About macro economy sector in sri lanka and it may help full for assignment and get knowledge about south Asian country

1. TITLE : Redefining Sri Lankan Economy; the Role of Innovation,
Investment, Business Sector and Role of Central Bank.
MODULE : Macro‐ Economics
MODULE LECTRURE: Ms.Shashini Gayanika
BATCH : 18.2 UGC
NAME AND INDEX NUMBERS OF THE TEAM MEMBERS
NO. STUDENT NAME STUDENT NUMBER
01 W.A.S. FERNANDO 10026804
02. H.D.A.M. DIDDENIYA 10026190
03. M.D.N. PERERA 10026824
04. P.N.P. ABEYWARDHANA 10026565
05. D.R.M.D. PALIHENA 22000155
06. S.A.S.A. SENARATH 10026309

2. 01. INTRODUCTION OF SRI LANKAN ECONOMY.
Sri Lanka is a middle income country which has 21.7 million populations and its GDP is USD
4102 in 2018. And Sri Lanka is in transiting period. Now our country transiting to more
competitive, inclusive and resilient country.
Now Sri Lankan economy face key major issues and challenges regarding,
⮚ Real Sector Issues
⮚ External Sector Issues
⮚ Fiscal Sector Issues
⮚ Financial Sector Issues
Which needs Immediate and appropriate policy responses.
One of the real sector issue is that, low income growth in the country. For minimize this
government can encourage local as well as foreign investment. Through this increase the
aggregate expenditure, its means it helps to increase gross national product of country as well as
increase the level of income of Sri Lanka.
High current account deficit is external sector issue faced by Sri Lanka. Trade account isolate
under current account. Therefore authorities persons can encourage exports through this they can
minimize the trade account deficit in Sri Lankan balance of payment account. It is one path to
minimize the current account deficit.
Using this above theory government can increase their income, it is a solution for one of the
fiscal sector issue called low revenue. Because through this government can increase revenue of
our country.
Because of the high exports increase the real GDP of our country so its helps to increase growth
rate. It is best solution for lack of the alternative investments. Because of the high growth rate
encourage investors to invest their money in Sri Lanka.
Likewise getting effective decisions and policy changes Sri Lanka can minimize issues and
challenges faced by itself.
NAME - W.A.S. FERNANDO
ST NUMBER - 10026804

3. 02. REDEFINING SRI LANKAN ECONOMY ROLE OF INNOVATION.
Innovation in its modern meaning is "a new idea, creative thoughts, and new imaginations in
form of device or method”. One of the significant advantages of innovation is its contribution to
economic growth. Basically, innovation can prompt higher profitability and productivity,
implying that a similar info creates a more prominent yield. As productivity rises, more products
and enterprises are created – as such, the economy develops. Innovation as an idea doesn't
simply mean the local improvement of cutting edge logical revelations – state for instance, Sri
Lanka attempting to build up a game-evolving innovation, yet additionally the adaption and
utilization of existing developments for productive use in the local context. This equalization
should be struck in Sri Lanka. While we keep on driving new advancement, for instance, through
inventive PPP (private-public partnership) components like the SLINTEC, we have to
collaborate all the more intimately with innovation champions on the planet – from the world's
most creative country, the USA, or Europe's development and innovation champion, Germany,
to Eastern innovation giants like Japan, China, South Korea and even India.
Sri Lankan innovation and entrepreneurship background.
 Unlike in most developed countries where much of the R&D expenditure is by the private
sector (over 65% in most cases), in Sri Lanka it is a mere 8%. The bulk of R&D
expenditure in Sri Lanka is by the state sector (71%). This has strong implications on the
rate of commercialization of research.
 Put the new step for contributes to innovation, Sri Lanka has recognized the need to put
this agenda front and Centre of the country’s economic development framework with the
recent adoption by the Cabinet of Ministers of the National ‘Innovation and
Entrepreneurship Strategy 2018-2022’. This ‘I&E Strategy’ provides the landmark
agenda for moving Sri Lanka towards a more competitive, dynamic, and innovation-
driven economy, through which a new growth impetus is provided to an otherwise tepid
growth picture. The Strategy’s vision statement captures it nicely, ‘Building a prosperous
Sri Lanka together: A resilient and innovative economy with export competitiveness; and
an entrepreneurial society with better jobs’.
 The Global Innovation Index (GII), a collaboration between Cornell University, INSEAD
and the World Intellectual Property Organization (WIPO), placed Sri Lanka at the 88th
position, out of 126 countries in its 2018 edition, up from 90th place in 2017.
 VEGA innovation is the new hopes in sri Lankan motor industry, because it can
contributes directly growth of sri Lankan economy.
 Research and development expenditure (% of GDP) in Sri Lanka was 0.109 as of 2015.
Its highest value over the past 19 years was 0.184 in 1996, while its lowest value was
0.100 in 2014.
NAME ‐ H.D.A.M.DIDDENIYA
ST NUMBER ‐ 10026190

