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Developing the North to benefit economy
View(s):The formation of the Northern Provincial Council with a far-sighted and broad-minded Chief Minister provides an excellent opportunity to develop the North to benefit the entire economy. If this devolution of power leads to ethnic reconciliation and national harmony, it could have far reaching benefits for the Sri Lankan economy.
The economic development of the North would contribute to the development of the Sri Lankan economy, just as much as the development of any other part of the country contributes to the sum total of the country’s economic development. The larger significance of peaceful development of the North, however, is that it could lead to ethnic harmony and the generation of a solid and durable foundation for the country’s economic development. This is the real peace dividend: An economic stimulus that the country can now look forward to.
Macroeconomic bonus
Harmonious relations between the North and the South would have all-encompassing benefits that would benefit the entire country.
Social and political instability generated by the ethnic conflict has undoubtedly been the main stumbling block to the country’s economic growth and development. The post -liberalisation period ushered in high expectations of rapid economic growth and industrialisation. However, the July 1983 ethnic violence and its aftermath of terrorism and civil war shattered all hopes of rapid economic growth.
Successful devolution of power would inspire confidence among investors and lay the foundation for long-term business confidence. Foreign investors in particular are likely to look favourably at Sri Lanka. The much -needed foreign direct investments of the right types are likely to be attracted to benefit the entire country — not only the North. In particular, Japanese investors who have been deterred by ethnic tensions are likely to invest more owing to peaceful conditions.
Economic benefits
There are many benefits that could accrue with the development of agriculture, industry and services in the three districts of the North. The output of agricultural and industrial goods could be increased and services expanded and developed.
During the three decades of the war there have been significant global developments that can be of advantage. The revolution in communications opens up new economic opportunities in information and computer technology. The huge diaspora in Western countries offers possibilities of exporting products from the North, including ethnic foods and beverages. Jaffna’s global publicity and diaspora provide tourist opportunities. Remittances from family members from abroad would expand investment opportunities and improve social security.
Agricultural development
The manner in which the North is developed would have backward and forward linkages with the rest of the economy with mutual benefits. The development of the Northern region would increase output of agricultural commodities significantly. There would be an expansion of internal trade to benefit producers and consumers in the entire country. Production on the basis of comparative advantage would lead to a more beneficial utilisation of resources.
Prices of many commodities are likely to be lower for consumers. Some marginal and inefficient producers would no doubt be disadvantaged, but they could move to enterprises that are more beneficial to the country. There would be greater self-sufficiency in food as Northern agriculture improves and expands. Consumers would benefit from a wider variety of foods that the agronomic conditions in the North would enable.
Traditionally, agriculture was the backbone of the Northern economy with about one fourth of the economy dependent on it. There is already a resurgence of agricultural production in the North, though there are severe constraints. The Jaffna peninsula grows a variety of food crops that are consumed in the country.
The agrarian economy of the North must be transformed into a modern one where agriculture would be more productive and expanded and agro-processing developed. Nonetheless agriculture would be of lesser significance in the diversified economy of the future.
Industrial expansion
In the long run the real potential of the Jaffna economy lies in the development of industry and services. Several industries in the North could be revived and new ones established. The revival of the Kankesanthurai cement plant, the Paranthan Chemical manufacture and the Valaiachchenai paper industry, are among industries that could be revived. There are also plans to develop two salterns.
The development of infrastructure, especially roads, bridges undertaken by the Government is a big boost to the Northern economy. The restoration of the railway would be of much benefit to the economy. The development of the harbour and airport would also contribute much to the economic development of the North.
The potential for tourism in the north is evident from the large numbers currently visiting the peninsula. Tourism can be expanded considerably by improving accommodation and transport.
Social infrastructure
The development of education and technological skills, such as information technology skills, provides the means for new avenues of productive employment.
An important step has been taken towards ethnic harmony by the devolution of power to the North. A durable peace and ethnic harmony could usher in a new phase of economic prosperity to the North. The development of the Northern economy would have significant benefits to the Sri Lankan economy, not only through forward and backward linkages, but the benefits of ethnic harmony that is especially important for foreign investor confidence.
The full realisation of the potential of this move would depend on the integrity, honesty and hard work of the council and the assistance of the central government to support the economic development of the North. Given the limited powers and resources of provincial administrations, such assistance is vital for effective devolution and economic development.
While the central and provincial governments have important roles to play in improving infrastructure and fostering an investment friendly environment. It is private enterprises that must develop industry, agriculture and services.
Time will tell whether the recent political developments will achieve national unity and ethnic harmony to bring about an economic resurgence.
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