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Economic development and structural changes since independence View(s):

The 66 years since regaining independence have been years of structural changes in the economy and economic and social transformations. There have been many achievements as well as emerging concerns. Sri Lanka’s post-independent economic development transformed a predominantly agricultural economy at the time of independence in 1948 into a diversified one where agriculture accounts for only about 11 per cent of national output, services for 59 per cent and industry for 30.4 per cent of GDP. An economy dependent on three agricultural export crops has been transformed into one that exports mostly manufactures.

Sri Lanka has attained low middle income status with a per capita income of over US$ 3000 in 2013. Since regaining independence, the economy grew at an annual average of 4.5 per cent. The economy grew at a much higher annual average of 7.5 percent in the post-war period. Unemployment has fallen below 4 per cent and the poverty headcount is 9 per cent. Social indicators have been impressive. In 2012, life expectancy was 75.1 years, infant mortality was as low as 9.4 per thousand (2009) and adult literacy was 92.2 percent in 2011.

Despite these achievements there are serious fundamental economic weaknesses. The high domestic and foreign debt and its onerous debt servicing burden, inadequate export earnings and large fiscal deficits are serious concerns. While recent improvements in infrastructure could contribute to enhanced productivity, inadequate funding of education and health could constrain economic development.

Economic growth Although, Sri Lanka’s economy grew at an annual average of 4.5 per cent since independence (1950-2013), there were significant differences in economic growth rates during this period. In the first half of the 1960s, the economy grew at 4.5 per cent per year, while during the second half, under more liberal policies, growth was slightly higher at 4.8 per cent.

The lowest rates of growth were during 1970-77 and 1987-89 when the average annual growth was only 2.8 and 2.2 per cent respectively. Low growth in 1970-77 was due to droughts, the 1971 insurrection, state control and inefficient management of the economy, unfavourable international factors such as food grain shortages, an oil

price hike, and unfavourable terms of trade. The low growth in 1987-89 was mainly owing to the insurgency in these years.

Growth and decline 1978-1993 In 1978, consequent to the policy reforms introduced in 1977, the economy grew at 8.2 per cent and at an annual average of 5.9 per cent per annum from 1978 to 1984. Then it declined from 5 per cent in 1985 to 2.2 per cent in 1987-89, due to the ethnic violence in 1983 and consequent internal security conditions. With the restoration of law and order, GDP growth reached 6.2 per cent in 1990 and averaged 5.5 per cent in 1990-93.

Economic performance 1994 – 2004 During 1994-98 the economy grew by an annual average of 5.2 per cent. However, in 1996 economic growth declined to 3.8 per cent from around 5.5 per cent in the two previous years owing to deterioration in security and drought conditions that reduced paddy and food crop production and caused power cuts that disrupted industrial production. Tourism suffered a setback and business confidence weakened. In 1997 the economy bounced back to grow at 6.3 per cent but declined to 4.7 per cent in 1998 due to adverse global conditions.

During 2000-2004, the economy grew by only 4.0 per cent owing to an energy crisis and LTTE terrorist attacks and the war in the North and East that crippled tourism, agriculture and fisheries.

Economic growth 2005-2013 Despite the intensification of the war, there was an upsurge in the economy between 2005 and 2009 with an annual average economic growth of 7 per cent. Since the end of the civil war in May 2009, the economy achieved high rates of growth — 8 per cent in 2010, followed by a growth of 8.4 per cent in 2011. The economy slowed down in 2012 to 6.4 per cent due to the global recession and the withdrawal of the EU’s GSP plus concession that decreased exports, adverse weather conditions and the US embargo on trade with Iran. The economy revived in 2013 to grow by an expected 7.2 per cent. The average annual rate of economic growth in 2010-2013 was 7.5 per cent.

The main sources of growth in the post-war years have been construction, tourism and other services such as communications, trade services, banking and finance. Exports fared badly in 2011-2013, while imports increased sharply. Consequently, trade deficits have been around US$ 9 billion. The strain on the balance of payments has, however, been mitigated by workers’ remittances that offset 60 to 70 per cent of the trade deficit.

Structural transformation The predominantly agricultural economy at the time of independence has been transformed into a more diversified one. This diversification that was gradual till the late 1970s, gained momentum in the last three decades. Agriculture that contributed 41 per cent of GDP in 1950 accounts for only about 12 per cent of GDP today. At the time of independence manufacturing that consisted mainly of processing tea, rubber and coconut, accounted for only 16 per cent of GDP. The most notable feature of this structural change is that manufacturing and services make a higher contribution to GDP than agriculture. In 2012, industry contributed nearly 30 per cent of GDP, while agriculture, forestry and fishing together contributed only 11 per cent of GDP and the contribution of services increased to 59 per cent of GDP. Reflections The Sri Lankan economy has been and will continue to be an import-export economy though the nature of the external trade dependency will continue to change. Dependency on food imports has been replaced by a dependency on oil and raw material imports whose prices would be an important determinant of the country’s economic future.

There has been an increasing dependence on foreign loans, foreign remittances and earnings from tourism. High fiscal deficits, a large public debt, a large foreign debt, high debt servicing costs and large trade deficits are economic concerns. Future economic development depends very much on an improvement in the country’s economic and social infrastructure; economic and administrative reforms; improvements in the investment climate; increased foreign investment; and above all national unity, peace and harmony and the rule of law. http://www.sundaytimes.lk/140202/columns/economic-development-and-structural-changes-since-independence81903.html //////////

Economic growth and social development IMPERATIVES FOR ECONOMIC DEVELOPMENT

By Nimal Sanderatne The trade-off between economic growth and social welfare has been a much debated issue. Last week’s column made reference to this in the discussion on poverty issues raised at the Centre for Poverty Analysis (CEPA) Colloquium. The pertinent issue in the context of the current higher economic growth trajectory is whether it would enable the country’s social indicators to improve.

There are some concerns that the path, process and priorities of economic growth may be neglectful of the social welfare of the country. These concerns are not without a basis. The expenditure on education and health, as a percentage of GDP, is declining and woefully inadequate to sustain the achievements in these areas.

Besides, there are new concerns in the post war era. The rehabilitation of the people whose livelihoods have been shattered by the war and the large number of orphans and displaced persons and persons physically maimed and in traumatic mental conditions that require medical attention and welfare measures pose serious challenges. And then there are the emerging problems of a rapidly ageing population.

If these problems are to be addressed there has to be much higher expenditure on these. Resources are always scarce. In the current background of huge expenditures needed for reconstruction and rehabilitation, as well as improvements in social welfare, the question at issue is whether the current economic policies have the correct priorities in the context of these needs. In recent years expenditure on health and education have been inadequate and declining. The need to increase expenditure on social infrastructure is indeed imperative, if economic growth were to improve the living conditions of the poor and those affected by the war. Furthermore such investments in human capital are needed for long term economic development.

Economic growth and social development In contrast to the country’s modest economic growth in the past, social attainments have been impressive. This was especially so during the first three decades after independence (1948-1977), when economic growth was slow but improvements in social indicators were outstanding. Since then human development indicators have improved steadily, but at a lesser momentum than the expectations generated by the initial successes.

Nevertheless in the first five decades after independence when the economy grew on average by only 4.2 per cent per annum, the social attainments were good owing to the impressive early improvements. Sri Lanka’s social indicators in the entire post independent period when the economy grew by 4.9 per cent per year (19502010) are commendable.