4. 03.REDEFINING SRI LANKAN ECONOMIC ROLE OF INVESTMENT
There is a Symbiotic Relationship between National development and Investment. National
development can be best defined as the all-round and balanced development of different aspects
and facets of the nation. political, economic, social, cultural, scientific and material. Investment
is a critical pre-requisite for development. The quality & source of investment are even more
important for sustainable development. There are major challenges for Sri Lanka for
investments. The most common challenge for an any economy is limited resources and unlimited
want. Rather than that there are unique challenges to SL economy. Escalating Needs for Physical
Infrastructure, Poor Savings, High Demand for Public Investments, Legacy issues, Fiscal Space
for Public Investment [Extremely Low Tax Revenue (11.85% of GDP), High Government Debt
(~85+% of GDP)], Public Sector Inefficiency & Incapability, Viability & Accountability of
Public Investments Lanka also failed to attract fair volume of Foreign Direct Investments (FDI).
This is critical for an any economy National development. Because It brings much needed
external Capital, without eating into internal sources of funding, Helps Balance of Trade through
growth of exports ,Helps bridging Trade Deficit, Two-fold stabilization of Currency, with FDI
inflow & exports, Improves National Competitiveness & Image, Enhances quality of products &
services, Enables productive employment & resources utilisation.For SL economy there are
strengths from the privet sector for investment & national development. They are dynamic,
efficient, effective, ability to adopt latest technology, solution focus. Also, there are strengths for
public sectors also. High legal authority, Guaranteed Protection of Investment, Balancing Public
Interests, Easiness in Scaling-up, Value of Opportunity being High
What is PPP? PPP is a special contractual arrangement between a public entity or authority and
a private entity, for providing a public asset or a service, in which the private party bears
significant risk and management responsibility
Advantages of PPP, Synergies the strengths of each Sector, Reduces Risks, mobilizes excess of
underutilized assets, Accelerates Development, Faster Delivery, Better Legal & Environmental
Compliance, Improved Service to the Community, Economy becoming competitive &
sustainable
Problems in National development are, Tardy economic growth in terms of GNP & standard of
living, Large scale unemployment and under-employment, Rapid growth of population.,
Challenges of national and emotional integration, Incidence of poverty. (4% to 40% @ $5.5/day
poverty line)Challenges before the nation are, Focus should be not only in projects, money or
capital, but determining as to what, how to do and sequencing the priority, rationally
Transforming the thinking of people, including the Government, the Private Sector, Academia &
the Public, establishing system that enables sustainable growth
NAME-M.D.N. PERERA
ST NUMBER-10026824

5. 04. REDEFINE SRI LANKAN ECONOMY THE ROLE OF BUSINESS SECTOR.
Business sector or corporate sector is simply known as business. It is a part of the economy made
by companies. Business sector includes economic activities of general government, privet
households and non-profit organizations. There are three sub sectors in business sector.
1. The primary sector (producing raw materials)
2. The secondary sector (carrying out manufacturing)
3. The tertiary sector (providing sales and services)
All these three parts of business sector is helps to redefine sri Lankan economy.
The free market economy of Sri Lanka is worth $88.9 billion. The main economic sectors of the
country are tourism, tea export, apparel, textile, rice production and other agricultural products.
Business sector of sri Lankan economy provide lot of jobs & the unemployment problem will
soul effect of that. But unemployment rate is increasing 2018-2019. Sri Lankan expect to reduce
unemployment in 2025 by starting new business.
Import & export are the main factors of business sector. When we analyze about export, there is
$15 billion worth exports in 2018 in Sri Lankan business sector. The main export goods are
textile and apparel, tea and species, rubber manufactures. But sri Lankan economy I expect to
export services like information technology more than goods in 2025.Sri Lankan main export
partners are USA, UK & India. Business sector expect to export more agricultural products &
technical services to these countries in 2025.The worth of imports is $20.98 billion in2017. Main
import goods in Sri Lankan economy are petroleum & textiles. But Sri Lankan business sector is
import building materials more than textiles in the future. India & china is the main import
partners in the Sri Lankan economy.Sri Lanka is expecting 8% real GDP growth in 2025. Sri
Lankan economy is expert business sector is more involved in investment to achieve this. Sri
Lanka expect business sector is more invested in ports and shipping, waste management,
communication services in 2020 – 2025.Role of business sector must advance, so it can truly be
the engine of growth.
NAME - P.N.P. ABEYWARDHANA
ST NUMBER -10026565

