Northern businesses and entrepreneurs should compete with others coming from outside the region and not see them as a threat, a Sri Lankan economist and researcher has said. “ … I seriously feel that local businesses and entrepreneurs should not view competition from rest of the country or national/ international businesses as threats to their [...]

The Sundaytimes Sri Lanka

Northern entrepreneurs should welcome competition, not see it as a threat


Northern businesses and entrepreneurs should compete with others coming from outside the region and not see them as a threat, a Sri Lankan economist and researcher has said.

“ … I seriously feel that local businesses and entrepreneurs should not view competition from rest of the country or national/ international businesses as threats to their survival. Instead, the local businesses and entrepreneurs should strive to increase their productivity and enhance their competitiveness by learning from mature national and international enterprises,” noted Muttukrishna Sarvananthan, Principal Researcher, Point Pedro Institute of Development, Point Pedro.

He was making a presentation on “Challenges and Opportunities for the Economic Development of the North” at the 25th Anniversary of the Association of Professional Bankers of Sri Lanka held in Jaffna on Friday. Here are excerpts of his presentation:

Structural weaknesses

While the high value cash crops (such as tea, rubber and coconut) dominate the agriculture sector in the national economy, low value food crops (such as chilies, onions and paddy) dominate the agriculture sector in the northern provincial economy. Similarly, while private sector led manufacturing industries dominate the industrial sector in the national economy it is public sector dominated construction industries that dominate the provincial industrial sector.


The Jaffna district is the only district in the country that experienced a sharp decline in the population (-20.0 per cent) between 1981 and 2011 from 734,474 in 1981 to 588,378 in 2011. This is due to the exodus of large number of Jaffna population to other parts of the country and abroad as a direct consequence of the civil war between 1983 and 2009. The Jaffna district population accounted for 4.9 per cent of the total population of Sri Lanka in 1981, which almost halved to 2.9 per cent in 2011.

The former conflict-affected districts in the East and North (except Jaffna) have the youngest population in the country. Ampara, Batticaloa, Kilinochchi, Mannar, Mullaitivu, Trincomalee, and Vavuniya districts have the highest share of less than 15 years old population among the 25 districts in the country.

According to official statistics, while the unemployment rate in the country as a whole was 4.2 per cent in 2011 (and 4 per cent in 2012) it was almost double in Mannar district (8.1per cent) and more than double in Kilinochchi district (9.3 per cent) in the same year. I feel that the foregoing national and district unemployment figures are gross underestimations.

Low educational levels

According to the latest Household Income and Expenditure Survey 2009-10, while 14.7 per cent of the population in the country had passed the GCE O/L public examination, only 10.1 per cent of the Jaffna District population had passed the same. Similarly, whereas 11.2 per cent of the country’s population had passed the GCE A/L or above, only 7.2 per cent had passed the same in Jaffna. The educational level of the population in the Vanni districts is even worse than that of Jaffna.

Banking sector

Like most other sectors and sub-sectors this sector has been severely affected by the civil war. However, in the aftermath of the civil war there is an upswing in the financial sector’s growth in the north which is reflected in the recent data.

The most important opportunity for the financial sector in general and the banking sector in particular in the North (particularly in Jaffna) is the large pool of Diaspora spread throughout the world; especially in Australasia, Europe, and North America. Although remittances from abroad are the largest source of foreign exchange earnings to the country during the past decade it has not resulted in investments that could create employment opportunities locally. At least around 500,000 first and second generation Tamil Diaspora (who are originally from this region) are out there, which is equivalent to half the current total population of the North. However, we cannot find any significant amount of human capital, portfolio, or direct investments by the Diaspora in the aftermath of the civil war.

Unlike many other post-conflict countries around the world Sri Lanka has failed to tap the enormous human and financial resourcesof the Diaspora.

Investment options

‘Diaspora Bonds’ are sovereign bonds issued by governments to its own Diaspora in order to tap their assets in host countries. Diaspora Bonds is a long standing revenue raising mechanism for sovereign governments in many countries such as India, Israel, Philippines, and many Latin American countries that have huge Diaspora populations in affluent countries.

Although the Sri Lanka Development Bond floated by the Central Bank during the past five years are primarily (though not exclusively) targeted at the Sri Lankan Diaspora it has not exploited the potential to any significant extent for a variety of reasons. One of its limitations is that it is one of many revenue raising mechanisms for the government that is not specifically tied to a project or a region within Sri Lanka.

The private banking sector in Sri Lanka should develop innovative financial products such as the Diaspora Bonds in order to mobilise investment resources for specific projects or development of specific geographical area with which particular Diaspora groups have emotional bond. For example, development of an airport, harbour, highway, or a manufacturing industry could be financed through such Diaspora Bonds targeted at particular Diaspora populations who would potentially have an emotional tie to a particular project or a geographical area.


Businesses find it very difficult to borrow from the formal financial sector (by way of overdrafts or loans), particularly from banks. Rightly or wrongly businesses and the general public in the North feel that banks that operate in the North are primarily interested in mobilising their savings rather than lending for purposes of investment and thereby help revive local economies.

Under special circumstances such as this post-civil war scenario the banking sector should think out of the box and reach out to investors who could potentially create substantial number of jobs to tap the vast reserve of unemployed persons noted earlier. As a benchmark, at least half the amount of savings mobilised locally could be ploughed back into the local economy by way of lending to local businesses or projects.

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