The significance of the Sri Lankan experience has been succinctly captured by Nobel Prize winner Amartya Sen and his colleague Jean Dreeze, who observed that “Sri Lanka’s strategic experience as a pioneer in overcoming the major penalties of low income remains one of great significance for understanding the prospects for supportled security in poor countries.” Sri Lanka’s social development experience has been of much interest and controversy among social scientists.

Prominent among economists who have argued that the Sri Lankan experience illustrates how a poor country could achieve a high level of human development is Amartya Sen, who observed that Sri Lanka was able to achieve levels of life expectancy and mortality that are much better than even countries with higher levels of per capita income.

Sen argued that the goal of economic growth and increases in per capita incomes is to achieve human development. Therefore, if a country has achieved that objective, even before attaining high levels of per capita income, as was the case of Sri Lanka, then it had achieved the ultimate objective of economic growth. Sen cites the Sri Lankan experience as illustrative of the possibility of achieving human development even at relatively low levels of per capita incomes.

Different view Other economists have challenged this view and asserted that the country has had low rates of economic growth owing to its social welfare policies. They have pointed out that the high achievements in human development came at a cost to economic growth and contend that economic growth was retarded owing to the emphasis on welfare and ascribe the relatively slow economic growth, the persistence of poverty and unemployment to the country’s high welfare expenditure. One of Sri Lanka’s eminent economists, Lal Jayawardena put across the view that the country lost about 1 per cent of growth each year owing to welfare expenditure, particularly owing to the high cost of the rice subsidy. Jayawardena’s argument was that if the country did not expend as much on the food subsidy, the investment of such funds would have resulted in substantial compounding of economic growth.

Another perspective is that a number of factors have affected economic growth, besides welfare policies. These other factors, inter alia, include the high population growth till the 1970s, civil conflict and poor governance.

Saman Kelegama contends that several reasons including the welfare-oriented policies accounted for retarding economic growth. He argues that economic growth was adversely affected by the welfare state that led to excessive politicisation, export pessimism and the ethnic conflict. He also identifies three important constraints apart from welfare policies as having retarded economic development: the ethnic conflict, security situation and the war.

Furthermore Kelegama contends that “Sri Lanka was also stricken by the doctrinaire of export pessimism and

delayed moving towards an export-oriented strategy by overstaying as a closed economy for nearly two decades. When economic liberalization began in 1977 it was a latecomer to the export-led industrial world and thus could not stage a significant breakthrough like the East Asian Tigers. Third, concerted effort was not made to address the ethnic animosity between the two major communities that erupted time and again…..and culminated as a civil war in North/East Sri Lanka during 1983-2001. This conflict substantially disturbed the economic management process.

However Kelegama is also mindful of the human development achievements of the country and points out “Despite the stressful environment, there were some achievements about which Sri Lanka is well known internationally. Sri Lanka came to be known as an exception among developing countries in improving the physical quality of life.

Contrarian view There have been others who have argued that Sri Lanka achieved a satisfactory rate of economic growth with equity. They contend that the country’s economic growth was good and do not contribute to the view of a trade off between economic growth and social attainments. A few have argued that the country’s economic growth performance was good and in fact much better than many other countries and was one of the best performers in economic growth in Asia, in the developing world and in fact the entire globe. Has the country obtained a dividend on the social investment it has made in the past? Has social development expenditure contributed to social capital formation that has in turn contributed to economic growth, if not immediately, in the fullness of time?

Policy imperatives Sri Lanka’s social development indicators have shown slow progress in recent decades and failed to keep to the promise generated by early progress. This can be closely co-related to the inadequate investment in education, health and other welfare measures. Besides this, some of the welfare measures do not reach the intended beneficiaries. Expenditure on caring for the elderly and otherwise able is woefully inadequate.

Three policy thrusts are needed to improve the country’s social conditions. First, the strategy and process of economic development should be more pro-poor oriented and focussed on areas of development, such as in agriculture that would benefit the poor. Second there must be much higher expenditure on social infrastructure and recurrent social expenditure and emerging needs. Third, funds expended on social welfare must be better targeted to reach the deserving.

The prioritisation of social expenditure in tandem with economic infrastructure development is imperative.Many social expenditures are more important than some economic infrastructure investments with doubtful returns. Since resources available to the state are limited, the extra expenditure on social development must come from increased revenue collection and curtailment of excessive and wasteful government expenditure. There are real concerns that public expenditure is not prioritised to meet significant goals of economic or social development.

http://www.sundaytimes.lk/110717/Columns/eco.html

Sri Lanka's Development Since Independence: Socio-economic Perspectives and ...

By W. D. Lakshman, Clement Allan Tisdell

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Economic policy shifts in post independence Sri Lanka

By Sajith de Mel It would rather be an interesting academic and an intellectual exercise to probe into the economic policies of governments that had been in power since independence. One may confess a strong relationship of one’s economic policy with that of the philosophical thought, the ideology and the dogma to which a political party is attached to. A vigilant observer and an analyst may confirm that the mode of thinking and the policy stance of the political parties which had been in authority from time to time, had nevertheless been influenced by their ideological attachments.

Since independence, the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP) led coalitions had been the only parties that had been able to rule and govern the island of Ceylon. The UNP, the right of centre of Sri Lankan politics adopted basically a libertarian ideology in combination with an element of social democracy, while the SLFP was basically social democratic in its orientation from the radical left. In theory, irrespective of the fact that both confessed to be Non-aligned in their foreign policy, pragmatically symptoms of pro-Western orientation were evidenced with the UNP, while the other was more oriented to the socialist bloc. In its fundamentals, the UNP, market oriented and pro-free trade party is a true believer of the market mechanism in the allocation of economic resources in the economy driven by the private sector. In contrast the SLFP at the birth of independence preached and practised the theology of state intervention in activities of the market forces and followed a more socialist oriented model which encouraged the system of centralised planning; later to have been convinced by the efficiency and the power of the market model, was baptised and converted and now a follower of the market mechanism with a human face.

Liberal economic regime UNP that came to power in 1948 represented largely the interests of the colonial bourgeois and elite groups. From the early 19th century the so called Sri Lankan bourgeois class emerged through the accumulation of wealth through engaging themselves in the retail of arrack, plantation agriculture and land ownership. Later, these bourgeois branched out into the trades of transport, labour contracts, graphite mining, commerce as well as serving the colonial bureaucracy at its middle and higher levels, while some made their mark by entering into "learned professions". Given these circumstances, the elites who were now enthroned to govern were more eager to sustain and maintain the export economy. Probing the foreign policy of the newly independent government of Ceylon would add an insight of its pro-Western economic policies. The defence agreement and the agreement on external affairs entered into on the November 11, by the government of Ceylon and the British government confesses the pro-Western economic outlook of the then government. The rationale for entering into a defence

agreement was explained by the then government as they saw it was of high importance in protecting the sea and air communications of the island which inherited highly an import-export economy. The external affairs agreement was regarded as a reflection of Sri Lanka’s pro-British foreign policy. During this era, Britain was the island’s main trading partner and as the trading with the West was very favourable, the government did not require new markets for her imports and exports.

At independence, Ceylon inherited a dualistic export economy. It comprised a plantation sector linked to international markets and a backward subsistence agrarian economy.

