A positive growth trend could be seen in the foreign-born population in many countries. Over three million Sri Lankans live outside the country and there were 267,000 registered migrants in 2018. However, the migration trend is slowing down, Prof. H. D. Karunaratne told the annual sessions of Sri Lanka Economic Association, titled ‘Impact of globalisation on Sri Lanka’s economy; challenges and opportunities’ in Colombo recently.
There is a change in migration and diversification trends, he said, adding that migration is an important part of the economy.
“Migrant worker remittances facilitate Sri Lanka’s economic growth. However, foreign worker remittance is stagnating at the US $ 7 billion mark at present,” he said.
Migration has a positive impact such as being receptive to different cultures, acquiring new knowledge, language learning and literacy in financial and ICT spheres, he said.
Dr. Dayaratne Silva said, “Trade integration will facilitate the economic growth of a country. Bilateralism and multilateralism provide the breathing grounds. These types of agreements came to the picture in the mid 90s, especially, bilateralism and are complex in nature.”
In 1990, there were 110 agreements and last year, it had gone up to 279 and a proliferation of FTAs could be seen. The share in world trade among FTA member countries increased from 28 percent in 1990 to 50 percent in 2011. However, this information is misleading as the comparison is not accurate, he said.
Low growth
“Political foreign policy objectives are based on FTAs which provide supply side flexibility and trade compatibility. However, it is important to note that the use of the GST facility offered by the European Union has dropped. It is necessary to implement domestic reforms, supply side reforms and removal of para tariffs which are anti-export,” he said.
Ms. W.A. Dilrukshini said, “We are struggling with low growth in the country. It is necessary to increase exports to drive economic growth. However, unsatisfactory macro economic policies have hampered the country’s progress.”
The rupee depreciated by 17 percent over the past year and the IMF program will support the country’s economy. However, improving national competitiveness is the way forward. Therefore, it is important to have a national competitiveness policy. The measures taken to improve Sri Lanka’s competitiveness will need broader level reforms, she said.
Prof. Indralal de Silva said there will be many implications due to the fertility upturn. The country could expect a population of 25 million by 2042 and 26 million in 2060. These are projections. However, Sri Lanka’s population will stabilise at 26 million by 2030.
“There will be a change in the age structure. The transition will have demographic dividends. We are expecting a youth bulge in the coming years. This will create an increased demand for houses, health, food production, education, energy, water, transportation and infrastructure facilities. There will be inevitable environmental degradation,” he said.
The changes in population structure will have serious implications. Therefore, political stability, creating a knowledge economy, increasing the level of savings and investment, commitment and minimising corruption are necessary, he said.
The demographic dividends will be available for a few more years. However, it will not be sufficient enough for the anticipated economic take off, he said.
Dr. Harsha Aturupane said, “Higher education is the most globalised sector in the economy. Among the benefits it offers are advancement of knowledge, technological development, cultural enrichment and internationalisation of higher education.”
Among the challenges higher education faces are the stress of change and excluded groups. The economic benefits of higher education are human capital accumulation and scope for human capital to flourish. The social benefits of higher education are democracy and good citizenship. The rate of return for higher education is highest at the university level and above, he said.
Poverty
There is massification in enrolment. Higher education contributes to social and cultural development. The forces of automation and innovation will shape future employment and routine cognitive skills. There will be new employment sectors coming up. The emotional aspect will need consideration. However, conventional universities continue to be teaching universities and need to be transformed into research universities. There is a need to convert intellectual capital into economic capital through innovation, research and development, he said.
Dr. Dilani Gunawardane said, “Poverty and inequality could be seen in various dimensions in the country. The highest poverty rate prevails in the Northern and the Eastern Provinces and Central highlands. These are the provinces that have contributed to make Sri Lanka a middle income country. The nutritional status is of concern though a big decline is not visible except in the North and the East which were deprived of potential for future growth.
“Women’s decision-making in relation to education is low and female employment is either a choice or compulsion. It shows the need for policy evaluation and gender sensitive budgeting. It is also important to analyse labour migration patterns, she said.
Dr. Nisha Arunathilake said, “Looking at population trends is important. The labour force is growing at a similar rate as the labour market. However, labour shortage means production cannot be at the optimal level. Foreigners will be a part of our population.” Free education, health and the labour shortage are not a numbers issue, but a skills issue. The fourth industrial revolution highlights the need for skilled workers, whose demand will increase in time to come.
