Dr. Indrajit Coomaraswamy, Governor, Central Bank of Sri Lanka, presenting the Gamani Corea Memorial Lecture on Monday, 6th November, 2017 at 5.00 p.m. at the BMICH , entitled“Towards a vibrant economy and prosperous country”
I -Introduction: The theme of my remarks this evening is going to be Towards a Vibrant Economy and Prosperous Country. I intend to begin by trying to make the case that this is probably the most favourable set of circumstances Sri Lanka has enjoyed for over five or six decades. I then propose to talk about key paradigm shifts which have changed the landscape for policy-making; the frameworks that have been put in place for macroeconomic policy making; the growth model; the policies to strengthen the growth framework; and some of the Government’s major development programmes. These are embedded in the Government’s Vision 2025 document.
IIII -Most favourable circumstances: Let me first seek to explain why I believe the current set of circumstances are the most favourable for 50 or 60 years. From the late-1950s, there was a secular decline in the terms of trade. The domestic economy was dependent on the export of tea, rubber and coconut sectors at that time. For almost 25 years, there was almost a continuous decline in the prices of these commodities. In fact, if you look at the World Development Report of the World Bank, the 1982 edition, there is a box citing Sri Lanka as a classic example of a country that had been buffeted by severe terms of trade decline. This was clearly a major drag on the development prospects of the country in those years. The challenges posed by this secular and continuous decline in the terms of trade were compounded by the fact that in the 50s, 60s and 70s there was a demographic surge. While surpluses in the economy were coming down, the number of people was increasing.
Clearly, these twin effects were a major challenge in terms of policy making. One could argue that the situation was further constrained by the fact that there were a set of inward looking, dirigiste policies which, with the benefit of hindsight, were clearly inappropriate for a country with Sri Lanka’s endowments. Of course, the policies pursued were very much part of the mainstream thinking in many parts of the Third World at that time. This was an era when the general perception was that political sovereignty that came with decolonization had not been accompanied by economic sovereignty. It was argued that transformation was needed in that area as well. As the domestic private sector, the national bourgeoisie in Marxian terms, was not strong enough to pursue the objective of economic sovereignty, the state had to step in. Hence, it can be argued that it was probably a phase that we had to go through. However, clearly it did not give us good economic outcomes, particularly as over time the politicisation of institutions debilitated the capacity for prudent policy-making.
Then in the 80s, we had the conflict which lasted for almost 30 years. Now, when you look around there aren’t any such major drags on the economic outlook of the country. Furthermore, we are located in Asia which is the most dynamic economic region in the world. So, one can plausibly make the case that these are probably the best set of circumstances that the country has had for several decades.
III — Three Paradigm Shifts
There are three types of mind set changes, or paradigm shifts, that need to be addressed, if we are to take advantage of this propitious set of circumstances. The first is the balance between social development and wealth creation. Have we got that balance right? Have we had it right in the past? As you are all aware, Sri Lanka has been an over-performer in terms of social development. If one looks at Sri Lanka’s performance on the UNDP Human Development Index and its ranking in terms of per capita income, the gap has been the second largest of any country in the world. We have punched above our weight when it comes to social development. So, it is legitimate to ask why a paradigm shift or a mindset change is needed in the context of such accomplishments. The reason we need a mindset change to give greater weight to growth, to wealth creation, is the fact that despite all our social sector achievements we have had two youth insurrections and a separatist conflict in the country. Tens of thousands of our young people have lost their lives. While there is complex causality behind these episodes, arguably the most significant explanatory factor was the mismatch between expectations of and opportunities for our young people. We have not met their aspirations. So clearly, we have not done as well as we can in terms of growing the cake and providing productive livelihoods. The cake has to be distributed equitably but it is also important that the cake is grown.
We were second to Japan on almost all social indicators at the time of independence, in 1948, and we were above South Korea as late as in the mid-sixties. Singapore’s per capita income was just a little bit higher than Sri Lanka at that time. It is now over USD 50,000 whereas ours is USD 3840. We have clearly fallen behind. Now, the focus must be not only on consolidating and building on our achievements in the social sector but also on looking for ways and means of pursuing growth and wealth creation. At same time, the quality of that growth has to be good. It has to be inclusive and regionally balanced. In addition, priority needs to be attached to employment generation which transmits the benefits of growth widely. It also needs to be sustainable. But the bottom line is we require 6% plus growth to meet the needs of an increasingly aspirational society.
