C3S Event Report No: 013/2018
The following is the event report of a Lecture-discussion and Book Launch at C3S on December 11 2018. The views expressed were the speaker’s own.
The Chennai Centre for China Studies (C3S), National Maritime Foundation-Tamil Nadu (NMF-TN) and the Center for Asia Studies (CAS) jointly organized a Lecture-discussion and Book Launch at C3S, Chennai on December 11 2018. The talk which was on the theme, “Role of Foreign Capital in the Economic Transformation of Sri Lanka”, was led by Dr. A. S. Chandrabose, Senior Lecturer in Social Studies, Department of Social Studies, The Open University of Sri Lanka. The event was moderated by Prof. V. Suryanarayan, Former Director, Centre for South and South East Asian Studies, University of Madras, Chennai, India; and President, C3S. Cmde. R. S. Vasan IN (Retd.), Director, C3S, welcomed the gathering.
Prof. Suryanarayan introduced the speaker, describing Dr. Chandrabose’s journey as being from a family of tea plantation workers, and notably becoming the first among his community in Sri Lanka’s plantation areas to attain a PhD. Dr. Chandrabose is currently a Senior Lecturer at the Department of Social Studies of the Open University of Sri Lanka (OUSL). Apart from the teaching, he coordinates the course on Certificate in Social Harmony for the undergraduate students of the Open University of Sri Lanka, which is World Bank-funded project of Undergraduate Development Grant for the Higher Education for Twenty-first Century (HETC) of the Ministry of Higher Education, Sri Lanka. He is also involved in supervising the research dissertations of the students of Development Studies of the postgraduate programme both in the Open University and the Faculty Graduate Studies of the University of Colombo, Sri Lanka. His primary research interests are in the area of plantation economy, rural labour, social welfare, minority community and the Indian Tamil culture in Sri Lanka. His publications are mainly focused on plantation workers and have published several articles and book chapters locally and internationally. He has participated in several international conferences and symposium which includes SUSNET at Lund University, Sweden, ILO in Geneva, CARAM Asia in Malaysia and Peoples SAARC in Kathmandu. Dr.Chandrabose was invited by the Graduate School of Asianand African Area Studies (ASAFAS), Kyoto University and the Faculty ofInternational Studies of the Utsunomia University in Japan to conduct a fewinteractive academicsessions for the students and the public.
Dr. Chandrabose presented facts, statistics and perspectives on the event theme. The speaker stated that Sri Lanka received US$ 1.6 billion as foreign investment in 2017. In light of this figure it is imperative to examine briefly the history of Sri Lanka’s economy, as was explained by the speaker.
Evolution of Sri Lankan Economy
After the island nation’s independence in 1948, when Sri Lanka’s was left wanting in economic prosperity, the government aimed to gain income from tea sector. This led to the nationalization of the country’s tea plantations, which took place over twenty five years. In 1975, a Land Reform Commission was setup to ensure all the tea plantations in Sri Lanka were nationalized. Subsequent plantation exports generated revenue for the country, and this was spent on welfare programs. Meanwhile, Sri Lankan political parties of Sri Lanka Freedom Party (SLFP) and United National Party (UNP) desired more power for the Parliament. Hence, there was distribution of ration items to the public in electoral provinces. Hence, the revenue from plantations was spent on welfare, mainly for the Orural communities in the country. Besides infrastructure there was expansion of free education programs. The people were content with the government’s initiatives.
However, there was a catch- the successive governments in Sri Lanka were unable to invest in the country’s economy, as funds were prioritized for welfare. This issue led to Sri Lanka partially liberalizing its economy in 1977. While the SLFP had a closed economic approach and the UNP displayed a fairly open approach, the country’s efforts for industrialization were not successful. The rural community was abandoned, and was deprived of adequate livelihood. Following this, foreign loans were acquired for agricultural projects which benefited the country’s northern areas.
After 1977, the UNP gained a high number of Parliament seats. It began the country’s economic liberalization to improve situation in rural areas. In fact, the per capita income in Sri Lanka’s rural areas was lesser than other Asian nations. Notably, the country was the first in South Asia to liberalize the economy. Sri Lanka built a Free Trade Zone, and the Greater Colombo Economic Cooperation (GCEC) was setup for providing industrial areas. The country’s Board of Investments (BOI) was launched in 1992 to facilitate FDI. It was dubbed as a ‘One Stop Shop’ where one organization was dedicated to many products in one area. The BOI included focus on tourism and apparel industries.
Current Scenarios in Sri Lankan Economy
The following figures were presented by the speaker on Sri Lankan economy status:
GDP- US$ 93.45 (2018)
GDP growth- 4.8% (2018)
GDP growth per capita US$ 4310/
GDP by sector(2017)
Sri Lanka’s Education Sector- Performance in National Exams, 2015
25,624- Entered to University
155, 447- Qualified to applying for University
Health Sector of Sri Lanka- In 2014, Sri Lanka spending per capita on healthcare was above that of its South Asian counterparts.
