industry. Opening of major banks and supermarket chains
in the North are signs of increased economic activity.
Furthermore, the rise in property value over the past six months in
and around Jaffna has been phenomenal combined with the fall in property
values in Tamil dominated areas in Colombo, indicating a tendency of
return of the local Tamil economic 'migrants' to the North. This seems a
clear sign of economic prosperity in the North and the East in the short
period."
Challenges for development
A major challenge that needs to be taken into consideration in terms
of economic development in the North and East is the vast disparities
between districts. This is not only in respect of population, but
perhaps related to that as well. In respect of population distribution,
Jaffna district has more people than the rest of the other three
districts of Mannar, Vavuniya and Mullaitivu taken together. This is
very much the case at present and even before the war. In the case of
the population in the East, disparities are less conspicuous except
between Ampara and Trincomalee.
The socio-economic disparities between districts are more significant
which might impinge on development strategy. If the consumer finance
surveys (CFS) of the good old days were of any indication, there were
major disparities between Jaffna and the rest of the three districts in
the Northern Province. Perhaps this has enlarged further due to the fact
that Jaffna was largely liberated from the LTTE well before the other
districts. This is not unusual in Sri Lank as a whole either.
There are other challenges which are economic as well as
non-economic. When the war ended, there were over 300,000 internally
displaced people.
It was independently estimated that over two years might take to
resettle them particularly due to the spread of landmines in areas where
they had to be resettled. It is reliably estimated that almost 95
percent of the case load is now cleared, after one and a half years, and
only around 20,000 remain to be resettled. This does not however mean
that the resettled IDPs would automatically contribute to the economy.
There are considerable social dislocation among IDPs and others. It
is estimated that over 89,000 women are widowed as a result of the war,
40,000 in the North and 49,000 in the East. The most devastated is
children's education. All these might affect economic development
adversely for some years to come.
The Northern Province or particularly Jaffna was prominent for its
educational and professional contribution to the national economy in
yesteryears. By the time of independence, Jaffna produced around 15
percent of the three key professions of doctors, lawyers and engineers.
Even by 1985, educational standards of the Jaffna community were
exceptionally high, with 25 percent of the age group of 15-60 years
having GCE (O/L) and 10 percent of the same age group attaining GCE
(A/L). There were 1,411 degree holders, with 140 of them having
postgraduate degrees.
Irrespective of the war, the educational standards of Jaffna have not
deteriorated. Thanks to the functioning of the University of Jaffna
under trying conditions, there are more graduates today than at anytime
in history. This is a welcome sign for the resurrection of the economy
in the North and their contribution to economic planning. The situation
in the East is not dissimilar with two universities functioning under
similar circumstances.
In considering the North and East contribution to the national
economy or national development, the 'ethnic challenge' cannot be
ignored or overlooked. As there had been open discontent from these
provinces in the past three decades, political reconciliation is in
order. The following is what President Mahinda Rajapaksa stated recently
on the subject.
"The entire focus of our nation is now on building a lasting peace;
healing wounds, ensuring economic prosperity and guaranteeing the rights
of the whole nation to live in harmony. We are mindful that to fulfil
these aspirations, economic development and political reconciliation
must go hand in hand".
There are provincial structures in place under devolution to address
many of the issues as the obstacles of terrorism are now eliminated.
However, two important matters have to be reconsidered under devolution.
First is whether the provincial councils have the competence or full
capacity to handle all the 37 functions attributed to them under the
13th Amendment. Second is how far the present system obliterates the
issues of districts or the local government system as a result of the
overwhelming concentration of power in the hands of the provincial
councils. There need to be some form of rethinking about devolution,
moving towards more cooperation between the central government,
provincial councils and local governments. 'Cooperate devolution' might
be the right word and the formula.
Conclusion
Sri Lanka is in a different paradigm altogether after the end of the
conflict. There were various reasons why Sri Lanka could not progress
enough compared to some other countries in the region in the past. It is
an exaggeration to consider the conflict as the only reason. The main
reason was the 'lack of a proper strategy' in addressing the fundamental
issues, including the conflict, in a comprehensive manner. This gulf has
now been filled by the Mahinda Chinthana. Connected to this issue is the
question of political leadership and political will.
Sri Lanka inherited a political culture from Britain and according to
this culture political plurality was overemphasised to the extent that
'concerted national effort' for development or social progress was
almost impossible until recently. This has changed dramatically after
the Mahinda Chinthana.
A concerted national effort is now forged through broad political
coalitions of various parties and formations, minimising divisiveness
and also maintaining the maintainers of dissent, freedom and political
plurality. The most important need of the hour is for the political
parties and the groups representing the North and the East to
participate in this 'grand coalition' more broadly than as at present.
There are different views as to how a national economy could be
constructed and developed. In economic terms, the infrastructure
development is emphasized along with the importance of technology. There
are other factors and sectors that need to be developed.
While there is no much dispute over what appear to be technical or
pure material conditions necessary for such a development, the main
controversy appear to be on two directions. First is the private sector
public sector mix or the role of the State.
While there are extremes of views on the matter, Mahinda Chinthana
has developed a conception of a 'developmental state' where the market
is allowed to function with public sector participation and supervision.
Second is the centre provincial policy mix in the national development.
Yet again there are extremes of view, and the present paper argues
for a mixture of national-provincial participation in development where
devolution could be implemented in a cooperate fashion.
It might be on that basis that 'expected contribution from the North
and the East' could be anticipated for the 'national development of Sri
Lanka'. |