It is encouraging that the recent household and income survey found that incomes had increased and the Gini Coefficient had improved. The median household income per month increased from Rs 30,814 in 2012/13 to Rs 43,511 in 2016. The Gini coefficient improved from 0.48 to 0.45 during the same period. Furthermore, the latest provincial GDP figures reveal a greater regional balance, with a reduction in the Western Province’s share of total GDP. It has declined from 39.9% in 2015 to 39.7% in 2016.
The second paradigm shift is associated with the fact that we have now graduated to Lower- Middle -Income country status. For many years, as a Low-Income Country, we enjoyed extremely generous levels of ODA or foreign aid. Sri Lanka was treated very favourably because the traditional donors were very keen to demonstrate good development outcomes in a country, which since 1977-78 has had liberal economic policies as well as a relatively open polity. Sri Lanka was the second country after Chile, in 1974, to liberalise its traditional economy. Donors were keen that such a country should be successful in terms of development and they pumped in a lot of foreign aid. Not only did we receive a lot of foreign aid but about 2/3 of that came from the concessional windows of the World Bank and the Asian Development Bank. That money essentially had 10 years grace period, 40 to 50-year maturity and less than 1% administration charges. That was the kind of infusion of resources we were receiving to supplement domestic savings. It certainly helped in terms of our social development and some infrastructure improvement. However, it also meant that we got into the habit of living beyond our means and did not take some of the tough decisions that we had to make. In every year since 1987, recurrent expenditure has exceeded government revenue. This means that we have borrowed even for our recurrent expenditure each year. If a company or a household did that they would not have survived. We were able to survive because of the inflows of foreign aid.
Then we graduated to Lower Middle Income Country status, in 2010, and our access to concessional money began to dwindle. We were fortunate because at that very time the major Central Banks in the world were pumping in large amounts of liquidity into the global system in the aftermath of the global financial crisis. That money was looking for higher yields in emerging markets. Hence, plenty of money was available at relatively low rates. Furthermore, Sri Lanka had negligible amounts of commercial borrowing so it had the headroom to borrow. Consequently, there was a shift from foreign aid to foreign commercial borrowing. Now, the headroom has run out. Our fiscal deficit and debt dynamics are such that we can’t keep borrowing commercially at an incremental rate. We have got to the stage where we are now borrowing to repay our debt. So, the mindset has to change.
There is a new Paradigm where we are now exposed to rating agencies and international capital markets. This imposes far more discipline and places a far higher premium on sound economic policy-making than we have ever experienced in the past. This is a major paradigm shift we need to understand. The IMF imposes conditions on its lending but rating agencies and international capital markets are far more unforgiving. We have seen in Greece and in a number of Latin American countries that access to markets can suddenly “stop”. Extremely painful austerity is the inevitable consequence. It is imperative we have a shift in both mindset and actions in the light of this harsh reality. We need to understand the very high premium now placed on prudent and disciplined economic policy-making. We need to break out of the toxic combination of populist politics and a deeply entrenched entitlement culture among the people. This has been a mutually reinforcing non-virtuous cycle that has been a major drag on our development since independence. We have regressed from being second in Asia to Japan on most Socio Economic Indicators at the time of independence to a relative laggard today.
The third paradigm shift that I would like to draw your attention to is that we are unique in experiencing a demographic transition before our economic transformation. The population is ageing at a far earlier stage in our development process. This means Sri Lanka can no longer drive growth merely through labour augmentation. Instead, growth has to be driven to a greater extent by productivity improvement, by innovation, by research and an increase in total factor productivity. We are having to rely much more on productivity enhancement, at an earlier stage of our development process.
So, it is crucial we have a laser-like focus on improving productivity and shifting financial and human resources from lower to higher productivity economic activity. Agriculture, which has 27% of the labour force and accounts for 7% of GDP, the public service which accommodates 15% of the work force; and the SOE sector absorb significant amounts of human and financial resources yet yield low returns.
IV –The New Growth Model: Let me now address the importance of developing a new growth model which will give us 6-8% growth over 10 – 15 years i.e. the kind of economic transformation enjoyed by the successful countries of East and South-East Asia. In the years after the end of the conflict, the major growth impulses in the economy emanated from public investment in infrastructure which was largely financed by foreign commercial borrowing. Economic expansion was driven by non-tradable like construction, transport and retail/wholesale trade.