Tea, rubber and coconut brought over 90 percent of the foreign exchange earnings, while tea accounted for 60 percent. Other agriculture, particularly rice production, drew the attention of the government as rice was the staple food and a large proportion of the electorate was in paddy cultivation. During this era, the industrial sector received less attention, particularly since the economy could be still sustained on the production of few primary products.

At independence, the contribution of export production to GNP was 31.6 percent. More than 64 percent of the government revenue was derived through the taxation of foreign trade and much of this was used for the importation of food as part of the food subsidy scheme exercised by the state. Given the government’s commitment to social welfare, the UNP maintained a skeletal welfare system comprising the food subsidy, free education and free health. This served as a basic measure for sustaining political popularity. The economy during this regime was more or less "open", in the sense that quantitative restrictions on imports and foreign exchange transactions were almost absent. With the open economy and the free flow of imports, Sri Lankans enjoying high levels of consumption; the ratio of consumption expenditure to disposable income averaged 95 percent during this period. The economic growth rates recorded for the period 1951-1956 averaged at a low 3.6 percent, while the terms of trade deteriorated from 374 in 1950 to 275 in 1952 and then improved to 340 by 1956. Most of the first post-independence decade turned out to be a time of a liberal trade regime with few taxes on imports and exports for the purpose of revenue generation.

During this decade much foreign policy advice received from international agencies encouraged the government for the gradual elimination of subsidies, curtailment of government participation in public welfare and so on. However, reluctance on the part of the government was exhibited due to political reasons. Soon after independence, the development strategy had a strong commitment to maintaining an open economy driven by the private sector and the market mechanism in the allocation of resources. However, factors such as export pessimism at that time and the possible criticisms by the opposition retarded the pace of the government in moving in that direction. In this context, import substitution in agriculture and industry was considered a policy alternative, while industrialization was postponed for a later stage.

The import substitution strategy on agriculture was taken as a measure to attain selfsufficiency in rice and thereby to reduce the import bill of rice. Moreover from a macroeconomic point of view, it was essential to reduce the dualistic nature of the economy.

Due to several weaknesses, these goals never materialized.

1956-1970: closed economy The government which assumed power in 1956, a centre- left based coalition adopted the Soviet type of central planning system where the state played a major role in the decision- making of the economy and thus exhibited a major deviation in the political and economic ideology it held as opposed to the UNP. The coalition consisted of the SLFP

as its principal partner, along with some leftwing socialist parties and a few other groups which represented sectarian interests. The government believed that the underdeveloped state of the economy which had a structure highly dependent on a few export primary commodities, unsustainable in the long run.

On the one hand, the private sector had no investment capacity in order to undertake huge capital investments that would free the economy of its aggravated position in the face of deteriorating economic indicators. Thus, the state was to play a major role in fuelling the economy. In finding solutions to the problem, the government extended the previous government’s strategy of agricultural import substitution also to industries. The import substitution industrialization after 1960 started with increased tariffs and quantitative restrictions on imports and controls over foreign exchange payments, designed to meet the growing balance of payment problem. A distinction was made between essential and non- essential imports with a view to discouraging the latter. The placement of import controls had twin objectives. On the one hand, it reflected the government’s desire in exercising control over the deteriorating foreign exchange position, while on the other hand it was used as an instrument to encourage the local producers and the local industries. By the beginning of the 1960s, the government was facing a critical problem with respect to its external reserves position. Restriction of imports, on the one hand, was crippled as more than 60 percent of the imports represented essential consumer items. To this it responded in the budget of 1960 by sharply increasing the duties of cars, petrol, liquor and tobacco. In the following year, a five percent duty surcharge was imposed, and cars, watches, clocks, radios and high priced textiles were banned from importation.

The popular economic formula of the day even in the West was growth fuelled through industrial import substitution. Yet the private sector in the island was at its infant stages and was not in a position to undertake massive industries. The government announced several policy packages to attract foreign direct investment. But a restricted and a controlled economic regime never attracted the foreign investors in investing in Sri Lanka.

Economic...

A highly controlled economy coupled with a feeble private sector created a supply gap in the economy which made the state take up the role as a producer in the economy. This made the government to get directly involved in the industry by expanding the allocation of economic resources to state owned industries and for the setting up of public sector industrial corporations with the assistance of the Soviet bloc. The government established a large number of state owned enterprises in industry for the production of a wide range of goods such as paper, cement, steel, hardware, petroleum products, fertilizers, tyres and textiles. From 1948 onwards, Sri Lanka produced an array of planning documents.

Initially a six year plan was formulated in 1948 and subsequently a six year investment programme was prepared. Before much work could be started under this plan, the government changed in 1956. This government which came into power placed a larger weightage on planning following the centralized planning model. The main objectives of the ten year plan emphasized the need to expand the output, income and the standards of living, removal of unemployment, altering the structure of the economy and to promote equal distribution of incomes. A sound warning was given in this plan that Sri Lanka may lose the lead to some East Asian countries, if higher growth rates were not achieved. The plan projected a six percent growth annually, which implied that GDP

would double every twelve years or so and by 1997; the GDP would become eight times the GDP of 1959.

With the assumption of power by the UNP led coalition during the period 1965-1970, the policy stance of this government saw a partial deviation from that of the previous regime. However, signs of reluctance to deviate from the policy framework of import substitution instituted by the previous regime were exhibited due to several reasons. At that time, the policy of import substitution was relentlessly fashionable and was even regarded by the Western economists as the panacea for the underdeveloped economies in transforming their economies. Apart from this, a full scale liberalization would nevertheless attract criticism from the political opposition. During this regime, the economy saw partial liberalization in the fields of import trade, foreign exchange payments, initiation of some export promotion policy measures, an attempt to restrict state intervention in economic activities and a resurgence of policy emphasis on import substitution in agriculture.

1970-1977: regulated policies A coalition of SLFP and left-wing parties known as United Front formed a new government in the general elections of 1970. This regime saw a complete reversal of the liberal economic policy stances initiated by the previous government. The state was to play a major role in rejuvenating the deteriorating economic circumstances. The state assuming the role of a producer in the economy, a radical import substitution industrial policy was implemented. Under the Business Acquisition Bill, several industrial undertakings were taken over, while under the State Industrial Corporation Act, new industrial corporations were established. The role of the state in the economy saw an expansion, while discouraging and crowding out the private sector investments. The size of the public sector increased from ten percent in 1950 to 30 percent in 1977 and the number of state enterprises increased from a handful in 1960 to more than one hundred by 1970.

A five year plan (1972-1976) was introduced by the government that was to guide the development policy of the country. However, the aspects such as the food subsidy, administered pricing policies by the state corporations and the worsening external payment situation, crippled the government in mobilizing resources in the economy as per the plan. High levels of tariffs and quantitative restrictions over imports, quantitative controls over foreign exchange payments, individual licensing system and monopoly by the government over the importation of essential commodities were the order of the day. Along with the policy of nationalization of the industries, the government also exhibited an interest in attracting foreign investments. A White Paper issued in 1972, reiterated the government’s interest in foreign capital. However, attraction on the part of the foreign investors was dismal due to contradictory economic policies. One of the major reasons that led to the defeat of the previous regime was the cut in the rice subsidy. This came under the attack of the SLFP led coalition in facing the elections. With the coming to power, one of the first steps undertaken by the government was to respect its promises and to thereby to reinstal the rice subsidy. With the cut in the rice subsidy and the installation of the administrative controls, the UNP led regime was capable of improving the rice cultivation up to two thirds of the country’s requirements.

