DIGEST 2017 - ISSUE ONE

06 Regional Economic
Integration in the
Bay of Bengal

12
Bridging the
Persons with Difficulties
in the Sri Lankan
Labour Market

22 Sri Lankas Debt

Overhang:
Getting Better,
or Worse?
Skill Gap
48 Microinsurance in
Sri Lanka:
Big Opportunities,
Small Outreach
CONTENTS EDITORIAL Previous Issues
04 30 48 It is with a heavy heart that I pen this Editorial, wrecked by a series of unfortunate natural disasters
A Visionary, whose Legacy was Four Lessons from the Microinsurance in Sri Lanka: as we mourn the loss of IPS visionary Executive most of which are caused by irresponsible human
Built on Humility and Humanity Pakistan-China FTA for Big Opportunities, Small Director, Dr. Saman Kelegama, who passed away behavior. Every time Colombo and other urban
- Condolence Messages Sri Lanka Outreach unexpectedly in June. Dr. Kelegamas name is areas are flooded, with devastating consequences
revered among economists and academics, not to human lives and infrastructure, we are reminded
just in Sri Lanka, but also in South Asia. Leading about the poor measures employed to dispose and
32 the IPS since 1995, his goal was to establish manage wastewater in Sri Lanka. However, just as
06 Oceans and Sri Lankas
50 the institute as an influential think tank in the soon as the rains stop, the issue is conveniently
region that accelerated socioeconomic progress forgotten. According to Athula Senaratne, an effective
Regional Economic Integration Future: Towards a Blue World No Tobacco Day: Where through excellent, and independent policy-oriented system to efficiently manage effluence, as well as
in the Bay of Bengal 16 Economy Does Sri Lanka Stand? research. The legacy he left behind is testament to
his character IPS is a reflection of his diligence,
a sense of personal responsibility when disposing
wastewater, are both essential to solving the
The Dwindling Stitching strong work ethic, and inspiring leadership. Those problem.
Hands: Labour Shortages in
34 52 who were lucky enough to cross paths with him
08 the Apparel Industry in
Sri Lanka Pay as You Throw! A Solution Unite to End Tuberculosis
will also attest to the fact that he was incredibly
humble, patient, and kind, despite his world-class
Tied to this is the challenge of addressing the
mounting garbage crisis. The tragic event in
Combating Labour Shortages to Sri Lankas Mounting achievements. As such, it is fitting that this issue Meethotamulla, where the decades-old garbage
by Mobilizing Sri Lankas Youth Garbage Issue? of the Talking Economics Digest is dedicated to his dump collapsed, killing several residents of the
to Be Economically Active 18 54
memory. area, and causing irreparable damage to houses
surrounding it, was a wakeup call for citizens and
Role of IPRs in Stimulating Breaking the Silence on In our opening article, Dr. Kelegama explores the policymakers alike. However, macro-level strategies
Innovations Depression: Challenging Task role of the Bay of Bengal Initiative for Multi-Sectoral, to process garbage are not sufficient to combat
for Sri Lanka Technical, and Economic Cooperation (BIMSTEC) the problem. Given the magnitude of solid waste
in using its two key functions - market-driven generation for collection by local authorities, and
integration and government-driven integration the scale of negative externalities in the process,
20 to gain economic benefits to countries in South Bilesha Weeraratne argues that it is only reasonable
Come Together Raising
56 and South East Asia. A collection of other articles to expect citizens to also become more responsible
in the Digest also explore issues of trade and in their waste disposal. She proposes a pay-as-you-
Standards in the Sri Lankan IPS News
global assimilation, such as proposed Free Trade throw system as a way of reducing the burden of
Pepper Industry Agreements (FTAs), the effect of regaining GSP Plus, collecting and disposing garbage. Overall, people
and challenges faced by the export industry. also need to be more connected to the environment Executive Director
57 and be considerate towards nature, as Kanchana
Wickramasinghe duly points out. Saman Kelegama
22 IPS Publications
The theme of this edition of the Talking Economics
Digest is Bridging the Skill Gap. As Priyanka
Sri Lankas Debt Overhang: Jayawardena notes, the mismatch between the In addition, the Talking Economics Digest sheds Deputy Director
Getting Better, or Worse? 36 demand and supply of skilled employees is the light on a wide range of topics including the looming
Managing Wastewater in Sri 58 Achilles heel of Sri Lankas labour market. If Sri threat of the debt overhang, the economic and social Dushni Weerakoon
Lanka: An Uncomfortable Lanka is to achieve Sustainable Development Goals costs of health issues, such as depression, hiding
Authors & TE Team (SDGs), attract more Foreign Direct Investment in plain sight, innovations and intellectual property
Reality Talking Economics Team
10 24
(FDI), and become competitive in the global market, rights, the concept of Blue Economy, and poverty.
a skilled labour force is a must, and quality higher Aptly, a well-articulated interview by Mr. W. A. Janaka Wijayasiri
Bridging the Skill Gap: A education and training is the key to achieving this Wijewardena, former Central Bank Deputy Governor,
GSP-Plus: An Elixir or Just
Challenge in Sri Lankas Quest
Palliation for Sri Lankas 38 goal. However, the skill gap is not the only pressing gives a glimpse into the life of Dr. Kelegama.
Bilesha Weeraratne
Kithmina Hewage
for Economic Growth issue in the Sri Lankan labour market; low female
Export Woes? Connecting People to Nature: A Shihara Maduwage
labour force participation, labour shortages, and We hope that you find the latest edition of the Talking
Need of the Hour for Sri Lanka
holes in the education system are some of the major Economics Digest interesting and thought-provoking Charmaine Wijesinghe
obstacles that diminish labour market productivity in and most importantly, that it will inspire policy
12 26
Sri Lanka. This year, IPS annual flagship publication, discussions on some much-needed economic and IPS Photo Credit
Persons with Difficulties in the
40 Sri Lanka: State of the Economy 2017, also centers social reforms. As always, we welcome your thoughts
Crunching the Numbers: What around the theme Demographics, Labour Market, and insights which can be posted on our website. Roshan Kaluarachchi
Sri Lankan Labour Market Status of Poverty in Sri Lanka and Growth.
is the Real Export Benefit of Based on Different Poverty Nalaka Liyanapathirana
GSP Plus to Sri Lanka? Lines
60 While we should be working to improve our human Shihara Maduwage Institute of
resources, we cannot ignore the natural resources Editor | shihara@ips.lk
14 Fast Facts surrounding us. As of late, Sri Lanka has been August 2017 Policy Studies of Sri Lanka
Womens Labour Force 43
Participation in Sri Lanka: An 28 100/20, Independence Avenue

Inquiry into the Key Social and Sri Lanka and the Pivot to Asia
Inside IPS : Saman Kelegama
Top Policy Researcher with a
61 Colombo 07, Sri Lanka
Tel: +94 11 2143100, +94 11 2665068
Cultural Constraints in the New Global Order Mission In a Nutshell URL: www.ips.lk
Blog: Talking Economics
Web: www.ips.lk/talkingeconomics
Twitter: www.twitter.com/TalkEconomicsSL
Copyright and Disclaimer
All material published in the Talking Economics Digest are copyright of the Institute of Policy Studies of Sri Lanka (IPS), unless otherwise specified. It cannot be quoted without due Design/Layout
acknowledgement to the IPS and the author. It cannot be reproduced in whole or in part, without the written permission of the IPS. The content, comments and posts of the Talking
Economic Digest and the IPS blog represent the views of individual authors and do not necessarily represent the views of the IPS. Shiran Sabar - Frontallobe Innovations

2 3
 Condolence Message A Visionary, whose Legacy was
by the IPS Board on Built on Humility and Humanity
the Passing of In Appreciation of Dr. Saman Kelegama, by the Staff of the Institute of Policy Studies of Sri Lanka

Dr. Saman Kelegama Those of us who have been fortunate enough to work with Dr. Saman Kelegama during his long and distinguished tenure at the
Institute of Policy Studies of Sri Lanka (IPS), first as a Research Fellow from 1990 and then at the helm as its Executive Director
from 1995, are immeasurably saddened by his sudden demise on Friday 23 June, 2017.

His legacy at the IPS was driven by three core beliefs that he held dear; foster independent thinking, secure financial stability,
It is with deep sadness that we, the members of IPS governing board, received the
and provide an enduring IPS identity. His ideas and vision have bequeathed to us a sense of all that is possible to achieve, if
news of the sudden passing of the Institutes Executive Director, Dr. Saman Kelegama.
there is drive and determination to pursue your dreams.
He embodied IPS from its early days. Saman had worked at IPS since 1990, and led it as
Executive Director since 1995. He spearheaded its expansion. More than anyone, Saman
The culture of independent thought that Dr. Kelegama nurtured has seen innumerable numbers of us returning to the IPS, time
made IPS Sri Lankas leading institution for economic policy research. He built the IPS
after time, on completing post-graduate studies or professional qualifications abroad. His mantra of you are representatives
endowment fund, got its new building constructed, and oversaw its move to its present
of IPS inculcated a spirit of commitment and self-belief in all of us. The liberal, free thinking environment fostered intellectual
offices on Independence Square. It is testament to Samans character and resolve that
growth of the many researchers who have passed through IPS doors and encouraged our team of support service professionals
he protected and preserved the independence and integrity of IPS as a non-partisan
to innovate and deliver. We believe it is this legacy of independent research and engagement in public policy discourse that is
research organisation, free of political bias. That is no mean feat in Sri Lanka. His legacy
Dr. Kelegamas enduring legacy, not only to IPS but to Sri Lanka and the wider regional community.
is a solid institution that will continue to be the lodestar for evidence-based economic
policy in Sri Lanka.
Dr. Kelegama understood from the outset that in order to sustainably build human capital, research capacity, and an efficient and
effective organizational machinery, long-term financial security is a must. He worked tirelessly towards this end from the outset.
We also note that Samans passing is a loss to the government and the country, and
On taking the helm as the Executive Director, his first priority was to secure a financial base for the IPS in 1995. His foresight
not just to IPS. Saman had a long record of public service, having served on numerous
and diligence allowed us to expand our activities over time and weather changes in fortunes when raising research grant funds.
government commissions and advisory boards, which included contributing to the
last Presidential Tax Commission. In the last two years he was especially active in
Dr. Kelegama was also passionately convinced that a growing organization must have an identity that is uniquely its own. This
government service as the leading official and adviser on trade policy in the Ministry of
he envisioned in the form of a permanent office for the IPS, custom built to suit our own requirements. He embarked on this
Development Strategies and International Trade. He played a critical role in Sri Lankas
journey as early as 2000. Again, his vision and foresight was commendable. It took him a further decade in which to realize his
trade negotiations with India, China and Singapore, and contributed to the formulation of
dream, when the IPS head office was ready for occupation in 2010. Through all the years of innumerable delays in obtaining
a new national trade policy strategy.
land and raising funds for construction, Dr. Kelegama persevered tirelessly against all obstacles, and personally oversaw the
project over a three year period until completion. His commitment to bequeathing a beautiful office in which we are so fortunate
Saman will also be missed beyond our island shores. He was a fixture in South Asian and
to work in will never be forgotten.
wider Asian policy networks; and thanks to him IPS is well embedded in these networks.
We are all moved by expressions of condolence from Samans and IPS friends
Through all his pioneering efforts to build a strong and stable organization, Dr. Kelegamas humility and humanity are perhaps
around the world.
what we will remember most. His career is too long and distinguished to detail here, but he was the most modest of men. On
most occasions, we, the staff of IPS, would find out the details of his numerous high profile appointments and accomplishments
The IPS board and staff will ensure IPS builds on Samans legacy. We would also like to
only well after the event or through other sources. Dr. Kelegamas belief was that you just get on with the job. His humility was
take this opportunity to express our heartfelt condolences to Samans wife, son, daughter
only surpassed by his humanity. No personal difficulty faced by a staff member was ever too small for a sympathetic hearing
and other family members.
from him. We must be sympathetic on humane grounds was his second mantra.

Dr. Kelegama left us too soon. We have lost a visionary head and the IPS will never be the same without him. But, we have all
gained from working with him. We want to thank him for his ideas and vision; he inspired us all, and his legacy will live on.

We offer our deepest condolences to Mrs. Kelegama, Chandana and Jayathri.

May Dr. Kelegama attain the supreme bliss of nibbana.

4 5
 Regional Economic
Integration in the Bay of Bengal
This article is based on the synopsis of the lecture delivered at the BIMSTEC Secretariat, Dhaka, on 19 February 2016. It originally
This year marked 20 years since the establishment of Bay of Bengal
Initiative for Multi-Sectoral, Technical, and Economic Cooperation
(BIMSTEC), a regional organization involving a group of countries in
South Asia and South East Asia, including Sri Lanka. To mark this
occasion, Dr. Kelegama, Executive Director of IPS, argues that the
two key functional aspects of BIMSTEC, which are market-driven
integration and government-driven integration, should be utilized
selectively to seek quick gains to the region.
The Bay of Bengal is rich in natural resources and embraces both South
and East Asia. Although a number of regional groupings like Bangladesh-
China-India-Myanmar (BCIM) and Bangladesh-Bhutan-Nepal-India (BBNI)
partially cover the region, it is the Bay of Bengal Initiative for Multi-
Sectoral, Technical, and Economic Cooperation (BIMSTEC) that covers the
entire region and provides a framework for regional economic integration.
BIMSTEC accounts for US$ 2.7 trillion GDP, 21 percent of global
population (1.3 billion population) and 7 percent of intra-regional
trade. BIMSTEC provides South Asian countries a conduit for economic
cooperation with East Asia countries and a link to East Asian production
networks and value chains. It can become a building block of a future
Asian community; however, the progress so far has been exceedingly
slow.
Launched in 1997, BIMSTEC began as a sectoral cooperation grouping
partly to better utilize the natural resources in the region and partly to
quicken integration of the region. Sectoral cooperation was broadened
by extending it to many selected areas normally referred to as Multi-
Sectoral Cooperation. Such cooperation is government-driven in contrast
to mostly market driven integration through an Free Trade Agreement
(FTA). BIMSTEC has identified a number of areas for sectoral cooperation
such as tourism, fisheries, transport, etc.
6 7
appeared on The Daily Star on 25 February 2016.
By Saman Kelegama
BIMSTEC also envisaged a market driven integration process when it
first mooted an FTA in 2004. It was supposed to be in full operation
by 2011, but did not become a reality by then. This is most probably
because some member countries of BIMSTEC questioned the need for
another FTA when the tariff levels in the region are already low. As it is
well known, via unilateral liberalization as well as through bilateral and
regional liberalization via the existing FTAs and RTAs (regional trading
arrangements) in the region, the tariff levels have come down. Despite
delays, a BIMSTEC FTA still remains in its agenda.
It is argued here that the two key functional aspects of BIMSTEC, which
are market-driven integration and government-driven integration, should
be utilized selectively to seek quick gains to the region.
As for market integration, BIMSTEC should not have high hopes on an
FTA coming into operation. Indications are that it will drag on for a long
time. In this situation, more emphasis should be given on trade facilitation
via liberal transit, business-friendly customs, transport corridors, etc.
Such a process will partly address some of the non-tariff barriers in the
region and catalyze trade. According to the ESCAP, Trade Facilitation is a
more powerful driver of trade than tariff reductions when tariff levels are
already low, and this argument is aptly applicable to BIMSTEC.
As for government-driven integration, it is prudent to focus on a few
sectoral cooperation projects related to connectivity and people-to-
people contact rather than spreading too thin by focusing on a large
number of sectoral cooperation projects. Road, rail and sea transport
facilitation through road and rail links, transport corridors, multi-modal
systems, transit arrangements, etc., which have been highlighted by the
2009 ADB Study on BIMSTEC Transport Infrastructure and Logistic Study
(BTILS) needs to be worked on to improve connectivity. Perhaps digital
connectivity may also be considered to strengthen physical connectivity.
People-to-people contacts can be improved by improving air connectivity
and tourism promotion via inter-governmental cooperation in the region.
Buddhist circuit is one such example for BIMSTEC tourism promotion.
For sectoral cooperation to be effective, there needs to be strong
institutions and information. Four areas need particular focus: BIMSTEC
Secretariat; BIMSTEC Chamber of Commerce and Industry; external
partners, viz., ADB and ESCAP; and interaction of the BIMSTEC network of
think tanks with BIMSTEC officials, and BIMSTEC Chamber.
A strong Secretariat is required to push the activities of the regional
grouping in between summits. The SAARC Secretariat has proved to
be an ineffective body, whereas the ASEAN Secretariat has been able
to drive the ASEAN agenda of the organization more effectively. The
BIMSTEC Secretariat needs to be similarly empowered like the ASEAN
Secretariat, and delegated by member states to play a more proactive
role in driving the BIMSTEC agenda. This becomes all the more important
in the absence of a Charter for BIMSTEC.
BIMSTEC working mechanism has six layers: a leaders summit;
ministerial meetings; senior officials meeting; expert group meetings;
business and economic forums; and BIMSTEC Working Group (BWG).
Basically, leaders summit to expert group meetings are at the inter-
governmental level, and the new BIMSTEC Secretariat has absorbed
all the work of the BWG. The business and economic forums should
basically be absorbed by the BIMSTEC Chamber of Commerce and
Industry located in Colombo, Sri Lanka. The Chamber should closely
coordinate with the BIMSTEC Secretariat and drive the BIMSTEC
economic integration agenda. The CUTS (India) proposal to have an
annual BIMSTEC economic summit should be welcomed and should be
closely coordinated with the BIMSTEC Chamber.
The external funder to facilitate BIMSTEC regional integration could be
the ADB. The role ADB played in sub-regional cooperation in the Greater
Mekong sub-region is well known. With the concurrence of the BIMSTEC
member countries, the BTILS project can be initiated by the ADB.
Thereafter, attracting additional funds to complete the project will not be
a problem. However, duplication with the initiatives of BCIM and BBNI
needs to be avoided. The Asian Highway that ESCAP suggested sometime
back can also be part of the BIMSTEC connectivity and ESCAP can
provide technical assistance to drive the project. Japan played a key role
with FDI in ASEAN economic integration, likewise ADB and other external
funding led connectivity improvement can catalyze BIMSTEC economic
integration.
Finally, the role of think tanks cannot be overlooked in regional economic
integration. They can play a crucial role as knowledge-partners of
BIMSTEC. It is understood that there is both a Track 1 and Track 2 think
tank networks for BIMSTEC. Both these tracks can interact with each
other and network with the BIMSTEC senior officials and private sector to
bring about necessary policy changes to activate sectoral cooperation.
When BIMSTEC started, Indias Look East policy coincided with
Thailands Look West policy and there was much enthusiasm to drive
the organization by these two member countries to integrate a part of
South Asia to the growing economies of East Asia. But since then, India
and Thailand had embarked on an FTA and India and ASEAN had worked
out an FTA. Thus both these member countries do not have the same
enthusiasm to push the organization for deeper integration as before.
The other member countries are less powerful and passive partners of
BIMSTEC. Thus BIMSTEC is no longer a member-driven organization, and
in this context, the Secretariat becomes vital in driving the organization.
Clearly, empowering the BIMSTEC Secretariat should become a priority
of the member countries to keep the BIMSTEC Work Programme moving
and producing gains to the people of the Bay of Bengal region.
 Combating
In a bid to improve Sri Lankas living standards, the government
envisages creating one million jobs in the next five years. On average, the
economy has been creating 60,000 jobs a year from 2011 to 2015. This
year olds). The major reasons for economic inactivity were household and other job related skills to improve their employability.
duties (47 per cent), studies (20 per cent), and being retired or being too
old to work (21 per cent). A significant proportion of youth are neither in education nor in
employment (NEETS). The proportion of NEETS more than doubles from

Labour Shortages
will need to be more than tripled to reach 200,000 jobs a year to create
one million jobs in five years. This article is mainly concerned with the economically inactive youth. 16 per cent to 37 per cent from 15-19 year olds to 20-24 year olds.
Figure 1 shows that youth enter the labour market late. Part of the delay
With labour shortages being experienced by most industries, one main in entering the labour market is because, youth stay in education longer. Although they spend more time in education, the educational outcomes

by Mobilizing challenge in reaching this goal would be in finding workers. In 2015, Only 11 per cent of 15-19 year olds and 45 per cent of 20-24 year olds of youth are not satisfactory. Of the 25-29 year olds, only 8 per cent
the country had an unemployment rate of 4.7 per cent (according to the are in employment. obtained a degree or a higher level of education. The rest did not have
Labour Force Survey of the Department of Census and Statistics). In any tertiary level qualifications. This indicates that although close to 20
per cent of youth are in education, they are studying to improve skills

Sri Lankas
A large proportion of youth are students (see Figure 1). Around 72 per
Figure 1: What are youth doing? rather than to gain qualifications that would enable them to undertake
cent of 15-19 year olds and 18 per cent of 20-24 year olds are students.
This is not surprising as many are 18 or 19 years old when they do their professional and technical level jobs.
A-levels for the first time. They have to then wait several months to get

Youth to Be
Policies for Improving Youth Labour Force Participation
their results. If selected, most have entered their twenties before entering
20-24 years

44.5 1.7 16.5 37.2

university. In comparison, in developed countries such as USA and UK, As noted earlier, many youth delay entering the labour market due to
most youth finish general education when they are 18, and come out of studies. But, only a few obtain tertiary level qualifications. Policies should

Economically Active
universities with four year degrees when they are 22. aim to reform general education so that individuals enter the labour
market when they are 18 years old, or continue to obtain tertiary level
Despite being students, only a small proportion of youth in education are education at universities or vocational training institutions. To achieve
in a university or a vocational training institution. Of the 15 to 24 year this, the efficiency of the education system will need to be improved and
By Nisha Arunatilake and Neluka Gunasekara
olds only 4.7 per cent were in university, and only 4.3 per cent were in restructured.
15-19 years

11.4 0.5 72.0
0% 20% 40% 60% 80%
Employed Unemp and in Edu/Train Not in LF and in Edu/training
Source: Authors calculations based on Labour Force Survey 2015 data.
Note: NEET* Neither in Employment nor in Education or Training. Unemployed who are not in education or
training are also usually included in the NEET category.
economy, a small proportion of the economically active are unemployed.
This is because new entrants to the labour market and those who are
changing jobs take time to find jobs - which in economic terms, is called
structural unemployment.
A majority of workers for the envisaged new jobs will have to come from
the currently economically inactive population. These consist mainly of
females, old persons and youth. Hence, policies for creating one million
jobs will need to specially target these population groups. According to
2015 labour force survey data, 75 per cent of the economically inactive
were females. Across age groups, 22 per cent of the inactive individuals
were aged 65 years or more, and 27 per cent of them were youth (15-24
8 9
16.1 Figure 2: Where are the youth studying?
Policies should aim at reducing the transition time between general and
Youth (15 - 24) tertiary education and ensuring that the education courses are completed
1.4 according to a schedule. Improving the efficiency of education will also
help to increase female labour force participation indirectly. If females
100% 4.3
enter the labour market in their early twenties, they are more likely to
8.9
NEET* gain several years of experience before their reproductive years. With
prior experience in the labour market, they are more likely to resume
4.7
School work after their reproductive years than those who never work. On the
University
other hand, engaging in education till their late twenties allows females
very little time to gain experience before starting a family.
Other Edu Inst.
Improving the quality of tertiary and vocational training, and making them
Vocational/Technical Inst.
80.7 more relevant to the market place can improve the early employability of
Other young people. Further, job-search assistance can facilitate job-matching
and ensure that young people receive training that is in demand in the
market. Given budget constraints, expanding publicly provided vocational
training may not be an option. Further, already a variety of institutions
Source: Own calculations based on LFS 2015 data
Note: Only students not in the labour force and studying are included in this analysis. are involved in providing vocational and technical training in the country.
Hence, the way forward would be to streamline the publicly funded
vocational training institutions. . Others are either in school (81 per cent), vocational and technical training sector, and encourage more training that
in other education institutions or are students who are not attached to are linked to existing vacancies, through partnerships with firms, training
any education institution. Many spend time and money improving their IT providers, and the government.

