Sri Lanka will be presenting its “first industry zone master plan” in April. On Wednesday, Industry and Commerce Minister Rishad Bathiudeen said work by the special task force drafting it began on January 16. The expected blueprint will encourage Public Private Partnerships, and also include top private and public consultants in formulating industry reforms.
Currently, the country’s industrial policies are scattered, lacking uniform organization. Bathiudeen’s ministry oversees 30 “industrial zones” employing 17,000 people, and another 19 “industrial estates” that employ 6,500 more. (There are also two privately-owned industrial parks — one devoted to apparel and the other to IT services.) But those figures don’t reflect the major imbalances that the government is hoping to fix with the master plan.
In total, 2,275 industries of all sizes had registered with the Ministry by the end of 2015 (although Bathiudeen believes more are operating unregistered in the country). However, the vast majority of them – 86% — are located in the Western Province, which is home to the capital Colombo as well as the majority of the population. That regional disparity will be addressed under the new master plan, with the minister promising to “formulate frequent District Industrial Exhibitions so that industry awareness is created across the country.” He also instructed attendees of a special industry planning session to “include youth and the university system so that employment and R&D aspects are integrated.”
The minister also called for the expansion of basic metal products and minerals –currently accounting for just 2.5% and 5% of registered industries, respectively — since they are essential sub-sectors of a globally competitive manufacturing-based economy. (By contrast, 21% of the registered industries are in apparel and textiles, and 15% are in food and beverages.)
The last problem to overcome is that almost all of the registered industries are domestic investments, not FDI that the country’s Board of Investment tries to facilitate with roughly a dozen “export processing zones.” However, the country has the potential to become a darling of international investors. Following the end of its civil war in 2009, Sri Lanka has maintained stability even when transferring power between presidents of different parties. The island nation also has favorable geography (near India, close to major maritime routes), and an under-served population growing in numbers and affluence. At the World Economic Forum in Davos, P.M. Ranil Wickremesinghe said he envisions an upward trend of economic growth from 2017, reaching 7.5% annually.
Improved industrial policies under the master plan should make attracting FDI much easier. And on Tuesday Sri Lanka secured $1 billion in loans from the Asian Development Bank for 2017, for sectors including highways, water distribution, and business development, which should also help in that regard.
Sri Lanka currently has a low level of urbanization, so it has the opportunity for smart urban planning to prepare for the future. If its master plan incorporates industrial zones in or near cities, their expansion should emulate best practices of low-carbon infrastructure and public transportation, as well as preparations against climate change like sea walls and adequate drainage. Then the path would be set for many years of sustainable growth.