However, the massive welfare economics practised by the regime of the 1970s, almost paralyzed the rice cultivation in the island.

Confronted by the same combination of factors that led to the defeat of the previous regime; grave unemployment, rising prices and scarcities in essential consumption

items, the United Front government faced a deadly threat from the JVP, an ultra left organization dominated by the educated unemployed youth in 1971. The rebels although defeated played a significant part in shaping the future economy of Sri Lanka. Sri Lanka was pushed more rapidly towards being a socialist society. The liberalization of the local economy initiated by the UNP regime being completely abandoned, the state established control and dominance over the economy. The Land Reforms Law of 1972 and the nationalization of the plantations in 1975, state control in trade and industry were some momentous measures taken.

One may confess a strong correlation between the UF government’s foreign policy and the economic policy. On the ideological front it was anti-capitalist, anti- Western. The external economic policy aims expressed by the UF regime were to enable the government to rely on more trade than aid, avoid making extensive borrowings from international lending institutions, putting forward Sri Lanka’s own conditions in external borrowing that ensured Sri Lanka’s self- respect, independence and sovereignty. Such a policy would nevertheless confess a commitment to liberate the economy from Western economic domination. Naturally the response of the West to the economic approach of the UF government was negative and thus this was experienced by way of sharp decline in trade and aid.

Post 1977: opening up The development model in the post- 1977 period is basically a liberalized trade regime in which export promotion received priority and in which the private sector was assigned to play a major role in economic development. The restrictions placed on the smooth functioning of the market forces by the previous regime were removed to fuel the economy by paving way for the private sector to play a dominant role in the economy as a producer. The state only assumed a role of facilitating the economic functioning of the private sector by embarking on huge capital investments beyond the capacity of the private sector and in the provisioning of public goods. In its policy statement, the UNP government elected promised a path of economic growth and economic development by transforming free economy through economic rehabilitation and transformation. It was also committed to reform the exchange system accompanied by substantial liberalization of external trade through the assistance of international agencies and financial institutions. It also explicitly expressed their interest in getting substantial assistance from the West, from the socialist and other friendly nations.

Liberalization was at the centre of the UNP government’s election platform. A series of liberalization initiatives were taken by the government subsequent to sweeping into power. The prospective targets all had a strong liberal competitive flavour with an open economy particularly in capital, services, and labour markets. Measures were taken to improve foreign investments, including tax incentives. Import controls were abolished and tariffs were rationalized. The tariffs were mainly as nominal measures to protect the domestic import substitution industries. Many quantitative restrictions that were in place were abolished. Apart from the above, the dual exchange rate system introduced in 1968 was abolished and the exchange rate unified. The exchange rate was tied to a basket of currencies and allowed to float as the basket floated. Export expansion was to play a major role in the free economic structure. As a result, the export licensing was gradually phased out and export duty structure reformed. The establishment of the Export Development Board by the government played a major role in the promotion of exports of the country. The policy reforms of 1977 were fundamental and far reaching as they facilitated the country’s integration into the global economy. The main thrust of the

economic reforms initiated in 1977 has been to stimulate the private sector economic activities by setting up a liberalized economic environment and providing infrastructure public investments. Thus in the global environment the new government emphasized less, planning models. In spite of anti-planning attitudes, major developmental projects were undertaken by the government. The Accelerated Mahaweli Development Program, the Housing and Urban Development Program, and the Free Trade Zone were some of them. The 17 long years of UNP regime came to an end when again the political pendulum swung in the direction of the SLFP led coalition, the Peoples Alliance.

Ideologically, this political party was from the left based school of thought. Pragmatically, they saw moving against the direction of globalization which was the renewed form of the open economy and liberalization ideology would fail to guarantee them victory.

Accepting the reality, the party was bold enough to promise its electorate that it will never revert to the era of 1970-1977. A newer variant of the theology of open economy and liberalization which they named, "An open economy with a human face", was the main campaign slogan, while mitigating corruption, maintaining law and order were the core promises which brought the PA to power in 1994.

Thus, it becomes quite evident that the economic policies initiated by the regimes that had been in power were a major function of their ideological attachments. However, presently we see a deviation by the political parties from their ideological attachments and becoming disciples of globalization. Thus, globalization and its direction seem to have taken over the economic policy modelling of the contemporary political parties. http://www.island.lk/2009/02/04/midweek7.html ///////

Sri Lanka’s Economy: Challenges And Way Forward October 2, 2012 | Filed under: Colombo Telegraph,MORE OPINION | Posted by: COLOMBO_TELEGRAPH

By W.A. Wijewardena –

Dr. W.A. Wijewardena

Sri Lanka’s impressive performance since the end of the war Since the end of the disastrous war conclusively three years ago, Sri Lanka was poised for a rapid take-off filling everyone with hopes of a bright future ahead. As a herald of these hopes, several macroeconomic indicators recorded impressive performance in the first two years of the new era. The overall real economic growth rate which amounted, on average, to less than 5 per cent per annum in the whole of the postindependence period shot up to 8 per cent in 2010 and 8.3 per cent in 2011. The unemployment rate which was above 10 per cent of the labour force in 1990s started to fall sharply, finally settling at low 4.2 per cent by mid 2011. Given the normal unemployment in an economy due to people leaving jobs in search of better jobs and people waiting for acquiring the necessary skills to get themselves employed, this rate of unemployment denoting employment at 96 per cent connotes more or less a state of full employment of the country’s work force. The poverty level as measured by the number of people below poverty as a percentage of total population fell from above 15 per cent a few years ago to below 9 per cent by end-2011. Inflation which had been eroding the real welfare of people at the rate of 23 per cent per annum in 2008 was tamed and contained at an annual average of 5 per cent in the subsequent three year period. The Sri Lanka rupee which was exchanged at the rate of closer to Rs 115 per US dollar in 2009 was strengthened to reach a level of Rs 110 per US dollar by mid 2011. Though Sri Lanka’s trade deficit expanded phenomenally, its exports continued to rise at an unprecedented rate of over 20 per cent per annum in 2010 and 2011. The confidence which the investors had about the future health of the Sri Lanka’s economy was amply demonstrated by an unprecedented improvement in the indices of the Colombo Stock Exchange in 2010 making it one of the best performing markets in the world.

All these indicators of reported good performance contributed to raise the high hopes which everyone – politicians, policy makers and the general public – had about the Sri Lanka’s future. Encouraged by the super performance of the country’s economy in the first two years of ending the war, the country’s top policy makers set on a mission of projecting this high growth into indefinite future by having such goals as ‘doubling the per capita income of the people in US dollar terms, within 6 years and thereby making Sri Lanka a nation to be awed, respected and emulated by others in Asia. The development tagline, ‘Sri Lanka: The Emerging Wonder of Asia’, was coined in order to market this highly ambitious goal of the nation.

But 2012 started to see a reversal of all these achievements which Sri Lanka had made in the previous two years.

The gloomy outcome in 2012 Economic growth started to slip away from the high growth trajectory forcing the policy authorities in late September to revise downward the high growth target of 8.5 per cent set for the year to a level of 6.8 per cent.

