IPS Talking Economics Digest / Jul - Dec 2014

July to December 2014TALKING ECONOMICS DIGEST & Development Migration Migrant Voices: Returning Home Finally Some Good News about the Ozone Layer? Quality of Teachers Does Matter in Sri Lanka What Sri Lanka Should Know about China’s New Economic Dynamism contents Editorial Migration & 04 Poverty and MDGs in Sri Lanka: What More Needs to be Done? 44 Quality of Teachers Does Matter in Sri Lanka: Lessons from the Best Education Systems 06 Better Business Development Services Can Help Sri Lanka’s Women Entrepreneurs Prosper 46 Open Online Courses Can Help More Sri Lankans Access Higher Education Development 47 Asia’s Rise: Undoubted but not Unimpeded Welcome to 9th edition of the Talking Economics Digest! 50 Laying the BRICS for a New Global Financial Architecture? 52 What Sri Lanka Should Know about China’s New Economic Dynamism 08 Key Determinants of Sri Lanka’s Fertilizer Subsidy: Some Research Findings for Policy Makers 10 ‘Standards’ Can Help Sri Lankan SMEs Access New Markets 11 Sri Lanka’s Balancing Act of Promoting International Migration while Protecting the Well-being of Migrants and their Families 54 Aid and Trade Between Sri Lanka and China – A Snapshot of IPS Insights 14 Where Do Migrant Workers Fit in Sri Lanka’s Population? 56 Looking at Sri Lanka’s Existing Trade Agreements and Lessons for the FTA with China 16 Are Restrictions Imposed on Female Migrant Workers Discriminatory or Improving Family Well-being? 58 China’s Approach to FTAs with Other Countries: What Can Sri Lanka Expect? 60 63 64 65 IPS News 18 Accessing Labour Markets Abroad: 6 Key Challenges for Sri Lanka 20 Does Foreign Employment through an Agency Minimize Vulnerability of Sri Lankan Female Domestic Workers? 22 Sri Lanka Can Gain More from Migration by Helping Returnees Reintegrate Better 24 26 28 29 Migrant Voices 30 Finally Some Good News about the Ozone Layer? 32 5 Things to Know About Building Resilience from Droughts in Sri Lanka 34 Tackling Environmental Challenges in the Indian Ocean Will Require Closer Collaboration in the Region 36 Getting Communities Involved in Sri Lanka’s Nature Tourism 38 The Dilemma of Dengue and the Health Economics of It 40 A Closer Look at Youth Mental Health in Sri Lanka and Some Consequences 42 Sri Lanka’s Ageing Population and its Health Policy Challenges Latest IPS Publications Talking Economics Crossword Puzzle Fast Facts Migration – Expert Views MED_MIG Search Engine Inside IPS Research. Inform. Impact The institute of policy studies of sri lanka (IPS) is an autonomous institution that aims to promote policy-oriented economic research and to strengthen the capacity for medium-term policy analysis in sri lanaka. Its mission is to contribute to the socio-economic development of the country through informed, independent and high quality research that seeks to influence the policy process. With over two decades of substantial research expertise, IPS has emerged as a regional centre of excellence and the most influential think tank in sri lanka. Saman Kelegama Deputy Director Dushni Weerakoon Talking Economics Team Janaka Wijayasiri – Editor I n this Edition, the Digest focuses on Migration and Development, one of cross cutting and emerging thematic research areas at the Institute. Anushka Wijesinha – Former Editor Bilesha Weeraratne Shanika Samarakoon Dishnika Perera Over the past decade, the number of people leaving for foreign employment has surged and there are over 1.5 million Sri Lankans working overseas, according to the Sri Lanka Bureau of Foreign Employment. Nearly 250,000 Sri Lankans annually leave for employment abroad and their remittances account for the largest source of foreign exchange to the country, roughly 9.5 per cent of Gross Domestic Product (GDP). Remittances also have been a vital source of income for migrant households, enabling them to improve the socio-economic situation of their families and their own position. However, migration has social and physiological costs in terms of family breakdown, physical abuse of workers at destinations (p.20) etc. Thus, Sri Lanka is struggling to strike a balance between promoting migration while protecting migrant workers and their families (p.14). Towards addressing this challenge, the government is interested in promoting more skilled migration and accessing non-traditional markets (p.18). It is also paying attention to facilitating the return and reintegration of migrants with opportunities for skills transfer, productive employment and social integration (p.22). Charmaine Wijesinghe Given that migration will continue to play a key role in the development of Sri Lanka, the IPS has been strengthening its research capacity, policy engagement and outreach activities on migration in 2014 through training, research, recruitment (p.29), setting up of Labour Migration Resource Centre (p.28) and hosting an international conference (p.60). This Digest also features insightful interviews with international migration experts from India, Pakistan, the Philippines and the UK (p.26), and two compelling stories of migrants who have returned home and the challenges they face in reintegrating (p.24). Suwendrani Jayaratne As usual the Digest features articles by IPS researchers who are working on a diverse range of policy issues including poverty, agriculture, environment, health and education, international trade, etc. Some contributions to the Digest are based on recent publications (p.63), which are now available for purchase. I would like to acknowledge the contribution of Anushka Wijesinhe to the ‘Talking Economics’ Blog and Digest. His initiative, effort, and hard work as the Editor have enabled us to share our insights with a wider audience beyond policy makers of the country. I hope that you find the Digest interesting and look forward to your continuous support and feedback. Janaka Wijayasiri, Research Fellow [email protected] May 2015 Savani Jayasooriya Contributing Authors Athula Senaratne Anushka Wijesinha Bilesha Weeraratne Chatura Rodrigo Dharshani Premaratne Janaka Wijayasiri Kanchana Wickremasinghe Keshini Sritharan Neluka Gunasekera Nipuni Perera Nisal Herath Nisha Arunatilake Priyanka Jayawardena Raveen Ekanayake Sunimalee Madurawala Yolanthika Ellepola talking economics Executive Director Institute of Policy Studies of Sri Lanka 100/20, Independence Avenue Colombo 07, Sri Lanka Tel: +94 11 2143100, +94 11 2665068 URL: http://www.ips.lk Blog: www.ips.lk/talkingeconomics Twitter: @TalkEconomicsSL Design/Layout Malaka Udara Printing Karunaratne and Sons (Pvt) Ltd. 67, UDA Industrial Estate, Homagama, Sri Lanka. Copyright and Disclaimer All material published in the Talking Economics Digest are the copyright of the Institute of Policy Studies of Sri Lanka (IPS), unless otherwise specified. It cannot be quoted without due acknowledgement to the IPS and the author. It cannot be reproduced in whole or in part, without the written permission of the IPS. The content, comments and posts of the Talking Economics Digest and the IPS blog represent the views of individual authors and do not necessarily represent the views of the IPS. 3 Poverty and MDGs in Sri Lanka: What More Needs to be Done? By Nisal Herath important to look at the Millennium Development Goals (MDGs). In Sri Lanka, many of the MDGs are within sight. The national poverty head count ratio – the percentage of population who live below the national poverty line – has decreased from 8.9% in 2009/2010 to 6.7% in 2012/2013 in Sri Lanka. Compared to the same in neighbouring South Asian Countries, Sri Lanka’s progress in poverty reduction is remarkable. However, it is time to look beyond the MDGs. Sri Lanka’s success in achieving the MDGs is partly due to the social protection policies that the country has implemented since Independence. Also programmes such as free universal health care and education that is provide by the government has contributed towards the goals of universal primary education, promoting gender equality and empowering women, reducing child mortality, improving maternal health and combating HIV, malaria and other diseases. However, sustaining these achievements has become a challenge. Image courtesy Anushka Wijesinha Special article marking International Day of Eradicating Poverty P overty – a condition where people’s basic needs for wellbeing are not being met – is a multidimensional issue that affects most, if not all, nations. Despite huge success in reducing poverty in many parts of the world, poverty remains a major development challenge and a multidimensional issue that affects many nations, In fact, in South Asia alone, 31% of the population is still living in poverty. Poverty is one dimension of development and is interlinked with many other dimensions. As such, it is 4 Continued poverty reduction depends on maintaining and updating free healthcare and education in Sri Lanka. The challenge is that on one hand, there is a need to maintain the growing demands for free health and education in a market-oriented economy while on the other hand, expectations of these services are evolving. Literacy should not only be about the ability to read and write any more, it should also include a component of computer literacy which is what matters now. Similarly, improvement of health care standards is required to match that of modern Sri Lankan Society. The public sectors alone cannot expand services while maintaining required quality is evident. It is important to involve the private sector in the provision of healthcare. At the same time, equitable services that have reach to ensure inclusiveness is needed. Availability of healthcare services is not enough, ensuring inclusive accessibility of health services for everyone is important. Sri Lanka has been a success story in poverty reduction, but the challenges are not over yet. Although the number of people living below the national poverty line has declined, extreme hunger is still an issue. The prevalence of undernourishment in Sri Lanka was approximately 24% in 2012[i]. Poverty and hunger are interlinked, but it appears that decreased poverty does not necessarily ensure decreased hunger. Why does such a high level of undernourishment exist in a country where income poverty has been reduced significantly? Is it a food affordability issues or misallocation of household incomes? As such it is important to understand food insecurity. Food security can be enhanced by reduction of food price volatility. Food price increases have reduced calorie intake by 8.5% and protein intake by 6% for poor households[ii]. Also, increased use of health care and improved sanitation and water facilities — as of 2010, 91% of the population had access to sanitation facilities — would help towards decreasing undernourishment and help solve this specific poverty issue in Sri Lanka [iii]. There are other issues that still need to be addressed, however. Foremost among these issues is environmental sustainability. Poverty issues are interlinked with environmental issues as sustainability cannot be achieved without ensuring that natural resources management underpins the development process. In Sri Lanka, the forest cover has decreased from 36.4% in 1990 to 28.8% in 2010[iv]. The forests need to sustainably managed as a part of poverty reduction effort because poor are the first to adversely affected by environmental degradation. As people are vulnerable to external shocks, natural disaster can push people who were out of poverty back into poverty. Climate related natural disasters such as droughts and floods affect agriculture and fisheries sectors[v]. Livelihoods that depend on these sectors face a major risk factor that could bring back the nonpoor people to poverty. Thus, a sound climate adaptation policy should be an integral part of poverty reduction strategy of any country. In the case of Sri Lanka, the Climate Change Secretariat has been established to address the issues of adaptations to climate change. Poverty is linked to many other aspects of development. Although the MDGs look at various aspects of development, it is not exhaustive. The MDGs have not looked at inclusive growth and inequality. It is also important to identify a new set of goals after 2015 as the MDGs are due to expire. There is dialogue underway to develop post-2015 agenda with new goals. Significant progress has been made regarding poverty reduction, but continuing work needs to be done to ensure further development. In the case of Sri Lanka, the issues are not necessarily with facilities with regards to MDGs, but the accessibility and inclusiveness of facilities. As such, it is also important to look beyond the MDGs and incorporate missing dimensions in the poverty reduction agenda. References: [i] Asia Pacific Aspirations: Perspectives for a Post-2015Development Agenda Asia-Pacific Regional MDGs Report 2012/13 http://www.adb.org/sites/ default/files/pub/2013/asia-pacificregional-mdgs-report.pdf [ii] Food price spikes, increasing volatility and global economic shocks: coping with challenges to food security in Asia http://www.fao.org/ docrep/016/i3031e/i3031e00.pdf [iii] FAO Country Programming Framework 2013 – 2017 Sri Lanka. http://www.fao.org/fileadmin/user_ upload/faoweb/sri_lanka/docs/CPF_ SriLanka.pdf [iv] Asia Pacific Aspirations: Perspectives for a Post2015Development Agenda AsiaPacific Regional MDGs Report 2012/13 http://www.adb.org/sites/default/ files/pub/2013/asia-pacific-regionalmdgs-report.pdf [v]Climate Change Vulnerability Data Book http://www.climatechange. lk/adaptation/Files/Final_Climate_ Change_Vulnerability_Databook.pdf 5 potential of women in the development process of Sri Lanka. Better Business Development Services Can Help Sri Lanka’s Women Entrepreneurs Prosper By Sunimalee Madurawala Despite these obvious gains, gender biases against women are common. As the National Policy on Human Resource and Employment observes “…there is a gender bias in small-and-medium enterprises (SME) employment. Workers employed in SMEs are predominantly men. Good equal employment practices are needed to correct the above bias”. According to the World Bank Enterprise Surveys for Sri Lanka, regardless of the sizes of the business, fewer women are employed in top managerial positions and less women participate in ownership compared with men. Business Development Services Image courtesy Rose Charities Sri Lanka W omen should not restrict themselves to household chores. We have plenty of time to do much more, and this is a time when women have to contribute more to their family’s income”, says Kumari, a 53 year old entrepreneur, wife and mother of two, living in Matale. Kumari once worked as a typist at the Ceylo n Cement Corporation, but, quit her job due to family commitments. Kumari’s story, which is captured in a new study by the IPS and Oxfam on female entrepreneurship in Sri Lanka, is just one of many across the country. Although Sri Lanka has achieved most of the MDG’s related human development goals, the active female participation in the economy is relatively low. Females account for as much as 70% of the population that is classified as ‘economically inactive’. Even of those who are ‘economically active’, the number of women in the workforce (33%) remains far below that of men (67%). Kumari, however, wanted to buck this trend. She felt that she could do more than being ‘a stay at home mother’. She started manufacturing detergent products at a very small scale, and despite facing many difficulties and resistance, today she proclaims her success as an entrepreneur with great pride. Inoka, a successful traditional food producer from Kurunegala, faced similar struggles, but like Kumari, she took up the entrepreneurship challenge. “Being 6 a woman I have several roles to play. I have to be a good mother to my kids, a wife to my husband, a daughter-in-law to my in-laws, and now especially, a good business woman to the society. I’m happy with where I am today. I gained all this recognition because I started this business and I am carrying it out successfully”. RESEARCH HAS SHOWN THAT WOMEN ARE MORE LIKELY THAN MEN TO INVEST A LARGE PROPORTION OF THEIR HOUSEHOLD INCOME IN EDUCATION, NUTRITION AND WELL-BEING OF THEIR CHILDREN Like Kumari and Inoka, there are many micro-level women entrepreneurs in Sri Lanka who yearn for a successful career, and help their families, and the country, prosper. Women entrepreneurship can contribute to a country’s development process in number of ways. At an individual level, it creates employment opportunities for women. Women seek entrepreneurship for many reasons. While some women start a business based on an idea or innovation, or due to an unsatisfactory experience as an employee, others are compelled to start their own business due to ‘forced unemployment’ – either from a layoff or due to lack of marketable skills. Regardless of the reason for women to start up a new business, ‘entrepreneurship’ not only empowers women economically, but also builds up their dignity and earns social recognition for them as well. The impact of women’s economic empowerment goes beyond the individual level. Research has shown that women are more likely than men to invest a large proportion of their household income in education, nutrition and well-being of their children. It has been estimated that in emerging markets, women reinvest 90% of their earnings in their families and communities. With the accumulated assets and enhanced economic security, women improve industrial capacity and spur economic growth by creating new jobs, as well as by expanding the pool of human resources and talents available in a country. It’s also acknowledged that, female-operated Small and Medium Enterprises (SMEs) could well cater to the demands of the rising middle class – important to Sri Lanka now given the country’s move towards an upper middle-income economy. Given the low female labour force participation in the country, fostering women entrepreneurs can be an effective way of capturing the A good way of helping women entrepreneurs start up and grow is through Business Development Services (BDS). According to a recent IPS-Oxfam study, there is enough evidence to argue that BDS providers have to play a much more dynamic role in assisting women entrepreneurs to grow from micro level to the SME level. BDS are non-financial services that provide a variety of services including training, counselling, advice, information provision, facilitating access to markets, etc. These services assist SMEs overcome various internal and external obstacles to their businesses. Financial services alone will not result in business growth in the SME sector. In fact, in some cases, women’s businesses grow slower than that of men even within the same financial support programmes, indicating that women entrepreneurs in particular require more non-financial support. The role of effective and well planned BDS becomes increasingly important in such instances. There are a number of BDS available in the market catering to the needs of SME strategic level development, such as business development training, technology transfer, creating markets and market linkages, sharing of business information, facilitating access to credit for the business, etc. Generally, three major actors in the BDS sector can be identified – BDS providers, BDS facilitators and aid donors supporting BDS. In Sri Lanka, BDS are provided through a range of programmes initiated by both government and non-government institutions. These include training by the Ministry of Traditional Industries and Small Enterprise Development, training and technology services by Industrial Development Board (IDB), Small and Medium Enterprise Developers (SMED) FINANCIAL SERVICES ALONE WILL NOT RESULT IN BUSINESS GROWTH IN THE SME SECTOR project, business incubator services by United Nations Industrial Development Organization (UNIDO), services offered by the Sri Lanka Business Development Centre, and assistance with marketing by Laksala and the Sri Lanka Handicraft Board. Recommendations for Reaping the Benefits Both the public sector and the private sector will have to make a significant effort to increase awareness – who the providers are, what services they provide, where the providers are located at, etc., on BDS among the small and medium entrepreneurs. BDS providers can learn from financial institutions that often visit villages and meet with entrepreneurs personally to sell loan schemes to them. A similar technique can be adopted by BDS providers, where they personally visit entrepreneurs and inform them about the services available. Government institutions and Chambers of Commerce also need to fulfill their role as BDS facilitators, especially in disseminating information related to available BDS. A KEY OBSERVATION IN THE STUDY IS THAT BDS PROVIDERS NEED TO EXPAND THEIR SERVICES AND TO LOOK FOR MORE INNOVATIVE APPROACHES IN PROVIDING THEIR SERVICES There is an unmet demand for BDS such as marketing services, direct marketing methodologies, new technologies, information on banking services, efficient machineries and market opportunities, taxation, and market information. These are areas for BDS providers and facilitators to focus on, in order to improve existing enterprises and to make them more profitable. However, to do so, there should be better information channels regarding these services and how they can be accessed, all of which should be readily available to the entrepreneur. Aside from improving information on BDS, the issue of appropriateness of available BDS also needs to be addressed. The study revealed that, rather than offering generic BDS that tend to be available everywhere, BDS providers should offer more focused services catering to the needs of entrepreneurs. For instance, they can use mobile phones as effective mediums of communicating with women entrepreneurs in remote areas, as opposed to traditional methods like posters and banners. An important aspect for consideration is to encourage ‘micro credit-plus’ BDS. In this, the credit provider organizes and/or provides BDS suitable for entrepreneurs as a way to ensure credit recovery. The entrepreneur herself benefits tremendously through this system as it focuses on individual needs. Such a method would include technological support, input linkages, business counselling, market links, and individual mentoring, that will build up a successful enterprise. A key observation in the study is that BDS providers need to expand their services and to look for more innovative approaches in providing their services. Overall, the study asserted that fostering ‘female entrepreneurship’ and encouraging women to act as ‘employers’ is an important way of unlocking women’s potential in contributing to Sri Lanka’s economy. In the course of the study, the research team met many women entrepreneurs who grew their small enterprises in difficult circumstances. As Karunawathi, an entrepreneur from Anuradhapura asserted that: “When it comes to business, it does not matter whether you are a man or a woman; but all you need is talent, determination and dedication”. In the interviews with them, entrepreneurs like Kumari and Inoka acknowledged that the BDS help they received from various institutions benefitted them greatly. A good system of support for entrepreneurs like them, which eases the obstacles they face, and helps build on their determination and inherent potential, will surely help women play a stronger role in the SME sector and in the Sri Lankan economy as a whole. (This article is based on a recently publication ‘Female Entrepreneurship and the Role of Business Development Services in Promoting Small and Medium Women Entrepreneurship in Sri Lanka’ by IPS and Oxfam GB Sri Lanka. The IPS Research Team included: Kaushalya Attygalle, Dilani Hirimuthugodage, Sunimalee Madurawala, Athula Senaratne, Anushka Wijesinha, and Chopadithya Edirisinghe). 7 Key Determinants of Sri Lanka’s Fertilizer Subsidy: Some Research Findings for Policy Makers By Chatura Rodrigo A s in many developing countries, fertilizer subsidies represent a major component of agricultural policy in Sri Lanka. This is particularly true of the paddy sector. With rice being the staple food in Sri Lanka, successive governments have provided significant fertilizer subsidies for paddy with the primary aim of increasing the paddy production[1]. Since 2005, the fertilizer subsidy has accounted for 2-2.5% of total government expenditure[ii] and the subsidy is given for all three major fertilizers (Urea, Murate of Potash – MoP, and Triple Super Phosphate – TSP). Over the years, the subsidy has significantly contributed to increasing paddy production, stabilizing the milled rice price[iii], and helped the country attain self-sufficiency in rice[iv]. However, there are questions on the effectiveness and sustainability of the programme because of concerns around the overuse of subsidized fertilizer and its use for crops other than paddy. The excessive use of fertilizer has also raised concerns over soil and water pollution, food safety and the burden on the national budget[v] and[vi]. In response to these concerns, especially the burden on the budget, the government of Sri Lanka reduced the fertilizer subsidy by 25% in the 2013 Budget. It further aimed to encourage farmers to adopt organic fertilizer. However, paddy farmers complained to the government that they are not in a position to shift to organic fertilizer 8 within a short time and announced a possible price hike for rice. After the reduction in the fertilizer subsidy and the consequent price hike, paddy production declined as farmers did not cultivate the full extent[vii]. In response, the government revised their decision in 2014 by reducing the subsidy by only 10% instead of the original 25%[viii]. This shows the inconsistency in recent agricultural policies, and calls for better evidencebased policymaking. Paddy – A Mainstay Paddy cultivation is a major source of livelihood in Sri Lanka, providing more than 1.8 million people with employment opportunities. So, in terms of food security and rural employment, the government is under constant pressure to continue with the subsidy scheme. Furthermore, the subsidy has become a politically sensitive issue, since paddy farmers are a high share of the voter base[ix] and[x]. This is very common in most developing countries. However, a sufficient and effective decision on the reduction of the subsidy is not possible without a clear understanding of the factors that determine the demand for fertilizer[xi]. A New Study There are several studies in Sri Lanka that have examined the factors that determine the demand for fertilizer in paddy cultivation. However, these have failed to consider recent data that capture the fertilizer subsidy implemented since 2005; they only take into account a handful of variables that determine the demand for fertilizer. Moreover, data on fertilizer use in Sri Lanka needs to be studies considering the two main paddy-harvesting seasons. In order to address these limitations, a new study by IPS uses panel data regressions in fixed and random effects scenarios to investigate the factors that affect fertilizer demand in the major paddy producing areas of Sri Lanka between 1990 and 2011. This study uses fertilizer consumption, prices, and cost of cultivation data published by the Department of Agriculture. Significant Findings Estimation results suggest that the price of fertilizer, price of seed paddy, price of labour, quantity of paddy output, cost of materials, cost of pest management, provision of fertilizer subsidy and the whether the paddy cultivation is commercial or not, all have significant implications on the demand for fertilizer. However, the use of machinery – which represents the degree of mechanization in paddy farming – does not have a significant impact of the demand for fertilizer. The demand for fertilizer decreased as the price of fertilizer and the price of seed paddy increases. However, the increases are relatively inelastic. Both fertilizer and seed paddy do not have close substitutes. Even though organic fertilizer can be used in place of chemical fertilizer, it is not widely practiced in Sri Lanka and commercial paddy farming is predominantly based on chemical fertilizers. Therefore, simply reducing the fertilizer subsidy would not encourage farmers to adopt organic fertilizer. Adoption of organic fertilizer in the short run may hinder production unless farmers are compensated for possible yield reductions. The demand for fertilizer increases as the price of labour increases which could possibly be explained by the labour scarcity. An increase in the cost of materials (mainly the cost for weed management) pushes farmers to use more fertilizer while an increase in the cost of pest management reduced the demand for fertilizer. On average, farmers use more fertilizer when the fertilizer subsidy is provided. But the increase in demand, under the subsidy, is significantly smaller. Finally, the study finds that more fertilizer is demanded by commercial paddy cultivating areas. Policy Recommendations This study proposes several major policy recommendations based on three major outcomes: self-sufficiency in the production of rice; prevention of the overuse of chemical fertilizer; and the gradual removal of the fertilizer subsidy. The relatively inelastic relationship between the price of and demand for fertilizer, the limited availability of organic fertilizer, and the possible yield drops with organic fertilizer use, all create issues in adoption of organic fertilizer among Sri Lankan paddy farmers. Therefore, the objective of promoting organic fertilizer requires farmer support programs to ensure supply of fertilizer as well as possible production cuts. The price of seed paddy has a significant impact in sustaining paddy production in Sri Lanka. While increasing the seed price would reduce the farmers’ incentive to over use fertilizer, this might actually limit farmers’ full production potential. Therefore measures are needed to stabilize prices of seed paddy. This study recommends that in order to reduce the overuse of the fertilizer, the price of labour needs to be stabilized and there should be measures to reduce the cost of weedicides. Labour is becoming scarcer in paddy farming. There is an out-migration of labour and the farm workforce is ageing. Therefore, farmers who depend on hired labour would want to make the best out of what they spend and thus apply more fertilizer when the labour is employed. This could potentially lead to an overuse of fertilizer. Mechanization has the potential to reduce this over use while simultaneously tackling the labour constraint. Mechanization was significant in reducing the demand for fertilizer until 2005, however, since then the price of labour has become a more significant factor in determining fertilizer demand. Way Forward Undoubtedly, the fertilizer subsidy has greatly influenced the increase in paddy production, and contributed to achieving rice self-sufficiency in Sri Lanka[xii]. However this study recommends the gradual removal of the fertilizer subsidy in the long-run, in a phased manner. The short-run reduction of the fertilizer subsidy can be done for non-commercial paddy producing areas since their fertilizer usage is low. Organic paddy farming is ideal for these areas. While the fertilizer subsidy is more important to commercial paddy producing areas, the amount of subsidy given to them can be reduced in several stages, by gradually introducing organic fertilizer. Yet, for that to happen, farmer awareness and willingness needs to be heightened, while the necessary supply chain is developed as well. The removal of the fertilizer subsidy in the long run will give room for establishing local fertilizer markets, reduce negative environmental externalities, and reduce the burden on public finances. Additionally, it will encourage the growth of cultivation and consumption of organic foods. References: [1] Rajapaksa, R. D. D. P., & Karunagoda, K. S. (2009). Factor demand for paddy cultivation in Sri Lanka with special reference to fertilizer subsidy program. Sri Lanka Journal of Agrarian Services, 13 (2), 25-38 [iii] Semasinghe., W., M. 2012. Economics and Social Cost of Fertilizer Subsidy on Paddy Framing in Sri Lanka. International Journal of Science and Research, 3(10), 1261-1267 [iv] Gamawelagedara, W. C., Wickramasinghe, Y. M. & Dissanayake, C. A. K. (2011). Income of rural farmers in Anuradhapura District. The Journal of Agricultural Science, 6(2), 92-99 [v] Weerahewa, J., Kodithuwakku S. S., & Ariyawardana, A. (2010). The fertilizer subsidy programme in Sri Lanka, Case Study No 7-11 of the Program: Food policy for developing countries, The role of government in the global food systems. Cornell University, Ithaca, NY. [vi] Ministry of Finance and Planning. (2014). Annual Report 2014: Economic perspectives of Sri Lanka. Government of Sri Lanka. Colombo. [vii] Jayakody., R. 2014. Farmers to Hike Prices Sans Fertilizer Subsidy. Published Article on the Sunday Leader News Paper, Visited Online, 10th September 2014. [viii] Ministry of Finance and Planning. (2014). Annual Report 2014: Economic perspectives of Sri Lanka. Government of Sri Lanka. Colombo. [ix] Thenuwara, H. N. (2003). A Policy Rule for the liberalization of agriculture in Sri Lanka. Staff Studies, 33(1), 1-13. [x] Weerahewa, J., Kodithuwakku S. S., & Ariyawardana, A. (2010). The fertilizer subsidy programme in Sri Lanka, Case Study No 7-11 of the Program: Food policy for developing countries, The role of government in the global food systems. Cornell University, Ithaca, NY. [xi] Jayne, T. S., & Rashid, S. (2013). Input subsidy programs in Sub-Saharan Africa: A synthesis of recent evidence. Agricultural Economics, 44, 547-562 [xii] Gamawelagedara, W. C., Wickramasinghe, Y. M. & Dissanayake, C. A. K. (2011). Income of rural farmers in Anuradhapura District. The Journal of Agricultural Science, 6(2), 92-99 [ii] Ministry of Finance and Planning. (2014). Annual Report 2014: Economic perspectives of Sri Lanka. Government of Sri Lanka. Colombo. 