IPS Talking Economics Digest_January - June 2015

JANUARY TO JUNE 2015

DIGEST

Adopting a Blue Economy Approach in Sri Lanka

page 11

Overcoming Challenges of Marine Pollution for Healthy Oceans

page 09

Millennium Development Goals – Sri Lanka’s Achievements and Challenges Ahead

page 35

Integrated Water Management and Sustainable Urbanization in Sri Lanka

page 15

Environment ManagementSustainability &

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.

Charting a Course for Sri Lanka’s Economy: Politics Triumph Economics for Now

Trade Facilitation: Breaking Down Barriers to International Trade in Sri Lanka

Reaching Greater Heights in Innovations: A Sri Lankan Perspective

Overcoming Challenges of Marine Pollution for Healthy Oceans

Adopting a Blue Economy Approach in Sri Lanka

Does Restructuring Property Rights Hold the Key to Natural Resource Management in Sri Lanka?

Integrated Water Management and Sustainable Urbanization in Sri Lanka

Good Environmental Management Practices in the Hotel Industry in Sri Lanka: Determinants and Barriers

Climatenet

Inside IPS

National Medicinal Drug Regulatory Authority Bill and the Medicinal Drug Policy of Sri Lanka: Some Challenges

Patient Waiting Times in Private Hospitals: A Growing Concern in Sri Lanka

Food Additives – Are They Safe?

“Let Food be Thy Medicine”

Towards Healthier Diets in Sri Lanka: The Role of Nutrition Labeling

Emerging Food Standards: A Cause of Concern for the Sri Lankan Tea Industry

World No Tobacco Day: Tobacco Smoking - An Issue of Un-awareness

Millennium Development Goals – Sri Lanka’s Achievements and Challenges Ahead

IPS Careers / IPS Internship Programme

Addressing Issues of Social Protection to Enhance Equity in Sri Lanka

Child Labour and Education in Sri Lanka: Combating Child Labour through the Provision of Quality Education

Networking and Information: Crucial Ingredients in Empowering Women Owned and Led Micro, Small and Medium Enterprises in Sri Lanka

Inspirational Women

Text-bombs of Unsolicited Promotional Messages: Do Consumers have Control Over their Personal Information?

IPS News

Latest Publications

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TALKING ECONOMICS

Welcome to the 10th edition of the Talking Economic Digest!

The Talking Economics Digest is a bi-annual compilation of articles by IPS researchers brought out

during the year in our Talking Economics Blog. The articles in this Edition reflect the broad thematic

areas of research we focus at the Institute as well as highlight some key developments in the

country and the world in the first half of 2015.

The efforts of successive governments during the last several decades have led to growth in per

capita incomes, resulting in a increase in standard of living of the people and a decrease in overall

poverty levels. However, Sri Lanka faces a host of environmental problems such as land degradation,

de-forestation, pollution and poor management of water resources, loss of biological diversity,

coastal erosion, increasing scarcity of water, etc. As an emerging economy, the challenge for Sri

Lanka is to achieve sustainable high economic growth without causing irreversible damage to the

environment.

More than ever before, Sri Lanka needs to strike a balance between rapid economic growth and the

demands of a growing population on a limited natural resource base. The Digest focuses on this

issue, featuring articles relating to sustainable environment management of water, ocean, forest and

its resources, and tourism in the country. In the article, Adopting a Blue Economy Approach in Sri Lanka, Kanchana talks about the use of ocean and its resources sustainably while Athula highlights

the need for coordination amongst various agencies concerned with marine and land based pollution

in the country as well as regional/international cooperation in Overcoming Challenges of Marine Pollution. Forests in Sri Lanka are depleting at an alarming rate, requiring a restructuring of property

rights to better manage forests, argues Chatura in his article to mark the World Environment Day

2015. He also discusses the increasing demand for water in urban areas and the need to adopt an

Integrated Urban Water Management (IUWM) approach to achieve sustainable economic, social and

environmental goals. In the article Good Environmental Management Practices in the Hotel Industry in Sri Lanka, which is based on an IPS study, Kanchana looks at the adoption of good

energy, water and waste management practices in the Sri Lankan hotel industry, which has been

seen a remarkable growth in the recent past with the ending of the war.

The Digest also has a number of other interesting articles looking at issues relating to health, labour,

education, social security, trade, etc., which would appeal to our wide and growing readership

beyond policy-makers of the country. Articles like, “Let Food be Thy Medicine”, The Role of Nutrition Labelling, and Food Additives – Are They Safe?, aim to inform the general public of the

importance of healthy diets and nutrition labeling in maintaining and promoting a healthy lifestyle

while being aware of chemicals contained in the food we consume every day.

We hope you will enjoy the Digest and look forward to your continuous support and feedback.

You can always access these articles and the previous editions of the Digest from our website.

Editorial

Janaka WijayasiriResearch Fellow, IPS

[email protected]

September 2015

EXECUTIVE DIRECTOR

Saman Kelegama, DPhil (Oxon)

DEPUTY DIRECTOR

Dushni Weerakoon, PhD (Manchester)

TALKING ECONOMICS TEAM

Janaka Wijayasiri Dishnika Perera Bilesha Weeraratne Raveen Ekanayake Charmaine WijesingheShanika Samarakoon

CONTRIBUTING AUTHORS Athula SenaratneBilesha WeeraratneChatura RodrigoChayanka Wikremesinghe Dilani Hirimuthugodage Dushni WeerakoonGanga ThilakaratnaG D DayaratneJanaka WijayasiriKanchana WickremasingheRaveen EkanayakeSahan Jayawardena Samanthi BandaraShanika SamarakoonSunimalee MadurawalaSuwendrani JayaratneWimal Nanayakkara

INSTITUTE OF POLICY STUDIES OF SRI LANKA

100/20, Independence Avenue Colombo 07, Sri Lanka Tel: +94 11 2143100, +94 11 2665068 URL: www.ips.lk Blog: ‘Talking Economics’ Web: www.ips.lk/talkingeconomics

Twitter: www.twitter.com/TalkEconomicsSL

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Shiran Sabar

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All material published in the Talking Economics Digest

are copyright of the Institute of Policy Studies of

Sri Lanka (IPS), unless otherwise speci�ed. It cannot be

quoted without due acknowledgement to the IPS

and the author. It cannot be reproduced in whole or

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02

Environment ManagementSustainability &

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Happy reading!

03

ri Lankans might be forgiven for thinking that the country’s economy must be sufficiently

strong to be put on auto-pilot indefinitely while policy makers focus their energies almost

entirely on political reforms for the better part of six months. Indeed, it appears to fall back on

the belief that the economy is inherently resilient, based largely on its relatively reasonable

performance during a long-drawn conflict. This, however, can be an erroneous assumption that

may prove costly. Global economic conditions are very different today from what prevailed

before the financial and economic meltdown of 2008. Even the most competitive of economies

in East and Southeast Asia are struggling to keep economic growth above 6 per cent

post-crisis. It would be peculiar indeed if Sri Lanka is to buck this trend without substantive

government policy direction that charts a course for growth.

CHARTING A COURSE FOR SRI LANKA’S ECONOMY: Politics Triumph Economics for NowBy Dushni Weerakoon

Figure 1: Contribution to Quarterly GDP Growth

that high growth; it relied almost entirely on infrastructure development that

skewed growth heavily towards non-tradables, with a deferred cost of an

external debt overhang. However, investors could afford to overlook these

weaknesses for a time as long as GDP continued to expand. High growth

allows headline ratios that spell out the health of an economy – especially

on the fiscal front – to look more convincing than otherwise.

Clearly, the country’s growth drivers and the quality of economic expansion

must change. However, in the interim, Sri Lanka cannot afford to allow GDP

growth to moderate too far as a consequence of economic policy inertia. A

moderation in growth that results from a deliberated economic policy

framework is something else entirely.

For the second consecutive quarter, GDP growth moderated to 6.4 per

cent in the first quarter of 2015, registering a decline from 7.6 per cent

in the first quarter of 2014. In the fourth quarter of 2014, a contraction

of 3.3 per cent in agriculture pulled growth down. By contrast, growth

moderated in the first quarter of 2015 largely as a result of a slowdown

in the industry sector (Figure 1). The sharp contraction in construction

activity was to be expected; what appears to be a more general

slowdown in productive economic sectors such as manufacturing, and

transport and communications is, however, of concern.

While GDP growth is an imperfect measure of economic progress, it is

an important comparative indicator. Global financial investors have

continued to show interest in Sri Lanka largely on account of its growth

prospects. This is despite inherent structural weaknesses underpinning

-1

0

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8

9

Q1 Q2 Q3 Q4 Q12014 2015

%

Agriculture Industry Services GDP

-0.5 0 0.5 1 1.5 2 2.5 3

Agriculture

Manufacturing

Construction

Wholesale & ret. trade

Transp. & comm.

Banking & insurance

Government services

%

q1 2015 q1 2014

Figure 1: Contribution to Quarterly GDP Growth

Source: Estimated from DCS, Quarterly GDP Data.

Image Courtesy: ancientworldtours.net

S

Dushni Weerakoon, PhD (Manchester)

Deputy Director / Head of Macroeconomic Policy Research, IPS

[email protected]

Governments may opt to do this, faced with an

unsustainable growth process that is in danger of

generating macroeconomic instability in the long run.

When growth begins to slow in the context of a

perceived policy vacuum, business confidence starts

to wane and the private sector will be in no mood to

invest. Despite a government that is perceived to be

more market friendly, credit uptake by the private

sector has been a low 0.9 per cent in the first quarter

of 2015; by contrast, the government has been a

heavy borrower, with 8.5 per cent growth in credit.

The government has been dipping into the domestic

market to meet expenses. The budget put forward in

January 2015 presented an opportunity to set out

some early signals on economic policy direction.

However, it confused more than it clarified, with a

mix of populist measures and taxes on business

profits. The fiscal targets also look increasingly

suspect with proposed tax measures caught up in the

country’s current political maelstrom. There is very

limited fiscal space despite a reduction in the overall

deficit in recent times; contingent liabilities of the

Treasury are rising sharply and pose systemic risks to

fiscal policy management (Figure 2).

With revenue targets under threat to meet higher

current expenditures, fiscal adjustments will most

likely take the form of cuts to government

investment, already forecast to be cut sharply to

4.4% of GDP in 2015; in an economy that

Figure 1: Contribution to Quarterly GDP Growth

reserves as well as to ease pressure on the exchange rate; but they are also earmarked for

development purposes. If Sri Lanka is to continue to tap foreign commercial borrowing for

budgetary support, the growth outlook must remain attractive more so than even before.

International capital flows to emerging economies are tightening – with markets affected by

shifting expectations of US monetary policy as well as weaker growth prospects in emerging

economies. The days of easy money may be coming to a close.

Sri Lanka is still aiming for over 7% growth in 2015. Some of the sources of faster growth of

recent years will begin to change, as they must. The infrastructure boost to growth will begin to

exhaust, and needs to be replaced with productivity growth. For this to occur, Sri Lanka has to

confront difficult and delayed reforms to make the economy more efficient and competitive. A

policy framework to guide this process is vital. It appears increasingly that the country’s best

hope of focusing attention on the economy lies with a viable government emerging from

parliamentary elections, with the fortitude and electoral mandate to not only set an economic

agenda, but persuade entrenched interests to accept it.

0

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3

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6

0

100000

200000

300000

400000

500000

600000

2006 2007 2008 2009 2010 2011 2012 2013 2014

% o

f GD

P

Rs.

mn.

Treasury guarantees (Rs. mn.) % of GDP

Figure 2: Fiscal Developments

Source: Ministry of Finance

As % of GDP 2014 2015a2015 Revised

Revenue 12.2 14.6 14.1

Current expenditure 13.5 13.5 14.2

Public investment 5.0 6.2 4.6

Overall deficit 6.0 4.6 4.4

Notes: a: Estimates presented in Oct. 2014; b: Revised estimates presented in Jan. 2015.

relies massively on such investment for growth, the impact will be all the more immediate as

evident in first quarter 2015 GDP figures.

For now, tapping the domestic market for funds is possible in a climate of subdued private

investment, low inflation and interest rates, but it is not a long term option. To ease pressure, Sri

Lanka issued a 10 year US$ 650 million sovereign bond in May 2015, and announced plans to

raise a further US$ 1 billion. The funds are partly to shore up the country’s

04

TALKING ECONOMICS

Breaking Down Barriersto International Tradein Sri Lanka

Trade FacilitationPriorities for Sri Lanka

Trade Facilitation:

By Suwendrani JayaratneThis article was written to mark the International Customs Day, 26 January 2015

The Institute of Policy Studies of Sri Lanka

(IPS) recently concluded a ‘Trade and

Transport Facilitation Audit’ in Sri Lanka. As

part of the study, a survey was carried out

among 121 stakeholders in the country

including key government agencies and the

private sector to find out the current status of

trade facilitation (TF) in the country and related

priorities. This included exporters, importers,

shipping lines, freight forwarders, chambers

and relevant agencies. Following are some of

the TF issues and priorities highlighted in the

survey and a stakeholder consultation meeting

held recently.

Publication and Administration of Policies:

There is a need for prompt and comprehensive

publication of international trade related

information. Many stated the availability of

information for example in the Customs website

to be inadequate to get a comprehensive

understanding of the total import/export and

clearance processes in Sri Lanka. Information

provided in the Sri Lanka Customs website was

rated as ‘average’ by a majority of the respon-

dents, with the effectiveness of information on

changes in regulation, applicable customs

duties, and applicable fees and charges

identified to be ‘low’.

Setting up/Strengthening Enquiry Points:

While there are enquiry points in different

agencies such as the Customs, these are

generally perceived to be inefficient and difficult

to access. While the existing enquiry points at

different institutions could be strengthened, a

national enquiry point can function as a

coordinating body between the trading

community and the relevant regulatory bodies. It

can collect requests, direct them to relevant

regulatory bodies, compile their responses and

inform the requesting party of the responses.

Currently, enquiries are often directed at the

wrong agency as traders are unaware of the

relevant agency to address a specific issue.

Having an Institutional Mechanism for the Implementation of TF Measures:

There is no agency in the country which takes

responsibility to implement TF measures.

However, the recently appointed National Trade

Facilitation Committee is expected to remove

this vacuum and actively take up TF recommen-

dations that have been highlighted by stakehold-

ers over a long period of time in many forums.

Some of the high priority areas related

to/procedures for imports/exports, identified in

the survey are given in Figure 1.

Change of Mindset and Culture at both Government Agencies and the Private Sector:

While recognizing the recent TF initiatives

undertaken by the relevant authorities such as

Sri Lanka Customs, some traders are of the view

that they do not function well in practice mainly

due to the lack of change in mindset to accept

and adapt to new ways of conducting business,

etc. Likewise, the need for the private sector to

produce correct and required documentation

ri Lanka has undertaken key initiatives to

facilitate trade and transport over the years.

Vital agencies in the trading process such as

the Sri Lanka Customs and the Sri Lanka Ports

Authority have taken measures to facilitate

trade through the automation, infrastructure

expansions and others. While acknowledging

the initiatives by relevant agencies, Sri Lanka

still has a lot to achieve if it is to reach the

facilitation levels of Singapore which is often

cited by policy makers and the private sector

to be the country’s benchmark.

S

05

Suwendrani Jayaratne, MA (ANU)

Research Officer, IPS

[email protected].

Legal Amendments to the Customs Ordinance:

Sri Lanka’s Customs Ordinance is over 200 years old and certain provisions need to be

amended to facilitate the implementation of identified TF measures such as the extension of the

pre-arrival processing facility to all goods whereas, currently the facility is only available for

perishable goods.

purview Customs functions. Nonetheless, having

an ombudsman that is specialized in customs and

tariff regulatory matters that could assist the

trading community to review/appeal a particular

decision taken by a regulatory authority can

enhance the transparency of the system.

Improving Inadequate Warehouse Facilities:

More than the inadequacy of warehouse in terms

of numbers, traders highlighted the lack of

adequate facilities available at warehouses. Lack

of proper storage racking systems, poor

conditions within them, poor handling and

inadequate security are some of the pertaining

issues of traders.

Use of ICT for Exports and Imports:

A majority of 107 of the 121 respondents

highlighted the need for a single window in the.

Such a system is required to minimize human

intervention in the trading process. The need for

electronic/online submission of customs

documents were also identified to be high. While

the export process is almost entirely automated in

the country, the import process is yet to be

completely automated.

In conclusion, the importance of trade facilitation

has been recognized at the multilateral level with

the wrapping up of the WTO Trade Facilitation

Agreement in December 2013. This Agreement

will come into force once two-thirds of the WTO’s

160 members (107 members) complete their

ratification process. Countries such as Hong Kong

and China have already ratified the Agreement.

Many of the TF measures highlighted above can

be implemented at a relatively low cost and are

not contentious in nature. Therefore, it is

important that Sri Lanka pursues pertinent TF

issues without further delay and enjoy early mover

advantages that these reforms offer.

Having a Non-Judiciary Review/Appeal Procedure: 72 of 121 respondents of the survey mentioned that there is no non-judiciary review or appeal

procedure available in the country if traders are not satisfied with a decision taken by the Customs

or any other border management agency. However, according to the Customs, traders can appeal

to the Director General of Customs if they are not in agreement with decisions taken at the

operational level, and then to the Minister of the Ministry of Finance and Planning under whose

Trade Related Infrastructure:

The need to improve quality and efficiency of ports, roads, the quality of warehouses and the

need to reduce loss and damage of cargo are some the main trade related infrastructure and

infrastructure requirements in the country (Figure 2). For example, while acknowledging the

improvements in infrastructure in the recent past, the need to give a face-lift to the Colombo

Port with modern equipment was highlighted by traders. Furthermore, problems such as

congestion at the Colombo Port can be reduced if more gates at the Port can be opened;

currently only 2-3 gates are open for container traffic at any given time.

Figure 1: High Priority Areas related to Rules/Procedures for Imports/ Exports

Source: IPS Survey (2014)

Reduce clearning times

Issue & validity of advance ruling

Reduce irregular payments/bribes

Improve coordination btwn border management agencies

Reduce no./time required of exp/imp documents

Post clearance audit

Reduce physical inspection by customs

79%

31%

78%

72%

69%

59%

57%

48%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Pre-arrival processing of import documents

Figure 2: High Priority Areas of Trade Related Infrastructure and Services

Source: IPS Survey (2014)

Quality of warehouses

Efficiency of quality/standard inspection agencies

Reducing cargo loss/damage

Reducinng logistics services cost

Quality of telecommunication/ IT services

Effociency of health/SPS/quarantine agencies

Quality/efficiency of airports

69%

58%

68%

65%

64%

63%

60%

59%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Quality/efficiency of railways

Quality/efficiency of roads

Quality/efficiency of ports

69%

85%

06

TALKING ECONOMICS

without resorting to irregular payments as a relatively easier means of clearing goods

was also highlighted.

Reaching Greater Heights in Innovations: A Sri Lankan Perspective

Sri Lanka at a GlanceThere are several indicators to measure the level of innovation and

creativity within a country. The expenditure on research and

development is one of the main indicators to identify a country’s

support for innovations and creations. In Sri Lanka, Gross Expenditure

on Research and Development (GERD) as a percentage of the GDP

was 0.16 % in 2010. This was a 30% increase from 0.11% recorded

in 2008.

his year the world celebrates its 15th Intellectual Property (IP) Day on

April 26th. Since 2001, the World IP day has focused on how IP

contributes to innovations and creations, which ultimately help shape the

world. Moreover, the day provides an opportunity to encourage people to

think about the role played by IP in their day-to-day lives and its

importance in stimulating a country’s economic growth and wellbeing.

In the process of development, the human mind and innovations play a

significant role. Thus, every country recognizes the importance of

encouraging innovations and creations and simultaneously protects the

intellects of its people. Sri Lanka too has introduced a number of policies

and programmes to drive innovations and foster creations while offering

protection. However, Sri Lanka is still far behind in the number of

innovative outputs and in creating a strong protection mechanism for

inventions.

By Dilani Hirimuthugodage

The most common and formal methods in protecting innovations and

intellectual property rights in Sri Lanka are trademarks followed by

patents and copyrights (Figure 2). It is noted that a high number of

patents is issued for food and beverage process technology,

innovations in IT and telecommunications, and agricultural system and

developments. Trademarks are popular in Sri Lanka as several

enterprises and products enter the market daily and these trademarks

differentiate the goods and services sold by them.

The public sector contributes the most towards Research and

Development (R&D) in Sri Lanka (nearly 56%). In most developing

countries, the public sector provides a higher percentage of a

country’s total investments in R&D. Public investment is essential in

R&D as markets fail due to difficulty in assuring profits for investors.

However, most developed countries have overcome the issue of

private investments in R&D by providing effective protection via strong

Intellectual Property Rights (IPRs) systems.

In Sri Lanka, GERD is high in agriculture sciences (33.1 %) followed by

R&D expenditure on engineering & technologies (20.2%), natural

sciences (12.1%), social sciences & humanities (6.6%) etc., (Figure 1).

