Nation building need of the hour

By the Economist

60 years after independence

On the eve of celebrating the 60th anniversary of regaining independence, we must live in hope rather than despair. Our hope lies in the expectation that the proposed interim solution to the national issue would be implemented and that it would lead to a durable solution. A general acceptance of the arrangement and its effective implementation would make an enormous difference to the economy.

We have on numerous occasions in this column stressed the importance of a durable peace to foster rapid economic growth. The irony is that this is well recognised even by the man in the street and yet there are shades of political opinion that oppose a settlement. The decisive question is whether we are in the direction towards peace that could usher in a period of economic prosperity for all.

There may be little to celebrate in as far as the economy is concerned. The current status of the economy is indeed depressing. A wave of high inflation that is symptomatic of the economic impasse we have got into is the foremost apprehension. The country’s public debt is around the size of the GDP, the foreign debt is about one half of this, debt servicing is a high proportion of budgetary expenditure, fiscal discipline is totally absent and government expenditure continues to outpace revenue by a significant proportion of GDP. The implications of these economic facts are that the economic prospects for the next three years could be daunting. The continuing high defence expenditure, the large trade deficits in the last two years, the external shocks of high oil prices as well as high prices of wheat, rice, milk and other imports are certainly causes for concern at this time of reviewing the economy sixty years after independence. Depressing though these current economic facts, there are long term achievements that we could celebrate. Let us turn to these.

First and foremost is the pride we can take in the country’s social development indicators. The achievements in education and health are impressive. The country has achieved considerable progress in social development during the 60 post independent years. Foremost is the fact that life expectancy at birth increased from around 55 years at independence to 74 years; adult literacy increased from 57.8 per cent (1945) to 91 per cent at present. A significant indicator of progress is the fact that female literacy improved more sharply from 43.8 per cent (1945) to 90.6 per cent, while male literacy increased from 70.1 per cent to 92.5 per cent. An adult literacy rate of over 90 percent, low death rates, improvements in housing and amenities, high rates of school enrolment are among those achievements. School enrolment of children between the ages of 5 - 19 years increased from 54.1 per cent (1945) to 75.2 in 2003. Primary net school enrolment rate is 97.8. Female school enrolment, which lagged behind male school enrolment has caught up and is higher than male enrolment. There have been significant improvements in maternal mortality, infant mortality and under 5 mortality. All three of these are vital indicators of health conditions. Maternal mortality rate decreased from 560 to 100 per one hundred thousand live births in 2002, while infant mortality declined from 82 to 11.1 per thousand in 2003. Under 5 mortality declined to less than 19 per thousand.

These improvements are reflected in the Human Development Index (HDI) that measures the development of a country from a broader perspective than per capita incomes. The HDI is at 0.755 (2004) and the country ranks 93 of 177 countries. This ranking is higher than those of other South Asian countries, with the exception of the Maldives. It is also above those of most countries at similar levels of income. The country has also already achieved most of the Millennium Development Goals (MDG) set for 2015.Although these attainments over the entire period are quite impressive, the economic strains of the 1970’s were responsible for a deceleration in their improvement. For instance, a literacy level of 87.2 per cent that was attained in 1981 declined to 86.9 per cent in 1991 and has now risen to 91 per cent. Similarly school enrolment that rose sharply to reach 70 per cent by 1981 increased only marginally to 73.4 per cent in 1991 and is only 72.8 per cent now. With the initial growth in school enrolment the expectation was that near full school enrolment would be achieved. This remains a goal with the primary school enrolment at 97.8 per cent owing to pockets of acute poverty.

Although many economists characterise Sri Lanka’s economic growth experience as inadequate, in fact the statistics indicate that the economy has not fared badly. Over a 60 year period a growth of over 4 percent is in fact an achievement. Rapid population growth in the first three decades after independence, itself the product of the achievement in social development, brought about economic strains. Per capita incomes were depressed owing to the high population growth. Nevertheless per capita incomes quadrupled in the sixty years. The growth performance in the last three decades is in fact more impressive, touching over 5 per cent per year on average.

What then are the reasons for the dissatisfaction in the economic performance? At independence the country had good initial conditions. It had a reasonably good economic and social infrastructure, fairly well developed institutions, and economic conditions were favourable. The country was well ahead of most Asian countries other than Japan and Malaysia. However East Asian and South East Asian countries have overtaken us in their economic performance. The most notable example is that of Singapore. Malaysia and South Korea are among the other countries that have outpaced our development by much. Even with respect to social and human development, countries in East Asia and South East Asia, such as Singapore, Malaysia and the Republic of Korea that were behind the achievements of Sri Lanka in the 1950s and 1960s, have overtaken the country.

The economic record of the country has been described as one of missed opportunities and one that was far below the potential. The reasons for this inadequate economic performance lie very much in the domain of nation building and good governance. In both these areas the country has failed badly. Once again the nation may have the opportunity to begin a forward march in nation building.

Will the country seize the opportunity to progress as a united country or opt to continue in chaos and be satisfied with less than the potential in economic growth and poverty?