June 18, Colombo: Despite three decades of civil conflict, Sri Lanka has managed to become one of the most successful countries in Asia in terms of social development indicators - especially health and education, the President of the Asian Development Bank (ADB), Takehiko Nakao said.
Delivering the eminent speaker's address at the Miloda - Academy of Financial Studies, training nstitute of the Finance and Planning Ministry, on "Chance of Sri Lanka to be the Next Asian Miracle", the ADB President said Sri Lanka can and should become another Asian economic success story.
Mr. Nakao, who arrived in the country Tuesday on a three-day visit, said in his view the island nation is on the path to becoming another Asian economic success story.
Pointing out that since the end of civil war in May 2009, Sri Lanka has been recording solid rates of growth and is on course to surpassing last year's rate of 7.3% in 2014, the ADB Chief said the expansion of the economic activity in the conflict-affected Northern and Eastern Provinces almost twice as fast as in the rest of the country is striking.
"What is especially striking is that economic activity in post-conflict Northern and Eastern Provinces expanded almost twice as fast as in the rest of the country. This is a remarkable sign of reconstruction and rehabilitation - a means to securing jobs and income, and to delivering reconciliation in the conflict-affected regions," Mr. Nakao said.
However, despite the sound macroeconomic management, high level of public capital investment at 6% of GDP, low inflation and high economic growth, one major challenge was the low revenue ratio, which stood at 13% in 2013, the ADB official noted.
He said for the Government to continue to play a key role in infrastructure development and human capital improvement, Sri Lanka will need to increase this ratio.
"In this regard, I am happy to see that a major tax reform program has been under way since 2011. The aims of the reform include broadening the VAT base and improving administration," he said.
He said the government's goal of reaching $ 4,000 per capita income by 2016 and making the transition from a lower middle income country to an upper middle income country is realistic and Sri Lanka has the potential to be the first country in South Asia to break through the middle income trap and achieve high income status.
However, Mr. Nakao said there are challenges ahead.
Highlighting the challenges he said it is imperative to maintain a sound macroeconomic policy and keep investing in physical infrastructure.
He pointed out that the government needs to reform state-owned enterprises. Several strategic enterprises may remain publicly owned, but they must be streamlined and reformed to ensure much greater operational, managerial and financial efficiencies.
Mr. Nakao said the country needs a highly skilled labor force to fully tap its potentials. Although investment in skills development, including technical and vocational training, is already underway, the ADB President encouraged "unrelenting" investment in upgrading human capital to create good jobs and income, and attract new investments from home and abroad.
The Government should improve the investment climate and facilitate private sector development and encourage the foreign direct investment (FDI) to bring along new and improved technologies, as well as new markets and management skills, he added.
Concluding his speech Mr. Nakao said his strong belief is that Sri Lanka can and should become another Asian economic success story, and in this sense the next Asian Miracle.
"ADB is proud to stand by Sri Lanka and be a trusted partner in this process," ADB chief assured.