D.A. Rajapaksa Memorial Lecture :
National development of North and East
National development is not merely about the economy
but the economy is central. It entails economic, social, political,
cultural and even moral aspects. The contribution of the North and the
East during the last three decades or so was hampered in all these
spheres by the separatist and the terrorist war. It is necessary to
emphasize not only the terrorist character of the war but also the
separatist aspect. One cannot be separated from the other. If terrorism
was the symptom, as some people argue, separatism was the cause.
However, as the war is over and peace is established, prospects are high
for the people, the institutions and organizations of these provinces to
participate in the processes of national development and contribute to
its progress. D A Rajapaksa
This Memorial Oration of Hon. DA Rajapksa, one of the
most illustrious and committed national leaders of Sri Lanka, highlights
both prospects and challenges of the north-east participation in the
national development. It takes Mahinda Chinthana as the main framework
of analysis which outlines not only the directions but also various
projects and plans for the national development in the ongoing future.
Sri Lanka has entered the category of the middle
income countries with over 42 billion economy and little above a
population of 20 million people. This means that the country is still at
the lower level of the middle income countries with a per capita income
of around USD 2,085. There are vast disparities in the income
distribution in the world today and Sri Lanka's per capita income is 17
times lower than the United Kingdom, the country's former colonial
master. When Britain left Sri Lanka in 1948, the gap was wider. Sri
Lanka has managed to catch up to an extent, but not to the extent of
people's aspirations or country's capacity.
Sri Lanka was a typical 'export-import' economy at the
beginning of independence with the agricultural sector contributing to
over half of the GDP. The exports and thus the foreign exchange earnings
depended primarily on three main products of tea, rubber, and coconut.
The situation has drastically changed by now the sectoral composition
shows the following picture in Table I in contrast to 1950.
It is mainly the expansion of services and industries
that has changed the composition. Although the plantation agriculture
has contracted, the food producing domestic agriculture has expanded and
increased. It is believed that the present composition is akin to a
'modern economy', the service sector taking the lead in the economy.
While the spread of infrastructure and services is uneven between the
provinces and districts, the overall availability of facilities is
conducive to domestic development and Foreign Direct Investment (FDI).
The most important is the growth that Sri Lanka could
sustain during the last five years irrespective of the war, Asian
Tsunami and the international economic/financial crisis. Sri Lanka could
maintain 7.6, 6.8, 4.2 and 3.5 growth rates respectively in 2006, 2007,
2008 and 2009. While the growth rates were only 1.6 and 2.1 for the
first two quarters of 2009, when the war culminated, after the defeat of
the LTTE in May that year the growth picked up by 4.2 and 6.2
respectively in the last two quarters. The growth rate rose to 7.1 in
the first quarter of this year followed by 8.5 in the second quarter.
This figure is higher than what prevailed before the Eelam War IV that
broke out in mid 2006.
The other main index of economic performance after the
war is the Stock Market. There are two indexes, All Shares Price Index (ASPI)
for all stocks listed in the market and the special index called Milanka
Price Index (MPI) for blue chip companies. The market was extremely
sluggish throughout the war. In May 2009, both indexes were just above
the 2,000 mark. By the end of the year ASPI exceeded the 3,000 mark
while MPI recoding 3,500. Together this was over a 50 percent growth;
since than MPI performing always better than the ASPI as could be
anticipated. So far since the beginning of this year growth has been
around 100 percent. By the end of 2009 Sri Lanka was considered the best
performing stock market.
There are other economic fundamentals that indicate
that Sri Lanka could 'take off' for a higher growth and development
making the economy elevated to the upper range of the middle income
countries. One objective of Mahinda Chinthana is to increase the present
per capita income to the level of around USD 4,000 by the year 2016. Sri
Lanka appears well into that direction.
For and efficient market economy, supervised by the
state, both the inflation rate and the interest rates are maintained
low. Low interest rates are an inducement for the small and medium scale
enterprises (SME); which is mainly the nature of the Sri Lankan economy.
The unemployment rate is all time low within the range of 5-6 percent of
the labour force.
The gross official reserves now stand at their highest
level of USD 6.1 billion, which is equivalent to six months of imports.
Following the successful completion of the fourth review of the
Standby-Arrangement, the IMF has released the fifth tranche to the value
of USD 212.5 million. This shows to the confidence that the IMF has
placed on the Sri Lankan economy.