Why does Sri Lanka Need Foreign Investment
Foreign investment into Sri Lanka can bring the developing nation into the upper middle income bracket. The country’s aim is to achieve at least 6% growth rate in GDP. Meanwhile FDI in Sri Lanka has overtaken aid and remittances from other states. Yet Sri Lanka is struggling for attracting more FDI, as the country needs savings for enhancing the insufficient public spending. FDI can help diversify exports, reduce borrowings which are currently very high, and to close other gaps.
FDI Scenario in Sri Lanka
According to UNCTAD’s 2018 Report, Sri Lanka had a historic influx of FDI of US$ 1.37 billion in 2017. The post war scenario of Sri Lanka shows that the nation’s FDI stock is more than US$ 11 billion, which represents 13.2% of the GDP. The government expects FDI to triple to US$ 4 billion by 2022. The measures to ensure this include Free Trade Zones, and reduction in food subsidies. Sri Lanka can attract more FDI as it has the advantage of geographic location of proximity to India and the Malacca Straits.
It should be noted here that a 2018 World Bank report positioned Sri Lanka in the Ease of Doing Business Index as 111 out of 190 countries. Colombo aims to attain a spot in the top 70 of this index by 2020.
Reports also state that Sri Lanka’s FDI slumped 54% to US$ 450 million at the end of 2016 due to certain fluctuations. The labour cost in the country had a negative impact on FDI. This led to lowering of wages in Sri Lanka. The speaker then described the Chinese and Indian angles to FDI in the island country.
China and India as Sri Lanka’s FDI partners
China as is well known has acquired Sri Lanka’s Hambantota port for US$1.6 billion on a 99 year lease. Besides, China has also acquired 1000 acres of the Hambantota Tapioca Farm, constructed the Nurochcholai Power Plant, built the Colombo-Katunayake Highway, laid the Palai-KKS rail line and setup a Special Economic Zone in Gampaha district. There are now 75,000 Chinese semi skilled workers in Sri Lanka.
India for its part has built the Northern Railway in Sri Lanka and also setup a large number of housing projects. About 100 Indian companies have invested US$600 million in Sri Lanka. The sectors/industries of Indian investment include petroleum, IT, real estate, tourism, banking, metals and infrastructure. In addition India is providing scholarships for Sri Lankan students for their higher education.
The Maritime Silk Road led by China is expected to benefit Sri Lanka, given the island nation’s geographical location. The country also expects approximately US$ 5 billion by 2020 for improving living conditions via jobs.
It cannot be ignored at this juncture that Sri Lanka has a very poor trade balance, as inferred from statistics.
Dr. Chandrabose explained the need for Sri Lanka’s export diversification. There is also the need to address the issue whereby skilled labour from India and China is making inroads into Sri Lanka, leading to natives migrating to the Middle East for livelihood. Semiskilled labour is bringing the island country remittances worth an average of US$ 6 billion.
India and China, according to the speaker, must maximize the advantages offered by the island country’s location. Investment is needed for Sri Lanka’s tourism, logistics, IT and food processing. The small nation’s labour migration must be reduced when FDI is increased.
Following the lecture-discussion, a book, printed and published by the Express Newspaper Ceylon (Ltd) in Sri Lanka, and edited by Dr. A. S. Chandrabose and R. Ramesh. The book is titled as (150 Years of Tea in Sri Lanka). It was launched by Prof. Suryanaryan. Dr. Chandrabose presented the first copy to Cmde. Vasan.
The book was written in Tamil in order to reach the Tamil readers to update their knowledge about the dimensions of tea plantation sector in Sri Lanka. In fact, the speaker described how large turnouts of Tamil speakers came for the book’s launch events in Sri Lanka. It includes 28 essays written by university lecturers who are largely representing of the plantation community. The researchers and other writers who write frequently on the plantation community have also contributed to the volume. Prof. Suryanarayan was thanked for writing the foreword to the book.
Q & A Session
The talk was followed by an insightful interactive session with the audience.
On FDI: FDI in tea plantation has been great in India. Yet, India has not taken advantage of this natural convergence. Mr. K Subramanian, Member, C3S,highlighted that privatization has reduced the quality of welfare measures and that social upheaval has left development projects and economic agendas to go astray.
Plantation Funding: Most of the funding for housing in the plantation areas do not reach the estate community. In fact, the labour ordinance that affects plantations under a decentralized budget, has not impacted the enclaves. Moreover, the government officials have relinquished their control over determining payments.
10 year projection for Sri Lanka: According to Dr. A. S. Chandrabose, in 10 years, many workers will not be working in tea plantations, especially the Tamils as many have begun working in the service sector.
On role of NGOs and Think tanks: Although there are many NGOs AND Think tanks in Sri Lanka, their impact is not very significant.
In terms of local attitude towards Chinese investments, Dr. A S Chandrabose believes there is a positive attitude towards the Chinese as there is better recognition for Chinese labour and business in Sri Lanka. Mr. T. V. Krishnamurthy, Member, C3S, pointed out that the Chinese have been regularly funding housing in plantations and increasing the capacity of production in Sri Lanka.Interestingly, Sri Lanka has even given citizenship to upto 1000 Chinese.
Economic growth: Foreign debt and political instability are the biggest imbalances of economic growth in Sri Lanka.
Cmde. R.S. Vasan, Director, C3S, gave the vote of thanks.