9 What are Standards? In simple terms, standards are commonly agreed reference documents that help to bring order to the world. Most people know what shoe size they wear, because shoe sizes are ‘standardised’. Likewise when purchasing an electrical appliance such as a television it could be reasonably assumed that it would be compatible with the electricity system at home, as the plugs that are fitted to electrical products and the sockets that are installed in our homes have both been designed to meet commonly agreed and widely accepted ‘standards’. Standards can be broadly categorized into product, process and management system standards. They work to support industry competitiveness by assisting with the codification and dissemination of new knowledge and innovations, helping to improve products and services, ensuring interoperability and enabling trade. They also help businesses to demonstrate to regulators and customers that their products and services meet defined safety, quality and environmental standards. ‘Standards’ Can Help Sri Lankan SMEs Access New Markets By Raveen Ekanayake S tandards are a critical element of today’s society; they provide a common and repeatable basis for doing things and help bring order to the world we live in.They also play a vital role in the economy, by facilitating business interaction and access to markets. The products we consume today are no longer made in one country; rather they are made in the world. Before ending up with the end consumer, they pass through many countries where people or parts add value to the final product.Adhering to globally relevant standards make it easier for many companies – particularly small and medium enterprises (SMEs) – to get their products certified and on the shelves in countries around the world, allow them to take part in global value chains, benefit from technology transfer, and compete on a more equal footing. Against this backdrop, this article takes a cursory look at how standards stimulate trade by helping overcome artificial trade barriers, and assist SMEs become more competitive. 10 In this special article marking World Standards Day 2014, Raveen Ekanayake calls for government institutions and regional chambers to take a lead role in creating more awareness on standards among SMEs and help them in implementation. How SMEs Benefit from Standards It is often the case that SMEs view standards as a burden, made by large enterprises, for large enterprises and believe that they have no bearing upon them. In reality however, adhering to standards, provides a number of clear, tangible benefits for SMEs which far exceeds the costs of implementing them. By meeting standards, SMEs can clearly demonstrate their commitment towards quality, leading to enhanced customer satisfaction and repeat business. Standards provide reassurance and inspire trust; consumers view businesses that apply standards more favourably than those that don’t, and thereby help to build the company’s image. In the arena of international trade, the use of international standards aids access and entry to international markets, and assists with the marketing and acceptance of a company’s products and services in these markets. This is especially vital when seeking access to developed country markets. Using standards as part of an export strategy can create new business opportunities and increasing sales, while reducing trading costs. More importantly, standards help to open-up markets by allowing customers to compare offers from different suppliers, thereby making it easier for smaller and younger enterprises to compete with larger and much more established enterprises, creating a level playing field with bigger enterprises internationally and to enter new or established markets. Barriers to Realizing Benefits of Standards Whilst the benefits of adhering to standards are clear-cut and outweigh costs, especially in the long run, it is most often the case that SMEs are unaware of such benefits. The lack of awareness of standards (either generally, or of specific relevance to their business) prevents SMEs from realizing the full benefits that standards can bring to them. Once SMEs are made aware of existing standards and their usefulness for business expansion and growth they may still face difficulty in identifying the ones most relevant to them. Tracing relevant standards require knowledge of where to look, how to look, and what to look for[2]. In addition, SMEs require the skills to interpret the CREATING AWARENESS AMONG SMEs ON THE COSTS AND BENEFITS OF ADHERING TO STANDARDS IS FUNDAMENTAL information found and to determine whether the standards identified are relevant to them, complete, and the latest versions available. Once a relevant standard is traced, SMEs face the issue of understanding standards. Standards are written by experts – using a lot of technical jargon – and SMEs find these difficult to comprehend. To make matters worse, most international standards are either in English, French or German, thus making it difficult for a non-native English speaker to comprehend. Owing to their complex nature, SMEs also find it difficult to implement standards due to their lack of knowledge, skills and resources to do so. Helping SMEs Realize the Benefits of Standards Governments must play a critical supporting role to help SMEs realize the benefits from standards. At the outset, creating awareness amongst SMEs on the costs and benefits of adhering to standards is fundamental. The provision of ongoing training and support is critical to introduce SMEs to standards and to engage these businesses in enhancing their uptake. Another pertinent area of intervention is the provision of information on standards, in an accessible and understandable form, about the content or relevance of standards. Assistance should be provided on how to interpret standards to ensure effective implementation. Acquiring standards entails significant upfront capital outlay, and financial support in the form of subsidized credit to access standards should be considered. Way Forward for Sri Lanka Sri Lanka has a gamut of national and regional-level government agencies, development banks and business chambers, with wide geographical coverage geared to service SMEs. However, very little effort on their part has been made in assisting SMEs embrace standards. It is therefore vital that national-level SME institutions such as the Industrial Development Board and the National Enterprise Development Authority, in collaboration with business chambers, take the lead in creating awareness on the benefits of standards and creating an institutional mechanism through which SMEs could be provided continuous information, training and advice on the importance of standards and how to implement them. 11 Sri Lanka’s Balancing Act of Promoting International Migration while Protecting the Image courtesy www.lankastandard.com Well-being of Migrants and their Families By Bilesha Weeraratne and Janaka Wijayasiri E very year about 250,000 Sri Lankans migrate for foreign employment. The departure of migrant workers helps the domestic economy by easing the pressure for jobs while pumping in valuable foreign exchange. As such, labour migration is a growing priority amongst policy makers in the country. However, they are often challenged by the trade-off between promoting migration and protecting the welfare of migrants and their families. Trends in Migration International migration is a cross cutting phenomenon in Sri Lanka. The stock of migrant workers of Sri Lankan origin stood at around 1.9 million in 2010 [1] and they remitted US$ 6.4 billion in 2013 (over 9.5% 12 of GDP [2]). International labour migration became popular in Sri Lanka in the late 1970’s and since then the predominant destinations have been the Middle Eastern countries and most migrants have been unskilled. Over the years, Sri Lankan migrants have gained access to other markets and other skills levels, but unskilled labour into the Middle East continues to account for the bulk of migrants (94% in 2013). Unskilled labour and housemaids together account for nearly 60% of total departures[3]. The Three Phases Migration involves three consecutive phases – pre-migration, migration and post-migration. Characteristics and decisions such as destination, occupation and skills level, which are relevant in the ‘pre-migration stage’, affect outcomes in the subsequent two phases. Specifically, the departure of females leaving their families behind to pursue overseas employment is associated with significant social costs during the migration and post-migration phases. To reduce the number of females pursuing foreign employment, the Government of Sri Lanka is interested in diversifying migration in terms of skills as well as destinations. But this requires a clear understanding of the labour market for temporary migrant workers in potential destinations – the market structure there, the skills sets that are in demand and their existing supply of foreign labour, as well as of Sri Lanka’s supply of migrant labour. TO REDUCE THE NUMBER OF FEMALES PURSUING FOREIGN EMPLOYMENT, THE GOVERNMENT OF SRI LANKA IS INTERESTED IN DIVERSIFYING MIGRATION IN TERMS OF SKILLS AS WELL AS DESTINATIONS In the ‘migration phase’ migrants are immersed in a new country and a new culture, which often leads to various adversities like harassment. Among all migrant occupations, it is female domestic workers who are most vulnerable to such hardship because their living quarters overlap with their working environment. In 2012, nearly 80% (10,220) of complaints made by Sri Lankan migrant workers were by female domestic workers. Their vulnerability to many forms of harassment is an ongoing concern among the migration stakeholders. Post-Migration Needs Greater Focus While there is a lot of emphasis on the first two phases of migration, there is limited focus on the post-migration phase in Sri Lanka. This phase is important to consider because the majority of Sri Lankan migrants plan to return after working for a few years to accumulate savings (known in migration studies parlance as part of ‘an optimal life-cycle residential location sequence’). This temporary nature of departure promotes remittances and eventual return of the migrant, which marks the beginning of the post-migration phase. Attention to the post-migration phase is critical for migrants to achieve the socioeconomic objectives of migration, as many return not only with new skills and accumulated savings, but also strained relationships with those they left behind. As much as potential migrants need pre-migration training, returnees need guidance on socioeconomic reintegration after their return. The Balancing Act Policy makers are often grappling with the trade-off between promoting international migration and protecting the well-being of migrants and their families. Policies on migration would be successful if related policy packages are drawn in consultation with all relevant stakeholders; such as migrants, their families, foreign employment agents, relevant ministries and institutions, and researchers. Dialogue and interaction among stakeholders are important precursors for successful migration policy formation. References [1]Central Bank of Sri Lanka (2013), Economic and Social Statistics of Sri Lanka 2013. [2]Central Bank of Sri Lanka (2013), Annual Report 2013. [3]Central Bank of Sri Lanka (2013), Annual Report 2013. 13 Where Do Migrant Workers Fit in Sri Lanka’s Population? Sri Lanka are positively correlated with oil prices. In the context that fuel imports account for nearly a quarter of Sri Lanka’s total imports, the capacity of remittances to hedge the domestic population against oil shocks is as valuable as remittances. neither counted in censuses nor can they vote at elections in Sri Lanka [6]. Depending on the definition of ‘foreign born persons’ adopted in destination countries, some Sri Lankan migrants may be counted in censuses at destination, but are [3] Migrants are not in denominator of this estimate. the [4] However, it should be noted that some migrants – especially females, were not prior participants in the labour force in Sri Lanka. By Bilesha Weeraratne Figure 1: Major Sources of Foreign Exchange Earnings in Sri Lanka 2009-2013 7 6 USD Billion 5 4 3 2 1 0 2009 2010 Remiances I n Sri Lanka, the projected population growth rate is slowing down and is expected to turn negative around 2031, at which time, the population is expected to peak to approximately 21.883 million. These population estimates reflects the ‘usual resident’ population in the country – those living or intend living in Sri Lanka continuously for more than six months. As such, the number of Sri Lankan migrants is not considered in this population estimate, and there is no updated estimate for the number of Sri Lankans living in the rest of the world. The only available estimates is for migrant workers of Sri Lankan origin (over 1.5 million), which is neither current nor precise. Despite the absence of a clear understanding of the number of migrant worker of Sri Lankan origin, there is a strong nexus between them and the resident population of Sri Lanka. Temporary Migrant Workers As per Department of Census and Statistics definition, temporary 14 migrant workers are those who have migrated for employment, have been living aboard for 6 months or more, and intend returning to Sri Lanka. Presently, there are approximately 497,544 temporary migrant workers in the rest of the world.[1] These temporary migrants are the type of migrants who are most connected to the population in Sri Lanka. They live outside Sri Lanka as part of optimizing their lifecycle residential location sequence and maintain regular connections, and continue to contribute to the domestic population in many ways. Most temporary migrants return to Sri Lanka with improved human capital/ skills and accumulated savings, which contribute to the productivity of the local economy upon their return and reintegration. Social Costs of Migration Among temporary migrant workers, nearly half are females. The departure of females has significant impact on the population left behind as most female migrant workers are married and have children. The longterm absence of a maternal figure has emotional, psychological, and social impact on families of migrants. [2] Additionally, spouse and other family members such as elderly parents also find it difficult to cope with the ‘domestic upheaval’ due to migration. How vital are Migrant Workers to the Country? Despite negative implications, migration has tremendous benefits as well. In 2013, migrant workers contributed US$ 6.4 billion in remittances, which accounted for over a third of Sri Lanka’s foreign earnings, 9.5 % of Gross Domestic Production (GDP), and over 3.5 months’ worth of goods and services imports. This is clearly highlighted in Figure 1, which shows the increasing importance of remittances toward foreign exchange earnings in Sri Lanka, relative to other contributors such as export of garment, tea, rubber and tourism. Moreover, literature shows that remittances to Garments 2011 Tea 2012 Rubber 2013 Tourism Source: Compiled from Central Bank of Sri Lanka (2013) Another notable contribution by migrant workers to the local economy is through the domestic labour market. In 2013, migrant workers accounted for nearly a quarter of the labour force [3] and have contributed towards keeping unemployment at current low levels in Sri Lanka [4]. Where do Migrant Workers Fit in? Amidst such prominent socioeconomic implications of labour migration on the resident population in Sri Lanka, there is a question of ‘belonging’ for migrant workers. They are neither here nor there, as the temporary nature of their migration prevents them from fully assimilating to the destination country. Upon returning to Sri Lanka, they often experience difficulties in reintegrating back into the society [5]. During the period they are away from the country, they are likely to get minimum protection due to their ‘second class citizen’ status. As such, Sri Lankan migrant workers are an ‘invisible population’ of the country. They are so connected to Sri Lanka that their absence is dearly felt while their support is highly appreciated. The mutual support between migrant workers and the resident population of Sri Lanka is so important that both need the other for socio-economic success. References [1] This estimate should not be confused with estimated over 1 million Sri Lankan migrant workers, which includes both permanent and temporary migrant workers. [2] Ukwatte, Swarna. 2010. Sri Lankan female domestic workers overseas: mothering their children from a distance. Journal of Population Research. [5] Athukorala, Premachandra. 1990. International contract migration and the reintegration of return migrants: The experience of Sri Lanka. International Migration Review, 323{346. Gunasinghe, M. 2011. `Abandoned and Forgotten’: Returnee Migrant Women Workers in Sri Lanka. Pages 93{152 of: Skanthakumar, B. (ed), Rights, Remittances and Reintegration: Women Migrant Workers and Returnees in Sri Lanka. Colombo: Law & Society Trust. [6] Even though Sri Lanka ratified the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families, which holds that Migrant workers shall have the right to vote and to be elected at elections, absentee voting is not yet materialized in Sri Lanka(IOM, 2006). 15 ? Are restrictions imposed on female migrant workers discriminatory or improving family well-being This decline can be attributed to the efforts by the Ministry of Foreign Employment Promotion and Welfare (MFEPW) and the Sri Lanka Bureau of Foreign Employment (SLBFE). Circular 13/2013 of June 2013 and its update of December 2013 have been at the heart of this change. One of the aims of this directive is to minimize the psycho-social cost on children of female migrants, through the Family Background Report (FBR). The FBR, prepared by the Development Officers (DO’s) of the MFEPW is a mandatory requirement for female labour migrants from Sri Lanka. According to the FBR, females with children under the age of 5 years are not “recommended” for foreign employment, while females with children above 5 years will only be recommended for migration if satisfactory alternative care arrangements are in place to ensure the protection of children. Discrimination vs. Well-being F emale migrant workers make a vital contribution to the Sri Lankan economy, mainly through remittances. However, this economic gain often comes at a heavy social cost on the children they leave behind. This article, written to coincide with the International Migrants Day, is aimed at highlighting the discriminatory nature of the recent restriction on labour migration of mothers. Females dominated migration for employment from Sri Lanka over the last two decades. But since 2010, the number of women departing for foreign employment has been lower than men, declining to 40% in 2013 (CBSL, 2013). 16 The restrictions imposed through the FBR are often perceived as `discrimination against Sri Lankan women in relation to the right to migrate’ (UN Special Rapporteur on the human rights of migrants). It discriminates migrant mothers of younger children against mothers of older children, and female parents against male parents of young children who can migrate for foreign employment without restrictions. Marking International Migrants Day 2014, Bilesha Weeraratne highlights the discriminatory nature of the recent restriction on labour migration of mothers. For many mothers from low income families, migration is the only viable livelihood option. For some it is a strategy to overcome domestic problems, including abusive spouses. In such cases, the FBR requirement perpetuates their difficult situation at home. This system also promotes corruption, a market for forged FBRs and female migration through clandestine channels, as the FBR only applies when migrating through lawful channels. It is an presence during a A survey established fact that the of a mother is critical child’s key growth years. by the Ministry of Health and International Organization for Migration (IOM) in 2011 found that 23% of female migrants in Sri Lanka had children between the ages of 1-3 years, while 33% of females had children between the ages of 4-6 years. The well documented negative association between a mothers’ migration for employment and children’s socio-economic outcomes supports the rationale behind the FBR requirement. However, as highlighted earlier, if the presence of a mother leads to a tradeoff in funds needed to access vital inputs for a child’s well-being such as food, shelter, clothing, education and health care, such situations may also lead to a mother being stressed and helpless, which might also negatively contribute towards the child’s wellbeing. Solution In this case, what is more important – a mother’s right to choose her job or a child’s need to be raised by her mother? In this conundrum there is no clear cut answer. As mentioned by the Ambassador/Permanent Representative of the Permanent Mission of Sri Lanka to the United Nations, this “is neither an act of discrimination against women, nor a restriction of their freedom of movement and the right to work, but a reasonable classification to promote a more balanced view of all rights involved in the decision to migrate, taking into account the need to safeguard the family unit as the fundamental unit of society”. Hence, the FBR should be promoted for its merits while minimizing negative implications. The blanket nature of this directive could be relaxed, where compelling cases with children under 5 years have an avenue to pursue foreign employment when adequate arrangements are made for alternative care arrangements. This can be done under strict and continuous supervision and guidance provided by the MFEPW and other applicable agencies such as National Child Protection Authority. In addition, its discriminatory nature could be addressed. At inception, the FBR was expected to be a requirement for all migrant workers. However, limitations in manpower and logistics led to the FBR initially being made mandatory only for females. Therefore, if the FBR is made a requirement for all labour migrants, it would not only minimize its discriminatory aspects but would also contribute more towards the well-being of the children who are left behind. The FBR could recommend that male migrant workers with dependent children provide adequate support to their wives in order to assume the dual roles of parenting. However, such an expansion would revert back to the logistical issue that resulted in the FBR being implemented only for females. IN THIS CASE, WHAT IS MORE IMPORTANT? A MOTHER'S RIGHT TO CHOOSE HER JOB OR A CHILD'S NEED TO BE RAISED BY HER MOTHER? Currently, there are three DOs of the MFEPW for each of the 330 administrative divisions in Sri Lanka, which translates to a little over one FBR per day per officer. If such a workload is unmanageable for these officers amidst their other duties, perhaps they can seek the services of DO’s appointed by other ministries. Additionally, family evaluation for FBR could be further streamlined and aligned with duties of the DO’s of all ministries, to eliminate duplicate visits to a given neighbourhood by officers appointed by several ministries. As this article highlights, there is a need to review the way in which the restrictions on female migrant workers are implemented. If the gaps are addressed, it would help minimize the discriminatory nature against female migration workers, while providing balanced opportunities for the wellbeing of migrant mothers and their children. 17 Accessing Labour Markets Abroad: 6 Sri Lanka Key Challenges for fundamental human rights at work is upheld to the highest standards’. study called for assistance from the relevant authorities in this regard. Six Challenges in Accessing New Labour Markets 4. Salaries abroad 1. Language proficiency This article was co-authored by Janaka Wijayasiri, Dharshani Premaratne and Keshini Sritharan as part of the MED_MIG project and is based on a forthcoming IPS publication on the topic. The forthcoming IPS study based on stakeholder interviews with recruitment agents and government officials reveals that a large proportion of unskilled or semi-skilled Sri Lankan migrants possess comparatively inadequate English language skills, which is the primary medium of communication for foreign migrants. As an agent observed, ‘even labourers, they need English. If he has a stomach ache he has to [be able to] tell properly; otherwise they might be treated for something else. So basic English is a must.’ A half of all the agencies that were interviewed claimed that this creates a host of barriers and restricts foreign employment opportunities. 2. Rules and regulations governing recruitment of migrants in Sri Lanka Image courtesy http://www.asergeev.com/ S ri Lanka has set itself a target of increasing migrant remittances to US$10 billion by the end of 2016 from US$6.4billion in 2013, and a key element in achieving this figure will be altering the profile of migrant workers and labour markets abroad. This article highlights the key challenges facing Sri Lanka in accessing labour markets abroad. Diversification of Markets and Occupations The Middle East is currently the largest foreign employment market for Sri Lankan migrants, with over 94% of Sri Lankan workers employed in the region. According to data from the Sri Lanka Bureau of Foreign Employment (SLBFE), 18 many migrant workers from the country occupy low-skilled positions. In 2012, housemaids and unskilled workers made up 64% of migrants from the country, while skilled and semi-skilled workers constituted only 25% of all foreign LOW-SKILLED WORKERS ARE MORE VULNERABLE COMPARED TO SKILLED WORKERS AND PROFESSIONALS employment. In the context of Sri Lanka’s concentration of labour markets (i.e., Middle East) and skill categories (housemaids and unskilled), the National Labor Migration Policy stated that, ‘new overseas markets and opportunities must be explored and promoted. This will ensure the promotion and development of employment opportunities outside Sri Lanka for Sri Lankans.’ As of late, the government has also been encouraging the migration of more skilled migrants as opposed to housemaids and unskilled workers. Evidence shows that, low-skilled workers are more vulnerable compared to skilled workers and professionals and subject to human rights violations, including breach of labour rights, harassment and abuse at the work place. Consequently, the government has been promoting and supporting ‘the migration of skilled men and women to secure work environments where the protection of Though the rules and regulations that are in place are intended for the protection and welfare of the migrants and their families, it appears that this has made the recruitment process a barrier to the growth of the foreign employment industry. Interviews revealed that some of the rules and regulations governing the recruitment of migrant workers in Sri Lanka appear unnecessary – for example, irrelevant documentation requirements must be reviewed and streamlined. For example, females who want to go abroad as housemaids are required to get the permission of their spouse while professionals/skilled workers have to undergo generic training which is not specific to their jobs. So, rules and regulations need to be reviewed to simplify and streamline the recruitment process. 3. Job orders outside traditional markets Licensed foreign employment agents play a significant role in the labour migration process, but most of them have little or no contacts outside the traditional market – the Middle East. Thus, they have difficulty in ensuring that the job orders that they receive and potential employers from other regions are genuine and legitimate, which prevent them from pursuing new opportunities. Almost all agencies interviewed for the Increasingly, salaries offered for unskilled and skilled workers by some labour receiving countries are not attractive compared to salaries they would receive in Sri Lanka. Moreover, considering other matters such as opportunity cost of sacrificing family life in Sri Lanka, there is little or no incentive in some cases for Sri Lankans to seek foreign employment. According to an agent interviewed, the salary offered must be thrice the wage in Sri Lanka, for there to be an incentive to go abroad for employment. Both traditional markets such as the Middle East and some of the emerging Asian Markets such as Malaysia offer inadequate wages to Sri Lankan migrants, particularly for unskilled and semi-skilled workers and this has made it harder for recruitment agencies from fulfilling the available vacancies. 5. Preferences Findings reveal that certain preferences of some Sri Lankan migrants act as a barrier to recruitment and fulfilment of job orders. Sri Lankans are reluctant to go to some markets despite the availability of job vacancies due to negative publicity regarding these countries in the media, and also due to restrictions on life styles in countries such as Saudi Arabia. Instead, they prefer to go to developed markets like the EU where obtaining visas are difficult. The study also found that preferences of recruitment agencies and employers abroad can affect the vacancies on offer to Sri Lankans as well. As a result of poor performance or misbehaviour at the place of work, recruiters and employers in destination countries can sometimes hold a negative image of the suitability of Sri Lankan workers for employment. This serves to decrease the recruitment opportunities available for Sri Lankan migrants. 6. Lack of capacity to supply required man-power Recruitment agencies revealed that there is a lack of manpower in the country, and that the present skill mismatch adversely affects the competitiveness of Sri Lankan migrants. This prevents them from reaching non- traditional markets, creating more constraints to recruitment opportunities. Sri Lanka has not been able to supply the numbers of workers in mid-professional, skilled and semi- skilled job categories, for whom there was demand from various countries. For instance, in 2009, there was demand for 784,212 positions from all job categories, but Sri Lanka could only supply persons for 247,119 positions. Lack of unity within the industry, Sri Lanka being uncompetitive compared to other labour sending countries in the region, lack of marketing/promotion to penetrate new markets, bureaucracy, high cost of recruitment, difficulties in obtaining working visas, rules and regulations in labour receiving countries restricting recruitment were also identified as other challenges affecting the country from accessing labour markets abroad. Way Forward The scope for addressing some external challenges is limited, as Sri Lanka has little or no power to affect changes in labour receiving countries with regard to rules and regulations, salaries, visas, etc. In this context, more focus should be given to deal with issues within Sri Lanka by improving the relevancy and quality of training programmes, using better marketing strategies, streamlining recruitment processes and enhancing cooperation within the industry. In terms of training, much more attention needs to be given in improving spoken English amongst migrants, which could be done through establishing training institutes in rural areas, upgrading the training course of SLBFE, and conducting courses to develop skills that meet the requirements of destination countries and the job. Further, marketing needs to be done to alter the negative image and attitude surrounding migrant workers and the Middle East, with due consideration given to the important role they play in the economy. This can be done through conducting exhibitions, attending job fairs abroad to promote a more positive image of manpower from Sri Lanka while more support needs to be extended to the SLBFE for it to carry out marketing and promotional activities Also, recruitment for foreign employment could be facilitated through simplification of rules and regulations, removing unnecessary requirements, wider application and usage of IT in the recruitment process to reduce the paperwork/documentation involved, etc. There is also a dire need for the stakeholders to come together for the betterment of the industry, which is lacking at the moment. 19 Vulnerability and the channel of recruitment Does Foreign Employment In Sri Lanka, recruitment of female domestic workers to foreign employment involves various channels, such as through agents, sub-agents, combination of agents and sub-agents, and direct contacts. These various types of recruitment channels protect female domestic workers from specific types of vulnerabilities at destination. A recent study by the IPS investigated the link between the recruitment channel and vulnerability at destination. The study was based on a sample of 1,409 females who were employed as domestic workers in Middle Eastern countries. The findings showed that vulnerability is multifaceted, involving various types of issues. Different aspects of vulnerability can be minimized through different recruitment channels and no recruitment channel will protect a migrant from all types of vulnerabilities. For instance, if a female domestic worker secured employment through a formal recruitment agent, she has lower chance of being forced to work longer hours with no overtime payment, while having a higher chance of being forced to work for a different employer. When a female domestic worker is employed through a combination of an agent and a sub-agent she has a higher chance of being forced to do activities that she had not initially agreed to. As such, the study finds that the effect of recruitment channel is specific to the type of vulnerability faced. through an Agency Minimize Vulnerability of Sri Lankan Female Domestic Workers? F emale domestic workers are highly vulnerable to adverse situations at the destinations to which they migrate, ranging from issues such as nonpayment of agreed wages, to physical and sexual harassment, to confiscation of passports by employers, and denying of communication with family in Sri Lanka. It leads to physical and emotional trauma among female domestic workers. Is there a way to minimize these female domestic workers’ vulnerability? It is often perceived that recruitment through formal channels minimize vulnerability. Is this true? they are females, workers and foreigners, with no party with any interest in them. In some destination countries they are not considered as employees, while households where they work are not considered workplaces, and private persons who hire them are not considered employers. Moreover, their working environment and living quarters overlap blurs the lines that separate the two. Together, all these characteristics of this occupation make female domestic workers highly vulnerable to various forms of difficulties at their work places. Why are female domestic workers so vulnerable? As depicted in Table 1, the most common complaints among Sri Lankan female migrant workers in 2012 were non-payment of agreed wages, sickness, and physical and sexual harassment. Together, these three issues accounted for over a third of complaints. The nature of complaints varies from issues emanating from specifics of the employment contract, to health issues Domestic work is identified as one of the most vulnerable occupations among female migrants, due to multiple reasons. At the country of origin, those who seek female domestic work are often drawn from a vulnerable group in society – the poor. In Middle Eastern countries they are vulnerable because 20 Types of vulnerabilities to, controlling and abusive nature of the employer. Protection from employment contracts Certain aspects of vulnerabilities are supposed to be covered by employment contracts. For instance, an employment contract entered through a foreign employment agent normally has a written agreement specifying terms and conditions of employment. Similarly, ILO Convention No.189 requires that migrant domestic workers should receive a written job offer or contract, which is enforceable in the country of destination, prior to their arrival and stipulates that living-in workers have a right to keep their travel and identity documents with them. Employment through other informal channels often does not involve such clear specifications about employment. As such, does recruitment through formal agents minimize vulnerability at destination? Table 1: Nature of Complaints by Females Received by SLBFE, 2012 In this context, potential migrants should be well informed about the various types of vulnerabilities associated with domestic employment and how to strike a balance between these conflicting implications, through their choice of recruitment channel. An ideal way to provide such information is through a public awareness campaign, such as the one adopted by the Australian High Commission to discourage illegal immigration to Australia by boat. The benefits of such a public awareness campaign – that will highlight the benefits and challenges associated with different recruitment channels and vulnerabilities common to female domestic work, is that it will reach a broad cross section of viewer not limiting to potential female migrants. Then potential female migrants’ friends, relatives, neighbours, community/religious leaders, etc., will be more knowledgeable and will be able to passively contribute in evaluating each recruitment channel in the context of potential vulnerabilities and in supporting the better informed potential female migrant to make an informed decision about her choice of recruitment channel. 21 Sri Lanka Can Gain More from Migration by Helping Returnees Reintegrate Better This article was written by IPS researchers Nisha Arunatilake, Suwendrani Jayaratne, Nipuni Perera and Neluka Gunasekera , based on the findings from an IPS study ‘Returning Home: Experiences & Challenges’. of funds for self-employment, and a lack of information and documentation required to access loans and other business opportunities. The National Labour Migration Policy (2008) considers reintegration of returnee migrant workers a priority MOST STATEASSISTED ECONOMIC REINTEGRATION PROGRAMMES CONCENTRATE ON PROVIDING LOANS FOR SELF-EMPLOYMENT VENTURES OR FOR HOUSING area, and since then several specific programmes on reintegration have come into operation by several state and non-state entities. Most stateassisted economic reintegration programmes concentrate on providing loans for self-employment ventures or for housing. Meanwhile, non-state actors play an active role in providing vocational training and business Figure 1 :Reintegration Experience “I have been migrating to Italy since 1993…my last job was as a caretaker in a castle…I returned to Sri Lanka in 2003 with the intention of becoming a tourist guide. I am fluent in speaking foreign languages and thought this would be an ideal job for me… but I was unable to work out this dream since I received a negative response from the relevant institutions…”, says Nihal, a 58 year old father of one, who returned to Sri Lanka once again earlier this year. N ihal is just one of the many migrants who find the process of economic reintegration a challenge. Many return with minimal savings, and also face difficulties in resuming employment after their return. Migrant workers generally return with accumulated savings and new skills. But the economic implications of migration for the home country depend on how these savings and new skills are utilized. Some studies find that returnees can contribute to the economy more than migrant workers, if the returnees are 22 successfully reintegrated. However if reintegration is not successful, it can cause destabilizing effects on the country and can result in migrants going back abroad again and again. The ability of returnees to impact a country’s development depends on both the conditions of return as well as their reintegration experiences. Re-integration Challenges A recent study by the IPS (based on a survey done by ILO and the SPAARC on returnee migrants), shows that a majority of the returnee migrants have not successfully reintegrated upon their return. Of the sample of 1,981 respondents in the survey, only 21% improved their family’s economic situation, only 6.3% improved the possession of productive assets (Figure 1), only 47% are currently employed, only 26% successfully reintegrated with their immediate families, and only 5% successfully reintegrated with their extended families. Interviews with returnees indicated that some of the key challenges faced by them included difficulties in finding employment, lack development training for returnee migrants. However, vocational training offered to returnee migrants by government institutions in Sri Lanka is limited to just pre-departure training, and that too mainly for young people. Yet, despite these programmes, the IPS study reveals that that less than 10% of the returnees received any institutional support. Learning from the Philippines Compared to the Sri Lankan experience, the Philippines has a more comprehensive reintegration programme from pre-departure, to on-site, and return. This programme addresses both psychological as well as economic aspects of reintegration. To provide psychological support, the programme organizes gatherings for migrants and returnee families, provides counselling services, and assists in managing stress. To provide support for economic reintegration, the programmes provide livelihood projects, community-based incomegenerating projects, skills training, and credit schemes. Some of these training programmes are conducted at the overseas work places itself, and migrants are provided with information on investment opportunities available back home, while still working abroad. As part of the employment facilitation services, returnees can get referral assistance for local or foreign employment through the Overseas Workers Welfare Administration (OWWA). Trainings and scholarships are also awarded for both returnee migrants and their dependents to engage in short-term vocational and technical courses. Further, awards such as the ‘Model Overseas Filipino Workers Family of the Year’ recognize the achievements of workers as well as their families in managing the impact of overseas employment in family life. This is used as a strategy to exemplify the best practices adopted by families to enhance the benefits of migration. The Philippines also has a National Reintegration Centre, which acts as a “one-stop centre” for all reintegration services, and coordinates and facilitates the delivery of services by all relevant service providers. What Can Sri Lanka Do? Like in the Philippines, reintegration programmes in Sri Lanka should cater to all aspects of reintegration, and recognize the importance of working with migrant families, rather than individuals. Reintegration programmes must start working with migrants before they depart and continue to work with them during their time abroad as well as on their return. Access to reintegration assistance can be facilitated through a ‘one-stop shop’. Reintegration programmes should also extend to psychological counselling and support for family members. The key is to improve coordination between different reintegration programmes that are available and to improve the awareness among migrants of the programmes that are on offer. Nihal, after many failed attempts at starting a business in Sri Lanka, is considering migrating for work yet again. A better business environment would have allowed him to use the skills he has gained and the money he has saved in starting and running a business in Sri Lanka. It would have not only benefitted him, but also the country. 23 Migrant Voices: Returning Home Every year thousands of migrants leave the shores of Sri Lanka with dreams and aspirations of a better future for themselves and their families. Upon return they hope to reunite with their families and restart their lives in Sri Lanka. However, they face a number of challenges which make their reintegration difficult. These are some of their stories. Deepthi*, Mother from Gampaha Hoping to collect enough money to build a house of her own and uplift her family, Deepthi left Sri Lanka in 2012 to Jordan to be employed as a housemaid. However, the 33 year old mother failed to save anything as her employer refused to pay her due wages. She could not fulfill her dreams of building house back in her hometown of Gampaha. Needless to say her stay overseas was nothing short of unpleasant. care of her newborn baby, she is unable to look for employment outside her home. Therefore, she is looking for suitable self-employment opportunities she could engage in. Deepthi claims to have gone to many institutions seeking assistance to start up her own sewing business venture at home, but so far has not been successful in obtaining any assistance due to the inability to show proof of a steady income in the household. I went abroad with the hopes of building a house, but fortunately I was unsuccessful in fulfilling this … I could not save anything. In the end my family had to send money from home for me even for the ticket. I like to stay at home with the baby. I know how to sew a bit… and I’d like to get some help to start a business. People’s Bank was saying that they were giving loans, and I went to check. They said to be eligible for the loan I have to be working in a garment factory. They asked for a pay slip and because we cannot show this sort of document we cannot get the loan. Since returning home, Deepthi has been unemployed for nearly one and a half years. With the added responsibilities of having to take 24 Even though Deepthi is happy to be back, she is still challenged by the inability to raise initial funds for a suitable self-employment opportunity making reintegration difficult. Although I am happy to back at home, we would really appreciate it if someone or some institution could assist us to be self-employed and self-sustained so it would become an effective alternative for overseas employment. Name has been changed in order to protect the privacy and identity of the individual. Mahinda, Entrepreneur from Anuradhapura Interested in finding capital to start his own business enterprise, Mahinda left to the Gulf to work as a driver for a company in Saudi Arabia during 2002-2003. Utilizing the remittances earned abroad Mahinda is now a successful entrepreneur and owner of vehicle service and filling stations in Anuradhapura, Eppawela and Thabuththegama. Mahinda who had returned to Sri Lanka with savings of only about Rs. 90,000/, had invested it in its entirety on starting up his own business in his hometown. I started my business on my own. I didn’t bring back a lot of money. I brought about Rs. 90,000/= and I spent all of it on the business. …I put up a small building to start the business, and bought two machines. I only had a chair and an old table I brought from home to sit and do all my transactions. …That is how I started; those were my humble beginnings. Mahinda began his journey by opening up a small Service Center to wash and repair machines that were used in paddy fields around his hometown. Working hard towards expanding his business, Mahinda had been successful in introducing several new field equipment and machines to the local market. In 2012, he won the Gold award for Best Young Entrepreneur in Anuradhapura for his exceptional accomplishments. Commenting about his successful reintegration experience in Sri Lanka, Mahinda claims that the experience he had gained while working abroad is what helped in shaping him into a more hardworking and determined individual. Working in a highly regulated and regimented environment made him realize his I realized how lazy we were and how much of opportunities and freedom we had back at home that we take for granted. The strict training on working according to a timetable, following rules shaped me into who I am. I feel that I am strong and more determined than I had ever been. The experience I gained abroad was more valuable than money. Going abroad changed my life. It made me complete. potential in both a physical and mental capacity in starting up his own business back at home. When a person migrates they have to have a clear target as to why they are going abroad Drawing lessons from his own experience abroad, Mahinda claims that successful reintegration should start at the pre-migration stage. He states that migrants need to have a clear objective to achieve while working abroad. Mahinda also states that upon his return he did not receive any type of institutional support for reintegration. However, he feels that although he did not receive such support it is important for government officers to assist migrants in setting objectives prior to migration as well as supporting them through the settling in process upon return. Mahinda’s is one of the more successful stories of Sri Lankan migrants who come back home. He is now married and has two children and even owns his own home and vehicle. He also has several employees working under him at his service stations and hopes to further expand his business. 25 EXPERT INTERVIEWS Talking Economics caught up with 4 migration experts from India, Pakistan, the Philippines and the UK at the sideline of the International Conference on Policies for Mainstreaming Migration into Development in Sri Lanka, held on 14 August 2014 in Colombo. We were able to obtain their views with regard to accessing new markets, reducing vulnerability of workers at destinations and reintegrating returnees successfully at home. Dr. S. Irudaya Rajan, Chair Professor, Ministry of Overseas Indian Affairs (MOIA) Research Unit on International Migration at the Centre for Development Studies, Thiruvananthapuram, Kerala shares his insights on how Sri Lanka can use its diaspora communities in developed countries to access emerging labour markets in the world. Dr Rajan has three decades of migration research experience and has coordinated several major migration surveys in Kerala. In your opinion what do you think Sri Lanka should do to improve access to new markets and job categories? I think the Sri Lankan government’s mindset has to change. They still think that their market is only in the Gulf. I think they have to move away from oil rich economies to new emerging economies where with small modification of skills, Sri Lanka can reap a lot of benefits. This way Sri Lanka’s trend of sending women workers can bring more remittances and more development to the Sri Lankan economy. Indian Day). They should organize it every year and discuss with the diaspora so that they can be a part of the new development manthra of the Sri Lankan economy. This way the diaspora, migrants and the local people can take the Sri Lankan economy to the next level of development. In your opinion how can Sri Lanka use the diaspora to improve access to new labour markets and job categories? I think what is missing in Sri Lankan migration research is a good database. I think it is time IPS with the IDRC, launch a Sri Lankan migration survey modeled like the surveys done in Kerala for the last 15 years, so that they can document the impact of migration on individuals, economy and society in Sri Lanka and how best to integrate returnee migrants. I think Sri Lanka has diaspora in many countries. I know in Canada and the UK they have a large diaspora community. I think it is time for Sri Lanka to organize diaspora meet ups like we do in India, ‘Pravasi Bharatiya Divas’ (Non-resident Lucia Villamayor currently holds office in the Philippine Overseas Employment Administration (POEA) that manages the licensure and regulation of more than 1,200 participating agencies in the field of recruitment for job placements of Filipino workers overseas. She shared some of the more successful practices in the Philippines that could be adopted by Sri Lanka. programme includes components of The recruitment of Filipino workers as well as the manpower requests of the counseling, mentoring, and provision of foreign employers are duly verified by free training on financial literacy, skills and livelihood training. We also provide our Philippine labour offices at the jobsite to ensure that they are truly foreign financial and livelihood assistance which employers in need of such skills. Also they returnees can access to start their micro ensure that there are actual jobs available businesses, immediately upon return. for our overseas Filipino workers before This way they can also contribute to the national economy upon their return. being deployed. What are the best practices Sri Lanka can learn from the Philippines to protect and promote worker welfare for migrants at destination? We have a licensing system in the Philippines to ensure that only qualified private recruitment agencies could recruit and deploy Filipino workers overseas. What do you think that Sri Lanka should do to improve access to the European market? I think one possible solution could be, as in the Middle East, is to have a dedicated person in every embassy and consulate, explicitly focused on the labour market. This person can send back information on the latest schemes, shortages, and different opportunities across the EU. Sending the collected information back to the relevant ministries like the Labour Ministry, Imigration Department and the Sri Lankan Bureau of Foreign Employment is important because I think the communication channels need to be improved. There needs to be more information because as we heard this morning there is a lack of systematic information. It [information] is not flowing. The Sri Lankan government is not aware of all the opportunities available, where 26 Secondly, publicizing and sharing that information. There should be a dedicated person focused on the labour market. Once that information is collected getting it out to both the official agencies as well as newspapers is important. Otherwise people would continue to just think about the Middle East. So, Sri Lankans on the ground should be encouraged to think about other destinations in Europe that can ensure them stronger labour rights. Also how can Sri Lanka use the diaspora in the EU to improve access to the EU labour market? In my opinion and from my experience we are dealing with Sri Lankans already. In Italy for example there is already a proper network. All my friends from Sri Lanka have already sponsored their relatives. So it is already happening, at least among family members but also to a lesser extent among friends. What could be instituted is stronger links with the diaspora, especially with the diaspora that is not going to come back. So I think the assumption is that a lot of these migrants go temporarily and they come back to Sri Lanka. But in the EU, I don’t think we can assume that, because from what I have seen in Southern Europe once Sri Lankans migrate, they stay, and build a life there. The Sri Lankans I know in Italy have purchased homes and their children go to Italian schools. It is a permanent settlement. I think the Sri Lankan government also has to think about how to cultivate relationships over the long term and ensure that these permanently settled Sri Lankans will continue to send their remittances back home. I don’t think the Sri Lankan government has to do anything pro-actively; the networks will take care of themselves. It is more about cultivating relationships with long term permanently settled Sri Lankans who take on EU nationalities. Do you have other comments with regarding to expanding the market for migrant workers? I think we spoke this morning about skill upgrading and I think what is really important is focusing especially on women. There are so many women who are going to the Middle East as housemaids that are vulnerable. I think a key part of the policy for Sri Lanka in terms of skills upgrading is to look at how the skills could be upgraded for women within a gender aware and gender sensitive policy and not just talk about skills up grading in general. Otherwise it is really only the male citizens who benefits. Making sure that female citizens also benefit I feel is very important. We have a national reintegration center for our returnees. This center was created by the Department of Labour and Employment to monitor and support the existing integration programmes available for the returnees. Our integration Do you have any other additional comments with regard to worker welfare of migrant workers? Yes, the recruitment agencies should deploy people only to accredited foreign employers with approved manpower requests. Also the jobseekers should only deal with duly licensed recruitment agencies so that the welfare would be protected even at the site. Dr. G.M. Arif, the Joint Director at Pakistan Institute of Development Economics (PIDE) shares his views on worker welfare at different stages of migration and what needs to be done in order to