A majority of the R&D expenditure in the agricultural sector is spent on

crop production, soil science, variety improvement, etc. In terms of

commodities, a greater share of R&D was allocated to rice, plantation

crops, fruits and vegetables in 2010.

T

07

Figure 1: Indicators on Technology & Innovation

Dilani Hirimuthugodage, MEcon (Colombo)

Research Officer, IPS

[email protected]

Sri Lanka in the Global Context

Sri Lanka has seen an increase in R&D expenditure since 2008. This has

resulted in a significant increase in the country’s innovation indicators.

However, when compared to other developing countries such as China,

Malaysia, Thailand, and India Sri Lanka is lagging behind in the number of

innovations and protection of innovations.

There are several policies and programmes introduced by several

ministries to improve innovations in Sri Lanka. The National Biotechnology

Policy, Science, Technology and Innovation Strategy for Sri Lanka

2011-2015 are among such policies/programmes. However, the effective

implementation of these remains questionable.

The Global Innovation Index 2014 (GII) has ranked Sri Lanka at 105th

place out of 143 countries in the world. According to the GII rankings,

when compared to other South Asian countries, Sri Lanka is placed third,

after India (76th), and Bhutan (86th). Bangladesh (129th) and Pakistan

(134th) are ranked much lower. Switzerland, United Kingdom and

Sweden are ranked on top while Singapore and China are ranked 7th and

10th, respectively.

R&D expenditure in Sri Lanka is low compared to some selected countries

in Asia (Table 1). Developed countries spend more than 2% of their GDP

on R&D activities. The GERD benchmark figure for developing countries is

1 % and Sri Lanka significantly falls short of this figure.

What Needs to be Done?

CoordinationThe link between the ministry, institutes and universities on research,

science and technology is weak. This was highlighted in a recent report on

‘Integrating Intellectual Property into Innovation Policy Formulation in Sri

Lanka” by the National Intellectual Property Office – Sri Lanka. The

introduced policies and programmes are implemented in isolation by

different institutes and organizations. Therefore, it is of utmost importance to

improve coordination between research, science and technology institutions.

A separate institute may help to better formulate, monitor, manage and

coordinate innovation policies and programmes in the country.

IncentivesSimultaneously, it is vital to motivate private sector investments in R&D by

way of introducing tax deductions/low tax rates, better investment climate,

strong IPRs system, etc. Further, an innovation voucher system can be

introduced to enhance collaboration between research institutes and the

industry. Introducing a reward system to inventors will be another effective

means to encourage innovations.

Improve IP Protection MechanismIntellectual Property Act No.36 of 2003 is the legal framework under which

IPRs are currently protected in Sri Lanka. It provides protection via patents,

copyrights, industrial designs, trademarks, etc. Apart from that, Sri Lanka is a

party to a number of international IPR treaties and agreements. However, Sri

Lanka to-date has been unable to implement a proper mechanism to protect

new plant varieties and rights of plant breeders, which is very important in

enhancing innovations in the agricultural sector. Moreover, the country is still

unable to introduce utility model patents, which are cheaper, and have a

simple and faster registration process than patents.

Firstly, it is important to ensure an effective implementation of the existing IP

Act. Secondly, it is imperative to implement the proposed Act of 2011 on New

Plant varieties (Breeder’s Rights). Thirdly, it is a timely need to prepare a

strong and a proper protection mechanism for animals and microorganism.

Further, it is imperative to introduce a national policy for innovations in Sri

Lanka.

AwarenessIt is essential to increase awareness among the public on the importance of

creativity and innovations towards a country’s economic growth while

protecting third party inventions. Public awareness could be improved

through the Ministry of Science and Technology, Intellectual Property Office,

and other related institutions. Furthermore, increasing awareness on the

importance of protecting inventions remains essential amongst researchers,

universities, and scientists.

Figure 2: Methodologies Used in Protecting IPRs -2010

Source: Sri Lanka Science, Technology and Innovation Handbook: 2010, National Science Foundation

India 0.76

Singapore 2.43

China 1.7

Japan 3.36

Sri Lanka 0.16

Table 1: Gross Expenditure on R&D as a % of GDP in Selected Countries

Source: Sri Lanka Science, Technology and Innovation Handbook: 2010, National Science Foundation

23.28

74.07

20.63

67.19

31.21

1.050

102030405060708090

100

Patents Trademarks Copyrights Secrecy Complexity ofdesign

Other

Formal Strategic Methods

08

TALKING ECONOMICS

The World Ocean Day is celebrated on 8th June every year. This year’s theme to mark the day is “Healthy Oceans, Healthy Planet”. The selection of this theme highlights the growing threat of marine pollution that needs effective and sustainable solutions.

JUNE 8th

arine pollution involves dumping waste substances into the sea

thereby reducing the quality of ocean environment that leads to

unhealthy conditions for all organisms including humans. Being an

island nation, the ocean plays a vital role in many aspects of the

everyday lives of people living in Sri Lanka. The most important among

these are food security, trade and cargo transportation, coastal

livelihoods, tourism, coastal protection and bio-diversity as well as

national security.

Marine Pollution: A growing Menace

Marine Pollution in Sri Lanka Sri Lanka experiences marine pollution originating from a variety of sources.

Heavy metal pollution can be seen in certain areas, which could be due to

land-based activities. Some studies also have reported heavy metal

accumulation in edible species in coastal water bodies. This has been

reported from Negombo lagoon, Bolgoda Lake and in sediments of Galle

harbour. Among the types of heavy metal reported were Ferrous (Fe), Zinc

(Zn), Cadmium (Cd), Copper (Cu) and Lead (Pb). These pollutants have been

reported in concentrations higher than permissible levels of coastal waters.

Apparently, industrial (e.g. Katunayake and Ekala industrial zones) and

municipal sources in surrounding areas are responsible for this situation.

A number of incidents on oil and chemical spills and marine accidents have

been reported from different locations of sea around the country (Table 1).

All these events have resulted in local pollution affecting the marine environ-

ment and associated organisms. The Marine Environmental Protection

Authority (MEPA) with the support of other agencies such as Coast

By Athula Senaratne

Overcoming Challenges of Marine Pollution for Healthy Oceans

M

Besides serving as a source of many economically

useful products and services, oceans are the ultimate

sink of much of the waste created by humans not only

in their sea-based activities but also land-based

activities. Activities of a growing population have given

rise to increased loads of waste, of which a significant

portion eventually finds its way to oceans making them

unhealthier each passing day. Nevertheless, little is

known about sink functions of oceans and the ever

increasing problem of marine pollution is fast reaching

tolerable limits. Waste generated in both land–based

activities and sea-based activities are responsible for

marine pollution (Figure 1). Among the land-based

sources of marine pollution are municipal waste and

sewage disposal, pesticides and fertilizers from

agriculture, industrial waste from production facilities in

coastal areas, debris generated from numerous human

activities including tourism and waste from inland areas

washed off finally into the sea through

water courses. Major marine-based pollution sources include oil/chemical

spills from transportation of oil and accidents in the sea, off shore oil

exploration facilities, disposal of non-degradable litter substances by vessels

such as plastics, periodic dry docking and servicing of vessels, ballast water

discharges, deep sea mining activities and volcanic eruptions. It is not

difficult to see that a majority of both land- and sea-based sources are of

anthropogenic origin.

Table 1: Oil and Chemical Spills in Sri Lankan Waters

Source: Azmy (2013), BOBLME Country Report on Pollution

09

Athula Senaratne, PhD (Deakin)

Research Fellow /

Head of Environmental

Economic Policy, IPS

[email protected]

Conservation Department (CCD), Sri Lanka Ports Authority (SLPA) and the

armed forces has taken positive steps to minimize the damage from

certain events. Another problem is the invasive alien species (IAS)

brought in with ballast water. Studies have reported 26 previously

unrecorded species from the inner harbour area of Colombo, some of

which are found in the ballast water of ships. Some of these species are

potentially harmful and they have been reported in sea areas near major

ports. Above are some anecdotal evidence about the nature and scale of

marine pollution currently taking place in Sri Lankan waters. Scientific

studies on marine pollution are rare in Sri Lanka and more research and

monitoring activities are necessary to make a realistic assessment of the

situation. Despite the lack of scientific evidence, some trends are easily

identifiable and should be addressed before the situation worsens. The

country is making an effort to promote economic growth through trade

and that would invariably increase ship arrivals to Sri Lankan ports and

marine traffic in sea lanes around the island. With the rising number of

ships entering the country, problems of oil spills, marine accidents and

ballast water disposal are bound to increase. Even for someone casually

observing the country’s coastal areas, the accumulation of debris and

litter is evident. Not only ships, but coastal dumping and a growing

fishing fleet also are responsible for this. The country has just begun oil

explorations in off-shore areas that can also create marine pollution,

especially in the Mannar basin. Moreover, large scale poaching in Sri

Lankan waters by Indian fishermen has become a daily occurrence,

where the fishermen use harmful bottom trawling methods banned in Sri

Lanka, causing severe damages to the marine environment. So far, the

environmental outcomes of these actions have not been assessed.

Overcoming the ChallengeThe ways to overcome the growing menace of marine pollution is not as

visible as the problem. The MEPA is the mandated agency in Sri Lanka

to address issues concerning marine pollution. Sri Lanka introduced the

Marine Pollution Prevention Act (MPPA) as early as 1981, around the

same time that the National Environmental Act (NEA) of 1980 was

introduced. However, like many environmental problems, marine

pollution also cannot be solved by efforts taken by a single line, single

agency or a ministry. As explained in this article, marine pollution has its

land-based sources as well as sea-based sources. Land-based sources

are handled by a variety of agencies that include the CEA, CCD and

municipal authorities. Sri Lanka’s efforts to manage land-based

pollution can hardly be considered as a success story and hence the

landward side of the problem is not under control. Despite failures,

however, this is entirely a source that is within the control of the

national jurisdiction, and as a result there is room for improvement

through our own efforts. The more contentious issue is the sea-based

sources, which are trans-boundary and international. We have limited

control of these sources and international cooperation is mandatory for

solving them. There are several international agreements and arrange-

ments that deal with different aspects of marine pollution and Sri Lanka

is a party to many of them. Besides, there are regional arrangements

too. In spite of all these efforts, marine pollution continues to grow at a

rapid rate. It is a global threat that needs global solutions. We as a

nation should look after what is under our control while cooperating with

the world community to overcome this global menace.

10

TALKING ECONOMICS

Blue EconomyAdopting a

Approach in Sri Lanka

he development process known as 'Greening’ has been the foremost topic of discussion for years, while ‘Blue’ seems to be the new ‘colour’ entering the ongoing dialogue. ‘Blue’ talks about the use of ocean and its resources sustainably. The blue economy approach will not replace but mutually support the green economy, for the use of ocean resources.

The concept of blue economy stresses on the conservation and sustainable management of oceans. It is related to the ‘blue’ or ocean capital and complements the green economy. Accordingly, the blue economy approach recognizes the productivity of healthy ocean ecosystems as a way to safeguard sustainable ocean-based economies, as well as to ensure that coastal countries benefit from their marine resources

INTERNATIONAL MILESTONES

The oceans were on the multilateral negotiations agenda at the Rio+20 Conference in 2012. The outcome document titled the “Future We Want” highlights the ocean’s contribution to growth, stating; “We stress the importance of the conservation and sustainable use of the oceans and seas and of their resources for sustainable development.”

The Abu Dhabi Declaration, adopted in January 2014 highlights a blue economy’s contribution towards alleviation of hunger, poverty eradication, creation of sustainable livelihoods, and mitigation of climate change. Accordingly, the aspects which were particularly highlighted are:

(a) Fisheries and their vital role in providing food security and sustainable livelihoods, (b) Tourism as a source of decent employment and a contributor to poverty alleviation, (c) Ocean as a source of renewable energy from wind, wave, tidal, thermal and biomass sources, (d) Ocean as a source of hydrocarbon and mineral resources and, (e) Ocean as the primary medium of global trade through shipping and port facilities.

The commitment to strengthen the blue economy was made at the 14th Meeting of the Council of Ministers of the Member States of the Indian Ocean Rim Association (IORA) in Perth in October, 2014. The maritime related economic activities were identified as a common source of growth, innovation and job creation. It further highlighted the need for expansion of trade and investment within the region, including fisheries activities, minerals exploration, development of renewable energy, and coastal tourism, in order to stimulate growth and improve region’s food and energy security.

Countries which are blessed with ocean resources have already begun to take policy level initiatives to increase the economic gains of the oceans. Mauritius has already prepared the Ocean Economy - A Roadmap for Mauritius in 2013. The roadmap takes into account six principals; economic efficiency, equity, ecological, social partnerships, safety and compliance with international instruments.

OCEAN’S ROLEBeing an island in the Indian Ocean, Sri Lanka is endowed enormously with ocean resources. Even now, the Indian Ocean is making a notable contribution to various economic sectors of the country, thus to the overall national output. Fisheries, trade, agriculture, and tourism have been key sectors, which are reliant on the ocean resources in Sri Lanka.

By Kanchana Wickramasinghe

From the policy perspective it is important to ensure that proper information is available on different types of ocean resources

T

11

Fishery and mineral resources in the Indian Ocean are of directcommercial importance. However, there is much more to be gained,

There has been no clear definition on the concept of the blue economy, though various countries take different approaches to adopt the concept. Good practices on the blue economy approach are available rarely, or not at all. Therefore, it is important that the country takes its own initiatives and approaches to establish a strong blue economic component in the overall economic framework.

It is imperative that the country identify ways in which the contribution of the ocean can be enhanced towards national development. Still, there can be many unknown factors regarding certain aspects of ocean resources, due to technological and research gaps. However, the country should prioritize areas it can develop for creating a blue economy facet, in the overall economic development framework.

THINGS TO NOTE

Greater regional collaboration is required to make the best use of ocean resources

Meanwhile, from the policy perspective it is important to

ensure that proper information is available on different

types of ocean resources. This requires a stock taking

task. In line with that, it is important to identify the

possible use of such resources, environmental sustainabil-

ity aspects and resource requirement in terms of financial,

human resources, and technological know-how.

We should not forget that the environmental and resource

degradation is already taking place in the ocean due to

human interventions. Ensuring the sustainability of the

resources makes the blue economy viable in the long

term. Land-based pollution, over-exploitation of certain

fish types, unsustainable harvesting practices are some of

the activities that threaten the sustainable utilization of

ocean resources. The Indian Ocean region as a whole

should particularly focus on four areas, namely, ocean

resources, energy resources, biosecurity and climate

change as highlighted earlier.

Apart from sectoral and national level responses, greater

regional collaboration is required to make the best use of

the ocean resources. Meaningful regional collaboration

can help technology transfer, multidisciplinary research,

fair utilization of resources, etc.

Sri Lanka plans to establish the Centre of Excellence on

Ocean Sciences and Environment, via the Indian Ocean

Rim Association (IORA), with the objective of promoting

such collaborations among Indian Ocean rim countries.

The initiative aims to enhance the sustainable utilization of

Indian Ocean resources and increase its role in the

economies of its member countries, including Sri Lanka.

as highlighted in a previous article. For instance, fishery

resources are abundant in the deep sea, and Sri Lanka has not

tapped the existing potential. Deep-water fish stocks represent a

potential new frontier for commercial fisheries. There is also an

untapped potential for minerals such as polymetallic nodules and

polymetallic massive sulphides.

The coastal sediments contain titanium and zirconium tin. In

addition, the Indian Ocean possesses a number of energy

sources, including gas and oil reserves. The strategic location of

the country in the Indian Ocean has brought numerous economic

benefits to the country. Sri Lanka should be tactical in making

use of its geo-strategic position. It is time that the country

seriously adopts the blue economy concept and attempt to

increase the benefits of the ocean for its development, in a

sustainable manner.

Kanchana Wickramasinghe, MEcon (Colombo)

Research Economist, IPS

[email protected]

12

TALKING ECONOMICS

Source: UN MDG Sri Lanka Country Report, 2015

MANAGEMENT OF FORESTRY RESOURCES IN SRI LANKA: THE CURRENT PROPERTY RIGHTS REGIMES

orld Environment Day 2015 is marked today (5th June), under the theme "Seven Billion Dreams. One Planet, Consume with Care." In this article to mark the day Chatura Rodrigo highlights the importance of governing forest resources in a sustainable manner by restructuring the property rights systems.

DOES RESTRUCTURING PROPERTY RIGHTS HOLD THE KEY TO NATURAL RESOURCE MANAGEMENT IN SRI LANKA?

Sri Lanka is rich in natural resources; filled with features including forest cover,

coastal ecosystems, inland water bodies, fauna and flora and geological

resources such as minerals and gems. While all these are equally significant in

defining Sri Lanka, forestry resources attract particular attention since it is

depleting at an alarming rate.

Forests produce many Ecosystem Goods and Services (EGSs) and provide an

income for communities. The rising population’s demand for infrastructure and

awakening of local economies have resulted in an increase in the deforestation

for development and the extraction of forest resources for the increasing demand

of forest products. However, it is important to manage forests in a sustainable

manner, allowing sufficient consumption while ensuring inter and intra

generational equity. The total forest cover of Sri Lanka has declined

gradually from 31.23 per cent in 1992 to 28.74 per cent in 2010.

Figure 1 below shows different forest covers and their depletion over

time.

Forests produce timber and Non-Timber Forest Products (NTFPs).

Commercial extraction of timber from protected forests in Sri Lanka is

prohibited. Protected forests are governed by the Forests Conservation

Ordinance of 1885 and land clearing and timber extraction is an

offence. However, timber extraction can be done through plantation

forests, especially grown to harvest timber. Furthermore, a significant

amount of forest products derive from home gardens. The most

important NTFPs are medicinal plants, rattan, bamboo, products of

hunting, products of kithul palm (Caryota urens), edible plants,

mushrooms, honey and pine resin. These products are extracted form

forests in a sustainable

manner and are directly linked to the livelihoods of people who reside

close to the forests. However, despite the rigid legal framework and

alternative forms of managing the timber demand, protected forests are

still being cleared for timber and colonization.

Forestry is classified as a renewable resource. Given enough time,

forests have the ability grow back. However, the complexity of

By Chatura Rodrigo

Figure 1: Proportion of Forest Cover

W

0.00 5.00 10.00 15.00

Percentage of Forest Cover

Sparse forest

Dry monsoon forest

Mangroves

Riverine dry forest

Sub Montne forest

Moist monsoon forest

Lowland rain forest

Montne forest

Forest Types

20.00

2010

1999

1992

13

THE WAY FORWARD

bio-diversity in forests needs a long period to restore. Therefore, if the extraction rate of the timber and NTFPs are higher than the restoration rate, the forest resources can deplete faster. In order to prevent this, like in all the other countries blessed with forest resources, Sri Lanka’s forests are protected by law, which prevents over extraction of forest resources by providing ample time for regeneration.

In theory, property right regimes that govern natural resources such as forestry always aim to keep the extraction rate of resources below the regeneration rate, allowing a buffer stock to be developed. However, misallocation of property rights can either result in over extraction, which leads to the “Tragedy of Commons” or under extraction, which leads to the “Tragedy of Anticommons”. When forests are managed as an open access resource where no one holds the rights to manage and utilize forests, everyone has an equal chance of consumption and the probability for people to consume forest products without preserving for the future is high. This will result in over extraction and leads to the “Tragedy of Commons”. On the other hand, if the forest is managed by more than one entity with equal rights of exclusion, there’s a higher probability for under extraction leading the “Tragedy of Anticommons”.

Property rights that manage forests of Sri Lanka hold characteristics that, if misallo-cated, can drive towards either one of these situations. For example, NTFPs are managed as an open access resource or a common property. The extraction of these resources from forests does not have a set limit. Such a property right regime does not have the capacity to prevent the extraction of indigenous medicinal plants. Sri Lanka has a “red list”; fauna and flora are identified and categorized in order to take proper measures to prevent the extinction of endangered species. However, allowing open access can easily increase the probability of harvesting resources towards their extinction limit. Extraction of medicinal plants as a NTFP is a better example of this.

On the other hand, forest clearance for colonization and development is highly regulated. Several government institutions have the mandate to manage resources in a forest and institutions such as department of forestry, department of wildlife divisional secretariat office and ministry of resettlement are some of those. Such a property rights regime holds the characteristics of an Anticommons property. When forest lands are to be cleared for timber extraction and colonization, it is required to obtain the necessary permission from all these institutions. Such a property right system can discourage development and open the probability for forceful clearance of forests under political influence and bribes. Therefore, managing forests under an Anticommons property regime would drive the underutilization of forests and result in the “Tragedy of Anticommons” in the eyes of development.

Striking a balance between development and natural resource management is important. An increasing population, urbanization and development of infrastructure will demand more forests lands to be cleared. If there’s a lack of clear allocation of ownership, clearance of forests lands for development will be driven by political influence and bribes. If management rights are clearly defined without lapping jurisdictions, clear and transparent decisions can be taken on whether or not to use a particular forest land for development. Therefore, it is important that management of forest lands for development is vested with a minimum number of government institutions that are less likely to be influenced by political pressure or bribes.

