Restoring long-term peace and stability - Part II:

Prosperity with balanced regional growth

Text of speech by Disaster Management and Human Rights Minister Mahinda Samarasinghe at the Key Person’s Forum organized by the Small and Medium Enterprise Developers (SMED) Project of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and the Friedrich Naumann Foundation in Colombo. Part I was published yesterday.

Restoring long-term peace and stability - Part I

Our next medium to longer-term challenge is ensuring rapid economic development and improvement of living standards which will ensure that the peace achieved will be made sustainable and that restoration of normality will be assured. Prosperity, with equitable and balanced regional growth, will ensure that seeds of conflict will never germinate and thrive in the future.

I am not being simplistic by assuming that there is an economic answer to every problem or issue that we will be caused upon to face. However, it will be equally na‹ve to assume that whatever home-grown socio-political solution we evolve, will function successfully without attention being paid to the economic dimension.

The Central Bank’s projections for 7 percent economic growth by 2012 - a gradual enhancement from the growth rate projected in 2009 of 3.5 percent and an enhancement of the level of per capita income of over USD 2,000 achieved in 2008 with targeted growth to the level of USD 4,000 by 2014, will ensure that the peace we have achieved will be made stable and sustainable.

Tourism, agriculture and fisheries, industry, services and especially information and communications technology, are sectors with enormous potential that will expect to exploit. Remittances from migrant workers whose profile must be gradually changed from unskilled to skilled labour will also boost growth.

The potential exploitation of the enlarged economic zone including larger access we have claimed to the outer edge of the continental shelf will enable Sri Lanka to derive greater benefits from the seabed surrounding us.

Allied with this effort, a major goal must also be foreign direct investment (FDI) which we must target to achieve at least USD 2 billion or 5 percent of GDP by 2013 from present levels of USD 1 billion.

Reinvestment of retained earnings, which formed the bulk of FDI in 2008, will play a significant role in stimulating national economic growth. We must continue to create a climate conducive to sustain and encourage investment.

This requires developing national policy and regulatory frameworks which will encourage and promote investment. Sectoral diversity in making these investment opportunities available is as important as ensuring enhanced volumes of investment.

While ensuring increased levels of FDI we must ensure that, primarily and secondarily, the national interest is served. In doing this, we need to effectively demonstrate the sincerity of the President’s sentiments when he called on all expatriate Sri Lankans to join us in the process of national reconciliation, development and renewal.

These people represent a vast pool of human and financial resources who must be co-opted into the national initiatives for reconstruction and development, launched by the Government, for the betterment of those areas which witnessed little development for decades due to the unlawful presence of the LTTE.

These are resources that we should seek to exploit and we need to reach out to them and convince them that they can be productive partners in the new Sri Lanka we are building. While some initial efforts have been made in this direction, much more has to be done.

Our foreign policy must be targeted towards principled interaction and constructive engagement with these groups. This engagement should be based on openness and building mutual trust in a manner that encourages investment by these persons in rebuilding conflict affected areas as well as enhancing the national economy.

To further buttress and support this process and also to sustain the program through the inevitable difficulties that we will encounter going forward, we need to build Sri Lanka’s image to achieve several key objectives. Image building is as important to support national renewal as any component of the Government’s program.

It will make Sri Lanka an attractive destination for tourists, investors and will also help draw in the vast pool of resources that is available among the Sri Lankan expatriate community, which I referred to earlier. Raising our national profile will also help us immensely in our interactions with the global community of nations and international organizations.

It is also essential that, concurrently, we encourage and nurture local entrepreneurship. This is especially the case in the north. Access to capital, whether it be debt or equity, is a sine qua non to nurture and resuscitate northern entrepreneurship. Within a short space of two months the banking system has extended Rs 260 million in funding to 1875 small and medium enterprises.

This should be of particular interest to your SMED project. A further 6,000 loan applications are under review for disbursement. Approximately half of the loans applied for are for agricultural purposes.

We expect to disburse loans in excess of US$ 25 million to support and rebuild Northern entrepreneurship over the next year. Over the past months, many of the local banks have opened branches in the North and we expect more foreign banks to follow the one that has already opened a branch.

To be continued