optimize migrant worker welfare. high and the migration experience might not be good for them. These two things, recruitment system and good briefing of migrants and their families will be key at the pre-departure phase of migration. Dr. Kathryn Lum, a Research Fellow based at the Migration Policy Centre at the Robert Schuman Centre for Advanced Studies, European University Institute, Italy shares her views, based on her research interest and expertise in migration policy in Europe, diaspora policy in Asia and the South Asian diaspora. these opportunities lie and how they could be exploited. So that could be one area. What are the best practices Sri Lanka can learn from the Philippines to protect and promote welfare for migrants upon return? Based on today’s deliberations what do you think Sri Lanka should do to improve workers’ welfare at different stages of migration? That is, at pre-departure, at destination and on return? I think, for pre-departure, from today’s deliberations, the experiences of other countries and migration literature suggest there are two things that are quite important. First thing I would like to mention is briefing of migrating workers and their families [prior to departure]. Briefing is a way of telling them how they can manage the migration phase. When we talk about managing the migration phase basically we are talking about managing remittances. If the family does not have a plan on how they are going to use the remitted money during the working period of the migrant, usually all the money is spent on consumption and nothing will be left for investment when that person comes back. Money may not be there for his or her [migrant] reintegration. So the first thing is briefing workers and their families on how to manage remittances. The second is the recruitment system. It needs to be an exploitation free recruitment system, particularly to reduce the cost. If the system is exploitive, costs will be Regarding [welfare of migrants] at the destination I have a couple of points as well. The first thing is the protection of workers. The employers have some clause in their terms and conditions. So I think the Sri Lankan Embassy over there should be active and have close contact with workers and employers, so that the migrants’ rights are protected. If they are exploited at the destination then the migration experience may not be good for them to improve their wellbeing when they come back. Similarly many workers at the destination have problems in sending remittances back. They end up sending through an informal channel and sometimes there is exploitation there as well. I think there is a need to guide the migrant workers on how they can send remittances through the formal banking system. While the banking system should be easy, I think there is a need to give them guidance during the migration phase when they are at the destination. So protecting workers and strengthening linkages between workers particularly and the Sri Lankan government representatives can make this phase of migration better for the workers. Regarding reintegration upon return there are several things that require attention. But I think the most important thing is that, if workers have money when they come back they may not have enough information on how to invest, particularly if they are going to open up a new business. There is a need to have a good information system to reach these returnees and guide them on how to invest. Otherwise the possibility is there that they may spend their money on nonproductive uses and their condition or situation may not be better or even worse off even after years working overseas. The first thing they need is information. The second thing is what we have learnt from today’s deliberations. If there is no special scheme for returnee migrants, at least they should know and have access to the existing credit system and get loans to start their businesses. This is quite important for migrants to settle and become secure. Thirdly, Pakistan has recently started to give some skill training to returnee migrants for them to become self-employed or start their own business. That is how you can make this third phase or returning phase of migration better for migrants. Do you have any other comments with regard to worker welfare of migrant workers? As I have discussed in today’s session, basically migration welfare is connected with all three phases of migration. Their pre-migration background, how they work and earn while they are abroad and how this money is used during their period of migration, and how they plan to become self-employed and resettle in Sri Lanka are important. Also, this cannot be managed only by the government. Nor cannot it be managed only by the migrant workers. Therefore, close corporation between the stakeholders is required and this can bring a better outcome for all parties concerned. 27 Labour Migration INSIDE IPS Resource Centre at IPS of New York (CUNY). The title of my PhD dissertation was `Essays in Unauthorized Immigration and Migration’. My Postdoctoral training also focused on migration. What inspired you to pick Migration as an area In this Edition, we feature of specialization? Dr. Bilesha Weeraratne, Research Fellow, attached to the Labour, Employment and Human Resources Development Unit at the IPS. L abour Migration Resource Centre (LMRC) is a special collection on migration related articles and documents located within the IPS library. In order to provide quick and convenient access to the resources, as a part of LMRC, the IPS Library developed an online database called ‘MEDMIG Search’. MED-MIG Search (http://med-mig. ips.lk/) provides a platform for the collection, organization, access and preservation of scholarly information on labour migration in electronic formats. The database targets an audience of researchers and policy makers, seeking information on labour migration in South and Southeast Asia. The types of documents in MEDMIG Search database include 28 books, book chapters, conference papers, journal articles, technical reports, working papers, government documents and theses and dissertations.This information is categorised under eight key thematic areas; Domestic migration control, Employment, Remittances and economic impact, Recruitment, Reintegration, Social cost of labour migration, Social protection, and Welfare and protection. Information can be searched by Author, Title, Subject, and Key themes. Subject to copyrights and licensing of documents, when available electronically, full-texts are made accessible on-line, either through the web-link provided in the item to the original source or through the IPS Library. Copyrighted items are available at the IPS library for reference, and photocopies of relevant publications could be obtained upon request. The most significant aspect of the MED-MIG Search database is its interactive feature. Any researcher, author, state official or organization can submit relevant documents to the MED-MIG search from their desktops. We, at IPS welcome your scholarly research on labour migration on South and Southeast Asia to the MED-MIG Search database and are happy to guide and work with you in the process of submission.  Bilesha also serves as an International Consultant to the Asian Development Bank, Philippines. Bilesha holds a BA in Economics from the University of Colombo, Sri Lanka, an MA in Economics from Rutgers University, USA and an MPhil and PhD in Economics from the City University of New York, USA. How long have you been with IPS? I re-joined IPS in March of 2014. Before re-joining IPS, I was a Post-doctoral Research Associate at the Princeton University, USA. My first stint at IPS was from 2003-2005 before I left for my higher studies. What is your area of specialization and what is your background on the subject? Migration - both international and internal. I specialized on migration for my PhD in Economics at City University While I was doing my higher studies overseas, realized that being a migrant is not easy. Migrants are neither here nor there, and the experience of having lived in another country stays with one forever. These things make migrants different from natives at the destination as well as from nonmigrants at the origin. The issues of migrants have to be analyzed in this context. Being able to relate to migrants made me passionate about it. What is your migration related highlight? Within days of graduating from my PhD Programme, I was chosen by Princeton University to serve as a Postdoctoral Research Associate of the New Immigrant Survey. There I was mentored by one of the greatest migration scholars in the world – Douglas Massey. Why do you think international migration is important to Sri Lanka? International migration is important to the Sri Lankan economy on many levels. On the one hand remittances provide valuable foreign exchange to us. At the end of 2013, remittances stood at USD 6.4 billion, which accounted for 9.5 percent of the GDP. As a foreign exchange earner, foreign employment has surpassed other leading categories such as apparel, tea, rubber and tourism. On the other hand, international migration helps the labour market in Sri Lanka by keeping unemployment down. Moreover, migration and related remittances have the capacity to reach the grass root level, and its benefits go beyond the migrant and his household to the entire community. What is your agenda for migration research at IPS? During the next 2-3 years I plan to research some of the key themes of migration such as remittances, poverty, labour market, brain drain and unauthorized migration to name a few. One of my ongoing research focuses on financial behavior of migrant households. Migration research at IPS also covers internal migration and urbanization. Under this aspect I am working on developing an alternative definition for urbanization in Sri Lanka to study rural to urban migration in Sri Lanka. What aspects of your personal life help you do your job well? My experience of having been a migrant for nearly 10 years. What are the five most important things in your life? Rather than things, I have five very important people in my life. They are my husband, our three kids and my mom (not in any particular order!). 29 Finally Some Good News about the Ozone Layer? By Athula Senaratne Marking the International Day for Preserving the Ozone Layer Athula Senaratne takes a look at the latest positive news about the recovery of the ozone layer and what this means for environmental and climate change challenges. T here are several days in the global event calendar that are dedicated to matters concerning the environment. News that we used to hear on these special days often carries negative or alarming facts. The usual message is that the respective matter of concern is getting deteriorated and the world is finding it difficult to come to terms with the problem. Quite often, criticisms are exchanged among parties and both the state authorities and public are at the receiving end either for ignoring their responsibilities or irresponsible behaviour. This year’s ozone day 30 makes a difference. It comes with the good news that at the end, the ozone layer in the atmosphere is recovering and the global community can be credited for their collective effort. This article attempts to highlight a few of the salient messages contained in the report. Montreal Protocol is delivering The joint report published by the World Meteorological Organization (WMO) and United Nations Environment Programme (UNEP) brings this good news on the eve of the global ozone day. The report titled Scientific Assessment of Ozone Depletion 2014 released a few days ago, presents some important facts that is worth wider public attention. The Montreal Protocol is the global arrangement for negotiating the international actions against the problem of depletion of the ozone layer. Ozone layer is the special zone of atmosphere that contains a higher concentration of ozone molecules which helps to protect the biosphere from exposure to harmful levels of cosmic ultra violet rays (UV). In the absence of ozone layer, exposure to excessive amounts of UV rays could harm humanity by increasing the chances of skin cancer and causing damages to eyes and immune system. Not only are humans but, other living beings in the world are also vulnerable. During the final quarter of the last century, scientists observed that the ozone layer is getting depleted rapidly and the so-called group of chemicals known as CFC (Chlorofluoro-carbons) are among the most damaging ozone-depleting substances (ODCs). These are some widely used substances in industrial products such as refrigerators, air conditioners, etc. Scientists have further observed that the ozone layer over certain parts of the Southern hemisphere has become particularly thin compared to other areas of the atmosphere that popularly came to be known as the ‘Antarctic ozone hole’. This has become alarming to inhabitants in those parts of the world including Australia. The Montreal Protocol helped to form a global alliance against this menace by orchestrating a collective effort of all countries in the world to phase out the ODCs from the world. The new assessment report suggests that actions taken under the Montreal Protocol on ODCs are making the way for the ozone layer to recover towards the benchmark 1980 levels. So the Montreal Protocol is delivering and this sets an example to follow at a time when the world is struggling to come to terms with the potentially more harmful problem of global warming related to climate change. Ozone-depleting substances (ODSs) are in decline The report brings out the following major facts. The ODSs controlled under the Montreal Protocol continues to decrease. The report finds that major controlled ODSs are decreasing largely as projected and stratospheric abundances of chlorine- and brominecontaining substances originating from the degradation of ODSs are decreasing. It observes that by 2012, combined chlorine and bromine levels had declined by about 10–15% from the peak values of ten to fifteen years ago. However, it also observes that the group of substances known as hydrochlorofluorocarbons (HCFCs) and halon-1301 are still increasing, which needs unknown or unreported sources of carbon tetrachloride to explain its abundance. It further reports that there is an increase in ozone levels in the upper stratosphere. According to climate models, this can be explained by contributions from declining ODSs and upper stratospheric cooling caused by increasing carbon dioxide increases. It looks possible that ozone will recover toward the 1980 benchmark levels in many parts of the globe if the full compliance with the Montreal Protocol is maintained. This recovery can be expected to occur before the mid-century in mid-latitudes and the Arctic and may be followed somewhat later by the Antarctic ozone hole. This implies that the Antarctic ozone hole is likely to continue to occur each spring, as can be expected for the current ODSs abundances until sometime into the future. It has been observed that the Antarctic ozone hole has caused significant changes in Southern Hemisphere surface climate in the summer. The lower stratospheric cooling due to ozone depletion is considered the dominant cause for observed changes. In contrast, no robust link has been found between stratospheric ozone depletion and tropospheric climate in the Northern Hemisphere. The report also points out that changes in carbon dioxide (CO2), nitrous oxide (N2O), and methane (CH4) will have an increasing influence on the ozone layer as ODSs decline. As a result, the evolution of the ozone layer in the second half of the 21st century will largely depend on the atmospheric abundances of those substances. These have a mixed effect over global ozone, with high CO2 and CH4 elevating global ozone while increasing N2O is responsible for depleting global ozone. However, the world cannot be fully complacent about the situation which is seemingly improving. The substances known as hydrofluorocarbons (HFCs) currently used as a replacement for ODSs is growing at a rate of about 7% per year and are projected to continue to grow. If this continues, it could result in HFC emissions of up to 8.8 gigatonnes CO2-equivalent per year by 2050. The HFCs have highGlobal Warming Potential (GWP) and need to be replaced with lowGWP compounds. Otherwise, the climate benefits of the Montreal Protocol could be significantly offset by projected emissions of HFCs used to replace ODSs. Hence, more future efforts are still necessary. The report highlights several other technical aspects that need the attention of the global community and calls for continuation of collective action to consolidate the gains so far achieved for further gains. In spite of those concerns, overall, it seems the world action is heading towards the right direction and correct initiatives have been taken at the right time. This conveys one important message to the same global community which is currently passing a treacherous episode of negotiating mitigation of greenhouse gasses (GHG) for avoiding potentially harmful climate change impacts. It suggests that alarming signals from Mother Nature cannot be left unheeded perpetually and that humanity cannot ignore her calls for ever. She is benevolent and duly reciprocates when we respond to her warnings. All we need to do is to help her to help us. Finally, Sri Lankans can be especially happy about the news as we did our best to contribute to this achievement. Even though Sri Lanka is not a major emitter of ODSs, the National Ozone Unit coming under the Ministry of Environment and Renewable Energy successfully carried out a Phase-out Management Plan of ODSs in the region to fulfil its Montreal Protocol compliance targets in advance to the levels specified under the Protocol. As a result, Sri Lanka managed to phase out Chlorofluorocarbons (CFCs), Halons, Carbon Tetrachloride (CTC), Methyl Chloroform and Methyl Bromide consumed in the country. So we can be proud of us as a nation that fulfilled its responsibility as a member of the global community. In this regard, we should be thankful to the National Ozone Unit and the Ministry of Environment and Renewable Energy for providing the leadership towards the right direction. 31 5 Things to Know About Building Resilience from Droughts in Sri Lanka By Editorial Team M any parts of Sri Lanka faced a severe drought in the past few months, with some regions (especially the North and East) not having received significant rains since November 2013. Estimates suggest that across six provinces, over 1.2 million families were impacted and nearly 200,000 hectares of rice fields (approximately 20% of the cultivable area) have been affected by the drought. The devastating impacts on lives and livelihoods will be felt for some time, and beyond the immediate relief measures taken by the government, donors and civil society, it is important to think of ensuring better drought resilience for the future. The Talking Economics Editorial Team met with IPS Research Economist Chatura Rodrigo, who specializes in agriculture and environmental issues, to find out more about the underlying issues and what can be done about them… 1. Could this drought have been prevented or was it all the fault of nature? In general, droughts are a part of climatic variability and – longterm climate change can increase the frequency and severity of their occurrence. So, droughts are not preventable. However, socio-economic impacts of droughts are determined not only by the physical hazard alone but exposure, vulnerability and coping capacity of communities also. Situation of these factors can be improved. For instance, meteorological data and analysis have the capacity to warn people about the likelihood of droughts in the short run as well as long run. What can be done is to better prepare for them. The effort needs to be better coordinated in terms of physical, human and financial resources. The frequency and severity of droughts in Sri Lanka appear to be increasing. How can irrigation and agriculture improve to tackle future droughts, or are climate change effects catching up too quickly? Here are 5 things you ought to know… 32 2. Are the irrigation systems keeping pace with these changes? Sri Lanka has a well-established irrigation system. However, due to poor management of watersheds and inappropriate maintenance these systems are not functioning fully efficiently. Even though there are tanks that could store water and release them in drought situations, siltation and poor maintenance have limited the water holding capacities of most of them. There are a couple of programmes already in place to address these issues. One such programme will deploy one member from each family to the reconstruction of irrigation canal ways and rural access roads on a payment basis. According to official sources, they will be given 8 to 12 days work per month for a maximum payment of 6,000 rupees. Excess silt and mud sediment in reservoirs and tanks will be removed and distributed among the rural bricks and tile earthen manufacturers, free of charge. 3. Are we seeing an increase of extreme droughts like this? Droughts are not uncommon for countries like Sri Lanka. However, with the impacts of climate change the frequencies and the intensities of these events have increased. In the future there will probably be more droughts and so it is important to be ready and learn lessons from previous events. The places where droughts might occur may change over time, along with the changing rainfall patterns and shifting of agro-ecological zones. DROUGHTS ARE A PART OF CLIMATIC VARIABILITY AND LONG TERM CLIMATE CHANGE CAN INCREASE THE FREQUENCY AND SEVERITY OF THEIR OCCURRENCE 4. What are the longer term solutions to help these areas be resilient for droughts like this? is the primary responsibility of the department of meteorology. While there are enough data to do so, capacities of analysis needs to be improved. From an agricultural point of view, drought resistant plant varieties need to be developed. While there are some varieties already in place they might not be adequate for severe droughts that could come in the future. In addition agricultural methods must look for less water intensive approaches. Rain water harvesting is also important. This has to come from the attitudinal of the people. Sri Lanka does not have a good reputation of saving water when we have plenty. Harvesting rainfall water will allow minimizing the impacts of droughts. Finally, there should be a better way of learning from past experiences. This is not the only time that Sri Lanka has faced a drought but still the efforts show that we are not yet ready for a similar situation in the future. Coordinating and information sharing becomes ever more important. 5. What changes can we make in agricultural practices to help prepare for changes in weather patterns? Agriculture practices that conserve water better are a key determinant in drought impact management. Rather than cultivating as usual, it is important to identify changing weather patterns. To do that, information from the Meteorology Department is crucial but farmers own knowledge is also important. Farmers have, over time, developed many methods to cope with situation like these and that indigenous knowledge needs to be disseminated. More research and development is also the key to identifying new drought-resistant plant varieties. Finally information communication technology can play a major role in better information dissemination, especially in disaster relief efforts and sharing of climate change and cultivation information. There are couples of things that need to be done. First of all, the ability to identify and predict future drought events needs to be increased. This 33 Tackling Environmental Challenges in the Indian Ocean Will Require Closer A regional workshop of the Indian Ocean Rim Association (IORA) highlighted the critical Collaboration in the Region Ocean environment By Kanchana Wickremasinghe and the implications for issues facing the Indian the countries that are around it, and benefit from it. Kanchana Wickramasinghe points out that a strong regional collaboration agenda is needed to tackle many of these. T he Indian Ocean presents unique characteristics when compared to other oceanic regions. It covers around 30% of the global ocean area and is home to nearly 30% of the world’s population[1]. The region is also important because of its geophysical and environmental characteristics. The Indian Ocean has the unique characteristic of seasonally-reversing wind and sea surface circulation patterns because the Indian Ocean is landlocked in its northern part. Meanwhile, around 30% of the world’s coral reef cover, 40,000 square Kilometres of mangrove cover, and nine large marine ecosystems and important estuaries are found in this Ocean. With such rich natural resources, the region has a huge potential to provide a number of ‘ecosystem goods and services’ (food, fuel, hydrological cycles, nutrient flows, etc.), useful to the countries located in the rim of the ocean as well as in its interior. Of course, these are in addition to the region’s geo-strategic 34 significance and its role in international shipping. It is estimated that the total economic value of the entire biosphere is US$33 trillion per year and for the marine environments US$ 20.9 trillion per year. This means that more than 63% of ecosystem services and natural capital originate from ocean environments, globally. During the same year (in 1994), the global gross national product total amounted to US$18 trillion, which is less than the total economic value of the marine environments in the world. However, these are considered as minimum estimates due to the nature of uncertainties. Though total economic value estimates for the Indian Ocean region are rarely available, given its geographical and environmental significance, a considerable share of the total global marine economic value may be originating from the Indian Ocean. Issues The utilization of the region’s resources is determined by a number of other factors – for example, governance. Governance in the ocean environments is particularly difficult due to its fluid nature. The Indian Ocean’s resources THE INDIAN OCEAN'S RESOURCES ARE SHARED BY A NUMBER OF COUNTRIES WITH DIVERSE INTERESTS AND CAPABILITIES are shared by a number of countries with diverse interests and capabilities. Not all of them have the same level of technology or expertise when it comes to extraction and utilization of the resources. contributing to this pressure. The resulting uncontrolled development and unsustainable use of resources around the ocean is rapidly becoming a challenge to be addressed. Mangrove and coral reef habitats are being lost due to aggressive economic activities, and unregulated utilization is leading to an over-extraction of resources. Pollution is also affecting the ocean resources and its ecosystems. Additionally, the emerging impacts of global climate change are likely to have negative consequences on the ocean resources, people’s livelihoods that are based on them, and in turn, the economic contribution that the ocean’s resource base can make. Regional Collaboration Utilization of ocean resources by the ‘rim countries’ involves multiple actors, multiple uses, and multiple demands in varying scales. So, it is clear that efforts by individual countries are not enough to address the issues faced by the region. There is a clear need for regional collaboration in ensuring better utilization of the Indian Ocean’s resources, as we highlighted in a previous article. Most of the Indian Ocean rim countries are developing economies. Moreover, the extraction of certain resources such as minerals can have impacts on the natural oceanic environment and therefore, environmental factors are intrinsically linked to the economic potential of the ocean’s resources. Fisheries and minerals are identified as the most commercially viable industries in the Indian Ocean region. [2] The evidence indicates that international agreements which have been put forward in relation to marine environments have progressed very slowly due to a number of impediments.[3] Some of them include developing country constraints such as human and financial resources, capacity building, technology transfer, limited data and information in some areas, insufficient governance and management capacity, etc. Regional collaboration can be viewed as a must to address these types of issues. The economic contribution that the Indian Ocean’s resources make to the countries around, it is immense; for example, fisheries (for commercial purposes as well as a source of protein), ocean-related industries, and tourism. However, recent socio-economic changes in the region have been putting pressure on these resource base. The growing populations in the Indian Ocean region, particularly the increasing densities in the coastal regions, the expansion of cities and the rising middle class, are key factors Experts at a recent regional workshop organized by the IPS in collaboration with the Ministry of External Affairson “Establishing a Centre of Excellence on Ocean Sciences and Environment for the Indian Ocean Rim Countries” (30 June – 1 July, 2014), strongly emphasized the need for regional collaboration. The issues faced by the region were discussed under four themes – ocean resources, energy resources, biosecurity and climate change. As highlighted by the experts of each area, regional collaboration was identified as a must to find solutions for the ongoing environmental challenges and make best use of the ocean for the economies in the region. A key area for regional collaboration was scientific and policy research – vital for formulating effective regional and national, and sectoral policies. The research should focus on critical areas of interest and continuously update in line with the changing conditions. Capacity building at regional level and financing becomes a key requirement for this. The absence of a centralized data source on the Indian Ocean also need to be addressed through meaningful regional cooperation. Gathering and sharing of data, which is necessary for effective policy formulation, can be facilitated through regional partnerships. Also, technology transfer could be one of the benefits that regional collaboration can bring in. This is particularly important for the region’s developing countries that lack the technologies to make use of the ocean resources. Finally, in order for collaboration to be meaningful and sustainable, it is important to have an effective regional centre which can initiate and maintain close links with all the parties involved in the process. The proposed Centre of Excellence, to be located in Sri Lanka, under the aegis of the Indian Ocean Rim Association (IORA) is envisioned to take the leadership in regional collaboration in relation to ocean sciences and the environment. References: [1] Wafar M, K. Venkataraman, B. Ingole, S. Ajmal Khan, P. LokaBharathi (2011), State of Knowledge of Coastal and Marine Biodiversity of Indian Ocean Countries. PLoS ONE 6(1): e14613. doi:10.1371/journal. pone.0014613 [2] Michel, D., H. Fuller, L.Dolan (2012), Natural Resources in the Indian Ocean: Fisheries and Minerals. In D. Michel, & R. Sticklor (Eds.), Indian Ocean Rising: Maritime Security and Policy Challenges, New York: Stimson. [3] IOC/UNESCO, IMO, FAO, UNDP. (2011), A Blueprint for Ocean and Coastal Sustainability. Paris: IOC/ UNESCO. 