Despite drawbacks in terms of forest cover decrease and bio-diversity loss, deforesta-tion for colonization and development present opportunities. Rather than clearing forests just to build houses and buildings, forest clearance for development can be done through a more sustainable and coordinated manner. In a colonization process, private land titles are mostly given to people. However, these land titles do not reflect clear characteristics of private property rights. Instead they are permits issued by local government authorities. Clear ownership of private land can significantly motivate the implementation of satiable land use management practices.

Plantation forestry is also a major source of timber in Sri Lanka, which is in operation since 1870’S. While there are government owner plantation forestry establishments, there is an increasing emergence of private ventures. The main property right regime that drives these private ventures is the private property. One approach is that, the people can invest in the land and then purchase plants from the private company and sell the trees back once they reach maturity. This provides the land owners the responsibility of managing the timber lot. The other approach is to invest in the land lot owned by the private company where people can only own the timber trees.

Finally, forest based eco-tourism initiatives have also proven to be useful in sustainable forest resource management in Sri Lanka. In this approach the forest land is privately owned by the operator of the eco-tourism venture and managed in such a way that it preserves the bio-diversity of the environment. Interested tourists can visit these lands and pay a fee in enjoying the environment. Tourists are not allowed to consume forest products. The approach has now been successfully expanded in to tea and rubber sector also. This system of eco-tourism has proven to be more sustainable in managing forests than the usual way of managing forests by government institutions. Since the forests are privately owned, they are managed well and kept at its best to attract more tourists and support many local livelihoods.

Chatura Rodrigo, MSc (Guelph)

Research Economist, IPS

[email protected]

The colonized lands can be easily converted in to successful home gardens. It can also be encouraged to grow timber products that have a significant demand in such land lots, which will help restore the loss of bio-diversity to a certain extent.

Community forestry is another significant initiative to manage forest resources in a sustainable manner. Community forestry management systems promote; alternative livelihoods, collaborative management of specific forest areas to control illegal extraction of timber or the unsustainable harvesting of NTFPs, collaborative management of specific forest areas with community participation, along with awareness and fire control measures. It also promotes improving home gardens to provide a source of timber, materials for stakes and trellises, and fire wood that are easier to collect and helps avoid forest degradation and the develop-ment of woodlots. In this initiative, the forest land is owned by the state and its representative the department of forestry while the management rights are given to the people. Therefore, compared to an open access regime, this will help monitor the use of forests resources by the regulating authority.

14

TALKING ECONOMICS

ri Lanka is fast becoming urbanized with low

density urban sprawl and ribbon development

along the main roads of the country’s coastal

areas. During 2005 – 2010, the country had an

average urban population growth rate of 0.3 per

cent, which was amongst the lowest in Asia.

However, this has gradually started to change

with rural to urban migration, with the end of the

conflict in the county’s North and East. An

increasing trend in urbanization can be observed

in many areas, and statistics do not capture this

correctly. The projected increase in urbanization

will create challenges, and ensuring the

country’s sustainable development will rest

upon how effectively these challenges are

addressed.

World Water Day 2015 is celebratedon March 22 under the theme

“Water and Sustainable Development”. In this article to mark the day,

Chatura Rodrigo and Athula Senaratnehighlight the importance of Integrated

Urban Water Management in meetingthe demand for water in a fast

urbanizing Sri Lanka.

in Sri Lanka

Integrated

Water Management and

Sustainable Urbanization

Meeting the demand for water of a growing

urban population is one of the major challenges

for policy planners of urban development. The

country’s vision on urbanization involves

development of many physical infrastructures

such as buildings, roads, railways and

industries, which will attract many people to

urban areas. They will demand more domestic

and industrial water, creating pressure on

natural water bodies. Water availability for both

industrial and domestic consumption will also be

affected by climate change. Low lying urban

areas will be prone to inundation with heavy

rainfalls and floods while dry spells will create a

high demand for industrial and domestic water.

In this context, it is imperative to look at

Sri Lanka’s vision on urbanization and potential

drawbacks connected to the increased demand

for water.

Sri Lanka’s Urbanization Vision and Potential Water DemandUnder the National Physical Plan of Sri Lanka

(2011-2030), Sri Lanka aims to focus on five

metro regions – Colombo, North-Central,

Southern, Eastern, and Northern – and nine

metro cities – Ampara, Anuradhapura,

Batticaloa, Colombo, Dambulla, Hambantota,

Jaffna, Polonnaruwa, and Trincomalee. These

regions are to be connected and integrated into

a country-wide system of urban areas. At

present, there are more than 15 mega projects

By Chatura Rodrigo and Athula Senaratne

S

15

associated with development of town centers in

Sri Lanka. Urban regeneration efforts include the

construction of 70,000 low cost housing units in

the next six years. These are intended for

relocation of residents presently living in

under-served settlements in the city of Colombo.

All of these developments will create demand for

more water. Water is a basic necessity, a human

right of urban as well as rural population. At the

same time, water is a limited resource.

Demand for safe water has been increasing by

8-10% each year. Most urban water supply

schemes do not have the capability for providing

a 24-hour service. When it comes to addressing

water related matters, the urban sector faces a

number of challenges.

While the urban water supply is mainly

dependent on surface water, the degree of

dependency on ground water appears to be

rising. Storage reservoirs have limited capacity,

and no expansions have been done in the recent

past. In addition, in the dry season, salt water

intrusion occurs. . Being an island, urban flood

management is vital for Sri Lanka. In order to

account for flood issues, hydrological assess-

ments are needed. However, these assessments

are done with models with limited verifications.

Monitoring of the quality of water bodies that

supply pipe borne water is poor. From time to

time cases of water pollution are reported, and

activities by individuals as well as industries

create negative environmental externalities,

which costs private as well as public resources .

In managing urban water, different agencies

have different areas of jurisdiction which often

overlaps. . In the Colombo metro region, most of

the water and sanitation infrastructure dates

back to the colonial era, and a majority of the

pipes that carry water and sewage are old and

malfunctions from time to time, sometimes

resulting in leaks. A proper financial mechanism

is needed to fund the expansion and the repair

of the water supply infrastructure in urban

areas.

people without proper access to water and

sanitation. By providing water services of

appropriate quantity and quality would

invariably lead to improve the health and

productivity of urban residents.

Current State of Affairs

Water is a basic necessity, a human right of urban as well as rural population. At the same time, water is a limited resource.”

While the usage of freshwater for the country’s

agriculture has decreased, the usage of water in

both domestic and industry has increased.

Currently, 87.37% of freshwater is used for

agriculture, 6.22% and 6.42% for domestic and

industry usage, respectively.

The increase in domestic and industrial water

usage is prominent in the urban sector compared

to rural and estate sectors. Achieving the demand

created by urban settlements is reflected in the

statistics on access to safe drinking water.

Compared to the rural and estate sectors, access

to safe drinking water of households is high in

the urban sector. The coverage figures have

increased from 96.8% in 2009 to 98.7% by 2012.

Among the safe drinking water sources, pipe

borne water is the safest. Approximately 75%

and 14% of urban and rural population respec-

tively are served by pipe borne water. Domestic

demand for billed water is around 66% of the

total demand. Industries as a whole demand 9%

of the water sold. Furthermore, Sri Lanka has

been successful in providing exclusive sanitation

facilities to a higher share of the urban house-

holds when compared to the households in the

rural and estate sectors. The urban sector will

require more pipe borne water as population

density increases and industries expand.

In addition, waste water disposal is also a major

concern in the urban sector. The share of water

used by the urban population in Sri Lanka is

projected to increase to 45% by 2015 and to 65%

by 2030, which is bound to increase the pressure

to meet the national targets for drinking water.

What are the Challenges?

The Way Forward

Managing urban water demand calls for

innovative actions. In this regard the Integrated

Urban Water Management (IUWM) is considered

an innovative and optimistic way of managing

water demand linked to urbanization.

IUWM calls for the alignment of urban develop-

ment and basin management to achieve

sustainable economic, social, and environmental

goals. Planning for the water sector has to be

integrated with other sectors, such as land use,

housing, energy, and transportation. Adopting

IUWM and its adaptive, iterative processes will

help cities to significantly reduce the number of

16

TALKING ECONOMICS

Good Environmental Management Practices in the Hotel Industry in Sri Lanka: Determinants and Barriers

Most commonly adopted energy management practices include; the use of energy

efficient lighting methods (88%), use of solar power (69%) and key switches (60%).

However, the contribution of each practice towards energy savings depends on the

intensity of adoption. For instance, possible savings due to energy efficient lighting

is dependent on the proportion of energy efficient bulbs used in a hotel.

The study also found that dual flush toilets (79%) and linen and towel reuse (56%)

Energy, Water, Waste Water and Solid Management Practices

ith the tourism sector in Sri Lanka recording remarkable growth in the recent

past, it is imperative to ensure such growth is environmentally sustainable. In this

regard, the accommodation should receive foremost attention given its expansions

both in terms of investments in new hotels and refurbishments of existing hotels in

the country. Around 37 registered hotels have been added during the period

between 2009 and 2013, according to the statistics of Sri Lanka Tourism Develop-

ment Authority. Currently, adoption of good environmental management practices is

taking place in the hotel industry but on a voluntary basis. It is important to

understand what motivates hotels to adopt good environmental management

practices, and identify barriers to their adoption so that such activities could be

encouraged.

A recent IPS study looked at the adoption of good energy, water and waste manage-

ment practices in hotels in Sri Lanka. The findings of the study were based on

econometric analysis using data gathered through a comprehensive survey of

registered hotels in the Western Province, which has the highest number of hotels at

provincial level. On average, the study found that 7.81 good environment practices

are currently in place. Of the different good environmental management practices,

those relating to energy were the most commonly adopted followed by water, solid

waste and waste water practices. It was interesting yet not surprising to note that,

comparatively large hotels (with more than 50 rooms) perform better than their

smaller counterparts. For example, the total number of good environmental

management practices (energy + water + waste) is around 9.3 in large hotels

compared to the figure of 5.6 in small hotels.

By Kanchana Wickramasinghe

W

17

Determinants in the Adoption of Good Environmental Management PracticesThe study assessed factors which determine the number of

good practices in energy, water, and waste management

adopted in hotels. Accordingly, the size of the hotel, percent-

age of guests for leisure purposes, number of employees per

room, and the location of the hotels determine the adoption of

good environmental management practices. Also, hotels that

have undergone capacity building, training and were provided

awareness support, demonstrated better environment

management practices.

Barriers to AdoptionAn important finding of the study is that the barriers to adopting

good environmental management practices are not the same

among small and large hotels. The most commonly observed

barrier for the large hotel category is the perception that cost of

adopting good practices exceeds the benefits. Under the small

hotel category, the most observed barrier was that environmen-

tal management is not a top priority. Lack of financial

resources and constraints due to the structure of hotels and

limitations in space were also significant barriers.

Policy Attention for an Environmentally Sustainable Hotel Industry

are common barriers for adopting good environmental management practices. This

indicates that environmental management should be considered at the initial stage of

designing hotels or when considering refurbishments.

These findings call for greater awareness, training and capacity building support to

improve environmental management practices in the hotel industry and thereby

promote sustainable tourism in Sri Lanka.

This article is based on the study undertaken with financial and technical support of the South Asian Network for Development and Environmental Economics - SANDEE.

are most common water management practices among the

hotels that participated in the survey. Some of the water

management practices need the participation of the

customers to save the amount of water consumption. For

instance, correct handling of dual flush toilets, linen and

towel re-use, etc., require customer’s involvement.

However, other water management practices, such as low

flow showers and taps, re-use of treated waste water and

sensors in toilets directly lead to water savings, irrespective

of customer involvement.

In terms of solid waste management, over 65 percent of the

hotels’ waste is collected by the municipal council. Good

solid waste management practices include composting

(22%), recycling (22%), and solid waste segregation (18%).

In addition, the study looked at waste water management,

and found that 42 percent of the hotels have sewerage

treatment plants.

Policy-wise it is important that more attention is given to small

hotels to improve their environmental management activities,

as they are lagging behind. Space and structural constraints

18

TALKING ECONOMICS

Figure 2: Commonly Adopted Energy Management Practices

IPS CLIMATEnet is a website dedicated to

sharing ideas, information, insights, news

and resources on how to face the

challenge of climate change. While its

main focus is on South Asian region with

particular attention on Sri Lanka, it is open

to views and ideas on climate change

policies from anywhere in the world that

can make a useful contribution to the

dialogue .

Climate change is a global problem that all

nations are destined to face together. It is a

complex problem demanding complex

policy interventions to address multiple

issues. This calls for combined action of all

countries throughout the policy making

processes. The CLIMATEnet is thus aimed

at creating a dialogue on different aspects

of climate change policy. The ultimate

goals of this exercise are to inform policy

makers on better strategies and to create

awareness among stakeholders on

different aspects of the challenges faced.

CLIMATEnet aims to build up a fruitful

collaboration with professionals from all

relevant disciplines on the basis of mutual

benefit and cooperation. It also hopes to

improve outreach to various stakeholders

and build linkages necessary for a fruitful

policy dialogue. In this connection,

CLIMATEnet welcomes and appreciates

contributions by all who wish to participate

in this important dialogue.

Visit IPS CLIMATEnet at

http://www.ips.lk/climatenet/index.html

You can also visit the CLIMATEnet

Blog at http://climatenet.blogspot.com/

19

This is my 10th year at the IPS. I have been

working on many areas related to environment,

such as natural resource management, climate

change, tourism, disaster management, green

economy etc.

Kanchana WickramasingheResearch Economist

Kanchana holds a Masters Degree in Economics from the

University of Colombo and a BSc – specialized in Agricultural

Economics and Business Management from the University

of Peradeniya. She has also completed a post-graduate

diploma in Universalizing Socio-Economic Security for the Poor at the International Institute

of Social Studies (ISS), The Hague, Netherlands.

How long have you been with IPS and what is your role at the Institute?

I followed science subjects during my

secondary education, and as a part of the

university education where I chose to specialize

in economics. I believe that blend of two

backgrounds – science and economics - is

ideal for a researcher working on environmental

economics. Naturally I choose environment as

my area of specialization. I am passionate

about researching on environmental sustain-

ability issues in tourism, maybe because

travelling is something I enjoy a lot in my life.

What inspired you to choose Environment as an area of specialization and what aspect of environment are you most passionate about?

As a researcher, I am proud of winning the First

prize for the Japanese Award for Outstanding

Research on Development (ORD) at the Global

Development Awards and Medals Competition

of the Global Development Network (GDN) in

2014. I also received the Top Outstanding

Young Persons (TOYP) in Sri Lanka Award 2014

for Personal Accomplishment, and was the only

female to receive the award in 2014. I have

also received the President’s Award for the

work published in the WHO Health Bulletin,

which I am proud of.

What are your career related achievements?

Environmental issues have been largely

neglected in policy decision making in Sri Lanka.

There are a lot of areas where environmental

Why do you think Environmental research is important to Sri Lanka?

I hope to expand the research work on

sustainable tourism in Sri Lanka. Also, I would

be working on climate change, particularly

climate related risk management in the coming

years.

What is your agenda for environmental research at IPS?

A good understanding and background on

environment and economics is required at the

first step. One should be skilled at formulating

good research questions which are policy

relevant and feasible. Technical skills and

proper communication skills are also needed. I

also feel you should be passionate about

environment related affairs and be keen on

researching on those. I would also think that an

interest in conducting field research as an

added qualification.

What advice can you give career starters who are keen to explore this line of work?

Enormous support I receive from my family - it

helps me achieve a good work-life balance.

What aspects of your personal life help you do your job well?

Climate change has become the mostly

discussed global issue today. International

cooperation is a must to mitigate climate

change. Meanwhile countries should focus on

adaptation measures to minimize the impacts

of climate change.

What do you feel is the biggest environmental issue the world is facing today, and how can that be tackled?

IPS INSIDE

20

TALKING ECONOMICS

research has not touched upon or referred to as

an afterthought. Good environmental research

is required to help better make decisions on

sustainable development.

Some Challenges

National Medicinal Drug Regulatory

Authority Bill and the Medicinal Drug Policy

of Sri Lanka:

By G D Dayaratne

The concept of essential medicine was initiated

in 1962 with the establishment of National

Formulary Committee to reform the selection of

drugs for the government drug supply.

Subsequently, as per the recommendation of the

1971 Bibile-Wickramasinghe Report, the Ceylon

Hospital Formulary was prepared and the total

number of drugs were reduced from 2,100 to

630 under their generic names and the usage of

brand name drugs was greatly reduced. These

were pioneering initial steps in Sri Lanka’s drug

policy.

Although attempts to develop a National Drug

Policy by the Ministry of Health were made in

1991 and 1996, they never reached the level of

the Cabinet for approval. The Report of the

Presidential Task Force on Formulation of a

History and Emergence of National Drug Policy

The National Medicinal Drugs

Regulatory Authority Bill which

provides provision for the forma-

tion of a Medicinal Drugs Regu-

latory Authority was passed in

Parliament with amendments on

6th March 2015. In this article,

G D Dayaratne takes a look at

the challenges in effectively

implementing the Policy.

National Health Policy for Sri Lanka, which

wasestablished in 1992, recognized the

need for a National Drug Policy but it was neither

comprehensive nor well defined. In 2005, the

Ministry of Health worked out a comprehensive

draft for a National Medicinal Drug Policy for Sri

Lanka which was approved by the Cabinet in

October 2005. However, it was stopped at Cabinet

level due to well-known reasons. After the new

government came into power in 2015, it was

submitted to the Parliament and ratified.

Salient Features ofthe New MedicinalDrug Act The new Act provides for the establishment of a

National Medicines Regulatory Authority respon-

sible for the regulation and control of registration,

licensing, manufacturing, and importation, and

conducting of clinical trials. Making available of

efficacious, safe and good quality medicine is one

objective of the Authority.

According to the Act, doctors shall write the

generic name of the medicine with the option

of writing the brand name on request.

Successful implementation of this passage

depends on the behaviour of over 10,000

pharmacies spread across the country. Most of

these pharmacies are well looked after by the

players in the pharmaceutical industry. The

general perception is that the pharmacists will

try to exploit the new law as the pharmaceuti-

cal industry has been highly unregulated,

despite Clause 56 (4-6) specifying pharma-

cist to dispense any other brand of drugs with

the consent of the customer. Countrywide

pharmacies are operating, in an unregulated

environment, and proper implementation

would be difficult as drug inspectors have

cultivated friendly relations with pharmacies.

Brand-namevs. Generic

21

G D Dayaratne, BA (Peradeniya)

Manager - Health Policy Programme, IPS

[email protected]

The price of medicines is another concern as it is likely

to affect access to affordable medicines.

According to the Act, there is no clear indication of

pricing policies related to medicines. The Authority is

to appoint a pricing committee to formulate a

mechanism which will determine medicine prices,

after considering the prevailing international and

regional market prices of similar products. According

to media reports, the Committee that drafted the Act

assured the public about the quality of medicine, and

prices are expected to come down in the short-term

and decrease further in time to come.

The arrangement on pricing shows a clear departure

from the Bibile concept on which Sri Lanka’s first

National Drug Policy was established in 1971.

According to that, an essential drug list was introduced

by a new formulary and the number of essential drug

reduced to 630.

According to various reports, the country presently

imports over 10,000 varieties of drugs. However, there

is no mention of introducing a hospital formulary in the

newly enacted Act which is an essential element of

pragmatic drug policy to provide safe and quality

medicine at affordable prices.

Pricing

Sri Lanka’s drug procurement process follows various

stages, including registration, selection, procurement,

distribution, and service delivery, which were designed

to be transparent. The registration process guarantees

the drug’s safety and efficacy, but various news

reports highlight that the credibility of this system has

eroded due to the pharmaceutical industry lobby. The

registration of new drugs takes almost one year and

involves tedious bureaucratic procedures. This has led

to an increase in circulation of unregistered drugs that

undermines the objective of regulation to ensure the

supply of safe drugs.

Moreover, the country’s National Drug Quality

Assurance Laboratory (NDQAL) does not have the

capacity to test all drugs imported into the country.

There are also weaknesses in post-marketing

surveillance due to restrictions in capacity as a result

of shortages in necessary manpower to inspect

pharmacies.

Present Status of Drug Regulatory Regime

Challenges The National Medicinal Drug Authority Regulatory Bill, which was

recently passed in Parliament, is one of the healthiest gifts to the

people, after a delay of almost ten years with several attempts to derail

or dilute the move. The Bill has two major lapses as mentioned below.

The Act had laid down three conditions for the registration of medicinal

drugs. They are quality, safety, efficacy, while omitting the cost factor,

which is the most important factor related to access to affordable

drugs.

According to the Act, the doctors are required to write the generic

names of drugs along with any brand names prescribed. However, it

does not mention if the doctors will be held liable and any action will

be taken against them in case they fail to adhere to this requirement.