The previous growth model no longer has any headroom due to the country’s budget deficit and public debt dynamics. Arguably the biggest indictment of the policy framework of the past decade was the combination of the sharp decline in exports and the rapid build-up in the commercial external debt burden. This has resulted in the potential transfer of an inter-generational time-bomb. The situation can be managed through prudent liability management provided there are disciplined macro economic policies. This is a necessary but not sufficient condition. The unsustainable debt burden can only be resolved through transformation of our export performance.
The new growth model has to be private sector driven, with exports and FDI as key pillars.
Why the private sector? Countries have achieved successful development outcomes with varying mixes of the public and private sector: China and Vietnam have been statist while others have had a much larger role for the private sector. In Sri Lanka’s case, there isn’t the fiscal space to have a statist development model. Hence, the emphasis on the private sector is not an ideological option. Instead, it is a pragmatic conclusion based on our fiscal deficit and public debt dynamics.
Why exports? With a domestic market of only 21 mn people and per capita income of USD 3,825 it is not possible to achieve sustained growth of 6-8% without a transformation in our export performance. Exports have fallen from 32% of GDP in 2000 to 12.7% in 2016. The corresponding figures for Malaysia, Thailand and Vietnam were 67.5%, 54.2% and 83.7% respectively in 2015. Sri Lanka’s share of global exports fell from 0.09% to 0.06%. There is a lack of product (2/3 were apparel, tea and rubber products in 2016) and market (US and EU accounted for 58%) diversification. The share of external commercial borrowing has increased from 2% of GDP in 2007 to 13% in 2016. As mentioned above, this clearly is an unsustainable, and potentially dangerous set of circumstances. It can only be addressed by policy reforms which promote export transformation to generate non-debt creating earnings to both service the debt and support growth as well as employment generation. This places a high premium on getting the exchange rate; effective protection rates, particularly reducing paratariffs; trade policy, including trade agreements; and trade facilitation right. It is noteworthy that the success of the countries of East and South-East Asia has been based on transformation of their export performance – whether they are as large as China or as small as Singapore.
Why FDI? Evidence also confirms that FDI has played a major role in the economic transformation of the successful countries of East and South-East Asia. FDI not only infuses much needed capital to fill the savings/investment gap but it also brings in technology, know-how and market access. It also facilitates access to regional and global value chains which are the most dynamic aspect of the international trading system. Over half of global exports are accounted for by cross-border production sharing networks.
One may pose the question whether it is advisable to pursue a development strategy based on exports and FDI as key pillars in the context of the new normal for the world economy of relatively low growth and sluggish international trade. The response is that this is mitigated by Sri Lanka’s strategic geographical location and excellent international relations, particularly with the capital surplus countries of East and South-East Asia. Sri Lanka is located twenty miles from India, the fastest growing large economy in the world. Access is particularly easy to the five fast growing South Indian states. In addition, we are at the Centre of China’s Maritime Silk Route. Furthermore, countries like China, Japan, India, Singapore and South Korea have indicated their willingness to support Sri Lanka’s development process. It is also important to factor in that geopolitics in the Indian Ocean has increased the potential for Sri Lanka to leverage its excellent location for its commercial advantage.V —
V — Strengthening the Growth Framework
(a) Framework for Macroeconomic Policy-making
Sri Lanka has historically been characterised by stop-go policies. The excess demand pumped into the system by unsustainable budget deficits has been the main source of instability in the system. We have tended to be a high budget deficit, high inflation, high nominal interest rate and over-valued currency economy. This caricaturisation is diametrically opposite to what the successful Asian economies have achieved. In order to address this and achieve sound macroeconomic fundamentals, the Government is putting in place clear frameworks for policy-making. This should serve to promote greater consistency and predictability in policies.
On fiscal policy, the Government has embarked upon a medium-term revenue enhancement based budgetary consolidation programme. It is designed to reduce the budget deficit to a sustainable 3.5% of GDP by 2020. The medium-term strategy is based on the premise of fiscal consolidation with the aim of increasing revenue, rationalising expenditure and reducing government debt to a sustainable level. The VAT reforms, the new Inland Revenue Act and measures to strengthen revenue administration and compliance are major achievements. The Government is considering institutionalising the fiscal consolidation process by introducing more binding targets to the Fiscal Management Responsibility Act.
On monetary policy, the CBSL is making progress in introducing a flexible inflation targeting regime. This will create a framework for a data-driven, forward-looking and proactive monetary policy. For instance, the 25 basis point increase in the policy rates, in March 2017, was designed to anchor expectations at a time when there was a spike in headline inflation due to weather induced supply disruptions, tax adjustments and base effects rather than demand-side pressure. Legal and accountability frameworks are being formulated to institutionalise the flexible inflation targeting regime.
