ECONOMIC REVIEW
SRI LANKA’S DIGITAL JOURNEY
Shiran Fernando believes that digitalisation will help bolster the national economy
With the presidential election scheduled for 21 September, the focus on sustaining economic growth will continue. And it’s necessary to consider specific sector and cross cutting strategies that can catalyse growth.
While there have been reforms in the realms of fiscal, energy and monetary policy, there are many more policy initiatives that can potentially catalyse sectors to grow.
Several laws have been passed in the last 12 months related to debt management, energy reform, public financial management and economic transformation. If implemented properly and not reversed by a future administration, they could lay the foundation for sector policies to be built on.
DIGITAL IDENTITY The idea of implementing a digital identity has been explored over the last 15 years or so with limited success in its implementation. It has been delayed either due to a lack of interest or procurement related issues.
Presently, there is support through an Indian grant to enable the implementation of the Sri Lanka Unique Digital ID project (SLUDI). If implemented, SLUDI can streamline and make several processes ranging from taxation to welfare payments transparent.
The digital journey can be extended to ensure that the government utilises electronic methods for payments, digital signatures and so on. This level of efficiency will not only boost public sector productivity but also assist the private sector.
TOURISM GROWTH Tourism has rebounded from its lows in the last few years with the first half of 2024 recording 75 percent of the earnings garnered for the full year in 2023. It’s very likely that organic growth will see earnings and arrivals reach the highs of 2018.
Policy makers must identify what factors can promote growth from these highs to newer levels with an improvement in the average tourist spend. This growth will need to be complemented with the expansion of terminals at the Bandaranaike International Airport (BIA) in the next two years at least.
While marketing in traditional forms such as international fairs and exhibitions should continue, digital marketing efforts must be strengthened.
AGRICULTURE At the end of last year, the agriculture sector accounted for eight percent of GDP and a fifth of exports. There is significant potential for self-sufficiency in certain crops while increasing value addition and exports to regional markets.
The government should also consider releasing land to take commercial agriculture to scale. Land and land use is a binding constraint for growth in this sector. And the use of technology in agriculture needs to be adopted in line with our regional peers.
This will not only help crop cultivation and reach new export markets but also the provision of access to finance since there will be transparency in data.
Infrastructure such as cold chain storage will assist at a regional level in safeguarding produce and reducing post-harvest wastage. Moreover, infrastructure at ports and airports will also support the export of agricultural products.
GREEN FINANCE The green and sustainable finance space is evolving at a rapid rate with new instruments, standards and applications.
Since most countries and corporates recognise the need to decarbonise, and reorient their existing operating and business models, the need for finance to match the funding gap that currently exists has been promoted.
To cater to this from a debt perspective, different types of bonds have emerged to finance green initiatives, which traditional finance through instruments such as plain vanilla bonds did not cater for.
Last year, green, social, sustainability and sustainability linked (GSSS) bond issuance rose to nearly US$ 1 trillion, and accounted for 15 percent of the global bond market. This is a major opportunity for Sri Lanka as it concludes its debt restructuring negotiations.
Once the country can access international capital markets again, obtaining green finance instruments through credible transition, adaptation and mitigation projects will be key. This is also an area for the private sector – particularly financial services – to be involved in.
LOGISTICS HUB The World Bank and S&P Global Market Intelligence note that the Port of Colombo was ranked as being the 22nd best port in 2021 but fell to No. 40 last year.
Since there’s more regional competition today, modernisation and digitalisation are imperatives. As such, digitalisation of the ports through the Port Community System and implementation of the national single window will need to be prioritised.
Given Sri Lanka’s inherent advantage due to its geolocation, an integrated logistics hub should be established with the relevant infrastructure put in place.
STRATEGIC PLAN While a future government will need to stick to the debt restructuring parameters, and fiscal and external sector targets, it should focus on micro and sector level reforms that can catalyse growth.
Some of the aforementioned recommendations have been in the pipeline for quite a while but failed at the operational level or communication of the need for implementation.
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