Business

To Leave or to Stay? Years of bad economic policy are killing the aspirations of Sri Lanka’s youth

Published

4 years ago

2021/09/1

By Sathya Karunarathne

Overseas migration for work or study, seems a popular option for Sri Lanka’s youth. Central Bank data shows that in 2019 alone the age group 25-29 recorded the highest number of departures abroad for skilled, semi-skilled, and unskilled employment. This age group also recorded the second-highest number of departures for professional, middle, and clerical level jobs. UNESCO’s Eurostat data collection on education for 2020 states that the total number of Sri Lankan students overseas is 24,118.

A significant segment of the youth population seem dissatisfied with the available opportunities and choices within Sri Lanka.The above numbers reflect their lack of faith in a better and safer society in the years to come. For decades this lack of opportunity was blamed on the war. However, even twelve years after the conclusion of the war little has changed.It is worthy to explore why.

How did we get here?

The island nation’s predicament was in the making for almost 70 years.Consecutive governments since independence have failed to successfully implement policies to deliver economic growth and better living standards.

Trade is the engine of growth but over the last fifteen years Sri Lanka has shied away from trade led growth. Although Sri Lanka was South Asia’s first to embark on economic liberalisation in 1977 and despite the relatively robust economic performance that resulted even during the war years, Sri Lanka began to move away from international trade and investment.

Starting in 2004 import tariffs were raised in an ad hoc fashion to finance a growing defence budget. By 2009 Sri Lanka had one of the world’s most complex import tax regimes made up of para tariffs, (taxes above custom duties) and customs duties. By 2009 the overall protection more than doubled from 13.4 percent to 27.9 percent. Sri Lanka’s import policies by this time were as protective as they had been 20 years ago. While Sri Lanka continued to miss the boat of economic globalisation our East Asian neighbours such as Vietnam and Thailand have risen to prosperity by successfully integrating with global value chains.

This was compounded by an increase in state spending and increased state involvement in the economy. Much of it is financed by debt. Sri Lanka’s state expenditure has ballooned. Due to excessive borrowing, the central government’s highest recurrent expenditure is on interest payments which were at 36 percent in 2020. The country boasts a bloated public sector. The Ministry of Finance states that 30 percent or the second largest of the central government’s recurrent expenditure is spent on salaries and wages. This amounted to a staggering 794.2 billion in 2020 an increase of 15.7 percent from 2019. The Economy Next reported in June that 86 percent of tax revenue went into salaries and pensions in 2020. Moreover, these salaries are only a part of the problem, much expenditure is wasted sustaining mismanagement, corruption, and negligence within some 527 SOEs whose cumulative losses outweigh profits.

Tax revenues have not kept pace with expenditure and the tax system is weighted towards indirect taxes. In 2020 of the share of Sri Lanka’s tax revenue only 22.1 percent was direct taxes with 77.9 percent being indirect. This is highly regressive as a large component of indirect taxes end up on goods and services consumed by the average Sri Lankan imposing a higher burden on low income earners.

Consecutive government’s reluctance to rectify these economic miscalculations through hard reforms have brought the island to a precarious state of high levels of accumulated debt with exponentially growing interest payments.The country now has a debt to GDP ratio of over 101 percent, while foreign reserves have declined to 2.8 billion- sufficient for less than two months of imports.Fitch ratings have estimated that Sri Lank’s foreign currency debt service obligations until 2026 amount to USD 29 billion. Sri Lanka’s debt is on an unsustainable path.

So what’s at stake for young

people in all this?

Sri Lanka’s youth sit helplessly as bungled policy results in the economy tanking, taking them further away from their aspirations, hopes and dreams. Labour force survey for the fourth quarter (Q4) of 2020 reported a startling youth unemployment (15-25 years) rate of 25.7 percent. In terms of education level, the highest unemployment rate is reported from the GCE A/L and above group. Although the labour force is educated their main source of employment remains in the informal sector. Nevertheless, skills gap and mismatches have been identified as a major obstacle preventing employment. For example, a 2019 survey estimated a shortage of 12,140 ICT graduates.A World Bank study recognised poor English language skills as another impediment.

In addition to this, COVID exacerbated Sri Lanka’s challenge of providing employment. Unemployment as a percentage of the total labour force increased from 4.5 percent to 5.2 percent between 2019 Q4 – 2020 Q4.19 This coupled with the country’s poor economic conditions will lead to more job losses in the coming months.For instance, with banks rationing letters of credit those employed in the import sector are in panic. Additionally, with prices of essential items increasing the demand for other products and services will decline as people are forced to deprive themselves of small luxuries such as ordering a meal from a restaurant to survive.This poses a threat to business operations and employment.

