QUEST FOR BALANCE Our Country Vanity Sanity and

QUEST FOR BALANCE - Our Country. Vanity, Sanity and Reality Prepared for the 32 nd National Conference of the Institute of Chartered Accountants (ICASL), Sri Lanka Anila Dias Bandaranaike 21 October 2011 1

Basic Premise A Nation strives to improve the quality of life of all its citizens through sustainable development that uplifts human well-being As Sri Lanka strives, how do we “balance” our development? 2

What is Human Well-being? • Material Well-being - food, clothing, housing, economic services, physical health, clean environment • Intellectual Well-being - educational, professional, aesthetic, cultural pursuits • Emotional Well-being - freedom of thought, speech and beliefs, family, community, personal safety, mental health Human well-being requires material needs as well as intellectual stimulation and emotional security. 3

Reality - Sri Lanka’s Resources • • • for Physical , Intellectual, Emotional Well-being Island: national security, beautiful beaches, harbours, ocean resources, strategic location Land: mostly arable, mostly flat, accessible mountains, plentiful water, nutrition, easy road/air/sea access Cultural: rich, diverse traditions of Sinhala, Tamil, Muslim, Burgher heritage Religious: teachings of 4 great religions - Buddhism, Hinduism, Islam, Christianity Communication: 2 ancient languages (Sinhala, Tamil) and global business language (English) New Era - end of 30 years of terrorism and conflict 4

National Priorities in our Quest for Balance • • • Achieve – our potential by ethical means Safeguard – our rich multicultural heritage Maintain – unity in our diversity Preserve – our natural environment Share – leisure with family and community Enjoy – living in harmony and health Our Country’s potential is unlimited – Develop it with wisdom and balance! 5

Current Reality – Material Well-being(a) 1973 2010 Category na 89 Housing-owned/rent free na 86 -92 Housing-permanent floor, walls, roof Electricity Safe water Sanitation TV Telephone Poverty Headcount (26% in 1996) (a) Share of Households with access 8 85 46 59 0 1 na 88 90 80 77 8. 9 In 2010, Samurdhi provided 1. 6 mn families Rs. 9. 2 bn , while 1. 8 mn migrant workers remitted USD 4. 1 bn (Rs. 465 bn) to Sri Lanka

Current Reality – Regional Disparities Southern Sabaragamuwa North Central Eastern Uva Northern 45 10 10 10 6 5 3 Share of Households 27 13 13 13 10 6 7 6 5 42 26 28 29 26 29 25 24 26 4 Central Western Share of GDP Monthly Household Expenditure-Rs, 000 Poverty Headcount North Western Province 11 10 10 11 7 15 14 13 • Strongest disparity between WP and others Source: DCS HIES 2009/10

Current Reality – Intellectual Well-Being • Free preventive 2. 1 1. 0 Population growth rate-% and curative Dependency ratio-% (a) 88 61 health services Life expectancy-yrs 66 73 Infant mortality/ ‘ 000 48 10 • Needs of aging 34 71 Secondary Education or higher population LFPR-% 35 49 rising. Private Unemployment-% 19 5 health care expanding. • In 2010, 61% eligible, but only 10% could enter Free State Universities. Opinion divided on Private Universities • State provided 14 % of employment in 2010. • 1. 8 mn migrant workers equal about 20% of labour force Category 1970 2010

Current Reality – Emotional Well-being • Terrorism no longer a threat, but inadequate trained professionals to treat post conflict mental trauma • Rising political thuggery, gun culture, underworld violence – do police, courts protect citizens? • Balanced language policy, but no minority rights in practice – for official letters, notices, court proceedings • perceived apathy on reconciliation issues – e. g. excessive army presence , weak inclusivity in North development • Self-defeating attitude to criticism – attacks on local media personnel and offices, poor diplomacy to counter international hypocrisy

Current Reality – Summary • Material Well-being? - Sri Lanka a lower-middle income country with national socio-economic indicators at upper income levels. But regional disparities high, aging burden rising • Intellectual Well-being - Good basic indicators. But mismatch between education and labour market with poor access to tertiary education • Emotional Well-being? - Significantly improved when conflict ended. But, inadequate resources to address postconflict trauma and minority rights in practice, while freedom of speech and personal security questionable Good progress on economy and material well-being, but need to balance with intellectual and emotional well-being 10

Current Reality - Structure of Economy 1970 2010 Sector 28 12 Agriculture 24 29 Industry Services 48 59 Total 100 • Agriculture share declining, Services increasing, as economy develops • Minimal change in Industry share • Efficient services needed to fuel growth in other sectors • More and better services required as household needs expand with higher incomes