6. 05. REDEFINING SRI LANKAN ECONOMY ROLE OF CENTRAL BANK
The Central bank has some commendable plans to promote competitiveness of the economy as
well as the growth and liberalization of trade and investment of the country. Likewise Sri Lanka
is transiting to a more competitive, inclusive and resilient country.
There’re some issues that are linked with the role of central bank that can effect on the
performance of the country.
First issue is low economic growth. Last year it shows 2.7% of growth. Downward trend was
shown in the economic growth for the last few years. As a result we’re having a slack (output
gap) in the economy. Second issue is low trade and investment growth. According to the central
bank we have 10 billion trade deficit. Total export is less than 12 billion dollars and we’re having
low services exports. At the same time the total maximum FDI we’ve reached is only 2 billion.
Third issue is the high budget deficit. (6 to 7%) Main reason for this is low revenue (tax income).
Fourth issue is high interest rates. Currently interest rates have brought down due to low global
growth and coronavirus. The nominal rate adjusted for inflation should be less than 15%.
The growth does not alone deliver results, therefore the government, central bank and other
authorities have come together in order to achieve sustainability and stability. It is called the
Policy Mix. Ensuring the ‘stability’ is the main task of CBSL. It is assigned by the monetary law.
It specifies two objectives.
 Economic and Price Stability
 Financial System Stability
Price stability- Through achieving price stability the Central bank will be able to decrease the
inflation level as well as the price level. Therefore its role is related in an indirect way to
promote economic growth. Central bank has been able to maintain inflation below 5% in 2018
through the monetary policy. They’re expecting next few years will also be in the green area of
less than 5%.
Financial system stability- The financial sector regulates more than 80% of the country. The
insurance board supports the economic activity through the release of financial growth and by
maintaining low interest rates. Another important initiative by the central bank is Green Finance.
This concept supports the sustainable growth agenda. Ex; SDG, 2030 Agenda, Paris Agreement
Economic stability- The central bank role is to ensure that exchange rate is stable. In that way
central bank is contributing to promote external sector.
The central bank is in the process of re-thinking its policies, procedures, laws and guidelines
which will fit into this new era. Therefore its future goal is to move out of the middle income
trap and to uplift this economy.
NAME ‐ D.R.M.D. PALIHENA
ST NUMBER ‐ 22000155

7. 06.Conclusion
This report presents and empirical exploration of what aspects of the business environment are
associated with increases in productivity and innovation. We tasted several hypothesis regarding
determinants of cluster level productivity, firm level productivity, firm level innovation. In the
cluster level productivity analysis, we find that connectivity to global knowledge, access to
skills, as well as access to finance, pressure from foreign competition, and infrastructure are
significant and quantitatively important correlates of output and value added per worker.
Economic and institutional reforms paving the way to a more efficient allocation of capital may
enhance the quantity as well as the quality of new investment and sustain growth. We have
extended a well known endogenous growth model to include natural resources as an input into
the production of final goods. The model implies that the larger the share of natural capital in
national income, the lower is the rate of growth of consumption and the greater is the need for
measures to investment. Role of business / private sector must advance. So it can truly be the
engine of growth. In redefining Sri Lanka’s economy, one must also look at achieving key social
and developmental goals such as the SDGs. The business sector will need to continue being
resilient to weather external and domestic stock in its growth journey. CBSL needs to ensure to
conducive economic environment by performing their tasks assigned by the law. And also its
role needs to be aligned with country’s overall macro-economic policy. The central banks
support the growth objectives, while achieving price stability and financial system stability.
CBSL need to modify its systems, frame works, laws and policies in better saving the nation.
NAME- S.A.S.A. SENARATH
ST NUMBER - 10026309