Given the current prolonged drought conditions and the gloomy global economic performance, the authorities may have to make a further downward revision of the growth rate by the end of the year. The inflation which was tamed below 5 per cent per annum started to accelerate gradually by mid-2012 making it necessary for tightening the monetary policies by way of increasing the interest rates, raising the statutory reserve requirement and introducing quantitative ceilings on the private sector credit growth. The rupee fell freely in the foreign exchange market from Rs 110 per dollar in mid 2011 to Rs 132 by September 2012. With the depreciation of the rupee, imports started to contract as expected, but the gloomy global economy imposed a heavy penalty on the country’s exports. In fact, during the first seven months of 2012, exports fell by 4 per cent and the current indications are that it would generate a trade deficit as big as the deficit in 2011. The government budget came under pressure overshooting its current expenditure and underperforming its revenue as against the budgetary projections for 2012. Accordingly, the government’s revenue shortfall over its consumption expenditure, known as the revenue account deficit, ballooned from a target level of Rs 2 billion for the whole of 2012 to Rs 75 billion or 1 per cent of the country’s Gross Domestic Product or GDP during the first half of the year. When annualised at this rate, it amounts to a deficit of 2 per cent of GDP for 2012. The overall budget deficit which had been targeted at Rs 489 billion or 6.5 per cent of GDP amounted to Rs 311 billion or 4.1 per cent of GDP during the first half of the year. If the government’s expenditure is not kept in check, this level of overall deficit in the budget will end the year with a much larger deficit of over 8 per cent of GDP frustrating the country’s attempts at disciplining its budgetary operations.

Budget may be disciplined by cutting capital expenditure

The gravity of the country’s budgetary problem is seen by the recent announcement by the country’s top policy administrator, Dr P.B Jayasundera, that the Treasury would prune the government’s expenditure to keep the budget numbers within the targets set for the year. Since the government’s consumption expenditure consisting of salaries, pensions, interest payments and subsidies cannot be curtailed, the essential expenditure cuts are expected to come from a cut or a postponement of the government’s capital expenditure programmes.

Sri Lanka’s economy is not in good shape Accordingly, contrary to the belief of many, Sri Lanka’s economy is not in good shape. Its macroeconomic health has deteriorated with growing problems on every front. The growth is faltering, inflationary pressures are building, external sector is deteriorating and the budget is slipping. The ultimate casualty of these maladies is the high hopes which people have formed about the future; if the situation is not arrested promptly, it is inevitable that people’s dreams are to be evaporated into thin air.

The country’s future economic challenges Thus, Sri Lanka’s economy is currently facing two challenges: To sustain the high economic growth it started since the end of the war and to regain the needed macroeconomic health to create the conditions conducive for such economic growth.

Since the government has to rely very much on the private sector participation in economic activities, it is necessary to create the suitable ground conditions for the private sector to invest its moneys in business enterprises that would create wealth for the nation. As this writer has been arguing in the previous articles in this series, the most essential ground condition is the protection of property rights.

The protection of property rights a must In every modern economy, people have two types of property – material property such as land, buildings, businesses, and so on and human property such as labour, knowledge, skills and talents. An individual who owns this property must be able to sell this property in a voluntary transaction in the market for his personal gain. If for some reason, the government or a group affiliated to the government can expropriate this property from him through coercion, in the first place, he has no incentive to develop this property. It also gives a bad example to others and they are also discouraged, in the second place, to develop their property. Societies have created wealth and brought prosperity to their members through the development of both the material property and the human property belonging to such members. If this process is halted, it is inevitable for such society to revert to poverty.

Zimbabwean example not to be followed The physical property is expropriated by governments in many countries by using the majority power they have in the respective legislatures. For instance, the government of Zimbabwe took over the farms which had been developed by its minority white population and handed them over to the black majority who did not have competence to develop them as had been done by their previous owners. The result was the deterioration of farms leading to a decline in the agricultural output. This made Zimbabwe, once a net exporter of meat and grains, a net importer of such products. When the country did not earn enough foreign exchange to import such essential products, there were chronic shortages in the market putting upward pressure on prices. When the country’s central bank, Reserve Bank of Zimbabwe, printed local currency in massive amounts to promote the farm outputs, the inflation became uncontrollable and accelerated to even one million per cent per annum at one stage. Hence, a government should think twice before it decides to take over private material property however much such take over could be justified on political grounds.

Illegal killing of people too is a violation of property rights Since slavery has been outlawed in all countries today, human property cannot be expropriated by a government or any other person. However, governments can deny right to life directly or indirectly. Directly, it can use its armed forces to kill people indiscriminately as is reported to be happening in Syria today. Indirectly, it can get government-sponsored para-military groups to kill targeted people as it has happened in many Latin American countries in 1970s. Or it can simply overlook the killing of people by individuals connected to high places in the government by not applying the laws of the country impartially. Whatever the way a government uses to deny the right of people to life, it reduces the human capital stock and dampens an economy’s ability to create wealth and prosperity on a sustainable basis.

Requirements to ensure the protection of property rights To protect the property rights, there are three basic conditions to be created by a democratic government. The first is the maintenance of law and order and observance of the Rule of Law. The second is the promotion of good governance practices at all levels of the government including the handling of the public finances. The third is the restoration of the judicial system to its due place by guaranteeing its independence and impartiality.

Almost all the Latin American countries which were among the developed countries in early 20th century could mot maintain that status for long because they failed to create these basic ground conditions needed for a nation to continue to prosper and sustain its growth. This historical lesson is a good eye-opener for Sri Lanka when it decides on its future economic policies.

Budgetary reforms are a top priority Sri Lanka needs to undertake budgetary reforms on a priority basis if it is to provide a permanent cure for its macroeconomic maladies. This is because all its ensuing macroeconomic problems – rising inflation, sick external sector and inability to sustain economic growth – are all have their roots to the imbalances in the budgets pursued by Sri Lanka’s successive governments in the whole post-independence period. The reform programme requires Sri Lanka to put a stop to government sector expansion, consolidate its revenue generation efforts, curtail consumption expenditure to manageable levels, properly screen its capital expenditure programmes for potential benefits over costs and, above all, restructure its leading state enterprises which have now become a severe burden to the tax payers. In fact, all these prescriptions, though presented in a different language, have been identified by the Ministry of Finance and Planning as outlined in its Annual Report for 2011.

Stop bailing out loss making state enterprises Restructuring the state sector enterprises to make them financially self-sufficient is a top priority in the country today. When these enterprises incur losses year after year, due to inefficiency or otherwise, their capital base gets eroded resulting in a negative networth. If it were a private sector company, it has to be wound up in terms of the Companies Act since it is classified as not being a ‘going concern’. But what has happened in the past has been to clean their balance sheets by providing them with free grants of immense magnitude thereby transferring their losses to tax payers. Such transfers give wrong signals to them as well as other state enterprises: That is, there is nothing wrong in their making losses because eventually the tax payers are ready to bail them out. Two good examples are the Treasury bonds issued to Sri Lankan Airlines and Mihin Air recently to wipe out their losses and enable them to show clean balance sheets to potential creditors. According to information now in public domain, Mihin Air has been provided with grants to a value of nearly Rs 6 billion from time to time and Sri Lankan Airline, Treasury bonds to a value of Rs 15 billion in a single payment. To settle the debt owed by the state enterprises, mainly CEB, to CPC, Treasury bonds to a value of Rs 55 billion were issued by the government to CPC early in 2012. The sum total of these cash grants by the Treasury amounts to Rs 76 billion or little over 1 percent of the country’s GDP. Put in other words, that is the amount of funding required to run 12 state sector universities for five years.

