New vistas in economic growth

It is not even one year since Sri Lanka defeated LTTE terrorism and vast strides are already being made in the sphere of development. It is also just one month since Sri Lankans elected a stable Government, with 144 seats in Parliament. These two factors have combined to give the economy a boost as the two key impediments to achieve high growth - war and lack of political stability are now out of the way.

The Colombo Stock Exchange has reached dizzying heights, beating all previous records. The North and the East have been fully integrated with the rest of the economy. Tourism is soaring, helped in no small measure by the prevailing peaceful climate. Foreign investments are pouring in. Mega port, airport and road projects are under way. International lending agencies such as the International Monetary Fund, which granted a US$ 2.6 billion facility, have kept faith in our economy and debt management.

This is just a glimpse of the country's creditable achievements in the post-war period. The future can only be brighter. The Central Bank is upbeat about Sri Lanka's growth potential and independent economists are now confirming the Bank's predictions.

A senior economist declared on Thursday that Sri Lanka's actual potential growth rate is above eight percent and can reach even nine to 10 percent by 2015 like India and China. According to Institute of Policy Studies Executive Director Dr Saman Kelegama, economic growth in 2010 will be closer to six percent. He predicts a higher growth of seven percent in 2011 and an even higher level beyond 2011.

This is indeed good news for a country recovering from a three-decade conflict. But we cannot afford to rest on our laurels. The main challenge is to make the economy more competitive, bearing in mind the international market forces as well. Thus action should be taken to implement institutional and regulatory measures to gear the economy to be more competitive.

The Government has recognized this need to focus on developing the economy, through the creation of a new Economic Development Ministry. It will be akin to a 'one-stop-shop' for economic activities. Minister Basil Rajapaksa has a major challenge ahead of him as this will be a vast undertaking. In this quest, it is essential to identify the country's strengths and weaknesses to map out a strategy to bring Sri Lanka to the front ranks of Asia.

Sri Lanka was able to beat the global recession which adversely affected even the most developed countries in the world, through prudent economic management. But the nature of the globalized economy is such that no country can virtually keep its economy cocooned against external shocks forever. This is why it is important to keep the economic fundamentals in shape.

It should not be forgotten that agriculture is still the mainstay of the economy. Agricultural development must be given priority, especially in the North and the East, still emerging from the shadows of war. Other aspects of rural development including infrastructure development must be expedited. Empowering rural communities and eradicating poverty will also be essential.

It is important to ensure low inflation and keep it at a single digit level in 2010. Keeping inflation low and stable is the key to the management of interest rates and exchange rates. Improving local production and productivity, encouraging exports, creating more employment and moving development to the provinces are other important initiatives. The Government's move to create five hubs - knowledge, ports, aviation, energy, commerce and finance to achieve these aims is commendable.

Some of the targets appear to be very ambitious, but they should be within reach with planning and foresight. Exports are to be increased to US$ 20 billion by 2015, Foreign Direct Investment (FDI) to US$ 5 billion, expatriate remittances to US$ 5 billion and tourism earnings to US$ 1 billion. Tourism is a very important segment of the economy, with Sri Lanka having the potential to attract at least one million tourists annually in the coming years. Any barriers hindering these goals must be removed.

The Government has also underscored the need for peace and reconciliation in this exercise. Indeed, development and peace go hand in hand. Resettlement and rehabilitation are being expedited in the North, with both physical and psychological bridges built between the North and the South. A multi-faceted program that takes all these factors into consideration will take Sri Lanka to greater heights, as envisaged in the Mahinda Chinthana Idiri Dekma policy statement.