Three rating agencies, Standard and Poor's, Fitch and
the Moody's, upgraded Sri Lanka's rating standards primarily in capital
markets from B to B+, from Stable to Positive and from B to B1
repectively in September, 2010.
When Sri Lanka made its third global debt issue aiming
at USD 1 billion, it was oversubscribed by more than 6 times within 14
Between January and June this year, Sri Lanka's
exports improved by 13.7 percent and internal remittances by 13.5,
compared to the same period last year. The balance of trade, however,
shows a 108 percent deficit due to the heavy import of investment and
infrastructure material including motor vehicles.
Although the FDI inflows are still sluggish due mainly
to the world decline by 29 percent in 2009, for example, it is estimated
that the situation would improve after the favourable international
ratings and confidence. So far this year, USD 124.2 million flowed into
the infrastructure sector, USD 55.6 million to the manufacturing sector
and USD 25.9 million to the service sector. A reason for the FDI
reluctance into the country could be the prevailing fiscal deficit which
might be improved or corrected after the new budget for 2011.
North and East
Traditionally, the East was considered the granary of
the country. The North and the East are two distinct and important
portions of the Sri Lanka's national economy that became obliterated by
the war for nearly three decades.
As the Governor of the Eastern Province Mohan
Wijewickrama stated at the inauguration of the new Provincial Assembly
in June 2008,
Sectoral Contribution to GDP
Source: Snodgrass and Central Bank
The Eastern Province contributed around 14% to the
national GDP in the early eighties which declined to about 8% thereafter
because of the unsettled conditions in the Province.
The above is to highlight the essence of this Oration
before going into some description of the two provinces under
Provincial demarcations were first devised by the
British for revenue and administrative purposes in 1883 and later
abandoned considering the importance of the district for both purposes.
As a result, the district was the main focus of analysis before the
provinces again became a major unit under devolution of governance in
In terms of total area, the Eastern Province is the
second largest province (9,996 km2) after the North Central (10,472km2)
and North is the third largest (8,884km2) in the country. However, in
terms of land area, the North becomes third to Uva because of high
inland water area (594km2). When considered the population percentage or
population density, the North and East stand two of the lowest in the
country with North Central and Uva. The relative land area of the East
constitutes 15.2 percent of Sri Lanka's total and the North 13.5
In contrast, while the Northern population is 5.8
percent of the country's total, the East constitutes 7.5 percent. These
population figures and land areas should be taken into consideration in
estimating and generating possible contribution by these provinces to
the national economy in the foreseeable future.
The disparity between the area size and the population
perhaps is one major factor why these provinces were relatively
underdeveloped with similar provinces like the North Central and Uva.
These are the predicaments of uneven development linked to climatic and
other conditions which could also give rise to social unrest again and
All these provinces by and large constitute the dry
zone of Sri Lanka. Unless these areas are planned, irrigated and taken
care of by proper national policies in coordination with provincial
administrations, disregarding ethnic or political considerations, the
lives of the people inhabited in these provinces may remain largely
destitute. North-East in Sri Lanka is not unique in underdevelopment.
Like in the world at large, there are many countries where there are 'centres
and growth poles as well as peripheries and underdeveloped regions.
The objective of sustainable development is to avoid
them. There is the Ministry of Development of North Eastern Region in
India established in 2001 by the central government to take care of
development planning and projects in eight states of North-East India
covering Arunachal, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Tripura and Sikkim. Even in Egland, the North-East is considered
relatively underdeveloped and special attention is made to develop the
areas from Northumberland to Durham and from Tyne to Middlesbrough.
However, before the separatist war began, the
conditions could not be considered singularly unsatisfactory in the
North or the East in overall terms compared with many other regions or
provinces. For this period, national accounts or survey data was not
available for provinces.
Most of the data was compiled on the basis of
agro-climatic zones and all the districts in the North-East except
Ampara came under Zones 3. The following Table 2 gives Consumer Finance
Survey (CFS) data for four years between 1973 and 1986 presented in
index form compiled taking Zone 5 or the Colombo Municipality area as
the base (100) at a previous year.
Consumer Finance Survey
One Month Income as Index of
Source : W.D. Lakshman, Dilemmas, p. 192
While the above data corroborates with many other data
available for the period, what can be seen is the common predicament
that Sri Lanka has been facing in respect of centre-periphery dichotomy.
This dichotomy was significantly enlarging
particularly after the districts of Jaffna, Mannar, Vavuniya, Mullativu,
Trincomalee and Batticoloa. This zone did not have any special
disadvantage in overall terms before 1978, and by 1986 it was virtually
impossible to conduct any reasonable survey to gauge the socio-economic
conditions of these areas.