Bridging the Skill Gap:
A Challenge in Sri Lankas Quest for
Economic Growth
According to the Governments Economic Policy
Statement issued in October 2016, Sri Lanka
envisions achieving sustainable development
by linking the country to global supply chains
and increasing trade. The Government hopes
to create more exposure and opportunities
for entrepreneurs and skilled professionals in
various sectors, including the digital economy,
tourism and commercial agriculture, and to
attain the status of a modern manufacturing
economy. In this context, quality higher
education and training is crucial if the Sri
Lankan economy is to move up the value chain
beyond simple production processes and
products.
Sri Lankas human capital is an essential
resource in achieving the envisaged
development goals and transforming the
economy into a modern manufacturing one.
Thus, it is increasingly important for the
country to be equipped with new technological
innovations, and an educated workforce with
market-oriented skills. High quality human
resources with expertise in science and
technology and a skilled labour force are
necessary, specially to compete globally. Even
lower-skilled jobs increasingly require talent
and knowledge. As such, vocational training
and secondary education need to prepare
prospective employees for a complex, digital
work environment. Today, Sri Lanka faces a
10
major challenge in catering to these emerging
skill requirements. In this backdrop, this article
explores some policy options to bridge the
skill gaps to achieve the Governments stated
objectives.
A World Bank study on Building the Skills
for Economic Growth and Competitiveness in
Sri Lanka based on a survey of employers
perception of skill demand against the skills
available in the workforce reveals 56% of
employers consider that high-skilled workers
should have passed A-Levels, while 70% of
employers consider that low-skilled workers
should have passed O-Levels. But the real
situation is that, of the age 20 and above
population, only 17% have passed A-Levels,
and another 17% have passed O-Levels
(calculations based on LFS 2014 data). This
means that there is a significant gap in meeting
the skills demand of the country.
Also, today there is a rapidly growing demand
for soft skills especially English literacy and
IT prowess. Individuals competent in English
have access to better quality jobs with higher
salaries and benefits in the domestic labour
market, as well as internationally. The study
mentioned above reveals that about 80% of
employers expect higher-skilled workers to
know English and 40% employers expect
similar soft skills from less-skilled workers.
By Priyanka Jayawardena
Similarly, 75% of employers expect higher-
skilled workers to possess computer skills
and 38% of employers expect similar soft
skills from lower-skilled workers. However,
calculations based onCensus of Population
and Housing in 2012 show that, of the age 15
and above population, knowledge in English
literacy (ability to speak, read and write) and
computer literacy were around 22% and 23%
respectively, indicating a large skills gap.
Reasons for the Skill Gaps
Sri Lankas tertiary enrolment rate is low.
As of 2014, only 5% of 20-24 year olds were
enrolled in a university, while another 8%
were enrolled in other educational institutions
and only a 3% of the same age group were
enrolled in Technical Education and Vocational
Training (TEVT) courses (Figure 1). These
figures indicate that tertiary enrolment rates in
Sri Lanka are quite low, compared to those of
other countries in the region. For instance, Sri
Lankas gross tertiary enrolment rate (21%)is
below the averages for lower middle income
countries (22%) and upper middle income
countries (44%), according to the World Banks
World Development Indicators of 2014.
The main reasons behind Sri Lankas low
tertiary enrolment rate are capacity constraints
of the state university system, unavailability
of a proper parallel higher education system
with the private sectors involvement, and
underdeveloped TVET. For example, the Central
Bank of Sri Lanka (CBSL) Annual Report of
2016 shows that, of the 155,450 students
Figure 1: Engaged in Education 15-29 year olds, 2014
0% 10% 20% 30% 40%
15-19
20-24
Age
25-29
School University Other education institute
Source: Calculated using DCS, LFS 2014 data
who were eligible for university entrance from
A-Level exams in 2015/2016, only 18.6% were
admitted to state universities due to limited
placements. Consequently, each year, about
125,000 students who qualify have to abandon
their ambitions to enter a university (Figure 2).
Figure 2: Performance in National Exams, 2015
Entered to
university
25,624
Qualified to applying
for university
155,447
Sitting for A/L
255,191
Sitting for O/L
314,635
On the other hand, with regards to vocational
training, the transition from school to vocational
training is not smooth. A majority of school
leavers leave the education system after
their O-Levels and A-Levels. Each year, about
300,000 students sit for O-Levels but only
50% 60% of them passed O-Levels and
qualify to sit for A-Levels. Further, each year
about 250,000 students sit for A-Levels but
only 60% of them qualify to enter public
universities. Thus, each year about 130,000
and 100,000 students leave the school system
without succeeding at the O-Level and A-Level
examinations, respectively.
Owing to this situation, most school leavers
usually find unskilled work or engage in casual
jobs. For example, calculations based onCensus
of Population and Housing 2012 data show
that only 4% (470,000) of the age 25 and
50% 60% 70% 80% 90%
VT Does not attend
above population have degree level education.
Further, only around 10% of age 20 and above
population have formal professional or technical
training relevant to their occupation. However,
according to the World Bank study mentioned
above, about 60% of employers expect workers
in high-skilled occupations to have completed
125,000
University Qualified Students
NO ENTRY
Failed A/Ls
100,000
Failed O/Ls
130,000
technical or vocational education and training,
and 24% think low-skilled workers should
have received training. Thus, this limited
number of workers with higher education acts
as a constraint in meeting the labour market
demand for skilled workers.
Limited opportunities in the state sector have
resulted in the emergence of a parallel system
of non-state sector higher education, with
the establishment of private higher education
institutes (HEIs) many of which are affiliated
to foreign universities. There are concerns
among many stakeholders about the variability
in quality among private HEIs. For example,
the South Asian Institute of Technology
and Medicine (SAITM) was recognized as
a legitimate degree-awarding institute to
award the degree of Bachelor of Medicine and
Bachelor of Surgery (MBBS) in 2011, under the
University Act, but it has garnered opposition
from state university students and Government
100%
doctors due to certain concerns on standards to
be met and maintained, especially with regards
to clinical training. This is mainly because there
is no proper monitoring mechanism to ensure
the quality of the programmes offered by such
private HEIs.
Addressing Critical Concerns
School leavers are the prime target for specific
training and skills development programmes
aimed at meeting the skill demands of the
country. Thus, a minimum of two years of
training is recommended for students after
sitting for O-Levels, to address the skill gaps
of school leavers. Training programmes should
be more work-oriented to suit different fields
such as hospitality, construction, textile
and garment sectors, etc. Public-private
partnerships, and schemes of direct recruitment
to the industry through vocational education
and training institutes, are essential.
The expansion of higher education opportunities
in Sri Lanka have enabled many students,
who would otherwise have studied abroad, to
graduate locally at a considerably lower cost,
saving foreign reserves and minimizing the
outflow of knowledge (referred to as brain
drain).
However, policy makers have to ensure that
quality and standards are not compromised,
through effective monitoring and control
of private providers. The prevailing quality
assurance mechanisms and regulatory systems
have very narrow coverage, excluding the vast
non-state HEIs functioning independently.
Thus, it is necessary to strengthen the
regulatory mechanism of these institutes by
incorporating new rules and regulations. It is
crucial, therefore, to identify desired standards
of these institutions with respect to their
student recruitment criteria, fee structure,
academic programmes, quality assurance and
accreditation, etc. As in the case of SAITM, and
other institutes offering professional degrees,
the first intake should be allowed only after
the institute has obtained the compliance
certification from the relevant professional
body.
11
 Figure 1: Proportion of economically active 15 and above population, by gender and prevalence of difficulty Sri Lanka recognizes that every person
WHO IS A PERSON WITH DIFFICULTIES? has a right to earn a living, this include
Any person who, as a result of any deficiency in his physical or mental 90 persons with difficulties. Several policies
capabilities, whether congenital or not, is unable by himself to ensure for 75.6
78.5 and legislation to support persons with
80
himself, wholly or partly, the necessities of life is defined to be a person with BOX 1 disabilities have been enacted or adapted
difficulties in Sri Lanka. 70
in the last 25 years. These include: a) the
60 54.2 Rehabilitation of the Visually Handicapped
51.6
Protection of the Rights of Persons with Disabilities Act No. 28 of 1996 46.4
50 Trust Fund, Act No.9 of 1992; b); Protection
40 of the Rights of Persons with Disabilities
29.1 29.7 31.4
30 Act, No.28 of 1996; and, c) the National
16.2 Policy on Disability for Sri Lanka of 2003.
20
10
However, the share of population
0 economically active (i.e., either employed
All Pop with Pop All Pop with Pop All Pop with Pop
difficulties without difficulties without difficulties without
or unemployed) was much less for those
difficulties difficulties difficulties with difficulties, compared to those without
difficulties. This indicates that the labour
Sri Lanka Males Females
market for persons with difficulties is
Source: Constructed using data in Nisha Arunatilake, (2016), Labour Market Characteristics Thematic Report based on Census of Population not as favourable as that for persons
and Housing 2012, United Nations Population Fund, Colombo.
without difficulties (see Figure 1). It is
noteworthy that the unemployment rate
Figure 2: Total employed population, by employment status and prevalence of difficulty
(the unemployed as a per cent of those employed or available
50.0 for work) was lower for persons with difficulties, compared
46
45.0
to persons without difficulties. This is not unusual; when it is
41 difficult to find work, people stop looking for work or give up
40.0 hoping to work.
35.0 33
32
Even the persons with difficulties were more likely to be in
30.0
vulnerable employment (i.e., either unpaid family workers or
25.0 own account workers, who usually do not benefit from social
20.0 security provisions enjoyed by persons working in the formal
16 sector). As shown in Figure 2, close to half (46 per cent) of
15.0
persons with difficulties were own account workers and a
10.0 9
8 larger proportion of them were unpaid family workers. Access
5 to government employment was also less for persons with
5.0 3 3 2 3
difficulties.
-
Total employed without difficulties Total employed population with difficulties
Policy Recommendations
Government employee Semi Government employee Private sector employee
Employer Own account worker Unpaid family worker Given that the proportion of persons aged five and above
Source: Constructed using data in Nisha Arunatilake, (2016), Labour Market Characteristics Thematic Report based
population experiencing a difficulty is notable, it is prudent to
on Census of Population and Housing 2012, United Nations Population Fund, Colombo.Note: For employed population strengthen policies to improve labour market participation of
15 and over.
persons with difficulties.

Chitra is a language teacher at the high school near her home. She is

Persons with Difficulties

well loved by her students. But, her class room is different it is brightly
lit, all the time. Chitra is only able to see in bright light. Despite this
seeing difficulty (see definition of a person with a difficulty in Box 1) she
Sri Lanka considers employment is a right for all. The current
initiatives by the government to train and assist persons with difficulties
to obtain employment can be improved further. Possible policies for
improving labour force participation of those with difficulties could

in the Sri Lankan

has studied well and obtained a degree. The principal in the school she include, affirmative action to facilitate employment opportunities for
is now teaching was able to recognize her talents and was willing to persons with difficulties, assistance to firms to modify their work spaces
provide a brightly lit class room for her, so she will be able to overcome to accommodate persons with difficulties, formal recognition of firms
her difficulty. But all persons with difficulties are not as fortunate. employing persons with difficulties, tax concessions for employing

Labour Market
According to the Census of Population and Housing (2012), 1,617,924
million (or 87 per every 1000 persons aged five and above population
in the country) have either partial or full difficulties in seeing, hearing,
By Nisha Arunatilake
walking, cognition, self-care or communication. Amongst the different
types of difficulties, the most prevalent difficulty is in seeing. For every
1000 persons, 54 persons have difficulties in seeing. Other difficulties (in
order of prevalence) are: walking (39 per 1000 population), hearing (21
per 1000 population), cognition (18 per 1000 population), self-care (11
per 1000 population) and communication (10 per 1000 population).
12
persons with difficulties.
Inclusion of persons with difficulties in employment can start with the
public sector. The results show that the public sector can do more to
provide employment to persons with difficulties. The share of persons
with difficulties employed in the public sector was less than for persons
without difficulties.
(This blog draws on a study by Nisha Arunatilake (2016), Labour Market
Characteristics Thematic Report based on Census of Population and
Housing 2012, United Nations Population Fund, Colombo. )
13
 World Day of Social Justice, a commitment, made by the UN in
2007, is rooted in the ILO Declaration on Social Justice for a Fair
Globalization and focuses on guaranteeing fair outcomes for
all through employment, social protection, social dialogue, and
fundamental principles and rights at work. Unsurprisingly, an
important focus of this commitment is the economic empowerment
of women and girls. According to the United Nations: Observance
of World Day of Social Justice supports efforts of the international
community in poverty eradication, the promotion of full employment
and decent work, gender equity and access to social well-being for
all.
It is in this context that this article chooses to examine the status of
female labour force participation (LFP) in Sri Lanka. In doing so, it
recognizes the enduring positive impact of female LFP on broader
economic outcomes and, more importantly, on poverty alleviation
and social protection among women.
Labour force participation, as defined by the ILO, is a measure of
the proportion of a countrys working-age population that engages
actively in the labour market, either by working or actively looking
for work. According to 2015 estimates, the rate of labour force
participation among women in Sri Lanka is 35.9. This means that
a disproportionate majority of women remain outside the labour
market, with no access to wages, pensions and other benefits tied
to gainful employment.
While evidence points to several pervasive constraints on womens
participation in the labour force ranging from protectionist
Beyond macroeconomic impacts, labour force participation is also While socio-cultural perceptions and attitudes impact a womens
fundamentally important for poverty alleviation and economic decisions to enter the labour force, these factors also influence hiring
development. Women constitute a majority of the poor and increasing practices. A recent study conducted by the ILO titled Factors Affecting
access to wage employment is critical to ensuring that women have the Womens Labour Force Participation in Sri Lanka (2016) reveals the
means to overcome persistent poverty. extent to which socio-cultural norms and perceptions hinder womens
access to employment opportunities. Although the study did not find
evidence of overt discrimination, it found that gender stereotyping led
Socio-cultural Constraints to Female LFP
to indirect discrimination in the hiring process. For example, Key Person
Interviews in the study revealed that managers were more likely to hire
Evidence from studies on female LFP in Sri Lanka reveals that household men due to extraneous considerations such as higher probability of
income and status of wealth play a significant role in determining a women having family responsibilities.
womans decision to seek employment. Studies such as Guntalika
(2013) show that receipt of remittances and earnings of male household Policy Recommendations and Conclusion
members deter labour force participation among married women and
female heads of household. While it is hard to locate the precise driving
While the Government of Sri Lanka has recognised the need to address
force behind this trend, it is safe to posit that these trends are largely
the low rate of participation among women in the country, its focus has
reflective of traditional views on male and female income earners.
not been on addressing these
cultural norms and practices that
Figure 1: GDP Losses Due to Economic Gender Gaps in Select Countries (as a % of GDP) continue to hold women back. If
Sri Lanka hopes to tap into the
40 productive potential that women
hold to stimulate growth, it must
35
work to change the pervasive
30 perceptions around womens
work. It must also work to develop
25 greater support systems for women
20
who continue to operate within
current socio-cultural frameworks.
15

legislature to the lack of access to vocational training it has 10

For example, the state should
become increasingly evident that social and cultural factors play consider the provision of affordable
a defining role in determining womens inclusion in the labour 5 (perhaps publicly financed) care
market. These cultural constraints primarily stem from negative services that would reduce the
0
attitudes towards womens work as well as societal perceptions of burden of unpaid care work

Dominica
Ecuador
Greece
Italy
Japan
Honduras
Paraguay
Philippines
Chile
Indonesia
Mexico
Panama
Costa Rica
Djibouti
Belize
Guatemala
Malaysia
Maldives
Mauritious
Sri Lanka
Fiji
Sao Tome
Malta
Niger
Suriname
Turkey
India
Morocco
Kuwait
Yemen
Bangladesh
Lebanon
Tunisia
Egypt
Bahrain
Pakistan
Algeria
UAE
Iran
Oman
Qatar
womens roles and responsibilities in the household. These cultural on women. This is particularly

Womens norms, which are often internalized by women, negatively influence

a womans decision to pursue gainful employment opportunities
and limit her occupational choice and earning capacity in the long Source: IMF Report
important in the context of Sri
Lanka, where low fertility rates and
an increasingly ageing population

Labour Force
run. If Sri Lanka is serious about transitioning from its status as a is likely to increase the dependency
lower-middle income country, it must address these key constraints burden on women in the future.
in order to ensure that women become an engine of sustained Introducing day-care options at places of employment is another
Although women are considered to be economic actors, their income

Participation
economic growth. alternative worth considering.
is regarded as supplementary to that of male income earners who,
traditionally, play the role of primary breadwinner. Therefore, women who
Why is Increasing Female LFP Important for receive income from other sources such as remittances, or live with the Similarly, the introduction of flexible work options such as part-time
Sri Lanka?
in Sri Lanka:
work and working from home could also support a womans ability
high-earning male family members, do not feel the need to seek gainful
to achieve a work-life balance. A survey of more than 1,000 workers
employment opportunities in the market.
While female LFP is an important social goal in itself, it is also in Australia, a country where over a 50% of Australian organizations
crucial from an economic growth perspective. Empirical evidence have a workplace flexibility policy in place, revealed that women were

An Inquiry into on the negative outcomes of gender asymmetries in the labour

market is extensive and underscores the positive nexus between
female LFP and economic development. For instance, studies such
The study further finds that having children below the age of five is also
a significant deterrent to labour force participation. While this trend is
also undeniably reflective of pervasive attitude towards womens roles
10 percentage points more likely to work flexible or alternate hours.
In addition, 38% of women also claimed to be working night-shifts or
part-time to juggle professional and personal obligations. It is evident

the Key Social as Cuberes and Tiegner (2015) demonstrate the extent to which as mothers and caretakers, it is also indicative of the disproportionate that, with the right systems in place, women are willing and able to
gender gaps negatively affect per-capita income and productivity; burden of unpaid care work that women continue to shoulder. The economically empower themselves.
according to their findings, gender inequality creates an average opportunity cost that results from cutting back on work hours or dropping

and Cultural
income loss of 16% in the short-run and 17.5% in the long-run out of paid labour force is well documented. Nancy Folbre, a leading Finally, Sri Lanka should promote policies that support the more equitable
for developing countries. In Asia alone, UNESCAP estimates that economist at the University of Massachusetts calls this opportunity distribution of family responsibilities in the household. For example, the
restrictions on womens access to employment opportunities result cost the care penalty and argues: unpaid work, by definition, carries expansion of paternity leave benefits could encourage men to take up

Constraints
in a loss of $42 $47 billion per year. Other studies also highlight
significant losses to GDP that occur due to gender asymmetries in
the labour market; an IMF staff note estimates an average loss of
20% to the Sri Lankan economy stemming from lower participation
By Anarkalee Perera rates among women (Figure 1).
14
a pecuniary penalty: one forgoes the potential earnings from working
the same hours in a paid job. In addition, because pay is affected by
how much job experience one has, women who leave employment to
rear children suffer wage penalties for years after they re-enter the job
market.
greater responsibility in child-care activities. In addition to sharing the
costs of family care, Nancy Folbre argues that the impact of such policies
could also have a positive effect on re-engineering gender roles in
society by validating the value of care work. As a result, they could have
a large cumulative and ripple effects on society as a whole.
15
As a relatively new industry in Sri Lanka, the apparel industry has played
an important role in the economy as a major income source and an
avenue for creating employment opportunities, especially for women,
over the last few decades. It has also created a global brand name
for the country, positioning Sri Lankas name at a prestigious level for
high quality garment products. The Sri Lankan apparel industry which
operates in a highly competitive global market, mostly occupies female
workers. However, it is observed that the industry has been experiencing
a labour shortage over the years, especially in recruiting women for the
position of machine operators. In this backdrop, a recent study on An
Empirical Investigation of Labour Shortage in the Manufacturing Sector
in Sri Lanka* examines the possible reasons and recommends viable
solutions for the issue of labour shortage in the apparel sector.
Apparel Sector in Sri Lanka
The Sri Lankan apparel industry boasts of a long history. However, it
boomed to become the largest industry in Sri Lanka after the late 1970s,
owing to three major contributory factors. These were, market-oriented
liberal economic policies introduced in 1977, supportive measures
taken by the then government through the Board of Investment (BOI),
and the quota hopping under the Multi-Fibre Arrangement (MFA).
Export-led industries were given greater emphasis and promoted under
The Dwindling
Stitching Hands:
Labour Shortages in
the Apparel Industry in
Sri Lanka
By Sunimalee Madurawala
marketoriented, liberal economic policies, by providing various types of
concessions. Availability of educated labour at a relatively cheaper cost
made Sri Lanka an attractive investment location for investors, especially
as the apparel industry is labour intensive.
Since its peak, the apparel sector has been a key contributor of the
Sri Lankan economy, especially in terms of the export earnings and
employment generation. According to the Central Bank of Sri Lanka, in
2015, total exports of the country accounted to US$ 10,505 million out of
which 46 per cent was earned from the apparels. Total export earnings
from the apparel sector indicate a growing trend and accounted for US$
4,674 million in 2016. Apparel industry provides direct employment
opportunities to over 300,000 and to 600,000 indirectly.
Women in the Apparel Industry
From its conception, the apparel industry workforce has been dominated
by women; in fact, women have always managed to secure more than
80 per cent of the employment share in the industry. This share is
significantly higher than the womens share in the national labour force,
which was only 35 per cent in 2015. Even though the majority of the
apparel sector workforce comprises of women, they are mostly confined
to the lower levels of the production process, (e.g., machine operating),
and men tend to dominate the upper management positions.
16
Despite the high level of female participation in the apparel sector,
labour shortage remains a key challenge in the industry. The issue of
labour shortage has become so severe that there have been proposals
to automate the manufacturing process of the apparel sector in order to
overcome this issue. Labour shortage is more prominent in the machine
operator positions, which are mostly occupied by women. With a low
labour force participation rate and a high unemployment rate of women
at the national level, (in 2015, the female labour force participation
rate was 35 per cent and female unemployment rate was 7.6 per cent
whereas these values for males were recorded as 75 per cent and 3
per cent respectively), it is quite alarming to see that the apparel sector
is experiencing a difficulty in filling vacancies even in the occupation
category, where women dominate (i.e., machine operators).
The Causes
There are several reasons behind the difficulty in attracting women to
fill the vacancies of the lower level job categories. Based on interviews
with Human Resource Managers of some leading as well as medium and
small scale firms, the following points were identified as the key reasons
for the labour shortage in the apparel industry; competition, mobility, bad
social image, and changing career aspirations.
Competition from other sectors Apparel sector has to compete with
other sectors, especially service sector industries such as tourism and
retail, to attract labour. Wages offered by these sectors are competitive
and in some cases slightly higher than the wages offered by the apparel
sector. That being said, wages are not the only factor that attracts labour,
especially women, to these sectors. The working environment also plays
an important role in this regard. A pleasant working environment that
provides facilities and comfort attracts labour more easily.
Mobility Issues - Proximity and the ease of accessing the workplace
are important factors for women when choosing a job. This is particularly
important for married women and women with children. Due to their
familial responsibilities, they are reluctant to migrate and to work in
urban areas or in the free trade zones, where many garment factories are
located. Even single women are hesitant to live in urban areas because of
the difficulty in finding safe accommodation.
Bad social image - There is a negative social perception associated with
women who in garment factories. Female factory workers in the apparel
sector are stigmatized as promiscuous and are referred to as Juki girls,
a derogatory term for machine operators. Thus, due to the low social
recognition and the bad reputation of female garment factory workers,
young women are reluctant to join the industry. This stems from safety
concerns for females and exposure to sexual harassment and abuse
resulting from poor infrastructure facilities (inadequate transport and
housing near factories). Women also prefer alternative sectors because
of the social recognition and job esteem attached to the employment
opportunities in industries such as tourism and retail.
Changing career aspirations of the younger generation - Unlike the
young girls who joined garment factories as machine operators in the
early stages of the apparel industry, today, most young women have
obtained basic educational qualifications such as G.C. E. Ordinary Level
Certificate. Along with higher level of education, their career aspirations
have also changed. They tend to perceive garment factory work as a low
skilled job and these target oriented hardworking machine operator jobs
are not no longer able to attract young women into the industry. Instead,
they seek for more prestigious computer based jobs where they can
enjoy more flexibility and social interaction.
Addressing the issue
Factors that create and intensify labour shortage in the apparel industry
should be tackled immediately, considering the high competition facing
the Sri Lankan apparel industry in the global market. Offering competitive
salaries and creating attractive working environments, providing more
gender sensitive working options, enhancing the social recognition,
and professionalization of jobs are some measures that can be taken to
address the issue.
Offering competitive salaries and creating better and pleasant
working environments - In order to compete with the other rival sectors
in attracting labour apparel sector has to offer higher salaries. Other than
this, creating pleasant working environments is another key strategy to
attract more women to the apparel sector. This should entail providing
not only the basic facilities such as drinking water, separate toilet
facilities but also other amenities such as dining rooms, clean and tidy
surroundings, proper workspaces, and suitable temperature and lighting.
Other engagement activities (celebrations for special days, community
work, and entertainment activities) are also important.
More gender sensitive working options and facilities - Given that
the machine operator category is the most severely affected occupation
category due to labour shortage, more gender sensitive work options
(e.g., flexible working hours, working from home and work sharing)
and facilities (e.g., day care facilities and maternity aids) would help in
attracting more women to the industry.
Creating more social recognition - Social acceptance and recognition
is an important element in tackling the issue of labour shortage at lower
levels of the apparel sector. There have been several effective campaigns
by some leading firms in the industry and by industry associations (e.g.,
Women Go Beyond, Abhimani). However, the social stigma attached
to the women working at the garment sector prevails and holds back
women from taking up jobs in this sector. More awareness should be
created about the contribution made by the women occupied in the lower
levels of the apparel sector for the countrys economy and they should be
appreciated more.
Professionalization of jobs and creating clear career paths by offering
standard professional qualifications and certificates for occupations
categories such as machine operator would increase the willingness of
women to take up those jobs. It is also important to make clear career
paths for them by identifying their skills and giving promotions. This
would help to attract women with higher education qualifications to the
industry.
There are large as well as medium and small sized firms operating in
the industry. All the firms in the industry may not be able to take these
measures and offer these benefits in order to attract eligible women due
to financial constraints. But given the high competition for labour with
other booming sectors and concerning the future of the industry, all the
firms in the apparel sector have to address the issue very effectively.
Individual as well as industry level approaches are also needed.
Sustainability of the apparel sector is vital for the countrys economy.
It plays a key role in employment creation, especially for women, thus
empowering women who occupy this sector. Employment in the apparel
sector has created an environment where women can enjoy economic
independence and enhance their well-being to a greater extent. Hence
it is very important to protect the industry while giving dignity and
recognition to the stitching hands which back the countrys economy.
An Empirical Investigation of Labour Shortage in the Manufacturing
Sector in Sri Lanka by Prof. Athula Ranasinghe (University of Colombo,
Sri Lanka), Sunimalee Madurawala (Institute of Policy Studies of Sri
Lanka), Dr. Jen Je Su, and Thushara Senadeera (Griffith University,
Australia) funded by the Australia Awards Fellowship Programme 2016.
This article is based on the Key Informant Interviews conducted for this
study.
17
This year, the world celebrated its (IP) Day focusing on the theme of
innovation improving lives which aims to explore how innovation
makes lives healthier, safer and more comfortable. A well-built IP system
stimulates innovation by attracting investments, rewarding inventors,
encouraging inventors to develop their ideas and ensuring that their
new knowledge is protected. Almost all innovations can be protected
Patents play a pivotal role in protecting new innovation, as it provides S&T institutes too are facing the same issues in enhancing innovations.
property rights for inventions usually for a specific period of time and Furthermore, ownership of inventions from research granted by the
provide the right to exclude others from exploiting the invention during government resides with the government and not with the grantee of the
that period. Furthermore, to obtain a patent the inventor has to disclose funds which creates a disincentive for government employees to engage
the patented invention to the public, where it will provide an opportunity in innovations. This also acts as a negative factor when improving human
for others to use and develop the technology further. Therefore, the patent capital to enhance innovations in the country.
When comparing Sri Lanka with other
selected countries on resident applications
An effective IPR system especially with proper patenting policy and
implementation mechanism stimulates almost all of these factors and
creates an environment which provides incentives for innovations.
As an example, strong IPR systems will overcome the issue of private
investments in R&D, by providing effective protection for investors,
encourage people engagement in innovations by providing credibility for
inventors and promote commercialization of innovations.
International best practices, as shown in Singapore, China, Malaysia