35 Getting Communities Involved in Sri Lanka’s Nature Tourism By Kanchana Wickremasinghe In this article marking “World Tourism Day 2014' on the theme “Tourism and Community Development”, Kanchana Wickramasinghe argues that tourism-related community development in nature tourism should not be just about getting a few villagers to guide tourists, but must take a more meaningful and holistic approach. “A lot of tourists are coming to see Yala. Only a few villagers are having small boutiques closer to the entrance. There are a few who are working as guides in the safari jeeps. Other than that we do not get any income through Yala tourism”, remarked a villager who lives in the periphery of Yala National Park, when he was asked about the benefits to his community of the increasing tourism in the area. Helping local communities gain more from tourism remains an elusive goal in many tourism areas across Sri Lanka, not just in Yala. It is increasingly being recognized that local communities should be a stronger part of a country’s tourism industry. Not only does it directly result in community empowerment, but it also ensures the sustainability of tourism businesses especially in natural environments and rural contexts. Nature tourism can take various forms; ecotourism, agro tourism, etc. Meaningful participation of local communities in nature tourism is vital because they have been the guardians of the natural resources in the country, including forests, over the years. The local communities possess the knowledge and understanding about the natural environment and sociocultural context, much better than an outsider – which is an important asset for nature tourism. However, in the case of Sri Lanka, meaningful involvement of communities in nature tourism activities has not been satisfactory so far, as highlighted in previous IPS publications. The same mistake should not be repeated in the emerging areas of nature tourism. A villager in Ranpathwala, Kurunegala who was optimistic of tourism said, “Our village is blessed with natural beauty. We would like to gain some income through tourism. Our involvement can make sure that there will be no impacts on the forest or villagers. But the whole issue is that it is difficult to find English speaking young people to guide the tourists”. Tourism is an entirely new business for some rural villages in Sri Lanka. These communities do not have any experience in carrying out, or being a part of, tourism in their respective areas. Though they can be used as an important asset in the businesses, the lack of skills and knowledge holds back their effective involvement. TOURISM IS AN ENTIRELY NEW BUSINESS FOR SOME RURAL VILLAGES IN SRI LANKA. THEY DO NOT HAVE ANY EXPERIENCE IN CARRYING OUT, OR BEING A PART OF, TOURISM People tend to be pessimistic of the role of tourism in their own community’s context. The common belief that tourism can cause negative social implications in the rural villages is a barrier that hinders the active involvement of communities in tourism. Villagers in Illukkumbura, a village bordering the Knuckles forest range, assert that the behaviour of 36 some of the tourists was a threat to their traditional socio-cultural set-up. These aspects should receive enough attention in tourism promotion, when targeting and marketing policies at higher levels. Efforts to sensitize tourists to local culture would also help address this, and should focus not only on foreign tourists, but domestic tourists as well. The absence or lack of community involvement in the planning stages of tourism is also a major gap that needs attention. Most of the problems which can arise in the operational stages can be minimized by getting community inputs in the initial stages of the businesses. This also helps create a better sense of ownership. Sri Lanka can learn lessons from success stories in regard to meaningful community involvement in small scale tourism in different parts of the world. Ecotourism in the Monteverde Cloud Forest Preserve in Costa Rica and in the Periyar Tiger Reserve, Kerala, India, are two examples where lessons can be drawn for Sri Lanka. In these two cases, establishing meaningful and strong links with the communities in decision making and implementation and also better sharing of benefits, were the reasons for their success. Tourism-related community development in nature tourism should not be limited to getting a few villagers to guide the tourists, as in the case of Yala. Of course, the pathways for community involvement may be different, depending on the location, socio-economic conditions of the households, target customers, etc., so a one-sizefits-all approach would not bring the desired outcomes. But more capacity building of communities and better community involvement at an early stage must become priorities in this process. New forms of tourism which are emerging in Sri Lanka can create more opportunities for communities to get involved and gain greater benefits. Innovative and careful planning will be a must in order to make sure that community benefits are meaningful and long-lasting. 37 I n the first half of 2014 alone, this ‘deadly disease of the tropics’ infected 20,610 people, in comparison to 32,063 in 2013. According to the Epidemiology Unit of the Ministry of Health, approximately 60% of dengue cases in the country are from the Western Province – home to some of the main commercial hubs in Sri Lanka. Despite there appearing to be strong political will and continued government commitment to eradicate this epidemic, the surge in dengue continues, affecting many individuals and the country as a whole. Additionally, once an income-earner in a family is infected, their lost labour time due to the illness poses an economic burden on the household. This then also impacts the household’s financial capacity to support treatment. At a macroeconomic level, the overall economic burden of dengue affects not only through the opportunity cost of lost productive time, but also the burden on public health expenditure. Moreover, a continuation of the current outbreak could pose a threat to the country’s tourism prospects. Some foreign governments such as United Kingdom, Australia and the United States have issued health advisories warning travellers about it. The Rise and Rise of Dengue Government Action Dengue shares a fatal bond with rain. In Sri Lanka, two peaks of the disease occur annually alongside the monsoon season, leading to growth in densities of mosquito vectors. The influx of population to capital cities, coupled with problems for waste disposal and management by local governments, have been identified as primary causes of the high incidence of dengue in the country. According to the Epidemiology Unit, incidences of dengue escalated rapidly to 28,473 cases and 167 deaths in 2011. This trend continued to rise in 2012, with 44,456 cases (and 180 deaths), but declined to 32,063 cases in 2013. However, in the first six months of 2014, the Colombo, Gampaha and Kalutara districts of the Western Province have reported notably higher numbers of dengue cases compared to the rest of Sri Lanka. Why is Dengue More Prevalent in the Western Province? The Western Province has experienced an 11% increase in population density from 2002 to 2012. Rapid commercialization accompanied with new development projects, and the favourable growth outcomes in the Western Province have encouraged migration from rural areas to the more urban areas in the province. More importantly, out of the total population in the country, 28% are clustered within the Western Province. In 2012, urbanization has accounted for population growth in Gampaha and Kalutara districts. With the two Free Trade Zones – Katunayake and Biyagama 38 At the outset, it should be stated that ministries alone cannot eradicate dengue. Community participation is paramount. In the absence of an antiviral drug or vaccine, effective mosquito control underpins dengue prevention. Although it is the responsibility of households to keep their premises free from the spread of dengue, local authorities are responsible for community cleanliness, and the continued efforts of the central and local government should be rightly acknowledged. Wide-scale campaigns include improved communal awareness of the epidemic through mobile technology; continuous education of medical and nursing staff in the handling of patients; education campaigns in schools and universities to raise awareness of environment health and sanitation; an inter-ministerial dengue fighting task force; and imposing fines for improper waste disposals are some of the initiatives that are in place. The Dilemma of Dengue and the Health Economics of It RESIDENTS HAVE COMPLAINED THAT LOCAL GOVERNMENT WORKERS HAVE DEMANDED By Yolanthika Ellepola – the Gampaha district showed a 1% population increase, and Kalutara 1.2%, respectively. With population growth, attention should be given to basic needs such as household and sanitary facilities of the communities. However, in the Western Province, 10% of households dwell in unsatisfactory sanitary facilities, while 0.1% of households have no access to sanitary facilities at all. Appallingly, 52% of households in the province consume unsafe drinking water. The deteriorating public health infrastructure in the province is largely to blame for this. High population densities coupled with access to unsafe drinking water and unhygienic sanitary facilities are providing a favourable environment for the spread of dengue in the Western Province. FINANCIAL INCENTIVES IN RETURN FOR SPRAYING Economic Burden of Dengue Those at lower ends of the income strata could be more susceptible to dengue, and could also face a greater economic burden from it. Due to poorer housing and other facilities, they may be less able to maintain ideal hygienic and sanitary conditions that help prevent dengue. MOSQUITO REPELLENT In addition, the Public Health Department in coordination with the local authorities have controlled the outbreak through inspection of land parcels and spraying BTI in high-risk dengue areas. Even though BTI could be used to control dengue, the natural bacterium could merely be used in limited areas, as it could lead to adverse consequences for human consumption. However, regrettably, residents have also complained that local government workers have demanded financial incentives in return for spraying mosquito repellent. In a further attempt to contain costs local governments have decided to charge Rs. 1,000 from households in return for spraying mosquito repellent. Despite the progress made, limited infrastructure for surveillance and control, quality diagnostics, lack of active laboratory based surveillance are many of the challenges that continue to prevail. Apart from that, lack of financial resources and active public participation are also issues in effectively addressing this deadly epidemic. Since the development of the dengue vaccine is at its infancy, vector control is the only means by which the spread of dengue could be curtailed. However, it cannot be denied that vector control is essential to limit the spread of dengue although the development of the vaccine is vital to eradicate the disease. Way Forward: Lessons for Sri Lanka Dengue has been a major public health issue in Sri Lanka for many decades. The impact of the disease on the country’s economy and society is serious, and can only become worse if not addressed effectively. While commending government efforts to prevent and control the spread of the epidemic, more needs to be done to completely eradicate this deadly disease from the island. A combination of good environment management, effective solid waste management, and a flood retention programme are key elements of mosquito control. The multifaceted nature of the disease requires efforts among multiple actors – laboratory personnel of multi-disciplines, public health inspectors, and the wider community. Sustaining the gains made in reducing fatalities and continued encouragement and support of doctors, nurses and health practitioners on the clinical management of dengue patients is central. Furthermore, the referral system needs strengthening – ensuring timely referral of patients to appropriate levels of health care. Apart from these measures, Sri Lanka can also learn from countries like Singapore where architects have successfully designed buildings without gutters and have thus successfully tackled the epidemic by using simple, yet, effective mechanisms of mosquito control. More pragmatic and efficient preventive measures are essential in first minimising the risk, and then, eradicating this epidemic, before many more Sri Lankans lose their lives to this deadly disease. 39 A and given peer pressure and stress, the probability of them being victims of substance abuse is high. Closer Look at Youth Mental Health in Sri Lanka and Some Stigma is a considerable barrier to mental-health service delivery, particularly among young people. Helpseeking behaviour comes less readily to young people who may be evenmore impacted by stigma, embarrassment and the lack of basic knowledge about mentalhealth. The issue of stigma is further challenged by the lack of quality mental-health services in countries such as Sri Lanka. Consequences Image courtesy University of Wollongong, Australia. This is a special article to mark International Youth Day 2014 (#IYD2014) by Chatura Rodrigo and Priyanka Jayawardena Youth encounter two main landmarks in their lives: the entry into the youth life and entry into the adult life. Both these transitions bring about many challenges and tension. These two transitions will decide whether the youth is a catalyst of good or bad. Understanding what youth go through during these transitions and in between is very important. This year, the International Youth Day is focused on discussing “Youth and Mental Health”. Many factors impact the mental health of youth and they lead to many consequences. From a Sri Lankan point of view, usage of alcohol and drugs, suicides, and teenage pregnancies are some of the significant consequences related to the mental health status of youth. A Closer Look at Youth of Sri Lanka In Sri Lanka, high incidence of homicides, self-inflicted injuries, and suicides are major causes of death among youth. High rates of suicide and self-harm indicate high levels of psychosocial stress amongst individuals in the community. According to the Sri Lanka police records, 3770 deaths were recorded in 2011 were due to suicides. Further, suicides were highest among females in the 21-30 year age group followed by those in the below 20 years age group. The highest male suicides were among elders, but more than 500 suicides were by young males[1]. Smoking and alcohol use among youth is significant and needs careful attention. 40 Usually the first use of a cigarette, or use of alcohol, takes place during adolescence. Some youth continue smoking and alcohol use from then onwards. According to the spot survey carried out by the Alcohol and Drug Information Centre (ADIC) in 2012,33% of respondents were current users of tobacco, while 35.6% were users of alcohol. According to the responses, the highest prevalence of tobacco and alcohol use was from the age category of 25-39 years. Out of those aged 15-24 years, a majority current smokers and alcohol users reported that the main reasons for use of substances were to be social with friends. These substances greatly impair mental abilities and the physical skills of youth, and enhance the long run risk of developing cancers, lung diseases, ulcers, heart disease, and liver diseases. Further, the use of these substances is a contributing factor to accidents, suicides, violence, and sexual abuse, among young people. While the substance abuse issue is directly linked to peer pressure, it also highly depends on the ability of person to cope with frustration and stress. For example, substance abuse is high among youth who live in war affected areas, compared to other parts of the country. This is mainly due to fact that youth in the reconciliation process are most of the time in highly stressful situations due to the uncertain nature of their future. Sometimes the lack of availability of guidance, employment, and educational opportunities, push them towards coping mechanisms that include smoking and substance abuse[2]. Mental health of youth in Sri Lanka has also direct impact on their sexual and reproductive health. Marginalized youth and war affected youth are more prone to have damaged mental conditions, thus are poor in planning their families and adopting accepted family planning measures and being aware of sexual and reproductive health. Youth in the estate sector of Sri Lanka are more unemployed, and they are the poorest among all. Province wise, Northern and Eastern provinces have been exposed to 30 years war, thus youth of these areas are more likely to face Post-Traumatic Stress Disorder (PTSD) and are mentally unstable to follow sexual and reproductive health advise. Proving this, teenage pregnancies in Sri Lanka are highest among estate sector girls and girls of Eastern province. On a national scale, according to the Demographic and Health Survey (DHS) 2006-2007, 6.4% of adolescent women (age 15-19 years) have begun child bearing – are already mothers or are pregnant with their first child[3]. Global Scenario Sri Lanka does not stand alone in any of these aspects when compared to the world’s statistics. Mental health disorders were the most prevalent source of disability for young people worldwide, accounting for 45% of total morbidity. Disorders included major depression, substance abuse, schizophrenia, and bipolar disorder. The next most prevalent causes of disability were injuries (12%) and infectious and parasitic diseases (10%). Further, the prevalence of mental health disorders varies across gender, ethnic, and socioeconomic lines[4]. Suicide rates among young people have risen to such an alarming extent that 15 to 19 year olds are now at highest risk of suicide in a third of all countries, with suicide being the second leading cause of mortality for this age group globally. Young people can be expected to be the Increased education and awareness of mental-health conditions is likely to reduce the perceived stigma associated with seeking treatment and disclosing symptoms to professionals and other adults in positions to help. Socialmarketing campaigns and national programmatic efforts aimed at raising social awareness of the issues of mental health are a critical next step in the effort to reduce the stigma among young people with mental-health conditions. Source: Institute of Policy Studies of Sri Lanka and Ministry of Youth Affairs and Skills Development, 2014. group at highest risk of suicide in the future. In most countries, suicide rates are higher in males than in females. This also applies to the 15 to 19 year old age group, with about 10.5 suicides per 100,000 people for males and about 4.1 per 100,000 people for females[5]. Gender ratios vary between countries (about 3-4:1 in European countries and 1-2:1 in Asian countries) with a high rate of suicides among young males in the West and a relatively lower rate in Asia[6]. The causes of suicide worldwide are also diverse; with different risk factors in different cultures. Mental disorders (particularly depression) and abuse of alcohol or drugs are the major risk factors for suicide in Europe and North America. In Asian countries, impulsiveness and adjustment disorders play an important role. A risk factor that is evident across the East and West is unemployment, especially when coupled by stressful events such as financial problems and an inability to compete[7]. What is the way forward for Sri Lanka? Substance abuse is a significant issue that relates the health of youth. While peer pressure and stress are two significant factors that drive youth towards substance abuse, it is a personal decision. With proper knowledge and enforcement, these things can be prevented. Therefore, life skills education for both, school-going, and out-of school adolescents could be the most appropriate channel to create awareness among adolescents. Smoking, alcohol, and other substance abuse prevention, should be integrated with life skills education. Further, in most developed countries, retail outlets are prohibited from selling tobacco and alcohol to minors, however this is not the case in developing countries. Access to these substances is easy for youth, Finally, a public-health approach to the prevention of behavioural and mentalhealth conditions is instrumental in addressing this issue at a national level. This approach includes a range of preventive interventions spanning mental-health promotion, universal prevention, selective interventions and indicated interventions, each of which map onto different levels of risk. A number of school-based programmes focused on promoting competencies such as emotion regulation, social skills, behavioural inhibition and conflict resolution also hold promise for implementation in low resource settings Workplace-based programmes have been also shown to reduce stress and mental health problems of youth. References: [1] Jayawardana, P. (2014), “Healthy Youth for Development”, in Youth and Development: Realizing the Millennium Development Goals for Sri Lankan Youth, IPS & Ministry of Youth Affairs and Skills Development, Sri Lanka. [2] & [3] ibid. [4] Gibson, J. (2013), “Mental Health Disorders Prevalent among Youth Worldwide”, http:// brainblogger.com. [5]Wasserman, D., Cheng, Q., & Jiang, G. X. (2005), Global suicide rates among young people aged 15-19. World Psychiatry, 42, 114-120. [6]Yip, P. S. F. (2005), A public health approach to suicide prevention. Hong Kong Journal of Psychiatry, 15, 29-31. [7]World Health Organization (2010), World Suicide Prevention Day. Many faces, many places: Suicide prevention across the world. 41 while diseases such as Diabetes, Cancer and Cardiovascular Diseases (CVDs) are on the rise. Government hospital statistics indicate that 71% of all annual deaths are attributed to chronic Non-Communicable Diseases (NCDs). In particular, CVDs, Diabetes, Sri Lanka’s Ageing Population and its Health Policy Challenges SRI LANKA'S DEMOGRAPHIC TRANSITION IS APPARENT NOT ONLY IN THE AGE By Yolanthika Ellepola PYRAMID BUT ALSO IN THE DISEASE PROFILE OF THE COUNTRY Cancers and Chronic Respiratory Diseases account for 29.6 %, 9.4%, 3.9% and 8.5%, respectively. An 82.4% probability of developing Chronic NCDs is explained by unhealthy diet when compared with smoking, alcohol consumption, physical inactivity and over-weight, as reported by the Ministry of Health. A study by the National Bureau of Asia Research estimated that by 2025 diet related factors – primarily saturated fat intake – will account for almost 40% of CVDs. Diabetes will contribute to approximately 29% of CVDs and 18% of strokes. Similarly, obesity and excess weight will account for 24% of Diabetes and 27% of Hypertension. Expenditure on NCDs U nited Nations (UN) celebrates the International Day of Older Persons 2014 under the theme ‘Leaving No One Behind: Promoting a Society for All’. This necessitates understanding the importance of demography and sustainable development, while acknowledging that population dynamics will shape key developmental challenges in the 21st century. Given that 20% of the global population would be classified as elderly dependence by 2030, this article reiterates the importance of considering the health needs of the elderly, and developing strategic policy options so that no one is left behind. 42 The Demographics of Ageing Population ageing is a universal phenomenon, and the number of people aged 65 years and above is expected to grow dramatically across Asia. Although the ageing process in the West occurred over a 50 year period, in Asia, this process is likely to occur in a shorter span of 20-30 years. For the region as a whole, people in the 65 years and above age group will increase by 314% – from 207 million in 2007 to 857 million in 2050. While countries like Republic of Korea and Singapore are expected to have a more rapid ageing population by 2025, elsewhere in Asia, the share of the population 65 years and older will not reach 10% until after 2025. In Sri Lanka, sustained decline in fertility coupled with out-migration has significantly changed the country’s dependent population. The child population of 4.7 million in 2011 is projected to stabilize at 3.5 million during 2031-2041. Similarly, the working age population that comprised of 65% of the total population in 2006 will gradually decline to 63.2% and 52% in 2031 and 2071, respectively, with a demographic dividend lasting in Sri Lanka only until 2017. On the other hand, the elderly population of 1.7 million in 2001, is expected to rise to 3.6 million by 2021, and will comprise 16.7% of the total population. By 2041, 1 in every 4 Sri Lankan is expected to be elderly. Health Issues of an Elderly Society Sri Lanka’s demographic transition is apparent not only in the age pyramid but also in the disease profile of the country. Communicable diseases such as Malaria, Tuberculosis and Japanese Encephalitis have shown less morbidity and mortality patterns, An increase in Sri Lanka’s ageing population calls for continuous specialist care and geriatric treatment – all of which involves a substantial proportion of investment. In Sri Lanka, one of the main difficulties faced by the country’s healthcare provision is to separate health expenditure for the elderly from general health expenditure. A considerable proportion of elderly in the country require long term intensive care for both preventive and curative purposes. Although treatment for emergency inpatient care such as Cancer, Myocardial Infraction, are predominantly publicly financed, a substantial proportion of care for NCDs such as Diabetes, Hypertension and Asthma are financed through out-of-pocket spending delivered by the private sector. Despite spending in hospitals being dominated by the public sector, ambulatory care and retail sales of medical goods are predominantly spent in the private sector. Although the government has supported a policy of providing universal health services through tax-based financing, the actual government expenditure fails to meet the financial requirements of health needs. Despite the allocation of Rs. 2 billion for investments in NCDs in 2014, shortcomings of healthcare delivery continue to prevail. Way Forward Projected data on Sri Lanka’s future population trends, although alarming, is an unavoidable demographic issue. Today, population ageing is at its inception and the temptation might be to dismiss this issue for the distant future. However, to do so would be a mistake. Although ageing in Sri Lanka is not as advanced as in developed nations, a “silver economy” is not far off. With rising longevity and low fertility rates, Sri Lanka is confronted with social and economic repercussions that are mostly negative for the society at large. It is even anticipated that Sri Lanka will follow a similar trajectory to developed South East Asian nations and run the risk of growing older before growing richer. Unlike in South Korea where healthcare spending rose from 2% to 6% of GDP between 1970 and 1997, most Asian countries including Sri Lanka face a predicament of expanding elderly population with associated healthcare needs and lower levels of health spending. Given the high costs entailed, adequate healthcare is simply beyond reach for many Asian countries. Lessons could be drawn from Japan for instance, where universal health insurance is funded by both the employers and individuals assisted by significant government subsidies. Therefore, complying with this year’s UN theme, the Sri Lankan health sector should include chronic disease prevention through enhanced care for the elderly population, and invest in a formal system of old age support on a priority basis. 