55 percent growth concentrated in rural areas:

2011 economic growth, an all-time record

By Shirajiv SIRIMANE

The Euro Zone crisis, oil price uncertainties, sanctions on Iran, political uncertainties in the West and many other countries, weak global economic recovery and the possible outbreak of global hostilities last year resulted in many countries seeing high inflation and low economic growth.

All these factors affected Sri Lanka’s economy. However, the country was able to withstand these pressures and maintain an all-time record 8.3 percent economic growth and delivered the expected results last year.

Central Bank Governor Ajith Nivard Cabraal, presenting the Central Bank annual report, said the Government and Central Bank have substantially delivered the economic development goals projected over the past two years.

Sri Lanka’s economy grew at 8.3 percent in 2011 while inflation remained low at 4.9 percent. The island earned US$ 5.2 billion in remittances in 2011 and unemployment remained low at 4.3 percent.

The year 2011 was historic because growth of the 8.3 percent this year, and recording over eight percent growth for two consecutive years for the first time since independence is a milestone. A growth of eight percent in consecutive years has been achieved only in 2010 and 2011.

The Government’s objective is to guarantee that the dividends of the high economic development the country has achieved reached the remotest corners of the country, including the North and the East, President Mahinda Rajapaksa said. The President said that unlike in the past, more than 55 percent of the growth is concentrated in the rural areas.

Jaffna peninsula

The Jaffna peninsula is being reactivated for major business with the Achchuveli investment zone attracting investors. The upgrading of the Kankesanthurei harbour and the Palali airport to international status would definitely help the entire North and the East move up the economic ladder. The Fisheries and Aquatic Resources Development Ministry has allocated Rs. 300 million for the development projects related to the inland fisheries industry and the aquaculture industry in the Northern and Eastern Provinces.

President Rajapaksa noted that this historic economic growth could be achieved at a time a majority of countries were in a crisis situation and mainly due to the fact that the country was able to see the back of terrorism that devastated human resources and also due to the fact that the Government was able to put in place many strategic policies.

The Government has spent Rs.160 billion for reconstruction activities in the Northern and Eastern Provinces from 2006 to 2011.He added that even during the humanitarian operation, the Government had initiated massive development projects to make the country a hub of many sectors. “Today, most of them are reaching completion,” President Rajapaksa said.

The President said although the country eliminated terrorism, leading to economic progress, local and international organisations which manipulated the LTTE are still functioning and are reluctant to see the enormous development that has taken place in the North and the East.

He added that they were blind to the fact that more than Rs. 260 billion was utilised in the North and the East for infrastructure development.

President Rajapaksa said these people including certain politicians make false statements for petty political gain.He said room for foreign intervention in the country was created through terrorism. He said those who attempt to solve our problems suffer due to numerous issues in their own countries.President Rajapaksa said reconciliation cannot happen overnight as suggested by outsiders as hatred was spread for three decades by the terrorists.

Executive Vice President IFC Henrik Thaunell with Economic Development Minister Basil Rajapaksa

Fisheries recorded its highest growth in 39 years

Growth of fisheries in Jaffna

Development of the North

Reconstruction in the North

He added that the Government has not ceased to make peace achieved at great sacrifice, a permanent one.

Mutual understanding

The President said: “Suggestions made by outsiders could be short term. We can reach our solutions with mutual understanding.”

The traditional sectors, the ‘Five Hub’ based development concept and tourism sector development are making considerable progress.

Several mini city hotels with around 25 to 30 rooms are now being planned similar to those in Europe. In addition, major players such as Shangri-La and Hyatt are investing in the country while Lankan entrepreneurs such as Nipuna Rice mills are seen diversifying in to the leisure sector, investing over Rs. 700 million.

They recently took over the Deer Park Hotel.

The banking sector, capital markets and bond markets are responding to the growth momentum in a satisfactory manner, and gearing themselves to function in a future US$100 billion economy.

Many international and Sri Lankan companies have indicated their confidence by continuing their investment appetite towards Sri Lanka.

Executive Vice President of the International Finance Corporation (IFC) affiliated to the World Bank Lars Henrik Thaunell praised the economic development strategies adopted by Sri Lanka during the post-conflict period when he met Economic Development Minister Basil Rajapaksa.

Thaunell who discussed the steps taken by Sri Lanka as regards its future development activities, including the promotion of private sector investments with the Minister, also promised assistance towards Sri Lanka in its future efforts in this direction, a press release issued by the Economic Development Ministry said.The release said IFC, along with the World Bank, contributes towards President Mahinda Rajapaksa’s poverty eradication program.

It provided assistance towards increasing private sector investment, promoting balanced economic development through rural development and post-conflict development including the development of small and medium scale industries.

The IFC can be described as an arm of the World Bank which deals with the private sector. Thaunell’s delegation also include IFC Director (South East Asian region) Thomas S Davenport and other officials.

Doing Business Index

According to the “Doing Business 2012” report published by the World Bank, Sri Lanka’s overall ranking in the ‘Doing Business Index’ had risen nine places, from a ranking of 98 in 2011 to a ranking of 89th in 2012 from 183 economies.

According to the report, the rank for strengthening investor protection improved by 28 points, jumping from the 74th position last year to 46th in 2012.

The monetary authority also expects a slight reduction in the trade balance this year from the US$ 9.7 billion in 2011 to US$ 9.2 billion in 2012 due to the recent policy measures taken by the Bank.

The monetary expansionist policies of Western nations, the growing loss of confidence in the Euro Zone and the weakening of the hitherto unchallenged global reserve currency of the US Dollar may pose new challenges to all global economic planners for Sri Lanka this year.

Inflation is projected to remain in single-digit levels this year even as higher commodity, fuel and energy prices will add to the uncertainty on price movements.

Many significant achievements were also recorded last year…

*Services recorded its highest growth in 46 years

*Fisheries recorded its highest growth in 39 years, except after the tsunami

*Industry recorded the highest growth in 33 years

*Construction recorded its highest growth in 31 years

*Import trade recorded its highest growth in 18 years

*Small industries recorded the highest growth in 14 years

*Hotels and restaurants recorded the second highest growth in 12 years, except for post-tsunami year

*Manufacturing recorded its highest growth in 11 years

*Factory industry recorded the highest growth in 11 years

*Export trade recorded the highest growth in 11 years