With a domestic market of only 20 million consumers with a modest per capita income, Sri Lanka needs to look beyond its borders and increase its global competitiveness to sustain high and long-term growth.
To that end, Sri Lanka’s new Vision 2025 sets out a course of reforms to make the country more competitive and lift all Sri Lankans’ standards of living. These reforms range from the pressing need for labor law reform to restructuring social safety net programs and boosting technology acquisition and digitisation.
Here’s how Sri Lanka intends to transition to a more competitive and inclusive upper-middle income country and how the World Bank Group, a partner of nearly six decades, will continue supporting its development.
Sri Lanka’s Growth is Geographically Uneven
Vision 2025 pinpoints how unequal economic development across provinces has contributed to large income disparities in Sri Lanka.
Among a slew of programs focused on underserved communities and regions is the World Bank-supported North East Local Services Improvement Project, which helped improve infrastructure and the delivery of public services in isolated communities in the North and East Provinces.
Now completed, this project paved the way for the Local Development Support Project, which aims to improve the livelihoods of vulnerable populations and make local governance more efficient and accountable to citizens.
Other similar priorities comprise an expanding portfolio on infrastructure, including urban development, roads, flood protection and water supply. In this context, the Government’s commitment to supporting Private Public Partnerships (PPPs) to reduce reliance of public funds for infrastructure will require greater private sector financing. This is central to the World Bank’s strategy to maximize finance for development through the participation of the private sector.
Land Administration: A Constraint to Economic Development
Land administration in Sri Lanka is impeding economic development. As noted by the government, the island’s “archaic land policy” is “inefficient” and “underdeveloped” and reform is urgently needed.
Here is an all too common example:
In 2017, Kamala Wijesekera (name changed) is locked in a legal battle with squatters. It began in 2000, when Janaki, Kamala’s mother, originally welcomed new tenants to the Wikesekera’s ancestral home in Anuradhapura. But at one point, the rent simply stopped coming. Kamala explains that her mother finally filed a case in court but then Janaki passed away unexpectedly; still grieving, the family neglected the issue.
By the time Kamala tried to sort out the mess, the squatters were claiming they owned the land. Kamala first had to claim her inheritance—a relatively simple, though lengthy process. She then re-filed the case at the Anuradhapura court, and it’s been going on ever since. Court dates are so far apart, that they must wait six months for every appearance. Her former tenants often ask for continuances, delaying a resolution even further.
“The land is just there, totally unused,” says Kamala. “There is an empty house on it, falling to pieces…and this case looks like it could drag on for at least another five years.” Any plans to rent it out or sell are indefinitely on hold, a real downside at a time when the family could use the revenue. Kamala is glad that people have recourse to the law in such land disputes, but says that the bureaucracy is labyrinthine. “I just wish it didn’t take so long. We need a quicker process,” she says, adding, “This is a very common problem—there are many cases relating to land.”
As Sri Lanka gears up to modernize the sector, the World Bank is extending its support. Initial technical work on the status of land administration will be expanded to review broader constraints in the sector, and to expose stakeholders to international experience and good practice.
Coping with an Aging Population
Sri Lanka’s old-age income protection is not adequate for its rapidly aging population. Today, the Public Servants Pension Scheme (PSPS) covers about 10.3% of the labor force and provides a generous benefit at a high and growing cost of about 1.4% of GDP. The growth in civil service headcount and payroll suggests that pensions costs will only grow, testing state coffers.
Reforms are also needed for pension systems like the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF), to ensure they are a reliable support for an aging and vulnerable population, while also proving sustainable and affordable for the government.
The World Bank is committed to supporting the Government’s efforts to strengthen social safety nets. The main welfare program, Samurdhi, was established in 1996 and has a force of 26,000 civil servants but many of the beneficiaries have been in the program without review since its inception. Reform is long overdue.
Having identified many of the problems and possible solutions, the test of V2025 now lies in implementation.
Many critical steps have been taken toward realising the vision outlined in this document, but sustained commitment will be required to see it through. To see this become a reality, deep and system-wide reforms are needed toward reducing poverty and creating prosperity for all Sri Lankans.
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