In the case of pharmacists, the Act clearly states that a pharmacist

who fails to disclose the brand of a medicine available at the pharmacy

together with a generic medicine and their prices to the customer at

the time of sale, commits an offence.

It has been reported in various quarters that the new Bill ratified in the

Parliament is a National Medicinal Drug Authority sans a National Drug

Policy. Also, there has been a serious lapse by not providing enough

time and space for the civil society groups to review the contents of

the Bill before it was submitted for the approval of the legislature.

Introducing a pricing mechanism for essential drugs is going to be an

extremely difficult task given that over ten thousand varieties of drugs

are imported today. Without the introduction of a National Hospital

Formulary, which includes an essential drug list, the task of pricing

drugs will remain a challenge.

22

TALKING ECONOMICS

Patient Waiting Times in Private Hospitals: A GrowingConcern in Sri Lanka

Patient waiting times, an important

aspect of the patient experience,

influences patient satisfaction to a

significant extent. It is, however,

an often overlooked component of

the patient encounter. In Sri Lanka,

long waiting times at private

healthcare providers is commonplace.

A fundamental reason behind this is

the doctor-centric approach of the

healthcare delivery model; where

hospitals in the private sector facilitate

doctors rather than patients

(RAM, 2013).[i]

DOCTORS CONSULT AT MULTIPLEHOSPITALS IN A SINGLE DAY

PATIENT EXPERIENCE ON EXPECTED AND ACTUAL WAITING TIMES

A pilot survey on patient satisfaction conducted by the IPS was used to obtain

information on expected and actual waiting times.[iii] Figure 1 shows the link

between actual and expected (what the patient thinks is an acceptable

waiting time) waiting times as reported by respondents.Area ‘AWT>EWT’

below the reference line is the area where the reported actual waiting time

is greater than the reported expected waiting time. Area ‘AWT<EWT’

above the reference line is the area where the reported actual waiting time

is less than the reported expected waiting time. The size of the bubble

indicates a proportion of respondents; the bigger the bubble, the bigger the

proportion of respondents.

At present, a permanent cadre of doctors is not available at private hospitals

(except in Lanka hospitals which was introduced recently). Doctors, therefore,

consult at multiple hospitals, sometimes, as many as six to seven hospitals

in a single day. Private hospitals in Colombo are scattered across the city

and there is often only a narrow time gap (sometimes as low as 15 minutes

or half an hour) between scheduled appointments at different hospitals.

As a result, doctors who consult at multiple hospitals inevitably arrive late to

most of their scheduled appointments because they are either held up in their

previous consultation commitments or held up in traffic (Dayaratne, 2013).[ii]

By Shanika Samarakoon

23

Patients sometimes travel great distances to consult a

particular specialist and they are not fully compensated when

doctors are late. They are also inconvenienced by unannounced

cancellations. Furthermore, patients are not briefed on who is

responsible for their care, the hospital or the visiting specialist

doctors. In this regard, both the monetary and time costs to

the patient are high.

NEED FOR A PERMANENT CADRE OF SPECIALISTS AND AN OPTIMUM REFERRAL SYSTEM

Having a permanent cadre of specialists consulting in one

hospital at a given time would considerably minimize

the issues pertaining to long waiting times.

When a hospital has a permanent cadre, if one specialist

is unavailable, another will be available to consult patients.

Lanka hospitals is one key player in the industry

who now has doctors consulting throughout the day at

the hospital. Furthermore, Sri Lanka needs an optimal

referral system. A referral system is where

a general practitioner (GP) refers a patient to a specialist.

The absence of such a mandatory system has

resulted in patients going directly to specialists,

in turn creating long queues and waiting times in private

hospitals. If a mandatory referral system exists

in the country it can not only reduce waiting times but

also allow specialist doctors to spend more time with

their patients during a consultation.

REDUCING WAIT TIMES IMPACTS THE PATIENT EXPERIENCEShorter waiting times can make an important positive difference in the

patient experience. It is, therefore, necessary to look into how waiting

times can be avoided or at least kept a minimum to improve the

patient experience. Given that Sri Lanka’s households are continually

spending large portions of their income on private healthcare, it is

necessary to ensure that they receive proper value for the

money they spend.

[i]

[ii]

[iii]

RAM ratings (2013). Private Pills for Public Pains.

The Private Healthcare Sector of Sri Lanka. Standpoint Commentary.

March 2013. Colombo, Sri Lanka.

Dayaratne, G.D. (2013). Private Hospital Healthcare Delivery in

Sri Lanka: Some Issues on Equity, Fairness, and Regulation.

Research Studies. Working Paper Series No. 18.

Institute of Policy Studies of Sri Lanka. Colombo.

The survey is based on a forthcoming IPS report on ‘Value for money

in healthcare services in Sri Lanka’.

Shanika Samarakoon, PhD (Nottingham)

was a Research Economist at IPS.

Actual waiting time (AWT) (minutes)

Figure 1: Individual responses on actual and expected waiting times

0

1

2

3

4

5

6

0 1 2 3 4 5 6

Expe

cted

waiti

ng ti

me

(EW

T) (m

inut

es)

< 5 about 5 5 to 10 10 to 20 > 20

< 5

about 5

5 to 10

10 to 20

> 20

AWT>EWT

AWT<EWT

24

TALKING ECONOMICS

ave you ever stopped to consider that your

day-to-day meals, particularly the

packaged/processed food, contain varieties of

added substances, which are made of synthetic

chemicals? When you read the list of ingredients in

the food labeling/packages, you can see different

substances named with ‘INS’ or ‘E’ numbers, some

of them you may have never heard of or some

names are very hard to read. These substances

are called ‘Food Additives’. In this article, Samanthi

Bandara takes a look at how the use of food

additives is threatening the safety of the food we

consume.

More than any other time in history, people are

conscious about ‘food’ they consume – where they

come from and how they are produced. Unlike in

the past, when ancestors harvested their own food

for consumption, most food consumed today

comes from unknown sources and the food value

chain is increasingly becoming modernized along

with developments in science and technology.

Together with structural changes -- population

growth, urbanization, and globalization –people’s

lifestyles and food habits have changed, accelerat-

ing demand for processed and convenient food. In

this regard, ‘food additives’ play a key role in the

food processing industry, making a variety of food

available from every corner of the world.

Since prehistoric times, people have used spices

and salt as ingredients for food preservation. In Sri

Lanka, traditional techniques such as soaking in

honey, salting, pickling, and smoking were

FoodAdditives

AreThey

Safe?

found to be used to preserve and prepare

vegetables, fruits and meat by Veddas, aborigines

or indigenous people.. The first patent for food

additives was taken by the US in 1886 for a

mixture of salt and calcium phosphate as a food

condiment.

Are food additives essential?Over the last 50 years, food additives have

revolutionized the food industry, moving with

advanced technology to cater to the increasing

demand for convenient, tasty and nutritious foods

as well as increasing overall demand for food with

population increase.

Thousands of food additives made of synthetic

chemicals introduced by the US Food and Drug

Administration (FDA) are now used by food

industries all over the world. According to the

book, Staying Healthy Shopper’s Guide: Feed Your

Family Safely by Elsom M. Haas, food industry

commonly uses these substances to:

• improve shelf life or storage time,

• make food convenient and easy to prepare,

• increase the nutritional value,

• improve the flavour of foods,

• enhance the attractiveness of food products

and improve consumer acceptance.

By Samanthi Bandara

H

25

Samanthi Bandara, MSc(Chulalongkorn)

Research Officer, IPS

[email protected]

Food additives can be categorized based on the purpose of

each additive. Generally speaking, there are 6 types of food

additives; they are preservatives, nutritional additives,

flavoring agents, coloring agents, texturizing agents, and

miscellaneous additives.

Growing concerns in Sri Lanka

It is important for countries to carry out regular ‘dietary exposure assessments’

to examine the harmful effects of food additives on human health. The results of

such assessments can be used to spread awareness amongst people. It is well

known that over-consumption of any food item can have an adverse effect.

Likewise, eating food containing additives often and in large quantities may

have health implications later in life. Therefore, it is advisable to avoid food that

contains synthetic chemicals, as much as possible. Moreover, it is difficult to

point out whether the reactions to additives are mild or severe. Therefore, those

who suffer from allergies or food intolerances should carefully check the

ingredients listed on labels.

As per the Food Act of 1980, proper labeling in food products is a must.

However, listing the ingredients on labels is not adequate. It is important to list

the quantity of each ingredient used, along with nutrition information. This will

provide the necessary information for consumers about each ingredient, to help

balance their daily food intake.

Another major issue is that packed/unpacked food items such as rice, kottu,

hoppers, thosai, etc., prepared by food venders do not contain labels to state the

type of ingredients (e.g., salt, sugar, and other additives) and quantities used. .

As a result, consumers are not able to gauge the safety of such food. In Sri

Lanka, there are frequent media reports of unsafe/unhygienic food items being

sold by vendors for human consumption. This highlights that the availability of

policies or regulations is not adequate.

While it is important to identify and take necessary action against those who

violate such regulations, a number of measures are required to facilitate this

process. These include recruiting adequate staff by relevant authorities (e.g.,

Public Health Staff), imposing high penalties within short periods in line with the

law, providing adequate laboratory facilities for testing, etc., which are essential

for the proper implementation of regulations to ensure safety of food we

consume.

Despite the multiple purposes of additives, there are emerging

‘hard facts’ with regard to the use of food additives, which raise

concerns.

One of the main concerns is the adverse reactions to food

additives by individuals. To run a safety analysis for a range of

dosages, each additive is fed to an animal. Thereafter, the FDA

recommends the ‘safe dosage’ of each chemical substance for

human use. Many studies have found harmful effects of over

dosage of certain chemicals on animals. For instance, Monoso-

dium Glutamate (MSG - INS 621 or E 621) popularly known as

Ajinomoto, discovered by the Chinese and Japanese about 1,500

years ago, is used universally as a flavour enhancer.

MSG is made up of two chemicals -- sodium (salt) and glutamate.

Glutamate or amino acid can also be found in natural food stuff

such as mushrooms and tomatoes. It is said that ‘MSG does not

bring any nutritional value to the food, but stimulates taste buds by

exciting the brain cells’. A study found that a large part of neurons

in brains of infant mice can be destroyed by feeding large amounts

of MSG. Research has also found other adverse effects of MSG on

human health, including headache, facial pressure, chest pains,

burning sensation, wheezing, and difficulty of breathing – a

collection of symptoms often called “Chinese Restaurant

Syndrome”.

However, the use of this substance in food products in Sri Lanka is

permitted under the regulation No. 1795/51 in the Food Act, No.

26 of 1980. Importation of MSG into the country has seen an

increase over the years. According to Custom data, Sri Lanka

imported 1,772 tons of MSG worth Rs. 316 million in 2009 – these

figures have increased to 2,740 tons of MSG and Rs. 499 million

by 2013. Like in many other countries, Sri Lankan consumer

movements have also raised their voices demanding the

authorities ban MSG, particularly in food preparations at school

canteens. However, no policy decision has been taken yet.

Another area of concern is that food additives in general accelerate

attention-deficit disorder (ADA), and attention-deficit hyperactivity

disorder (ADHD). A study found that hyperactivity increased in

3-year-old and 8-9 year old children who consumed juices

containing artificial food colours and preservatives. In addition,

additives are likely to lead to increase asthma among children.

What needsto be done?

26

TALKING ECONOMICS

This article was written to coincide with the World Health Day 2015.

“Let food be thy medicine and medicine be thy food”, said

Hippocrates, who is considered the ‘Father of Modern

Medicine’, over 2000 years ago. He recognized the impact

good food has on good health, as the food we consume not

only sustain our lives, it also prolongs the quality of life.

With globalization and rapid urbanization over the years,

people’s food habits have substantially changed along with

their lifestyles. This has shifted the traditional healthy meal

that consists of whole grains, fruits, and vegetables (high

fibre, low fat, and low calorie food), towards calorie-dense

foods that are high in saturated fats, trans-fats, sugar and

salt.

This is causing significant health problems around the

world, particularly giving rise to Non Communicable

Diseases (NCDs), also known as chronic diseases. While

NCDs cannot be transmitted from person to person, the

diseases last over a long period and progress slowly.

According to the World Health Organization (WHO) 38

million people (68%) die due to NCDs each year. Of which,

the main types of NCDs including cardiovascular diseases

(e.g., heart attacks and strokes),

By Samanthi Bandara

Unhealthy Diets and NCDs

Unhealthy food can be defined as food high in saturated fats, trans-fats, free sugar or

salt. According to the WHO, an unhealthy diet is one of the four modifiable behavioural

risk factors that increase NCDs. Other risk factors include: tobacco use, physical

inactivity, and harmful use of alcohol.

Frequent unhealthy diets increases obesity/weight gain, which is a risk factor of chronic

NCDs such as cardiovascular disease, diabetes and cancer. Globally, more than 1.9

billion people are overweight while more than 600 million are obese. According to the

WHO, annually, 3.4 million adult deaths occur worldwide due to overweight/obesity.

While, this problem is prevalent in higher socio-economic settings, it is also on the rise

in low and middle income countries. In Sri Lanka, prevalence of obesity in persons aged

18+ years was 3.5% and 10% amongst males and females, respectively (Figure 1).

Statisticson overweight were much higher. Obesity and overweight have become an

acute problem among children due to overindulgence in high calorie food and indoor

leisure activities (e.g., television, internet, computer games, etc.). Moreover, children are

increasingly subjected to advertisements that promote fast/processed food, which have

a detrimental impact on their diets and health.

People from Sri Lanka as well as many countries across Asia are displaying unhealthy

diets and consumption patterns reflected by a low intake of fruits and vegetables, high

consumption of salt and sugar, and extensive use of trans-fats in the food industry. Half

a million deaths in the Southeast Asian region are attributed to low intake of fruits and

vegetables. While this is common among both males and females in Sri Lanka, among

women 100 out of 83 do not consume an adequate amount of fruits and vegetables a

day (less than five servings).

In addition, the consumption of salt and sugar in today’s diets are high. Current

estimates suggest that the global mean daily intake of salt is around 10g (4g of sodium

a day). This is substantially higher than the recommended limit of the WHO (5g of salt or

2g of sodium a day). A Sri Lankan adult is estimated to consume over 12.5g of salt per

day. The high consumption of salt is associated with hypertension (high blood pressure)

and cardiovascular problems. Hypertension is found to be more prevalent among people

with an average salt intake of 13.8 g per day, compared to salt intake of 4.9 g per day.

According to WHO, excess salt intake is the key contributor of 1.7 million annual deaths

from cardiovascular causes in 2010. In Sri Lanka, the prevalence of high blood pressure

was around 21.9% and 21.5% for males and females, respectively in 2014 (Figure 1).

The high consumption of sugar is directly associated with obesity/weight gain and

dental caries. Similar to salt consumption recommendation, the WHO recently

introduced a new guideline to reduce sugar intake. As per the recommendation, adults

and children, particularly non-diabetic people, are strongly advised to reduce the daily

intake of sugar to 5-10 % of their total energy intake. This is roughly about 25 grams or

6 teaspoons of sugar per day. At present, individual sugar consumption in Sri Lanka is

about three times higher than the recommended amount. Prevalence of raised blood

glucose/diabetes in Sri Lanka among persons aged 18+ years was 7.7 % and 9.1 % for

males and females, respectively.

Let Food be Thy Medicine

cancer, respiratory diseases (e.g., asthma) and diabetes account for 82% of all NCD

deaths globally. NCDs are the leading cause of deaths globally and three quarters of the

deaths (8 million deaths) now occur in low and middle income countries.

27

NCD status in Sri LankaIn Sri Lanka, 75% of the deaths are estimated to be caused by

cardiovascular diseases, cancer, chronic respiratory diseases,

diabetes and other NCDs. The number of NCD related deaths in

2014 was 60,300 and 43,500 among males and females

respectively. Although it is said that NCDs are often associated

with older age groups, almost half of the male deaths and more

than one-third of female deaths were under the age group of 70

years.

Figure 2, provides a break down profile of deaths by diseases in

Sri Lanka. 40 % of the deaths can be attributed to cardiovascular

disease, followed by cancer and other NCDs such as

obesity/overweight, respiratory diseases and diabetes.

Not only are NCDs the main cause of deaths in Sri Lanka but the

number of hospitalization due to NCDs appears to be increasing. In

fact, NCD prevalence in Sri Lanka is substantially higher compared

to some Asian countries. In terms of NCD mortality, Sri Lanka is

placed third (66%) in the ranking, behind Maldives (79%), and

Thailand (71%).

Towards a Healthy Food CultureChronic diseases create financial burdens not only on individuals,

and the health system, but also adversely affect the country’s

productivity and national income.

Towards combating NCDs, there is a need to strengthen the

existing policy/legal enforcement governing food value chain from

production to advertisement in the country. According to Liyanage

(2009 & 2010), 60 % of Sri Lankan consumers are not satisfied

with the quality of food, and the types of food available in the

market that are considered to be ‘not as healthy as expected’. In particular, many

food products have additives such as artificial colours and preservatives that

exceed permitted levels. There are also regular media reports of expired food items

being sold in the market, which raises the question of the extent to which the

prevailing laws are enforced.

Unregulated advertisements can also have adverse impacts on food choices of

consumers. In fact, some studies have found advertisements to be a determinant

of an obesogenic environment – that is, an environment that promotes weight gain

and is not conducive to losing weight. Many developed and developing countries,

such as the US and Taiwan have established effective initiatives to prohibit

unethical food advertisements to combat obesity and other chronic diseases.

Taiwan, which has the highest obesity rates in Asia, has recently drafted a Bill to

prohibit advertising of five kinds of junk food on children's television channels. In

Sri Lanka too, enforcing strict rules and regulations on unethical advertisements,

which promote unhealthy food is an area that needs policy attention, especially to

safeguard the health of the country’s young population.

Consumers also need to be made aware of the quality of food products they

consume. This calls for programmes to raise ‘health literacy’ amongst consumers,

which can be provided through various channels including electronic and print

media, community health workers, and school curricular. In addition, the Ministry of

Health, and the private sector can target school children/teenagers, housewives, as

well as white-collar workers when to implement programmes on healthy lifestyles

including diets - through Corporate Social Responsibility programmes.

Towards promoting a healthy lifestyle and prevent cardiovascular diseases, the

College of Community Physicians of Sri Lanka in 2012 launched the ‘Super 8’

initiative in partnership with the National Nutrition Secretariat, the Ministry of Health

and the Department of Agriculture. The Super Eight includes: 1) developing a

healthy Body Mass Index (BMI) of 18.5 - 24.9; 2) avoiding excessive consumption of

salt and 3) sugar; 4) engaging in moderate exercise; 5) eating five servings of fresh

fruit and vegetables every day; 6) avoiding food that contains trans-fat; 7) giving up

smoking and alcohol consumption; and 8) maintaining blood pressure below

140/90. Evidently, being conscious about the food we consume is vital; as a healthy

diet is an integral part of a healthy lifestyle. Therefore, as the father of medicine

once said “Let food be thy medicine”.

Figure: 2. Percentage of Mortality by Cause, 2014

Source: WHO (2014), ‘Non-Communicable Diseases Country Profiles 2014’

http://www.who.int/nmh/countries/en/(last access 9th March 2015)

Cardiovascular diseases

Cancer

Respiratory diseases

Diabetes

Other NCDs

Communicable diseasesand other conditions

Injuries

14%

11%

10%

7%8% 10%

40%

Figure: 1. Prevalence of selected metabolic/physiological riskfactors for NCDs (Population aged 18+ years, 2010)*

Source: WHO (2014), ‘Global Status Report an Non-Communicable Diseases 2014’, Geneva

28

TALKING ECONOMICS

Towards Healthier Diets in Sri Lanka: The Role of Nutrition Labeling

In this article to mark World Consumer

Rights Day (WCRD) 2015 under the theme

‘Healthy Diets’, Raveen Ekanayake and

Chayanka Wickremesinghe

take a look at the importance of nutrition

labeling to promote healthy diets.

Rights Day

Unhealthy diets are linked to four of the ten

biggest causes of deaths worldwide:

overweight and obesity, high blood pressure,

high blood glucose and high cholesterol. In

2010, it is estimated that over 11 million

deaths globally resulted from

Non-Communicable Diseases (NCDs) linked to

unhealthy diets. The impact of poor diets on

health now exceeds that of smoking. The effect

of obesity (US$ 2 trillion per year) on global

GDP is now equivalent to the cost of war, gun

violence and terrorism. Increased productions

of processed food, rapid urbanization, and

changing lifestyles have led to a shift in dietary

patterns. Increasingly, people around the world

are preparing less food from raw ingredients

and buying more processed, pre-packaged

food. Over the last decade or so, global sales of

pre-packaged foods have increased by 92 per

cent, reaching 2.2 trillion US dollars by 2012.

This increase in production, promotion, and

consumption of processed foods that are

unhealthy - energy dense, nutrient poor and

high in fat, salt or sugar - has become a global

driver of unhealthy diets in high, middle, and

low-income countries.

