Northern Province’s Economic Development Framework

 11 March 2019

conomic Development Framework for a Northern Province Master Plan´, is a study commissioned by the Central Bank of Sri Lanka and carried out by a team of seven members with competence in relevant fields and knowledge of post-war conditions in the province. The study provides an opportunity for an open discussion on post-war development in the Northern Province. Apparently, the first post-war Provincial Council (October 2013 – September 2018) did not find it worth creating a development plan as a means of collective action to address the challenges of socio-economic advancement of the war-torn community that had elected it to office with great enthusiasm and expectations. Now, ten years after the end of the war and shortly after the end of the five-year term of the provincial council, we have a study, commissioned by a central government institution that provides an opening for discussion and debate on the development of the province. 

The study begins with an overview of the pre- and post- war economic and social conditions in the NP, and proceeds to present a framework for a provincial development plan. It highlights the destruction, displacement and depopulation caused by the protracted war and their consequences, and identifies some of the social and economic challenges of post-war development of the province. It makes the point that the official policy of post-war development had failed to yield satisfactory results because of the government´s failure to take these challenges into account. In the absence of a macroeconomic vision, the approach was reactive, piecemeal and project based. ´Soon after the war´, says the study, ´local production was subjected to a market shock as road connectivity resumed to the wider market with far more advanced production.´ This ´sudden reintegration with the market in the rest of the country´ along with credit expansion without due consideration for the vulnerabilities of war-affected households had contributed to ´widespread indebtedness and a rural economic crisis.´ There has been a growing financialisation of households. Indeed, for the poor in a neo-liberal world, debt is a dangerous substitute for safety net – dangerous as it leads the poor deeper into a debilitating debt trap, and even to suicide under extreme conditions! Investments expected from the diaspora did not arrive in spite of the tax incentives offered. Apparently, tax incentives alone were not sufficient to attract investments into a war-ravaged region. There was a lack of understanding of the institutional and capacity deficiencies – and, one may add, of the post-war political environment in the NP. 

Indeed, the government´s approach was top-down, militarised and bureaucratically centralised. Securitisation and road connectivity seemed to precede the priorities of resettlement and socio-economic advancement of the war-affected communities. Investment in road connectivity was almost entirely devoted to A9 and some other main roads while neglecting local infrastructure development. As observed by some critics, the government was continuing the war by other means. In this environment, the government tried to use ´development´ to evade the need for a political solution to the national question. Evidently, there was no ´enabling environment´.  
Given the themes addressed in the study, one would have expected to see a critical macroeconomic analysis of the larger national context. This is a significant shortcoming of the study. Its critique of post-war development remains incomplete, as a result. It is generally known that Sri Lanka´s rise to the status of a low middle-income country was accompanied not only by growing material inequality and loss of social welfare entitlements but also by policies and practices that suppressed democratic freedoms. The higher GDP growth rate in the immediate post-war years was infrastructure-led and it slowed down after 2013. The economy has been in trouble since then. The present government seems to be groping around   clutching at a neo-liberal agenda. The study´s silence on the current macroeconomic situation is rather intriguing.    

"For many years, the government has been actively promoting migration of labour to other countries, while failing to invest adequately in skill development"

Based on its unfinished critique of the post-war development trajectory and inspired by a vision of ´sustainable development´, the study offers a three-pillar-based conceptual framework for the economic development of the NP. In its present form, the framework incorporates several key areas under ´Social Foundations of Development´ and ´Enabling Environment´, the two pillars linked to the pillar of Production. The study highlights the need for a sustainable strategy for stable growth with distribution and resilience based on small producers and industries. A reasonable premise indeed for a normative approach to development. Growth is not an end but a means to sustainable human development and flourishing. The pace of development may be moderate but what is more important is to ensure that the process is on a trajectory that is inclusive and dynamic enough to progressively enhance the capabilities of the vulnerable. 
The real test, however, of the integration of the three pillars, lies in the application of the framework to policy making, planning and implementation. In the absence of independent and competent (visionary and capable) leadership and meaningful participation of the people, the framework may easily slip into a purely technocratic mode. If that happens, social and political issues would be reduced to technical issues in the name of economic efficiency by experts, especially those belonging to a neo-liberal epistemic persuasion. Of course, a lot will depend on changes in the national context and the ability of the provincial government to play a dynamic and proactive role in the interest of the people.   

Interesting points are raised regarding the character of the capital that was invested in the region, and regarding the role of banks. It may be worth examining how the existing ´savings surplus´ in the banks in the North can be mobilised for productive investment in the province. What are the barriers and how can they be overcome? What should be the role of the public banks in provincial development, especially in micro, small and medium enterprise development?  This is a policy question, of course. The idea of setting up a provincial development financing agency prioritising Micro, Small and medium Enterprise (MSME) development is worth pursuing. But it has to be seen in conjunction with the policy and institutional environment needed to ensure producers´ access to resources and opportunities for enterprise development and social mobility. The role of grants, loans and subsidies for livelihood revival and human development of vulnerable groups should have received consideration. This is also related to reparations as a part of transitional justice for war victims. 
MSMEs are invariably linked to buyer-driven commodity chains in an unequal relationship in which the buyers are able appropriate a major part of the value. MSMEs need policy backing to strengthen their organised bargaining positions through cooperatives to get better prices for their produce. Access to market on equitable terms is a necessary condition to promote the economic viability and development of MSMEs. One is thinking of MSMEs-based on agriculture, fisheries, crafts and manufacturing in the north.   

