Country Spotlight: Sri Lanka
Sri Lanka’s civil war ended in 2009. As she undergoes a nationwide transformation, economic reforms and re-established goals emerge. Sri Lanka has great plans to become a higher grossing country and an integral leader in global trade.
After putting an end to the 25-year-long civil war in 2009, Sri Lanka had a dream. Today, Sri Lanka takes another step forward in achieving this dream: to become a higher-middle income country. While it won’t be an easy path, the country has reason to be hopeful, thanks to its many new policies and projects.
A Promising Future for Sri Lanka
Becoming a middle-class country will be an important milestone for Sri Lanka’s economy. When this happens, she will become an investment-grade nation, one that can attract a growing amount of investment funds for high-positive returns. This can lead to multiplied growth in foreign direct investment and increased levels of business activity, which will set Sri Lanka upon the path towards robust and stable economic growth. Ahead of its South Asia counterparts, Sri Lanka has made an impressive economic recovery from its debt, with an average increase of 6% GDP per year since 2010. Previously, Sri Lanka’s precarious economic position was alleviated by an IMF loan through a bailout. For the past five years, Sri Lanka has experienced robust economic growth and is now recognised as a stable economy. Such vast improvements so soon after the end of the civil war puts Sri Lanka in the spotlight as a country with high potential for booming growth.
Sri Lanka’s economy consists of largely primary industries — namely the garment, cement, fishing and agriculture sectors. Yet these industries have faced problems.
As reported in the Financial Times in 2016, local talents who could not find a fit with the manufacturing and agriculture industries left Sri Lanka for job opportunities that better fit their skillset. Despite foreign remittances providing some protection from the brain drain, the leaking talent pipeline should be on the agenda as part of sustainable development. A 2016 report by Asian Development Bank has also cited that there is insufficient policy and infrastructure supporting secondary and higher education.
This pipeline issue starts with education. In Sri Lanka, higher education is mostly under the control of the public sector. These institutions are not well optimised to become efficient in quality management and cost effectiveness. Education system reforms have to encourage these institutions to develop quality education that extends beyond the budget provided by the government. In addition, Sri Lanka has to cut its fiscal deficit each year, which makes a public sector-driven education less viable.
Additionally, there are talent challenges to be addressed in the growing industries. The tourism industry saw record growth in 2015, with 10-times more tourist arrivals than in 2009. This growth spike suggests that the influx of income from tourism projects future demands in the tourism industry. As more luxury players in the hospitality industry enter the tourism scene in Sri Lanka, workforce levels will need to keep up with development and new demands to maximise growth.
To sustain development for the long term, Sri Lanka will need to adapt structural changes to diversify the current industrial involvements, which will increase efficiency and productivity. Education will also need to transform in order to construct a capable talent pipeline for continued growth. On a brighter note, opportunities may not be such a rare find in the near future. Sri Lanka has undertaken a spectrum of projects to repair and reconstruct infrastructure for the local airports, schools and other institutions.
As such, foreign investors are keenly eyeing Sri Lanka’s recovery and potential. The strategic geographic location of Sri Lanka has also attracted a huge investment project aimed at developing the Colombo Port City. This US $1.4 billion project may help Sri Lanka become a major maritime hub, like Singapore and Dubai. This project has the potential to connect Sri Lanka with the rest of the world in terms of trade and future foreign investments. Such far-sighted plans do set Sri Lanka on the right path towards its new golden dream: that of higher-middle income status and stability.