The growing incidence of NCDs linked to

unhealthy diets has gradually led to more

consumers becoming conscious of the inputs

that go into the production of the food items

they consume. Labeling, nutrition labeling in

particular, has been widely recognized as a

powerful tool in allowing consumers to quickly

and easily interpret the nutritional value of

packaged foods and inform and help them

decide on their diet. This article takes a cursory

look at the importance of nutrition labeling, the

regulatory environment concerning labeling,

and issues pertaining to the effective

implementation of such regulations.

Need for MandatoryNutrition LabelingConsumers around the world are increasingly

becoming conscious of what goes into the food

they eat. Moreover, a large number of health

conscious consumers look for key information

presented on the ‘Nutritional Facts’ given on

product labels. For example, the amount of

carbohydrates, calories, vitamins, minerals,

cholesterol, sodium are some nutritional facts

at the forefront on the minds of the consumers.

In some cases, consumer behavioural patterns

can be observed as a result of such labeling.

For instance, the inclusion of unhealthy

ingredients on the labels would encourage or

motivate consumers to switch to alternative

product which they deem to be healthier.

However, if the nutrition content of the

products is not labeled, the consumer cannot

make an informed decision. As a result,

labeling offers a certain degree of minimal

protection for consumers.

The current set of regulations governing food

labeling in Sri Lanka, mandates that in addition

to the date of manufacture and expiry, product

labeling must clearly disclose all ingredients

and permitted additives used in the product.

However, there is no mandatory requirement

on the disclosure of nutrition related informa-

tion. With growing health concerns due to the

consumption of unhealthy foods, from a

consumers view point, it is important that

regulatory authorities implement mandatory

nutrition label requirements on processed and

prepackaged foods for sale.

Need for MandatoryNutrition LabelingFor instance, the inclusion of unhealthy

ingredients on the labels would encourage or

motivate consumers to switch to alternative

product which they deem to be healthier.

However, if the nutrition content of the

products is not labeled, the consumer cannot

make an informed decision. As a result,

labeling offers a certain degree of minimal

protection for consumers.

The current set of regulations governing food

labeling in Sri Lanka, mandates that in addition

to the date of manufacture and expiry, product

labeling must clearly disclose all ingredients

and permitted additives used in the product.

However, there is no mandatory requirement

on the disclosure of nutrition related informa-

tion. With growing health concerns due to the

consumption of unhealthy foods, from a

consumers view point, it is important that

regulatory authorities implement mandatory

nutrition label requirements on processed and

prepackaged foods for sale.

March 15

WorldConsumer

By Raveen Ekanayake & Chayanka Wickremesinghe

29

Raveen Ekanayake, MPP (ANU)

Research Officer, IPS

[email protected]

Chayanka Wickremesinghe

Project Intern, IPS

In addition, regulatory agencies must seek to

ensure coherence in the information provided

in these labels. The flavour enhancer

mono-sodium glutamate commonly referred to

as MSG is one such example. The consumption

of MSG is commonly linked to symptoms such

as diarrhea, headaches, and insomnia.

However, when it comes to labeling, there is

no mention of MSG. Rather it is substituted by

a range of associated terms such as yeast

extract, glutamate, glutamic acid, etc. Hence

there is a tendency for consumers to be misled

by the information provided. Due to the

absence of specific mandatory guidelines

governing the type of nutrition related

information included on a label, firms have the

opportunity to pick and choose nutrition related

information that best suits the marketing needs

of their product, and leave out essential

information that are key for consumers in

making an informed decision.

Regulatory authorities must develop a set of

guidelines and make it mandatory to include

key nutrition facts on the labels of food

products in order to ensure uniformity of

information. This will also guarantee that the

consumers are not misled by the provided

information. Likewise an ingredient naming

convention must be established. For instance,

the US Food and Drug Administration (FDA)

stipulates that firms must always list the

commonly used names of ingredients unless

there is a regulation that provides a different

term,for example, using the term ‘sugar’

instead of its scientific name ‘sucrose’.

Ensuring Coherencein Information

Whilst nutritional labeling is a useful tool to

highlight essential information about the

nutritional value and composition of products,

the effectiveness of such regulations in

promoting healthy diets, rests largely on how

well consumers take notice of these nutrition

labels. Understanding nutrition labeling is

closely linked to nutrition knowledge of a

consumer. For nutrition labeling to be effective,

it is first and foremost important for consumers

to have a basic understanding of nutrition,

which will aid them in choosing prepackaged

foods. Studies suggest that the level of

knowledge and use of food labeling information

increases with age, level of education and

family income. It is therefore pivotal that

targeted consumer awareness programmes be

implemented to boost the general public’s

knowledge on nutrition. In India, a number of

initiatives have been organized at the

grassroots level with the involvement of the

regulatory agencies, business, both local and

multinationals and the NGO sector in improving

consumer knowledge on basic nutrition facts.

In Sri Lanka too a leading apparels manufac-

turer and a leading public school has teamed

up with a local NGO to raise awareness on

nutrition knowledge amongst its constituents.

Encouraging such initiatives in the country will

help improve consumer knowledge on

nutritional values of the food they consume.

What Can be Done? The growing incidence of NCDs associated with

unhealthy diets poses a serious public health

challenge for governments across the world

including Sri Lanka. Nutrition labeling has been

recognized as a key tool in the government’s

arsenal in tackling this problem.

Many governments in the developed world

have recognized this and mandated compul-

sory nutrition labeling requirements on

prepackaged products. For effective implemen-

tation of such regulations, it is key to establish

a specific set of labeling guidelines to ensure

consistency and transparency so that the

consumers are not misinformed or misled by

the information given in the labels.

In this regard, the regulatory authorities must

work together with the private sector and

relevant NGOs to raise nutrition knowledge and

awareness to promote healthy diets in the

society.

Raising ConsumerAwarenessby ImprovingNutrition Knowledge

30

TALKING ECONOMICS

ver the last two decades, there has been a tightening of

public standards, a shift from product standards to process

standards, an increase in the importance of private standards

and a widening scope of standards. These developments have

raised concerns amongst developing countries, as standards

can become non-tariff measures with falling tariffs. Failure to

comply with standards could potentially result in loss of

international market, a decrease in employment and a decline

of an industry. However, compliance offers the possibility of

enhancing international competitiveness and encourages the

advancement of an industry.

Sri Lanka’s tea industry, which is predominately export

oriented, is increasingly governed by strict and complex

standards. This reflects the evolving trends in the standards

environment globally. The main standards that affect the tea

exports from Sri Lanka are listed in Table 1. They can be

classified according to public/private, product/process, and

mandatory/voluntary.

By Janaka Wijayasiri

EMERGING FOOD STANDARDS: A CAUSE OF CONCERNFOR THE SRI LANKAN TEA INDUSTRY

STANDARDS GOVERNING TEA EXPORTS FROM SRI LANKAIn order to export tea, companies have to comply with local and foreign standards

and regulations pertaining to food quality and safety. These are usually mandatory,

product standards. In this regard, tea has to comply with ISO3720 product

standard for black tea. In addition to ISO3720, the Sri Lanka Tea Board requires

tea exports to comply with other product standards, including foreign matter,

micro-biological contamination, heavy metal and pesticide residue limits, which

are specified and monitored by the Tea Board.

International food assurance standards such as Hazard Analysis and Critical

Control Point (HACCP) and ISO22000 (Food Safety Management System) are also

increasingly becoming important in the tea trade. While these standards are

voluntary at the moment, compliance with either HACCP or ISO22000 is becoming

necessary and considered as de facto mandatory standards. Initially, companies

selected ISO9001, which is a quality management system (QMS) but with the

introduction of HACCP and subsequently ISO22000, which are more relevant to the

food industry, tea exporters are switching to HACCP and/or ISO22000 certifica-

tions. The drive towards obtaining these standards in the tea industry gathered

momentum when the EU stipulated in 2006 that food imports including tea into

Europe must meet the HACCP standard.

In addition to the mandatory and voluntary public standards, there are a number of

private standards which have been voluntarily adopted by tea exporters. These go

beyond the realm of public standards in food quality and safety, and cover a gamut

O

Table 1: Food Safety and Other Standards Governing Tea Exports from Sri Lanka

Standards Public/private Mandatory/voluntary Product/process

-

ISO3720; Foreign matter, micro biological, heavy metal & pesticide residue limits

Public Mandatory Product

ISO9001, HACCP, ISO22000

Public Voluntary Process

Fair Trade, Organic, BRC, Private Codes of Conduct

Private Voluntary Process

31

of issues including social and environmental concerns. Commonly

stated private standards by tea exporters include: BRC (British Retail

Consortium) Global Standard, Organic, Fair Trade (FT), Ethical Tea

Partnership (ETP), and Rainforest Alliance (RA), which have been

collectively set and monitored by third party agencies. There are also

private standards or private codes of conduct, specific to individual

buyers; for example, supermarkets (i.e., Japanese supermarkets)

and fast-food chains (i.e., McDonalds) have their own set of

standards and requirements. The emergence of private standards

reflects a growing interest by buyers, and ultimately consumers,

about the conditions under which tea is produced.

COMPLIANCE CHALLENGES

Tea exporters from Sri Lanka have been able to meet various standards,

and ship tea to some of the most stringent markets in the world. How-

ever, they still face a number of difficulties in complying with such

standards, which needs to be addressed in order to ensure that Sri

Lanka remains a one of the leading tea producing and exporting countries

So far, tea exporters from Sri Lanka have been able to meet various

standards, and ship tea to some of the most stringent markets in

the world. However, they still face a number of difficulties in

complying with such standards, which needs to be addressed in

order to ensure that Sri Lanka remains one of the leading tea

producing and exporting countries.

Lack of testing infrastructure and human resources: Although there are a number of laboratories operating in country –

both government and privately run – they are not accredited to

undertake tests for certain chemicals. For example, the Tea Board

has set up a state of the art laboratory, but it is not accredited while

the government-run Industrial Technology Institute’s (ITI) laboratory

can analyze only certain chemicals. Similarly, private laboratories

are not accredited for certain chemicals. As a result, it is

sometimes necessary to send tea samples abroad – to either to

Singapore or to India – for testing. The absence of fully-accredited

laboratories is compounded by lack of qualified scientific personnel

to conduct tests. In the case of Tea Board, not only is the laboratory

not accredited but the Analytical Laboratory Division does not have

qualified staff to do testing despite the huge demand to get tea

samples screened.

Compliance costs: The most common challenge faced by the exporters was

the compliance cost which involved upgrading factories, audit/certification fees,

consultant fees, training costs, etc. All of these add up to a substantial amount

and contribute towards increasing the total cost of production. They are unable

to pass this cost to the buyers as it makes them uncompetitive in the market.

Whilst exporters were willing to bear various costs associated with standards,

they were frustrated about the lack of monetary return for compliance.

Changing the mindset of workers: Apart from implementation costs,

many companies faced internal resistance to their adoption. Initially, exporters

found it difficult to change the mindset of workers to fall in line with the

standards, although they are now more or less compliant. Training has to be

continuous as workers tend to revert back to their old ways.

Proliferation of standards: This is also becoming increasingly challenging

for exporters, as there is multiplication of costs (certification and audit fees,

etc.) and effort (in maintaining various documents). Exporters are also

disillusioned that different versions of the same standard are brought out

regularly, requiring them to continuously upgrade in order to comply with the

latest version of the standard. While there have been some efforts towards

harmonization between various private standards, proliferation of private

standards is likely to continue in the foreseeable future.

ASSISTANCE FOR COMPLIANCEWhile tea exporters have managed to comply with standards and regulations,

they still have to overcome a number of challenges in order to stay competitive

in international markets. In this regard, exporters require assistance to comply

with the changing standards environment.

Forms of assistance required include financial assistance (loans with low

interest rates, and longer pay back periods), and technical assistance to comply

(training). There is also the need to harmonize standards as there is duplication

of costs and an effort to comply with different requirements of various countries

and buyers, and obtain accreditation for laboratories operating in the country.

Given that standards are likely to multiply and become further complicated in

the future, the government and the industry should provide exporters the

necessary support to comply with such standards and ensure continued access

to the global tea value chain.

Janaka Wijayasiri, PhD (Monash)

Research Fellow / Head of International Economics Policy, IPS

[email protected]

32

TALKING ECONOMICS

obacco kills half of its users, with smoking and smokeless tobacco

killing nearly 6 million people worldwide. According to the World Health

Organization (WHO), tobacco use has killed 100 million people in the

20th century and could increase to one billion in the 21st century. One

person dies every six seconds due to tobacco use, which accounts for

one in 10 adult deaths. The WHO says up to half of current users will

eventually die of a tobacco-related disease.

Smoking prevalence is a key indicator for smoking-related diseases as

well as health inequalities. Smoking has been identified as the single

biggest cause of inequality in death rates between rich and poor in

most countries. Death rates from tobacco are two to three times higher

among disadvantaged social groups than among the better off.

Long-term smokers bear the heaviest burden of death and disease

related to their smoking.

Tobacco consumption also gives rise to a number of

Non-Communicable Diseases such as cancer. According to reports,

cigarette smoke contains over 4,800 chemicals, 69 of which are

known to cause cancer. In Sri Lanka, around 25,000 cancer patients

are registered at cancer units in state hospitals countrywide. The

Government has allocated LKR 40,806 million for the 2013 - 2016

period to provide radiology treatment for cancer patients. The amount

of funds allocated for this purpose this year is LKR 1,500 million.

According to a WHO survey conducted in 2013, in Sri Lanka, smoked

tobacco prevalence was 15.7 per cent among youth and 22.8 per cent

among adults. Sri Lanka’s Household Income and Expenditure Survey

of 2012/2013 indicate that the average household spent 2.7 per cent

of their monthly income on tobacco and liquor.

Like any other addiction, quitting tobacco use has both immediate and

long-term benefits.

Amidst measures taken by Sri Lanka to curtail the consumption of

tobaccos use among its citizens is the approval of a 2014 Cabinet

Paper to appoint a Presidential Task Force to control tobacco and

alcohol consumption, with the aim of building a society free of tobacco

and alcohol.

THE ‘WORLD NO TOBACCO DAY’

IS MARKED ON 31 MAY 2015.

IN THIS ARTICLE TO MARK

THE DAY, G.D. DAYARATNE

TAKES A LOOK AT THE STEPS

TAKEN BY SRI LANKA TO

JOIN THE GLOBAL FIGHT

AGAINST TOBACCO SMOKING.

LARGER PICTURE, HEALTH WARNINGHard-hitting anti-tobacco advertisements and graphic pack warnings –

especially those that include pictures – reduce the number of children who

begin smoking and increase the number of smokers who quit, says the WHO.

In January this year, the Government of Sri Lanka approved a proposal to

revise Clause 34 of the National Authority on Tobacco and Alcohol Act. The

amendment, presented as an urgent Bill in Parliament, made it compulsory for

tobacco companies to carry a pictorial warning covering 80 per cent

of the pack with information on serious health hazards that could arise from

smoking. The Cabinet also decided that the penalty for companies that do not

conform to these regulations will be increased to a fine of LKR 50,000/= and

one year in jail. The health warnings should be changed once in six months.

As recognized by the guidelines to implement Article 11 (packaging and

labelling) adopted under the WHO Framework Convention on Tobacco Control,

well-designed package warnings are a highly cost effective means to increase

awareness of the health effects and reduce tobacco use. Accordingly, there

has been tremendous progress internationally in implementing package

warnings, with many countries increasing the warning size. Progress since

2012 includes Thailand increasing the size of picture warnings from 55 per

cent to 85 per cent, Nepal implementing 75 per cent picture warnings,

Jamaica from 33 per cent text to 60 per cent pictures, Uruguay implementing

its 7th round of picture warnings at 80 per cent, and Sri Lanka going from 60

per cent in 2014 to 80 per cent in 2015. In addition, a new EU Directive will

require picture warnings to cover the top 65 per cent of the package front and

back, effective 20th May, 2016.

TOBACCO SMOKING AN ISSUE OF UN-AWARENESSBy G D Dayaratne

T

33

With increasing evidence that tobacco is harmful and is the leading

cause of various diseases and deaths, many countries are now

taking action. Amidst these developments the tobacco giant Philip

Morris, an American company, which offers seven of the largest

selling brands of cigarettes in the world, is suing Uruguay arguing

that the warning labels (80 per cent) leave no space for its

trademarks. The company has already filed an expensive lawsuit

on Australia – and if it wins against Uruguay, it could run cases

against more than a hundred other countries. Uruguay is known for

having some of the best anti-smoking laws in the world.

In a media report, the CEO of the Ceylon Tobacco Company (CTC)

Felicio Ferraz, pointed out that whilst regulations are important, the

move to bring in graphic health warnings will open the doors for

inferior illicit products to cloud the market. According to media

reports, in 2012 authorities detected 56 million illicit sticks

attempted to be smuggled into Sri Lanka valued at over LKR 1.35

billion and within the first five months of 2013, authorities

confiscated over 40 million illicit sticks.

Meanwhile, CTC makes a significant contribution to the govern-

ment revenue every year. According to the Central Bank of Sri

Lanka (CBSL), the amount rose to LKR 61.3 billion in 2014 from

58.5 billion in 2013, 53.5 billion in 2012 and LKR 49.6 billion in

2011 , under the trade of nine brands of cigarettes. The CTC says

while its industry is a controversial one, its share value spiked from

LKR 800 to LKR 1,400, within a year registering a 5% increase

amidst challenges.

CHALLENGES FOR PICTURE WARNINGS

WHAT CAN SRI LANKA DO?

Statistics by various authorities clearly indicate that smoking and

tobacco consumption in Sri Lanka is on an unprecedented rise.

Such a trend has long-term health consequences costing govern-

ments extraordinary amounts of money for the care of those

afflicted with smoking-related diseases.

Over the years, Sri Lanka has taken many steps to address this

issue for the well-being of its population. Increasing the size of the

pictorial warning in cigarette packets is one step taken by many

countries that are alarmed at the rise of smokers in their population,

which Sri Lanka has also implemented. In addition, in joining the

global fight against tobacco, it is time for Sri Lanka to take some

pragmatic steps with the aim of building a society free of tobacco.

QUITTING

TOBACCO

USE HAS

BOTH IMMEDIATE

AND

LONG-TERM

BENEFITS

ASHES TO ASHES, DUST TO DUST !

34

TALKING ECONOMICS

In 2000, world leaders signed the

Millennium Declaration, which was

followed by a set of Millennium Develop-

ment Goals (MDGs), to be achieved by

2015. There are 44 MDG indicators in

total, of which 27 have clear targets.

Table 1 gives a snapshot of the status of

MDGs at national level for Sri Lanka. The

table also compares the status of the

indicators in the base year (1990 or

closest) with the current status (2013 or

closest).

MILLENNIUM DEVELOPMENTGOALS SRI LANKA’S ACHIEVEMENTS

Sri Lanka has achieved the targets for 13

of these indicators by 2012/13 (based on

the available data) and 11 were “on

track” to be achieved by 2015. Only two

indicators were off track. Free education,

universal health care, and a number of

welfare programmes which were

implemented for more than six decades

By Wimal Nanayakkara & CHALLENGES AHEADThe Millennium Development Goals (MDG) Country Report 2014, compiled by the Institute of Policy Studies of Sri Lanka (IPS) was recently launched in Colombo in partnership with the United Nations (UN) and the Government of Sri Lanka (GoSL). In this article, Wimal Nanayakkara, Senior Visiting Fellow of IPS takes a look at how far Sri Lanka has come in achieving these goals.

Goal Status (figures are for “Base Year” ”Latest”) for 27 indicators

1

Eradicate extreme poverty and hunger

Poverty:

26.1

6.7%

Poverty Gap Ratio:

5.6

1.2

Prevalence of underweight children (under 5 years): 29.7

21.1%

Prop. of population below minimum energy consumption: 51.3 47.8%

2 Achieve universal primary education

Net enrolment rate in primary school: 88.0

99.7%

Prop. of pupils starting grade 1 who reach grade 5:

64.1

100.0%

Literacy rate in the age group 15

-24 years:

92.7

97.8%

3 Promote gender equality & empower women

Primary Education

94.2 99.4%

Lower Sec. Education

91.2%

Upper Sec. Education 107.7%

Tertiary Education

75.4113.8%

Secondary Education 102.6%

4

Reduce child mortality

Under-five Mortality Rate: 22.2 11.3 (per 1000 LBs)

Infant Mortality Rate: 17.7

9.4

(per 1000 LBs)

Prop. of 1 year old children immunized against measles: 95.5 95.0%

5

Improve maternal health

Maternal Mortality Ratio (per 100,000 live births):

92.033.3

Prop. of births attended by skilled Birth Attendants: 94.1 99.8

Antenatal care coverage (at least one visit): 95.8 (in 2006/07)

6

Combat HIV/AIDS, malaria and other diseases

HIV Prevalence:

less than 0.01%

HIV

Access to antiretroviral drugs:

34.0%

Malaria death rate: 0.8 0.0

Prevalence of TB:

118 109

TB Death Rate: 7.5 1.1

Prop. of TB cases detected: 58 73%

Prop. of TB cases cured under DOT short course:

86.3 (2005) 84.9% (2008)

(per 100,000 population)

7

Ensure environmental sustainability

Prop. of land covered by forest:

33.8 29.6%

Prop. population using an improved drinking water source: 68.0

89.7%

Prop. of population using an improved sanitation facility:

69.0 87.2%

KeyAlready achieved

Almost Achieved On track Off track

Table 1: Snapshot of the Status of MDGs at National Level, by 2012/13

Note: Refer - unstats.un.org/unsd/mdg/Resources/Attach/Indicators/OfficialList2008.pdf, for official list of MDG indicators; “Base year” – 1990 or closest and “Latest”, 2013 or closest (based on the availability of data)

35

have contributed to the impressive results in education, health

and living conditions. More recent policies and programmes

related to MDGs have helped to accelerate the progress and

achieve some targets well ahead of schedule.