This practice which is not transparent and contributory to the perpetuation of inefficiency in state enterprises has to be stopped. To do so, state enterprises should be restructured and run as if they are profit making private enterprises, a suggestion made by IMF too in its seventh review of the just concluded Stand-by Arrangement with Sri Lanka.

Lure FDIs to convert Sri Lanka to a complex economy Sri Lanka should also bring about a transformation in its economic structure from the simple type of products it produces at present to complex products to sustain its export markets. Since Sri Lanka does not possess technology to do so, it has to acquire the needed technology from abroad as is being done by both India and China today. Such acquisition of technology can be done by opening the country to foreign direct investments involving high technology. This was the strategy adopted by both Singapore and Malaysia in their initial transformation from a poor country to middle income country and in the case of Singapore, from a middle income country to high income country. To facilitate Sri Lanka to receive high technology from abroad, its work force should be developed by equipping it with ‘productive knowledge’, the type of knowledge that is applied in the market place to generate new income and create wealth on a sustainable basis.

Therefore, the challenges which Sri Lanka faces in sustaining its initial growth momentum after the end of the war three years ago are not simple but daunting. It requires Sri Lanka’s policy authorities to reassess the government-centred growth model they are currently pursuing and design a new growth strategy to take Sri Lanka out of the growth hampering maladies from which it is suffering. *Writer is a former Deputy Governor – Central Bank of Sri Lanka and teaches Development Economics at the University of Sri Jayewardenepura. This article first appeared in Daily FT – W.A. Wijewardena can be reached at waw1949@gmail.com https://www.colombotelegraph.com/index.php/sri-lankas-economy-challenges-and-way-forward/

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66 Years of Sri Lanka Independence

By Srimal Fernando, Global Editor “Mother Lanka We Salute Thee” is the inspirational national anthem of Sri Lanka composed by Ananda Samarakoon, a student of Laureate Rabindranath Tagore in the 1940s. Every year since 1948 the Independence Day of Sri Lanka is commemorated on 4 February in a patriotic spirit by more than 20 million people in the Indian Ocean Island nation. The makers of modern Sri Lanka, Prime Minister D.S Senanayake the father of the Nation, Ceylonese Buddhist revivalist Anagarika Dharmapala, Sir Ponnambalam Ramanathan, Honorable S.W.R.D .Bandaranaike, the martyrs of the Sri Lankan Independence movement will be remembered by all country men with profound respect as the National flag of the country is raised by Mahinda Rajapaksa, the current President of Sri Lanka on the occasion of the 66th Independence Day. The socio economic and political aspects of Sri Lanka is one that comes with a great story with its ancient history, strong traditions and home to majestic dynasties. The English name “Ceylon” originated for Sri Lanka during the colonial era. During its long history, the country had to endure numerous invasions by Portuguese (1505 - 1650), Dutch (1656-1796) and later by the British (1815 1948). Each of the colonial rulers who ruled the Island left their imprint on the current inhabitants. The British occupation of the Island nation from 1815 saw a new era of political, cultural and religious landscape of the country until Ceylon gained independence in 1948. In pre-independence Ceylon during the 152 years of British rule Colebrooke-Cameron reforms of 1833, Donoughmore Constitutional reforms in 1931 and the Soulbury Constitution reforms in 1944 took initiatives to usher in some necessary reforms.

The Soulbury constitutional reform and the first Parliamentary general elections on September 20th 1947 marked the move towards Independence. D.S Senanayake took charge as the first Prime Minister and chose 14 other members for his cabinet. Most members of the first Cabinet were experienced. Among the members of the first cabinet J.L Kotelawela and S.W.R.D Bandaranaike were among cabinet members who have gone on to become Prime Ministers of Independent Sri Lanka in the early 50s. J.R Jayewardene the Minister for Finance in the first cabinet at the forefront of politics for fifty years in pre and post Independence period, served as the President of Sri Lanka in 1978. Independence from British colonialism saw nationalist aspirations for development. Agriculture was the most important sector of the Sri Lankan economy. Tea, rubber and coconut were the main export commodities. Tea plantation introduced to the Island nation by James Taylor, a British Planter in 1867 provided the main export earnings at the time of Independence. Rice cultivation was the main activity of the people.

In the initial two decades after independence, the country saw the development of democratic political parties and trade unions.

During the same era progress in social and economic sustainability was achieved through government planning. Successive governments from the mid 50s relied on a nationalizing projects and maximizing welfare. Sri Lanka became a republic on 22nd May 1972 adopting a new constitution replacing the 1948 constitution. In the early eighties, Sri Lanka liberalized its economy and adopted liberal and free-market principles. After the mid 70s the country continued to face challenging problems. The major political conflict in Sri Lanka in the post Independence history originated in the early 1970s. The 1971 youth uprising led by a Marxist political group was the first major political unrest in Sri Lanka. Thereafter the Tamil separatist movement which ultimately got transformed into a civil war began in the mid-70s. The ongoing violence turned into a cycle of violence in 1983 after the killing of 13 Sri Lankan government soldiers in the Northern Province. This incident sparked riots in the rest of the country that would cause the conflict to spiral into a civil war. The Indian intervention in 1987 and the Norwegian brokered Cease Fire Agreement (CFA) in 2002 could not stop the violence. After nearly three decades of fighting and failed tries at peace talks the Sri Lankan Civil war, one of the longest, complex and most destructive conflicts in Asia ended in May 2009. Civil War in Sri Lanka has influenced economic history profoundly across time and space. Peace is a necessary precondition for sustained economic growth. Two years after the long, drawn-out civil war ended, the countries economy grew at 7.2 per cent GDP (Gross Development Product) according to “the Asian Development Out Look (ADO) 2012” the annual flagship publication of the Asian development Bank (ADB). Political stability has been gradually restored in the North -Eastern Provinces of Sri Lanka .The recently held Northern Provincial Council (NPC) elections where the Tamil National Alliance (TNA) won majority of the seats have become a lens through which to observe the political changes. The biennial Commonwealth Heads of Government Meeting (CHOGM) was held in Colombo, from 15 to 17 November 2013. The country’s spectacular landscape has played host to a tourism boom in recent years. According to the Sri Lanka Tourism Development Authority statistics the number of foreign visitors travelling to Sri Lanka in 2013 was 1,274,593, a 26 percent increase from 2012. Emphasizing the need to enhance road, air and sea connectivity, two high-speed expressways connecting Colombo to Colombo International Airport in Katunayake, the 126 kilometer long Southern Expressway, the second international airport Mattala Rajapaksa International Airport located in Hambantota and the Hambantota seaport are multi-million dollar additional infrastructure development projects opened in the Indian ocean Island nation in the recent years after the conflict ended.