On exchange rate policy, the framework being adopted is to adopt a competitive exchange rate. In this connection, one needs to adjust the nominal exchange rate gradually to bring the REER Index to 100. This is crucial for reducing the anti-export bias in the overall policy framework and increasing the competitiveness of the economy. This is an important prerequisite for transforming the country’s export performance which is essential to overcome the onerous external debt burden and achieve sustained growth and employment generation.
A framework is also being established for liability management. There is a peak in domestic debt repayments in 2018. As there are no maturities in the last five months of 2017, this has presented an opportunity to build up a buffer to manage the elevated domestic debt repayments next year. In addition, a Liability Management Act will be enacted to create the space to address the bunching of external debt from 2019. This will relax the ceiling on Government borrowing set out in the Appropriation Act to raise financing to extend the tenor and reduce the costs of external obligations. This will serve to reduce rollover risk. It is important to recognise that these measures serve to buy time by managing the cash flow. It must be reiterated that the solution to the problem lies in fiscal consolidation, export transformation and utilising the proceeds of the divestment of public assets to pay down debt.
On SOE reform; the five major state enterprises [CPC, CEB, Sri Lanka Ports Authority, National Water Supply and Drainage Board (NWS & DB), Airport and Aviation Lanka Ltd] have signed Corporate Statements of Intent. For the first time, there will now be a framework against which the performance of these enterprises can be measured in terms of governance and financial performance. Furthermore, the Government is committed to introducing cost-reflective pricing through a formula for the CPC in March 2018 and the CEB in third quarter of 2018. This will go a long way towards putting these enterprises on a sounder financial footing. Most of their large accumulated losses have been due to part of the budget deficit being transferred to them. The subsidies built into their administered prices have not been compensated out of the Consolidated Fund. These losses were eventually reflected in the balance sheets of the state banks.
On factor market reform, the Government will be introducing legislation establishing a land bank. This will address a major constraint in the business environment by identifying pre-cleared land which will be available for private investment projects. Land titling is another issue which is receiving attention. Other land-related issues include the removal of archaic laws and the need for a comprehensive review of land use/crop mix. Labour Market reforms include measures to increase female labour force participation from the current low level of 35.9%. There is a strong case for a concerted tripartite effort (Unions, business and Government) to modernize Sri Lanka’s labour laws which are currently an impediment to investment and a constraint on improving overall labour standards in the country by incentivising informality and casual labour. On capital market reform, the Central Bank, SEC and the Insurance Board of Sri Lanka are all being supported by the World Bank and the Asian Development Bank to develop the government securities and share markets as well as the insurance sector.
(b) Boosting Investment
On the investment climate, Task Forces have been established on eight pillars of the World Bank’s Doing Business Index. Each of the Task Forces comprises all the Government entities involved in the respective pillars. Action Plans have been launched in May 2017, to deregulate by reducing the number of steps involved in each pillar; and technology is to be introduced where it can facilitate processes. These Action Plans must be implemented expeditiously. This will benefit domestic investors first.
On investment promotion, the BOI has worked with the Centre for International Development (CID) at Harvard, to identify sub-sectors with potential for attracting FDI, which will enhance the complexity of the export basket and diversify export markets. Here again, effective implementation is the next step.
(c) Promoting Trade
There is a great deal that is being done in the area of trade policy. The Government has developed a National Trade Policy Framework. An Anti-Dumping Bill is being presented to Parliament to protect domestic business from unfair competition. A trade adjustment package is being developed with the assistance of the World Bank and the EU/International Trade Centre. It is designed to increase the competitiveness of local businesses exposed to increased competition as a result of trade liberalisation and to provide retraining for workers. There is also a medium-term plan to reduce paratariffs to create a more conducive environment for promoting linkages with regional and international value chains.
Arguably, the most significant trade policy measure is the negotiation of bilateral Partnership Agreements. The FTA in goods with India is being deepened and it is being broadened to include services, investment, technology and training. In addition, an “early harvest” is being pursued to address some of the shortcomings of the existing FTA, including some NTBs and quotas. Similar partnership agreements are being negotiated with China and Singapore. In addition, GSP plus has been restored providing preferential market access for 6000 items. If things proceed according to plan, it is possible the narrative will be that Sri Lanka has preferential access to a market of over 3 bn. people: China, EU, India, Pakistan and Singapore. In a world where over 190 countries are competing for FDI, this preferential market access can be a unique differentiator. It will greatly enhance our capacity to leverage the trade/investment nexus to our advantage. Of course, the Partnership Agreements need to be negotiated vigorously with positive and negative lists; safeguard arrangements; and dispute resolution mechanisms which pursue national interests. Our trade negotiators are well aware of this.