Role of IPRs in
per million population (by origin), in 2015
Sri Lanka was on par with India. However,
when compared with other Asian countries,
Sri Lanka was not in a favorable position
and India, have suggested that a well-constructed and a balanced IP
system accelerates innovations, whereas a weak IP system reduces
domestic incentives for innovations. Policies and processes for
issuing and enforcing patents are the most important aspect of IPR for

Stimulating
(Figure 3). innovation. Since the late 1970s, Singapore has taken several steps to
enact new patent laws and has established a court of IP to strengthen
In 2013, the highest number of its IPR policies and to improve innovations. India enacted its Patent Act
patents issued was in the fields of IT, in the 1970s and since then patents were expanded to several areas

Innovations
telecommunication, and electronics (49 such as pharmaceuticals, agriculture developments, etc. Since 1979
patents out of total 326). The other fields China has also recognized the importance of IPRs and passed its patent
were agriculture related developments law in 1984. The Republic of Korea has carried out a massive public
(44), development of domestic appliances/ awareness campaign on IPRs and patents in schools, universities, and
By Dilani Hirimuthugodage utilities (44), drugs, cosmetics & other R&D institutes.
related product developments (33), and
automobile and related inventions (31). Figure 3: Resident Applications per Million Population (by origin)
The highest number of innovations in IT, 800
706
telecommunication and electronics could be due to the fact that those 700
with Intellectual Property Rights (IPRs). Therefore, every country has system is created to balance the interests of both inventors and the inventions can be more easily applied in industrial use than other
recognized the importance of protecting the intellects of its people. Sri general public. According to Sri Lankas Intellectual Property Rights Act inventions. Even though Sri Lanka is a signatory to the Trade Related
600
Lanka too encourages its people in this regard, through several policies 2003, patents are available for inventions, products and processes in all

and programmes designed to enhance innovations. Some of these fields of technology. Patents allow an inventor to control the commercial
policies and programmes are directly linked with IPRs. use of his/her invention.
Figure 1: Number of Patents Registered Locally Given the importance of patents, this blog article discusses the role of
600
IPRs, especially patents, in stimulating innovations.
500
Sri Lanka: where do we stand?
400
300 There are several criteria to evaluate Sri Lankas generation of
innovations. One such important criterion is the number of patents
200
registered at the National Intellectual Property Office (NIPO). Figure 1
100 describes how patents have been registered by residents and non-
residents. It shows that, from 2011 to 2013, there has been an increasing
0
trend in residents patents registration, but since then, it has been
2010 2007 2008 2009 2010 2011 2012 2013 2015
decreasing. However, the total number of patents registered locally
Residents Non-Residents Total (residents and non-residents) indicates an increase. This suggests that
Source: Sri Lanka Science, Technology and Innovation Handbook: 2015, National Science Foundation and the number of innovations is gradually increasing. This slow growth could
WIPO Statistics
be explained by cost of patenting, high cost of annual renewals, and the
lack of awareness among scientists.
Sri Lanka was ranked 91st out of 128 countries in the Global Innovation
Index (GII) in 2016. It was a drop of 6 places when compared with the
It is also interesting to evaluate the various types of institutions and
GII in 2015. According to GII 2016, Sri Lanka is second only to India
individuals that have obtained patents in Sri Lanka as it shows peoples
(66th place) in the South Asian region but, when compared with other
interest and their knowledge on patenting. According to the latest
Asian countries (Singapore 6th, China-25th, Malaysia 35th places) Sri
available data from the Sri Lanka Science, Technology and Innovation
Lanka falls far behind. This highlights the fact that Sri Lanka is not only
Hand Book, more than 90 per cent of patent holders are individuals (91),
lagging behind in the number of innovations but also in its protection and
5 per cent are private institutes, 2 per cent are Science and Technology
promotion of innovations.
(S&T) institutes and 1 per cent is higher education institutes (Figure 2).
It is important to note that higher education institutes are at the very
Protecting Innovations through IPRs bottom when obtaining patents. According to the reports on Integrating
Intellectual Property into Innovation Policy Formulation in Sri Lanka, this
An effective and well-built IPR system consisting of one or more different could be due to limited research conducted by such institutes, lack of
IPR tools such as patents, copyrights, trademarks and trade secrets will research interest in staff and students, poor management system of
protect the ownership of innovation and thereby, encourage innovations. IPRs, lack of awareness of patenting, and the high cost of patenting. The
18
Intellectual Property Rights Agreement (TRIPs), Sri Lankas IP system
does not provide patent protection for new plant varieties as suggested
by the Agreement, which is one of the factors that discourages plant
breeders in developing new plant varieties. Since enacting Sri Lankas
IPR Act in 2003, the country has not yet made any national policies,
strategies etc., to enforce patent protection for new plant varieties.
Figure 2: Number of Patents Registered by Residents by Sector (As a %) in 2013
Higher Education
Institutes 1%
S&T
Institute 2%
Private 5%
Institutes
Individuals
Source: Sri Lanka Science, Technology and Innovation Handbook (2015), National Science Foundation
Furthermore, the reports on Integrating Intellectual Property into
Innovation Policy Formulation in Sri Lanka and Science, Technology &
Innovation: Strategy for Sri Lanka (2011-2015) have also highlighted the
fact that the intellectual property management system with regards to
innovations in Sri Lanka is very poor.
What needs to be done?
Several factors shape a countrys generation of innovations. Amongst
them, the most important are the R&D initiatives in place, the stock of
human capital, and strategies of commercialization of new knowledge.
Number of Applications
500
400
300 265
200
100 42
10 1 10
0
China India Malaysia Pakistan Singapore Sri Lanka
Source: WIPO statistics database. Last updated: February 2017
Furthermore, international best practices have highlighted that being
a signatory to TRIPs alone is not sufficient. What is most important is
national enforcement. Governments should use straightforward strategies
such as establishing proper IPR management systems in universities and
other research institutes, awareness programmes, incentives such as
92% vouchers and rewarding systems for inventors and consider modernizing
the IPR Act with timely changes to enforce these rules.
For an effective use of IPRs in stimulating innovations, Sri Lanka
should explore alternatives such as integrating with regional patenting
organizations, sharing information and building good relationships with
other national patenting offices as a solution to sharing the high cost of
patenting, including the cost of renewals. Recently, Sri Lanka reduced
the cost of patent registration and created new cost structures with three
categories with students, individuals and private firms to encourage
patenting. Simultaneously, it is of utmost importance to create public
awareness on IPR services, especially patenting, its importance, how
patents support and encourage inventors by providing recognition, and
how to transform inventors knowledge into tradable assets. Effective
enforcement of the existing IPR policy and effective management of IP
is also crucial. It is also important to provide IPR policy managements
for research institutes, universities and other higher education facilities,
especially in the areas of commercialization, research collaborations and
ownership of innovations to encourage innovations.
19
Black pepper (Piper nigrum L.), known as the King of Spices, is the most Given that majority of black pepper from Sri Lanka is exported to the low There are Sri Lanka Standards for Black Pepper (SLS 105 Part 1: 2008)
important and widely used spice in the world. Pepper production is confined to a end of the market (India), Sri Lanka should explore high end markets and White Pepper (SLS 105 Part 2: 2008); however, neither of these
few countries in Asia including Sri Lanka and the Pacific, Brazil and Madagascar. elsewhere (USA and EU), which are yet to be fully exploited. At the same product standards is required for export at the moment. Systems
Currently, Sri Lanka ranks at 5th place in terms of area under pepper cultivation time, stringent standards in the developed countries can act as a trade certifications are increasingly obtained by the pepper industry at the

Come
(after India, Indonesia, Vietnam and Brazil), and 7th place in terms of production,
with a world share of 5.7% in production. Also, Sri Lanka is the 5th largest
exporter of black pepper, after Vietnam, Brazil, Indonesia, and India. However,
productivity levels in the industry remain low, despite improvements seen over
barrier to entering those markets, and therefore, Sri Lanka needs to exporter level and these include, ISO22000 Food Safety Standards,
upgrade its standards. Hazard Analysis and Critical Control Points (HACCP), and Good
Manufacturing Practices (GMP). Few exporters have also obtained
organic and fair trade certifications. However, these standards have been

Together
the years. voluntarily adopted by the exporters.
PEPPER INDUSTRY IN SRI LANKA
Sri Lankan pepper, like other spices from the island, is well-known for its Quality needs to be adhered across the value chain from the point
superior inherent properties. For example, Sri Lankan pepper has higher piperine Pepper plant is a perennial, evergreen, climbing vine. Dries fruit of harvest and onwards not just at the point of export. Unfortunately,
content, which gives it a superior quality and pungency. Piperine content in or peppercorn is used as condiment; the same is used to this does not always happen. For example, collectors/shops buy any
produce white, red & green pepper.

Raising Standards
Sri Lankan black pepper is 2-6 times higher than in other countries. However, supply of pepper produced by farmers, regardless of the quality of
Central Sabaragamuwa Uwa North Western
the export of sub-standard products can ruin the reputation of Sri Lanka in the pepper produced by smallholders. This is due to weaknesses in the
international market as a supplier of high quality spices. Therefore, significant coordination in a fragment chain, lack of awareness/regulations and poor

Province
measures need to be collectively taken to upgrade standards governing the infrastructure in terms of proper drying/storage, etc.

in the Sri Lankan

product and production process across the pepper value chain in the country.
Moreover, improving the capacity of stakeholders in the value chain to meet
Cultivation
Areas Moving Forward Together
standards can boost pepper exports and competitiveness. 0 5000 10000 15000
Hectares
Towards improving quality standards of pepper supplies in Sri Lanka, a
Pepper Value Chain
Pepper is the second most important spice grown in the country, after cinnamon.
Pepper Industry number of measures can be collectively taken by the government and
stakeholders in the pepper value chain:

There are numerous actors performing various functions in the Sri Lankan pepper Improve attitudes of the agents in the value chain towards adopting
value chain, as shown in Figure 1. The figure vertically maps the functions/ By Janaka Wijayasiri #5 #7 #5 good agricultural and manufacturing practices not only to increase
activities, stakeholders and supporting services in the chain from point of inputs Area under Pepper Production Exporter in the World the productivity but the quality of pepper by Organizing field trips
Cultivation in the in the World
to retail. World and constructing model farms in each village to educate farmers
about proper agronomical practices include drying and storage of
In Sri Lanka, pepper is cultivated in the wet and intermediate agro ecological pepper;
zones, in the mid and low country regions, mostly by smallholders.
Most of the smallholders grow pepper in their own small plots Figure 1: Pepper Value Chain in Sri Lanka Provide assistance to build/upgrade process facilities like steam
of land (home gardens), which are less than 20 acres or sterilization treatment plants, and buy equipment like dryers. The
8.1 hectares. Apart from cultivating pepper in their ACTIVITIES STAKEHOLDERS SERVICES Ministry of Primary Industries (MPI) will be providing a 50% grant
own lands, harvesting of pepper is also done by Inputs DEA/own nurseries/shops Department of for entrepreneurs to upgrade/add value their product/production
farmers, with the help of hired labour; some (sun/ Export Agriculture
Cultivation/ (DEA) and such assistance could be made use for this end.
machine) dry their harvest and sell, while others Production Smallholders (93%) Estates (7%)
Farmer Groups
dispose it in a fresh form. A majority of the farmers Collection/ Village collector/Dryer
Exporters Establish central collecting/processing/ storage centres to improve
sell their product to village collectors or shops in the Pre -processing
The Spice Council quality of pepper at the intermediary stages of the value chain;
town, which are important intermediaries in Wholesale
Traders
Town/Regional (TSA)
the pepper value chain.
Marketing Brokers
Spices & Allied
Products Producers & Improve efficiency and reach of extension services by increasing
Traders Association resources to the Department of Export Agriculture (DEA) to carry out
Local collectors are sometimes Wholesale
(SAPPTA)
Pettah buyers their activities;
farmers themselves or rural Sri Lanka Standards
Processing/ Institute (SLSI)
entrepreneurs who purchase Processors/Exporters
Exporting
pepper directly from farmers.
Industrial Technology
Institute (ITI)
Encourage exporters to integrate backwards in the value chain
Retailing Local Market (40%) International Market (60%) by providing land or to purchase directly from farmers/farmer
Other than being involved in the Export Development
Board (EDB) organizations to ensure a consistent quality;
spice wholesale trade, operating
Source: IPS, 2017
from stores based in town
bordering spice growing areas, traders also Implement mandatory standards at the point of exports to ensure
purchase pepper from collectors/ farmers/ estates/ quality of Sri Lankan pepper exports whilst encouraging the
lessees, after which they clean, dry, store, pack and adoption of quality systems such as HAACP/ISO22000 as well as
Lack of Supply of Quality Black Pepper
transport the pepper to buyers, mostly in Colombo. good agricultural and manufacturing practices in the value chain

Buyers include spice exporters, low local spice manufacturers
and marketers, Pettah buyers, and hotels/restaurants/
households. Currently about 60% of pepper production of the
country is exported, while the remainder is consumed domestically
according to government sources. Pepper bought by exporters is
then dried, cleaned, graded and packed to meet the requirements
of the international buyers. Currently, India alone buys 62% of pepper
exports from Sri Lanka to the world followed by, Germany, Pakistan,
Egypt, USA, UAE, UK, Vietnam, Saudi Arabia and Spain. Together, the top ten
countries account for 91% of total pepper exports from Sri Lanka.
20
Currently, there is an inadequate supply of black pepper throughout the
year to meet the international demand. Moreover, the quality of black
pepper production is inconsistent due to the fragmented production
and absence of standards governing the pepper value chain. Quality
characteristics in pepper include appearance of the pepper, its maturity,
bulk density, moisture content and presence of extraneous matter (dust,
stones, leaves) in the product. Unlike the tea industry, no compulsory
system to control quality by the government exists at the moment. As a
result, exporters depend on the requirements prescribed by importers,
and usually request quality-certifying bodies to certify the pepper.
Improve awareness of farmers, collectors, traders, and processors
of quality requirements of export markets
Invest in advanced testing equipment, which can detect lower limits
of pesticides, aflatoxins, ochratoxins, etc.; test that are necessary to
export to more developed markets.
(This article is based on a JICA study on Analysis of Cinnamon, Pepper
and Cardamom Value Chains in Sri Lanka, which was conducted by the
IPS.)
21
 Sri Lankas
The Sri Lankan economy appears to be enmeshed in a growing debt overhang. The
latest figures released in the Central Bank Annual Report 2016 indicate that total general
government external debt has grown by 10% in 2016 to US$ 27.2 billion. Even averaging
Debt
out for 2015-2016, annual debt growth was 6.2% compared to 4.5% in the preceding
two years.
It is also not the case that the country is witnessing a lowering of the costs and risks
Overhang: of its external debt profile. The share of higher cost non-concessional and commercial
external borrowing has crept up to 53% in 2016 from 51% in 2015, owing in part to US$
2.2 billion raised through an International Sovereign Bond (ISB) and a syndicated loan in
Getting Better,
2016.
The combined impacts make for a risky external sector outlook for Sri Lanka in the near
or Worse?
term. Already, an estimated US$ 5.7 billion of ISBs and syndicated loans are scheduled for
settlement over a period of three years, beginning in 2019. As of mid-2017, the country
is facing an incipient crunch point with regards to its ability to withstand any exogenous
shock to the economy. The most recent available data suggests that official reserves
By Dushni Weerakoon have plummeted to US$ 5.1 billion at end March 2017, sufficient for only the minimum
recommended threshold of three months of import cover. Not surprisingly, Sri Lanka is
looking to tap international capital markets once again by mid-2017 to raise urgently
needed funds through ISBs and syndicated loans.
Thus, despite the existing external debt overhang, foreign borrowing shows no signs of
lessening in 2017 either. The continued recourse to foreign borrowing has often been
blamed on the need to service high debt costs on past borrowings. This is partly so, but
the explanation is a little more intricate going by the available figures released by the
CBSL on external debt settlements (Figure 1).
In actual fact, total external debt service payments dropped in 2016. Amortization and
interest payments on general government debt fell to US$ 1.9 billion in 2016 from US$
2.8 billion in 2015 (and an average of US$ 2.2 billion in the two preceding years). The
spike in 2015 came largely from the maturing US$ 500 ISB settlement. Thus, the total
settlement for 2016 was well within US 2.2 billion foreign capital market borrowings
raised in the year.
However, foreign financing for budgetary needs in 2016 exceeded the estimated 2.3% of
GDP. The final outcome tallied at a high 3.3% of GDP or approximately US$ 2.7 billion, up
22
from 2.2% of GDP in 2015 (or an annual average of 1.7% of GDP in the In addition to the above, the Central Bank settlement of foreign currency
two preceding years). Thus, Sri Lankas reliance on foreign loans to drive swaps, obtained primarily from the Reserve Bank of India (RBI) in 2015
development is on-going. Long-term loans to the government and foreign to prop up reserves, drained a further US$ 1.1 billion as debt service
investments in Treasury bills and bonds in 2016 brought in US$ 1.4 billion payments in 2016. All told, the overall impact of debt management has
and US 1.2 billion respectively, to cover fiscal requirements. still left the country without adequate official reserves and an increase in
the outstanding volume of external debt.
Figure1: External Debt Dynamics
1A. OUTSTANDING GOVT. EXTERNAL DEBT
The medium-term trajectory of macroeconomic indicators suggests that
debt indicators will worsen before they stand a chance of getting better.
External indebtedness is typically based on two ratios i.e., the value
30000 of total debt service to a countrys national income and export earnings.
These are employed given that they capture two important aspects of a
25000
countrys potential capacity to service its debt; export earnings are an
20000 indicator of foreign exchange to service debt, and national income is a
15000 broad measure of income generation in an economy. By such measures,
various debt indicators for Sri Lanka are worsening as GDP growth slows,
10000
and signals of a sustained recovery in exports remain elusive.
5000
0 Government external debt to GDP rose further to 79.3% of GDP and
2012 2013 2014 2015 2016 public external debt to 34.2% of GDP in 2016. A decline recorded in
Sri Lankas debt service ratio to 25% in 2016 owes more to the overall
Loans ISBs T-bills & bonds
drop in debt service payments rather than to a surge in earnings from
exports of goods and services. The latter is stagnating at 20% of GDP for
1B. DEBT SERVICE PAYMENTS
a third consecutive year, while earnings from exports of goods alone have
4000 continued its downward spiral to a low 12.7% of GDP.
3500
3000 Sri Lanka has nonetheless made a start towards debt sustainability
2500 with a stronger fiscal outcome in 2016 under the watchful eye of the
2000 IMF. The primary account deficit has shrunk from 2.9% of GDP in 2015
1500 to 0.2% of GDP in 2016; debt begins to stabilize when the interest
1000 payment is exactly off-set by a primary balance. Thus, the real test of
500 debt sustainability will come with progress on fiscal consolidation efforts
0 where improved domestic resource mobilization will lessen dependence
2012 2013 2014 2015 2016
on foreign borrowing. In the interim, the next two years are critical; Sri
Project loans Debt securities IMF Swap Lanka must urgently address the current dip in export performance and
build hard currency buffers in view of its risky ISB redemption profile
Source: Data from Central Bank of Sri Lanka (CBSL), Annual Report, various issues. post-2019.
23
 relief. Gaining tariff-free access to a European market that has seemingly
recovered from the 2009 financial crisis and regional economic pressures
such as the Greek debt crisis bodes well for improved demand for Sri
Lankan goods. This will especially be a boon to the apparel and fisheries
sectors that suffered significantly in recent years and face growing
pressures from regional competitors. Other export sectors such as small
manufacturing and especially those that have emerged in a post-conflict
Sri Lankan economy will also get an opportunity to penetrate the
European market.
Temporary Relief, Not Permanent Solution
The abovementioned benefits, however, will be restricted to the short
term and Sri Lanka should prepare its export sector and the economy
overall for the eventuality when these benefits expire. Critically, Sri Lanka
Export Merchandise from Sri Lanka to the EU
In the year 2016, 31% of exports
from Sri Lanka was to the
European Union
Export Value to EU
More concerning, however, are the structural limitations of the Sri
Lankan economy that will hinder the ability to fully leverage the benefits
of GSP-Plus. Crucially, the apparel sector is currently facing significant
labour shortages that undermine the ability for the sector to expand
sufficiently in a manner that can cater to expected increases in demand.
Similar structural issues such as high para-tariffs and policy instability
also reduce the competitiveness of the Sri Lankan economy. Whereas
Sri Lankas competitors such as Bangladesh and Vietnam are embarking
on large-scale economic reform agendas, Sri Lankas relative reticence
restricts its potential for growth.
In addition to these structural challenges, Sri Lanka should also be
cognizant of the impact of Brexit on leveraging GSP-Plus. Since the
referendum and the subsequent triggering of Article 50, the United
Kingdom is scheduled to leave the European Union on the 29th of March
2019. Worryingly for Sri Lanka, approximately 30% of
Sri Lankas exports to the EU are to the UK. Sri Lankan
exports will no longer qualify for preferential access to the
UK once it leaves the EU, unless a similar arrangement
is negotiated directly between Sri Lanka and the UK.
Therefore, Sri Lanka should prepare to face an economic
shock, at least temporarily, to its export sector once the
$3,101,000,000 UK officially leaves the EU.

Agriculture Products (6.38%) Chemicals (0.65%)

Non-Agriculture Products (43.61%) Machinery (2.86%) Managing the Future
Food & Raw Materials (7.30%) Textiles & Clothing (30.95%)

GSP-Plus:
Sri Lankan exports, which have been flagging in recent times, gained some Fuel (0.14%) Other (8.12%)
much needed relief with the European Unions (EU) Foreign Affairs Council A combination of structural failures, protectionist
deciding to grant additional trade preferences to Sri Lanka under its GSP-Plus Exports to the European Union (EU) economic policies, and external factors has led to Sri
initiative. By granting this concession, Sri Lanka will now benefit from the 4000 Lankas export sector performance diminish in recent

An Elixir or Just full removal of tariffs on Sri Lankan imports into the EU on 66% of tariff lines
3000
years and fail to fully realize its potential. The withdrawal

Value (US$ mn)

(approximately 1200 Sri Lankan products), covering a wide array of products of GSP-Plus in 2010 was especially damaging since the
including textiles, small machinery, and fisheries. While gaining GSP-Plus is country was not adequately prepared to compensate

Palliation for Sri

2000
undoubtedly a positive development for Sri Lankas economic progress, its for its loss in relative competitiveness in the European
impact will provide only temporary relief and policymakers and the private market. Therefore, regaining GSP-Plus is a much
1000
sector should urgently ensure broader economic reforms in order to fully utilize welcome development for the economy. These benefits,

Lankas Export this opportunity.

