2nd July 2000

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World trade: challenges facing Sri Lanka

By Yukthi K. Gunasekera

Gains from greater engagement in world trade are enormous to both Sri Lanka and its population. For the people, increased trade means the availability of cheaper and a greater array and variety of goods.

The economy reaps the benefits of scale economies (individual production units or firms that operate at its utmost level of efficiency), increased competition which makes scale economies possible, technology transfer, and economic growth. The wealth of the nation in the twenty first century will depend on the extent to which Sri Lanka engages itself in the international web of trade.

The global economy of today is akin to a spider web: each national economy is inextricably connected to others like a network with goods and services flowing in all directions.

What Sri Lanka must do to compete successfully in the global marketplace?

Sri Lankan leaders should combine an integrated vision for the country with world-class planning, perhaps in the form of a set of five-year plans, as implemented in Singapore and South Korea.

A drawback since independence has been Sri Lanka's lack of a well-integrated, long-term national vision and the presence of a piecemeal approach to national planning, and even poorer implementation of those plans.

Sri Lanka must involve as many constituencies as possible in the planning process, especially political parties and the business community. The country also needs to develop a system of think tanks (professional research groups which offer policy perspectives to the leadership in a particular field) to assist in the planning process.

Think tanks might start off by ascertaining the reasons for the failure of the country's five-year plans so far, and offer guidance to avoid them in the future. The goal should be to formulate a national vision integrating solid economic policies that have long-term potential and application. Such a strategy will ensure continuity and consistency in policy and development, not to mention investor confidence in the country.

A crucial piece of national planning is the nation's commitment to provide a first-class education at all levels, especially gearing education toward achieving diverse and predetermined technological competencies. Equally important is to make English a compulsory subject in the curriculum from grades 1 through 10.

The education system must accommodate a curriculum geared towards providing a deep understanding and appreciation of the country's cultures and value systems. The government should tailor the curriculum to its economic agenda. Thus, it should give priority to technical training, public administration, management studies, computer science, and bio-technology.


Sri Lanka's primary challenge, of course, is political instability and violence brought about by the northern separatists. The cost of fighting the war, in terms of both financial and human capital, has been tremendous. The only solution to this would be to resolve the issue politically or otherwise and put a permanent end to the reign of terror, which has dictated terms to our national life for two decades.

Sri Lanka should commit itself to improving its infrastructure. Infrastructure includes provision of water and electricity.

The government must draw up an energy master plan for the next two or three decades detailing how it plans on resolving the energy crisis.

Sri Lanka cannot blunder its way to succeeding in international markets. It must do so with a clear vision and a set of goals in hand, preceded by careful planning and a total political commitment and economic will to succeed.

Sri Lanka needs a better work ethic. Reflected in the Korean work ethic is hard work, punctuality, attention to detail, enthusiasm, honesty, patriotism, professionalism, love of family, and a healthy sense of humour. Sri Lankans need improvement in all these areas, except perhaps in the last! A national commitment to these values is essential if we are to excel in exports and draw overseas investments to our shores.


Sri Lanka's primary strength lies in its people. In a region where the literacy rate lags at below 50 percent, Sri Lanka enjoys a literacy rate of about 90 percent. The challenge is to attract, train, and retain an excellent community of teachers so that education of the country's youth will continue to be in competent hands.

Sri Lankans are conversant with a world outside their shores, are adept at social intercourse, possess a good sense of humour, excel in mastering foreign languages, and possess the requisite drive to play successfully in the international marketplace. The government should utilize these inborn personal characteristics to catapult the country to greater achievements in international trade and investment.

Sri Lanka enjoys an excellent geographic location. However, it is a sad commentary to have to admit that the country has not yet made optimum use of this strategic location right in the middle of international trade traffic between East and West. The location of not one but three main sea ports can be the base of a trade hub of the East, capable of easily surpassing Singapore in providing transshipment and other shipping facilities and services.

Many people would view Sri Lanka's economy as a drawback in the promotion of international trade and investment. On the contrary, because Sri Lanka has not invested in heavy industry and the world is moving away from this phase of development, it can simply leapfrog directly into the next generation: hi-tech communication industries.

Thus, Sri Lanka does not have the same problem Russia has in having to deal with obsolete mammoth industrial complexes. However, the country cannot achieve this transformation by merely giving the private sector a "free hand."

The political leadership must direct the private sector to maximize the export-led-growth effort.

The "Industrial Strategy for Sri Lanka" offers special incentives to investments in, among others, electronic- and information technology, agro-based industries, light engineering and metal work, and industrial infrastructure.

The development of a light electronics manufacturing base, like computer assembly, would facilitate leapfrogging into the information age.

Thus, the industrial policy appears to be a step in the right direction of promoting a technological base which has long-term potential. It would have been a mistake, for instance, to promote heavy industry, which entails huge capital investments, environmental degradation, and quick obsolescence.

The ministry's efforts to help make the Board of Investment a one-stop service centre for investors are highly commendable: red tape often is a turn-off for prospective investors.

Call to action

Sri Lanka has many challenges ahead in playing successfully in the arena of international trade and investment. However, it possesses strengths that few other countries of our size and type possess.

Most importantly, its human resources. If the political leadership is committed to, possesses, and directs its political will to harness this strength, Sri Lanka can very easily outdo its poor post-independence economic record in a matter of years. The key is to promulgate a clear and integrated vision for the country and to strategically plan how to get there, and fast.

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