However, there were clear indications of significant
disparities between districts within the zone, before and after, perhaps
which led to unrest among the people who lived in these marginal
districts. One implication of the situation is that even in the future,
the allocation of resources and funding should be primarily on the basis
of districts and not merely on the basis of provinces.
Prospects for Development
The major premise for the North and East contribution
to the national development is peace. An extremely volatile region
before, the provinces have not reported any type of disturbing violence
since May 2009 and even the crime rates have gone down with the
establishment of law and order in 1977. Zone 5 was the centre and all
others represented the peripheries. Zone 3 composed.
The economic cost of the war has been estimated to be
around USD 200 billion in the last decade only. This is around five
times of the annual GDP estimated from the present amount. Now the 'cost
of war' has stopped except for the maintenance and payments for the
armed forces. As the most successful section of the public sector in
recent times, the armed forces are contributing immensely for the
resettlement, rehabilitation and reconstruction. Development will be one
There was no doubt that even the 'illusive peace'
during the Ceasefire Agreement (CFA) in 2002-2004 also resurrected the
economy to an extent until the Asian Tsunami came. However, the economy
was kept apart from the national economy for the benefit of the war
efforts of the LTTE. Many of the foreign funded projects and their
monies also were channeled for war purposes than peace or people's
The contribution of the North to the national GDP has
been the lowest for a very long period. It was around 2.5 percent in
1999 which went only up to 2.9 percent in 2004. While the contribution
of the East has been double of the North, yet it was around 5 percent in
1999 which went up to 5.4 percent in 2004. One reason attributed to the
low contribution was the informal or the LTTE war economy which has
completely ended with the end of the war in May 2009.
In 2009, the contribution of the East was around 8
percent and hope that it would go up to at least 14 percent this year as
it was the pre-war contribution in early 1980s. Likewise, the
contribution from the North is expected to be at least around 5 percent
What would matter is not so much the percentage
contribution in the short term. Since some of the other provinces
(particularly the Western Province) are on a rapid growth path,
obviously the contribution of the North or the East might be depressed
for some time until the regional imbalances are corrected. When sectoral
composition of the North and the East is compared with each other and
with the national economy, there are interesting revelations. While the
Northern economy is predominantly service dominated (65 percent), the
East is basically an agricultural economy (39 percent) according to 2004
figures. It might be the case that the service sector in the North
appeared bigger because of the war conditions. What are clearly
resuscitated at present are agriculture, fisheries and the service
sector. An author from a Tamil nationalist point of view nevertheless
reported the resurrection of the economy in following terms.
As for the Tamil Homeland, there is already some signs
of increased economic activity in the North and East with trade booming
between North East and the rest of the country and while tourism is
another thriving industry. Opening of the major banks, supermarket
chains in the North are signs of increased economic activity. Further
more, the rise in property value over past 6 months in and around Jaffna
has been phenomenal combined with the fall in property values in Tamil
dominated areas in Colombo, indicating a tendency of return of the local
Tamil economic 'migrants' to the North. This seems a clear sign of
economic prosperity in the North and East in the short period."
Challenges for Development
A major challenge that needs to be taken into
consideration in terms of economic development in the North and the East
is the vast disparities between districts. This is not only in respect
of population but perhaps related to that as well. In respect of
population distribution, Jaffna district has more people than the rest
of the other three districts of Mannar, Vavuniya and Mullativu taken
together. This is very much the case at present and even before the war.
In the case of population in the East, disparities are less conspicuous
except between Ampara and Trincomalee.
The socio-economic disparities between districts are
more significant which might impinge on development strategy. If the
consumer finance surveys (CFS) of the good old days were of any
indication, there were major disparities between Jaffna and rest of the
three districts in the Northern Province. Perhaps this has enlarged
further due to the fact that Jaffna was largerly liberated from the LTTE
well before the other district. This is not unusual in Sri Lanka as a
When household output, consumption, sales and stocks
were surveyed for a month for non-seasonal crops in 1984, Jaffna
district stood 30 times higher than Vavuniya and 90 times of Mullativu.
Only Mannar could compete with Jaffna yet with a 50 percent disparity.