• "Debt is a dangerous substitute, as it leads the poor deeper into a debilitating debt trap, and even to suicide"

• "Govt´s approach was top-down, militarised and bureaucratically centralised"

• "Social Foundations of Development´ and ´Enabling Environment´, the two pillars linked to the pillar of Production"

Regarding labour, the issues identified are important indeed. The points addressed under ´Social Foundations of Development´ cover the key concerns including problems that are specific to youth, female-headed households, ex-combatants and disabled persons. Each of these groups has its specific needs when it comes to assisting them to become employable and more self-reliant. This seems to be an area in which the central and the provincial governments must work together while drawing on resources from civil society and the diaspora. The study refers to ´the need to rebuild trade unions and other workers´ institutions to raise labour standards´. The majority of the workers in the province, like in the rest of the country, are engaged in the informal sector and most of them belong to what some writers call the ´precariat´, i.e., persons working and living under extreme conditions of social and economic insecurity. It is also known that the proportion of unionised workers has been declining in Sri Lanka. This issue needs to be addressed and taken up at policy levels.      

It is important to be cognizant of the continuing trend of out-migration. For various reasons, the Tamil community in the North displays a high propensity to migrate. Moreover, for many years, the government has been actively promoting migration of labour to other countries, while failing to invest adequately in skill development. On the other hand, skill development without creating satisfactory job opportunities will fuel out-migration. Sri Lanka´s economic growth in the past had failed to generate job opportunities on any significant scale. As shown by various studies, unemployment, underemployment, indebtedness, lack of access to resources are the main drivers of out-migration. In recent times, thousands of unemployed youths with employable skills have migrated to countries such as South Korea. This situation poses a challenge to a systematic labour-intensive approach to economic growth and development in the changing demographic context of the NP as well as the country. This is a matter for national policy. 

Regarding land and natural resources, the study has not addressed some issues which have serious consequences for the livelihood security and human development of farming and fishing communities in the province. There are issues concerning distribution and sustainable use of land and water in Vanni and Jaffna. Land grabbing (small and big), landlessness, unresolved land disputes, absentee landownership, state´s enclosure of land as protected or sacred areas - thereby depriving communities of their traditional access to forests and grazing lands, and the military´s occupation of considerable extents of private lands are among the widely known problems. In Jaffna, there has been an ongoing conversion of prime agricultural lands into residential properties. What has happened may not be reversible but steps should be taken to preserve the remaining high quality agricultural lands. Another serious problem is the depletion and degradation of the peninsula´s groundwater resources. 

"Fishermen in the north, who are engaged in small scale low technology fishing in the Palk Bay, find themselves caught in a trans-boundary conflict created by massive daily intrusion by high-powered Indian trawlers"

Fishermen in the north, who are engaged in small scale low technology fishing in the Palk Bay, find themselves caught in a trans-boundary conflict created by massive daily intrusion by high-powered Indian trawlers. The northern fishermen are perpetual losers in this highly unequal competition. According to one report, there are more than 2500 Indian trawlers operating in Sri Lankan waters. The Indians are known to use banned fishing equipment and methods. The risk of resource depletion and degradation is very high indeed. The problem is fairly well documented but no workable solution has been found. There are also conflicts between local and migratory fishermen from the south operating in areas like Mullaitheevu.  
These problems need to be addressed in order to find solutions that can help the affected groups to revive and develop their livelihoods in sustainable ways. They are also linked to land as a contentious issue in devolution and power sharing. The study focuses on some aspects of agricultural development such as household resilience and food security and sustainability in some detail. These are relevant and the ideas presented are sound indeed but the issues mentioned above cannot be avoided. Fisheries has not received the importance it deserves. 
It is important to take a more explicitly critical stand on the government´s policies on land and natural resources. Counting land (along with other natural resources) as nothing more than a factor of production which is not compatible with a serious vision of sustainable development. On the other hand, Land is the environment at large and, in that role, it is an indivisible public good. This contradiction is at the centre of private and social cost-benefit calculus. Of course, not all social costs and benefits can be quantified but a deeper understanding of this contradiction is basic to sustainable resource and environmental governance. Enclosing public lands as reserves and sacred areas by shutting local communities out is not a sound approach to sustainability. 

It is a recipe for eternal resource conflicts. The social and environmental costs of enclosure of beaches and coastal zones in different parts of the country by private investors (from the so called hospitality industry) remain to be addressed too. Advocates for sustainable development may consider an approach informed by coevolutionary thinking. 
This is a way to look at society-nature relations and processes such as building resilience and adaptation to climate change and natural disasters. Devolution and power-sharing should provide for the participation of communities as stakeholders in resource and environmental governance. 

I have raised some issues that remain to be addressed. There are other issues as well, I am sure. The framework may need further critical review in order to take it closer to the people, whose participation is an absolute prerequisite to move towards a provincial development plan. The question as to when the hosting of this process would be legitimately taken over by the provincial council is pertinent indeed. At this point in time, one can only hope that the next provincial council will have the vision and the will to do it. No less pertinent is the question as to whether the government is capable of providing an enabling environment and going beyond towards a political resolution of the national question.