Sri Lankas History with GSP-Plus

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Exports to the EU
however, are short-lived and the country will fail to
fully leverage the opportunity afforded by GSP-Plus for
improved trade in the future unless significant reforms

Woes?
Source: Central Bank Annual Report 2016
are undertaken to address structural weaknesses in the
GSP-Plus concessions were initially granted to Sri Lanka in 2005, after the economy.
Tsunami. However, in 2010, the EU withdrew Sri Lankas preferential access
under GSP-Plus to the European market due to the governments failures in Sri Lankas Exports to the EU & UK
By Kithmina Hewage and Semini Satarasinghe adhering to human rights standards set under the provisions of the scheme. Such reforms need to focus on promoting growth,
4000
tackling demographic issues, fostering an efficient
Between 2005 and 2010, under GSP-Plus access, Sri Lankan exports to the EU
public taxation system and improving the labour market.
grew on average by 7.96%, notably amidst a decline in consumer demand in 3000

Value (US$ mn)

Europe due to the financial crisis during 2009 and 2010. Contrastingly, during
the 2010-15 period, Sri Lankan exports to the EU grew by a mere 1.02%. The
most direct impact was tariffs being reinstated on Sri Lankan imports to the EU,
making them uncompetitive compared to similar imports from other developing
economies such as Bangladesh, India, and Vietnam. The impact was particularly
severe on medium sized apparel producers, as they did not possess the
technical and financial resources to adequately diversify their export portfolio
compared to the larger firms. As a result, with regional competitors such as
Bangladesh and Vietnam producing similar products, a significant volume of
both domestic and foreign investment relocated to these countries seeking
preferential access to the EU market.
Scope for Growth
Whilst regaining GSP-Plus is a significant achievement for Sri Lanka, both
policymakers and the private sector should consider it as simply temporary
24
Liberalizing product and service markets would further
encourage private enterprises to participate in economic
2000
activities. In the meantime, the private sector should
1000 consider this as temporary relief and use the opportunity
to diversify its product basket while also looking towards
0 diversifying its export destinations. Preferential access
2004 2006 2008 2010 2012 2014 2016
Year granted through GSP-Plus provides Sri Lankan exporters
Exports EU Exports to UK an advantage in sectors that the country may not
Source: Central Bank Annual Report 2016
traditionally trade. Therefore, the risk of diversification is
lower and the reward of exploring new opportunities for
exports will be much higher. Moreover, the most dynamic
will lose GSP-Plus concessions once it graduates to upper-middle income economic growth is expected to occur in countries like India, China, and
level (Gross National Income per capita between $4,306 and $12,475). other East Asian countries in the ASEAN region. Therefore, Sri Lanka can
Currently Sri Lankas GNI per capita is $3,800 and will likely achieve no longer depend solely on the European and US markets and would be
upper middle-income status in the near future, estimated to be around better placed by reorienting towards emerging economies in Asia and the
2021. Middle East.
25
 Crunching
Table 1: Impact of GSP Plus on Sri Lankas Exports to the EU* normal GSP scheme, the average duty levied by the
EU on HS61 is 9.34 per cent but the number varies
Exports % of Exports % of Increase % increase
between 6.76 to 9.6 per cent, depending on the

the Numbers:
before GPS + exports after GSP + exports in exports in exports
(US$ Mn .) to EU (US$ Mn .) to EU to EU after GSP + items in question. Similarly, the duties on other items
(US$ Mn .) of export interest are high, and vary significantly
Animal & Animal 93.2 2.8 123.2 3.3 30.0 32.2

What is the
Products at the disaggregated product level. Under the GSP
Vegetable Products 259.0 7.9 265.7 7.1 6.7 2.6 Plus scheme, these would be brought down to zero,
Foodstuffs 52.1 1.6 58.3 1.6 6.2 11.8 providing a substantial duty advantage to the Sri

Real Export
Mineral Products 3.8 0.1 3.8 0.1 0.0 0.0
Lankan exporters, trading with the EU.
Chemicals & Allied 39.1 1.2 39.1 1.0 0.0 0.0
Industries
Plastics/Rubbers 359.2 11.0 359.7 9.6 0.5 0.1
Due to tariff reductions by the EU, there will be trade

Benefit of Raw Hides, Skins,

Leather & Furs
Wood and Wood
17.7

21.1
0.5

0.6
18.0

21.1
0.5

0.6
0.3

0.0
1.6

0.0
creation effects, as products from Sri Lanka become
cheaper, and there will be new buyers in the EU who

GSP Plus to
Products
would now want to buy from Sri Lanka. At the same
Textiles & Apparel 2,032.6 62.1 2,457.2 65.4 424.6 20.9
Footwear/Headgear 14.2 0.4 14.6 0.4 0.4 3.1 time, there will be some trade diversion; that is, there
Stone/Glass 127.5 3.9 128.6 3.4 1.1 0.9 will a shift of demand from other competing, supplying

Sri Lanka? Metals

Machinery/Electricals
Transportation
13.5
123.9
38.9
0.4
3.8
1.2
13.5
123.9
49.8
0.4
3.3
1.3
0.0
0.0
10.9
0.1
0.0
28.1
countries to Sri Lanka in the EU market. Countries
which are likely to be most affected as a result of
Sri Lanka regaining GSP Plus will include China,
Miscellaneous 79.4 2.4 79.8 2.1 0.3 0.4
By Janaka Wijayasiri 0.0 0.0 Bangladesh, Cambodia, Turkey, and India. It appears
Total 3,275.3 100.0 3,756.4 100.0 481.1 14.7 from the numbers that trade diversion will be marginally
Sri Lankas overall exports to the European Union (EU) can higher than trade creation.
Source: WITS/SMART Simulation
increase by US$ 480 million almost 15 per cent on average
from current earnings of US$ 3,275 million to US$ 3,756 Sri Lanka & Note: *The reported results show the immediate trade effect of one-off policy change (tariff reduction).

Caveat
million, as a result of regaining the GSP Plus benefit, according
to preliminary estimates using a partial equilibrium model. The
EU GSP+ Table 2: Top 5 Products Benefiting from GSP Plus
Came into force: 19 May 2017 According to available literature, the EUs GSP scheme
estimation is derived employing the SMART Simulations of the Total Trade Trade Trade
HS Code Description Effect Creation Diversion
Old Simple New Simple has had an overall positive impact on the beneficiary
World Integrated Trade Solutions (WITS), and disaggregated trade Duty Rate Duty Rate
(US$ M n.) (US$ M n.) (US$ M n.) countries; it has increased developing countries
data (at HS 6 digit level). This figure is slightly higher than the GSP+ provides additional tariff preferences to developing Articles of apparel and
number quoted by the EU a benefit of over Euro 300 million countries which are vulnerable due to lack of diversification 61 clothing accessories, 265.5 125.7 139.9 9.34 0 exports and welfare. In addition, the literature further
(about US$ 335 million) reported in the local media.
and insufficient intergration with the global trading system. knitted or crocheted suggests that the EUs GSP has helped with export

On 19 May 2017, the EU granted Sri Lanka better access to its
market for exports under the Generalized Scheme of Preferences
Plus (GSP Plus). While the scheme is conditional on Sri Lanka
making progress on human and labour rights and sustainable
development, it can boost exports to the EU, Sri Lankas
largest export market. GSP Plus aims at furthering Sri Lankas
development through more trade, as well as by diversifying
exports and attracting investment with the removal of custom
duties by the EU. Sri Lanka is now among eight other GSP
Plus beneficiaries, which include Armenia, Bolivia, Cape Verde,
Kyrgyzstan, Mongolia, Pakistan, Paraguay, and Philippines. Aside
from GSP Plus, the EU has two other trade arrangements 1)
a general arrangement (Standard GSP), which is targeted at
developing countries that are classified by the World Bank as
lower or lower-middle income countries; and 2) Everything But
Arms (EBA) arrangement for 49 Least Developed Countries
(LDCs).
Biggest Beneficiaries of GSP Plus
What is the likely economic impact of GSP Plus on Sri Lankas
exports? Previous studies show that the GSP benefit can lead to
26
%
Articles of apparel and
62 clothing accessories, not 149.7
Vulnerable developing countries need to fulfil
eligibility criteria linked to 27 international conventions.
knitted or crocheted
Fish and crustaceans,
3 30.0
molluscs and other
GSP+ will consist of the full removal of duties on aquatic invertebrates
Vehicles other than
66% of tariff lines, which is estimated to lead to
15% increase in experts from Sri Lanka to the EU. 87 railway or tramway 10.9
rolling stock, and parts
Animal or vegetable fats
TOP BENEFICIARIES IN SRI LANKA 15 and oils and their 4.2
cleavage products
Source: WITS/SMART Simulation
While Sri Lankas exports are likely to grow on average at 15 per cent,
the growth rates differ depending on the export category in question. For
GSP+ preferences can make a significant contribution to Sri Lankas economic
development by increasing exports to the EU market example, exports of animal and animal products are estimated to grow by
EU Trade Commissioner Cecilia Malmstrom
as much as 32 per cent (or US$ 30 million). Sri Lankas main exports to
the EU, textiles and apparel, accounting for bulk (62 per cent) of the total
Source: European Commission & own research
exports to the regional bloc, is likely to grow by more than 21 per cent (or
US$ 424.6 million) as a result of GSP Plus.
an increase in export, but numbers vary significantly between the three different
arrangements, product groups and beneficiary countries.
A breakdown of the above overall figures indicates that exports, which
stand to benefit the most from the duty free access to the EU, include
Table 1 contains results from simulating the removal of tariffs by the EU on articles of textile and apparel, fish (fresh or chilled), bicycles and other
Sri Lanka, with the exception of tariffs on some sensitive (agricultural) items. cycles, and coconut oil, to name a few (Table 2). Currently, under the
61.6 88.1 9.1 0 diversification and Foreign Direct Investment (FDI).
While the SMART model yields important (positive)
0
18.7 11.3 6.36 quantitative results, the model captures direct effects
of a trade policy change only in one sector of an
0
economy; that is, the model assumes that changes in
7.3 3.6 2.13
that sector have no, or minimal impact on other sectors.
0
3.6 0.7 2.13 Thus, the results may be sensitive to assumptions
and parameters used. Despite its shortcomings, a
partial equilibrium framework is useful as it allows
the utilization of widely available trade data at the
appropriate level of detail to capture variables of
interest to policymakers and others.
It is also important to bear in mind that the impact on exports occurs
within two years after preferences have been granted, according to
economic assessment of the EU GSP arrangements in developing
countries. Further, utilization rates vary significantly from country to
country, and differ by arrangement types. Of the three schemes
Standard GSP, GSP Plus, and EBA utilization rate was found to be the
lowest for the GSP Plus arrangement; reportedly 66.1 per cent in 2014.
Nonetheless, GSP Plus can make an important contribution to increasing
Sri Lankas exports to the EU market, especially at a time when Sri
Lankas exports are performing poorly.
27
 In October 2011, then US Secretary of State Hillary Clinton outlined a
new foreign policy vision for the United States that rebalanced its focus
to East Asia and Pacific from the Middle East. Given the costly American
interventions in the Middle East, the Obama administration believed
that a diplomatic and military pivot to Asia would best enable them to
benefit from the economic dynamism of the region while also balancing
Chinas military strength. At the time, the pivot to Asia was considered a
demonstration of American intent to influence the balance of power in the
region, as well as geo-politics and economics of the region. Six years on,
however, it is the regional and global balance of power that appears to be
pivoting towards Asia.
Obamas Pivot to Asia
Following the announcement of the pivot, the American foreign
policy establishment moved to strengthen its military capabilities
in the region and these moves were most prominent with
growing tensions in the South China Sea region. More important
however, especially from Sri Lankas interests, was the economic
strategy laid down by the Obama administration. The crown
jewel of Obamas economic pivot to Asia was undoubtedly the
Trans-Pacific Partnership (TPP). The largely US-led agreement
included 12 Pacific countries that covered a significant share
of international trade. Strategically, the agreement did not
include China and also set out to dictate new rules for trade and
investment while circumventing the gridlock of the WTO. The
regional economic focus was, therefore, two-pronged; undercut Cambodia
Chinas growing economic prowess through trade alliances and
reforms to trade rules, and tap into the economic dynamism of
the greater ASEAN region.
Trumps Isolationism
However, President Donald Trumps America First stance
has completely overturned the expected trajectory of Asian
politics. Rather than a more prominent role for the US in Asian
politics and economics, Trump has called for a more protectionist and
Sri Lanka
isolationist economic and foreign policy. Moreover, his Buy American,
Hire American stance could potentially undermine the role of the US
as a leader in international trade. One of his first actions as President
was to withdraw the US from the TPP. Moreover, some quarters of the
and the administration has also seemingly embraced a punitive tariff on Mexican
and Chinese imports. If such a policy were to be implemented, the
impacts on the American and the global economy will undoubtedly be
Pivot to Asia
catastrophic with close to one-third of American trade occurring with
Mexico and China. Moreover, Trump has also demonstrated his disdain at
regional trading agreements such as NAFTA. In withdrawing from the TPP
and also pursuing a protectionist trade policy, not only has the US forgone
in the
the opportunity to gain from the benefits of the free trade agreement, but
also the opportunity to mould the rules of trade in the 21st century. The
regimes ambivalence to regional trade and internationalism, therefore,
has created an opportunity for a new leader to emerge in international
New Global Order economic relations.
The Decade of the Dragon
By Kithmina Hewage
Given their economic successes in the recent past, Chinas rise, to at
least some degree, was inevitable. In fact, Chinas successes, along
with those of other East Asian economies, have balanced the economic
28
instability faced by their counterparts in Europe, and circumstances have
ensured that China in particular, has the opportunity to truly ascend to
become the new leader in international trade. The irony is that, within
the same week, the leader of the United State the bastion of free trade
delivered an inaugural address promoting protectionism while the
President of China a communist nation delivered an address extolling
the virtues of globalization at the World Economic Forum in Davos.
Where the TPP failed as a mega-regional to dictate 21st century trade
rules, China along with India is now touting the Regional Comprehensive
Economic Partnership (RCEP). If successful, the RCEP is likely to
present an alternate path towards trade liberalization based on a more
developing-country-perspective, compared to that of the TPP. In addition
to leading through mega-regional trading arrangements, Chinas booming
middle class allows them to transform the economy from an almost
exclusively export-oriented economy to one that is more balanced.
Figure 1: RCEP and TPP Members
RCEP TPP
Canada
China Korea Japan
USA
India Indonesia Malaysia Vietnam
Mexico
Brunei
Lao
Singapore Australia
Chile
Thailand Philippines
New Zealand
Peru
Myanmar
Taiwan
Source: ASEAN Trade Union Council
Chinas rise as a global leader in international trade could be particularly
beneficial to small developing economies. Countries such as Sri Lanka
will find it easier to make the incremental commitments needed to join
a mega-regional such as RCEP rather than the complete institutional
overhauls required for TPP accession. Moreover, the rise of protectionism
in the US and the expected instability in Europe due to growing
nationalism and Brexit has made it abundantly evident that Sri Lanka
needs to diversify its export markets. The economic dynamism of the
future lies in the greater-ASEAN region and the economy needs to make
the necessary adjustments that can cater to these markets. In order
to successfully do so, however, the country needs to urgently address
fundamental economic reforms in trade and investment policy along with
other institutional reforms.
Increasingly, investors from emerging economies (commonly referred
to as Third World MNCs) are starting to move outwards towards other
developing countries. Sri Lanka will be unable to attract these efficiency-
seeking investments if it fails to establish a conducive economic
environment. Even the success of free trade agreements currently under
negotiation with partners in the East will depend heavily on successfully
implementing the required reforms and achieving a semblance of policy
stability. Therefore, Sri Lanka needs to be cognizant and proactive in
making best use of the pivot in global trading power towards Asia.
29
 Four Lessons from the
Pakistan-China FTA for Sri Lanka
Sri Lanka is currently engaged in trade
negotiations with China, and five rounds
of talks have taken place to date with the
expectation of concluding discussions in mid-
2017. Whilst such negotiations are on-going,
it would be prudent for Sri Lanka to examine
the experience of one of its neighbors, Pakistan
with its free trade agreement (FTA) with
China to draw lessons before finalizing the
agreement.
Like Sri Lanka, Pakistan shares an extensive
cordial relationship with China. To deepen
this bond, Pakistan signed a FTA was signed
with China in 2006, which came into effect
in 2007. The agreement is divided into two
phases, with Phase I ending in December of
2012 and negotiations for Phase II beginning in
July of 2013. Under Phase 1, China agreed to
eliminate/reduce tariffs on 6418 product lines,
and Pakistan made similar concessions on
6711 product lines over a period of five years.
Under the Phase 2, tariffs are to be removed
on 90 percent of tariff lines and trade volume,
covering substantially all trade. However,
Pakistan and China have yet to embark on
Phase 2 of duty reduction under the FTA despite
a lapse of three years.
As of end of 2013, bilateral trade equaled
$9,278 million, as compared to $3,421.96
million in 2006 prior to the FTA being
implemented while the trade imbalance has
grown in favour of China during this time
(Figure 1). China has made substantial use of
the FTA; it has managed to utilize 57 per cent
30
of the concessions under the FTA, compared to
mere 5 per cent in the case of Pakistan.
Lesson 1: Tariff concessions and
exports post-FTA
Tariff concessions extended to Pakistan
appear to be generous at first glance (Table
1). However, nearly all top export products,
including those in which Pakistan has a
comparative advantage, China has awarded
higher or equal tariff reductions to competing
ASEAN countries. For example, tariffs under
the 100 per cent concession category were
reduced to 0 per cent by China for Pakistan
by 2011; these products accounted for more
than 35 per cent of the total products offered
concessions by China to Pakistan under the
FTA. However, the average tariffs levied by
China on these products for ASEAN countries
were also 0 per cent.
Even though there has been an increase in
Pakistans exports to China subsequent to the
FTA, growth of exports to China was also seen
in products which were outside the scope of
the FTA. In fact, many top exports of Pakistan
to the world (and China) were placed in Chinas
No Concession list. While Chinas demand
for these products was significant, Pakistan is
currently contributing to less than 1 per cent to
Chinas imports of these product lines.
Chinas share in Pakistans overall exports
remains below 10 per cent while there has
seen a significant increase in its shares in
Pakistans overall imports. Post FTA China
By Janaka Wijayasiri
became the second largest source of Pakistans
imports contributing over 25 per cent of the
total imports of Pakistan excluding petroleum
products.
One way to obtain better access to the
Chinese market is for Pakistan to renegotiate
concessions so that they are equal to or
more generous than those provided to other
suppliers. Moreover, Pakistan appears to
have failed to maximize the FTA despite
tariff concessions by China. This may have
been perhaps due to the fact that Pakistani
businesses were not involved in the negotiation
process. Thus, the first lesson to draw from
Pakistan-China FTA is that Sri Lanka needs to
ensure it gets similar or better concessions
compared to Chinas FTA partners, and
to consult Sri Lankan businesses so that
concessions negotiated are relevant to the
interest of the country.
Lesson 2: Product coverage and
utilization post-FTA
An analysis of the FTA by the Pakistan Business
Council shows that even though 7,550 products
(at 8-digit HS code) are covered under the FTA
with China, Pakistans exports to China were Consequently, the trade gap with China nearly
concentrated in 350 product lines (Table 1).
In the zero rated tariff category, exports were
recorded in 169 products out of the 2681
products eligible for duty concessions. Nearly
1400 products covered by the Agreement
recorded no exports from Pakistan to China or
to the world. Conversely, concessions offered
by Pakistan to China under the FTA appear
to be more beneficial- both in terms of the
coverage (number of product lines utilized)
and variety of products (type of product lines
utilized).
Figure 1 Pakistan-China Trade Before and After FTA
$15
$12
$9
$6
$3
$0
2006
2003 2004 2005
$3
$6
$9
$12
Imports Exports
Source: Irshad, M. Qi, X., Hao, H. & H. Arshad (2017), Swot Analysis of Pakistan-China FTA: Pros and Cons, International Journal of Asian Social
Sciences, 7(1):45-53.
Of the 6803 products covered by the
Agreement and concession offered by Pakistan
to China, imports from China were spread
among 57 per cent of the products (3800
products) and product utilization was more than
50 per cent for the zero rated goods. In the
case of Pakistan, the utilization rates as was 5
per cent for the zero duty items (350 items).
In this context, the second lesson for Sri Lanka
would be to negotiate an FTA which includes
products with high export potential as well as
those which enjoy a comparative advantage
against the rest of the world. Moreover, efforts
should be geared towards diversifying the
export basket, and this could be facilitated by
export oriented foreign direct investments from
China.
Lesson 3: Trade imbalance
Trade imbalance between Pakistan and China
is a cause for concern, as it is in the case of
bilateral trade with Sri Lanka. China, one of
the fastest growing economies of the world
with imports of over $ 1.7 trillion, shares only
$ 2.6 billion of its market with Pakistan in
2011. Share of Pakistans exports to China is
only 28 per cent of its total trade in 2011; the
figure has increased from 15 per cent in 2006.
However, China retains the position of main
supplier of many top products Pakistan imports.
doubled from $ 2.4 billion in 2006 to $ 4.8
billion in 2011.
The real challenge for Pakistan is not the trade
imbalance per se but the unequal benefits
that the two countries share because of the
FTA. While exports have been increasing after
the FTA, the loss of revenue to Pakistan is
also increasing, off-setting any benefits that the opportunity these new sectors present to
Pakistan is reaping from growth in exports. boost local production and exports to China and
obtain tariff concessions for these products.
However, the problem of trade imbalance Growth in such exports could potentially offset
cannot be addressed by discouraging imports any losses in revenue that Sri Lanka will incur
from exemption of duties to China under the
30
FTA.
27
24 Lesson 4: Protection of local industries
21
18 While zero rated category and other preferential
15 tariff concessions to China have enabled
12 Pakistan to import cheap raw material that
2007 2008 2009 2010 2011 2012 2013 2014
is used in local production, tariff concessions
9
6
to China under the FTA have also increased
imports of finished products into the country.
3
This has flooded the local market thereby
0
lowering profitability and/or underutilized
Balance Share in Im. Share in Ex.
capacity of local producers in Pakistan.
According to Irshad et al (2017), as many as
10 cases of anti-dumping have been filed by
from China as Chinese imports are important local producers against Chinese products to the
for Pakistan and tariff concessions to China National Tariff Commission and subsequently
have enabled local manufacturers to obtain anti-dumping duties as high as 71 per cent
cheaper inputs. A study on Pakistan and China have been levied.
FTA by the Pakistan Business Council argues
that Pakistan should focus on increasing its The study by the Pakistan Business Council
exports and expanding local production of recommends that Chinese imports, which have
sectors where opportunity for trade exists to adversely affected the local producers as a
address the trade deficit which is the third consequence of the concessions offered by
lesson for Sri Lanka. It is noted that many Pakistan, should be discouraged for a limited
products that are zero rated for Pakistan are
period of time (5 years) so these industries
imported in large quantities by China from the
could build up scale and competencies to
rest of the world and hence hold high potential
compete. This would be fourth lesson for Sri
for export growth if production/export is
Lanka; it too should be mindful of its tariff
facilitated.
liberalization with China and identify sectors in
Table 1 Tariff Lines under Pakistan-China FTA
Under Phase I Pakistans Pakistan's China's
Pakistan Utilization of FTA to China Utilization
of for FTA
100% reduction (three years) 2,681 169 2,423 1,332
0-5% ( five years ) 2,604 72 1,338 747
Reduction on Margin of 604 31 157 92
Preference of 50% (five years)
Reduction on Margin of 29 1,174
529
Preference of 20% (five years)
No Concession (Sensitive List) 1,132 49 1,025 556
Exclusion (not to be imported) - - 92 8
7,550 350 ( 5%) 6,803 3,909 ( 5 7%)
Source: Pakistan Business Council (2013), Preliminary Study on Pakistan and China Trade Partnership Post FTA
A preliminary study by the Institute of Policy the economy which may be adversely affected
Studies of Sri Lanka (IPS) regarding trade by opening up to China and provide a time
between Sri Lanka and China found 297 bound support to these vulnerable industries.
products with high trade potential to China; Moreover, Sri Lanka should urgently enact
these products are currently not exported legislations on anti-dumping, countervailing
by Sri Lanka but are imported by China from and safeguard measures, which are temporary
elsewhere in the world, presenting new in nature to ease the transition toward freer
market opportunities for Sri Lankan exporters. trade and protect local industries against unfair
In this context, Sri Lanka should recognize trading practices/surge in imports.
31
All nations around the globe celebrated World Oceans Day on 08 June
2017 under the theme of Our Oceans, Our Future. While the action
focus of this years Ocean Day is the prevention of plastic ocean pollution
through events organized in several countries, it is more opportune in
the Sri Lankan context to take a broad look at the overall theme in the
light of growing interest on Blue Economy as a prospective agenda for
exploring our future opportunities in oceans.
Oceans cover two thirds of the earths surface and over three billion
people are estimated to depend on marine and coastal systems for their
livelihoods, directly and indirectly. Important maritime activities, such
Oceans and Sri Lankas
Future: Towards a Blue
Economy
By Athula Senaratne
as fishing, sea transportation, tourism, offshore mining, and energy
generation, play a significant role in the national economies of many
countries, including Sri Lanka. Expansion of marine economic activities
can be considered as one frontier of globalization. Unfortunately, the
growing human activities in the oceans, while helping to increase the
prosperity all over the world, are also responsible for the degradation of
marine ecosystems.
Marine ecosystems fulfil environmental functions that are essential
for the survival of humans and other living beings. The oceans absorb
a major share of carbon dioxide emissions that humans produce,
play an important role in the stability of global climate systems, and
accommodate and protect a major part of global biodiversity, making
the world habitable for all of us. These global ecosystem services of the
oceans have come under threat as a result of human activities such
as, over exploitation of resources, illegal-unreported-unregulated (IUU)
32
fishing activities, marine and coastal pollution, habitat destruction, and
anthropogenic climate change. Impacts of such actions have become
increasingly visible. It has been estimated that over 30 per cent of
global fish stocks are being overfished, beyond their sustainable limits.
The ocean acidity has increased by about 25 per cent compared to
the pre-industrial era. Marine pollution has reached alarming levels,
making oceans the largest waste dumping site globally. In this backdrop,
the emerging concept of blue economy provides a way for balancing
competing demands, and lays the foundation for the sustainable future of
the oceans.
Blue Economy
The origin of the concept of Blue Economy is often traced to the book
titled The Blue Economy: 10 years 100 innovations 100 million
jobs, written by Gunter Pauli, first published in 2010. However, Paulis
concept refers to a business model, aimed at transforming society from
scarcity to abundance, with the help of locally available resources,
through adopting innovative measures to address environmental and
related problems. It does not essentially imply ocean based economic
prospects. Despite Pauli being credited with coining the term, the
concept of blue economy is now being widely used to refer to human
activities based on oceans, taking them as one entity. Unfortunately, it
carries many meanings and interpretations, creating doubts in the minds
of interested public on the subject. It appears that some parties are trying
to emphasize the ecological perspectives, while others are considering
it merely as an umbrella term for all economic activities in the maritime
sector, carried out using ocean resources, without any reference to
sustainability aspects.
To avoid such misconceptions, some international agencies have come
forward with interpretations that are aimed at introducing a balanced
view on the concept, emphasizing its economic, social and environmental
dimensions. The World Wildlife Fund (WWF) has defined sustainable blue
economy as a marine-based economy that provides social and economic
benefits for current and future generations while restoring, protecting
and maintaining the diversity, productivity, resilience, core functions, and
intrinsic value of marine ecosystems being based on clean technologies,
renewable energy, and circular material flows keeping within the limits
of one planet. The United Nations Environmental Programme (UNEP)
promoted the idea that blue economy is a marine and coastal analogue
to the Green Economy (GE); in essence, it implies that blue economy is
applying the concepts of green economy to the unique and irreplaceable
role of marine and coastal ecosystems. These definitions help to dispel
misunderstandings, emphasizing the sustainability dimension, without
that no value addition of advancing the concept. In the final count, a
blue economy should essentially be a green economy. The legitimacy
of the concept was further enhanced due to the adoption of sustainable
development goals (SDGs) by world leaders in the UN General Assembly
in 2015. The Goal Number 14 of the SDGs, Life below Water, is aimed at
enhancing conservation and sustainable use of ocean-based resources,
through wise management of resources and protection of marine and
coastal ecosystems from pollution, including the impacts of ocean
acidification.
Prospects for Blue Economy in Sri
Lanka
Being an island nation located in a central position of Indian Ocean,
adopting a blue economy strategy is not optional but mandatory for Sri
Lanka. Sri Lanka has advantages, but also faces challenges due to its
position. The major advantages for a blue economy include, a unique
geographical position, high accessibility to ocean resources from lengthy
coastline around the country, closeness to major sea lanes, sovereignty
over significant area of sea compared with the countrys land resources,
diverse range of coastal and marine ecosystems, and high potential for
tourism and recreation industries. However, these opportunities also have
challenges attached to them. The oceans around the country are highly
contested by global powers, and being a small player in global political
arena, Sri Lanka has to take cautious path.
The government of Sri Lanka has promoted a blue economy initiative
under the Sri Lanka NEXT programme in October 2016. This can
be considered as a timely effort. In addition, the country aspires to
become a maritime hub in the region, taking the advantage of central
geographical position and the closeness to major sea lanes. There were
some steps taken in this direction, with mixed results. The country has
been promoting its image as a tourism destination, with unique marine
and coastal attraction, with some success. Despite these ad hoc efforts,
however, Sri Lanka is yet to come with a viable blue economy strategy
that combines the strength of these efforts.
33
 Pay as You Throw! Free riding and over-consumption
Some consumers of this solid waste disposal service do pay an indirect
How much waste?
The World Bank estimates that per capita solid waste generation per

