Oct 18, Colombo: With a domestic market of only 20 million consumers with a modest per capita income, Sri Lanka needs to look beyond its borders and increase its global competitiveness to sustain high and long-term growth, the World Bank says.
In a feature story "Vision 2025: Sri Lanka's Path to Prosperity" the World Bank looks at the key constraints to the island's economic growth and how the global lender assists the unity government's proposed reforms in its Vision 2025, to reduce poverty and create prosperity for the Sri Lankans.
According to the global lender among the key constraints are, Sri Lanka's geographically unequal economic growth, land administration, and rapidly aging population.
The government has recognized that the unequal distribution of economic resources and economic development across provinces of the island have contributed to the large income disparities in Sri Lanka and the Vision 2025 sets out a course of reforms to make the country more competitive and lift all Sri Lankans' standards of living.
The World Bank says the land administration in Sri Lanka is impeding economic development. As noted by the government, the island's "archaic land policy" is "inefficient" and "underdeveloped" and reform is urgently needed.
Sri Lanka's old-age income protection is not adequate for its rapidly aging population, the World Bank points out. Today, the Public Servants Pension Scheme (PSPS) covers about 10.3% of the labor force and provides a generous benefit at a high and growing cost of about 1.4% of GDP. The growth in civil service headcount and payroll suggests that pensions costs will only grow, testing state coffers.
Assisting the government to redistribute wealth evenly across the island, the World Bank has supported several programs focused on underserved communities and regions under the North East Local Services Improvement Project which helped improve infrastructure and the delivery of public services in isolated communities in the North and East Provinces.
Now completed, this project has paved the way for the Local Development Support Project, which aims to improve the livelihoods of vulnerable populations and make local governance more efficient and accountable to citizens.
Other similar priorities comprise an expanding portfolio on infrastructure, including urban development, roads, flood protection and water supply. In this context, the Government's commitment to supporting Private Public Partnerships (PPPs) to reduce reliance of public funds for infrastructure will require greater private sector financing. This is central to the World Bank's strategy to maximize finance for development through the participation of the private sector.
As Sri Lanka gears up to modernize the land administration, the World Bank is extending its support to expand the initial technical work on the status of land administration to review broader constraints in the sector, and to expose stakeholders to international experience and good practice.
According to World Bank, reforms are needed for pension systems like the Employees' Provident Fund (EPF) and Employees' Trust Fund (ETF), to ensure they are a reliable support for an aging and vulnerable population, while also proving sustainable and affordable for the government.
To this end the World Bank has expressed its commitment to support the Government's efforts to strengthen social safety nets.
The lender underscores that Sri Lanka's new Vision 2025 sets out a course of reforms ranging from labor law reform to restructuring social safety net programs and boosting technology acquisition and digitization to make the country more competitive and lift all Sri Lankans' standards of living.
However, the World Bank points out that having identified many of the problems and possible solutions, the test of V2025 now lies in implementation.
"Many critical steps have been taken toward realising the vision outlined in this document, but sustained commitment will be required to see it through. To see this become a reality, deep and system-wide reforms are needed toward reducing poverty and creating prosperity for all Sri Lankans," the global lender said.
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