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| Sunday, 30 January 2005 |
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Business |  |
| News Business Features Editorial
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Last Chance by Lloyd F Yapa. The purpose of this article is to inform all concerned, that the opportunities presented by great disaster of 12/26 last year should be exploited to the maximum, as time is running out fast for Sri Lanka (to eradicate poverty), due to several reasons. Aging population The main reason for this expediency is that the country's population is aging fast.Demographers point out, that the population of Sri Lanka will stabilize at about 23 million by 2025 due to a steady fall in birth and death rates. The corollary is that the labour force, i.e. the number of able-bodied persons between the ages of 15-60 will also stabilize by about the year 2016. The main implication of such a trend is that economic growth will be severely hampered by labour shortages and burgeoning budget deficits, due to escalating health and pension costs. Most developed countries had already experienced this phenomenon. They are, however, well placed to afford these costs, as by that time they had been able to achieve per capita incomes of around US$ 15,000- 20,000 by dint of hard work and an unflagging commitment to maintain social, political and economic stability. The Western nations took a couple of centuries to reach this level of prosperity. East Asia took only 30-35 years to accomplish the task. Sri Lanka, however, is faced with the stiff challenge of achieving a reasonable level of prosperity within a short period of 10-15 years i.e. before the labour force levels off. Achievable per capita income Our present per capita income should be about US$ 1000. Even if it grows at 10% per annum (i.e. GDP grows at 11%) so that it doubles every 7 years, Sri Lanka can only hope to achieve a level of about US$ 4000 by 2019/20. Although the high performing Asian economies have achieved double digit growth rates at times, their average rate has been about 9% per annum. It looks as if Sri Lanka has to do better during this short period! Hostile external environment In the meantime, in the rest of the world more and more countries such as China, India and Brazil are getting richer. This means, that they would need more food, fuel and other materials. As supplies get stretched, prices may escalate. Consequently the poorer countries such as Sri Lanka may get edged out in the race for securing supplies of materials for economic growth. Competition for available markets may also intensify, as the above mentioned countries increase their exports of manufactured goods and services. The emergence of many new economic powers with differing agendas and approaches, besides the US and the EU, may make it harder reach agreement to liberalize and expand global trade. The challenge before Sri Lanka is therefore all the more difficult. Post -tsunami opportunities The post tsunami opportunities could enable us to face this task with some confidence. We have to remember, however, these have to be grabbed as they present themselves, as they might never be available again. Level of required investment It is observed, that most of the Asian nations, which have been able to grow at around 9% per annum have invested approximately 40% of their GDP every year for several decades in infrastructure facilities and services as well as on production capacities. Up to now Sri Lanka has managed to invest only about 25% of GDP in such facilities and services. It might be possible to raise this level to about 33-35%, if the government could save available resources by refraining from borrowing from the public and from foreign sources in addition to significantly reducing its expenditure on defence by securing a permanent peace with the LTTE. The debt freeze and the aid generously offered by the richer nations as well as the enormous outpouring of goodwill from all sections of the Sri Lankan community make such a feat immensely feasible. An effort has to be made to secure the balance of the required investment from foreign sources. In fact Foreign Direct Investments are essential to establish a strong export capability, without which a small country like Sri Lanka cannot hope to achieve prosperity. Any shortfall can be made up by improvement of productivity. High caliber leadership As stated in earlier articles in this column, substantial foreign or local investment would be forthcoming, only if a determined effort is made by our leaders to secure social, political and economic stability. The latter involves formulating key strategies for achieving an agreed vision or goals and implementing a sequential series of activities. These range from suitable changes to the constitution and the laws as well as institutions of the country to the liberalization of land, labour, capital and other markets along with suitable safeguards to protect the people from government and market failure. These vulnerable groups include consumers, farmers, workers and the most especially the poorest of the poor, the old and the infirm. The whole effort invariably calls for leadership of the highest calibre capable of arriving at consensus on key issues and a capacity to get things done. Alternative - deeper poverty It can be stated with certainty, that opportunities such as these would never present themselves again and even if they do, it will be too late. A labour force consisting mainly of the aged would not be able to push the economy forward. Attracting foreign workers may be an option. However, the country has to be sufficiently rich enough to resort to such an alternative. The country therefore could sink deeper into poverty, if the leaders prevaricate, as they do now, without seizing available opportunities. |
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