A Solution to Sri Lankas

and informal price for it. Specifically, those paying taxes to the local day in Sri Lanka is 5.10 kg. Given the average household size of 3.8
governments are indirectly paying for this service. However, not everyone persons, this amounts to 23,028 tons of solid waste per day for the
pays such taxes and thus the others free ride on those paying. Similarly, 1,077,950 households in Sri Lanka that rely on local authorities for this
some pay irregular tips to the personnel collecting garbage, while the service. In Colombo district alone, on average, 8,419 tons of solid waste

Mounting Garbage Issue?

By Bilesha Weeraratne
others free ride. Additionally, the absence of a direct price and the
possibility to free ride, results in overconsumption of the service in the
form of lack of initiative at household level to recycle.
Figure 1: DSDs in Colombo District by Method of Solid Waste Disposal - 2012
is generated per day by households for collection by local authorities (see
Figure 2).
Figure 2: Average Demand for Solid Waste Disposal Services Offered by Local
Governments (in tons per day)

Vavuniya. 180
Trincomalee, 653

Padukka Ratnapura, 357

Puttalam, 569
Homagama Polonnaruwa, 108
Nuwara Eliya, 434
Seethawaka Mullaitivu, 6
In the wake of the tragic event in Meethotamulla, there have been multifaceted proposals to address the Moneragala, 88
Kaduwela Matara, 572
immediate and long term issue of garbage disposal in Sri Lanka. However, most these suggestions are at Matale, 240
Maharagama Mannar, 125
the macro level, directed at the local governments or the relevant authorities, concerning techniques and Kurunegala, 392
Killinochchi, 6
strategies to process solid waste. It is well established that the State or local governments are responsible for Kolonnawa Kegalle, 353
Kandy, 1132
providing common goods (and services) such as solid waste disposal. Invariably, along with the provision of Moratuwa Kalutara, 1088
Jaffna, 418
common goods, come free-riders and issues of under production and over-consumption of the public good. Rathmalana Hambantota, 181 Gampaha, 3700
Sri Jayawardenapura Kotte Galle, 719
Colombo, 8419
Batticaloa, 1155
Colombo Badulla, 383
Anuradhapura, 302
Dehiwala Ampara, 1450
Thimbirigasyaya
0 200 400 600
0% 20% 40% 60% 80% 100% No. of households per District in 000

Collect by local auth. % Burry by occupant % Dispose by occupant% Notes: Size of circle indicates average weight of solid waste per day per district in tons.
Source: Authors calculations based on detailed Census 2012 data from DCS and World Bank Estimates
Burn by occupant % Compost by occupant % Other %

Consumer pays
Source: Census 2012 data from DCS

Given the magnitude of solid waste generation for collection by local

Negative externalities
The absence of garbage from their neighborhood offers many benefits
to those who consume the services of waste disposal. However,
unfortunately for another group like the victims and other residents of
Meethotamulla, solid waste disposal by the local governments results
in negative externalities. As per Census and Statistics of 2012, in the
Kolonnawa Divisional Secretariat (DSD), where Meethotamulla Grama
Niladhari Division (GND) falls under, only 82% of the households rely on
garbage collection by local authorities (see Figure 1). Due to the negative
externalities of open dumping in Meethotamulla, even the households
that resort to other methods of solid waste disposal in this area suffer.
Demand for solid waste disposal services
At the national level only 20% of households rely on local authorities
for solid waste disposal, while nearly half (47%) of occupants burn their
own solid waste. Another 23% dispose within their own premises, while
only 7.8 % resort to composting of solid waste. Among all districts,
Colombo accounts for the highest proportion of households relying on
local authorities for solid waste (68%) while Kilinochchi has the lowest
reliance of 0.9%. Within the Colombo district, among the 13 DSDs,
Thimbirigasyaya, Dehiwala and Colombo account for the highest share of
households relying on local authorities for solid waste disposal, while in
Padukka only 4% of households rely on such services (see Figure 1).
34
authorities, and the scale of negative externalities in the process, it is
only reasonable to expect consumers of this service to also become more
responsible. One way to succeed with such division of responsibility is to
charge consumers for the solid waste they generate. Versions of Pay as
you Throw are adopted by many municipalities across the world in cities
such as California, Michigan, New York, Washington, Dresden and Taipei.
Pricing
The charges for solid waste disposal by local authorities need not be
market prices that would fully offset the common good nature of this
service, but significant enough to make consumers conscious about solid
waste they generate and to limit overconsumption of the service. For
instance, a Partial-unit pricing would allow a certain number of bags/bins
of solid waste to be collected by tax money, and only the additional to be
charged. Other options for charging include variable-rate pricing, where
consumers would be charged by the amount of waste they generate,
while full-unit pricing would require consumers to pre-purchase bags/
bins in sizes of their choice, and be charged per bags/bins purchased,
regardless of the amount of waste generated.
Finally, any form of pricing would encourage recycling and related
separation/sorting of solid waste, and hopefully would work well with
other macro level initiatives currently considered for processing solid
waste.
35
 Managing Wastewater
in Sri Lanka:
An Uncomfortable Reality
By Athula Senaratne
This years theme of the World Water Day focuses on wastewater. This article
highlights the urgent need for effective management of wastewater, given the
severity of the problem and the catastrophic outcomes it could result in, if not
handled wisely.
Water can easily become wastewater due to many reasons mostly tied to premises without giving much thought to the health and environmental
human activity. The most common sources of wastewater include domestic
effluent consisting black water (excreta, urine and fecal sludge) and grey water remarkably similar to the garbage problem. Some people carry domestic
(kitchen and bathing wastewater), effluents from commercial establishments
(e.g., restaurants and hotels) and other working places including hospitals, storm
water and urban run-off and effluent from industrial, agricultural, horticultural and
aquaculture sources. Effluents from industrial and agricultural sources and from
hospitals are considered water pollution; comprehensive pollution control measures
that go beyond mere disposal of wastewater are necessary to handle the problem
of water pollution. On the other hand, managing wastewater from domestic and
commercial sources and urban run-off is largely a matter of proper disposal.
However, given the scale and frequency of wastewater generated from these
sources, especially in urban areas where population and economic activities are
36
concentrated, proper disposal requires comprehensive solutions based
on scientific management. This article focusses on domestic, commercial
and urban run-off wastewater which has received limited attention by
many.
Wastewater is an uncomfortable and unpleasant subject that many
prefer to avoid. However, it cannot be easily ignored as everyone is
faced with the problem of wastewater on daily basis, whether at home,
work place or during the everyday commute. Developed countries have
invested large amounts of resources to manage wastewater, giving
it high priority and treating the issue as a matter of social welfare. In
fact, the level of priority and resources allocated for solving the issue
of wastewater reflect a fundamental difference in attitudes towards
social welfare between developed and developing societies. In many
developing countries, even educated and wealthy members of society
seem to be intent on turning a blind eye to the harsh reality and prefer to
stay in their own comfort zones, rather than actively seeking solutions to
the issue. The usual inclination is to dispose the waste from ones own
repercussions of their actions. In this sense, the wastewater problem is
of city areas and surrounding suburbs mostly have to depend on onsite
garbage bags in vehicles and covertly dump it at isolated places. The
same motive is visible when a suburban household surreptitiously
empties its wastewater pits to storm water drains during heavy showers.
Such behavior is motivated by the lack of public collection and sanitary
disposal systems, a situation prevalent in many developing countries.
Common methods for disposal of wastewater
There are two basic wastewater management strategies. They are
onsite (non-sewered) disposal and off-site (sewered) disposal with or
without centralized treatment facilities. In urban areas, off-site disposal
of wastewater and disposal of surface run-off are closely connected.
Therefore, in some countries, combined systems that convey run-off
water with foul sewage in the same pipes can be found. However, many
countries have resorted to systems that carry surface run-off and foul
sewage separately. Off-site disposal systems are more effective and
are in place worldwide. Modern cities in developed countries have
established extensive systems for wastewater collection and disposal
with centralized treatment facilities. Like other public infrastructure
facilities such as transport, urban parks, water and electricity supply,
these wastewater management facilities also play a major role in making
these cities more habitable, contributing to high living standards enjoyed
by citizens.
However, establishing such off-site disposal facilities are costly
operations. They need high capital investments for establishment
and large operational budgets for running and maintenance. Users
are charged for these services by utility companies that operate on
volumetric basis. Large utility companies are usually run as public-
private partnerships under close supervision of city administrations. In
developing countries, city administrators have limited means to invest in
modern wastewater management systems and low-income city dwellers
cannot be expected bear the full cost of services they offer. As a result,
many developing countries are unable to afford such systems. Hence,
modern wastewater treatment facilities are restricted to limited areas
of large urban centers in the developing world. When available, these
systems are usually located in service opulent neighborhoods and a
large majority of the population suffers due to lack of proper wastewater
disposal facilities. These underprivileged areas are usually left with
onsite disposal systems in various forms of operational arrangements.
Usually such systems are less hygienic, and chaotic situations arise
during disasters such as urban floods. Furthermore, poor storm water
and drainage systems and ill-designed onsite disposal facilities
themselves contribute to hazardous events such as flash floods very
often.
Wastewater management in Sri Lanka
The current wastewater management systems in place in Sri Lanka are
abysmal. Being a developing country, Sri Lanka is also plagued with
inefficiencies in wastewater management mentioned above. Sewer
connections are only available for restricted areas in the Colombo city
and for a few other major cities. Inherited from the colonial period,
some sections of these systems are dilapidated and are in dire need
of renovations and upgrades. Extension work on the pipe system
is moving at a snails pace and the existing systems do not have
centralized treatment facilities. Wastewater collected from the Colombo
sewerage system is dumped in to the sea in two locations. Many other
fast-developing coastal towns follow this lead, making them leading
contributors to marine pollution.
Beyond the limited area covered by pipe connected facilities, outskirts
wastewater disposal methods. The common practices include individual
facilities of septic tanks or open-bottom soakage pits for black water and
open bottom wastewater pits for grey water. However, very often, grey
water is channeled illegally to storm water drains directly or indirectly.
In underserved areas of Colombo and other cities, residents often have
no choice but to share common toilet pits and dispose kitchen and bath
water to storm water drains, creating uninhabitable conditions in the
surrounding environments. Coupled with ill-designed storm water drains
and run-off water disposal facilities, non-standard waste water disposal
methods are the reason that Colombo and other major cities in the island
are plunged into chaos during flash floods.
Overall, poor investment on standard public wastewater disposal facilities
has led many residents in urban areas to depend on individual onsite
wastewater disposal facilities. The quality of these facilities varies greatly.
Moreover, this causes accumulation of wastewater in large quantities
in local neighborhoods, affecting the groundwater. In some suburban
areas, residents are still dependent on shallow groundwater wells for
domestic water supply and they get affected from groundwater polluted
by accumulated wastewater. Considering this situation, some technical
standards have been imposed in building approval criteria regarding
locating septic tanks and wastewater pits when constructing houses.
However, the effectiveness of such measures, monitoring of those
standards and level of compliance cannot be guaranteed.
Wastewater challenge
Sri Lanka boasts of the prevalence of sanitation facilities even among
poorer communities, when compared with many other developing
countries. However, the management of wastewater is an exception, and
remains a challenge. It is a public health and environmental hazard that
cannot be left for residents to resolve on their own. Serious health and
environmental issues demand public solutions where individuals have to
play their roles considering their own and community welfare. Individuals
cannot make large public investments required for establishing
standard facilities and the government and city administrations need to
give due priority to initiate such facilities. However, effective systems
need resources for establishment of facilities and efficient operation
that cannot be borne by cash strapped city administrations alone.
Beneficiaries of the facilities also have to bear some burden here. This
requires innovations in technical as well as management and institutional
aspects of wastewater management solutions in the country.
37
 People are reliant on numerous benefits or ecosystem services offered
by the nature. The ecosystem services range from provision of food
for sustenance to provision of cultural services such as recreational
Connecting People
experiences. However, a long lasting connection between people and
nature requires careful and responsible behavior of humans in all
activities that involve nature. The responsibility lies with all sects of
to Nature:
the society, ranging from the individuals, corporates, civil society and
the government. There is enough evidence to show that lack of true
connectivity between people and nature causes negative implications for
development. A meaningful connectivity between people and nature leads
A Need of the Hour
to informed decisions regarding the human activities that involve nature.
This avoids unsustainable activities that destroy nature, and contributes
effectively towards sustainable development.
for Sri Lanka
By Kanchana Wickramasinghe
No or Lack of Connectivity
Nature-based tourism is one of the activities which indicate peoples
desire to experience the nature. On the other hand, tourism businesses
are undeniably dependent on the recreational services offered by the
ecosystems. Therefore, a vital role has to be played by the visitors to
minimize their impacts on the nature. As a concerned villager who serves
as a local committee member in promoting nature-based tourism in a
rural area in Kurunegala pointed out, managing the local tourists is the
most challengeable thing for us. They leave polythene and bottles that
destroys the beauty of the environment. They only think about their day
of enjoyment. This has been the case for nature tourism sites in many
parts of the country.
An IPS study based on the Bar Reef in Kalpitiya revealed the negative
implications of the ongoing tourism activities on the ecosystem. The
Bar Reef has become a polluted area due to irresponsible activities of
tourists. A tour operator who owns a small scale boat service noted
its our people who pollute the environment most, not the foreigners.
The real aesthetic value of the nature sites decreases due to pollution.
Evidently, a substantial problem faced by the tourism industry in Sri
Lanka is local visitors responsibility to keep the natural environment
intact.
Furthermore, peoples connectivity with the environment is important in
every aspect of tourism, not only in nature sites. Patrons of hotels can
also contribute by being mindful of their water and energy consumption
and using these resources responsibly. A recent IPS research highlighted
that certain practices to increase the efficiency of water usage will work
better if users extend their cooperation by conserving water.
The recent tragedy in the Meethotamulla garbage dump is an ideal
example of the devastating consequences caused by negligent
behavior of people. Citizens are aware of the impacts of improper waste
management but only a few households are making an effort to convert
waste into environmentally-friendly compost. While there can be certain
constraints that limit such attempts by individuals, households can
contribute towards waste segregation and responsible management of
waste.
Environmental Literacy
The issues posed by peoples lack of connectivity to nature call for the
promotion of environmental literacy in Sri Lanka. Knowledge about the
natural environment and related issues only form a part of the concept
of environmental literacy. An environmentally literate person should be
able to make decisions using this knowledge and be willing to contribute
38
towards environmental sustainability. Thus, while environmental literacy
begins with knowledge, it is completed only with behavioral aspects
which are vital for environmental sustainability.
It is unlikely that many individuals are unaware of the environmental
impact of certain activities. The problem occurs when it comes to
responsible behavior. Therefore, though environmental education and
awareness have always been an important element in environmental
policies, the ultimate policy goals are yet to be achieved.
The UN Sustainable Development Goals also recognizes the importance
of environmental awareness under Goal 12, which deals with sustainable
consumption, and production, and under Goal 13 which deals with
climate change. The Target 12.8 says by 2030 ensure that people
everywhere have the relevant information and awareness for sustainable
development and lifestyles in harmony with nature. The Target 13.3
says improve education, awareness raising and human and institutional
capacity on climate change mitigation, adaptation, impact reduction,
and early warning. OECD (2012) which highlights directives for policy
makers in developing countries, considers the shifting science,
research, educational and training priorities to support the transition to a
green economy as one of the six enabling conditions for green growth in
developing countries.
Important to Consider
Promotion of environmental literacy among the various groups,
ranging from individuals to corporates, and policy makers, is a crucial
requirement in achieving connectivity to nature and sustainable
development. Ad hoc awareness programmes helps to get rid of certain
issues in the short term. However, in order to bridge the connectivity gap
between the people and nature, a far-sighted comprehensive programme
should be in place. Certain elements of environmental literacy are already
embedded in the school curricula. The formal education system should
not be limited to enhance awareness on environmental issues but also
should effectively contribute to behavioral changes. The environmental
literacy plans should be comprehensive and go in line with other
sustainable development objectives to make them feasible in practical
applications.
The most common cause for many environmental problems is
considering negative environmental impacts as an after-thought.
Improved environmentally literacy can guide the policy makers and
planners to make informed decisions considering nature as an integral
part of sustainable development.
The latest developments in sustainable tourism aim to encourage the
visitors to contribute towards conservation, without limiting themselves
to simply minimizing their impact on the natural environment. This is a
critical element of ecotourism activities. Tourism itself can be used as a
tool to nurture green thinking among the visitors, and make them actively
contribute towards conservation and preservation of environment.
Enhancement of environmental literacy at all levels should be undertaken
as a long term plan. Until environmental literacy delivers its intended
benefits, it is important to have an effective law enforcement system to
minimize the negative environmental impacts in the short run. Effective
enforcement of regulations can also lead to change the behavior of
citizens towards environmentally friendly approaches.
39
 The aim of Sustainable Development Goal 1 (SDG-1) is to eradicate Status of Poverty Based on Different Measures of Poverty
extreme poverty and to reduce all forms and dimensions of poverty, (Income, Multidimensional and Global)
at least by half, by the year 2030. As such, this article looks at the
status of poverty in Sri Lanka, based on different poverty lines, both The Income Poverty (IP), which is measured using National Poverty Lines
national and global. The estimates are based on the Household Income (NPL), declined from 26.1 per cent in 1990/91 to 6.7 per cent (or 1.34
and Expenditure Survey-2012/13 (HIES-12/13), conducted by the million persons) in 2012/13 (columns 2 and 3, Table 1). Although Sri
Lanka has made considerable progress in reducing IP, estimates show
Table 1Poverty Headcount and Share of Poor Persons under Different Poverty
Lines by Sector/ District that a large number
of persons are living
Poverty Headcount (HC) and Share of Poor Persons Under Different Poverty Lines just above the NPL.
Multidimen Extreme Extreme
District / For example, if the
Sector Income sional IP and/or Poverty : Poverty :
poverty (IP) Poverty
Near MDP
MDP (<$1.25 a day (<$1.90 a day NPL (which was Rs.
(MDP) (2005 PPP) (2011 PPP) 3,624 per person per
HC Share HC Share HC Share HC Share HC Share HC Share month in 2012/13) is
1 2 3 4 5 6 7 8 9 10 11 12 13
increased by 10 per
Urban 2.1 5.6 2.3 19.0 11.0 17.7 4.0 7.7 1.0 5.2 0.5 5.0
cent, poverty headcount
Rural 7.0 86.8 3.5 76.2 10.5 72.5 9.6 79.7 3.9 88.4 2.2 89.0
will increase to 9.9 per
Estate 10.9 7.6 17.9 4.2 23.5 9.8 25.0 12.5 4.7 6.4 2.2 5.4
cent, which accounts
Colombo 1.4 2.3 1.7 4.8 12.3 12.4 2.9 3.5 1.0 3.3 0.5 2.9 for 2.0 million persons,
Gampaha 2.1 3.5 1.4 4.0 7.5 7.6 3.1 3.7 1.3 4.4 0.8 5.0 indicating that there
Kalutara 3.1 2.8 3.7 5.6 8.2 4.4 5.7 3.7 1.9 3.4 0.7 2.1 are more than 620,000
Kandy 6.2 6.2 4.7 8.0 12.2 7.4 9.1 6.6 2.6 5.0 1.3 4.6 persons within the 10
Matale 7.8 2.8 6.5 3.9 14.1 3.0 12.9 3.3 3.2 2.2 0.9 1.2 per cent above the NPL.
Nuwara Eliya 6.6 3.4 10.7 9.5 18.7 5.9 15.2 5.8 2.9 3.0 1.3 2.5 The Multidimensional
Galle 9.9 7.6 3.8 5.0 8.7 4.1 11.5 6.5 5.2 7.9 3.3 9.0 Poverty Index (MPI),
Matara 7.1 4.2 4.1 4.1 9.7 3.5 9.6 4.1 3.5 4.1 2.5 5.2 measures acute poverty
Hambantota 4.9 2.1 2.2 1.7 7.4 2.0 6.3 2.0 2.1 1.8 1.6 2.5
and the overlapping
Jaffna 8.3 3.6 5.2 3.8 10.8 2.8 11.3 3.5 4.7 4.0 2.5 3.8
deprivations faced
Mannar 20.1 1.5 10.1 1.2 18.9 0.8 26.7 1.4 13.2 1.9 10.5 2.7
by members of the
Vavuniya 3.4 0.4 6.0 1.3 13.5 1.0 7.8 0.7 1.6 0.4 1.0 0.4
households in relation
Mullaitivu 28.8 1.9 10.2 1.2 18.6 0.8 30.4 1.5 18.5 2.4 11.9 2.8
to education, health
Kilinochchi 12.7 1.1 6.4 0.9 19.6 1.0 17.6 1.1 6.3 1.0 4.4 1.3
19.4 7.5 11.3 7.4 14.9 3.5 25.3 7.1 13.3 10.1 8.8 12.1
and living conditions.
Batticaloa
Ampara 5.4 2.6 2.8 2.2 10.3 3.0 7.2 2.5 1.7 1.6 0.6 1.0
Analysis show that
Tri n comalee 9.0 2.5 4.0 1.9 13.1 2.2 12.1 2.5 3.1 1.7 1.4 1.4 791,874 (or 4.0 per
Kurunegala 6.5 7.6 2.8 5.7 6.9 4.9 7.9 6.7 3.8 8.7 2.3 9.5 cent) of the people
Puttalam 5.1 2.8 2.5 2.4 7.7 2.6 6.4 2.6 2.5 2.7 1.5 2.9 in Sri Lanka are in
Anuradhapura 7.6 4.7 2.2 2.3 9.6 3.6 9.2 4.1 3.3 4.0 1.8 4.0 Multidimensional
Polonnaruwa 6.7 2.0 4.7 2.3 9.2 1.6 9.7 2.0 3.5 2.0 0.7 0.8 Poverty (columns
Badulla 12.3 7.3 8.7 8.8 17.3 6.2 18.2 7.8 5.0 5.8 2.3 4.9 4 and 5, Tables 1
and 2). Another 2.2