On trade facilitation, a single electronic window is scheduled to be operational in the Customs Department shortly. These measures are intended to reduce the transaction costs of the cross-border movement of goods thereby enhancing the trade competitiveness of the economy.
All these measures are intended to improve the investment climate and trading environment for both domestic and foreign investors.
(e) (d) Education, Training and Skills Development
These are the opportunities that are out there. Two questions need to be addressed. One is can we implement? The other one of course is do we have the human resources, ie whether we have the skills to be able to absorb this kind of investment. Arguably, the biggest challenge is for us to move as quickly and as decisively as we can to align what we see as the emerging sectors having a comparative advantage with our labour market and the education, training and skills development systems. This is an axis we need to align quickly. We have not done it very well in the past.
It is often said that there is a scarcity of labour. The real problem is that there is too much labour in low productivity/low income livelihoods. At present, 27% of the workforce accounts for 7% of GDP in agriculture. The public service has 1.5 mn employees or 15% of the workforce [equivalent to Greece]. All these workers are responding rationally to distorted incentives (free water, fertilizer subsidy, guaranteed prices and non-contributory pensions). The incentive structure should be created to shift labour from low to higher productivity/income livelihoods.
(e) Facilitating R & D; Innovation and Entrepreneurship
A concerted effort is required to create an eco-system which promotes innovative thinking to create value in the market. Priority should also be given to lower risks and barriers associated with start-ups.
(f) Energy Security and Sustainability
The country’s energy security needs to be established through a robust long-term energy generation plan based on credible demand forecasts. Priority is being given to LNG as the energy source of choice.
The increase in the frequency and intensity of extreme weather events highlights the need to mainstream sustainability into the planning and budget processes. Priority should be attached to mitigation and adaptive measures to address droughts and floods.
(g) Social Safety Net
It is important to shift from untargeted subsidies which benefit the non-poor disproportionately to a system of well -targeted cash transfers. In this respect, there is scope to reform the Samurdhi Scheme. The new bio-metric identity card can also serve to reduce leakages of scarce public resources.
The Budget 2018 is also expected to announce measures to address the acute challenges confronting debt-distressed families. There will be initially piloted in the North and North Central Province.
VI — Major Development Programmes
The Government is launching a number of major development programmes around the country along two economic corridors along major highways. This is intended to promote balanced regional growth. Japan is developing a Master Plan for the Kandy area. Given the religious and cultural importance of this area, the Japanese have been chosen as they are able to understand Buddhist sensitivities and priorities. It is expected that there will be a religious/cultural orientation to this development programme as well as an economic zone.
Then coming down, the Colombo/Kandy Highway that is being built, industrial zones are planned in the Kurunegala/Kuliyapitiya areas of the North-Western Province.
The Western Region Megapolis Plan covers the three districts of the Western Province. It is a USD 40 bn. programme over 15 years. It envisages elevated highways; a light railway; residential and commercial real estate, including affordable housing; a logistics hub, involving the Colombo Port and Bandaranaike International Airport, as well as a tech city.
The Port City Project, involving reclamation of 269 hectares, will have the Colombo International Financial Centre as its centrepiece. The intention is to develop a business area which has an investment climate which would rank in the top 10 in the World Bank’s Ease of Doing Business Index.
An industrial zone is being established by a Thai company in Kalutara. Tourism developments and additional industrial zones are being planned along the Southern Coast. Further South, there is the major proposal to develop the Hambantota area. The long-lease of the port will not only generate much needed non-debt creating flows for liability management, which is essential to address the bunching of external debt repayments from 2019 onwards, but also assist in commercialising an asset which is currently a major loss-maker casting a heavy burden on the people through its impact on the Government budget. The leasing of the Port to China Merchant will also catalyse a plan which envisages investment in a refinery, LNG Plant, Cement factory, steel billet plant and a ship repair company. Subsequent phases are expected to involve development of industrial zones by Chinese companies on up to 15,000 acres of land.
