Potential of free flow of capital, talent and ideas to help Sri Lanka grow
Sri Lanka is not on a great wicket economically. FDI into Lanka is one of the lowest in the world. Sri Lankan exports as a % of GDP have been on a severe downward trend with skilled capital exports accounting for just 13 per cent of current total exports, only Bangladesh is lower in the region.
We also have one of the least diversified baskets of export in the region, and in comparison Malaysia and Thailand have a much more diversified portfolio. We can certainly do better, but that will not happen in a vacuum and will certainly not happen by chance. It needs action and sound and bold political policy making.
At a recent discussion that was conducted by the World Bank together with the Ministry of Development Strategies and International Trade some of the ideas stated below were discussed. The implementation of the below mentioned recommendations will play a major role in the hopeful turn around for the Lankan economy.
Strategically opening up the economy
We should be a country where the flow of capital should happen with the least number of obstacles. One of the contributing factors for the low FDI is the low confidence by investors with regard to the flow of capital.
As a country, we should be far more open to the free movement of skilled labour. Currently there is a push for this to happen within the government.  This should be supported. We should develop a very high skilled workforce, and where there is a lack of skilled labour we should be able to import it swiftly.
We should be able to change economic direction depending on context. For far too long governments have picked up ‘winners’ and continued to back ‘losers’. No one really knows what will be a winner, whatever is working we need to back and embrace change. This is not currently happening in the island.
The government must make an effort to invest more in research and development. This must be done for us to prosper as a nation. Currently the investment in R&D is at 0.16 per cent compared to 4.5 per cent of GDP that for example Israel spends. Growth will cost money, and we should invest more. It will be difficult to expect the private sector to invest in R&D at the initial stages, since its high risk and does not help short-term profit, so this will have to come with support from the government where possible.
We should aim for opening up the economy. The main reason will be to attract FDI investments into the country. Sri Lanka should be a base for both export of high value products (technology backed) and services. This will only be possible by being an open economy. Currently there is too much protection for inefficient local industries. Competitiveness will also drive much innovation.
Finally, we need to be able to execute. These decisions need to be made and executed on, only then will we reap the rewards of the changes we make. One must also be aware that these investments and policy direction changes will take time to manifest, leading to changes over time (5-7 years).
(The writer is the co-founder & CEO of takas.lk and views in this article were made at the session held on March 2 on ‘Strategic Brainstorming on Innovation and Entrepreneurship’. Takas.lk or its management does not necessarily share the ideas contained here)..