43 Quality of Teachers Does Matter in Sri Lanka: Lessons from the Best Education Systems By Nisha Arunatillake A critical determinant in students’ overall schooling experience in general, and improving students’ education outcomes in particular, is the quality of teachers in schools. The recent budget speech presented in Parliament proposed to “recruit 50,000 teacher assistants to rural schools next year in English, Mathematics, Science, Information Technology, Aesthetic Studies and Sports. Once they complete their specialized subject training and leadership training, they will be absorbed to the respective schools. They will be required to complete In this article marking International Students’ Day 2014 Nisha Arunatilake takes a look at the vital ingredients for improving teacher quality in Sri Lanka’s schools. the Degree in Education within 5 years before absorption into Sri Lanka Education Service, after which they will be required to serve in the same school for a further five years.” This proposal has many merits. The recruitments are especially targeted at filling the gaps in identified subjects. Also, as they are school-based, they will fill the gaps in teacher shortages in rural schools. But why the recruitments made at the ‘teacher assistant’ level is not clear. Even if appointment of teacher assistants are necessary at the short term, long term strategies are necessary for improving teacher quality and alleviating teacher shortages at different locations and for different subjects in the country. “Nowhere does the quality of a school system exceed the quality of its teachers,” states PISA (2012), a tool designed to assess 15-year-old students across the globe for their competencies in reading, mathematics, science and problem solving. PISA is different from normal exams, in that, it is not meant to examine how well students know what they have learnt, but it tries to assess how well they can use that knowledge to solve problems situated in unfamiliar settings. This article compares the policies and practices of the education system in Sri Lanka with that of the best education systems, as measured by PISA, focusing mainly on teacher quality. Stringent Teacher Recruitment In the best-performing schools, ensuring teacher quality starts with recruitment. The best performers in the post-senior secondary level exams are chosen for a career in teaching. For example, in Singapore, candidates for teacher training are in the top three percentiles of their graduating classes. Only one in eight applicants are accepted for teacher training. The selection process is rigorous and includes interviews to assess the personal qualities of the candidates, and review of school records to assess contributions to school and community. School leaders are also of good quality as they are chosen primarily from amongst schoolteachers. The best schools systems use a variety of methods to attract the best to the profession. Teachers are relatively highly paid. For example, teacher salaries in Singapore are comparable with salaries of other professionals. High teacher salaries are an incentive for the best 44 students to choose a career in teaching. Teachers are also highly respected, and teaching is a highly sought after occupation. Teacher Promotions as a Means to Improving Performance In many of the better-performing Asian countries, having well defined career paths, compensations and promotions based on performance, and special incentives to encourage teachers to teach in difficult areas and challenging schools have resulted in encouraging the best candidates to enter the teaching profession, and allocating them across the system in a way that achieves the best results. In Singapore, teachers can get promoted along three different career tracks – teaching track, leadership track, and specialist track. Teachers in the teaching track can be promoted along their chosen career paths to become principals or master teachers, while teachers in the leadership track can work their way up to becoming the Director General of Education. In the specialist track, teachers are focused on research and teaching policy and can move up the ladder to become a chief-specialist. As teachers move along the career path, they receive salary increases and opportunities to train and develop themselves. Teacher Training and Development Quality improvement does not stop with the recruitment of the best candidates. Those chosen are continuously trained and developed to do their best. Throughout the teaching career, teachers are provided guidance and support for their development. Successful teachers can move up the career ladder and expect better salaries and promotions. In Shanghai, China, teachers are expected to undergo continuous development and given the space to do so. For instance, they are encouraged to allocate a significant proportion of their time for lesson planning. Teachers are provided with multiple avenues for development. Peer support is one of them. Teachers regularly meet in small groups, according to their subject area and grade, to discuss teaching methods, conduct mock teaching sessions, and to comment and learn from each other. Professional Teacher Service In China, since the 1980s, teachers are required to get certified in order to become a teacher. A general education certificate at the secondary or tertiary level is not sufficient to become a teacher; they must also pass the National Mandarin Language Test, and qualify in four exams covering pedagogy, psychology, teaching methods, and teaching ability. In Japan, since 2009, teachers are expected to renew their certification every 10 years, after undergoing professional development. This policy change has encouraged teachers to participate in professional development. Also, schools are able to not renew appointments of teachers who fail to upgrade or renew their certificates. The nexus of interaction between all the areas highlighted, are shown in Figure 1 above. Lessons for Sri Lanka Sri Lanka has already established some of the key features of the best performing school systems. Teacher recruitments through National Colleges of Education and Departments of Education in universities are similar to the way teachers are recruited in the best performing countries. However, the ad hoc recruitment of individuals to the profession through other means has reduced the quality of teachers available in the system. The education system in Sri Lanka can learn from some of the best practices of the best performing school systems. The system for developing, appraising and promoting teachers in Sri Lanka is not developed well. Maintaining the quality of teachers cannot be achieved only by recruiting the best. Once recruited, the system needs to support and encourage the continuous development of the recruits so that they improve their performance and keep up with changes taking place globally. Although Sri Lanka has a system of teacher appraisal, it does not functioning effectively. This is partly due to financial and time constraints, and partly due to the limited emphasis given for teacher appraisal. Last September, as usual, when the grade five scholarship exam results were released, the top performers of the exam and their teachers and schools were commended for a job well done. Next year, when the next public examination results come out, let’s celebrate the teachers who improve the results of all their students, and not just the most talented. 45 Online Courses Can Help Open More Sri Lankans Access Higher Education By Nisha Arunatillake be exposed to the best lecturers in the country, or indeed the world, language permitting. Under a system like MOOCs, students can learn from home, or at computer centers at their convenience. This could also be a solution to the problem of shortages of lecturers in universities. Students from all locations can benefit from recorded lectures conducted by the best lecturers around the world. IN SRI LANKA TOO Tertiary education is no longer a privilege. It is a necessity. Better quality jobs are open to those with university degrees. But, getting a good quality university degree is increasingly becoming hard around the world. The rising cost of university degrees is one main reason behind this. In the United States, the cost of a university degree has increased by 1.6 percentage points more than inflation over the last two decades. Also, with improvements made to general education and more students qualifying, the competition to enter university is getting harder. For those from developing countries, the challenge of getting to a good university, let alone graduating from one in an advanced country, is more demanding. Countries in the developing world, including Sri Lanka, are struggling to expand access to university education and improve the quality of education. Progress, however, has been slow on both fronts. Universities are underfunded and understaffed, and as such, they have little space for investing in development. Further, transportation and accommodation costs also raise the cost of education. 46 But new, technology-based, options are becoming available. Massive Open Online Courses (MOOCs), introduced in 2008, challenged the traditional model of getting a university degree of physically residing near a university and attending classes in person. MOOCs allow students to listen to lectures, conducted by the best university lecturers from across the world, online. Most importantly, these lectures are provided free of charge. However, a problem with MOOCs is that it has not yet come up with a reliable way of accrediting courses and assessing learning. This is gradually changing. Traditional universities are teaming up with other companies to offer online degrees for a fraction of the cost of traditional degree courses. PROBLEMS OF COST, SPACE, AND QUALITY ARE CRIPPLING THE CHANCES OF MORE YOUNG SRI LANKAN'S GAINING HIGHER EDUCATION In Sri Lanka too, MOOCs could be a solution to many of the issues facing the country’s tertiary education system and those aspiring to get higher qualifications. Students can MOOCS COULD BE A SOLUTION TO MANY OF THE ISSUES FACING THE COUNTRY’S TERTIARY EDUCATION SYSTEM Through this method, universities would be needed primarily for providing practical knowledge, accrediting courses, and for assessing learning outcomes. As a result, the universities will be able to accommodate more students, as students will need to spend less time inside the university. Presently in Sri Lanka, universities are open mostly to those completing their general education. A system similar to MOOCs can open university doors even for older students – those who wish to upgrade their skills or wish to change their career paths. Problems of cost, space, and quality are crippling the chances of more young Sri Lankans gaining higher education. New technology provides new options like MOOCs that can help address this, especially as the country aspires to be a knowledge-based economy. MOOCs could be a win-win solution to students and the state, and Sri Lanka needs to take a close look at it for introducing them here. Asia’s Rise: Undoubted but not Unimpeded By Anushka Wijesinha I f there is one defining feature of the tectonic shifts in economics, geopolitics and society taking place today, it is the rise of Asia. Asian economies – particularly those in East and South East Asia as well as India – are at the heart of the changes that are underway in the global economy. Asia is now home to about 60% of the world’s population, generates around one-fourth of global output (set to rise to half by 2050), and produces 47% of the world’s manufacturing. With this has come a rise in prosperity – around one-third of global middle-class spending is by Asians. The spectre of the Asian Financial Crisis that badly hit the region’s key Eastern economies (primarily, Korea, Malaysia, Indonesia, Hong Kong, Thailand and Philippines), has, seventeen years since, faded into distant memory. In the six or so years following the onset of the global recession, projected and actual growth rates in emerging and developing Asia were often as much as 6 percentage points higher on average than that of advanced economies. In 2014 and 2015, while advanced economies are set to grow at 2.2% and 2.3%, emerging and developing Asia is set to grow at 6.7% and 6.8%, respectively. This is higher also than the 4.9% and 5.3% forecast for the wider group of emerging markets and developing economies. Asian Vitality China, one of two regional anchors along with India, has long surpassed Germany as the world’s leading exporter. Asian firms are among the world’s most valuable brands, Japanese and Korean cars are ubiquitous on European roads, American technology giants like Apple source billions of dollars’ worth of advanced components from Korean and Taiwanese suppliers, and Chinese firms are buying into German, British and American companies across a slew of sectors. Western multinationals and consumer brands have flocked to Asian cities to gain a foothold in the growing markets, as Asians aspire to a Western standard of living, and increasingly, can well afford it. Industry estimates suggest that Asian consumers account for half of the US$ 80 billion global luxury brands market. Technology diffusion is not only enabling Asian firms to compete better on a global scale but also giving rise to disruptions in consumption patterns through e-commerce. EXPORTS TO CHINA BY THE TOP-10 EXPORTING ASEAN COUNTRIES NOW EXCEED THEIR EXPORTS TO EITHER THE NAFTA REGION OR THE EU China’s Alibaba online marketplace, for instance, now boasts 180 million users, handled around US$ 250 billion worth of transactions in 2013 (more than eBay and Amazon combined), and has filed for what is arguably the world’s largest technology IPO valued at close to US$ 20 billion (higher than that of Facebook’s). Meanwhile, intraAsian trade is proving to be a most vital element of Asia’s economic vibrancy, post-crisis. Exports to China by the top-10 exporting ASEAN countries now exceed their exports to either the NAFTA region or the EU. Newer emerging Asian economies are also showing promise. The Philippines, for example, is making great strides away from being “the sick man of Asia”, following sweeping reforms by the current President, Benigno Aquino III. GDP grew by 7.2% in 2013, the fastest in ASEAN, and this too despite the devastation wreaked by Typhoon Haiyan. Philippines sovereign debt was upgraded to investment grade and the country rose up 26 places in the Global Competitiveness Index (since 2010) and 30 places in the Doing Business Index. But the rise of Asia is by no means a foregone conclusion – many factors will influence the future trajectory of this rise. Aside from country-specific challenges too numerous to be reviewed here, some wider challenges merit discussion. Inclusive Growth The rise in wealth and affluence in Asia is startling, but not surprising given the rapid growth seen there. Industry estimates suggest that Chinese consumers lap up 10% of worldwide luxury sales and East Asian shoppers account for between one-fourth and half of all purchases at designer stores in Europe. Just sixty years ago, the picture in Asia was very different. It was the world’s poorest region. Strong growth has lifted millions of out poverty, but much remains to be done. The ADB estimates that around 1.7 billion people in Asia still live on less than US$ 2 a day, and roughly 700 million on less than US$ 1 a day. Disparities exist among sub-regions of Asia as well – poverty remains highest in South Asia and is lowest in East Asia 47 Regional Tensions (driven mainly by China’s slashing of poverty from 85% in 1990 to 30% by 2008). “Inequality in Asia is rising. While Asians now take a greater share of global luxury sales, 1.7 bn people in Asia still live on less than US$2 a day” Income inequality, too, is a challenge for the region. According to further ADB estimates, in the 12 countries that account for more than fourfifths of Asia’s population, income disparities worsened over the last two decades. During this period, the Ginicoefficient (measuring inequality) in Asia has deteriorated sharply from 38 to 47. While the glitzy Chinese city of Shanghai has achieved living standards similar to Portugal, the number of poor in just eight Indian states is more than in twenty six of the poorest African countries combined. Ageing Population Ageing population, income inequality and rapid urbanisation are three of the critical challenges to Asia’s rise. Image (c) Anushka Wijesinha, Seoul, South Korea. 48 Another characteristic of the rise of Asia is the seismic shifts in its demographic structure. Asia is ageing at an unprecedented pace. Emerging evidence suggests that this increase in the ‘ageing population’ will occur more rapidly than in the West, giving rise to numerous public policy challenges including financing of healthcare and social welfare (pensions, etc.). Some countries like Japan and South Korea will experience this more rapidly than others like India and Indonesia. China will be particularly challenged, as its one-child policy will cause a sharp rise in old-age dependency. Slowly, the demographic dividend – which helped many of these Asian countries attain rapid growth – will wane. Rapid Urbanization Another prominent feature of the Asian growth has been the rapid urbanization of Asian cities, characterized by extensive rural-urban migration, heightened pressure on urban infrastructure like transport, water, housing and sanitation, and the concomitant rise in pollution. While the more newly industrialized countries in Asia such as China and India still do not have a majority urban population yet, the number of urban inhabitants is growing fast. It is estimated that by 2025, over half of the population in Asia will be urban. Environmental Pressures Linked to this is the growing concern around the environmental outcomes of rapid growth. It is now widely accepted that Asia cannot grow under the same ‘pollute now clean later’ pattern as the West. Certain parts of Asia, especially countries located in the tropical region and in islands, are among the most vulnerable to impacts of global climate change.Asia is facing serious environmental degradation issues linked to poor land use management, unsustainable energy consumption, and overuse of natural resources. All of these appear to be influencing changing weather patterns, including freak events. The frequency and the intensity of natural disasters in Asia are showing an increasing trend. During the period 1980 to 2009, over 38% of global economic losses due to natural disasters were reported from Asia. Across Asia, the geopolitical landscape is littered with hostilities. Some of the most critical ones are the maritime tussles in the South and East China seas, particularly between Japan and China, linked to the territorial claim of the Senkaku/Diaoyu islands; between China and the Philippines, linked to demarcations of the Exclusive Economic Zone in the sea; and among China, Vietnam, Brunei and Malaysia linked to the Spratly Islands. Heightened hostility around the former in 2012 caused China to impose a boycott on Japanese goods, resulting in a 20% year-on-year decline of Japanese exports to China. In the aftermath, Japanese firms sharply cut their foreign investments in China (from 13% of total FDI to 7% in 2013). Meanwhile, South and North Korea continue to be at loggerheads, oscillating between good relations and dangerous escalations. Farther West in Asia, the hostilities are dominated by India and China as well as India and Pakistan. In the former case, the two countries have longstanding tensions around the control of South Tibet (currently in India’s Arunachal Pradesh) along the disputed ‘McMahon Line’. In the latter case, the conflict around Jammu and Kashmir has been the overwhelming narrative shaping the two countries’ relations, and by extension, the region’s. THE TPP COULD PROVE TO BE A KEY FACTOR IN THE US-CHINA RIVALRY OVER ECONOMIC LEVERAGE IN THE REGION While India continues to be an influential anchor in South Asia, it is China that has emerged as influential across the region through strategic investments and assistance. Some argue that China’s rising preeminence in Asia could be countered by a growing US engagement in the region – rekindled by the Obama administration’s “pivot to Asia” strategy. The much-touted Trans- Pacific Partnership (TPP) appears to be the key tool in this. It is not a typical trade deal – it straddles trade, investment, and strategic economic cooperation. Asian countries that are wary of the security implications of China’s rise may warmly welcome a heightened US presence in the region. The TPP could prove to be a key factor in the US-China rivalry over economic leverage in the region, and a tool for Asia’s other economies to hedge against the rise of China. Asian Integration All of these developments have unravelled how far Asia has to go in terms of a common vision around its ascendance. The closest effort towards bridging this is of course the moves by ASEAN to establish a fully-fledged ‘diplomatic and economic community’ by 2015. But one cannot forget that this is limited to just a sub-set of Asian nations. Asia would need an ambitious regional effort of the type seen in Europe. But unlike the ‘European project’, few political leaders have come out as willing to stake their careers to further an ‘Asian project’. Groups of countries swing between fear/suspicion of, and mutual gain from, the two regional giants – China and India. Little regional cooperation on security and military affairs prevail. There is also a notable absence of panAsian institutional arrangements and agreements (similar to the European Commission) to further all these agendas in a manner that is strong, consistent, and widely accepted. Nevertheless, cooperation on trade and investment appears to be growing ever stronger. While much of the attention is on the TPP, another pan-Asian trade deal is taking shape more quietly – the Regional Comprehensive Economic Partnership (RCEP). As Ganeshan Wignaraja, Director of Research at the ADB Institute remarked at a recent IPS seminar, “the RCEP could create the world’s largest trading bloc and have significant implications for the world economy”. The RCEP bloc – that includes three of the largest economies in the world, China, India and Japan – would represent half of the world’s population, nearly onethird of global GDP and global trade, and one-fourth of global FDI inflows. The RCEP, an example of “megaregionalism”, has the potential to not only bring large gains to Asia, but also carve even stronger position for Asia in the world economy. Sri Lanka Must Take a Strategic View of Asia and Beyond Sri Lanka has much to learn from what has and continues to take place in Asia. This is what the IPS flagship annual report, ‘Sri Lanka: State of the Economy 2014’ takes a look at. It argues that, while the Sri Lankan context is no doubt different, and following the Asian trajectory identically may not be feasible or desirable, there are salutary lessons to draw from Asia’s rise, both for Sri Lanka’s own development journey but also in understanding how to best latch on to it. Amidst this, however, Sri Lanka cannot forget that it lies in an enviable geographical location that connects this rising Asia with the rest of the world. WHILE LOOKING AT LATCHING ON TO RISING ASIA, SRI LANKA CANNOT IGNORE COUNTRIES TO ITS WEST While looking at latching on to rising Asia, Sri Lanka cannot ignore countries to its West – whether it is in Africa, the Middle East, or traditional partners in the industrialized West. Although many are quick to assume it, the countries in Europe and North America are not in systemic decline. They will continue to be poles of innovation, creativity, consumption, and global leadership, and failing to recognize that and navigate accordingly, will only be to Sri Lanka’s peril. (This article is based on the ‘Policy Perspectives’ chapter of the ‘Sri Lanka: State of the Economy 2014’, the IPS flagship annual publication.) 49 Laying the New BRICS for a Global Financial Architecture? By Anushka Wijesinha IMF. But the IMF is no longer approaching emergency lending in the way it used to. This was clear especially in the aftermath of the global recession, when IMF’s usually-rigid conditionalities were ditched in favour of more pragmatic and palatable reform frameworks in the interest of expediency. This was true even in Sri Lanka’s own Stand-by Arrangement with the IMF in 2009. Yet, there were still politics at play as the government’s request in February 2009 was dragged until July 2009, supposedly due to opposition from the IMF’s key shareholder, the US, on issues surrounding the end of the war. It is unclear to what extent the CRA would be different, in offering easier and quicker responses. Some experts have suggested that the CRA would be modelled along the Chiang Mai initiative of ASEAN, established in May 2000. But the Chiang Mai Initiative is very closely linked to the IMF – only 40% of a member’s borrowing quota can be accessed without the member agreeing to an IMF policy program. Reforming Global Economic Governance W hile very little is still known about the modus operandi of the New Development Bank formed by the BRICS nations, Anushka Wijesinha and Raveen Ekanayake argue that the new initiative marks a significant step for emerging economies in moving beyond the Bretton Woods institutions. As the FIFA World Cup in Brazil came to a close in Rio De Janeiro, the spotlight shifted to another Brazilian city, Fortaleza, in July 2014 as leaders of five nations gathered to make a new breakthrough in global economic governance. Two and a half decades since a Goldman Sachs investment banker coined the first acronym for an emerging markets basket – BRICs (Brazil, Russia, India, China), and 3.5 years since it added its newest member – South Africa, this grouping of emerging economic giants have just inked a deal to create the world’s newest development bank, the ‘BRICS Bank’. The bank (and a reserve fund), which is to be based in Shanghai and headed in its first term by a nominee of India, is being seen as a counterweight to financial institutions headquartered politically and physically in the West, like the World Bank and IMF. The agreement could see a new relationship emerging between the BRICS and other developing countries in financing infrastructure projects, away from the dependence on traditional ‘Bretton Woods’ lenders. Whilst a lot has been covered on the deal to set up the bank, this article aims to go beyond and explore some of the other compulsions and trends that might shape the bank’s form and function. 50 A 5 Year Journey It has been 5 years since the inaugural BRIC summit took place in Yekaterinburg, Russia in June 2009, when the leaders of the first four nations decided to moved beyond a catchy acronym and become an international economic platform. At subsequent summits, some progress was made on new avenues of economic cooperation, but the idea for a BRICS Bank was first conceived in Delhi in 2012 and further mooted in 2013. In fact, the 2013 summit was supposed to clinch the deal but that did not materialize. Back in March 2012, in New Delhi, BRICS leaders inked a deal to provide credit to each other in local currencies, to facilitate economic growth during times of crisis. The aim of the currency swap deal is to promote trade and investment in local currencies as well as to cut transaction costs. It is also viewed as a step towards replacing the dollar as a reserve currency in trade between BRICS. In March 2013, the central banks of both Brazil and China took a bold step entering into a US$30 billion currency swap agreement. The new bank is, then, a strong next step in this ongoing process. BRICS Bank Structure Little is known about the structure of the new Bank. What is known, however, is what the funding for it will look like. The BRICS bank will compose of US$ 10 billion of paid up capital – with US$ 2 billion from each member over seven years, and an additional US$ 40 billion to be “paid upon request”. Even that had been contentious. While it was agreed that the bank will initially have a capital of US$ 50 billion, India was keen that each country would contribute an equal US$ 10 billion share and thus have equal shareholding. China, however, was reportedly vying to offer the majority of funds, and that raised a concern among the rest of the group who felt it would give China greater power. The new Indian Prime Minister, Narendra Modi, had been particularly keen to ensure that unlike the Bretton Woods IFIs – where economic might determines voting power – the new bank should have equal shareholding and give equal voice to all members. The overall agreement is considered an early victory for Modi – a successful multilateral engagement early on in his tenure. Emergency Lending sans-IMF In addition to the BRICS Bank, the five nations also agreed to set up a US$ 100 billion dollar currency reserve pool called the Contingent Reserve Arrangement (CRA), which will act as an alternative to the IMF in providing emergency cash during times of economic stress, short-term currency crises, or balance of payments problems. To this, China is set to contribute US$ 41 billion, Brazil, Russia and India will each contribute US$18 billion, and South Africa $5 billion. The CRA might certainly be more flexible and attach fewer conditions than the The tussle by the BRICS for a greater voice in global economic governance is not new and it is no secret that many emerging nations are keen to move beyond the era of WB and IMF pre-eminence in the international financial architecture. As an article on our blog highlighted in 2010, emerging economies have been agitating for some time to secure more voting power and greater participation in decision making, relative to their weight in the global economy. Despite their ever-growing dominance in the world economy, the BRIC countries together enjoy less than 10% of the IMF’s total votes, while the USA alone enjoys around 15%. The G8, on the other hand, which consists of the world’s 8 mostdeveloped economies plus Russia, enjoys nearly 50% of the total votes. A draft deal was reached several years ago to restructure the governing boards and related voting power – called ‘share of voice’ – in the World Bank and IMF to increase the influence of China and other emerging nations. However, the deal requires approval by US lawmakers, and the US Congress has stalled on passing the required enabling legislation. At the annual meeting of the IMF’s International Monetary and Financial Committee (IMFC) in Washington in April 2014, developing countries’ frustration around this reached a tipping point. They released a communiqué stating “we are deeply disappointed with the continued delay in progressing the IMF quota and governance reforms”. Following Summit, the Brazilian President reiterated this view, remarking that “The IMF urgently needs to review its distribution of voting power in order to reflect the unquestionable weight of emerging countries”. Modus Operandi of Lending Unclear Very little is still known about how the new bank will conduct its lending. Will it immediately be open for loan requests from developing countries, or will it initially only be for the BRIC countries? Will there be specific types of projects that the bank focuses on, or will it accommodate any type of infrastructure financing needs? To what extent will the terms, durations, and conditions of the loans be more favourable than what is on offer from traditional multilaterals? On the latter, it seems intuitive that the BRICS Bank will make a decisive break from the practices of established institutions. The bank is likely to make it easier and quicker for developing countries to access to large-scale financing for their infrastructure projects. But in the desire to be more flexible and expedient, will environmental, social, and governance considerations suffer? Moreover, how will the new bank build up the institutional capacity to fund and manage large-scale projects? Institutions like the World Bank and ADB come with years of experience in development projects – how to structure them, how to account for social and environmental concerns, how to ensure sustainability, how to ensure good governance and transparency in procurement. They have access to in-house and international experts with specific skills across technical and financial aspects of projects, and it will take years for the BRICS Bank to build up similar capability. Generous funding, alone, will not ensure successful projects. Or, it may be that the bank simply provides the financing in an arms-length manner, in the form of budgetary support to the countries, letting the respective country governments take it from there. There would be very different implications in each case. China may be the biggest winner. It could use the BRICS Bank to lend to countries, instead of direct lending, in order to veil its predominance in a country (considering recent backlashes to its presence in Africa), give more legitimacy to its investments, and burnish China’s image as a responsible yet pro-reform global player. BRICS Showing Growth Cracks? When Jim O’Neill first coined the acronym BRIC back in 2001, the world economy was in much better shape than it is now. At the time, in current US$ terms, these four emerging economies accounted for 8% of global output (23.1% in PPP terms), and were growing rapidly. Given each country’s growth trajectory, it was envisaged that they would surpass the six largest western economies in terms of economic might by 2041, to become the pillars of the 21stcentury economy. But many of them are projected to grow much more slowly than their 2000-2009 average growth rates (see Fig. 1), mainly brought on by the lingering effects of the global recession. China is in the midst of a growth tempering, brought on by a tricky re-balancing of the economy. India is perilously close to being trapped in stagflation, and the new government is under pressure to kickstart growth. The once high-flying Brazil is expected to grow no faster than the US in 2014. Russia too seems to be slowing down. According to a survey of economists by Bloomberg, growth in the five countries is projected to be half the pace seen seven years ago. With economic vitality waning in Brazil and India, focus is likely to be mainly on generating domestic growth. A New Player, but a Strategic Game With a reported US$ 2.5 trillion a year funding shortfall facing developing countries, the BRICS Bank can only go so far in bridging this, and it will take decades to build up. According to a UNCTAD study, the new bank could lend US$ 3.4 billion per year in a decade – less than 6% of what the World Bank expects to disburse in 2014. It is also significantly less than the lending by BRICS’ own development banks – 4% of what the BNDES of Brazil, and less than 2% of CDB of China, doled out in 2013. But to cite these challenges to foretell that the BRICS Bank, and indeed the grouping itself, have poor prospects is to miss the larger, more strategic point. The BRICS Bank has emerged not simply to share finances, but rather to counterbalance the hegemony of the traditional forces that have shaped the global economic governance arena for decades. They want to move beyond symbolism to real economic and political clout. To what extent this will happen is still uncertain. But the BRICS Bank and the CRA are certainly laying the foundations for a gradual change in the global financial architecture. It will have interesting ramifications for countries like Sri Lanka, which have large infrastructure financing needs, need to rely more on affordable commercial borrowing given the transition to middle-income status, and appear keen to explore newer and different sources of development finance. 