The COVID-19 pandemic has wreaked havoc around the world. Since early 2020, the Sri Lankan economy has suffered significant losses in foreign exchange earnings; revenue from tourism alone dropped by $3 billion over the first eight months of 2021, compared with the same period in 2018.
The domestic service sector has also been hard hit, with a 40% drop in accommodation and restaurant earnings year-on-year (2019-20). Over 200,000 people have lost their livelihood in the travel and tourism sectors alone, according to the World Travel and Tourism Council. Tens of thousands of overseas workers have returned home.
But amid this economic disruption, there has been a ray of hope for those who have found alternative sources of livelihood.
Take for instance, the experience of Kingsley, a financial auditor who worked for a travel agency in Colombo before the pandemic struck. By mid-2020, Kingsley’s travel firm was literally out of business. With no job openings in his field, Kingsley turned to agriculture. Partnering with a colleague and with some financial assistance from his travel company, Kingsley invested in a micro irrigation system and started growing chilies on two acres near Habarana. Since then, he has had three profitable harvests. He is now planning to produce export-quality chilies.
Kingsley’s success is a tribute to his resilience and entrepreneurial skills. He found an opportunity and used his resources wisely. But his story also highlights the infrastructure, services, and networks that enabled his achievements. Kingsley has access to a good road network between his farm and market, the Dambulla Economic Center. He received agriculture advisory services from the Department of Agriculture on social media platforms. He was able to source good quality seed from commercial seed producers.
Kingsley’s story resonates with Sri Lanka’s National Policy Framework (Vistas of Prosperity and Splendor), which aims to establish a people-centric economy with productive citizens. It seeks to integrate urban and rural populations and bring about high value addition in agro-industries and quality services, in pursuit of a new national spatial system.
Achieving this goal requires a balanced combination of five forms of capital: physical capital (such as roads, power, water, and airports); human capital (an educated and skilled labor force with an entrepreneurial mindset); financial capital (access to finance for business and other purposes); social capital (a society where people can function freely with respect for one another); and natural capital (natural resources such as forests, mangroves, and ecosystems nourishing clean water and clean air).
An imbalance caused by deficiency in any one of these types of capital can affect the sustainability of development, be it at grassroots or national level. Efforts to invigorate rural economic growth must be centered around ensuring adequate balance among these forms of capital.
Sri Lanka has invested substantially in physical capital such as in road infrastructure connecting cities or townships distributed evenly across the country. The country has a great advantage of having urban centers and natural attractions located in close proximity to each other. These attributes can be tapped to achieve high returns from investments.
Sri Lanka also has much to show from decades of investment in human capital such as free education. The results are impressive levels of literacy amongst both men and women, and high levels of school enrollment. What needs to be addressed is a mismatch of skills between graduating students and what employers need. An unexpected benefit from the pandemic is that people like Kingsley have returned to their hometowns equipped with skills and experience, and possibly also some personal savings. This is a talent pool that can be tapped.
Access to financial capital is also an issue for small businesses. The banking sector relies on collateral, which most of them cannot easily pledge. There is a great opportunity to promote digital technology and support financial inclusion by efficiently addressing the asymmetry of information and expanding service outreach in rural areas. Likewise, financing opportunities for entrepreneurial activities could be diversified through capital market instruments and credit guarantee support.
Enhancing social capital in Sri Lanka is equally crucial. It reinforces integrated rural development by bonding people and networks together. The presence of social institutions and networks ensures that all social groups from the bottom up have a stake in the development process and its outcomes.
And finally, the importance of investing in natural capital cannot be overstated. Being an island, the country’s flow of ecosystem services – such as water in the rivers and nutrients in the soil – depends on how well the ecosystem is managed. Sri Lanka’s high vulnerability to climate change makes it even more important to manage its rich, diverse, and beautiful endowments of natural capital wisely.
As a longstanding development partner of Sri Lanka, the Asian Development Bank (ADB) has supported significant investments in rural development. ADB’s next Country Partnership Strategy (2023-2027) for Sri Lanka will recognize that sustainable, resilient, and inclusive rural development is essential to the country’s post-pandemic development strategy pursuing well-balanced spatial development.
The pandemic has posed Sri Lanka significant challenges; but it could be a serendipitous turning point to re-invigorate its rural economy and provide more bountiful opportunities for more of its citizens like Kingsley.