Global wage structure vital - Dr. P.B. Jayasundera

By Gamini Warushamana

“Structural shifts in the Sri Lankan economy have contributed to a rise in remittance income and changed labour market dynamics.

The decline in the unemployment rate and non-availability of a skilled workforce for emerging industries and services in the domestic economy have brought the Sri Lankan economy to a point where we have to think of a global wage structure and evaluate its comparative advantage which is linked to rising overseas employment,” said Treasury Secretary Dr. P.B. Jayasundera.

He was speaking at the first International Economic Research Conference of the Sri Lanka Forum of University Economists (SLFUE) in Colombo last week.

Dr. Jayasundera said that earnings from overseas employment have increased from $400 m in 1990 to $ 6 b in 2012, almost two-thirds of the commodity export income in 2012.

The composition of overseas employment has also been in transition with a shift from unskilled to skilled and professionals, women to men and from the Middle East to emerging and advanced economies. This also demands that we adopt a productivity-driven production process and introduce reforms to our education system.

“It is interesting to analyse how the economic paradigm has changed from the days when economists assumed capital as a mobile factor of production and land and labour as being immobile.

However, at present all variables seem to have become mobile. Probably, it is only the degree of mobility that matters now,” he said.He said that the biggest structural imbalance lies with external trade. The continued reliance on imports of products which can be produced domestically with sizeable investment in capacity expansion in such activities.

The ideology that import replacement is protectionism has to be changed and raw material exports has to be shifted to value-added manufactured exports. Import replacement can be made competitive and consistent with global economic integration on several grounds.

Most of the heavy industries can replace nearly $ 6 b or a third of country's imports.Current global dynamics provide us more opportunities in the midst of challenges, to position the Sri Lankan economy to adopt more sustainable development strategies in the future. Such strategies should include; flexibility in exchange rate regime, an incentive structure that favours production of all viable import-competing goods locally without labelling it as protectionism, diversifying value-added exports and discouraging any form of raw material exports, correct the energy price distortion to encourage renewable energy exploration and improve energy efficiency and prepare the human capital of the country to drive the economic transformation.

The forum was organised by the Department of Economics of the University of Colombo.

The chairman of the SLFUE, Dr. Sirimal Abeyratne said that this event is important in several ways and this is an apt time for university economists to present their research, build networks and linkages and contribute to the economic policy development of the country.