Need for Lanka’s rural economy to grow

The real challenge for Sri Lanka is to boost its rural economic growth to the level of the western province and create an institutional framework that is conducive to business, according to a top World Bank official.

The World Bank Sri Lanka Country Director, Naoko Ishii addressing a corporate gathering at the Federation of Chambers of Commerce and Industry (FCCISL)-organised ‘Key Persons’ Forum’ recently said that the stable economic growth in Sri Lanka has not trickled down to the regions and as a result the poverty alleviation measures have been less effective.

“For the past decade Sri Lanka has enjoyed a notable growth of five to six percent, but the growth during the last decade is concentrated in the Western Province. Between 1990 and 2002 expenditure in the Western province grew by 40 percent, but in the other regions the growth has only been half of what it is in the Western Province,” she explained, adding that in some regions poverty has also increased, with an alarming increase in the level of disparity.

“Therefore it is important for policy makers to integrate the rural economies into the growth path experienced by the western province,” she reiterated.

Ishii pointed out that despite the plus points the country is close to India and South East Asia with a long coastal line, an educated and healthy human capital, Sri Lanka’s rural sector economic growth has not kept pace with the western region.

“Sri Lanka’s economy has transformed from one that is a ‘primary’ export led system to a ‘manufacturing’ led one and regional integration is becoming more important and a truism,” she added.

She said that a recent joint survey done by the World Bank and the Asian Development Bank stated that electricity, macro economic stability, exchange rates, access to finance and international market conditions are the key requisites for urban business development.

“However, rural businesses are afflicted by the lack of access to finance, the lack of trained human resources, high utility charges and poor transport,” she said, adding that it is important for the government to focus on resolving these issues that restrict the business development in the rural sector. “Infrastructure is also a real constraint in taking development to the regions. Electricity is the most serious obstacle to doing business in Sri Lanka. Less than 70 percent of rural enterprises use electricity from the national grid. Sri Lankan businesses also pay much more for electricity than their Asian neighbours. Transport quality and accessibility is another constraint. Lack of transport results in long delivery times, low productivity and absenteeism,” she added.