In the 69 years since independence very little has been done for the people of Monaragala and Uva. The people of Hambantota have a number of assets, including a port and airport, which are very under-utilized at present while casting a heavy debt burden on the country. Chinese investment can transform the whole of that lagging region by generating thousands of employment opportunities at wages that are higher than the prevailing norms in the country. None of this is likely to happen unless a Chinese company has a long-term lease of the port; whose strategic location is a major part of the overall investment case. In assessing the Hambantota port deal, we need to ask ourselves is it right to stand in the way of developing a lagging region which has benefited so little after seven decades of independence and has been the heartland for two youth insurrections (1971 and 1988/89) which led to the loss of thousands of lives.
Surbana Jurong, the Singaporean Consultancy, which developed the Western Region Megapolis Plan, is also preparing a Master Plan for the Trincomalee area. Tourism, real estate and industrial zones will be major features of this development. This development will yield benefits not only for the Eastern Province but also for the people of Rajarata. There are plans to develop the road and rail network in the North Central Province and the North to improve connectivity to the Trincomalee Port.
In the conflict-affected areas, Palaly airport and the Kankasanthurai port are being rehabilitated. There are also plans to improve road and rail connectivity. In addition, there will be a 200% upfront investment allowance for businesses locating in these areas.
There are also Master Plans for the development of the tourism and ICT sectors.
Given the lack of fiscal space, much of the investment for these major programmes will have to come from private investment, domestic and foreign. High priority is also being given to PPPs, particularly BOTs, and alternate financing instruments which are off the Government balance sheet.
(VII) Conclusion: There are massive opportunities embedded in the plans in place. The jury is still out whether we will be able to rise to the challenge of executing effectively enough to take advantage of them. Even if we are able to execute 25 to 30% of all that I have mentioned, I think it will have a significant positive impact on the lives of the people of this country.
Thank you all very much.
Sa’adi Thawfeeq: “Indrajit Cooomaraswamy’s Harrow Innings at Lords,” April 17, 2017, https://cricketique.wordpress.com/2017/04/17/indrajit-cooomaraswamys-harrow-innings-at-lords/
ADDENDUM: in the light of one aspect of Indrajit Coomaraswamy’s remarks …. I quote a segment from an article** I presented on the 7th October 2015, the segment entitled “Hambantota as Growth Polë”
“Hambantota District in the extreme south eastern corner of the island is from where the Rajapakse clan hail. The creation of a modern artificial harbour is not the only major project they have sponsored within this area. A new airport estimated to cost US$210 million has just been inaugurated.
There is also to be a new cricket stadium. Sri Lanka already has a few too many cricket stadiums, nine now with that in Hambantota; but cricket is at the centre of sporting patriotism in the island because it is a new ‘religion’ and the only game in which our sportsmen can match the international best. Such a venue will undoubtedly boost the game in this neglected outback area and discover new Jayasuriyas over the long run.
What we see then is a multi-stranded endeavour by the Rajapakses to develop their own patch of territory. In doing so they are also catering to the Ruhuna sentiments within Sinhalese imagination. The venerable Pali and Sinhala texts say that it was this area in which the Sinhala hero-figure, Dutugämunu, was nurtured prior to military campaigns that evicted Tamil invaders and unified the island under one umbrella in the second century BCE. Mahinda Rajapakse is cast as a new Dutugämunu by his followers and the money invested within his home-ground may well be regarded as legitimate attention to hearth and kin.
Sceptics may cavil at the motives inspiring this regional focus. Such queries about their motivations notwithstanding, the Rajapakses have accidentally pressed forward with a master-stroke that will be of immense benefit to Sri Lanka. For over 100 years since 1850, and especially since Colombo port was developed as a modern harbour by the 1880s, Sri Lanka has been weighed down by the metropolitan hegemony of Colombo and its environs. Since that moment, the metropolis functioned as the island’s principal ideological manufactory, its modular display of symbolic life-styles and a magnet that has induced internal migration from outlying arenas to its hub of opportunities. Ruhuna-folk and Tamils from the Jaffna Peninsula have been important elements in this process of internal ‘colonisation’.
The Vaddukoddai Resolution of Eelam in 1976 and the war that followed challenged this spatial hegemony. The comprehensive defeat of the LTTE in 2009 threatens to restore the imbalance. But, in my view, the programmes centred upon Hambantota District will even the keel somewhat. That is to say, the Hambantota locality will soon develop a capacity to function as a growth pole and a counterpoint to Colombo’s dominance. This probability will be of immense benefit to Sri Lanka’s political economy.
**The article is entitled An Assessment of the Rajapaksa Regime in late 2009: Brickbats and Plaudits”, ….and the segment is followed by another segment entitled Ä Third Growth Pole”-which moots Point Pedro as another arena for special treatment.