To curb the outflow of dollars the country has resorted to increased import restrictions.These unsustainable policy responses have robbed the Sri Lankan youth of the luxury to dream and to aspire. Purchasing a car and housing are two such aspirations that are slipping through the fingers of the average Sri Lankan. Vehicle Importers Association of Sri Lanka (VIASL) stated that the price of certain vehicles in the local market has increased by around Rs.10 million due to import restrictions.20 A 2017/2018 Wagon R which was sold at Rs.3.5 million is now being sold at Rs.6 million. Those building or repairing houses face difficulty as cement importers have limited the release of cement to the market due to partial suspension of imports and price controls resulting in severe shortages. This coupled with high tariffs on construction material will further contribute to making the construction of a house an illusion to the middle-class Sri Lankan.

Even the escape routes of Sri Lanka are closing. Students aspiring to leave the country for higher education fear banks may not issue dollars to finance their stay. Migrants are unable to take their savings with them meaning they face a much harder start in another country- last month the Central Bank issued a new order under the Foreign Exchange Act declaring limits on migration allowances26. Social media is swamped with infuriated complaints on price hikes and scarcity of essentials such as medicine in midst of a pandemic.

It is safe to conclude that young people have found themselves in a perilous socio economic fabric with looming uncertainty.

To leave or to stay?

If the government is to retain young people they must be provided with indications of stability and hope. Excessive reliance on import restrictions as a policy solution to the foreign exchange crisis at hand exhibits the government’s reluctance to implement painful but necessary reforms. Stability and hope lie in reforms the politicians are resistant to.

Increasing sources of government revenue, re-prioritising government expenditure, limiting intervention, relying on markets and recognizing the vitality of trade in a globalised economy is Sri Lanka’s road to prosperity. It will not be easy or painless, the accumulated policy mistakes of the past two decades require some very hard reforms but it is the only sustainable way out of the current mess.

Sri Lanka faces a serious crisis but it presents an opportunity to learn from the mistakes of the past and to rebuild the island’s institutions along with the hopes and dreams of the young.

Sathya Karunarathne is the Research Analyst at the Advocata Institute and can be contacted at sathya@advocata.org. Learn more about Advocata’s work at www.advocata.org. The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute, or anyone affiliated with the institute.

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Business

Russell’s Tea partners with Sri Lanka’s indigenous community

Published

15 hours ago

2025/03/31

Thilina Walpola

Russell’s Tea Directors Rashne Perera and Jehan Perera with indigenous community leader Uruwarige Wannila Aththo at the launch event, where the community leader sampled the newly introduced herbal infusion.

Allocates 4% of global sales for their socio-economic empowerment

Sri Lankan tea exporter Russell’s Tea (Pvt) Ltd achieved a historic milestone by signing a Memorandum of Understanding (MOU) to allocate 4% of its international sales revenue from ‘Russell’s Ceylon Ancestral Herbal Infusions’ toward the sustainable development of Sri Lanka’s indigenous community.

The company simultaneously launched five premium tea ranges—Ceylon Health and Wellness Teas, Ceylon Ancestral Herbal Infusions, Ceylon Fine Teas, Ceylon Organic Specialty Teas, and Ceylon Artisan Teas—to the global market, beginning with the UAE.

The MOU, formalizing the 4% revenue pledge, was signed by Russell’s Tea Director Jehan Perera and Vedda leader Uruwarige Wannila Aththo during a ceremony at Colombo’s Amari Hotel on Saturday. This agreement marks the first time the indigenous community will receive dollar-denominated compensation for sharing their ancestral knowledge of herbal remedies, which contributed to the development of Russell’s Ceylon Ancestral Herbal Infusions.

“Our R&D team drew significant inspiration from the Vedda community’s traditional wisdom on natural health benefits,” said Jehan Perera. “We believe it is our responsibility to reciprocate by supporting their socio-economic growth through this initiative.”

He added that the company plans to export the Community’s goods like wild honey in the future, further integrating the community into global markets.

Russell’s Tea has already secured partnerships with major UAE retailers, including the Lulu supermarket chain, with plans to expand across Gulf Cooperation Council (GCC) countries and Europe. All products, targeting luxury and tourism sectors, will be available in leading supermarkets by late June.

Celebrating its 38th anniversary, Russell’s Tea founder Russell Perera reflected on the company’s evolution: “From pioneering Sri Lanka’s corporate outdoor catering service to becoming a forex-earning exporter, this global launch symbolizes our commitment to innovation and national progress,” he said.

