Maintain annual growth of eight to 10% for sound economy Prof. Indraratne

by Ramani Kangaraarachchi

An annual growth of eight to 10 percent in the next ten years is the only way for a sustainable economic growth in Sri Lanka which needs a disciplined, efficient, honest and patriotic leadership to direct it, said the Sri Lanka Economic Association President Prof. A.D.V. De S. Indraratne at the annual session of SLEA held at the BMICH on Friday.

Giving a brief overview on public and private partnership for accelerated growth in Sri Lanka, Prof. Indraratna said that the past experience has shown that this cannot be achieved by one lead sector. There must be an equal partnership between the public and the private sectors. The partnership of the public sector must be in the form of a provider of infrastructure services, a facilitator of creating and enabling environment and moderator of achieving equity, regional balance and environment compatibility", he said.

Referring to Central Bank statistics, he pointed out that the total gross investment, as well as its break-up into public and private sector, along with the corresponding growth rates, during the last 25 years, there had been no marked positive correlation between the rate of gross investment and the growth rate. However, there is an increase in total gross investment from around 16% before, to around 25% after, the opening of the economy in 1977 except in the most recent three years when it was around 22%. There was no commensurate increase in the growth rate which could be due to decline in average productivity.

The mere increase in the rate of gross investment would not lead to a correspondingly higher growth rate unless such investment is accompanied with higher productivity. The increase in productivity is crucial in a highly competitive environment," he said.

Indraratna said that accelerated growth rests on two pillars, increase in physical investment and in physical productivity. The latter depends upon improvement in economic infrastructure, technology, capability and social infrastructure because of their high private costs relative to their private benefits.

If on the other hand, the public sector invests in them, the costs of private sector productive investments would be less and their returns would be more because of the external economies associated with such investment.

By undertaking such investment, the public sector plays the role of service provider leaving the role of manufacturing entrepreneur to the private sector. Public sector investment then should promote it and they will see the relationship between increasing public investment and increasing private investment.

The public sector could also promote private sector investment by creating and enabling environment as a facilitator. But a good governance is a must above all these, he said.