Speech by ADB Sri Lanka Resident Mission Country Director Rita O'Sullivan on 28 August 2012 in Sri Lanka
Sri Lanka is at an important milestone, having reached middle income status. The economic performance over the last two to three years has been impressive and the country has clearly achieved a high growth trajectory, with falling poverty and an improving business climate. The global environment however, remains challenging, with economic uncertainty prevailing in Europe and elsewhere. While these developments are beyond Sri Lanka's control, their effects have direct consequences for Sri Lanka. Therefore it is both an exciting and a challenging time for Sri Lanka's policy makers, the ceramics and glass industries and their private businesses.
Sri Lanka's ceramic industry has achieved global recognition and though it contributes a small component of global demand, has made its mark in the world market. I understand that the industry at this point in time faces many challenges that require solid solutions to remain competitive and protect and expand your market share. To remain competitive in the global market, Sri Lanka's ceramic industry needs to look at innovation and where possible to diversify into new areas. It also needs to look at new markets which have sound growth prospects to minimize the adverse effects of the slowdown in the traditional markets in Europe. These are by no means easy tasks and cannot be achieved overnight. However, I know the process is underway to place the industry on a stronger footing.
High costs of production, mainly due to high energy and labor costs pose the biggest challenge to Sri Lanka's competitiveness. Dr. Siyambalapitiya focused on the issue of the challenge of high energy costs to Sri Lanka's ceramic industry. ADB's support to Sri Lanka's energy sector development is extensive having been involved in this sector for many years, and the Energy sector remains a major focus area. ADB's Energy Sector Assessment prepared as a background document to the Country Partnership Strategy (CPS) identifies the high cost of energy as one major problem facing Sri Lanka. Over the next five years, ADB's assistance to the Energy sector focuses on supporting renewable energy development, including wind and other clean energy sources, energy efficiency improvement, and transmission and distribution system strengthening. Strengthening the transmission system will include construction of new and upgrading of existing transmission lines to link electricity generated by renewable energy sources to the national grid, and construction of grid substations in locations critical for technical loss reduction and overall system reliability. The improvement of the distribution network will comprise reinforcement of medium and low voltage lines, and reactive power management to achieve technical loss reduction, increased energy efficiency, and better quality of electricity supply to the population. ADB will also work with the government to reduce system losses by improving metering efficiency and better managing systems. Assistance will also support development of an enabling environment and legislative support for clean power development, particularly good governance. Public-private partnerships and pursuing energy conservation is also in the agenda. Your industry faces the challenges of clean production and meeting environmental requirements. Clean energy also becomes a competitiveness factor for your industry. ADB is working with private sector project sponsors to finance biomass energy projects and with Universities to prove the efficiency of solar panels, by running experiments on the roofs of several schools of engineering faculties.
As Sri Lanka firmly establishes itself as middle income economy, higher value advanced products are also needed to sustain the current growth momentum. The threat of getting caught in the middle income trap means that business needs to invest in new technology and research and development. This is true for established businesses in the ceramic and glass industries, as well as new businesses.
A highly skilled labor base is also to meet your increased demands. Under ADB's CPS, human resources are identified to be a critical constraint as demand grows for an educated and skilled labor force. Across many countries, ADB plans to support skills development in 3 major areas of secondary education, technical education and vocational training, and to develop a science park to strengthen innovation and scientific research over the CPS period. ADB will assist to improve the quality of secondary education and to provide equal access to education through the 1,000 school concept island-wide. Quality of education will be improved through teacher training, curriculum development, greater use of information communication technology, and improvement in science and technology facilities. ADB will support the skills development program by expanding and improving the quality of technical and vocational institutes. ADB will help build government capacity over a wide range of activities that are likely to be critical in the next phase of your sector's development.
Many countries and industries face the same challenges that the Sri Lankan ceramic industry faces, especially as countries transit from low income economies to middle income economies. There are lessons to be learnt from experiences of countries that met these challenges successfully. The present challenges call for the ceramic and glass industries to focus on diversification and innovation and to reposition each industry as a higher value added industry. Theprivate sector is in the driving seat to lead Sri Lanka's next phase of development. Your success in innovation and high productivity is the key to enable Sri Lanka to continue the current trajectory of high growth. I trust that you will guide meet the challenges that you face successfully and play the vital role that is required of you to take Sri Lanka towards a high income country. I wish you well in all your endeavors, and I want to ensure you of ADB commitment to its partnership with Sri Lanka in its journey.