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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Wednesday, November 01, 2006

SL growth pattern “alarming” - WB

Daily Mirror: 01/11/2006" High growth of poverty, bureaucratic regulation, increased electricity costs, lack of infrastructure, lack of skilled HR – key impediments to growth By Ayesha Zuhair

Country Director of the World Bank Naoko Ishii yesterday pointed out that even though Sri Lanka has enjoyed remarkable economic growth annually over the lastfive years, the pattern by region was “alarming” as growth has been lop-sided.

Addressing a distinguished gathering at the Key Persons Forum organised by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) last afternoon, the World Bank Country Director said that economic growth has been concentrated in the Western Province with other regions lagging behind.

Although the Western Province had grown by 40% between 1990 and 2002, other regions had grown only by approximately one-half (i.e. 20%) comparatively. While poverty too in the Western Province had reduced by over 40%, poverty had reduced much less in other regions and as a result, inequality has been rising. “This is the real picture of Sri Lanka,” she said.

The World Bank’s new Country Director in Colombo who assumed duties just two months ago said, “Accelerated growth and poverty reduction requires integration of the rural economy into the growth enjoyed by the Western Province and promotion of production and export of goods and services with higher value addition.”

“The private sector is the engine of those activities and the public sector could support the private sector by creating a conducive regulatory framework by improving infrastructure and the factor markets. It could also facilitate the private sector efforts in the above mentioned activities within a partnership framework,” she outlined, adding that “A well-functioning financial sector can contribute significantly to growth and poverty reduction.”

She also asserted that the country’s regulatory regime did not hold in its favour. “Sri Lanka’s current environment is challenging and it ranks at 89 out of 175 countries. Heavy regulation of market entry takes its toll and although Sri Lanka has made some gains in the last year, high barriers to entry have slowed the process,” she said.

“Starting a new business requires eight different procedures and still takes 50 days. Enforcing a contract takes 837 days on average and there is extreme labour rigidity. As we all know that creating jobs is the best form of poverty reduction, and Sri Lanka therefore needs to have a flexible labour market,” the World Bank representative explained.

Ishii cited electricity as the most serious obstacle to doing business in Sri Lanka, asserting that Sri Lankan businesses pay a high price for electricity which exceeds that of countries such as Indonesia, India, USA, Thailand and Pakistan. She observed that less than 70% of rural enterprises use electricity from the national grid with 80% connected in the West and less than 10% accounting for usage from the North.

She stated that the road network needs upgrading in order to facilitate business growth as a lack of transport results in long delivery times, low productivity and absenteeism.

Contrary to a perception that Sri Lanka offers a human resource advantage for investors, this was not the case according to Ishii, who stressed, “Infrastructure and skilled human resources are an urgent need.”

According to her, Sri Lanka had experienced accelerated growth during late 1970s - early 1980s and mid-90s owing to economic liberalisation, export-promotion policy and private sector involvement in key industry sectors.

Ishii described Sri Lanka as an island “full of resources to be tapped” because of its close proximity to India and South East Asia; along coastal line, agricultural resources; rich culture and history; bio-diversity and wild life; educated and healthy human capital; open trade regime and quality institutions.

Speaking on the World Bank’s Role in Private Sector Development, Ishii said that the Bank supports government efforts to foster the growth and development of the economy and the private sector through: undertaking research and knowledge sharing; carrying policy dialogue; providing training; funding key infrastructure; assisting the service delivery in education and health; and empowering communities.


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