Professionals comprised 40 per cent of the employed in emerging developed countries, and in Sri Lanka, it is 35 percent. This is mainly due to Sri Lanka not having a proper tertiary education system. In technical and similar sectors the number is 68 percent. The tertiary education sector does not encourage soft skills development. Sri Lanka needs to expand the tertiary education sector educating teachers and teaching professionals. “If we wish to have skilled workers, we need to have a solid foundation from general education,” she said.
Dr. Seetha Bandara said, “Sri Lanka has reduced multidimensional poverty. We do not have the same sample every time. This is a drawback in reaching poverty reduction targets. We need specific policies for each region. We need to go for a national sample to address poverty.
“Child poverty is alarming in Sri Lanka. This is due to low sanitation and low nutritional levels of children of migrant mothers, children in areas affected by the war against terrorism and the tsunami and children living in the beach belt. People living just below the poverty line are the most vulnerable group. They are prone to external shocks. These should be highlighted for policy directions and implementation. We can see a significant school dropout rate in the 14-15 age group,” she said.
Global integration
“There are 40,000 outsiders in Sri Lanka with or without visas. Over one- hundred thousand workers will be in the Port City. We may have to consider increasing the retirement age as a policy issue, she said.
Dr. Nandalal Weerasinghe said there are several links due to global integration in goods, services, human capital, trade and the digital world. We are now in a completely different era of global integration. However, Sri Lanka’s performance during the past decade has been far below potential despite improvement in certain categories of trade and services,
“Trade openness in Sri Lanka was only 51 percent in 2017 compared to 136 percent in Malaysia, 122 percent in Thailand and 200 percent in Vietnam. Sri Lanka’s export performance lags behind compared to regional peers. Due to lack of diversification, export composition has been stagnant. Lack of progress in the tradeable sector is only a part of Sri Lanka’s persistent twin deficit phenomena. Fiscal policy, large deficit in current account, trade and investment are issues.
“We need to have fiscal and monetary policy reforms to address the current account deficit and it is necessary to have macro economic stability. We need to boost merchandise and services exports and attract export-oriented FDIs to generate non-debt creating foreign inflows. It is important to develop goods trading and entrepreneurship skills However, we face the issues of Brexit, USA-China trade war which resulted in slow growth of global trade,” he said.
C.P.J. Siriwardane said, “Banking is a high-tech business. This is a global trend. There are 33 banks including 13 foreign banks in Sri Lanka. The asset base in the banking sector is Rs 12 trillion. There is an increase of three folds from 2009. The capital base is over Rs. 1 trillion. There are 3,500 bank branches all over the country. We see technology-driven operations. Technology was introduced to the banking system three decades ago.
The emerging technological advancement, ever changing customer needs, changing human resources and regulatory framework are concerns for the industry, he said. Among the challenges the sector faces are redundant capital due to technological development, data security and privacy, cyber attacks, heavy capital needs for technological advancement, more tech-savvy staff and lay-off due to redundancy, proper maintenance of BCP and DR site, competition from fintech, big tech, AML, CFT related issues on KYC (Know Your Customer) and the rising trend of cryptocurrencies, he said.
The banking sector will surpass a Rs 30 trillion asset base and new foreign banks will enter the country with the launch of the international financial centre which will shape the banking sector by 2025, he said.
Prof. S.S. Colombage said, “The twin deficits of fiscal and balance of payment (BOP), poverty reduction, employment generation and trade integration are the concerns that the country had at present. Sri Lanka is disintegrated from the global economy. GDP to exports and FDIs are not very impressive. The only consolation factor is the rise in remittances.”
“We depend heavily on commercial borrowings. Society created an anti-export bias and did not have consistent policies. Non-tradable goods production was encouraged. We have to be competitive. We are in the 85th position out of 140 countries in the global competitive index. The country’s competitive environment depends on the policy environment, efficiency, capital and labour, innovation and sophistication.
Macro economic stability depends on three pillars. We need to address the imbalance in fiscal management, mismatch in the education system, tariff structure which is complicated with 7,400 lines, para tariffs and levies, and an exchange rate policy not favourable to exporters.