The export-oriented garment industry in Sri Lanka has grown rapidly for the last three decades providing workers with economic benefits. The sector was earning US$ 4.3 billion in 2013 according to the Joint Apparel Association Forum (JAAF). Sri Lanka’s annual per capita income rose to US$3200 (Estimates, 2012) as a Middle -income country according to international comparisons. The country’s agriculture sector plays a pivotal role in Sri Lanka’s economy and in the lives of the vast majority of its population. Tea is Sri Lanka’s key agricultural export, generating an income of US$ 1.5billion. Sri Lanka has continued to play an instrumental role in

Asia and has made significant strides on national, regional and in international fronts. As Sri Lanka celebrates 66 years of nationhood there has been progress in many areas in the past. There needs to be reconciliation among communities, and innovative planning for the future to consolidate sustainability, peace and stability of Sri Lanka.

http://www.thediplomaticsociety.co.za/index.php/home/16-home/894-66-years-of-sri-lanka-independence

///////////////////////////// Policy issues for sustainable development in Sri Lanka - See more at: http://www.ft.lk/2014/10/22/policyissues-for-sustainable-development-in-sri-lanka/#sthash.WsczrxkX.dpuf ‘Policy Issues for Sustained Development of Sri Lanka’ by A.D.V.de S. Indraratna Published by the A.D.V. de S. Indraratna Felicitation Committee, Tharanjee Printers, 2014, pp. 154 - See more at: http://www.ft.lk/2014/10/22/policy-issues-for-sustainable-development-in-sri-lanka/#sthash.WsczrxkX.dpuf

http://www.ft.lk/2014/10/22/policy-issues-for-sustainable-development-in-sri-lanka/ Prof. A.D.V.de S. Indraratna handing over a copy of the book to Minister Basil Rajapaksa - Pix by Krishan Ranasinghe Review by Saman Kelegama The Volume under review is based on Prof. Indraratna’s Presidential Addresses made in the Annual Sessions of the Sri Lanka Economic Association during the last 10 years of his Presidency. He has revised, updated and edited them and brought together in one Volume titled ‘Policy Issues for Sustainable Development in Sri Lanka’. The themes covered are wide ranging – human resource development, poverty alleviation, inequity, inclusive growth, private-public partnership, inflation, productivity and competitiveness, Free Trade Agreements, Foreign Direct Investment (FDI), fiscal consolidation, debt management, export growth, global economic downturn, and so on. They basically reflect the emerging economic scenario during the decade of 2004 to 2013 in Sri Lanka. Sustaining economic growth The author examines the scenario taking into account the historical trends and the macroeconomic background. The unique feature of these essays is that the author discusses these manifold issues within a policy framework of economic growth and development. His line of argument is that the goal of economic policies should be to sustain economic growth rather than aim for short-term high growth. He has shown that high growth can be achieved for a short period by undermining economic fundamentals and creating macroeconomic imbalances by generating inflation, overvalued currency, large debt, and so on, but that growth will not be sustainable. In this context, the large public debt, especially the growing foreign debt and debt servicing cost in Sri Lanka, are of concern as they are barriers to sustainable economic growth. He sees debt creating a vicious circle and argues the case for a transition to export and FDI-led growth from the current debt-financed growth, where the former is sustainable for long run development of the country. He has highlighted what should constitute the enabling environment for an export-led growth strategy and attracting FDI and argues that Sri Lanka should aim at obtaining FDI above 2% of GDP to maintain high growth momentum. He looks at sustainable growth from a wider perspective not confining only from a macroeconomic imbalances perspective.

He argues that if poverty and inequality issues are overlooked in the pursuit of economic growth, they will pose a major challenge to sustainability of economic growth as social uprisings will impede growth. Likewise, he argues that if human resource development issues are neglected while pursuing growth, the increasing wages in a growing economy will not be matched by increases in productivity and innovation that are so essential for growth sustainability. Inflation and growth In the chapter where the author discusses the nexus between inflation and growth, one can see the author’s theoretical knowledge blending with his practical experience.

Prof. Indrar

atna’s deep understanding of Economic Theory is

demonstrated in his magnum opus – ‘Mila Niyaya’ (Price Theory), which went into three editions over the years. His practical experience on price behaviour was gained during his tenure as Chairman of the then National Price Commission (in the 1970s), the Fair Trading Commission (in the early 2000s) and of the Monetary Board Consultative Committee of the Central Bank (in late 2000s). Using the synergies, he clearly shows how inflation distorts relative prices, distorts resource allocation, leads to over-borrowing, harms fixed income earners, makes achieving investment targets difficult, makes the poor poorer and thereby works against sustainable growth. Missed opportunities While addressing the central theme of sustainable development, the author highlights some of the characteristics of the Sri Lankan economic management during the postindependence period, such as missed opportunities, wrong prioritisation, and going into extreme ends of political ideology. In regard to missed opportunities, the author highlights how Sri Lanka missed taking advantage of the Korean commodity boom in the early 1950s for product diversification and physical infrastructure development of the economy; instead, consumption and social welfare were given priority at that time with limited results. The example of government expenditure allocation for education is taken to highlight wrong prioritisation. Here the author argues that even after achieving high literacy levels and school enrolment rates, expenditure focus was still on primary and secondary education with only 1/5th of the education expenditure going into tertiary education. He argues the case for at least 1% GDP expenditure allocation for tertiary education and without such commitment, leave alone sustainable growth but even the much-publicised knowledge hub status, will be difficult to achieve. Political ideology In regard to political ideology, the author has been very bold and critical, where he argues that in the case of SLFP-led regimes the public sector was trying to do too much, in fact, trying to do things which should have been best left to the private sector and he makes special reference to the 1970-1977 period where too many controls and restrictions impeded economic activities and growth. On the other hand, he argues that UNP-led regimes were going too far with de-regulation, with downsizing the public sector, eroding the production base and weakening the State. He states that it was a big mistake to think that the public sector is inherently inefficient, highlighting how with autonomous management and political commitment, Singapore Airlines and Japanese Railways have been made into efficient public enterprises. Referring to the 2002-2003 period, he argues that rural and regional development were neglected and argues that it is not realistic to regain Sri Lanka without regaining the rural economy of the country. His views on globalisation and liberalisation become clear in the later chapters when discussing the global economic crisis and the recovery. The author states that one should not have unqualified faith and embrace whatever comes in the way but rather extract the best out of them while safeguarding against the adverse impacts. Economic middle ground One thing comes out very clearly, i.e. throughout his life as an Economist he towed the economic middle ground and stood steadfastly for a mixed economy without moving to extremes of the right or left political-influenced ideologies. In that very belief lies his emphasis on balancing the macro economy, diversification of the economy, growth with equity, and growth with human development, which in turn are closely linked to sustainable development. Dr. Saman Kelegama Rich experience Prof.

Indraratna is an octogenarian and he has lived through the Great Depression in the 1930s, World War II in the 1940s, the cooperative movement, the beginning of the Welfare State, the Korean War boom, the beginning of import substitution industrialisation, hard times with economic restrictions, opening up and liberalisation of the economy, youth rebellions and war impacting the economy, post-war reconstruction and building of mega infrastructure, and so on. Thus he is endowed with a rich experience of economic transformation in Sri Lanka, and all his essays reflect this rich background from where he draws in facts to support his argument. This is a valuable compendium of the important economic issues that confront Sri Lanka. It is not a heavily researched and referenced work but one that provokes the reader’s interest for further research. Enriched with Tables in the Appendix, all the essays are written in simple and lucid style without any technical jargon, thus even a noneconomist will be able to follow the essays. The Volume will no doubt be of value to policymakers, academics, students and the general public who are interested in contemporary economic issues.

