x Abu Dhabi, UAEWednesday 17 January 2018

Stiff tests lie ahead for three Ts of the Sri Lankan economy

Three Ts - tea, tourism and textiles - account for the bulk of Sri Lanka's economy, valued by the IMF last year at US$64 billion.

Three Ts - tea, tourism and textiles - account for the bulk of Sri Lanka's economy, valued by the IMF last year at US$64 billion (Dh235bn). And while there is no comparison with the near-bankruptcy of 12 years ago, when the country was engulfed in bloody civil war, all three sectors face stiff tests.

Tea production, introduced by the British at the start of two centuries of colonial rule that ended 65 years ago, accounts for 12 per cent of GDP, earning an estimated $700 million a year as the world's fourth-largest producer. But having been globally the largest exporter in the mid-1990s, with just under a quarter of the total trade, Sri Lanka has been overtaken by Kenya.

Government supporters talk up the strength of the tea industry, but sceptics report troubling developments, notably a "rude shock" for exporters from an unexpected tax increase.

Tourism has suffered the twin effects of recession in its biggest markets in the West and the rising costs that mean it is no longer a low-cost option. And textile manufacturing is fighting an uphill battle with competition from South-east Asia.

Overseas employment continues to play a key role because of the foreign exchange remitted by workers abroad, 90 per cent of them living in the Middle East. But the government is committed to a massive reduction in the number of females migrating for jobs, mainly in domestic service, by 2020.

For one economic commentator, the challenge of sustaining growth to avoid destroying post-civil war dreams of a brighter future requires radical change.

"Contrary to the belief of many, Sri Lanka's economy is not in good shape," WA Wijewardena, a former deputy governor of the central bank, wrote in the Colombo Telegraph. He urged an upgrade in the island's business structure "from the simple type of products it produces at present to complex products to sustain its export markets" by encouraging foreign investments involving high technology.

And he had in mind two model economies: "This was the strategy adopted by both Singapore and Malaysia in their initial transformation from a poor country to middle income country and in the case of Singapore, from a middle income country to high income country."