Our Country Today – The Reality Development model targets material well-being • Provides for infrastructure to improve regional economic access • Focuses on “Hubs” in Services sector to grow • Advocates private participation in development • Encourages foreign employment to raise foreign earnings and reduce unemployment • Overlooks environmental implications of chosen path • Pushes chosen path by discouraging alternate views 12

Sri Lanka’s Economy Past Reality vs. Future Vanity or Sanity? Indicator Per Capita GDP-$ 1983 - 2008 2009 2010 2011 2014 Target 335 – 2, 014 2, 057 2, 399 2, 794 4, 190 Investment: GDP 22 – 29 24. 4 27. 8 29. 5 34. 0 National Savings: GDP 14 – 24 23. 7 24. 7 25. 8 32. 3 0. 9 -17. 1 5. 9 7. 3 6. 0 5. 2 3. 5 8. 0 8. 5 9. 5 6. 1 -12. 7 9. 9 7. 2 4. 8 68 -109 86 82 80 67 11. 6 - 28. 6 19. 0 15. 2 13. 5 14. 3 Inflation GDP Growth Budget Deficit Debt : GDP External Debt Servicing Targets based on post-conflict optimism that investment-led, infrastructure-led, consumption-led development will generate revenue to meet government’s expenditure and debt-servicing

Current Focus – Vanity or Sanity? 1. National Policy Targets and Performance • Can we expect private investment with expanding role o f state and armed forces in economy? • Can we achieve investment and growth targets on low credibility with investors? • Can we boast of high external reserves built on rising market borrowings? • Can we reduce budget deficit and maintain debt, debtservicing targets with rising state employment and current borrowing trends? • Can CBSL intervene to maintain current interest and exchange rates and also sustain growth targets? 14

Current Focus - Vanity or Sanity? Following on positive developments, – Are we on a balanced path to our medium-term development goals? – Can sanity overcome vanity to rectify perceived policy inconsistencies? – Will Sanity overcome Vanity to gain credibility with investors and other stakeholders? – Will Vanity prevent the Sanity of realistic performance evaluation and public pronouncements? – Does Sri Lanka balance attitude, nationally and internationally?

Current Trends – Vanity or Sanity? 2. Emphasis on foreign employment • End to civil conflict, but no end to out-migration, brain and skills drain • Retirees returning, but middle management and young skilled workers leaving • Government policy encourages migration • Inadequate options, incomes and challenges to retain trained and untrained Sri Lankans • Declining HR capacity to deliver on Sri Lanka’s postconflict development targets 16

Current Trends – Vanity or Sanity? Do state and citizens balance options for and against living in Sri Lanka today? Will Vanity prevent the Sanity of recognising the inconsistency between meeting Sri Lanka’s HR needs and pushing foreign employment? 17

Current Focus – Vanity or Sanity? 3. Show-casing Sri Lanka as “Emerging Wonder of Asia” • Can 20 million people and environment cope with 2. 5 million tourists? Why target numbers – not $ earnings? • At current migration, labour force entry rates, are 500, 000 jobs in tourism by 2016 realistic; also, targets for BPO, IT sectors, as envisaged? • 2 nd international airport, Hambantota seaport, International sports venues - True benefits vs. colossal costs to Sri Lanka? • “Hype” vs. performance (e. g. Gas) – “Walk the talk”? 18

Current Focus – Vanity or Sanity? Is there balance in our show-casing of Sri Lanka’s potential as the “Emerging Wonder of Asia”? Will Vanity prevent the Sanity of clarity, consistency and credibility, when show-casing our future? 19

Current Trends – Vanity or Sanity? 4. Emphasis on money and material well-being • What money can buy drives lifestyles • Monetary gains, not professional standards, drive most businesses • Non-communicable diseases linked to stress rising • Globalisation and unrestrained marketing, not facts, influence food habits; also lifestyles • Energy, water and waste disposal under strain with “development” • Rising noise, water, air pollution, traffic congestion with “development” • Do those who make “big bucks” enjoy optimal well-being? 20

Current Trends – Vanity or Sanity? Is there balance in our use (and abuse) of resources for “development”? Will Vanity prevent the Sanity of valuing our nonmaterial advantages and conserving our resources? Despite improvements in material well-being, is there balance towards achieving total human well-being? 21

How do we regain our Balance? • Recognise Reality • Avoid Vanity • Maintain Sanity …… to ensure that Sri Lanka’s development will be sustainable and uplift human well-being 22

Thank You 23