Financial Times

Sri Lanka should look at new areas of manufacture
By Chaturi Dissanayake
Sri Lanka needs to focus on real core manufacturing, according to Dr Howard Nicholas, an international economist of Sri Lanka origin. Speaking to The Sunday times FT during a recent visit to Sri Lanka from the Hague where he is based, Dr Nicholas said – referring to past government policies -- that “quick fixes such as turning Sri Lanka into the financial hub of Asia or the technological hub will not work.”

Contrary to general opinion, the tsunami has actually helped Sri Lanka in terms of the economic growth as there was an increase in the economic activity and foreign exchange that flowed into the country.

However the rapid economic growth the country experienced last year which was a direct result of the increase economic activity, will slow down a bit this year to a growth rate of 4.5 %, the economist, who set up Econsult, a widely-recognised economic research agency in the 1990s, noted.
He said Sri Lanka should look into new areas in manufacturing as well and try to keep profits within the country not let it go out of the country, one of the arguments of the JVP.

Dr Nicholas suggested that economic nationalism could play a major role in Sri Lankan economy adding that investors should make profits and reinvest it in the country, saying that the government has taken a step towards this in implementing the 300 factories programme under Mahinda Chinthana.

While it is important to allow foreigners to come into the country as Sri Lanka needs technological expertise, industrial knowledge and access to the world markets through them, it is also very important not to let them suck us in, he added.

Dr. Nicholas said infrastructure here needs to be developed into a much greater level if “we are to attract investors to Sri Lanka.” Referring to the fast growing Chinese economy, he said that the Chinese don’t need the capital but have made their country attractive to foreign investors because they need their technology. “Foreigners don’t want to come to Sri Lanka when they have the option of going to China; so we have to make our country an attractive place to invest. Sri Lanka has to take a good look at the East Asia and learn a few lessons such as productivity, competitiveness, and commitment without which we can’t expect much from an economy.”

Dr. Nicholas is opposed to following the policies of the IMF and the World Bank mindlessly as the country has been doing for so long saying that they don’t have any interest in developing the country.

According to him Sri Lanka has the human capacity that is second to none. It is the attitude that has to change in the people; the country should not underplay the skills and expertise of the local and employ foreigners.

Referring to the downfall of the American economy, and the dollar depreciating according to his expectations, Dr. Nicholas said that it would be better to play safe and look at the European and Japanese markets which are emerging in the world economy for exports. “America will anyway reduce imports so it is better to diversify from the American market at this stage,” he said.

Back to Business