8% economic growth in 2006
By Sunil Karunanayake
Government economists are projecting high growth of 8 % this year
based on various factors. An ambitious target? Our columnist today
examines why and how this is possible.
government has correctly set their target of eight per cent growth
for 2006. After the tsunami devastation Sri Lanka recovered adequately
to post a 4.5% growth for the first quarter 2005 and thereafter
maintained an average of 6% + growth for the secnd and third quarters.
Treasury Secretary has been optimistic that we may well reach a
6% growth for the year. Despite a presidential election, political
squabbles and threat to the existing fragile ceasefire agreement,
the economy has stood calm though stock market capitalization was
somewhat effected. This is a tribute to the politicians and policy
makers who had the courage to push through reforms in some of the
key sectors such as plantations, telecommunications, port services
etc to minimize state involvement in these areas resulting in considerable
growth and creation of employment. Given the current political system
it is difficult to expect good governance in state enterprises.
December 2005 export earnings grew by 21.8 % reaching the highest
ever-monthly value of $625 million. Despite the initial reservations
and fears garments and textiles showed remarkable growth to enable
cumulative exports to reach $6345 million ahead of $5757 earned
in 2005. With increasing oil prices cumulative imports grew by 10.8%.
However it was pleasing to note that the trade deficit for the month
of December recorded the lowest for the year though the trade deficit
for the year increased as expected. Despite the increasing trade
deficit the overall Balance of Payment position was strengthened
and the surplus increased to $502 million by the year-end with the
contributory factors being the increase in private remittances (26%),
effects of the debt moratorium and the flow of relief funds.
developments have enabled the gross official reserves to increase
to $2735 by year-end thus providing the necessary stability to the
Domestically with an abundance of rainfall and high water levels
in the reservoirs providing an impetus to hydro power generation,
record tea and paddy crops and significantly improved rubber prices
should see a satisfactory improvement in the overall growth rate
and achievement of 6% (in 2005) may not be an impossibility. The
high performing services sector too is expected to do well in trade;
transportation, Telecommunication, tourism and financial sub sectors
too are poised for increased activity.
Central Bank is optimistic that the economic expansion of 2005 will
continue in 2006 with improved performance in all key sectors.
Given that the weather and global trading conditions are outside
our reach the government must move on with the internal mechanisms
to provide an encouraging investment climate.
the southern expressway is progressing, other projects such as the
Colombo –Katunayake, Colombo-Kandy expressways and the Colombo
outer circular projects are yet on the drawing boards. The much
talked Upper Kotmale hydro power project and the Norochcholai Coal
power plant has now commenced work and one hopes these would not
be subject to political interruptions.
power and weather dependent hydro power is not going to lower the
exorbitant cost of electricity which is affecting every activity.
The ADB and the World Bank has come up with a programme to improve
the much neglected road network.
is rather disheartening to note the ever-increasing losses to the
public sector by way of strikes in essential economic activities.
At this moment of writing we hear that that the CEB trade unions
are flexing their muscles and the GMOA too has resorted to strike
do not suggest that trade unions should be suppressed; they are
an important stakeholder but why use the strike option as a threat
when other avenues are available to resolve conflicts? Employer-employee
conflicts are unavoidable; thus cannot the differences be discussed
and resolved with the public interests being given priority?
have repeatedly stressed through these columns that conflict resolution
and negotiation are specialized functions and should not be left
in the hands of Cabinet ministers (who may be forced into impulsive
decisions due political affiliations) but in the hands of competent
and trained public officials.
In the established private sector company CEO’s or Directors
rarely get involved in these conflict issues but entrust it to the
Employers Federation which comprises of trained and experienced
resource persons who will tackle the issues with trade union leaders
with whom they’ve developed a good understanding.
keeping with the Mahinda Chintana, the budget proposals for 2006
took a ambitious step in granting tax exemption to international
sports events such as the recently concluded under 19 World Cup.
Those who watched the recent VB series may have witnessed the invincibility
of the Aussies and the tremendous economic and social impact it
makes to a nation. In 2006 Sri Lanka will also be hosting the Rugby
Asiad and the 10th SAF Games (Athletics).
can definitely make a very positive contribution to our economy
and one hopes more international events would be hosted in Sri Lanka.
Here too we would expect least interference from politics as the
administrations and controlling bodies should be permitted to function
in the best interests of the sports in keeping with the public policies
with adequate regulatory checks to meet the Mahinda Chinthana targets.
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