51 What Sri Lanka Should Know about China’s New Economic Dynamism By Anushka Wijesinha Ruthless Focus on Reform The ruthless focus of the government on structural reform of the Chinese economy is impressive and bodes well for China’s future prospects. Since coming into power, the Xi Jinping-Li Keqiang government has embarked on the most comprehensive economic reform programme since the 1980s. Many Chinese experts who I spoke with acknowledged that the “structure of institutions need fundamental reform”. Already a lot of top-down reforms are happening. The government is greatly reducing ex-ante interference and increasing ex-post regulation and strengthening the legal system. The ‘administrative and approvals’ process has already gone through impressive streamlining, with over 600 items of regulations being either removed or delegated to lower levels of authority to be closer and more responsive to local business needs. China’s ongoing reform programme is a focused and strategic effort that has the potential to transform the business climate and also competitiveness of Chinese exports. Sri Lanka should take a cue from it. “China is still a developing country. We must give top priority to economic development. Only development will deliver progress. Ultimately, only development will resolve all the problems in China”. These were Premier Li Keqiang’s words at the start of the World Economic Forum’s Annual Meeting of New Champions (AMNC) 2014 held in Tianjin, China, , and would no doubt resonate well with the current policy orientation of the Sri Lankan government as well. Listening to his speech and interacting with delegates on the sidelines of the meeting gave a fantastic insight into the ongoing policy shifts in the Chinese economy and the underlying dynamics driving growth there. Given Sri Lanka’s closer links with China, it is a good to look at some key aspects of this shift, as it will become increasingly important for Sri Lankan businesses and policy makers to 52 e-commerce – is bringing in new efficiency in product markets. A third new engine that China is focusing on – the upgrading and ‘greening’ of production capacity in ‘old’ industries like petrochemicals and steel, etc. – has the potential to be a fresh source of growth. be better attuned to what goes on in the Chinese economy. Economy in Transition As widely acknowledged by any Chinese official or business leader I spoke to, the Chinese economy is in the middle of massive transformation – pivoting to new source of growth, tackling tough reforms, and managing new aspirations of the Chinese people. When I asked Daokui Li, Professor of Economics at Tsinghua University, about this shift, he remarked that the economy is in a “difficult and challenging transition. New engines of growth must take over the old”. He was referring to the re-balancing from growth led by exports and property development to consumption-based growth and greater infrastructure investment that improves competitiveness. Of course there are lingering doubts on how China’s ongoing economic re-balancing will pan out, and whether a ‘hard landing’ of the Chinese economy will cause systemic risks to the global economy. But several experts whom I interacted with asserted that the current slowdown is temporary, a ‘U-shaped’ adjustment. The government is keen to fend off such fears, and Premier Li asserted in his speech that, “We have the confidence, ability and resources to tackle the problems facing China”. Already private consumption is increasing, and the share of consumption in GDP could be as high as 50% by the end of the decade. Unemployment has remained at around 5% in 31 large and medium-sized cities surveyed. The services economy – particularly logistics, express delivery and The ongoing ‘business registration’ reforms are making it easier for businesses to start up, and this is already showing results. Between March and August this year, new business registrations grew by 61% yearon-year. On the financial side, the financial liberalization programme continues apace, with controls on interest rates being removed and becoming market-determined and borrowing rates set to follow suit. Of course, many officials are facing challenges in shifting to this new ethos of governance – regulating based on transparent rules, in dealing with businesses. But if the reforms are successful, this has tremendous implications for doing business in China. As Zhu Min of the IMF noted during one of the AMNC sessions, “If you want to run a healthy economy you need good institutional structures and transparency, and China is taking this very seriously”. Meanwhile, some bottom-up reforms are also happening, evidenced particularly by various experiments of reforming the State-Owned Enterprises (SOEs). Tackling State-owned Enterprises China’s SOEs are large beasts, with many of them featuring in the Fortune 500 list of top global firms, mainly because of their revenue. When market-oriented reforms in China started in the early 1980s, all enterprises were fully government owned. Since then, there has been a gradual move towards mixed ownership, but state ownership has continued to dominate. They play a key role in the Chinese economy, but with changes in the local and international context, many are under severe competitive and cost pressures. The ongoing focus of the Chinese government appears to be a multi-pronged approach in tackling this. Chinese SOEs are being geared to become more competitive and adopt an international perspective in their operations. Since the 1980s, SOEs have gone through a painful period of market oriented reforms. Many are much stronger than before and several of them perform well even in the international business context, winning lucrative contracts in overseas markets. As the Chairman of China Petrochemical Corporation (SINOPEC) Fu Chengyu argued during a session on the evolving business context in China, “Chinese SOEs are keen to enhance their core competence, restructure their corporate governance, and improve the quality of their assets. This was made clear in the Third Plenum statements of the Chinese leadership”. It appears that regardless of the evolving ownership structure of Chinese SOEs – whether mixed or still fully state-owned, building modern governance structures will be the key focus of the Chinese authorities. Fu added that, “the reform of SOEs is not to get rid of them, but to build them bigger and healthier”. New Dynamism through Innovation For an economy that, just at the start of this decade, was largely dependent on a lowwage low-cost model of export-led growth, the new focus on innovation-driven growth is truly impressive. China is moving rather rapidly to an economy driven by innovation and entrepreneurship. In his opening remarks at the WEF meeting, Premier Li put forward a vision of this growth – “Just imagine how big a force it could be when the 800 or 900 million labourers among the 1.3 billion population are engaged in entrepreneurship, innovation and creation”. And this doesn’t seem to be just rhetoric. With massive schemes like ‘Broadband China’ and ‘Smart Cities’, the government is harnessing technology and urbanization to drive a new wave of competitiveness. This is taking place not just in the traditional growth cities like Guangzhou, Shenzhen, Shanghai, and Tianjin, but in newer cities like Wuxi. The city of Wuxi in the Jiangsu Province is now home to 2,000 foreign companies (most of them are hi-tech), and among the 120-plus factories set up by 80 of the Global Top 500 firms, half of them are from Europe and the US. The Wuxi city government alone spends up to 2.8% of GDP on R&D investment. All this has been achieved while transforming the area from a polluted unlivable city in to a ‘garden city’ with extensive wetlands and lakes. The trend is seen around the country, where over 100 universities have innovation incubators to help young Chinese students commercialize their ideas, and in the past 3 years alone 100 universities in the country have started departments to research on the ‘Internet of Things’. “Innovation is a source of dynamism to boost development”, remarked Li, in his speech, and China certainly appears to have placed this agenda front and centre of its policy focus. Sri Lanka Must Learn While acknowledging that China’s political and administrative system, its large workforce, huge untapped human resource potential, vast natural resources, etc., offer the country distinct inherent advantages in infusing new dynamism into the Chinese economy, one cannot ignore the impressive way in which the Chinese leadership is steering this transitioning economy. It has important lessons for Sri Lanka’s own transformation. Hopefully the closer ties with China will benefit us beyond just the access to easy infrastructure investments. If I was to characterize the reform effort, it would be a “sheer focus and a strategic approach” – whether it is the impressive innovation drive or the ruthless focus on structural and institutional reform (including rooting out corruption). Recapping the ongoing policy focus, Premier Li announced, “We will continue to press ahead with revolutionizing government itself and further intensify efforts to streamline administration and delegate powers. We will deepen fiscal and taxation reform, promote reform of the budgetary management system so as to use public funds in an equitable and effective way, and continue to expand the pilot programmes for business tax to VAT reform which is conducive to development of the service sector, particularly the R&D companies”. Now, one may feel skeptical that this sounds like just a ‘shopping list’ of good policies. But, as highlighted in this article, the gap between reform rhetoric and reality is rapidly closing in China. Sri Lanka can certainly take a cue from it. (Anushka Wijesinha attended the World Economic Forum Annual Meeting of New Champions 2014 in China. He is a WEF ‘New Champions’ Awardee as a member of the Global Shapers Community – Colombo Hub.) 53 subsequently shifted to financing infrastructure development. Given the large infrastructure deficit following the end of the war, Chinese assistance was pivotal, according to Kelegama. “This gap China filled very effectively”, he observed. He added that, “Of course questions are being asked in regard to the repay period, interest rates, etc. Now they are not that important specially given the fact that most of this financial assistance are for long periods with long repayment periods. Assuming that the returns from these projects are rapid, we should be in a position to repay the debt we owe to China.”. &Trade Aid Between Sri Lanka and China A Snapshot of IPS Insights C hinese President Xi Jinping’s two day visit to Sri Lanka, the first by a Chinese leader in nearly 30 years, marked a new milestone in bilateral economic relations between the two countries. Coinciding with this, we present a snapshot of IPS researchers insights (including audio interviews) on this growing relationship, and what the future holds in store particularly in the context of the launching of a Free Trade Agreement. China’s growing presence in Sri Lanka is part of a broader trend of China’s growing influence in the South Asia region. As Dr. Kelegama, IPS Executive Director, argued in an op-ed to the East 54 Asia Forum in June on China’s growing influence in South Asia, since the late 1990s China’s trade and aid links with this region has been growing faster than India’s, “In 2012, India’s trade with its South Asian neighbours — those in the South Asian Association for Regional Cooperation (SAARC) — amounted to US$17 billion, compared to China’s trade with the same countries which amounted to US$25 billion. China is currently the largest trading partner of India, Pakistan and Bangladesh, and the second largest trading partner of Sri Lanka and Nepal.” He added that, “Chinese trade and investment links have led to growing Chinese financial flows in the form of loans and aid to the region since the mid-2000s. Most of these loans are associated with large infrastructure projects such as ports, highways, bridges and power plants.” This is evidenced in Sri Lanka too, with the majority of the agreements being signed during President Xi’s visit being on various infrastructure development projects. In an interview with Talking Economics’, Kelegama reviewed the recent trends in China-Sri Lanka economic relations, particularly relating to the soaring Chinese development assistance for Sri Lanka’s infrastructure thrust. He described how since the mid-2000s, China “gave a very significant helping hand to Sri Lanka” in financing defence expenditure during the war, and One of the key recent Chinese-funded projects has been the Colombo South Port. In an interview with Bloomberg last year, IPS Deputy Director Dr. Dushni Weerakoon observed “Sri Lanka has been looking toward China because of the availability of funding [...] With Sri Lanka’s plans to create a hub concept, expansion of the Colombo port makes good economic sense.” Many are of course pointing to the geo-strategic implications of China’s close and growing ties with Sri Lanka. In an interview with Bloomberg, Weerakoon noted that “China’s growing influence must surely be a cause of some concern to both Japan and India, evident from renewed Japanese interest in Sri Lanka and a more supportive approach by the new Indian government”, and “Sri Lanka stands to benefit from its growing economic links with each of these countries, but it will also require a careful balancing act on the political front.”. While Chinese financial assistance has soared, private Foreign Direct Investment (FDI) has been slow to come. Dr. Kelegama shed some light on this aspect in an interview with the editor of ‘Talking Economics’. He noted that, “the bulk of China’s investment is made by state-owned enterprises [...] if we use the strict definition of FDI, private FDI, China is not an important player in the Sri Lankan market, but since of late Chinese FDI has been increasing in the Sri Lankan economy, that is what the data shows. But if we also take into account the investment from Hong Kong [...] then that entire investment is very significant, in fact it comes very close to the Indian investment in Sri Lanka. All these new projects for instance the Shangri La hotel they are all from Hong Kong, not from mainland China.” WHILE CHINESE FINANCIAL ASSISTANCE HAS SOARED, PRIVATE FOREIGN DIRECT INVESTMENT (FDI) HAS BEEN SLOW TO COME He added, however, that if the yuan appreciates and Chinese firms look to set up in foreign locations, countries like Sri Lanka could stand to benefit. To hear his full comments on Chinese FDI prospects in Sri Lanka, listen to the audio clip embedded below. One of the key outcomes of Xi Jinping’s visit to Colombo was launching of the China-Sri Lanka Free Trade Agreement, which will set the stage for serious negotiations to begin. As this op-ed by Dr. Kelegama in the East Asia Forum highlighted, the growing economic relations (based on development financing) influenced changes in the trade between the two countries as well. IPS released the first ever analysis on the trade potential between China and Sri Lanka under a possible FTA, in April 2014, where authors asserted that, “Based on a preliminary analysis of RCAs (revealed comparative analyses), it appears that Sri Lanka and China have comparative advantage in quite dissimilar sectors which suggests that there are complementarities between the two countries to stimulate bilateral trade. Moreover, some of these sectors face high tariff rates in China and as such they are likely to benefit from tariff concessions negotiated under a FTA.” Sri Lanka is likely to benefit from a flexible and cooperative approach in crafting an FTA with China, if China’s existing trade agreements are anything to go by. As IPS research showed, China has adopted a fairly collaborative approach in devising the terms of FTAs with other countries, and Sri Lanka could expect the same. But they pointed to five key areas that must be tackled in the negotiation, in order to have a mutually beneficial agreement. IPS researchers Janaka Wijayasiri and Dharshani Premaratne argued that Sri Lanka must also draw from its, albeit limited, experiences with trade agreements in the past like the Indo-Sri Lanka and PakistanSri Lanka FTAs. Whether it be tackling Rules of Origin (ROO) issues or Not Tariff Measures (NTMs), they hold valuable lessons for crafting the ChinaSri Lanka agreement. In this article, IPS researchers also emphasised the need for greater consultation with domestic stakeholders – “Consultations should not be reserved exclusively to the level of governments – finance, commerce, or and trade departments, but rather with stakeholders at large. This can ease exporter-importer concerns, demonstrate that challenges in the agreements can be addressed in a participatory manner, and help create broader public awareness of, and confidence in, the opportunities and benefits of the agreements.” SRI LANKA IS LIKELY TO BENEFIT FROM A FLEXIBLE AND COOPERATIVE APPROACH IN CRAFTING AN FTA WITH CHINA, IF CHINA’S EXISTING TRADE AGREEMENTS ARE ANYTHING TO GO BY This was emphasised by Dr. Kelegama as well, in an article on the challenges posed by the proposed FTA - “An FTA between a large and a small country always poses challenges as stakeholders in the smaller country fear that the larger country will be the overall beneficiary at the expense of the smaller country. Thus a few lessons from the India-Sri Lanka FTA may be useful in the design of the FTA between China and Sri Lanka.” As Kelegama concluded in a presentation to the National Chamber of Exporters, “All in all, the China-Sri Lanka FTA should be welcomed but there needs to be caution in designing the framework governing it” 55 Sri Lanka’s Existing Looking at Trade Agreements and Lessons for the FTA with China By Janaka Wijayasiri and Dharshani Premaratne As Sri Lanka gears up to sign a trade agreement with China, Janaka Wijayasiri and Dharshani Premaratne highlights some key takeaways from Sri Lanka’s experience with previous FTAs. While Sri Lanka has been actively engaged in all multilateral trade negotiations and has been undertaking trade reforms in keeping with the WTO’s GATT principles, Sri Lanka also has been involved in a number of regional trade liberalization initiatives. Sri Lanka participates in two regional agreements, the South Asian Free Trade Agreement (SAFTA) and the Asia-Pacific Trade Agreement (APTA), and two bilateral agreements, the Indo-Sri Lanka Free Trade Agreement (ISFTA), and the Pakistan-Sri Lanka Free Trade Agreement (PSFTA). This article highlights some of the key lessons from Sri Lanka’s experience with these existing FTAs that must be borne in mind when negotiating a trade agreement with China. Special and Differential Treatment Given the asymmetry of economic size, Sri Lanka received special and differential treatment under each of the existing FTAs. For instance, Sri Lanka as a small economy was allowed a longer tariff phase-out period, a longer negative list, immediate duty free access for several products at the start of the agreement, and more favourable rules of origin under SAFTA, ISFTA and PSFTA. For example, India had a three-year tariff phase-out period, while Sri Lanka liberalized its tariff schedule over an eight-year period. Similarly, Pakistan liberalized products over a three-year period, while Sri Lanka liberalized its products over a five-year period. Under SAFTA, Sri Lanka was given eight years to phase-out its tariffs compared to seven years for non-LDC members. exports from Sri Lanka have received duty-free treatment to access the Pakistani market. Additionally, all three agreements have adopted the same domestic value addition criteria – 35% of the FOB value of the product[ii]. In negotiating a trade agreement, it is therefore important to relax and simplify the rules of origin so that they are easy for traders to understand and to comply with, while ensuring the necessary controls are in place to prevent fraud. Rules of Origin Negative List Rules of origin criteria, which are used to determine country of origin under a FTA, have varied among the FTAs in South Asia. SAFTA and ISFTA require a change of tariff classification at the 4-digit level.[i] This rule has been difficult to meet given the substantial transformation required of the product; for example, Sri Lankan tea exporters found they could not adhere to this rule even if they blended Sri Lankan tea with Indian tea. Having the experience with ISFTA, PSFTA negotiations adopted less restrictive rules of origin criteria. The major difference between the rules of origin of the ILFTA and PSFTA is the change of tariff classification criteria – the PSFTA adopts a change of tariff heading at the HS 6-digit level, which is more favourable to Sri Lanka. As a consequence, more value-added This list contains sensitive products which are exempted from tariff concessions under the agreement. The negative list should be prepared in consultation with local stakeholders by weighing revenue considerations as well as implications for local industries and livelihoods which may be adversely affected by trade liberalisation. However, it is important to keep the negative lists to a minimum to ensure that a substantial proportion of tariff lines and products are covered under the agreement. “The negative list should be prepared in consultation with local stakeholders by weighing revenue considerations as well as implications for local industries and livelihoods” For example, Sri Lanka’s negative list under PSFTA consists of 697 products, mostly in agriculture, rubber products, paper products, footwear, ceramic products, motor vehicles and parts, and metal products.[iii] Pakistan’s negative list, which consists of 540 tariff lines, contained many of Sri Lanka’s main exports to Pakistan including tea, rubber products, certain ceramics, paper products and several textile and garment products.