Status of Poverty in Sri Lanka

Monaragala 20.3 6.8 4.7 2.6 14.9 3.0 22.1 5.3 11.6 7.5 6.0 6.9
Ratnapura 10.4 8.4 3.9 5.3 16.3 7.9 13.5 7.8 5.1 8.0 2.5 7.2 million (or 11.2 per
Kegalle 6.7 4.1 4.0 4.2 13.3 4.9 9.0 4.0 2.7 3.2 1.5 3.2 cent) people are Near
Sri Lanka 6.7 100.0 4.0 100.0 11.2 100.0 9.3 100.0 3.5 100.0 1.9 100.0 Multidimensionally

Based on Different Poverty

No. of Poor
Persons
1,339,311 791,874 2,219,578 1,848,779 686,254 378,925 Poor (columns 6 and
7, Tables 1 and 2). This
Note: Sri Lankas National Poverty Line corresponds to $2.48 (2011 PPP); Most vulnerable and deprived districts are highlighted in blue indicates that quite
Source: Authors computations based on Household Income and Expenditure Survey-2012/13, Department of Census and Statistics
a large number of

Lines
Department of Census and Statistics (DCS), the latest data set available
at present. The analysis examines the status of poverty at national,
sectoral, and district levels, as well as by different population groups
based on the occupation or activity of the head of the household (Groups
are given in Table 2).
By Wimal Nanayakkara
Information on poverty estimated using different poverty lines, which
measures Income Poverty, Multidimensional Poverty, Extreme Poverty
based on global poverty lines etc., could be useful to those involved
in developing strategies to achieve SDG 1. It is important to note that
both, the Poverty Headcount (or the percentage of poor within a region/
population group), and the share (out of the total) in each region/
population group, need to be considered when developing strategies to
reduce poverty everywhere in the country.
40
persons are still at risk of slipping back to poverty. As the poor and near
poor could easily get affected due to various economic shocks and/or
weakening of any of the other three dimensions, education, health and
living conditions, it would be more appropriate to look at persons who
are in Income Poverty and / or Multidimensional Poverty, which covers
all dimensions of poverty. This is especially important, as SDG 1 also
envisages reduction of all forms and dimensions of poverty, everywhere.
There are 1.8 million persons (or 9.3 per cent) who are in IP and/or
MDP (columns 8 and 9, Tables 1 and 2).
To measure extreme poverty, the Global Poverty Line $ 1.25 a day (2005
PPP) was being used until October, 2015. Since then the World Bank
and UN agencies have introduced a new Poverty Line $ 1.90 a day
(2011 PPP) to measure extreme poverty, soon after the declaration of
SDGs in September, 2015. They also changed the lines used to measure
41
 Saman
Moderate Poverty, from $ 2.00 a day (2005 PPP) to $ 3.10 a day cent), because MDP is high (17.9 per cent) in this sector (column 4, Table
(2011 PPP). The World Bank claims that Poverty Headcounts computed 1). This is mainly due to inadequate access to safe drinking water and
using these new poverty lines, should not make much of a difference, safe sanitation, in the
Table 2- Poverty Headcount and Share of Poor Persons Based on Different Poverty Lines by Household Groups Classified by Occupation Estate Sector. Out of the
or Activity of the Head of Household-2012/13

Kelegama
districts, Batticaloa is
Poverty Headcount (HC) and Share of Poor Persons Under Different Poverty Lines the poorest, in terms of
Household Groups Extreme Extreme both Poverty Headcount
Classified by Occupation or Income and Poverty Poverty
Income poor MD Poor Near MDP / or MD [<$1.25 a [<$1.90 a and Share of Poor,
Activity of the Head of
Poor day (2005 day (2011 followed by Monaragala.
Household PPP)] PPP) ]
HC share HC share HC share HC share HC share HC share Other districts with high

Top Policy Researcher

1 2 3 4 5 6 7 8 9 10 11 12 13 shares of poor persons
Administrators, Senior Officials
(including those in the Armed are Badulla, Ratnapura,
Forces) & Professionals 1.0 1.4 0.7 1.7 5.2 4.3 1.6 1.6 0.6 1.7 0.5 2.5 Kurunegala, Kandy,
Technical & associated
professionals
Clerical, Services, Sales &
1.5 1.0 1.7 1.9 5.5 2.2 2.8 1.4 1.1 1.4 0.8 2.0
Galle and Nuwara Eliya.
Although the Mullaitivu
with a Mission
similar workers 3.8 4.0 2.1 3.8 7.9 5.1 4.9 3.8 1.6 3.4 0.8 3.1 district has the highest By W.A Wijewardena
Skilled Agricultural, Forestry &
incidence of poverty
Fishery Workers 8.8 20.0 2.8 10.9 10.1 13.8 10.3 16.8 4.4 19.3 2.6 20.5
Craft & related trade workers, (or Poverty Headcount),
Plant & machine operators,
*Dr. Saman Kelegama, one of Sri Lankas eminent economists, was the Executive
followed by Mannar
etc. 4.2 11.9 2.2 10.3 7.1 12.2 5.3 10.9 2.2 12.0 1.1 11.1 Director of IPS from 1995 2017, until his sudden demise. This interview, done by
Non -agricultural Labourers & district, the shares of the former Deputy Central Bank Governor, W. A. Wijewardena, a colleague and friend of
similar workers 12.5 15.4 5.9 12.2 12.7 9.4 15.9 14.2 6.7 16.1 3.4 14.9 poor persons (out of the
Agri., Forestry & Fishery
Dr. Kelegama, gives an insight in to his brilliant academic and research career, vision,
Labourers 16.6 21.0 8.9 19.0 16.4 12.5 21.8 20.0 8.1 20.1 5.2 23.2 total), in these districts and legacy. It first appeared in Daily Mirror (Business) in December 2011 under the Sri
Members of the Armed Forces are very low, due to low Lankas Prominent Economists series.
(excluding officers) 2.9 0.2 0.0 0.0 1.5 0.1 2.9 0.1 2.9 0.4 0.0 0.0
Unemployed 2.9 0.2 4.2 0.5 17.6 0.8 7.1 0.4 1.5 0.2 0.0 0.0
population densities in
Household Work 5.5 8.9 3.7 10.1 13.4 13.0 8.2 9.6 3.2 10.2 2.0 11.3 these districts. Among The writers first encounter with Dr. Saman Kelegama was at an international conference
Unable/ Too old to work 6.8 15.2 7.3 28.0 18.6 25.3 12.3 20.1 3.2 14.3 1.3 10.7 the population groups, held in Sri Lanka in early 1990s. He was one of the local resource persons who presented
Occ. not properly specified 6.3 0.8 6.9 1.5 15.5 1.2 11.0 1.0 4.0 1.0 1.6 0.7 persons living in a paper at the conference. When the bearded young research officer from the fledgling
All Groups 6.7 100.0 4.0 100.0 11.2 100.0 9.3 100.0 3.5 100.0 1.9 100.0 Institute of Policy Studies of Sri Lanka, or IPS for short, took the podium to talk on Sri Lankas
households headed by
No . of Poor Persons 1,339,311 791,874 2,219,578 1,848,779 686,254 378,925
Agricultural, Forestry and trade liberalization issues, the audience consisting of both local and foreign researchers and
Note: Most vulnerable groups are highlighted in blue; policymakers was enamored by the clarity of arguments and fluency in language of the young
Source: Authors computations based on Household Income and Expenditure Survey-2012/13, Department of Census and Statistics Fishery Labourers are
researcher.
the poorest, followed by those in households headed by Non-agricultural
compared to those estimated using the previously used lines for Labourers and similar workers, those unable or too old to work and
Extreme Poverty and Moderate Poverty. He did not hesitate to point out the glaring mistakes made by Sri Lanka in sequencing its
Skilled Agriculture, Forestry and Fishery Workers(Table 2). Out of those liberalization measures. It was a time when criticizing the countrys economic liberalization
who are in Income Poverty and/or Multidimensional Poverty, 70 per move was considered a heretic act and everyone was supposed to go by the accepted line of
However, it does not seem to hold true for a country like Sri Lanka, which cent are in households headed by the above 4 groups. thinking. Yet, the critical reviewer in Dr. Kelegama did not allow him to mince words.
is getting closer to transforming into a Upper Middle Income Country
(columns 10 and 12, Tables 1 and 2), as the Extreme Poverty Headcounts,
have almost halved, under the new poverty line ($ 1.90 a day), compared
Summary and Broad Recommendations Since then, the writer became a fan of Saman, the way he was addressed by his friends to
give that distinctive personality to him from his economist-father who was known by his
to the previous poverty line ($ 1.25 a day). Similarly, based on $ 2.00 a
family name, Kelegama. The writer recalls following Samans articles on numerous policy
day, 3.9 million (or 19.6 per cent) persons were in moderate poverty in This analysis clearly shows that there are considerable regional variations
issues in learned journals, magazines and newspapers.
2012/13, while the corresponding estimate based on the new poverty and variations between population groups.
line $ 3.10 a day, is 2.9 million (or 14.6 per cent). These differences are
He witnessed the step by step elevation of this young researcher into a matured top
too large to be disregarded. Due to this reason and the fact that these To eradicate extreme poverty and to reduce poverty in all its dimensions, economist earning reputation and recognition in Sri Lanka as well as abroad. Over the years,
global poverty lines do not take the multiple dimensions of poverty into effective strategies will have to be developed, which will ensure that he had jettisoned some of the old ideas he had held previously. Yet, one thing that had not
to consideration, it is far more appropriate to use the combination of IP
those who manage to escape poverty, will not get slipped back to poverty. changed in all these years is the short beard that he sports on his face marking his signature
measured using national poverty line and MDP (Columns 6, Tables 1 and
Those in extreme poverty and most vulnerable may need to be supported identity.
2), which covers income, as well as other dimensions of poverty, when
through precisely targeted social protection programmes, until they are in
developing strategies to reduce poverty in the country.
a position to stand on their own. If the programmes like Samurdhi are Research-friendly IPS building
not properly targeted to cover the most deserving and vulnerable, it will
Regional Variations and Variations between Population To learn more about this economist, I visit the head office of IPS, the modern multistoried
not be possible to eradicate extreme poverty. When developing strategies
Groups building that has come up recently in a serene location at the Independence Square in
to reduce poverty, highest priority need to be given to, elimination of
Colombo. At the entrance to the building, one is greeted by a long line of book shelves that
child poverty, which could lead to intergenerational poverty cycle, as it is
The above two tables provide a clear picture of the variations, between display numerous publications of IPS. I stop there for a while to read the titles and names
necessary to break the poverty trap.
regions, as well as between the different population groups. However, of authors. More than a half of the publications on display are either books authored by
only the highlights are given in this short article. Out of the IP persons, Saman or publications edited by him, some alone and some jointly with eminent international
nearly 87 per cent, and out of Extreme Poor persons ($1.90 a day, The results of the HIES-2016 will provide the latest estimates on Income economists.
Poverty Line) almost 90 per cent are in the Rural Sector. On the other Poverty. An indepth analysis of the new survey data could provide
hand, the Poverty Headcount is highest in the Estate Sector. For example, the latest estimates of poverty based on different poverty lines. Such I am ushered to his executive meeting room by his secretary and seated comfortably in a
Poverty Headcount within the Estate Sector (column 8, Table 1), for estimates will be extremely useful as the baseline information required to chair till he arrives. The atmosphere in the room as well as the rest of the building is benign
Income Poverty and / or Multidimensional Poverty, is high (25 per monitor the progress of SDGs, which came into effect in January 2016. for nurturing ones intellectual creativity with its pin-drop silence, a super luxury again one
can expect in the noisy commercial hub of Colombo.
42 43
Ambitions in natural sciences
Saman joins me soon and I ask him about his
childhood. How did his father, that veteran
economist, writer, educator, top policymaker
and international civil servant, influence him
to be an economist one day, an obvious legacy
which a famous father could pass to his son?
I didnt have an ambition to become an
economist, Saman smiles and admits.
At Royal College, where I did my GCE Ordinary
Level and Advanced Level, I studied in the
science stream in the Sinhala medium. For
A Level, I did double maths, physics and
chemistry. I wanted to be a natural scientist.
At home of course it was a pure economics
world. We were frequently visited by the top
economists of the country, who were my
fathers friends.
I recall visits by people like Dr. Gamani Corea,
Professor Indraratna, Dr. Rasaputram, Dr.
Salgado and Dr. Karunatilake. They talked
on and on economic issues and that didnt
interest me at all at that time. My fathers
library at home too contained basically books
on economics and I recall sometimes spending
my time just browsing through the titles. But I
didnt take them seriously. So, after my A Level,
I wanted to join a physical science faculty of
a university and read for a degree in natural
sciences.
Life in IIT Kanpur
Then, how did he become an economist? What
was the deciding factor? I ask him.
After A Level, I applied for an Indian
government scholarship to study in a university
in India. I was selected and got admission
to the Indian Institute of Technology (IIT) in
Kanpur. The IITs at that time were very famous
for degree courses in science and technology
subjects. Since I didnt want to be an engineer, I
chose to do a special degree in mathematics.
The IIT Kanpur, commonly known as IITK,
offered a special five-year masters degree
programme in mathematics. Saman joined
this programme because of his special interest
in leaning mathematics and statistics. The
programme was heavy, hectic and demanding.
IITK, like the other IITs followed a very stringent
evaluation system and students who could not
maintain the required Grade Point Average or
GPA were requested to leave the university.
Hence, it was really a battle between life
and death for students to remain within the
threshold of GPA and avoid being expelled from
the university on account of poor performance.
44
At IITK, we didnt have a social life. It was
always studies, from residences to classrooms
to libraries and back to residences. The only
consolation was the long summer vacations,
which I used to travel back to Sri Lanka, by
train to Chennai and then by air to Colombo.
recalls Saman.
Was the stipend paid by the Indian
government sufficient? I ask him.
Yes, he says. That was more than sufficient.
In fact, I paid for my visits to Sri Lanka out of
the savings I made. The food was cheap and
I got used to those North Indian foods easily.
We, students, didnt have other engagements
except studies. So, I didnt feel the passage of
time though it was long five years.
In addition to mathematics, statistics and
econometrics courses, Saman followed courses
in sociology areas too just to satisfy his
curiosity in the subject.
I was exposed to the dependency theory that
was very popular at that time for the first time
there, he says.
Though his major area of study was
mathematics, he offered elective subjects like
operational research, linear programming and
mathematical modeling in the final year.
How was his performance at the final exam?
I ask him.
I got through the MSc Degree in Mathematics
with a first class honors, Saman whispers
to me in a tone that expresses humility and
modesty as if he does not want to reveal it to
me aloud.
That was quite a feat because you have to be
above eight points in your GPA out of a total of
10 points. Only a very few students were able
to get that score.
Oxford days
How did you change from maths to
economics? I ask him.
After I did my Masters in Mathematics at IITK
in 1983, I immediately got an offer to follow a
postgraduate degree programme in economics
at the University of Oxford, he says.
Since my first degree was in maths, I had
to do a masters degree in economics first. I
completed it in 1985 and enrolled myself for
the doctoral programme there in 1986.
How was his experience at Oxford? I start to
wonder and ask him about them.
Oxford was a memorable event in my life.
They always upheld the freedom of thought and
freedom of expression. What was encouraged
was not to agree, but to dissent and disagree.
It fostered a rich culture of debate and
free dialogue. You can say anything to your
professors who patiently listen to you and if
you are correct, they would agree with you.
If you are wrong, they would tell you in what
way that you have been wrong. There was no
any attempt at imposing ones intellectual will
on another. They believed that such freedom
enjoyed by students leads to the development
of human intellect and creativity.
What did Saman do for his doctoral thesis at
Oxford? I ask him.
Researcher on trade policy
I was always interested in trade and trade
liberalization issues, says Saman.
So I did research on Trade Liberalization
Issues in Sri Lanka for my doctoral thesis
under two eminent supervisors. One was
Sudhir Anand, a professor at St Catherines
College of the Oxford University. He was a
specialist on Sri Lanka and had done research
on human development, poverty and inequity
issues. The other was David Bevan at St Johns
College, who had done his research on trade
and macroeconomic policy. They were very
helpful and at the same time very critical. I
completed the thesis in 1990 and was awarded
the DPhil Degree by Oxford in that year.
What were the main findings of his research?
I ask him.
I found that as far as timing is concerned,
Sri Lanka did it correctly when it decided to
liberalize the economy in 1977. If the country
had postponed it for a few more years,
then, the result would have been disastrous.
But with regard to the sequencing of trade
liberalization, we cannot say the same. It was
wrongly sequenced and had been done in
a hurry without regard for institutional and
regulatory issues and the adverse economic
consequences that resulted from it.
For instance, the sudden closure of the
domestic industries due to the flood of goods
from abroad created social tensions in the
country because many had lost their livelihood
due to that reason. There were no alternative
employment opportunities or safety nets
arranged for those people. That was a real
catastrophe, he says.
Had this foresight been available to Sri Lankas
policy strategists in 1977, the country could
have avoided the massive social costs it had
to bear as a result of not properly sequencing
the liberalization move, I begin to contemplate.
But its lessons could be used for planning the
countrys future liberalization moves to avoid or
minimize the social costs involved.
After you got your doctorate, didnt you think
of staying back at Oxford and leading an
academic career? I ask Whim.
No, he says emphatically. I wanted to come
back to Sri Lanka and develop my base here.
Besides, it was not that difficult to find a good
and promising job in the country at that time
after you have got a doctorate from Oxford.
I was skeptic of Samans assessment because
he was talking about 1990s when the job
market in Sri Lanka had begun to get heated.
Jobs were not aplenty in the country even for a
fresh graduate from Oxford. I express my doubt
to him.
IPS for a career
He starts clarifying the position to me.
I was offered a job in the Central Bank at an
appropriate level because the bank had been
hunting for talents from outside at that time.
While the banks offer was on the table, the
newly established Institute of Policy Studies
bettered the banks offer by offering me a
higher salary and prospects for quick career
advancement in an international setting.
I later came to know that it was Dr. Gamani
Corea, Chairman of the IPS, who had been
instrumental in getting me to the IPS. The
position was just a research officer. But it
offered me a chance to work with foreign
experts and do research independently. I valued
it more than the prestige I would have got at
the Central Bank.
So, Dr. Corea sealed Samans fate at the IPS. He
made a lifelong career there rapidly moving up
in its hierarchy.
How did his research programme at IPS go? I
ask him.
IPS had the support of the Dutch government
right from the beginning and there was an
in-house research officer from the Netherlands
to guide the institute. I could work with Howard
Nicholas towards his last lap in the IPS and
later with David Dunham, who was there from
1991 to 1999. We moved forward steadily
and resolutely gaining recognition at home as
well as abroad as an independent think tank,
Saman says.
What was your first job at the IPS?
I asked him.
Studying privatization issues
The first job at the IPS was looking at the
issues of privatization in Sri Lanka. Before
1977, Sri Lanka had established a large
public sector and most of these public sector
ventures, which had the support of a closed
economy, could not survive in a competitive
open economy. Having made losses
continuously, these ventures had become
a burden to the government because the
government had to provide massive subsidies
to them to keep them afloat.
So, there was the necessity for looking at them
from a new angle. Besides, this was an era
in which the use of private sector talents for
sustainable economic development and wealth
creation had been recognized. So, we looked
at the issues involved in privatizing public
sector businesses, legal, economic, ethical and
financial and so on. We studied extensively the
privatization of the plantation sector, which
had been nationalized in early 1970s, Saman
explains.
Samans rise at the IPS was very quick. In
1995, he became its Executive Director,
the equivalent of a CEO of an organization.
Now he has the responsibility of building it
as an independent think tank maintaining
its objectivity in providing policy advice
and thereby its credibility, reputation and
recognition locally as well as globally. At the
same time, the IPS had to intermingle with the
domestic and regional economic profession as
well so that it would not be viewed as an alien
creature set by foreign donors.
How did he set about accomplishing this
mission? I wondered.
Amalgamation of two economic
associations
At that time, there were two professional
bodies of economists in Sri Lanka. Instead of
working for a common goal, they had become
two rival organizations like two duopolies.
But most of the economists of the country
were members of both organizations. One
was the age-old Ceylon Economic Association
revived as the Sri Lanka Economic Association,
acronymed SLEA. The other was the Sri Lanka
Association of Economists or SLAE, which had
been set up in mid 1980s as a rival association
to the former.
I became the President of the latter association,
SLAE, in 1999 and found that apart from key
office bearers and an interchange of two
letters A and E in their acronyms, there was no
difference between the two. So, I thought why
not amalgamate the two and become one body
dedicated to the advancement of the profession
of economists in the country. As President of
the SLAE, that was my main job.
Saman accordingly approached the key person
at the SLEA, Dr. Neville Karunatilaka and made
the suggestion to him. He was receptive to my
suggestion, says Saman.
So we started working on the amalgamation
of the two bodies and we became successful in
doing so in 2000.
Saman became the Joint President of the newly
merged body, which decided to go by the old
name of Sri Lanka Economic Association or
SLEA in 2000 and held that post till 2001. In
that year, he became the President of the SLEA
for its operational year 2001 03. They started
publishing its journal Sri Lanka Economic
Journal, a quality journal carrying articles on
economic issues and published twice a year.
South Asia Economic Journal
and South Asia Economic
Summit
In 2000, Saman ventured into another
enterprise, which was regional. The objective of
this enterprise was to make the IPS a regional
body of economic research and policy.
In 2000, we started publishing a regional
journal called South Asia Economic Journal
providing a window for South Asia experts to
publish their research papers.
Saman starts to describe his new venture.
This was a joint venture between IPS of Sri
Lanka and Research and Information System
for Developing Countries or RIS of India. The
journal publishes refereed articles so that it
represents a quality regional economic journal.
The first issue of South Asia Economic Journal
was published in March 2000 (available at
http://sae.sagepub.com/content/1/1.toc).
Saman together with his Indian counterpart
Nagesh Kumar wrote its first editorial. The
articles in the journal authored by regional
experts have covered a wide area of subjects:
world and regional trade issues, problems
relating to poverty and inequity in individual
countries in the region, strategies for building
good governance and foreign investment issues
in the region.
In addition, the journal had included a book
review section that had reviewed books that
had been published on the economic issues
45
relating to the region. The journal, which is
published twice a year, has released its latest in
September 2011.
Publishing a quality economic journal is surely
a value addition since it adds to the knowledge.
But, does it help the countries in the region to
solve their massive economic issues? I ask
him.
Another important step that we took in this
regard is the setting up of the South Asia
Economic Summit in 2008, Saman explains.
This is similar to the world famous World
Economic Forum or WEF based in Davos,
Switzerland. It is a regional exercise and the
first summit was held in Colombo, Sri Lanka
in 2008 followed by summits in Delhi, India in
2009, Kathmandu in Nepal in 2010 and Dhaka
in Bangladesh in 2011. The next summit is
to be held in Islamabad in Pakistan in 2012.
The summit provides a forum to exchange
innovative ideas and policy options to tackle
regional economic issues.
In the first summit in Colombo, we discussed
the current status of the South Asia Free Trade
Agreement and the way forward to make it a
reality. We also discussed the trade facilitation
in South Asia and the proposed free trade
agreement between Sri Lanka and Pakistan.
An important event in this summit was the
release of the ADB UNCTAD Study on the
Quantification of Benefits from Economic
Cooperation in South Asia, which provided
the economic rationale for such a widespread
economic cooperation among countries.
South Asia Migration
Commission
In 2009, the IPS led by Saman organized
another path-breaking event in Colombo, this
time, a dialogue under the South Asia Migration
Commission, a policy recommending body set
up to protect the rights of migrants and how
economic migration could be integrated with
the overall economic growth of a country. The
draft text of the commission was discussed and
finalized after considering the observations of
the South Asian countries on migration issues.
The text of our commission had covered
the economic benefits of migration and
issues such as increasing the value of annual
remittances flow to each member country and
illegal migrant traffic which had been rampant
in countries like Bangladesh, India, Nepal
and Pakistan. The policies recommended by
the commission were to be used for taking
remedial measures for migrants issues at
international forums like the Colombo Process
and the Abu Dhabi Dialogue. The aim of
46
the South Asia Migration Commission is to
institutionalize scattered regional forums on
migration under one umbrella organization,
says Saman.
Popular myths on migration
Samans interest in migration, remittances
and development in South Asia led him to
edit a publication containing country studies
on migration and specific South Asian issues
on the subject under the same title in 2011.
In his introduction to the volume, Saman
has identified the increasing globalisation
and subsequent integration of countries,
economically, politically and socially, as the
two most important reasons that have led
to a massive migration flow to take place
throughout the globe in the recent periods.
The migration flows have helped poor country
workers to earn much higher wages in foreign
exchange and send them back to their home
countries to maintain their families and
as savings for use in investment in small
businesses and building houses.
Though people wish to migrate to other
countries in increasing numbers, various
impediments imposed by the governments in
both the host and migrant worker supplying
countries have caused to curtail these flows.
While developing countries are in a position to
supply more unskilled or semi-skilled workers,
the developed countries have favored the
migration of better educated and better skilled
persons into their countries. Saman has argued
that these barriers have led to the development
of a sizable illegal market for migrant workers
in many countries.
Quoting a UNDP study on the subject, he
has said that about 50 million illegal migrant
workers have been in the employ of agriculture,
mining, construction and services sectors in
many countries. Compared to the legal workers,
the service conditions of these illegal workers
have been dismal and much to be desired.
Many in developing countries oppose the
migration of their skilled workers on the ground
of what is known as brain drain, says Saman.
The brain drain occurs if the human capital
stock of a developing country declines as
a result of the migration of its skilled and
educated workers. It would weaken its
economy and in extreme cases can lead even
to a collapse of the economy. But this fear is
counteracted by the development of a new
concept called brain gain.
This occurs when those who leave a developing
country return after some time with knowledge,
experience and money.
Therefore, brain gain will not only compensate
for the initial loss but also add something more
to make it a real value addition. So, countries
should have appropriate policies to encourage
those who have left their motherlands to
return after sometime. This requires the
implementation of a positive brain gain policy
by the respective governments.
What were the other achievements of the IPS?
I ask him.
Designer of Sri Lankas
competitive policy
One area in which we have worked extensively
is the designing of the competitive policy in the
country.
Saman starts to explain to me.
We worked in several key areas in this regard.
One was the restrictive business practices.
Another was monopolies and mergers. A third
area was the consumer protection. Sri Lanka
had a Fair Trading Commission that tackled
issues relating to mergers, monopolies and anti
competitive practices and that commission
had been in existence since 1987. We found
that there was a necessity for a unified act to
deal with consumer protection while following
good business practices by corporate bodies.
Our studies with the Law and Society Trust led
to the repeal of the Fair Trading Commission
Act and enactment of the Consumer Affairs
Authority Act in 2003. In the new act,
mergers are permitted and become subject to
investigation only if they become an anti-
competitive act. So, businesses have freedom
to operate as long as they do not resort to anti-
competitive practices.
Expert on trade liberalization
Saman has been a champion in sequential
trade liberalization. His doctoral dissertation
was also on the trade liberalization process in
Sri Lanka. In the recent past, he was one of
the architects of the proposed comprehensive
economic partnership agreement or CEPA with
India. The CEPA, which was the product of a
long-drawn consultative process with business
and industry people in both countries, ran into
a stormy weather when the local businessmen
took to streets in an unprecedented manner
forcing the government to shelve it temporarily.
I ask him about his experience with the CEPA.
The CEPA was the logical evolution of the
previous free trade agreement, which Sri Lanka
had with India, says Saman.
India being one of the fastest growing huge
economies in the world, any preferential trade
relationship with that country is beneficial to Sri
Lanka because it opens up opportunities to Sri
Lankas trade and through trade, to its wealth
creation. Many think that India is a big country
and therefore a small country like Sri Lanka
does not stand a chance to engage in trade
to Sri Lankas advantage. They fear that India
would swallow Sri Lanka.
But what they forget is that international
trade takes place not with countries but with
individuals of equal size. If trading with a large
country is a disadvantage, then, a small country
like Singapore can never engage in trade with
a large country like the USA. But Singapore can
engage in trade with that giant of a country on
equal grounds because it is economic units that
do trading and not countries.
But there is a fear among many that Sri Lankas
tiny and undeveloped export sector cannot
do trading with India and cheaper Indian
products would flood the country and swallow
its economy. I ask him about that fear of Sri
Lankans.
To alleviate that fear, Special and Differential
Treatment in favour of Sri Lanka is in-built to
the agreement, he starts to explain.
....there is a negative list that has been
approved under the trade agreement. Indias
negative list is relatively smaller in number than
Sri Lankas negative list. What we mean by a
negative list is that the commodities listed in
the negative list are not subject to preferential
duty concessions. Sri Lankas negative list is
longer so that all those goods cannot come to
Sri Lankas market free of duty and so there is
a protection for those goods.
How does the Indo Lanka Free Trade Agreement
relate to the CEPA? I ask him.
The CEPA is a mere extension of the free
trade agreement to investment and services
as well. But many have expressed the fear that
it is simply a wholesale selling of Sri Lankas
services sector to India which is not true. When
India has made a deep opening of its services
sector, Sri Lanka has opened its services sector
to India very cautiously and in a limited way.
For instance, India has agreed to open 80 sub
sectors upfront while Sri Lanka would do so
only in the case of 20 such sub sectors.
The movement of professionals under the
CEPA is strictly linked to investment and there
is no room for free movement of professionals
between the two countries. For a limited
number, the movement of professionals has
been de-linked to investment by India and
it has, therefore, opened many areas for Sri
Lankans to work in India. Sri Lanka will extend
this concession to Indians only in the case
of two sectors, that is, the IT sector and the
maritime sector.
Trade liberalization leads to
poverty reduction
In a publication jointly edited by Saman with
two other Sri Lankan-born economists of
international repute, Jayatilleke S. Bandara
and Prema-Chandra Athukorala and published
under the title Trade Liberalisation and
Poverty in South Asia in 2011, the trio in their
introduction to the volume have identified a
crisscrossed trade liberalization system in Sri
Lanka since its independence from the British
in 1948.
Accordingly, Sri Lanka had a liberal trade
regime during 1948-55 followed by a
consolidation of controls during 1956-67.
Then, there was a partial trade liberalization
during 1968-69 followed by a reversal of earlier
liberalizations made by the country with a
further tightening of controls during 1970-77.
The period from 1977 has seen a gradual
opening up of the economy in larger measures.
The result has been, according to the three
authors, an acceleration of economic growth
from 4.4 percent during 1960-80 to 4.7 percent
during 1980-2000 and further to 5.2 percent
during 2000-8. Responding to this growth
momentum, the headcount poverty, that is,
counting those who earn less than US $ 1.25 a
day as poor people, has also declined from 31
percent in 1981 to 10.3 percent in 2005.
The trio, drawing on the research published
in the volume on Sri Lanka, have concluded
that the open economy policy pursued by the
country during the past two decades has
clearly demonstrated that an outward-oriented
policy regime can yield a superior industrial
outcome compared to a closed economy
regime, even under severe strains of political
instability and macroeconomic instability.
Popular economics columnist
Saman had to take forward his fathers legacy
as an economic columnist as well. His father
wrote a very popular economics column to
a Sunday newspaper under the pen name
of Kanes. After his untimely demise, Saman
continued the column now under a different
pen name, The Economist, which became
even more popular among the students
and practitioners of economics and also
the general readers. The articles he wrote
to this newspaper, have been published as
an anthology under the title Contemporary
Economic Issues: Sri Lanka in the Global
Context by the Sri Lanka Economic Association
in 2006.
Saman has made available his expertise
to many policy initiatives in the country. He
led the Task Force for Small and Medium
Enterprise Sector Development Programme
as its Chairman producing its SME whitepaper
in 2002. Based on its recommendations, the
National Enterprise Development Authority was
set up in 2006 catering to the needs of SME
entrepreneurs.
He also served as a member of the Human
Resource Development Council, Board
of Investments, Public Enterprise Reform
Commission, Industrialisation Commission,
Industrial Task Force, Presidential Taxation
Commission and Presidential Committee on
Regional Plantation Companies. He was also
a member of the National Economic Council,
which functioned under the Chairmanship of
the President of the Republic.
What are his plans for the future? I ask him.
Mission: Making IPS a regional
center of excellence
Now we have our permanent building for
the IPS; I want to make it a regional research
center of excellence on economic policy
matters. This is the dream of myself as well as
those dedicated researchers who work with
me at the IPS. Once this dream is realized,
then my mission as a policy researcher is
fully accomplished, he says showing his
resoluteness in going behind targets but
demonstrating a tone of humbleness when he
says it in public.
What about his family? I finally ask him.
My wife Eranthika, a biology graduate but
now a full-time housewife, is my strength.
She handles all the household matters alone
releasing me for my professional work.
Without her, I couldnt have done what I have
done. My son, Chandana, is studying for his
A-Level and daughter Jayathri for her O-Level.
I have given them freedom to pursue their
own career paths and therefore they may
not necessarily end up as economists. The
professional family man reveals to me.
I wonder whether it is the end of the family
legacy of producing reputed economists. But it
may be too early to make that judgment.
47