While Sri Lanka has made considerable progress pertaining to

most of the indicators at national level, there are still

considerable regional variations, which need the attention of

regional planners and policy makers. Few of the identified

gaps and regional variations are highlighted below, which may

help in taking suitable action to make an effective final push

towards achieving MDGs in all the regions of the country. The

details on Sri Lanka’s MDG achievements, gaps and regional

variations, as well as some suggestions to minimize those, are

given in the “Millennium Development Goals Country

Report – 2014”.

Sri Lanka is on track to achieve the target of reducing both the under-five and

infant mortality rates by two-thirds the level of the base year (1990) by the

end of 2015. The

SRI LANKA HAS ACHIEVED THE TARGET OF HALVING POVERTY AT THE NATIONAL LEVEL SEVEN YEARS BEFORE 2015 DEADLINE:

National poverty incidence declined from 26.1 % in 1990-91

to 6.7 % in 2012-13. All districts, except those in the Northern

and Eastern Provinces and Monaragala District in Uva

Province, have already achieved the target of halving poverty.

In Monaragala District, poverty increased to 20.8 % in

2012/13, even though it had achieved the MDG target in

2009/10 with a poverty rate of 14.5 %. The Jaffna and

Ampara Districts, which were earlier affected by the separatist

war have progressed well since 2009/10.

Poverty in Jaffna declined from 16.1 % in 2009/10 to 8.3 % in

2012/13, while in Ampara District poverty fell from 11.8 % to

5.4 % during the same period. The regional disparities clearly

indicate the need for continuous monitoring and focused

attention of planners and policy makers.

POVERTY GAP RATIO (PGR), WHICH MEASURES THE DEPTH OF POVERTY, HAS ALSO DECLINED SHARPLY SINCE 1995:

The PGR fell from 6.6 % in 1995/95 to 1.2 % in 2012/13,

indicating an overall reduction in the level of poverty even for

those below the poverty line. However, income inequality gap

persists. As such, the focus of policy may need to be on

SRI LANKA HAS BEEN SUCCESSFUL IN ACHIEVING ALL 3 TARGETS RELATED TO UNIVERSAL PRIMARY EDUCATION:

More than 97.8 % of the children aged 6 to 10 years and more than 95 % of

the children aged 11 to 14 years, are attending school in all the districts by

2012/13, showing the effectiveness of making education compulsory for

children aged 5 to 14 years in 1998.

HOWEVER, AFTER 14 YEARS OF AGE, A DECLINE IN THE PERCENTAGE OF CHILDREN IS OBSERVED IN ALL DISTRICTS:

Only 86 % of those aged 15 to 16 years are in school and only around 60

%continue their education after 16 years, at national. Regional variations are

high. It is important therefore to increase the compulsory age for schooling to 16

years, as early as possible. It is also critical for Sri Lanka to improve the quality

of education, as well as the education outcomes at secondary and tertiary levels.

Sri Lanka has already reached gender parity in primary education. In secondary

and tertiary education, the proportion of girls to boys exceeds 100 %, indicating

that more boys leave school earlier than girls, which may need the attention of

education planners. Another factor which needs attention is the very low

representation of women (5.8 %) in the Parliament.

FREE HEALTH CARE SERVICES FOR ALL, INCLUDING PREVENTIVE HEALTH SERVICES, FOR MORE THAN SIX DECADES, HAVE HELPED SRI LANKA, IN REDUCING INFANT, CHILD AND MATERNAL MORTALITY TO A VERY LOW LEVEL COMPARED TO MOST OTHER COUNTRIES IN THE REGION:

proportion of one-year-old children immunized against measles increased

from 95.5 % in 1993 to 99.0 % in 2011. However, proportion declined to 95 %

in 2012, which needs the attention of health authorities. Maternal Mortality

Ratio (MMR) declined from 92 deaths per 100,000 live births in 1990 to 33.3

in 2010 and is “On track” to achieve the target. The proportion of births

attended by skilled attendants, has almost reached the target of 99.8 % by

2010. The Family Health Bureau (FHB) of Sri Lanka has taken many initiatives

in recent years to enhance the quality of maternal and child care. Although Sri

Lanka has done well in improving maternal and child health, nutrition status of

children under five years, is still a major concern, as more than one fifth of the

children under five years, are under weight.

36

TALKING ECONOMICS

regional economic development, which will create more employment opportuni-

ties across all the regions, especially for women. Another important factor

which needs urgent attention is targeting of social protection programmes,

which will help the most vulnerable groups in the country.

Wimal Nanayakkara, BSc (Peradeniya)

Senior Visiting Fellow, IPS

[email protected]

Although Sri Lanka has made significant progress towards achieving the

majority of the MDGs, at national level, further efforts are required to minimize

the regional disparities. It is also important to sustain and further improve the

progress beyond 2015. In addition, Sri Lanka will also have to gear itself to

handle the 17 Sustainable Development Goals (SGDs) and accompanying

targets, proposed by the UN, which are expected to be adopted, in September,

2015.

WAY FORWARD

Through 2012, a total of 1,649 HIV cases and a total of 432 AIDS cases have

been reported. As such, continuous monitoring, proper detection and

improvement of the facilities for treatment are needed, if the disease is to be

controlled. Sri Lanka has managed to bring malaria cases down from around

400,000 in the early 1990’s to 124 cases by 2011 and has no malaria related

deaths since 2007: Country should be vigilant to prevent a reoccurrence, as

the disease has re-emerged whenever mechanism for preventions has

weakened,.

ALTHOUGH SRI LANKA REMAINS A LOW HIV/AIDS PREVALENCE COUNTRY, THE NUMBER OF CASES IS GRADUALLY INCREASING:

Around 8,000 new cases are reported every year. TB prevalence rate shows a

slight decline from 118 per 100,000 people in 1990 to 115 in 2004, and since

then rate has stabilized. Overall treatment success rate has increased from

78.6 % in 2000 to around 85 % since 2004. Among the main challenges in

controlling the disease are: maintaining adequate staff, reaching population

groups with limited access to services, scaling up TB control services among

returning migrants and the resettled population in the Northern and Eastern

Provinces, overcoming TB-related stigma and financial sustainability.

TUBERCULOSIS (TB) STILL REMAINS A PUBLIC HEALTH PROBLEM IN SRI LANKA:

The Millennium Development Goals (MDG) Country

Report 2014 was launched in Colombo, under the

patronage of Deputy Minister of Policy Planning and

Economic Affairs, Dr. Harsha De Silva. The report

was compiled by IPS together with the Government

of Sri Lanka and the United Nations. IPS Research

Team who contributed towards the compilation of

the report include Wimal Nanayakkara, Ganga

Tilakaratne, Sunimalee Madurawala, Chatura

Rodrigo, Swendrani Jayayartne, Ashani Abeysekara,

Ayodya Galapattige and Yolanthika Ellepola.

LAUNCH OF THE MDG COUNTRY REPORT 2014

37

IPS CAREERSThe primary strength of the IPS is its talented, dedicated and

hardworking staff. The Institute provides an exciting opportunity to

contribute to leading issues facing the nation as the IPS works closely

with government, the private sector, donor agencies, and academia.

We provide an environment conducive to highly effective independent

research and the professional growth of our staff.

Recruitment of new staff is based on need, and occurs periodically

throughout the year. For current job openings, please visit our

website: h t t p : / / w w w . i p s . l k / i n d e x . p h p / c a r e e r s - a t - i p s

The IPS internship programme offers short-term attachments to currently enrolled students

or recent graduates in economics or closely related fields. They provide an opportunity to

work with a senior researcher on a specific research project, or to obtain a wider experience

across research areas. The positions are open to applicants with an interest in development

issues, and are typically for 2-6 months. If you wish to join our internship programme send

us your CV to [email protected]

“Interning at the Institute of Policy Studies has been and is to this day, an inspiring experience.

The internship was a special learning curve. It enabled me to apply my strictly academic

knowledge to practical economic situations, analyze real world problems of migration and

employment in fragile situations, and above all conduct research at the grass root levels. These

internships I conducted both last year and this year upon completion of my degree,

Internship Programmeprovided me with insight into policy making and the

extent to which research in economics could contribute

to improving the standards of living in Sri Lanka,

cultivating my career path.The skills I developed

interviewing migrants and government authorities,

identifying their significant challenges, developing

strategies to address them in the labour market, and

communicating this to policymakers and concerned

stakeholders via the Migration Conference, blog and

news articles were unique. This experience assisted

me in my undertaking of the undergraduate thesis at

the University of Nottingham, and I am certain will

continue to equip and inspire me at my masters at the

University of Warwick.

Apart from the research, at IPS, Friday newspaper

discussions, regular in-house seminars, networking

sessions or even playing cricket with fellow research-

ers are some of incredible events I was fortunate

enough to experience.

Both internships at IPS were an incredible opportunity I

am grateful for, thank you for welcoming me into your

family, and granting me many friends through both my

peers and nurturing supervisors.”

38

TALKING ECONOMICS

Keshni Sritharan, Intern

Summer 2014 - 2015

Social protection has been increasingly

viewed as an important tool for addressing

poverty, vulnerability, inequality, and social

exclusion. Sri Lanka has a long history of

providing social protection to its population.

Social protection policies and programmes

such as the free education and health care

provision and food subsidy programmes

have been implemented by the successive

governments since the 1940s. At present,

there are many social protection

programmes targeting vulnerable segments

of the population: the poor, elderly, disabled,

children and women. These programmes

vary from cash and in-kind transfers to

pensions, insurance, and livelihood

development programmes. They can be

broadly categorized as: (i) social insurance,

(ii) social assistance, and (iii) labour market

programmes as shown in Figure 1.

Despite the multitude of programmes, there

are several gaps and weaknesses in the

current social protection system.

AddressingIssues ofSocialProtectionto EnhanceEquity inSri Lanka

Marking the World Day of Social Justice2015 (20th February), the blog highlights four key issues of Sri Lanka’s social protection system that need to be addressed in order to reduce vulnerability and enhance equity.

LOW COVERAGE AND POOR TARGETING

Low coverage and poor targeting are two

most common problems in the majority of

social protection programmes in Sri Lanka.

Programmes designed for the poor, elderly,

disabled and other vulnerable groups often cover only a

fragment of the eligible population. The programmes for

school children such as the free textbook and free uniform

programmes that are almost universal in coverage are

perhaps the only exception. Limited coverage is largely a

result of budgetary constraints. Many programmes also

suffer from targeting problems. A recent IPS study reveals

that only less than a half of the households in the poorest

decile (47.4%) receive benefits under the Samurdhi cash

transfer programme (see Figure 2). However, there are

3-15% households in the top four deciles who receive

Samurdhi benefits. These figures indicate the severity of the

targeting problem of the Samurdhi programme – both

inclusion and exclusion errors. The extent of targeting errors

of the other social protection programmes is difficult to

measure owing to the lack of data. In addition, many

INADEQUACY OF BENEFITS

The value of monthly cash transfers received

under most social assistance programmes

remains low. Under the Samurdhi income

transfer programme, the maximum amount

received by a family was Rs. 1,500 per

month until the end of 2014 (while the

minimum was Rs 210), which is far below

the minimum requirement to meet their basic

needs. The net cash value received by a

By Ganga Tilakaratna Figure 1: Social Protection System

Social protection

Social insurance

Old-age retirement

schemes (e.g. pensions, EPF/ETF)

Insurance/ micro-insurnace

Social assistance

Cash or in-kind transfers to poor,

elderly and disabled persons

Education and health assitance

Disaster relief

Labour Market Programs

Livelihood and skills

development programs

39

programmes lack clearly defined eligibility

criteria and an entry and exit mechanism,

which too has contributed to the targeting

problems in social protection programmes.

Ganga Tilakaratna, PhD (Manchester)

Research Fellow / Head of Poverty and Welfare Policy, IPS

[email protected]

Low coverage and poor targeting are two most common problems in the majority of social protection programmes in Sri Lanka.

Many social assistance programmes suffer

from budgetary constraints, which restrict

them from expanding their coverage and

improving the benefit amounts. Moreover, a

recent IPS study reveals considerable

inequity with regard to allocation of funds

within the current social protection system.

Over 80% of the total social protection

expenditure goes to retirement benefits of

formal sector workers (e.g., pensions and

EPF/ETF) while the expenditure on social

assistance programmes such as Samurdhi,

disability assistance and elderly assistance

as well as expenditure on labour market

programmes for vulnerable groups remain

low. In particular, the study finds that

pensions for the public sector workers

account for about 55% of the total social

protection expenditure. However, pensions

benefit only a smaller share of the country’s

elderly population.

BUDGETARY CONSTRAINTS AND INEQUITABLE RESOURCE ALLOCATION

Currently, there are several ministries,

departments, and provincial councils

carrying out different social protection

programmes for various vulnerable groups.

Lack of coordination among these

LACK OF COORDINATION

It is important to improve ‘targeting’ in programmes

such as Samurdhi, and make better use of the

limited resources available for social protection for

the benefit of the ‘neediest’ groups. This would help

improve the coverage of the programmes as well as

the amounts of benefit.

Moreover, strengthening the coordination among the

programmes implemented by various institutions in

order to minimize duplications is important to

enhance efficiency and thereby improve coverage

and benefit levels.

Given the rapid ageing of population, reforms are

also required for the pension scheme in order to

reduce the burden on the government budget and

make the programme more sustainable. Such

reforms would also help release funds to extend

social protection to elders who do not receive

retirement benefits or any other assistance.

WAY FORWARD

family was much lower than the above

amounts since there are deductions for

compulsory savings, social security and the

housing fund. However, as per the

Department of Samurdhi, these subsidy

amounts have been increased since January

2015, with a minimum of Rs. 420 and a

maximum of Rs. 3000 per month. The

monthly allowances provided under the

elderly assistance programme and Public

Assistance Monthly Allowance (Rs. 250 - Rs.

500) are also far inadequate to cover the

basic expenses like food. According to the

national poverty line, a person requires

around Rs. 3,800 per month to cover his/her

consumption expenditure at a minimum

level.

Figure 2: Share of Households receiving Samurdhi Cash Transfer by Decile -2009/10

Note: Based on the HIES 2009/10 of the DCS. 1= Poorest and 10=Richest

47.4

41.5

32.429.7

22.0 20.6

14.8

9.95.8

3.1

05

101520253035404550

1 2 3 4 5 6 7 8 9 10

% o

f Sam

urdh

i ben

efic

iary

H

Hs

Decile

40

TALKING ECONOMICS

institutions and programmes increases the cost of

social protection provision and leads to overlaps in

beneficiaries served under these programmes.

oday marks the World Day against Child Labour, an awareness

campaign launched by the International Labour Organisation (ILO) to

draw attention to the 168 million children aged 5-17 engaged in

child labour worldwide. First launched in 2002, the 12th of June of

each year is used to highlight the plight of child labourers and to act

as a catalyst for the worldwide movement to eradicate child labour.

This year’s theme is “NO to child labour – YES to quality education!”

drawing attention to the importance of providing quality education to

children as a means to eliminating child labour.

Child Labour and Education in Sri Lanka:

Drivers of Child LabourChild labour is defined as work that deprives children of their

childhood, dignity and potential. The work involved is hazardous to

their health, physical and mental development and deprives them of

the opportunity to attend school without interference. There are

numerous factors that lead to child labour such as poverty,

entrenched social attitudes, lack of access to quality education,

social and economic exclusion, lack of decent work for adults, lack

of an adequate legal framework and migration. These factors are

often interlinked (with poverty often being the underlying factor)

requiring a multipronged approach involving multiple stakeholders to

take effective action against child labour. In recognition of this year’s

theme for the World Day against Child Labour, this article will look at

the importance of providing quality education for all to improve

school attendance and reduce child labour in Sri Lanka.

Child Labour and EducationEducation is a theme that is particularly relevant this year since the

international community is set to adopt the post-2015 Sustainable

Development Goals, which proposes inclusive and equitable quality

education for all. The UN member states would pledge to ensure that

By Sahan Jayawardena

Child Labour in Sri LankaThe Employment of Women, Young Persons, and Children Act of 1956 states the

minimum age of employment as 14 with the minimum age for employment in

hazardous conditions set at 18 in line with the ILO Convention 138 on the

Minimum Age for Employment. According to the last Child Activity Survey

conducted by the Department of Census and Statistics in 2008/09, approximately

2.5 per cent of children from a total child population of 4.3 million were engaged

in child labour, out of which 63,916 children were engaged in hazardous forms

of child labour. A majority of child labourers are employed as unpaid family

workers engaged in the manufacturing industry with the exception of children

from the estate sector, where a majority work in agriculture.

Combating Child Labour through the Provision of Quality Education by 2030, all girls and boys have access to free quality primary and secondary

education that lead to effective learning outcomes. Eradicating child labour is

essential to achieving this

T

Figure. 1 School Attendance Status of Children Involved in Child Labour

AGE GROUP (YEARS) STATUS OF SCHOOLING (PERCENTAGE)

TOTAL (5-17) 53.4 46.6

5-11

12-14

15-17

98.3

71.5

22

1.7

28.5

78

Source: Child Activity Survey 2008/09, Department of Census and Statics

ATTENDING NOT ATTENDING

41

Child Labour and Education in Sri Lanka Sri Lanka has made commendable progress in achieving near

universal access to primary education for both genders with a net

enrolment rate of 99.7 per cent. Further, the findings from the

Child Activity Survey revealed that 97 per cent of the compulsory

school attendance age group (5-14) attended school continuously.

However, older children involved in child labour show lower school

attendance rates. 28.5 per cent of children in the 12-14 years age

category do not attend school and as much as 78 per cent do not

attend school in the 15-17 years age group (Figure 1).

Impediments to School AttendanceSri Lanka has high school attendance rates for the age categories

of 6-10 years and 11-14 years as a result of enforcement of

compulsory education. However, children involved in child labour in

the 11-14 years age group are at a high risk of dropping out. The

drop-out rate for 13-year-olds is 5.1 per cent. According to the

MDG Sri Lanka Country Report 2014, school attendance starts to

further decline after the age of 14 years, with around 14 per cent

of children not completing the GCE Ordinary Level. There are

numerous reasons for children not attending school, with poverty

being a central impediment, which is closely linked to child labour.

Out of these school children, most are more likely to be from

poorer families. Parents’ attitudes and perceptions regarding the

benefits derived from education against the advantages of

engaging in other activities also act as a barrier to school

attendance. If the opportunity cost of education is perceived to be

too high, children are more likely to drop out of school and get

pushed into child labour.

On the supply-side, regional disparities in access to schools, inadequate facilities

and shortage of teachers that affect the quality of schools also contribute to

school non-attendance. This is a particularly important issue for the higher

school cycles, where the equity in access is lower compared to the primary level.

Rural and remote schools are particularly affected by the shortage of science

and mathematics teachers, reducing the quality of learning outcomes that could

be achieved from attending these schools

No to Child Labour – Yes To Quality Education Child labour is a multifaceted issue. It is largely driven by poverty forcing

children to drop out of school, preventing them from acquiring the skills

necessary to exit poverty. Therefore, eliminating child labour is in part an

educational objective, where improving school attendance, particularly among

higher age groups, should be a key component in the policy framework to

reduce child labour. The key to improve school attendance and to capture

children excluded from education is to provide accessible, affordable and quality

education. In spite of welfare measures such as free textbooks, uniforms, school

meal programmes, and subsidised bus fares, poverty is still a barrier to

education due to direct and indirect costs. For poor households, the opportunity

cost of education is often viewed as too high, making the likelihood of children

getting involved in child labour high. Therefore, in addition to reducing this

opportunity cost through social assistance programmes, it’s important to

improve the quality of education that is accessible to the poorer segments of the

population, particularly in rural and remote areas by addressing the shortages in

resources. In addition, attention should be paid to making education more

relevant to the labour market by improving teaching and learning methods that

result in better learning outcomes and more returns to education.

Sahan Jayawardena, BSc (Liverpool)

was a Research Assistant at IPS

Image Courtesy: sevalanka.org

42

A group of women entrepreneurs gathers at the Ukuwela Divisional

Secretariat (DS) Office in the Kegalle District on a rainy day in November to

participate in a group discussion on challenges they face in operating and

expanding their businesses. 54-year-old Kamalawathi, a pepper producer

from the area, eagerly waits for the discussion to start. She has many things

to discuss in her mind. One burning issue she faces in running her business

is the lack of technological know-how to produce white pepper. Getting

information on technical support is the main purpose for her to participate in

the discussion.

