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Economists say comprehensive post-war economic plan needed Sri Lanka should increase ties with India, China - too much reliance on West
Monday, 31 August 2009 - 12:42 PM SL Time
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Economists said Sri Lanka should latch on to India and China and move away from over-relying on traditional export markets in Europe and the US.
`We have paid far too much attention to the export markets in the US and now we need to move towards the Asian giants and India and China. We have had an over dependence in the US market for our exports for too long,` Prof. A. D. V. De S. Indraratna, President, Sri Lanka Economic Association said.
Due to falling demand caused to the global financial crisis, Sri Lankan exports took a big hit, dipping by 18 percent during the first half of the year. The bulk of Sri Lanka s exports are to the US and the European region.
According to available statistics from the Export Development Board, in 2008 the US is ranked number one export destination with 23.2 percent of all exports, UK is second with 13.41 percent while Italy follows with 5.47 percent.
R. M. B. Senanayake, Vice President of the Sri Lanka Economic Association said Sri Lanka s export sector has no other hope but latch on to India and China.
`In China, savings is about 40 percent so there is a lot of room for China to build its own consumer market, and this is something Sri Lankan exporters should take note of,` Senanayake said.
China and India have a steadily growing middle class providing enough opportunities for Sri Lankan exporters to grab niche markets in these countries.
`China and India would become the leading economies of the world so we need to get closer to them. We need to latch on to their economies if our economy is to grow,` Prof. Indraratna said.
According to the EDB, in 2008, India was the fourth highest export destination with 5.14 percent of total exports. China was not even on the top-ten list.
Prof. Indraratna and Senanayake made these comments announcing the Annual Sessions 2009 of the Sri Lanka Economic Association to be held on September 11 and 12 at the Galle Face Hotel.
The Theme of this year s sessions would be The Way Forward to Recovery from the Fallout of the Global Recession .
Prof. Indraratna said Sri Lanka s economy has not suffer as badly from the global economic crisis, compared with most other countries, because the banking sector was not as sophisticated and integrated to global financial markets. Sri Lanka s growth trajectory has been over the 6 percent mark mainly due to the strong performance in the agriculture sector.
Developing post-war economies of the North and East will have to first be focused on the agricultural and fisheries sectors as they have the potential to provide immediate livelihood and have the capacity to grow.
`But in order to benefit from the ending of the war, these regions must be integrated with the rest of the country as soon as possible which means improving connectivity,` Prof Indraratna said.
He also called for a comprehensive economic plan in order to realise economic development, one which allows for significant trade with India and China.
Analysts said both India and China have been increasing their footprint in Sri Lanka s economy over the recent past.
`China is emerging as superpower and they would understandably increase their presence in the region. It is the same with India. There is an obvious tussle going on,` Prof. Indraratna said in answer to a question raised about growing investments into Sri Lanka from both India and China and their involvement in infrastructure development activities, especially with China building Sri Lanka s Hambantota port and India the Norochcholai coal-fired power plant.
The domestic economy...
Prof. Indraratna and Senanayake both said Central Bank s tight monetary policy stance for the most part of last year was effective in bringing down inflation.
But both were concerned that commercial banks have not brought down lending rates on par with recent relaxations of Central Bank s monetary policy. `The Central Bank said the banks are being cautious when lending,` Prof. Indraratna said.
Senanayake said the credit cycle has been disrupted with credit to the private sector still at low levels.
`Business prospects are down, there is no hope. Government and big companies are delaying payments and this should not continue,` he said.
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