Microinsurance in Sri Lanka:
Big Opportunities, Small Outreach
By Manoj Thibbotuwawa
I had not thought of buying an insurance policy until I listened to
one of the agents who built the trust in me and impressed me with a
clear explanation on the benefits it offers for different events such as
illnesses, financial safeguard for retirement, non-claim bonus, etc.
Microinsurance policy holder
Sri Lankans living in most areas of the island are highly vulnerable to risk
and uncertainty. They frequently suffer from various disasters such as
floods, droughts and landslides, diseases and deaths, pest and disease
outbreaks for crops, etc. Inability to effectively deal with such risks is
widely accepted as a contributory factor for persistent poverty. Insurance
has evolved as an effective instrument to compensate the financial
losses from such shocks affecting assets and livelihoods. In developing
countries like Sri Lanka, where the formal insurance markets are
inefficient in its delivery and ineffective in reaching the needy, especially
in rural areas, microinsurance is often available. Hence, microinsurance
has the potential to make the poor less vulnerable to such risks, by
offering a convenient risk transfer mechanism for them. Unfortunately,
convincing people, especially the poor, to trust a stranger to safe-
keep their hard-earned money, which they may or may not get back,
is a difficult task. Therefore, the demand for microinsurance products
by the rural inhabitants is very low and the outreach of microfinance
institutes in the rural areas is very limited, despite the increasing need of
microinsurance.
48
Which Opportunities are Available?
Rural poor households are vulnerable to various risks which exacerbate
their poverty levels (Figure 1). While informal risk management
mechanisms and social safety nets like Samurdhi are available, these are
often insufficient, particularly when risks frequently occur over a short
period of time. Further, low and volatile incomes hinder the accumulation
of savings and even the available savings are exposed to high inflation in
Sri Lanka.
However, the poor have been excluded from existing formal commercial
insurance schemes due to various reasons. From the supply side, formal
insurance products have been designed primarily for middle and high
income classes, and not much has been done to reach out to the informal
economy, especially in remote areas. From a demand perspective, the
poor lack the capacity to access formal insurance. This supply and
demand gap, along with inadequate insurance organizations, has raised
the need for a micro level insurance scheme that targets low income
households.
Moreover, there are certain household socio-economic and demographic
characteristics that underpin the necessity of microinsurance for rural
inhabitants. These include poor infrastructure, higher risk of illnesses due
to poor sanitation, inadequate nutrition and access to health services,
high risk occupations, volatile incomes, lack of savings and other assets,
and poor interaction with formal financial institutions. Undoubtedly,
this highlights significant opportunities that exist in the microinsurance
industry to be harnessed by service providers.
Why are People Reluctant to Buy Microinsurance?
Despite the many opportunities available, the demand for microinsurance
and its outreach are still low in Sri Lanka due to various reasons.
Even though the lack of understanding about microinsurance is often
cited as the underlying reason for poor demand, better awareness
and knowledge of insurance does not always translate into higher
demand (except sometimes in the case of index insurance). Field level
Natural Hazards Family Related Shocks
(eg: Floods, droughts, pest & diseases) (eg: Deaths & Ilinesses)
Loss of assets; lowered agricultural Forgone income, loss of
productivity and returns earnings & savings
Economic Shocks (eg: Inflation, Socio Political Shocks
unemployment, marketing problems) (eg: Thefts, political discrimination)
Loss of assets; lowered agricultural Loss of assets/income/ production
productivity and returns & Denial of benefits
Source: Authors field experiences
consultations in Sri Lanka reveal that trust, value proposition, irregular
incomes (liquidity constraints) and awareness as the most important
determinants of demand for microinsurance.
Dissatisfaction or lack of trust about insurance policies, and agents in
particular, has been the biggest concern for households while renewing,
purchasing or choosing to purchase an insurance policy in Sri Lanka.
Insurance agents are usually not direct employers of the service provider
and are paid based on the premiums collected and the number of new
enrolments. Rumours or experiences of insurance scams by so-called
agents have led people to mistrust insurance agents.
Volatility in main income flows, which makes it difficult to ensure timely
payments of high premium values, also plays a key role in the lack of
demand for microinsurance. Not having a continuous income stream
sometimes prevents policy holders from paying the premium without
defaults which then results in the automatic cancellation of insurance
policies. However, people who are able to pay the premiums regularly are
satisfied with their policies. Therefore, the reason for mistrust may not be
necessarily misconduct of the agent, but a lack of understanding about
the terms and conditions of the policy. For example, field consultations
revealed that the automatic cancellation due to unpaid premiums is the
reason behind certain policyholders mistrust.
Therefore, providing potential clients with comprehensive explanations on
the policy, and continuously engaging with the clients as explained during
consultations, is crucial to maintain the client base.
Coverage of insurance policies in terms of type of risk and benefits
available is also an important determinant of rural peoples buying
decisions. Field consultations reveal that some households have chosen
not to buy owing to the inadequacy of insurance policies that addresses
only specific needs such as crops or livestock, as well as the lack of
benefits.
What Can be Done?
The real challenge microinsurance faces in Sri Lanka is making supply
driven policies for insurees, but not for insurers, while focusing on
improving potential clients affordability, accessibility and trust.
Customizing the value of the premiums within the clients affordable
range to have a proper balance between affordable premium and
meaningful benefit is an important prerequisite for stimulating demand
for microinsurance. Also, flexibility in the insurance policy to customize
the value and allowing some leeway for clients to change their payment
frequency when they are in distress will increase demand and reduce the
drop outs.
The credibility of microinsurance can be improved by ensuring that
as many genuine claims as possible are paid quickly without hassle.
Using more reliable delivery mechanisms at the village level will also
help build trust. Positive impressions and increased trust that can be
generated by providing value-added services such as SMS alerts on
specific information (e.g., weather) will also encourage policy renewals.
Information campaigns through a trusted villager and the exploitation of
peer networks within the village can build awareness.
Low income earning, rural clients face multiple risks. Therefore,
composite products that cover multiple risks have the potential to attract
more clients to increase demand, as well as outreach. However, since
such complex schemes may be more difficult for clients to comprehend
easily, starting with simple schemes that can be understood by anyone
will be more appealing. Awareness creation can eventually facilitate the
move towards schemes covering multiple risks.
The poor generally prefer to rely on savings and informal borrowings for
emergencies due to the flexibility they offer. Therefore, bundling with
savings is preferred, as it gives some assurance for premium payments.
Technological advancements such as expansion of mobile phone
networks in Sri Lanka can be used to make the system more efficient
and to minimize operational costs.
Since microinsurance in Sri Lanka is still at the infant stage, the
gestation period for the returns on investments could be bit longer for
the insurance companies. The possible solution for this could be initial
cooperation with nonprofit-oriented government or non-government
organizations in order to reduce the cost of product design and
implementation. Finally, the facilitative role of government in promoting
microinsurance among the poor by creating awareness and breaking
the barrier of distrust and making an enabling environment through
regulation is also very important.
(This article is based on a desk review and set of focus group discussions
conducted by the IPS to evaluate the demand for micro-insurance in Sri
Lanka.)
49
 World No Tobacco Day:
Where Does Sri Lanka
Stand? By G D Dayaratne
World No Tobacco Day (WNTD) was established twenty nine years ago in 1987 by
the Member States of the World Health Organization (WHO). The theme for this years
World No Tobacco Day, Tobacco a threat to development, calls for countries
to accelerate tobacco control efforts as a part of the 2030 Agenda for Sustainable
Development. Tobacco control has been included in Sustainable Development
Agenda and is identified as an effective means to help achieve SDG target 3.4 of
reducing one third of the global tobacco use, by 2030. This target covers tobacco
control, reduction of premature mortality from non-communicable diseases by one
third, and prevention of disaster risks which lead to improvements in the health
conditions of the population. Improvements in health subsequently lead to economic
development. WHO estimated that the global economy is losing around US$ 1
trillion (820bn) due to depleting productivity levels, and the additional burden
on health services caused by tobacco use. Controlling tobacco use has been a
proven approach to improve the health of the workforce which in turn improves the
business productivity and profitability of companies, leading to enhanced revenue,
according to the Centre for disease Control and Prevention (CDC). Reducing tobacco
use also enables families to redistribute the money spent on tobacco products on
covering household expenditures and reduces expenditure on health care.
In this context, the article examines the effectiveness of various tobacco control
measures used by different countries, including Sri Lanka, in reducing the use of
tobacco.
50
The WHO Initiative
disadvantage of policies that increase taxes on tobacco products.
As WHO has pointed out, the objective of WNTD is to abstain from
tobacco use for 24 hours and draw worldwide attention to the
prevalence of tobacco use and its negative health effects. According
to WHO, tobacco kills nearly 6 million people a year and if the current
trends continue, the number is estimated to rise to 8 million by 2030.
It further says, the day also sheds lights on the significant number of
deaths, nearly 600,000, resulting from passive smoking and the health
hazards posed by secondhand smoke. This dire situation has led to
the focus of the initiative being on advertising efforts of the industry
sources, especially aimed at youth; as WHO has revealed the tobacco
industry is aiming to replace older, quitting, or dying smokers with
younger consumers. The campaign to stop these efforts of the tobacco
industry has met with growing support from world, and public health
organizations, amidst resistance from tobacco users, growers and
the industry itself. WHO initiative for WNTD is further strengthened by
creating a global public health policy through the Framework Convention
on Tobacco Control (FCTC) Treaty, with the agreement of 170 parties,
and 80 per cent of the global population, to implement policies toward
cessation of tobacco. WHO tobacco control framework, involves warning
about the dangers of tobacco use, enforcing bans on tobacco advertising,
and raising taxes on tobacco. Sri Lanka ratified FCTC in 2003 and in
line with the above initiative, introduced measures such as restrictions
on smoking in public places, the pictorial health warnings on cigarette
packets to cover 60 per cent area of the pack, in addition to text
warnings on all packs, and established the National Authority on Tobacco
and Alcohol (NATA) along with penalties for violating these regulations.
Further, in October 2015, the government raised prices of cigarettes by
43 per cent and tax on tobacco was increased to 90 per cent.
Measures Relating to the Reduction of
Demand for Tobacco
Among the measures that the world adopted to control smoking, the
most effective has been the raising the prices of cigarettes or tobacco
products, which leads to a reduction in the demand and limits the
market power of tobacco companies, as per Article 6 of FCTC. It was
reported in Australian Budget Review 2010-2011 that, policies to control
tobacco use, including introducing tobacco tax and increasing prices, can
generate significant government revenues for health and development
work. Tobacco prices have steadily increased in European countries,
Australia, African countries and some East Asian countries as a measure
to curb tobacco smoking. According to World Bank estimates, a 10 per
cent increase in taxes will decrease demand by 8 per cent. However, the
impact of tax increases on smokers who are poor is often portrayed as a
Next to the increase of prices, anti-tobacco campaigns are concentrated
on pictorial warnings, accompanied with text warnings. Many European
countries opted to display only text warnings such as SMOKERS
DIE YOUNGER or SMOKING KILLS while Australia introduced plain
packaging without pictorial and text warnings. In Sri Lanka introducing
pictorial warning took place in different stages. In 2012, the government
announced through a Gazette notification, the enforcement of pictorial
warnings covering 80 per cent the cigarette packet. Subsequently the
court reduced the percentage of the pictorial warning to 60 per cent,
after an interim order sought by the industry players. In 2016, new
legislation was introduced to the effect that 80 per cent of the surface
of the cigarette packet should be covered by the pictorial warning. India,
on the other hand uses a combination of pictorial and text warnings,
with graphic photographs of oral and throat cancers occupying 65%
of tobacco packages, while 15 per cent of the surface is used for text
warnings.
Sri Lankas Achievements
According to NATA, in Sri Lanka and around the world there has
been tremendous progress made in both adopting these measures
and reducing the devastating toll of tobacco. Annual tobacco related
deaths in Sri Lanka have been estimated at 24,000 by the Ministry of
Health. With the aim of curtailing tobacco related noncommunicable
diseases, the government introduced amendments to NATA Act 3 of
2015, to increase the pictorial warnings on tobacco pack to 80 per cent.
Further, according to Department of Excise, the battle against tobacco
smoking, mainly cigarettes, gathered momentum in recent time with the
increasing of prices, while beedi (raw tobacco) not smoked or even seen
on the streets of Colombo is growing in popularity in rural Sri Lanka,
unchecked. Beedi is a small and medium scale industry. It engages local
farmers to cultivate tobacco, imports a specific leaf called tendu that is
used to roll the beedi, and women in most rural households, engage in
rolling beedi for a pittance using the tendu leaves imported from India.
Sri Lankas effort in battle against tobacco smoking has yielded positive
results but smokers will find alternatives to satisfy their addiction due
to availability of low cost raw tobacco products, and the easy access
to smuggled cigarettes. The only good sign is, there is a marked drop
in smoking by the younger population, as reported by industry sources,
which will lead to building a healthy generation in the future, and could
help to achieve SDG 3.4.
51