Kamalawathi claims that: “White pepper is of higher value than black

pepper. I have been trying to produce white pepper but I have not been able

to meet the required quality standards. Despite many attempts we have not

been able to get the pepper to turn out as white as the white pepper

produced by larger scale pepper growers, who use various other methods or

machines. We don’t know or have the proper technical knowledge to

produce quality white pepper at home.” However, the fact is Kamalawathi is

unaware of the ‘Vidatha’ centre at the Ukuwela DS office, which offers more

than thirty different technology trainings and technology skill building

programmes including the training that she requires. Kamalawathi also

admits that she has few contacts with fellow women entrepreneurs and has

not obtained the membership at any of the trade associations operating in

the area.

Like Kamalawathi, many women owned and led micro, small and medium

enterprises (WMSMEs) in the country face the same problem. ‘Lack of

information’ and ‘poor networking’, are two major barriers that hinder the

development of their businesses. This is also highlighted in an ongoing IPS

study on constraints faced by WMSMEs, which found that women entrepre-

neurs have limited knowledge and lack awareness of market information

(price, buyers, new markets, suppliers) and services (financial and

non-financial) available.

Networking and Information:Crucial Ingredients inEmpowering WomenOwned and Led Micro,Small and MediumEnterprises in Sri Lanka

The International Women’s Day is globally celebrated on March 8 every year. This year’s celebrations under the theme ’Empowering Women - Empowering Humanity: Picture It!’ highlights the Beijing Declaration and Platform for Action - a visionary agenda for empowerment of women signed by 189 governments 20 years ago. The Declaration identifies ‘Women entrepreneur-ship’ as one of its strategic objectives, and proposes institutional and financial arrangements for its promotion and support.

By Sunimalee Madurawala

MSMEs The contribution of MSMEs to the country’s Gross Domestic Production (GDP)

and employment generation is quite significant. It has been estimated that

Small and Medium Enterprises (SMEs) accounts for more than 90 per cent of

the total number of enterprises in Sri Lanka. The contribution of SMEs’ to the

total GDP of the country has increased up to 52 per cent in 2011 from 40 per

cent in 2010. Furthermore, it accounts for 32-41 per cent of the employment

in agricultural, industrial and services sectors of the economy (Figure 1). The

contribution of MSMEs would be higher if one takes into account of micro

enterprises for which data is not available. Despite the important role of

MSMEs in the economy, female participation in the sector is significantly low,

and gender bias against women is commonly observed in the MSME sector.

Why is Women Entrepreneurship Important to Sri Lanka?Promoting and fostering women entrepreneurs is of utmost importance,

especially to a country like Sri Lanka, where female participation in the

labour force is considerably low (34 per cent) compared to the country’s

success in achieving many other socioeconomic targets. Sri Lanka has been

able to meet most of the Millennium Development Goals (MDG) such as

poverty reduction, increasing literacy rate, decreasing Infant Mortality Rate

(IMR), decreasing Maternal Mortality Rate (MMR) and access to safe drinking

water and sanitation.

43

Sunimalee Madurawala, MEcon (Colombo)

Research Officer, IPS

[email protected]

Information and Networking for Women EntrepreneursIn addition to accessing credit, training and legal policy

constraints, lack of access to proper information and poor

networking have been identified as major obstacles faced by

women entrepreneurs. Information is important to entrepreneurs

for many reasons. It helps entrepreneurs take prudent business

decisions, inspires new business ideas, and alerts them on

trends and potential new markets. Information is also a major

source in planning for the future.

Information relevant to business organizations takes different

forms such as information on customer, employee, and supplier

relationships; market knowledge; knowledge of the business

environment; professional associations and trade bodies; trade

exhibitions and conferences; research and development. The

way a business gathers, shares and exploits available informa-

tion is crucial to its success.

Networking (both formal and informal) is also much needed for

operation and growth of enterprises, especially MSMEs as it

gives them the means to share information and knowledge,

Accessing Information and Building Networks: What Can be Done? Although female literacy rate in Sri Lanka is more than 90 per cent and there are

various information channels (newspapers, tv, radio, etc.) and forms of networks

(business, social, formal, informal) available throughout the country, ‘lack of informa-

tion’ and ‘poor networking’ are among the major barriers facing WMSMEs in the

country.

capture opportunities, establish connections, increase confidence and become visible

and get noticed by various stakeholders (such as potential buyers, government

officers, chambers, and trade associations).

These simple steps would go a long way in empowering thousands of women

entrepreneurs like Kamalawathi to develop their businesses and effectively contribute

to the country’s development.

Promoting and fostering women entrepreneurs is of utmost

importance, especially to a country like Sri Lanka, where female

participation in the labour force is considerably low (34 per cent)

compared to the country’s success in achieving many other

socioeconomic targets. Sri Lanka has been able to meet most of

the Millennium Development Goals (MDG) such as poverty

reduction, increasing literacy rate, decreasing Infant Mortality

Rate (IMR), decreasing Maternal Mortality Rate (MMR) and

access to safe drinking water and sanitation.

Promotion of women entrepreneurs is important mainly because

it enhances the economic growth of the country and provides

employment opportunities for women, improves social,

educational, and health status of women and wellbeing of their

families. Further, it is an ideal avenue for women to start up their

careers as it provides them the flexibility and independency.

Setting up collective groups for women entrepreneurs at village level.

Strengthening existing information channels,

Effective use of available information channels (i.e., using primetime slots to

telecast informative and educational TV programmes targeting women

entrepreneurs),

The use of innovative methods to disseminate information, as well as using

Information and Communication Technology (i.e., use of mobile phones as an

effective medium to communicate with women entrepreneurs in remote areas

as opposed to traditional methods like posters and banners),

According to the Global Entrepreneurship Monitor, women who start businesses tend

to know fewer entrepreneurs than men. Men have more social connections enabling

them to access business opportunities, information, and contacts than women. As a

result of poor networking, women are disadvantaged by having fewer professional

connections, role models, and mentorship opportunities, which can adversely affect

their businesses in the long run. A recent survey of women entrepreneurs in Sri Lanka

found that 41 per cent of them do not belong to any business association.

Accessing information and building networks are inter-related: the more you can

access information, the more you can build your networks and vice versa. Likewise,

weakness in one affects the other. Poor networking is the main reason WMSMEs ‘lack

information’. In addition, low mobility of women and social and cultural practices can

obstruct building networks. WMSMEs may also find it difficult to access information

due to institutional weaknesses. For example, at present, there is a mechanism to

disseminate market prices for spices through the relevant government offices.

However, sometimes this information does not trickle down to the bottom as intended

mainly due to the lack of resources and commitment on the part of institutions.

There are a number of measures that can be taken to enhance networking and access

to information among WMSMEs. Among these are:

This article is based on an ongoing research study by IPS on: ‘Products with Regional Trade Potential and Associated Non-Tariff Barriers, with special focus on Women Owned and/or Led Micro, Small, and Medium Enterprises (WMSMEs) - A Case of Sri Lanka’. The study is led by UNDP Asia-Pacific Regional Centre (APRC) with funding from AusAID.

44

TALKING ECONOMICS

Figure 1: SMEs ontribution to the Sri Lankan Economy

Forty one year old W.K Indrani is a cinnamon oil producer living in Meetiyagoda, Ambalangoda, in the Galle district. She owns a cinnamon oil distillery

INSPIRATIONALWOMEN

While women entrepreneurship is important to the Sri Lankan economy, women engaged in Micro, Small, and Medium Enterprises in the country are facing many challenges. Despite the hardships, there are thousands of women who strive to develop their businesses through courage, determination and hard-work.

unit. Indrani’s story is an inspiration to all women as she is engaged in a business, which is male dominated. “I got involved in this work because of my father”, says Indrani. At the beginning of her career she worked as a day worker at distillery units close to her home.

In 2003 Indrani lost her husband, who died in a tragic accident, leaving her behind with two little children. With the hope of saving enough money to “build her own distillery unit”, she went abroad for work. Upon her return in 2008, Indrani started her own cinnamon distillery unit, with the savings she had made while abroad coupled with some money she borrowed from a personal money lender. “Setting up a distillery unit is very costly. My savings from employment abroad was insufficient. So, I borrowed a percentage of the equipment cost from a private money lender in my village.”

Generally, cinnamon oil producers need to travel from place to place to gather cinnamon leaves. They usually visit cinnamon land and offer to rent the entire land. Since Indrani owns and runs her business alone, it is sometimes difficult for her to travel from place to place in searching of cinnamon lands. “Sometimes it’s very difficult for me to find cinnamon lands. On such days I hire my hut to others. I get half of the final output. Normally, we produce five cinnamon oil bottles from one bundle of cinnamon leaves. I have to manage all my operational expenses (electricity bill, water bill) from the money I receive”.

She sells her produce to a nearby cinnamon oil collector. “I have selected one person to sell my products. I normally get LKR 1200/= per bottle (750 ml).Another buyer may buy a bottle for LKR 1300/= - Rs.1400/=. However, I deal with one person as there are perks such as the ability to borrow money from the person any time when I want to rent cinnamon land, and I can pay them back by selling my products.

Operating a cinnamon oil distillery unit is not easy. Owners need to get permission and approvals from the Central Environment Authority, Divisional Secretariat etc. Further, they need to pay annual taxes as well. “We have to pay income tax every year and LKR 750/= to the Divisional Secretariat as environment levy per annum”. According to Indrani, cinnamon oil producers receive a satisfactory income only during six months a year, as cinnamon trees are chopped during a certain times of the year. The other six months of the year they have to look for other work.

Indrani is happy as she is able manage her housework while working at her own distillery. “I can look after my family while working in my hut”. Sometimes, I keep the boiler on and go to school to pick-up my child”. My aim is to upgrade and expand my business and be a good mother to my children and a caring daughter to my parents.

W.K. IndraniCinnamon Oil Producer

Sepalika AnjaleeManaging Directress, EarthScape (Pvt.) Ltd

Forty one year old W.K Indrani is a cinnamon oil producer living in Meetiyagoda, Ambalangoda, in the Galle district. She owns a cinnamon oil distillery

“Motivation to start something of your own and courage do it right is important. If you want everything to be perfect you can’t get anything done. Taking the first step is hard but it’s rewarding. Make that step and move forward” says Sepalika Anjalee, Managing Directress of the EarthScape (Pvt) Ltd. Sepalika is from Negombo. She began her business in 1999 as a sole proprietorship; with 500 US$. Two years later she was able to build a small factory of her own. The business was gradually expanded and the venture was converted to a private limited company. In 2006, she purchased land and built a factory.

Today, Earthscape (Pvt) Ltd is one of Sri Lanka’s largest exporters of coir based horticultural products and the company has seen a steady growth in business over the last 10 years. “It is a long story. A story about dedication and hard-work”, says Sepalika looking back with pride. Earthscape exports coir based products such as bags, 5-25 kg blocks, husk chips, briquettes, disks, and coir geo textiles, to a host of European, American and Asian countries.

Currently, there are 110 employees, out of which 75 are permanent employees. The company’s workforce is a mix of young and old people. The company has also recruited many women, according to Sepalika: “We have many female workers too not because I am a woman. Women in Sri Lanka are hard-working”.

Finding additional capital for further expansion, managing cash flow, and adhering to certain environment laws are some of the main challenges faced by the company in expanding the business. Sepalika points out that certain ad hock decisions by the government and negative attitudes of certain government officers discourage exporters. As an exporter who brings a lot of money to the country, Sepalika calls for more recognition and assistance to develop the industry especially to micro, small and medium scale enterprises. She also emphasizes that the importance of information dissemination.

Reflecting on her journey, Sepalika says “it was not an easy one”. It requires a lot of dedication and hard-work. She also stated that her husband and family have been supportive. She does not think that being a woman is a disadvantage and that she has not experienced any kind discrimination because of her gender.

As part of the study on Women owned and Led Micro, Small and Medium Entreprises (WMSMEs) in Sri Lanka, IPS spoke to a number of women entrepreneurs in thespice and coir industries. The two case studies of two inspirational women were prepared by Dilani Hirimuthogodage and Sunimalee Madurawala.

45

Bilesha Weeraratne, PhD (CUNY)

Research Fellow, IPS

[email protected]

Recently the consumer rights day was celebrated

around the world and in Sri Lanka under the theme

healthy diets, where consumer rights in terms of

dietary information in food was the central focus.

An unrelated, yet growing concern in terms of

consumer rights is the privacy of consumers.

Many of the fast food restaurants and other

restaurants in Sri Lanka that accept online and/or

phone orders are now in the habit of saving contact

details for speedy processing of future orders. This

can be considered a benefit to the consumer.

However, it is becoming common practice that

these restaurants are using such contact

information for their promotional activities. For

instance, the leading international fast food chains

operating in Sri Lanka specializing in pizza and

burgers bombard their patrons with promotional

material via mobile text messages. The receipt of

Text-bombs of Unsolicited Promotional Messages: Do Consumers have Control Over their Personal Information?

scores of such unsolicited messages makes one

wonder if the restaurants are on a mission to

punish patrons for deviating from home cooked

meals!

At the time of placing a food order and the related

exchange of information, no explicit consent is

sought from consumers to use their contact

information for future communication of promo-

tional information. Similarly, many of the loyalty

cards provided by restaurants and other retail

establishments in Sri Lanka often do not explicitly

seek the consumer’s consent to contact them with

promotional material. Nonetheless, most of them

do contact consumers for direct marketing. The

absence of explicit consent does not mean implicit

consent. Additionally, consumers of such food and

retail establishments also receive promotional

material from unrelated commercial establish-

ments, such as realtor, housing developers and

financial institutions. The receipt of promotional

material from third parties raises the question

whether the personal information provided by

consumers are being shared or sold to third

parties.

The compilation and sale of individuals' personal

information is termed "list brokerage". Information

sourced from list brokering is often used to contact

individuals for marketing and promotional

activities. Common sources where personal

information is gathered for list brokerage includes

business transactions and information provided in

warranty cards and loyalty cards. Often, companies

that are involved in list brokerage do not inform

individuals of their information sales activities.

In other countries, there are strict laws against

such violations in the use of contact information.

For instance, in the UK individuals need to be

informed that their personal data will be used

for marketing and given the option to opt out. In

some cases, they must opt in. Similarly,

customers should be provided with an easy way

to opt out.

As per the US Fair Communications Commission

(FCC) text messages sent to a mobile phone

using an auto-dialer is banned unless the user

has previously consented to receive the

message or the message is sent for emergency

purposes. Additionally, in the US there is a “Do

not call list” in which consumers who do not

want such messages can place their numbers,

to stop being further disturbed.

Along with direct marketing laws, most

developed countries also have data protection

laws to prohibit sharing/disclosure of contact

information. For example, the state of California

(in the US) has the SB 27 – commonly known as

the "Shine the Light Law", which allows any

Californian to make a request to almost any

business for a disclosure of how individuals'

information is used for secondary marketing

purposes. The Sri Lankan institutional

framework seems to lack such protection to

consumers. The Consumer Affairs Authority

(CAA) established under the Consumer Affair

Authority Act of 2003 focuses mainly on the

promotion of effective competition and the

protection of consumers and for the regulation

of internal trade. In essence, the CAA mainly

protects consumers in terms of price and quality

of products, and does not specify about the

rights of consumers in protecting their personal

information. As such, it is high time that Sri

Lanka gears up in this area and develops rules

and regulations to protect consumer rights in

terms of their privacy and information.

By Bilesha Weeraratne

46

TALKING ECONOMICS

During a visit to Australia in June 2015, IPS

Executive Director Dr. Saman Kelegama made a

presentation on the “Contemporary Sri Lankan

Economics and Politics” at a conference on

“Economics and Politics in South Asia: Recent

Changes, Prospects, and Challenges”. The event

was organized by the South Asia Research Network,

Centre for Global Business, Faculty of Business and

Economics, Monash University, Australia. Dr.

Kelegama also made a presentation at the two-day

Roundtable on “New Development Challenges in

Asia-Pacific: Issues and Prospects” at the 11th

Australasian Development Economics Workshop

(ADEW) organized by the Caulfield Campus, Monash

University, Australia.

NEWSJan – June 2015

IPS

Conference on South AsiaEconomics & Politics and Policy Round Table

IPS Research Economist, Kanchana Wickra-

masinghe made a presentation on “Energy

Management in Hotel Sector in Sri Lanka:

Adoption of Good Practices”, at the Interna-

tional Symposium on Energy Challenges in the

Knowledge Economy held from 26th to 27th

June in Colombo. The Symposium aimed to

provide a forum for local and invited foreign

experts in the field to discuss, debate and

share futuristic knowledge relevant to the

energy related challenges that the nation is

facing in the evolving economy. It was

inaugurated by Dr. Abdul Kalam, Former

President of India.

International Symposium on Energy Challenges in the Knowledge Economy

IPS Research Fellow, Dr. Ganga Tilakaratna,

presented a paper on ‘Financial Inclusion

in Sri Lanka: Current Status and Issues’

at a workshop on ‘Understanding Financial

Inclusion in Asia’ held in Hong Kong from

20-21 May 2015. The workshop was

organized by the Institute for Emerging

Market Studies (IEMS).

Workshop on ‘Understanding Financial Inclusion in Asia’

The 2015 edition of the Economic and Social Survey

of Asia and the Pacific (ESCAP) was launched at the

IPS Auditorium in Colombo, under the patronage of

the State Minister of Finance Mahinda Samaras-

inghe. The event held in May 2015, was organized

by the IPS together with the United Nations

Information Centre, (UNIC) Colombo.

Launch of the Economic and Social Survey of the Asia and the Pacific 2015

A seminar on South Asian Regional Economic

Cooperation was held at the IPS Premises in

March 2015, where Dr. Sanjaya Kathuria,

Lead Economist on Regional Integration at the

World Bank’s South Asia Regional Cooperation

and Integration Unit, Washington, D.C.,

conducted a presentation on “Regional

Integration in South Asia: The World Bank’s

Approach”. The event was chaired by IPS

Executive Director, Dr. Saman Kelegama.

Among those present at the discussion were

IPS Deputy Director Dr. Dushni Weerakoon,

Department of Commerce, Director General,

Mr. R.D.S. Kumararatne, IPS research staff

and lecturers and students from University of

Colombo.

Seminar on South Asian Regional Economic Cooperation

47

Asia-Pacific High-Level Consultation on Financing for Development

IPS Executive Director, Dr. Saman

Kelegama was a speaker at the session on

“Regional Development Cooperation and

Partnerships” at the Asia-Pacific High-Level

Consultation on Financing for Development

organized by the UN-ESCAP, ADB, ADBI and

the Government of Indonesia. The event,

which took place in Jakarta, Indonesia in

April 2015, provided an opportunity for

member and associate members of the

United Nations Economic and Social

Commission for Asia and the Pacific

(ESCAP) and other stakeholders such as

private sector, academia and civil society

organizations to both re-evaluate the role of

traditional sources of finance and explore

innovative instruments and tools to fund

investments in the economic, social and

environmental dimensions of sustainable

development.

A Workshop on “Post-Bali Issues and Prepara-

tion for the 10th WTO Ministerial Conference: A

South Asia Perspective”, organized by the

Commonwealth Secretariat, Consumer Unity &

Trust Society (CUTS) International and the IPS

was held in Colombo in May 2015. Many issues

relating to South Asia and developing and least

developed countries (LDCs) in the run-up to the

10thWTO Ministerial Conference, scheduled to

take place in December 2015 in Nairobi, Kenya,

were discussed in detail to agree on a common

agenda.

Workshop on “Post-Bali Issues and Preparation for the 10th WTO Ministerial Conference: A South Asia Perspective”

NEWSJan – June 2015

IPS

National Consultation on Women Owned and Led Micro, Small and Medium Enterprises

IPS held a national consultation meeting on

’Products with Regional Trade Potential and

Associated Non-tariff Barriers, with special

focus on WMSMEs. This consultation was held

as part of a Sri Lanka study carried out for a

South Asian regional project, initiated by the

United Nations Development Programme Asia

Pacific Regional Centre (UNDP-APRC) with

funding from AusAid.

The Indian External Affairs Ministry Junior

Diplomats visited the IPS in March 2015 to

obtain a Sri Lankan perspective of the India –

Sri Lanka Economic Relations. The delegation

was coordinated by Kartik Pande, First

Secretary – Economic & Commercial Wing,

High Commission of India Colombo. IPS

Executive Director, Dr. Saman Kelegama,

provided a briefing on the topic which was

followed by a lively question and answer

session.

