Digitalisation can add momentum for economic rebound
The Sri Lankan economy is deteriorating continuously, nor, recovering from the COVID-19 pandemic. Growth will further ease in coming years, and inflation will accelerate, according to our latest economic projections in May. These outcomes are not only due to the external shocks such as the pandemic, and the ongoing war in Ukraine, but also due to the results of continuous internal, poor financial and economic managements. All of them pose substantial risks to the near-term outlook. The economy also faces longer-term headwinds from an aging and shrinking population, stagnant productivity growth and major climate change risks. Challenges come after challenges. Many challenges highlight the importance of efforts to enhance economic growth that can foster inclusion, build confidence of youth, reduce inequality, and ensure a sustainable future.
This brief write up is not armed to answer all of the said issues. It only shows, based on our recent studies, how scaling up digital investment enhance growth momentum of the country. The digital-led growth along with full implementation of growth-enhancing reforms that increase labor supply and productivity could boost gross domestic product and the economy.
Digitalisation, importantly, could provide additional growth momentum. The COVID-19 pandemic has become a good opportunity for digitalisation. Several countries converted much of their activities into the digital mode. Financial transactions are converting online. However, in Sri Lanka, we are heading back to conversational paper-based work and procedures. This structural weakness was further underscored by how many employers struggled to make the shift to remote work when the pandemic began, reducing economic output and sapping productivity at a crucial time. Paper-based procedures hindered government responses to the outbreak and the recent economic crisis. Adoption of cashless payments and e-commerce has also lagged. Faster digital transformation with government support would boost productivity and growth. ICTA can work as the Digital Agency, to speed digitalisation of central and local governments and the private sector.
Lawmakers must abolish most of the authorisation of documents. Converting to electronic signatures from traditional stamps is an important one because it allows for digitalising administrative procedures that make governments more efficient. Other key priorities in accelerating adoption of digital financial services include enhancing public trust by augmenting financial and digital literacy; improving connectivity between different cashless payment platforms; and strengthening data privacy, consumer protection, and cyber-security. Policy support should be carefully designed to mitigate any potential harm for workers and citizens. Providing training and career opportunities for those without lifetime employment, who are mostly women and elderly, will help raise productivity and wages. Better corporate governance and reduced regulation would boost productivity and investment. Digital transformation will also support green growth to achieve sustainable development goals gradually. Together, this brief note shows how Sri Lanka can make the most of the disruptions from the pandemic and the deadliest economic crisis to push through reforms that lift productivity and economic growth.
(The writer is attached to the Faculty of Graduate Studies, University of Colombo)
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