On 24 March 2017, the United Nations celebrated World Tuberculosis
Day, under the theme Unite to End TB: Leave no one behind. This is
a World Health Organizations (WHO) End TB Strategy, which calls for
a 90% reduction in Tuberculosis (TB) deaths and an 80% reduction in
the TB incidence rate by 2030. The focus this year is to address issues
relating to stigma, discrimination, marginalization and access to care.
TB is one of the major public health threats, with 10.4 million people
contracting the disease globally in 2015, of which 1.8 million died. Most
of these cases were reported from India which accounted for a 34%
increase from 2013.
52
also a contributory challenge. Overall, measures and research to combat
the problem of TB remain underfunded.
This article aims to outline the burden of TB in Sri Lanka and highlights
the institutional challenges in TB control, limiting access to care, and
proposes recommendations to overcome these discussed challenges in
accordance with this years focus mentioned above.
Burden of TB in Sri Lanka
Sri Lanka is considered a low burden TB country, although in the recent
past reported TB cases have been on the rise. Given that the disease is
airborne and easily transmitted through an infected person, poverty, poor
Unite to End
Tuberculosis
By Yolanthika Ellepola
Figure 1: Reported New and Relapse Case Notifications from 2005-2013
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0 Way Forward
2005 2006 2007 2008 2009 2010 2011
New Cases Relapse Cases
Source: Annual Report of the National Programme for Tuberculosis Control and Chest Diseases, 2013.
living conditions and increased use of tobacco, expedites the occurrence
Despite medical advances to cure TB, formidable challenges continue to
and transmission. The recent influx of migrants from China and India is
prevail. These include fragile health systems, the co-epidemics with HIV,
considered a contributory factor towards the increased incidence of the
diabetes, tobacco use and perhaps most importantly, human resource
disease.
and financial constraints.
According to the latest data published by the National Programme for
According to the Global Tuberculosis Report, low and middle income Tuberculosis Control and Chest Diseases (NPTCCD), and as depicted in
countries rely on international donors for 90% of financing on national Figure 1, it is evident that the incidence of the rate of TB in 2013 was
programmes. These countries incurred a deficit of USD 2 billion of the 44.1 per 100,000 population compared to 42.5 per 100,000 population
USD 8.3 billion required in 2016. The report further predicts that this in 2006. Despite external funding received by the Global Fund for
annual gap will widen to USD 6 billion in 2020, if funding does not AIDS, Tuberculosis and Malaria (GFATM), and heightened awareness
increase. Apart from this, Multi Drug Resistance Tuberculosis (MDR-TB) is campaigns to promote knowledge and improve access to medication
among vulnerable populations by the Ceylon National Association for
the Prevention of Tuberculosis, the incidence of the disease continues
to escalate. The Government has also taken measures to increase
the price of cigarettes by 90% in addition to the legal obligation of an
80% pictorial warning on the package and a recent proposition to ban
the selling of individual cigarettes with the intend of reducing the risk
factors associated with contracting TB and other non-communicable
diseases. Regardless of these efforts, inefficiencies in the design and
implementation of TB prevention and control strategies continue to
prevail.
Treatment Outcomes
According to the National Strategic Plan for Tuberculosis Control 2015-
2020, Sri Lanka has successfully maintained a high treatment rate for
TB with the highest rate of 87.1% in 2011 coupled with a significant
decrease in failure to follow up from 13.8% in 2000 to 3.5% in 2010.
However, the report further highlights that as of recently, there has been a
notable increase in those failing to continue treatment from 3.7% in 2011
to 4.6% in 2012 and 4.8% in 2013. These statistics are noteworthy and
a serious cause for concern since they are severe lapses in the control of
TB care. Substandard in-patient treatment facilities at district hospitals
and deficiencies in trained human resources for TB care are factors
inhibiting the control of the disease.
Challenges
Given that the incidence of the disease is relatively low in Sri Lanka,
the extent of discrimination and stigma associated with the disease
is comparatively less compared to India, China and other South Asian
countries. A slowdown in the reported TB cases in 2012, as depicted in
Figure 1, was not due to a sharp decrease in the total TB cases but rather
due to programmatic errors at primary and regional hospitals. Centralized
treatment at the district chest clinics, limited use of private providers of
Directly Observed Treatment Short course (DOTS), and an absence of a
centralized system of registering patients and initiating treatment at this
clinic inhibits access to care. Due to these inefficiencies at peripheral
hospitals, TB most often remains undetected in some patients or detected
at a later stage of the disease where the medication fails to respond to
the bacteria. Others discontinue the medication prescribed and opt for
traditional methods of healing due to the transportation costs and other
associated personal costs involved in travelling to these clinics/hospitals.
All these factors curtail access to TB care.
2012 2013
Since Sri Lanka is not a high burden TB country as its neighbor,
India, ending the disease is not a mammoth task. This requires a
multidimensional approach, where political will and commitment plays
a central role. Given that TB stems from diverse factors, collaboration
and coordination among several government agencies, civil society and
private sector is essential to effectively control the disease. Initiating
mobile clinics to alleviate the barriers involved in access to care and
introducing a family health worker to monitor the progress of TB patients
will help ease the issues relating to lost follow up and access to care.
In addition, given that Sri Lanka has implemented several national
policy programmes and secured funding through the GFATM, these
funds could be effectively utilized by enhancing the present institutional
arrangements to control the spread of the disease. However, in reality the
extent to which these stakeholders work in unity to control the spread of
this disease and alleviate bottlenecks to improve access to care to end
TB remains to be seen.
53
 health services (National Institute of Mental Health), 23 psychiatric in-
Figure 1: Prevalence Rate of Major Depression by Gender, 1990-2015 patient units/wards, 86 outpatient clinic centers and 250 outreach clinics
3 are operated throughout the country. In addition, day-treatment facilities
2.9 as well as 22 intermediate mental health care rehabilitation units are also
2.8
being managed by the Health Ministry. Apart from the hospital based
Male treatments and services, psychiatric nursing officers, CSO, and PSWs

Breaking the Silence

2.7
are closely working with other community health workers (MOH, Public
2.6 Female
Health Midwife etc.) to identify people with early signs of mental illness
2.5
Both sexes and to direct them for continuous medical treatment and counseling.

on Depression:
2.4
2.3
Adequacy and rationality of financial resources being mobilized for
2.2 mental health is still questionable. One reason is that, the Health Ministry
2.1 spends a large portion on curative care while a very small amount is

Challenging Task for

2 being allocated on prevention and health promotion. While treating
1990 1995 2000 2005 2010 2015 the mentally ill people at hospitals, strengthening the preventive and
Source: Global Burden of Disease Study 2015 (GBD 2015) Results. Seattle, United States: Institute for Health promotional measures on mental health is also important to reduce the
Metrics and Evaluation (IHME), 2016.
incidence of mental health cases.

Sri Lanka Figure 2: Years Lived with Disability (YLD) due to Major Depression, (000),
1990-2015, Sri Lanka
120
Developing evidence-based mental health intervention and utilizing
financial resources effectively can only be done with proper information
on mental health. However, Sri Lanka is still far behind of maintaining a
By Samanthi Bandara unique information system on mental health within the country.
100

80 What Needs to be Done?

Mental health has been emphasized as a core component of health by
the World Health Organization (WHO) since the late forties. For many
years however, safeguarding mental health remained on the backburner.
But mental health issues started gaining priority regionally and globally
in the mid-nineties, thanks to a WHO Report titled Bridging the Gap. After
this landmark report, a diverse area of mental health was explored, and
evidence based initiatives and interventions came into action. Moreover,
the importance of investing in mental health is further emphasized by the
goal number 3 of the SDG agenda.
Depression or depressive disorders, is the most common mental disorder,
and is referred to as the unknown silent killer.
A Global and National Public Health Concern
Global health estimates of the WHO found that about 322 million of
people suffered depression in 2015. As such, approximately 4 out of 100
people suffer from depressive disorders. In terms of gender, females
are approximately 1.5 times more likely to get depressed than men.
Prevalence is relatively higher among older persons between the ages of
55-74 years. Depression is the largest contributor to non-fatal disease
burden in the world. Another crucial aspect of depression is that severely
affected people are more likely to attempt to inflict injuries to self
suicide or other forms of physical harm. As per global health estimates
of the WHO for 2015, there were around 802,321 reported cases of
depression in Sri Lanka. The prevalence of depressive disorders in Sri
Lanka (4.1%) does not considerably differ from the global and South-
East Asia regions figures (4.4%). With regard to the major depression,
prevalence and the disease burden have increased over the years
(Figure 1). As in other parts of the world, prevalence is higher among
females.
54
With regards to the disease burden, number of years lived with disability
has also increased over the years. Tragically, Sri Lanka lost about
103,113 of life years due to major depression in 2015 (Figure 2).
Many studies have found that poverty and low income can push people
towards depression. A study published by the Journal of Affective
Disorders on depression in Sri Lanka revealed that the lack of basic
amenities and poor financial resources are strongly associated with
depression among men in Sri Lanka. Being unable to fulfill basic needs
such as food, water, sanitary facilities and housing, and unemployment
also contribute to depression in men in Sri Lanka.
Economic and Social Costs of Depression
Depression is a health concern that cannot be ignored as it leads to
social and economic repercussion and could even shorten the span of
productive lives due to suicide. Many studies found that depression
reduces productivity, increasing health care costs and staff turnover.
The Integrated Benefits Institute says employee absenteeism and
presenteeism caused by depression reduced productivity by 80%. From
the employers perspective, lost productivity accounts for 70% of the total
cost of depression while medication accounts for the remaining 30%.
Haslam et at (200) found that symptoms and medication of depression
weaken work performance, and leads to workplace accidents. Impaired
work performance caused by depression also weakens the economic
and social capabilities of individuals. According to WHO, the loss of
productivity at workplace due to depression and anxiety causes losses
of about US$ 1 trillion per year or approximately US$ 130 per head,
globally. Accordingly, investing in tackling depression can benefit not just
individuals, but the economy as well. Investment in treating depression
can result in better health and higher productivity in the work place. In
this context, Sri Lanka can also gain US$ 4 for every US$ 1 invested in
treating depression as WHO stated.
60
40
20
0 care facilities are concentrated only at big hospitals. More than two third
1990 1995 2000 2005 2010
Source: Global Burden of Disease Study 2015 (GBD 2015) Results. Seattle, United States: Institute for Health
Metrics and Evaluation (IHME), 2016.
Is Sri Lanka Ready to Address Pressing Issues in
Mental Health?
Providing comprehensive and quality mental health care services
in terms of promotion, prevention, treatment and rehabilitation with
effective, accessible, equitable and affordable for the entire population
is a challenge for every country. Likewise, Sri Lanka is confronting
three critical issues in terms of service provision, financial resource
mobilization, and rigorous information system within the country.
In Sri Lanka, depression is simply treated as a component of mental
health policy, and therefore, the national mental health interventions are
not tailored specifically towards tackling depression.
However, Sri Lanka has taken significant steps over the years to address
mental health issues with the assistance of various development
agencies. At the foremost, Ministry of Health considers mental health
as a core component of non-communicable diseases and therefore a
separate directorate for mental health is in place. Secondly, the initial
Mental Health Policy for Sri Lanka 2005-2015 is now being revised for
the period of 2015-2020, and preparations for the mental health action
plan 2015 2020 is underway. Medical services are provided through
hospital networks at national and reginal levels, with multidisciplinary
teams of professionals (Consultant Psychiatrists, Medical Officers of
Mental Health/ Psychiatrists, psychiatric nursing officers, Community
Support Officers (CSO), Psychiatric Social Workers (PSW), Occupational
Therapists). While there is only a single hospital designated for mental
Male
Female Thus, mental health services in Sri Lanka have room to improve,
Both sexes especially with regard to their reach, when considering the increasing
rates of depression. One reason for this could be irrational resource
allocation where all the sophisticated and intermediate mental health
2015 of Health Ministrys expenditure on mental health, excluding provincial
allocations (US$ 6.4 million out of US$ 8.5 million in 2008/09), is directed
to main psychiatric hospitals.
Spending on prevention of mental illnesses and promotion of mental
health is minimal. As such, the poor, especially those in rural areas, have
limited access to mental health facilities. A patient-centered service
model can be a possible solution to expand the coverage of services. One
of the ways to implement this is by integrating mental health service,
into the existing decentralized community health care system, as part
of Maternal and Child Health care services. Next, mental health services
can be coupled with existing primary health care (PHC) service system
that can enable community base intervention, and build social capital
to sustain the continuing care. District Mental Health Programme in
India has already integrated mental health into PHC in Kerala. However,
adequate physical and human resources are essential for the successful
implementation of such measures. A multisectoral approach towards
mental health financing, with a proper coordination mechanism to link
other ministries, could improve the management and coordination of
efforts and reduce the wastage of resources.
Absence of information on depression (and other mental health
disorders) is another obstacle which hinders the proper planning and
implementation of measures to address mental health issues. None of
the routine national surveys collect data on common mental disorders
depression and anxiety. Even now, Sri Lanka relies on fragmented sample
studies by independent researchers and international data bases such
as WHO, Institute for Health Metrics and Evaluation (IHME). Therefore,
the Ministry of Health should develop a comprehensive data base
mechanism, invest on mental health research and carry out evidence
based interventions.
55

CHINA NGO NETWORK FOR
INTERNATIONAL EXCHANGES
(CNIE) STUDY TOUR
Highlighting the need for engaging think tanks
and other NGOs to make Chinas Belt and Road
Initiative more inclusive, IPS Research Fellow,
Dr. Ganga Tilakaratna noted that think tanks
in particular can play an important role in
minimizing the information gaps, and creating
knowledge and awareness of the objectives and
benefits of this initiative at all levels which is
crucial as there is not much information at the
ground level.
Dr. Tilakaratna made this observation, while
participating at a study tour organized by the
China NGO Network for International Exchanges
(CNIE). The study tour included discussions on
the One Belt and One Road initiative, meetings
with the NGO networks in China, and field visits
in Guangdong and Fujian Provinces.
WORLD CONSUMER RIGHTS
DAY FORUM
To mark the World Consumer Rights Day, IPS
held a forum, centered on the theme Consumer
Rights in the Digital Age on 15 March 2017
in the IPS Auditorium, with the participation
of experts in the field, digital consumers,
entrepreneurs and stakeholders.
The keynote address was delivered by Jayantha
Fernando, Legal Adviser of the Information
and Communication Technology Agency (ICTA).
The panelists were Dr. Dayanath Jayasuriya,
Presidents Counsel, former Chairman of
Securities and Exchange Commission (SEC),
Lahiru Pathmalal, CEO of Takas Pvt. Ltd, Suhaila
Hussain, President of Sri Lanka Housewives
Association, Jiffrey Zulfer, CEO of Digital
Mobility Solutions Lanka and Thishya Weragoda,
Attorney at Law of the Supreme Court of Sri
Lanka.
56
IPS NEWS
JANUARY - JUNE
INTERNATIONAL CONFERENCE ON
HUMAN CAPITAL, FOOD SECURITY
AND ECONOMIC DEVELOPMENT IN
SOUTH ASIA
IPS in collaboration with the Centre of
Development Economics and Sustainability
(CDES), and the South Asia Research Network
(SARN), Monash University, Australia, organized
a conference on Human Capital, Food Security
and Economic Development in South Asia.
The conference provided an opportunity for
researchers from Monash University, the IPS
and other academics to engage with scholars
and policy analysts from the South Asia region
to strengthen links, and plan and implement
collaborative research activities on major
development challenges facing South Asia.
IPS EXECUTIVE DIRECTOR
PARTICIPATES AT SANEM ANNUAL
ECONOMISTS CONFERENCE 2017
IPS Executive Director, Dr. Saman Kelegama,
participated at the South Asia Network on
Economic Modeling (SANEM)s Second Annual
Economists Conference on Managing Growth
for Social Inclusion in Dhaka, Bangladesh.
Dr. Kelegama was one of the speakers on the
high-level panel on Managing Growth for
Social Inclusion in South Asia.
LATEST PUBLICATIONS
POLICY DIALOGUE ON THE ESCAP
ECONOMIC AND SOCIAL SURVEY
FORTHCOMING PUBLICATIONS
FOR ASIA PACIFIC 2017
A Policy Dialogue on the ESCAP Economic and
Social Survey for Asia Pacific 2017 was held at
IPS on 08 March 2017, with the participation of
IPS Executive Director Dr. Saman Kelegama and
several IPS researchers.
Economic Affairs Officer of ESCAP, Jose Antonio
Pedrosa Garcia, made a presentation on the
Survey at the Policy Dialogue which was
followed by a lively and engaging discussion.
THIRD MEETING OF THE BIMSTEC
NETWORK OF POLICY THINK
TANKS
IPS Research Fellow, Dr. Janaka Wijayasiri,
participated in the Third Meeting of the
BIMSTEC Network of Policy Think Tanks
(BNPTT) held at the BIMSTEC Secretariat,
Dhaka, Bangladesh on 22-23 April 2017.
IPS is the focal point of BNPTT in Sri Lanka.
Issues discussed included activities undertaken
since the last meeting, celebration of the 20th
Anniversary of the BIMSTEC, establishment of
the Centre for Bay of Bengal Studies, funding,
and new initiatives by the BNPTT.
Manufacturing Exports from Sri Lanka:
Opportunities, Achievements and Policy Options
Industrialization Series No. 8
This paper examines Sri Lankas experience with manufacturing exports expansion, placing
emphasis on opportunities and policy priorities in a rapidly changing global context in which
global production sharing has become the prime mover of cross border production and trade. The
findings make a strong case for redressing policy backsliding and continue with the market-
oriented reforms agenda that was left incomplete in the late 1990s, and set up institutional
safeguards to avert further backsliding.
By Prema-chandra Athukorala | April 2017
Sri Lanka: State of the Economy 2017
Demographics, Labour Markets and Growth
The IPS annual flagship report Sri Lanka: State of the Economy provides a critical assessment
of the countrys economic performance and near term outlook for growth and macroeconomic
stability. Each year, the report also examines crucial medium term policy priorities to achieve
sustained growth and strengthen socio-economic development outcomes for the country.
Despite lackluster GDP growth in 2016, the policy setting suggests that investors can look
forward to progressive improvements in the macroeconomic environment as fiscal reforms in
particular pay-off. However, a complimentary set of broad-based reforms that address structural
constraints on growth need to be implemented alongside. Access to cost-effective and reliable
infrastructure services, finance, and land; an efficient institutional and regulatory environment;
and a good human resource pool of professional and technical skills, to name a few.
Against this backdrop the Sri Lanka: State of the Economy 2017 report draws attention to
Demographics, Labour Markets and Growth as its main thematic focus. Two of the biggest
constraints holding back labour market efficiency in Sri Lanka are its stringent employment
protection laws and its low female labour force participation rates. Another main constraint
dampening labour market efficiency in Sri Lanka is the availability of skilled workers and the
related large number of Sri Lankan workers annually exiting the labour market in search of
employment overseas. At a broader level, other institutional and regulatory reforms that impinge
on the competitiveness and productivity of economic activities discussed in some details in the
report under Policy Debates: Special Issues are:
Fuelling Tourism to Move Forward
Revisiting Land Policy: Reforms to Match Evolving Economic Needs
Managing Natural Disaster Risks: A Need of the Hour
Exploring Sustainable Development Goals: What is Ahead for Sri Lanka?
Confronting Food Security in Sri Lanka: A Formidable Challenge
Battling NCDs for a Healthier Population
Visit our YouTube Channel IPS Sri Lanka for Interviews with the Authors.
For Details on IPS Publications Contact:
Amesh Thennakoon, Publication Officer, 011 214 3107 or 011 214 3100 | amesh@ips.lk or publications@ips.lk
57
 Nisha Arunatillake
Nisha Arunatilake is a Research
Fellow at the IPS. She heads the
Labour, Employment and Human
Resource Development research
unit. Her research interests include
labour market analysis, education
and skill development, migration and
development and health economics.
Neluka Gunasekara
Neluka Gunasekara is a Research
Assistant at the Institute of Policy
Studies. Her focus in research
lies on Education, Health, Labour,
Employment, and Human Resource
Development.
Saman Kelegama
Saman Kelegama was the
Executive Director of the IPS, and
a trade policy economist who also
worked on industrial economics,
public enterprise reform, and
macroeconomics. He served in
the Presidents National Economic
Council and in the Presidential
Commission on Taxation. He also
served on the boards of several
public and private institutions.
Anarkalee Perera
Anarakalee Perera was a Research
Assistant attached to the Poverty
and Social Welfare unit. Her research
interests include Poverty and
Development Policy, with a focus on
Public-Private Partnerships (PPP),
Information and Communications
Technology (ICT) and Gender Policy.
Dushni Weerakoon
Dushni Weerakoon is the Acting
Executive Director of the IPS and
Head of Macroeconomic Policy
research at the Institute. Since joining
the IPS in 1994, her research and
publications have covered areas
related to regional trade integration,
macroeconomic policy and
international economics.
Charmaine Wijesinghea
Charmaine Wijesinghe is Manager
CONTRIBUTORS
Publications & Events at IPS and is
a member of the Talking Economics
Team.
58
Samanthi Bandara
Samanthi Bandara is a Research
Officer in the Health Economics Policy
Unit at the IPS. Her research interests
are health care financing, healthcare
evaluation, and impact assessment of
health policies/interventions.
Kithmina Hewage
Kithmina Hewage is a Research
Officer with research interests in
International Political Economy
including WTO issues, Trade and
Development, Export competitiveness,
and Foreign Direct Investment.
Kithmina is also a member of the
Talking Economics Team.
Sunimalee Madurawala
Sunimalee Madurawala is a Research
Officer at the Health Economic Policy
Unit. Her research interests include
health economics, gender and
population studies.
Semini Satarasinghe
Semini Satarasinghe is a Project
Intern at IPS.
Bilesha Weeraratne
Bilesha Weeraratne is a Research
Fellow at IPS focusing on internal
and international migration and
urbanization. She is also interested
in labour economics, economic
development, and economics of
sports. She is a member of the
Talking Economics Editorial Team.
G D Dayaratne
G. D. Dayaratne works on health
economic policy issues at IPS. He
is the Manager of the Health Policy
Programme.
Dilani Hirimuthugodage
Dilani Hirimuthugodage is a Research
Officer working in the Agriculture
Economic Policy unit at the IPS. Her
research interests include agriculture
economics, intellectual property
rights, food security and innovations
in the agriculture sector.
Shihara Maduwage
Shihara Maduwgae is Manager
- Communications & Strategic
Outreach at the IPS and the Editor of
Talking Economics.
Athula Senaratne
Athula Senaratne is currently a
Research Fellow and Head of
Environmental Economic Policy
research at the IPS.
Kanchana Wickramasinghe Janaka Wijayasiri
Kanchana Wickramasinghe is a
Research Economist at the IPS,
with a focus on environment and
natural resource management
policy research. Her research areas
include sustainable tourism, disaster
management, natural resource
management, green jobs and climate
change.
Yolanthika Ellepola
Yolanthika Ellepola is a Research
Assistant at IPS whose research
interests covers Health Economic
Policy, Millennium Development
Goals, and Sustainable Development
Goals, in relation to health policy.
Priyanka Jayawardena
Priyanka Jayawardena is a
Research Economist at the Labour,
Employment and Human Resource
Development research unit at IPS.
Her research interests include
education and skills development,
labour economics, inequality
analysis, health economics and child
nutrition.
Wimal Nanayakkara
Wimal Nanayakkara is a Senior
Visiting Fellow of the IPS with
research interests in poverty, and is a
specialist in Sampling.
Manoj Thibbotuwawa
Manoj Thibbotuwawa is a Research
Fellow at the IPS, with research
interests on agricultural economics,
agricultural trade, food security and
environmental and natural resource
economics.
Janaka Wijayasiri is a Research
Fellow at IPS. He has over 12 years
of experience on trade policy issues
and heads the International Economic
Policy Unit. He is a member of the
Talking Economics Editorial team.

FAST FACTS
Sri Lankas tourist arrivals
hit a record high in 2016 by
surpassing two million
- Tourism Development
Minister John Amaratunga.
Sri Lankan government
sector kept on expanding
year on year, and as of
February, the total number
of state employees
was over 1.1 million.
The Land (Restrictions on
Alienation) Amendment Act No.
3 of 2017 was signed in April,
removing the tax on the lease
The Planters Association
of Ceylon (PA) said in a
statement that tea industry
crop losses were devastating
and cost in excess of an
estimated Rs. 15 billion in
the 18 months after the
glyphosate ban in May 2015.
60
Rs.110
BILLION
In February, the COPE report
revealed that the losses of
key public entities have
exceeded Rs. 110 billion
and will continue to increase.
The Asian Development Bank (ADB)
doubled its lending capacity to
Sri Lanka to $800 million.
GSP+
According to the government,
Sri Lanka stuck in a
Gigantic-Debt-Trap and that
The European Union paying off foreign loans would
formally restored GSP+ hit a record $2.41 billion this
trade concessions year, up from $1.82
to Sri Lanka in May. billion in 2016.
of land by foreigners.
Foreign net
inflows into the
Colombo Stock
Exchange topped Rs.20 million,
moving towards a 3-year high.
38
Recent environmental
problems are mostly due
08
to lack of meaningful
connectivity between
people and nature.
Enhancement of
environmental literacy is
a vital step in minimizing
such problems in Sri
Lanka.
40
14 Female labour force
participation continues to
be low in Sri Lanka. This
article highlights some of
the key social and cultural
constraints holding women
back.
16 Apparel industry has been
10
experiencing a difficulty
in recruiting women for
the lower level positions.
Protecting the industry
is of vital importance
given its contribution to
Sri Lankas economy and
its role in empowering
women.
06
20 Collectively measures need
to be taken to upgrade
standards governing
pepper in Sri Lanka to
safeguard its reputation as
a supplier of high quality
spices to the world.
The present Sri Lankan
labour market is besieged
by labour shortages. This
article shows that making
education provision more
efficient and effective can
get more youth to enter the
labour market.
More than 70% of the
poor in Sri Lanka are in
households headed by
agricultural laborers/
workers, non-agricultural
laborers and those unable/
too old to work, and
therefore poverty reduction
strategies should mainly
focus on them.
Setting the national
standards for all higher
education providers will
help meet Sri Lankas skill
demand, by unraveling the
controversy surrounding
private higher education
providers.
06 June 2017 marks
20 years since the
establishment of Bay
of Bengal Initiative for
Multi-Sectoral, Technical,
and Economic Cooperation
(BIMSTEC), a regional
organization involving
countries in South and
South East Asia.
12 A fairly large proportion
of the Sri Lankan
population is differently
abled. This article argues
that affirmative action
is needed to help such
persons enter the labour
market.
54 Depression is a health
concern that cannot be
ignored as it leads to
social and economic
repercussions and could
shorten the span of
productive lives due to
suicide.
50 Sri Lankas effort in its
battle against tobacco has
yielded positive results
but smokers will find
alternatives due to the
availability of low cost raw
tobacco products, and the
easy access to smuggled
cigarettes. However
there is a marked drop in
smoking by the younger
IN A NUTSHELL
population.
26 Sri Lankas overall exports
to the European Union
can increase by US$ 480
million almost 15 per
cent on average as a
result of regaining the GSP
Plus benefit.
61
 DIGEST

A PUBLICATION BY
THE INSTITUTE OF POLICY STUDIES OF SRI LANKA

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The Institute of Policy Studies of Sri Lanka (IPS) is an autonomous institution that aims to promote policy-oriented economic research and to strengthen the capacity for medium-term policy
analysis in sri lanka. Its mission is to contribute to the socio-economic development of the country through informed, independent and high quality research that seeks to influence the policy
process. With over two decades of substantial research expertise, IPS has emerged as a regional centre of excellence and the most influential think tank in Sri Lanka.