Sharing Perspectives with Indian Diplomats on ‘India – Sri Lanka Economic Relations’

An International Conference on “India and the

India Ocean: Renewing the Maritime Trade and

Civilizational Linkages,” was held in

Bhubaneswar, Odisha in March 2015. The

three-day event was jointly organized by the

Research and Information System for the

Developing Counties (RIS), New Delhi and the

Institute of Social and Cultural Studies (ISCS),

Kolkata. IPS Executive Director, Dr. Saman

Kelegama addressed the plenary session themed

‘Regional Economic Cooperation in Trade and

Investment in IORA’, and chaired a session

themed ‘Business to Business Interactions in the

IORA’. IPS Research Officer Raveen Ekanayake

was a panellist at a parallel session titled

‘Sectoral Cooperation in the IORA’.

International Conference on India & the Indian Ocean: Renewing the Maritime Trade and Civilizational Linkages

World Consumer Rights Day Forum 2015

The IPS, together with the Consumer Affair

Authority of Sri Lanka and Consumer

International, organized a forum in Colombo in

March 2015, to mark the Wold Consumer

Rights Day 2015 under the theme “Healthy

Diets”. Delivering the welcome speech IPS

Executive Director Dr. Saman Kelegama

stressed that “communication and information

go hand in hand when it comes to building a

successful consumer policy”. He added that

the “citizens must be aware of their rights.”

Minister of Industry and Commerce Hon.

Rishard Bathiudeen was the chief guest at the

event.

48

TALKING ECONOMICS

International Conference on ‘South Asian Economic Development: The Way Forward’

IPS Research Fellows, Dr. Ganga Tilakaratna

and Dr. Bilesha Weeraratne, were speakers at

the international conference on ‘South Asian

Economic Development: The Way Forward ’

organized by the Faculty of Economics at the

South Asian University, held in New Delhi, India

in April 2015. Dr Ganga Tilakaratna presented

a paper titled ‘Social Protection and Labour

Market Outcomes: Evidence from Sri Lanka’

while Dr Bilesha Weeraratne presented a paper

titled ‘Female Domestic Workers in the Middle

East: Does Recruitment through an Agent

Minimize Vulnerability?’.

IPS Executive Director Dr. Saman Kelegama,

and Deputy Director Dr. Dushni Weerakoon,

participated at the Think Tank Initiative (TTI)

Exchange 2015 on the theme “Research

Quality: Approaches, Outreach, and Impact”

held in Istanbul, in February 2015. The TTI

Exchange 2015 brought together 43 think tank

grantees from East Africa, West Africa, Latin

America and South Asia under the TTI

Initiative, managed by Canada’s International

Development Research Centre (IDRC).

Think Tank InitiativeExchange 2015

IPS conducted a Stakeholder Consultation

Meeting to discuss preliminary findings of a

study carried out together with South Asia

Watch on Trade, Economics and Environment

(SAWTEE) on ‘Trade and Transport Facilitation

in Sri Lanka’. The study was a part of a

Regional Study in South Asia, involving various

stakeholders in the trading process. Its aim

was to assess the current status of trade

facilitation measures in Sri Lanka and identify

obstacles in the movement of routine

consignments, particularly to South Asia.

Stakeholder Consultation Meeting on Trade and Transport Facilitation in Sri Lanka

The 20th Annual General Meeting of the

National Chamber of Exporters of Sri Lanka

(NCESL) was held in Colombo in January

2015. IPS Executive Director Dr. Saman

Kelegama was the Guest of Honour at the

event and delivered the keynote address titled

“Towards the 2020 Vision of US$ 20 bn

Exports and Beyond - Pressing Concerns and

Emerging Opportunities”. More than 150

members of the NCESL and other invitees

participated in the event which was graced by

the Deputy Minister of Policy Planning and

Economic Affairs, Dr. Harsha De Silva.

20th Annual General Meeting of National Chamber of Exporters of Sri Lanka

The Sinhala and Tamil translations of the book

titled ‘Money, Inflation and Output’ by Dr. H N

Thenuwara was launched at the IPS audito-

rium in January 2015. Delivering the welcome

speech, IPS Executive Director, Dr. Saman

Kelegama stressed the importance and the

need for more economic literature in Sinhala

and Tamil, in order to enrich the debate on

economic issues in Sri Lanka. Deputy Minister

of Policy Planning and Economic Development,

Dr. Harsha De Silva was the Chief Guest at the

event.

‘Money, Inflation, and Output’ – Book Launch

IPS Research Officer, Suwendrani Jayaratne,

participated at the ‘UNNExT Workshop on

Paperless Trade Facilitation for Small and

Medium-sized Enterprises’, held in Bangkok,

Thailand in February 2015. Organized by the

United Nations Economic and Social Commis-

sion for Asia (ESCAP) together with the

International Trade Centre (ITC) and the World

Bank, the two-day workshop aimed at building

the capacity of countries in the region to better

understand, identify and address trade

facilitation and paperless trade measures that

have a proportionally larger impact for SMEs.

UNNExT Workshop on Paperless Trade Facilitation for SMEs

Dialogue on Cooperation between China and Sri Lanka under the framework of 21st Century Maritime Silk Road

A Dialogue was held on China’s efforts to

revive the Maritime Silk Road (MSR), which

is expected to enhance connectivity and

promote mutual development among the

countries from the Far East to the Indian

Ocean to Africa. A six member Chinese

Delegation headed by H.E. Zha Peixin,

Member of the Foreign Policy Advisory

Group of the Ministry of Foreign Affairs of

China and the Former Ambassador to the

U.K. and Canada participated in the

Dialogue. From IPS, Dr. Saman Kelegama,

Executive Director, Dr. Dushni Weerakoon,

Deputy Director, and Dr. Janaka Wijayasiri,

Research Fellow participated in the

discussion. They were joined by former

Ambassadors N.Rodrigo and K. Godage, and

Suranga Algewatte, Assistant Director/ East

Asia and Pacific Division Ministry of Foreign

Affairs.

NEWSJan – June 2015

IPS

49

The study assesses the implementa-

tion of the guidelines in school

canteen introduced over seven years

By Manuj C Weerasinghe, Samanthi Bandara, and Munsif Sanoon

For more details on IPS Publications contact Amesh Thennakooon, Publication Officer, [email protected] or 0112143107

Sri Lanka’s fiscal constraints, the demographics of a contracting labour force,

and skill deficiencies suggest that a rise in infrastructure investment will spur

growth only temporarily. Sustaining higher growth in the long run must come

via a competitive export sector through improvements in productivity, notably

due to innovation and to investments in human capital.

Overhauling Sri Lanka’s tax system, tackling loss making state-owned-

enterprises (SOEs), improving labour market efficiency, filling skill gaps in the

work force, improving productivity of agriculture, delivering a better safety net

to the poor and vulnerable to name a few, are amongst a raft of reforms that

need attention. Such reforms are politically difficult to deliver through the

legislative phase, and are often even more difficult to implement. Reforms

generate distributional impacts that create ‘losers’ and ‘winners’, entailing

short term adjustment costs and the potential for long term benefits. Thus,

while reforms need to be ambitious in scope, it is typically the case that

ambition may have to be tempered by political economy realities.

An agenda setting for reforms must begin with attempts to strengthen

interactions between institutions, policy processes, and policy outcomes. The

environment in which many of these sorts of transitions take place is strongly

influenced by broader factors such as the quality of institutions and

IPS’s flagship publication ‘Sri Lanka: State of Economy Report 2015’

will be launched in October 2015.

To find out more details about our previous State of the Economy Reports visit

http://www.ips.lk/index.php/resources/state-of-the-economy-report

governance in a country. As such, this year’s Sri Lanka: State of the

Economy 2015 report is built around the theme of “Economic Reforms in Sri Lanka: Political Economy and Institutional Challenges”. The

report examines in some detail the many inter-related reforms that touch

on important economic policy areas – trade and investment, labour

market, foreign employment, education, health, social protection,

agriculture and the environment. Given the array of issues, the report

argues for coherence and prioritization in the design of reforms on several

fronts, so that they add up to a plausible overall economic strategy that will

help Sri Lanka to achieve sustained high growth in the long run.

50

TALKING ECONOMICS

An Assessment of the Implementation of Guidelines in School Canteens: A Case Study from the Western Province of Sri Lanka

ago; and identifies barriers that hinder its effective implantation. The

assessment was carried out in two districts, and finds that all the

canteens are experiencing difficulties in adhering to the stipulated

guidelines. The study identifies; external food outlets, lack of support

from parents, absence of alternative healthy food items, lack of

resources in schools, inappropriateness of the present system in

selecting canteen operators and the prevailing trade and fiscal

policies in the country as negatively affecting the implementation of

canteen guidelines.

The publication puts forward a new

way of looking at the access to

finance challenge for SMEs.

By Anushka Wijesinha and Nipuni Perera Working Paper Series No. 20

This ‘Twin-Pillar Approach to Access to Finance’ argues that

improving access to finance for SMEs is a case of improving

‘availability’ on the one hand and improving ‘bankability’ on the

other. The publication largely focuses on the second pillar –

‘bankability’. This stems from the understanding that a flush of SME

credit alone is not enough. ‘Bankability’ is about improving banks’

approach to SME lending as well as improving SMEs’ ability to

approach banks.

Banking on SME Growth: Concepts, Challenges and Policy Options to Improve Access to Finance in Sri Lanka

Aren’t public holidays great? For most of us, it

means a lovely long weekend or a break in the

middle of the week to spend a bit more time with

family and friends, doing things we enjoy without

eating into our annual leave. Today (Wednesday, July

1st 2015) is our 16th public holiday for the year and

there are two more due in the middle and at the end

of July. So many holidays and most of them close

together can have a knock-on effect on productivity

and output of the country’s economy. This raises the

question: do we holiday too much and not work

enough in Sri Lanka?

Source: Estimated from DCS, Quarterly GDP Data.

By Janaka Wijayasiri

Too Much Time Holidaying, Not Enough Time Working?

Countries with the Most Public Holidays in the WorldA ccording to data from Mercer’s Worldwide Benefit and

Employment Guidelines, India and Columbia top off as the

countries with the highest number of holidays (18). The report

provides an overview of mandatory and private benefit

practices, statutory regulations and employment conditions

across 64 major economies.

In the Asia-Pacific region, Thailand and South Korea offer 16

public holidays followed by Japan (15), Indonesia, Malaysia

and Philippines (14). Pakistan (13) is followed by Hong Kong

and Taiwan (12). Vietnam (10) has the lowest number of public

holidays in the region below China and Singapore (11).

Australia and New Zealand both lag behind with just 9 and 11

national holidays, respectively.

In Europe, Finland offers the most number of public holidays (15), followed by Spain

(14) whereas Hungary, UK and the Netherlands, are not so holiday minded with only

eight. Austria has 12 days public holidays while Sweden, Italy, France and Denmark

all provide employees with 11 public holidays. Belgium, Luxembourg, Norway and

Portugal all have 10. Germany typically celebrates 9 public holidays but this varies

between states, as in India.

In North America, Canada provides the greatest number of public holidays (11), and

the United States government provides 10 federal public holidays although private

employers are not obligated to allow their employees to take these days off.

Latin America is home to the highest and lowest public holidays. Colombia has the

most generous number of public holidays (18) while Mexico has the lowest in the

world (7).

Source: Mercer’s 2013 Worldwide Benefit and Employment Guidelines

Public Holidays Around the World20

10

Colombia India Lebanon South Korea Thailand

Days0

TOP 5

CLOSE

Mexico providesthe least generousnumber of publicholidays (7)

Workers in Indiaand Colombiaenjoy the greatestnumber of publicholidays (18)

Employees in the UK,Hungary andNetherlands receivethe second lowestpuplic holidayallowance (8)

18 1816 16 16

51

Mercer's study was based on a survey of 64 "major econo-

mies". Not all countries including Sri Lanka are represented in

the survey. If one calculates the number of public holidays Sri

Lankans were entitled to in 2013 – the year of the Mercer

survey – Sri Lanka appears to be ahead of India or Columbia

with 25 public holidays, of which 17 fell on a week day. This

number does not include the one-off holidays, which are

announced on an ad-hoc basis in a year. In 2015, we have

altogether 26 public holidays celebrating various

religious/cultural events, with at least 1 day off in a month

while the average number of public holidays in a month is 2

days (rounded off to the nearest decimal). Given that there are

260 weekdays, and 20 of the 26 public holidays fall in the

weekday in 2015, 7% of the weekdays are taken as time off

by many workers, putting downward pressure on productivity

and GDP. Comparatively speaking, Sri Lanka appears to have

too many public holidays; much more than several other

emerging and developed countries with stronger economies.

This calls into question the economic implications of public

holidays in the country and the need to strike a better balance

between the needs of workers and businesses.

Public Holidays in Sri Lanka

Assessing the cost of a public holiday on the economy is

tricky; there is no easy relationship between having a holiday

and the rate of GDP. A report by the Centre for Economics and

Business Research (CEBR) suggested that each holiday costs

the UK economy £2.3bn and scrapping the lot of them would

boost annual output by £19bn. Similarly, an impact assess-

ment of an extra break by the Department for Culture, Media

and Sport in the UK puts the "best estimate" at a £1.2bn loss

to the economy. However, the error of margin in the study was

quite substantial. In fact, it can boost the economy by as

much as £1.1bn - or record a loss of £3.6bn. While some may

see public holidays purely as a financial cost, they can boost

certain industries. Some businesses in the leisure, hospitality,

and retail sectors stand to benefit as workers spend their

holiday shopping, eating out or visiting tourist destinations.

Moreover, public holidays can have important individual,

community and cultural benefits, which are hard to measure. If

workers are overworked and stressed they produce less, they

are more likely to quit their jobs and have health issues,

whereas people may be more productive after a long weekend.

Holidays may also bring communities together and commemo

Costs and Benefits ofPublic Holidays

rate important national days; for example, the Independence Day. Thus, it is difficult

to quantify the “soft” benefit of public holidays. Overall, what can be said is that

there are likely to be winners and losers when it comes to the impact of public

holidays on businesses and the economy.

In the context of Sri Lanka, what we need to ask is: do we really need all these

public holidays, which seem too generous or decadent by regional/world standards?

Some days are due for a rethink, especially when there are too many close together

and people take annual leave to bridge over some of the holidays, which can lead to

loss of momentum and contribute to weakening of economic performance.

2015 Public and Bank Holiday Calendar Sri Lanka

52

TALKING ECONOMICS

January 04 Sunday

January 04 Sunday

January 15 Thursday

February 03 Tuesday

February 04 Wednesday

February 17 Tuesday

March 05 Thursday

April 03 Friday

April 03 Friday

April 13 Monday

April 14 Tuesday

May 01 Friday

May 03 Sunday

May 04 Monday

June 02 Tuesday

July 01 Wednesday

July 18 Saturday

July 31 Friday

August 29 Saturday

September 24 Thursday

September 27 Sunday

October 27 Tuesday

November 10 Tuesday

November 25 Wednesday

December 24 Thursday

December 24 Thursday

December 25 Friday

Duruthu Full Moon Poya Day * †

Milad-Un-Nabi (Holy Prophet’s Birthday) * †

Tamil Thai Pongal Day * †

Navam Full Moon Poya Day * †

National Day * †

Mahasivarathri Day * †

Madin Full Moon Poya Day * †

Bak Full Moon Poya Day * †

Good Friday * †

Day prior to Sinhala and Tamil New Year Day * †

Sinhala & Tamil New Year Day * †

May Day * †

Vesak Full Moon Poya Day * †

Day following Vesak Full Moon Poya Day * †

Poson Full Moon Poya Day * †

Adhi–Esala Full Moon Poya Day * †

Id-Ul-Fitr (Ramazan Festival Day) * †

Esala Full Moon Poya Day * †

Nikini Full Moon Poya Day * †

Id-Ul-Alha (Hadji Festival Day) * †

Binara Full Moon Poya Day * †

Vap Full Moon Poya Day * †

Deepavali Festival Day * †

Full Moon Poya Day * †

Unduvap Full Moon Poya Day * †

Milad–Un–Nabi (Holy Prophet’s Birthday) * †

Christmas Day * †

* Public Holidays † Bank Holidays

Important factor in Empowering Women Owned and

Led Micro, Small and Medium Enterprises in Sri

Lanka

Despite low density urban sprawl and ribbon

development along the main roads of the country’s

coastal areas, Sri Lanka is fast experiencing this

phenomenon

Cardiovascular diseases, cancer, respiratory

diseases and diabetes are collective referred by this

acronym

Having a permanent cadre of specialists consulting

in one hospital at a given time would considerably

minimize this issue.

Misallocation of property rights governing natural

resources can result in this.

Sri Lanka appears to have too many of these days;

much more than several other emerging and

developed countries with stronger economies.

International food assurance standards which is

increasingly becoming important in the tea trade.

16 07

20

19

14

12

9 10

13

15

11

8

5

3 4

1

2

6 7

18

Sri Lanka experiences marine pollution originating

from a variety of sources.

Sri Lanka still has a lot to achieve if it is to reach the

facilitation levels of this country in East Asia, which

is often cited by policy makers and the private sector

to be the country’s benchmark.

One person dies every six seconds due to use of this

substance, which accounts for one in 10 adult

deaths.

Sri Lanka has achieved the target of halving this

indicator at the national level seven years before

2015 deadline.

This has been widely recognized as a powerful tool

in allowing consumers to quickly and easily interpret

the nutritional value of packaged.

One of the weaknesses in the current social

protection programmes in Sri Lanka targeting

vulnerable segments of the population.

3

5

6

9

11

14

15

16

18

19

20

ACROSS

DOWN1

2

These ingredients play a key role in the food

processing industry, making a variety of food

available from every corner of the world.

This Authority in Sri Lanka focuses mainly on the

promotion of effective competition and the protection

of consumers and the regulation of internal trade.

The most common and formal methods in protecting

innovations and intellectual property rights in Sri

Lanka.

In May 2015 Sri Lanka issued a 10 year US$ 650

million sovereign bond to shore up the country’s

reserves as well as to ease pressure on this rate

This type of economy talks about the use of ocean

and its resources sustainably

The most commonly observed barrier for the

adoption of good environmental practices by large

hotels in Sri Lanka.

Provision of this social service is an important means

to eliminating child labour.

4

7

8

10

12

13

17

Talking Economics Puzzle

53

Answers:

Across: 1. Information, 5. Urbanization, 6. NCD, 9. Waiting, 11. Tragedy of Common, 14. Public Holidays, 15. HACCP, 16. Heavy Metal, 18. Singapore, 19. Tobacco, 20. Poverty.Down: 1. Labeling, 2. Targeting, 4. Additives, 7. Consumer Affairs, 8. Trademarks, 10. Exchange, 12. Blue, 13. Cost, 17. Education.

Sri Lanka expects a US$ 100 billion market

capitalization by 2020, according to the

Chairman of Securities and Exchange

Commission. The island had US$ 24 billion

market cap end 2014 which accounted for

36% of the GDP.

FASTFACTS

US$ 100 bn

Sri Lanka’s election commission declared

that the Opposition candidate Maithripala

Sirisena won 51.3% of the vote, securing a

victory against incumbent President

Mahinda Rajapaksa who gained 47.6%

votes, in a snap presidential election that

the latter called two years ahead of

schedule.

51.3%

Sri Lanka’s economic freedom

score is 58.6, making its

economy the 101st freest in the

2015 Index.

There are about 400,000 people in the North

Central Province with varying degrees of kidney

failure. In 2014, 13 people died of the condition

every day. The toll is expected to increase in the

coming years.

400,000Of the 1.5 million visitors

that have come to Sri

Lanka in 2014, 77%

commented that they

were ‘delighted’ with the

experience in Sri Lanka,

whilst 22% commented

that they were satisfied.

Only 0.8% said they were

dissatisfied.

$1.5mnMigrants pay a heavy price to

the Government and corrupt

agents who illegally charge

Rs. 300,000 for placement

in Hong Kong.

300,000The number of heroin

addicts in Sri Lanka is

around 78,000. It is

reported that more than

3.5 tons of Heroin is

smuggled in to Sri

Lanka annually.

78,000heroin addicts

The Indian Ocean Region contains

40% of the world's oil and gas

reserves, a third of the world's

population and plays host to key Sea

Lines of Communication.

40%

The earthquake of

7.8 M (Richter scale)

of Nepal occurred at

Lampung 77 km east

of Kathmandu on April

25, 2015.

Approximately 75% and

14% of urban and rural

population respectively

in SL are served by pipe

borne water.

75%

14%

Experts estimate that Sri Lanka would have elderly

population of about 3.6 million by 2021, which is 16.7% of

the total population and by 2041; one in every four Sri

Lankans would be elderly.

3.6mn

Sri Lanka exceeded its target of 1.5 mn

tourist arrivals in 2014 and earned 2.2

bn US dollars from tourism.

Out of over 5,000 pharmacies

established in the country only a

little over 2,500 are licensed

pharmacies. In World Happiness Report published in

2015, Sri Lanka is ranked lower than most

countries in the world (132 out of 158

countries). All Asian countries except

Cambodia and Afghanistan have done

better than Sri Lanka. 2500

132

54

TALKING ECONOMICS

A PUBLICATION BY THE INSTITUTE OF POLICY STUDIES OF SRI LANKA

SUPPORTED BY