Sri Lanka has to reform to push up growth, ride emerging tech: IPS

ECONOMYNEXT – Sri Lanka has to reform to push up flagging growth, make use of emerging technologies and fix the public sector and state enterprises, a think tank has said.

Years of protection had made Sri Lanka’s businesses turn inwards (non-tradables), while reforms to unlock growth has stalled.

“Under such circumstances, to keep growth buoyant through a phase of macro policy reforms require supportive micro reform measures – the so-called ‘structural reforms’ to lift constraints on growth,” Colombo-based Institute of Policy Studies said.

“These include policies to improve the efficiency of resources used by the public sector (such as public investment, SOEs), policies to improve economic incentives (such as trade), and policies to improve institutional efficiency (such as customs, tax administration).

“Some delayed reforms have been implemented, but these have gained little economy-wide traction.”

The IPS has just released its annual State of the Economy, report on a theme of ‘Transforming Sri Lanka’s Economy in the Fourth Industrial Revolution’.

The report comes as the government is putting up service sector protectionist taxes which officials said was to protect domestic firms like Takas and PickMe from some types of emerging new business models, just as hard goods were protected earlier.

The IPS said its report looks at the so-called Fourth Industrial Revolution or 4IR and examines Sri Lanka’s work, education, migration, gender, health, financial inclusion, trade agriculture and climate change.

IPS said there had been some fiscal reforms, however national debt is has reached 83 percent.

Analysts have faulted persistent monetary instability from the central bank for bloating foreign debt, triggering negative output shocks and pushing interest rates up, and called for its discretionary policy to be curtailed by law.

Educational reforms are critical for the future.

“For Sri Lanka, the demographics suggest that an assessment ofthe technological advancements of the 4IR, and what it means for the country’s productivity growth, cannot be put off,” IPS said.

“Fewer numbers are entering the labour force each year, with Sri Lanka’s current rate of 4 per cent unemployment considered to be almost full employment. ”

“Sri Lanka’s readiness for the 4IR – in digital, human capital, and economic agility – is low,” the report said.

“Internet usage is still 34 per cent of the population, national computer literacy rate is 23 per cent, with a gender gap in internet usage of 40 per cent and significant regional disparities in information technology (IT) literacy – urban (37 per cent), rural (22 per cent), and estate (9 per cent).

“On the plus side, 70 per cent of the population owns a mobile phone, with a 95 per cent mobile cellular networks cover across the country.”

“In human capital, there are significant deficiencies despite high literacy rates.

“School census data show that that less than a quarter (23 per cent) of A-Level students is in the science stream, and a further 10 per cent is in the technology stream. The majority (66 per cent) are in the arts and commerce streams.”

Sri Lanka’s software and ICT sector was largely started off with qualifications offered by unregulated private education institutes, which offered basic diplomas from sources like the British Computer Society and higher level qualifications from affiliated colleges.

However the government has now started to tighten regulations on private education. (Colombo/Oct16/2019)