[iv] Under the ILFTA, India has maintained a smaller negative list with 429 tariff lines compared to Sri Lanka’s long negative list of 1,220 tariff lines. Non-tariff Measures When tariffs are brought down through negotiations, non-tariff measures (NTMs) or ‘behind the border barriers’ can reduce the use of the agreements if they are not effectively dealt with. NTMs should be identified at the onset and addressed along with tariff reductions/eliminations. In this regard, there should be binding commitments. Many Sri Lankan exporters have faced difficulties in entering the Indian market due to the prevalence of NTMs such as state taxes, standards, and administrative procedures[v], which are outside the scope of tariff reductions under the ILFTA. Tariff-rate Quotas Supply-side Constraints There is little point in getting concessions under a trade agreement if the country does not have the capacity to supply the goods in demand – this can be a constraint in the case of a small country like Sri Lanka. This was demonstrated in the case of strawberry exports from Sri Lanka to India[vii]. Awareness The lack of knowledge and awareness among traders of the concessions offered by the FTAs has been a key impediment to Sri Lanka garnering maximum benefits of existing FTAs. Although a majority of exporters/ importers were aware of the FTAs, many SMEs lack awareness of specific information on the duty concessions offered and the processes in acquiring the preference (ROO, tariff rate quotas, etc.). Although tariff schedules have been liberalized to a certain extent under ILFTA and PSFTA, Sri Lanka’s trade expansion with India and Pakistan has been impeded by tariff-rate quotas agreed under the Agreements[vi]. India has maintained tariff-rate quotas for tea, garments, and textiles while Pakistan maintained tariff-rate quotas for tea, garments, and betel. Hence, a bulk of the tea exports from Sri Lanka to India and Pakistan have been outside the FTAs. Visas Mutual Recognition of Standards The absence of a fixed body to address problems arising when trading under the agreement is an impediment to using the FTAs better. When problems arise regarding a shipment – with documentation, for instance – there is no formal body of authority that takes up the complaints and addresses them quickly. Quick response is essential due to high costs of delays, and if the cost benefit under the FTA is negated then traders will not be encouraged to export/import further. Lack of mutual recognition of standards between two countries in an FTA is another obstacle exporters encounter, especially exporters of perishable goods. Lack of a Mutual Recognition Agreement (MRA) for standards between Sri Lanka and its FTA partners has resulted in various additional checks/certifications on the goods at the importing country, even though they have been previously tested and certified by the relevant authorities 56 in Sri Lanka. Some of the issues faced by traders include intergovernmental non-acceptance of testing methods and standards; packaging, labeling and markings; and duplication of health and safety checks in India and Sri Lanka. This has resulted in delays and additional costs. Traders have highlighted the need to facilitate the visa processes between two countries if trade relationships between them are to be enhanced. Sri Lankan exporters to India for instance have stated that getting business visas to India is extremely difficult and have highlighted the need to promote businessmen visiting India and to obtain multiple entry visas. Institutional Support Consultation Experience with the ILFTA, and attempts to extend the agreement into a Comprehensive Economic Partnership Agreement (CEPA), highlights the need for greater private-public dialogue in Sri Lanka on trade agreements, on an on-going and regular basis[viii]. Consultations should not be reserved exclusively to the level of governments – finance, commerce, or and trade departments, but rather with stakeholders at large. This can ease exporter-importer concerns, demonstrate that challenges in the agreements can be addressed in a participatory manner, and help create broader public awareness of, and confidence in, the opportunities and benefits of the agreements. References: [i] de Mel, D., undated, “India – Sri Lanka, Pakistan – Sri Lanka Bilateral Free Trade Agreements”, Institute of Policy Studies of Sri Lanka, Colombo, Sri Lanka. [ii]Weerakoon, D. (2010), “SAFTA: Current Status and Prospects” in Promoting Economic Cooperation in South Asia: Beyond SAFTA ed. Sadiq Ahmed, Saman Kelegama and Ejaz Ghani, Sage Publications, New Delhi, India. [iii]IPS (2007), “International Economic Environment” in Sri Lanka: State of the Economy 2007, Institute of Policy Studies of Sri Lanka, Colombo, Sri Lanka. [iv]ibid [v]Kelegama, S and C. Karunaratne (2013), “Experiences of Sri Lanka in the Sri Lanka-India FTA and the Sri LankaPakistan FTA,” Background Paper on Regional Value Chains, UINCTAD, available at: [http://unctad.org/en/ PublicationsLibrary/ecidc2013misc1_ bp10.pdf] [vi] Ibid [vii] Kelegama, S. (2014), ‘Challenges remain for China–Sri Lanka FTA’, East Asia Forum, available at: http://www. eastasiaforum.org /2014/03/28/ challenges-remain-for-china-sri-lankafta/ [viii]Ibid 57 China’s Approach to FTAs with Other Countries: What Can Sri Lanka Expect? Janaka Wijayasiri and Dharshani Premaratne argue that if China’s FTAs with other countries are any indication, Sri Lanka can expect a flexible and collaborative free trade agreement, but there are five key areas that need tackling in the FTA negotiation. In a previous article on the proposed Sri Lanka- China Free Trade Agreement (FTA), we looked at the potential to expand bilateral trade. Since then, the two countries have finalized a Joint Feasibility Study on 11 March 2014. As expected, the study reported that the FTA would bring substantial economic and trade benefits to the two countries, with both governments expressing hope that the deal will be implemented at an early date. Given that series of negotiations are likely to begin to hammer out an agreement in the near future, it is worth looking at the main features of China’s existing FTAs with other countries to get a sense of what a possible FTA with China would look like. China’s FTA Negotiations Though China was a latecomer to regional trade agreements, it has been actively pursuing FTAs with various countries over the past two decades. China has concluded FTAs, or entered into negotiations, with almost every major region in the world, including Europe, America, Middle East, Africa, East Asia, Southeast Asia, South Asia, 58 and Australasia. By June 2014,China had become a party to eleven bilateral trade agreements and one regional trade agreement – ASEAN (2004), Hong Kong (2004), Macao (2004), Chile (2006), Pakistan (2007), New Zealand (2008), Singapore (2008), Peru (2009), Costa Rica (2010), Taiwan (2010), Switzerland (2014) and Iceland (2014). CHINA HAS CONCLUDED FTAS, OR ENTERED INTO NEGOTIATIONS, WITH ALMOST EVERY MAJOR REGION IN THE WORLD As stated in its 12th Five-Year Plan, China intends to accelerate the implementation of its Free Trade Area Strategy, strengthen economic linkages with major trading partners, and deepen cooperation with emerging markets and developing countries. Currently, it is in the process of negotiating eight more FTAs; with the Gulf Cooperation Council (GCC), Australia, Norway, Southern African Customs Union (SACU), Korea, India and of course, Sri Lanka. A Gradual Approach to Trade Liberalization China has adopted a gradual approach in negotiating with trading partners – first, striking an agreement in trade in goods, then services and investment, followed by a comprehensive FTA package. The ASEAN-China FTA, China-Chile FTA, and China-Pakistan FTA followed such an approach. Both the China-ASEAN FTA and China-Pakistan FTA were preceded by an ‘Early Harvest Programme’, which was based on tariff reductions, followed by further negotiations on goods, services and investment[1]. For example, the liberalization of trade in goods with Pakistan was started with the signing of the Agreement on Early Harvest Programme in April 2005, with the Agreement on Trade in Services signed four years later (February 2009). Similarly, the agreement on trade in goods with ASEAN was signed in November 2004 while the agreement on services was signed in January 2007. In contrast, China-New Zealand, ChinaSingapore, and China-Peru FTAs were more comprehensive in scope at the time of signing. Coverage of Goods protecting its domestic industries. A number of vegetable products, animal and vegetable fats and oils, prepared food, chemicals, wood products, pulp and paper, and textile categories are protected by China. In almost all of the agreements, China has placed pulp and paper in its negative list. Nevertheless, almost all of the agreements cover a substantial number of tariff lines and trade, with the exception of FTA with Pakistan. There are no products exclusions in the FTA with ASEAN members. However, ASEAN and China maintain a Sensitive List for which tariffs are being lowered incrementally between 2012 and 2018. Preferential Rules of Origin Rules of origin, which are used to determine the country of origin of a product in preferential trade agreements, tend to vary from agreement to agreement in the case of China. Sometimes they are across product groups, which add to the complexity of China’s import regime[3]. Rules of origin criteria for China’s FTAs with ASEAN, Chile, Pakistan, and Singapore are Local Value Addition (40% of total content) and Regional Value Content (60% of the value of the product). The criteria for Peru, New Zealand and Costa-Rica are Change of Tariff Classification (HS 2-4 digit level) and Regional Value Content (40-60% of the value of the product). For most of China’s FTAs partners, the agreements have eliminated tariffs and allowed preferential market access to China, to a great extent. For example, in its agreements with Chile, Peru and New Zealand, China committed to eliminate duties on 94.6% to 97.2% of the tariff lines, which corresponded to 88 – 99.1% of its bilateral imports from these trading partners[2]. The only exception to this is the China-Pakistan FTA. Tariffs and trade under it have not been liberalized to a substantial level even after its full implementation in 2012; duties on 35.4% tariff lines were eliminated, corresponding to 44.4% of China’s imports from Pakistan. Pakistan too has committed relatively low levels of tariff elimination in the agreement. Services Liberalisation China’s Negative Lists Due to their focus on liberalizing markets and facilitating trade, agreements between China and other developing countries aimed at reducing tariffs and non-tariff barriers to trade. Moreover, China was reluctant to includeissues such as environment protection, competition policy, and labour standards as part of the FTA package. However, China has China’s FTAs take into account the sensitiveness of both countries and contain Negative Lists, which exclude a number of products from tariff liberalisation. Except with Singapore, China maintains a negative list with all the other FTA members, aimed at While the Agreements on Trade in Goods have taken a Negative List approach, China’s Trade in Services Agreements have taken a Positive List approach, in line with WTOs General Agreement on Trade in Services (GATS). Interestingly, in China FTAs with ASEAN, Chile, and Pakistan, the Agreement on Services is a separate document and follows the Agreement on Goods, while in the case of other partner countries (New Zealand, Peru, Singapore, Costa Rica), the FTA agreement was more comprehensive in coverage and included not only trade in goods but also services. Cooperation Beyond Tariffs shown some willingness to broaden its focus and include these issues over time. For example, China’s agreements with developed countries such as New Zealand and Singapore in 2008 incorporate issues such as intellectual property rights, trade facilitation, labour standards, and competition policy. [4] Nonetheless, China has taken a cautionary approach and chosen not to include them in the main agreement of the FTA but as stand-alone agreements or MOUs.[5] China has recently taken a more comprehensive approach to FTAs in the agreements with Iceland and Switzerland signed in 2013. China is now demonstrating a greater willingness to engage in deeper level of liberalization of trade, shifting from the previous narrow strategy of focusing on trade in goods to a broader focus on other issues. Nevertheless, China’s FTAs are not as comprehensive in terms of coverage and depth compared to FTAs among other countries/groups like the US, Japan and EU.[6] Five Focus Areas in the Negotiations Firstly, considering the asymmetries in size of the economy and production capacity between Sri Lanka and China, Sri Lanka needs to negotiate receiving similar (or higher) concessions that were granted to other countries that hold preferential treatment in accessing China. The negotiations on preferential market access to China must enable Sri Lankan exports to be as competitive as those from China’s other FTA partners. Secondly, rather than agreeing on a general rules of origin criterion, the negotiations should focus on achievable product-specific rules of origin requirements, as the requirements differ from product to product. Thirdly, the sensitivities of domestic industries to SRI LANKA NEEDS TO NEGOTIATE RECEIVING SIMILAR (OR HIGHER) CONCESSIONS THAT WERE GRANTED TO OTHER COUNTRIES THAT HOLD PREFERENTIAL TREATMENT IN ACCESSING CHINA imports from China also need attention when formulating and negotiating Sri Lanka’s negative list. Fourth, Sri Lanka must remember that since provisions made under China’s FTAs are based on the principle of reciprocity, the potential benefits of allowing preferential market access to Sri Lanka must be assessed carefully, and domestic interests and sensitivities must be accommodated in the roadmap towards finalizing the FTA. This would require a closer consultation between the government, and other stakeholders in the economy including the private sector, and civil society of the country. Finally, to achieve a more comprehensive bilateral cooperation between the two countries, the FTA should gradually move beyond trade in goods to cooperation in other areas such as investment, services and trade facilitation at a later date to build on a negotiated trade agreement. Flexibility Will Be a Bonus A cursory look at China’s existing FTAs indicates that the country does not follow one template or model in its agreements, but tailors them to the preferences of the partner country. Unlike the US, which has a standard model (together with enhancements) that it more or less adheres to in negotiating FTAs, China’s FTAs differ widely from one agreement to another[7]. China appears to be less stringent and more flexible; each agreement is made in collaboration between China and partner countries. As Zhao and Webster (2011) assert, the ‘greatest defining feature of Chinese FTAs is their malleability’. This no doubt serves China’s interest as well those of Sri Lanka. References: [1] Zhang, Y. Economic and Social Impact of Liberalization: A Study on Early Harvest Program under China-ASEAN FTA, Beijing: Social Sciences Academic Press [2] WTO (2012) “Trade Policy Review: China – Report by Secretariat”. [3] Ibid. [4] Zhan, Yunling (2011), People’s Republic of China, in Asia’s Free Trade Agreements: How is Business Responding? (ed.) M. Kawai & G. Wignaraja, Edward Elgar Publishing, pp.107-109. [5] Gao, H. (2011), “China’s Strategy for Free Trade Agreements: Political Battle in the Name of Trade”. [6] Ibid [7] Zhao, J. & Webster, T. (2011), Taking Stock: China’s First Decade of Free Trade, https://www.law.upenn.edu/ live/files/ 140-zhaowebster33upajintll652011pdf 59 IPS NEWS July 2014 - December 2014 IPS supports “Digital Dynamism” 14th Ministerial of the Indian Ocean Rim Association (IORA) Dr. Saman Kelegama, Executive Director, IPS, was a delegate of the government of Sri Lanka team at the 14th Ministerial of the Indian Ocean Rim Association (IORA) held in Perth, Australia in October 2014. Dr. Kelegama led the Indian Ocean Rim Academic Group (IORAG) from Sri Lanka and outlined the measures taken to establish the Centre for Excellence on Ocean Sciences and Environment in Indian Ocean Rim (COE) at the IPS with GoSL funding. IPS in partnership with Google, conducted a Round Table discussion titled “Digital Dynamism”, with the aim of shaping a new narrative around innovation and entrepreneurship in the country. “Digital Dynamism”, held at IPS premises in December 2014, was a platform to share insights on initiatives that are taking advantage of digital tools to disrupt traditional models. SASEC Trade Facilitation Week: Sanitary/ Phytosanitary and Technical Barriers to Trade IPS Research Officer Kanchana Wickramasinghe won an award for Personal Accomplishment at the ‘Top Outstanding Young Persons (TOYP) in Sri Lanka Award 2014 held in November. Organized by the Junior Chamber International (JCI) Sri Lanka, recognizes outstanding individuals, whose personal and professional achievements in a chosen field are exemplary, outstanding and nationally beneficial. In August, Kanchana Wickramasinghe, also won the First Prize for the Japanese Award for Outstanding Research on Development (ORD) in the Global Development Awards and Medals Competition of the Global Development Network (GDN). The 7th South Asia Economic Summit (SAES) was held in New Delhi, India, from the 5th to 7th of November 2014, under the theme ‘Towards a South Asia Economic Union’. IPS Executive Director Dr. Saman Kelegama, Executive Director, Deputy Director Dr. Dushni Weerakoon, Research Economist Anushka Wijesinha, and Research Officers Dilani Hirimuthugoda, Dharshani Premaratne, and Raveen Ekanayake were resource persons at the summit. It was organized by the Research and Information Systems for Developing Countries (RIS), India. IPS organized the 6th SAES in Colombo last year and was a co-organizer of the 7th South Asia Economic Summit along with CPD (Bangladesh), SAWTEE (Nepal), SPDI (Pakistan), and SACEPS (Nepal). IPS Research Officer Raveen Ekanayake was invited as a resource person to assist and advise the Sri Lankan delegation at the SASEC Trade Facilitation Week: Sanitary/Phytosanitary (SPS) and Technical Barriers to Trade (TBT) held in Thailand. The meeting, co-organized by the Asian Development Bank (ADB) and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) was held on 1-3 December 2014 in Bangkok,Thailand.The meeting discussed current and potential contributions of international organizations in harmonization of standards, setting of regional standards, and facilitation of mutual recognition arrangements/ conformity assessments. Workshop on ‘Trade Analysis and Economic Integration in Pakistan-India Relations:The Regional Dimension’ IPS and InterAnalysis Ltd. jointly organized a five day workshop on ‘Trade Analysis and Economic Integration in Pakistan-India Relations: The Regional Dimension’ in November 2014.The workshop discussed regional trade issues within SAARC drawing on work completed by participants who have attended previous workshops in Delhi, Islamabad, and Kathmandu.The key objective of the workshop was to introduce the Tradesift software, developed by the InterAnalysis Ltd. in Sussex University, and introduce the use of it in trade policy analysis in the region. 60 The 7th South Asia Economic Summit (SAES) Regional Conference on “MultiStakeholder Inputs for the 18th SAARC Summit 1PS Research Fellow Dr. Ganga Tilakaratna, participated and contributed to the Regional Conference on “Multi-Stakeholder Inputs for the 18th SAARC Summit – Declaration on Strengthening Social Protection in South Asia” organized by the South Asia Centre for Policy Studies (SACEPS) and Friedrich Ebert Stiftung (FES) held during 21-22 August, Kathmandu, Nepal. IPS Executive Director Dr. Saman Kelegama also participated and Chaired a session on redrafting the Declaration on Strengthening Social Protection with stakeholder inputs. Executive Director also participated in the Board Meeting of the SACEPS which was held back-toback with the conference. Regional Dialogue: Paths to Women’s Economic Empowerment in IORA Countries The Inaugural Gamani Corea Memorial Lecture Dr. Saman Kelegama, Executive Director, IPS, delivered the Inaugural Gamani Corea Memorial Lecture organized by the Gamani Corea Foundation on 3rd November 2014 at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKIIRSS). Dr. Kelegama delivering the lecture on ‘Recent Trends in International Trade: Implications for Sri Lanka’, honoured late Dr. Corea for his immense contribution to economic policymaking. Research Officer Sunimalee Madurawala participated at the “Indian Ocean Rim Association (IORA) Dialogue Event - Paths to Women’s Economic Empowerment, with a Focus on Tourism and Textiles in IORA Countries”, held in Malaysia in August 2014. The Dialogue aimed to promote women’s economic empowerment as a key element of broader economic growth, through a close examination of the tourism and textiles sectors. It brought together more than 100 women and men from business, government, academia and civil society from all twenty IORA countries-across Africa, South and East Asia and the Middle East. 61 LATEST IPS PUBLICATIONS International Conference on Policies for Mainstreaming Migration into Development in Sri Lanka Presentation on the 3rd MDG Sri Lanka Draft Report IPS Executive Director Dr. Saman Kelegama made a presentation on the 3rd Millennium Development Goals Sri Lanka draft report prepared by the IPS team, on UN Day at the UN Mission in Colombo on 24th October 2014. The event organized by the UN Mission in Colombo was graced by the Minister of External Affairs, Prof. G.L. Peiris (Chief Guest), parliamentarians, members of the diplomatic community, government officials, civil society activists, NGO representatives, and selected students. IPS organized a conference on “Policies for Mainstreaming Migration into Development in Sri Lanka”. The conference took place on 14th of August as a component of the IPS project Meeting the Development Challenges of Migration (MED_MIG), which is funded by the Think Tank Initiative (TTI) - a multi-donor program managed by Canada’s International Development Research Center (IDRC). Repositioning in the Global Apparel Value Chain in the Post-MFA Era: Strategic Issues and Evidence from Sri Lanka By Prema-Chandra Athukorala and Raveen Ekanayake International Economic Series No. 10 November 2014 The post-MFA world apparel trade has brought in many surprises: a number of 'predicted losers' have maintained or increased their market shares, while some 'predicted gainers' have performed poorly. This paper aims to broaden the understanding of the determinants of inter-country differences through a case study of the export-oriented apparel industry in Sri Lanka. Can People in Sri Lanka’s Estate SectorBreak Away from Poor Nutrition: What Causes Malnutrition and How It Can Be Tackled Workshop on Establishing a Centre of Excellence on Ocean Sciences and Environment for the Indian Ocean Rim Countries Seminar on ‘China-Sri Lanka Free Trade Agreement’ IPS Executive Director Dr Saman Kelegama delivered the Keynote Address at the ‘China-Sri Lanka Free Trade Agreement’ seminar organized by the National Chamber of Exporters of Sri Lanka in July 2014. The address was on the topic “China-Sri Lanka Free Trade Agreement: Opportunities and Challenges”. There were more than 150 participants from the government, private sector and the civil society at the seminar. The IPS, in collaboration with the Ministry of External Affairs organized a regional workshop on “Establishing a Centre of Excellence (CoE) on Ocean Sciences and Environment for the Indian Ocean Rim Countries”. The workshop, held in Colombo in July 2014, intended to identify specific priority areas of focus of the proposed CoE, and discussed its preliminary structure and implementation arrangements, with representatives from Member States and obtained their comments and suggestions. Another objective was to establish a network among relevant institutions based in member countries to exchange and share ideas in relation to ocean sciences and environment. Delivering the welcome address Dr. Saman Kelegama highlighted that high growth in IORA countries has also translated into negative impacts on the Indian Ocean, and stressed the importance of regional cooperative action for sustainable solutions. By Priyanka Jayawardena Health Economic Series No.1 September 2014 Improved healthcare alone cannot improve all health outcomes, as there are deep rooted socio-economic factors affecting health. Thus, this study looks beyond health and explores the socio-economic determinants of child and maternal malnutrition in the Estate sector. Sri Lankan Female Domestic Workers in the Middle East: Does Recruitment through an Agent Minimize Vulnerability? By Bilesha Weeraratne Labour Economic Series No.18 September 2014 The vulnerability of female domestic workers at destination is an important concern of Sri Lanka. This study attempts to discern if there is a nexus between vulnerability of female domestic workers at destination and the recruitment channel. Returning Home: Experiences & Challenges Project Advisory Committee Meeting and the Researchers’ Meeting of the South Asian Trade and Transport Facilitation Audit Project Executive Director Dr. Saman Kelegama and Research Officer Suwendrani Jayaratne, Research Officer participated in the ‘Project Advisory Committee Meeting’ and the ‘Researchers’ Meeting’ of the ‘South Asian Trade and Transport Facilitation Audit Project’.The meetings were organized by South Asia Watch on Trade, Economics and Environment (SAWTEE) with support of Department of Foreign Affairs and Trade, Australian Government. Country background reports of the South Asian countries were presented at the meeting with the session being chaired by Dr. Kelegama. 62 By Suwendrani Jayaratne, Nipuni Perera, Neluka Gunasekera and Nisha Arunatilake Labour Economic Series No.17 September 2014 The study analyses the economic and social reintegration experience of returnee migrants in Sri Lanka. It also examines effectiveness of existing programmes and institutions in assisting returnee migrants upon return. Female Employment for Inclusive Growth: Trends, Issues and Concerns of Female Labour Force Participation in Sri Lanka By Sunimalee Madurawala Labour Economic Series No. 16 September 2014 This study focuses on trends, issues and concerns of female labour force participation in Sri Lanka in order for the country’s growth to be inclusive. It also assesses whether the growth has improved the opportunities to access the labour force for females across different income groups over time. Towards a Stronger, Dynamic Inclusive South Asia Edited by: Saman Kelegama and Anushka Wijesinha 2014 This book examines four key issues concerning growth in South Asian states, namely, making maximum use of the region’s human capital resources by creating productive employment for a growing labour force, adapting to the vagaries of climate change and its socioeconomic consequences; addressing intracountry growth disparities; and ensuring the continued competitiveness of private enterprise in both domestic and external markets. Labour Migration in Sri Lanka: Select Annotated Bibiliography Compiled by: Dilmani Warnasuriya and Premila Gamage Labour Economic Series No.15 August 2014 This annotated bibliography was prepared as a guide and an easy reference to available scholarly literature on migration in the country which is scarce, scattered and not easily accessible. It covers the ten year period between 2004 and 2014. The State of the Economy 2014 Theme: Rising Asia - Opportunities and Challenges for Sri Lanka October 2014 The Sri Lanka: State of the Economy 2014 argues that, while the Sri Lankan context is no doubt different, and following the Asian trajectory identically may not be feasible or desirable, there are salutary lessons to draw from Asia's rise, both for Sri Lanka's own development journey but also in understanding how to best latch on to it. For further information on publications contact Amesh Thennakoon, Publication Officer [email protected] or 0112143107 63 PUZZLE 3 4 5 3,000 In November it was reported that at least 3,000 Sri Lankans were among 50,000 illegal immigrants the British Immigration authorities lost track of. The figure of 3,000 has been suggested to Sri Lankan consular officers as a minimum they think are evading arrest and deportation. 7 8 9 10 11 12 16 14 15 17 19 20 Across 2. Regional organisation in South Asia 4. This ocean covers 30% of global ocean 8. People aged 65 years and above are expected to grow dramatically in this region 9. In best-performing, ensuring teach quality starts with ... 11. A major source of livelihood in SL which successive governments have supported through fertilizer subsidies 13. A migrant who turns to his country 17. Frequency and intensities of these events have increased 18. Sri Lanka aspires to be such an economy 19. Acronym for 4 emerging markets 20. Major source of foreign exchange to Sri Lanka Down 1. Largest foreign employment market 3. China's biggest online commerce company 5. This list contains sensitive products which are exempted from tariff concessions 6. A major development challenge and a multidimensional issue 7. Chinese President 10. Ozone depleting substance 12. A forest range in Sri Lanka 14. Women are more likely than men to invest a large portion of income in ... 15. Province with the highest number of teenage pregnancies in the country 16. Deadly disease of the tropics Answers Across: 2. SAARC; 4. Indian; 8. Asia; 9. Recruitment; 11. Paddy; 13. Returnee; 17. Drought; 18. knowledge based; 19. BRIC; 10. Remittances. Down: 1. Middle East; 3. Alibaba; 5. Negative; 6. Poverty; 7. Xijin Ping; 10. CFC; 12. Knuckles; 14. Education; 15. Eastern; 16. Dengue 64 Sri Lanka’s surging IT and BPO exports is expected to hit the one billion dollar mark in 2015, surpassing previous expectations. The country earned $719 mn from ICT exports, and the projection for 2014 was $820 mn. It also has seen a 123% growth in IT sector over the last five years. “London Stock Exchange and HSBC also praised the Lankan IT sector with joy,” said Saman Maldeni (Director, Export Services of SLEDB). 70% 18 Sri Lanka saw a rapid economic growth and received US$ 1.4 billion in Foreign Direct Investments up to December. Sri Lanka is looking at high technology investments which would further increase this and end the year setting up a record revenue figure. 1bn 6 13 FAST FACTS 1.4 bn 2 1 According to social media analytics Socialbakers almost 70% of Facebook users in Sri Lanka are males. However, if you consider the age rather than gender, 41% of Sri Lankan Facebook users are between the ages of 18 and 24 and about 34% are between the ages of 25 and 34. 139 bn t4 ,h0a0 n0 More private companies and individuals have failed to pay taxes to Inland Revenue Department (IRD). The unpaid taxes in 2011 amounted to as much as Rs. 139 billion. 3,000 22 bn In October 2014, Facebook purchased the mobile messaging service WhatsApp for up to $22 billion (£13.7 billion) in cash and stock in the firms biggest ever acquisition. This is an increase on the $19 billion (£11.8 billion) initially announced as Facebook's share price has risen since the deal was first announced. Facebook will pay $4.59 billion (£2.86 billion) in cash and 177,760,669 shares in the company, which have risen to $77 (£48) since February 2014. A marginal increase of at least two kilos in the daily plucking average of each tea plucker can significantly boost Sri Lanka's entire plantation industry and benefit all stakeholders by bringing down the skyrocketing unit cost of production of tea, by nearly seven percent, a Planters' Association of Ceylon spokesman said. 2KG The overall poverty rate in Sri Lanka is 6.7%, while in Monaragala District the poverty level has increased to 20.8% in 2012/13 from the 14.5% registered in 2009/10. 6.7% Over 3,000 qualified Principals are without proper placements, as several schools including 98 National schools in Sri Lanka are currently head-less, an Education Trade Union claimed. Ceylon Teachers Union President, Joseph Stalin said “Principals are chosen by a competitive examination. These exams were last conducted in 2009, when about 1,980 candidates were selected to the Class II category and 2,200 candidates selected to the Class III category. 12,000 Nearly 12,000 females went to the UAE in 2013 to work as domestic workers with an estimated 40,000-50,000 Sri Lankan domestic workers presently employed in the seven emirates of the UAE (Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah). Sri Lanka has received $57 million from the Global Fund to Fight AIDS, Tuberculosis and Malaria. For 20142016 Sri Lanka will be receiving $16 million for HIV/AIDS, $ 12.2 million for tuberculosis and 17.3 for malaria. Of this $ 45.5 million, France contributes to over 12%, amounting to over $ 5.5 million in total just for Sri Lanka. 16 There are as much as 15, 000 vacancies in the country’s E x p o r t Processing Zones (EPZs), and this high dearth of labour is hampering operations of factories l o c a t e d in them, Investment Promotion Minister Lakshman Yapa Abeywardena said. 15,000 TALKING ECONOMICS 640 Chasing a moderate Foreign Direct Investment (FDI) target of US$ 2 billion this year as an outcome from the Commonwealth Heads of Government Meeting (CHOGM), Sri Lanka has been able to attract US$640 million Chinese investments through four projects, a Board of Investment (BOI) official said. The BOI had submitted 50 project proposals to the Commonwealth Business Forum of the CHOGM, in November 2013, out of which only 16 projects attracted foreign investor interest. /instituteofpolicystudies /TalkEconomicsSL www.ips.lk/talkingeconomics /IPSsrilankavideo SUPPORTED BY A PUBLICATION BY THE INSTITUTE OF POLICY STUDIES OF SRI LANKA Documents Similar To IPS Talking Economics Digest / Jul - Dec 2014Skip carouselcarousel previouscarousel nextJly Dec 2011 TE DigestIPS Talking Economics DigestTalking Economics Digest Innovation Special IssuePolicy Insights - Are Returnee Migrant Workers Economically Better Off?Talking Economics Digest | Jul-Dec 2013Talking Economics Digest | Jan-Jun 2013Jan Jun 2012 TE DigestSpeech by Hon. 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