Prime Minister Ranil Wickremesinghe: Viewpoint

Viewpoint: Ranil Wickremesinghe

Despite reasons beyond our control, and challenging domestic and global conditions, Sri Lanka has been able to sustain a steady GDP growth rate of 4.4% since our government was formed in 2015. Furthermore, it maintained the unemployment rate at 4.2% and reduced the budget deficit to 5.4% of GDP. But the more important thing is the change of focus rather than the statistics. Our government has focused on fostering development based on tradeable rather than non-tradeable goods.

Sri Lanka has been a trading nation since the era of ancient kings, serving as a hub for the transfer of goods and knowledge from East to West and West to East. We should learn from the history of exports and private sector growth, which are key elements for becoming a higher-middle-income economy. People living in developed and developing East Asian and South-east Asian countries such as China and Thailand have better jobs and higher living standards than the average Sri Lankan.

Our exports are still based on traditional plantation crops, along with apparel and tourism. The country’s apparel industry is still in competition with lower-income economies, resulting in pressure to keep wages low. Our biggest foreign exchange earner is still the foreign employment sector, yet these earnings are insufficient to meet our import bills, putting pressure on the balance of payments. This results in the depreciation of the Sri Lankan rupee and affects the price of goods. Other middle-income countries such as Thailand and Vietnam are exporting a more diversified range of high-value products such as automobile parts, machinery and electronics, leaving us behind. While we have obtained good results from the steps we have taken to stabilise the economy, we should now focus on adopting export-led economic growth strategies to provide high-value and diversified products and services.

A key part of this policy will be entering into free trade agreements (FTAs) with partner countries around the world. We are making great progress towards mutually beneficial FTAs with China and India. These deals will give our economy a massive boost by opening huge new markets to our entrepreneurs.

We must ensure that manufacturers are competitive through this export-led strategy. To ensure a smooth transition for these companies, the government will be formulating a trade adjustment package. We have already taken steps in this regard, enacting the Inland Revenue Act and the Foreign Exchange Act, and moving forward with the Anti-Dumping Bill. We are also formulating a new export strategy and trade policy. The government is establishing a national single window for trade facilitation and creating a new development bank.

For our export-led strategy to be a success, we must target and obtain much more foreign direct investment (FDI) and local private direct investment in high-value products. FDI has been the engine of growth for East Asia and South-east Asia, and we can certainly attract similar or higher levels of investment. To do so, it is essential that we improve the investment climate, pushing Sri Lanka to top positions in relevant global indicators, raising the country’s ease of doing business index ranking from 110th to 70th by 2020. We will simplify the hurdles that investors currently face in dealing with the large number of government agencies. A reform agenda – focusing on continuous progress review – is already in place, and we launched an eight-fold action plan on investment climate reforms in July 2017. It was developed following in-depth consultations with key stakeholders to understand the obstacles faced by investors. Additionally, steps are being taken to establish a single window for new business registration that brings more than 20 government agencies together.

Since economic liberalisation in 1978, our progress in human development indicators has been on par with the advanced economies, yet our industries have declined. We will revitalise the manufacturing sector by introducing a clearly defined industrialisation strategy.

The above is adapted from a statement made by Prime Minister Ranil Wickremesinghe on October 20, 2017.