(This review is based on a speech delivered by the reviewer at the launch of the Volume at the Sri Lanka Foundation Institute on 17 October. Dr. Saman Kelegama is the Executive Director of the Institute of Policy Studies.) –

See more at: http://www.ft.lk/2014/10/22/policy-issues-for-sustainable-development-in-srilanka/#sthash.WsczrxkX.dpuf /////////////////////////////////////////////////

D.S. Senanayake: Post-independent Sri Lanka’s outstanding Political leader - See more at: http://www.dailymirror.lk/91881/d-s-senanayake-post-independent-sri-lanka-s-outstanding-politicalleader#sthash.ZBbPOQvJ.dpuf

D.S. Senanayake: Post-independent Sri Lanka’s outstanding Political leader 2015-10-20 01:05:33

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Today is his 131st Birthday (October 20, 1884 – March 22, 1952)

S. Senanayake was the most outstanding political leader of post-independent Sri Lanka.

This great leader and the father of the nation was born 131 years ago on October 20, 1884 at the Botale Walawwa in Mirigama. His Father -- Mudliyar Don Spater Senanayake married Catherine Senanayake from Kehelella. They were blessed with four children -- daughter Maria Frances, sons Don Charles (D.C), Fredric Richard (F.R) and Don Stephen (D.S).

D.S Senanayake married Molly Dunuwila, with whom he had two sons -- Dudley Senanayake born in 1911 and Robert Senanayake born in 1913. His eldest son, Dudley Shelton Senanayake, succeeded him as Prime Minister in 1952.

I thought of writing this article on D.S. Senanayake with great respect and reverence and I strongly believe that it is the

right time to educate the present generation about this great and exemplary leader.

D.S. spearheaded the independence struggle of the then Ceylon. He and his elder brother F.R. Senanayake and

colleagues -- Sir D.B. Jayathilaka, Sir Ponnambalam Ramanathan, Sir Ponnambalam Arunachalam, T.B. Jayah, E.W. Perera and many others were the stalwarts of the Independence Movement. This intelligent group with its coherent plan was able to win Independence for our Motherland without shedding a drop of blood.

Though the British rulers were keen on suppressing D.S’ leadership, his influence was overpowering. In 1924, D.S. Senanayake became a member of the National Legislative Council, and subsequently with the dawn of the reforms of the “Donoughmore” Commission, he became the Minister of Lands and Agriculture in 1931. The new minister had the courage to undertake the herculean task of restoring the tanks and the irrigation network of the Dry Zone of the then Ceylon.

Minister D.S. issued a directive to the then Surveyor General R.L. Brohier to survey and map out the entire irrigation network system. On completion of this magnificent task, Mr. Brohier published the invaluable hand-book “Ancient

Irrigation Works of Ceylon”. This multifaceted comprehensive volume became “The Beacon” for the development of the Irrigated Agriculture Sector in Ceylon (Sri Lanka).

The passing of the Land Settlement Ordinance in 1931 was a major breakthrough in reversing the colonial government’s traditional policy towards peasant agriculture.

Along with the Land Settlement Ordinance, the relocation of landless people was carried out by D.S. under productive colonization schemes in Sri Lanka’s fertile lands located in the Dry Zone, which was covered in thick jungle. Agricultural Production and productivity took a leap forward and with D.S. Senanayake’s “Agricultural Policy” in place the various ethnic groups reaped the bountiful harvest of this brilliant plan which was implemented effectively.

He saw the need for a careful assessment of the land and water resources of the island before beginning work on the restoration of the old and generally neglected irrigation facilities. Sri Lanka was fortunate to have Don Stephen as the Minister of Agriculture and Lands in the State Council, where he put into effect his dreams on agricultural plans formulated as far back as 1926. The economic depression in the 1930s threw a challenge to D. S. Senanayake to prove his talents in agricultural development.

He was tough and courageous in making a strong decision by moving out a population to less-developed areas in the Dry Zone, such as Minneriya.

There is no doubt that the great achievement of D.S. Senanayake during this period was the Minneriya scheme in 1934.

He was able to start agricultural colonies in Minipe, Elehera, Bakamuna, Gal Oya and so on.

He restored the largest reservoir constructed in this county during the ancient times -- the Parakrama Samudra, with its nine-mile long bund. Next came the Gal Oya Development Scheme, the last of the great colonization schemes, which he initiated as the Minister of Agriculture.

He set up the Ruhuna and Wilpattu National Parks by legislation introduced in 1938.

"Along with the Land Settlement Ordinance, the relocation of landless people was carried out by D.S. under productive colonization schemes in Sri Lanka’s fertile lands located in the Dry Zone, which was covered in thick jungle. Agricultural Production and productivity took a leap forward and with D.S. Senanayake’s “Agricultural Policy” in place the various ethnic groups reaped the bountiful harvest of this brilliant plan which was implemented effectively"

He also took steps to restore many ancient shrines and gave special attention to the planned development of Anuradhapura, Polonnaruwa and Mahiyangana and was himself the president of the Mahiyangana Restoration Society when it was started.

As a result of the relentless struggle carried out by D. S. Senanayake and his colleagues, the London administration introduced the Soulbury Commission to this country in 1946 and the political party system became part and parcel of the local political scene. Consequent to these developments, the United National Party was formed bringing various political and social organisations such as Sri Lanka Jathika Sangamaya, Sinhala Maha Sabha and the Muslim League

under one umbrella.

D. S. Senanayake, who was elected the leader of the party, gave guidance to the freedom struggle with new vigour and foresight and the letter he sent to the colonial secretary paved the way for the discussions that led to Sri Lanka winning independence on February 4, 1948. D. S. Senanayake, the first Prime Minister of independent Sri Lanka, in his address to the nation, said: “We have regained the independence enjoyed by the inhabitants of this small island for a very long time from foreign dominance. The independence we won would be a reality only when the people are ready to safeguard their newly- won rights and responsibilities. By winning independence, we have seen the end of a struggle but it would be the beginning of another struggle which is mightier and more challenging than the one just concluded.�

After regaining independence, he introduced a new free health system and the free education system.

Travelling extensively in far flung areas of Sri Lanka, he worked tirelessly and lived with the people. He never travelled abroad to find solutions to domestic problems.

D.S. possessed an extraordinary vision and skill to give quick pragmatic solutions to the problems of this island.

It led to Sri Lanka becoming eligible to apply for UN membership. Sri Lanka became entitled to appoint its own diplomatic representatives or use those of Britain if it was so preferred.

As a genuine patriot, D.S rendered yeomen service to the nation with dedication and honesty by making an extraordinary contribution to this country as a whole. Without any division, each and every person belonging to Sri Lanka our motherland should pay their respect to this great leader demonstrating their gratitude as civilized human beings in the presence of the people in the world.

- See more at: http://www.dailymirror.lk/91881/d-s-senanayake-post-independent-sri-lanka-s-outstanding-politicalleader#sthash.ZBbPOQvJ.dpuf

http://www.dailymirror.lk/91881/d-s-senanayake-post-independent-sri-lanka-s-outstanding-political-leader /////////////////////////

Economic growth steady in Sri Lanka - Dr. P.B. Jayasundera

By Dhaneshi Yatawara http://www.sundayobserver.lk/2014/11/09/fea05.asp

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