All other survey indicators on trade, transport and
livestock also indicated to that direction. In the case of the Eastern
Province, Ampara was similarly ahead of Batticaloa and even Trincomalee
on the same indicators. There is much talk about provincial disparities
after the introduction of the provincial council system, which is
important. However, it should be noted that the district or even
divisional disparities are equally or more important which needs
There are other challenges which are economic as well
as non-economic. When the war ended, there were over 300,000 internally
displaced people. It was independently estimated that over two years
might take to resettle them particularly due to the spread of landmines
in areas where they had to be resettled. It is reliably estimated that
almost 95 percent of the case load is now cleared, after one and half
years, and only around 20,000 remain to be resettled. This does not
however mean that the resettled IDPs would automatically contribute to
the economy. There are considerable social dislocation among IDPs and
others. It is estimated that over 89,000 women are widowed as a result
of the war; 40,000 in the North and 49,000 in the East. The most
devastated is children's education. All these might affect economic
development adversely for some years to come.
The Northern Province or particularly Jaffna was well
prominent for its educational and professional contribution the national
economy in yesteryears. By the time of independence, Jaffna produced
around 15 percent of the key three professions of doctors, lawyers and
engineers. Even by 1985, educational standards of the Jaffna community
were exceptionally high, with 25 percent of the age group of 15-60 years
having GCE (O/L) and 10 percent of the same age group attaining GCE
(A/L). There were 1,411 degree holders, with 140 of them having
postgraduate degrees. Irrespective of the war, the educational standards
of Jaffna have not deteriorated.
Thanks to the functioning of the University of Jaffna
under trying conditions, there are more graduates today than anytime in
the history. This is a welcome sign for the resurrection of the economy
in the North and their contribution to economic planning. The situation
in the East is not dissimilar with having two universities functioning
under similar circumstances.
In considering the North and East contribution to the
national economy or national development, the 'ethnic challenge' cannot
be ignored or overlooked.
As there had been open discontent from these provinces
in the past three decades, a political reconciliation is in order. The
following is what President Mahinda Rajapaksa stated recently on the
The entire focus of our nation is now on building a
lasting peace; healing wounds, ensuring economic prosperity and
guarantee in the rights of the whole nation to live in harmony. We are
mindful that in order to fulfill these aspirations, economic development
and political reconciliation must go hand in hand.
There are provincial structures in place under
devolution to address many of the issues as the obstacles of terrorism
are now eliminated. However, two important matters have to be
reconsidered under devolution. First is whether, the provincial councils
have the competence or full capacity to handle all the 37 functions
attributed to them under the 13th Amendment.
Second is how far the present system obliterates the
issues of districts or the local government system as a result of the
overwhelming concentration of power in the hands of the provincial
councils. There need to be some form of rethinking about devolution,
moving towards more cooperation between the central government,
provincial councils and local governments. 'Cooperate devolution' might
be the right word and the formula.
Sri Lanka is in a different paradigm altogether after
the end of the war. There were various reasons why Sri Lanka could not
progress enough compared to some other countries in the region in the
past. It is an exaggeration to consider the north-east issue or the war
as the only reason. The main reason was the 'lack of a proper strategy'
in addressing the fundamental issues, including the war, in a
comprehensive manner. This gulf has now been filled by Mahinda Chinthana.
Connected to this issue is the question of political leadership and
Sri Lanka inherited a political culture from Britain
and according to this culture political plurality was overemphasized to
the extent that 'concerted national effort' for development of social
progress was almost impossible until recently. This has changed
dramatically after Mahinda Chinthana.
A concerted national effort is now forged through
broad political coalitions of various parties and formations, minimizing
divisiveness and also maintaining the main tenets of dissent, freedom
and political plurality. The most important need of the hour is for the
political parties and the groups representing the North and the East to
participate in this 'grand coalition' more broadly than as at present.
There are different views as to how a national economy
could be constructed and developed. In economic terms, the
infrastructure development is emphasized along with the importance of
technology. There are other factors and sectors that need to be
developed. While there is no much dispute over what appear to be
technical or pure material conditions necessary for such a development,
the main controversy appear to be on two directions. First is the
private sector public sector mix or the role of the State.
While there are extremes of view on the matter,
Mahinda Chinthana has developed a conception of a 'developmental state'
where the market is allowed to function with public sector participation
and supervision. Second is the center-provincial policy mix in the
national development. Yet again there are extremes of view, and the
present paper argues for a mixture of national-provincial participation
in development where devolution could be implemented in a cooperate
fashion. It might be on that basis that 'expected contribution from he
North and the East' could be anticipated for the 'national development
of Sri Lanka'.
Courtesy : Daily News