By Hiran Senewiratne

Business

Shyam takes helm at Sunshine Holdings as nephew succeeds uncle Vish in leadership transition

Published

16 hours ago

2025/03/31

Thilina Walpola

Under a Colombo sunset at the Taj Samudra, laughter, applause, and celebratory toasts recently marked the farewell of Vish Govindasamy, who stepped down from his executive role at Sunshine Holdings PLC after 28 years of transformative leadership.

The event, attended by business leaders, Sunshine’s senior team, and industry stakeholders, honoured his legacy as he transitioned to the Non-Executive Deputy Chairman role, while his nephew, Shyam Sathasivam, assumed the Group CEO position—a testament to the family bond steering this corporate evolution.

Sunshine Holdings announced that Govindasamy would continue in advisory capacity to ensure strategic continuity.

Govindasamy’s tenure which began in 1997 as CEO of Watawala Plantations, saw the Group expand into healthcare, consumer goods, renewable energy and dairy, while launching iconic brands such as Zesta, Watawala Tea, and Ran Kahata as well as Healthguard Pharmacy. Under his stewardship, Sunshine forged partnerships with global giants such as Wilmar and SBI Japan, earned recognition among Asia’s Best Workplaces, and championed social impact through the Sunshine Foundation for Good.

Shyam Sathasivam, Govindasamy’s nephew and successor, joined Sunshine in 2005 and has been integral to its recent growth. Having collaborated closely with his uncle for nearly two decades, Shyam emphasised his commitment to upholding the Group’s purpose-driven ethos: “Mr. Govindasamy nurtured a vision that blends business with heart. I am honored to build on this legacy, ensuring we continue to care for all stakeholders,” he stated at the farewell event.

During his address, Govindasamy observed attendees dispersed across the room and humorously underscored his attention to detail by remarking, “I kindly request everyone to assemble closer to the stage—such nuances catch my eye, a testament to my micro-management tendencies.” The lighthearted comment drew laughter while reflecting his reputed dedication to organizational precision.

Then shifting to the matter at hand and reflecting on his journey, Govindasamy acknowledged the Group’s resilience through Sri Lanka’s civil war and economic crises, expressing confidence in his nephew’s leadership: “Sunshine’s future is bright under Shyam. Our shared values and his forward-thinking approach will drive new heights,” he said.

The transition underscores a unique fusion of family trust and corporate strategy, positioning Sunshine Holdings for its next chapter.

By Sanath Nanayakkare

Business

Union Assurance is redefining financial literacy in Sri Lanka

Published

16 hours ago

2025/03/31

Thilina Walpola

‘Blog It Symposium’

The ‘Blog It Symposium’ hosted by Union Assurance on March 27 at the BMICH, had drawn writers, students and professionals alongside literary giants like Ashok Ferrey. The event was less a corporate gathering and more a cultural movement, symbolising a quiet revolution in Sri Lanka’s journey toward financial empowerment.

Financial literacy, often confined to jargon-filled pamphlets or intimidating technical writeups, has found an unexpected ally in storytelling with Union Assurance’s Blog It initiative, launched years prior, which recognises a universal truth: people connect with stories, not statistics. By inviting bloggers and writers to explore themes like life insurance, savings, and generational wealth through personal narratives, the initiative transforms complex concepts into relatable tales. A mother’s account of securing her child’s education amid economic uncertainty, a young entrepreneur’s journey from debt to stability, or a retiree’s challenges in the rest of his or her life were the seeds of stories that resonated deeply with the writers in the audience especially because they are writing for a society whose financial planning is often overshadowed by day-to-day struggles.

Ashok Ferrey, the keynote speaker asked the audience,” Why do we write? “We write,” he suggested, “to express ourselves in ways that evade the rigid pathways of ordinary consciousness.” Imagine, he said, slipping into a disguise to go to a fancy dress party; that lets you be someone else. Writing, in Ferrey’s vision, operates similarly—it is a costume party for the psyche. “When we write, we shed the constraints of our daylight selves. The keyboard or pen becomes a mirror that reflects not who we are, but who we might invent,” he said.

“These aren’t just blogs,” remarked Lal Medawattegedara, novelist and symposium panelist. “They’re survival guides written in the language of the people.”

Rather than lecturing, Union Assurance has created a platform for dialogue. Winning entries, published in newspapers and shared across social media, turns anonymous writers into local influencers. A gem merchant from Ratnapura, whose blog on gem buying and selling would go viral, encouraging young people in the area to follow suit. A Colombo college student’s poem about her family’s medical debt would inspire a community savings drive. “Financial literacy isn’t about telling people what to do,” said Union Assurance CMO Mahen Gunarathna. “It’s about giving them the tools to write their own futures.”

As the 2025 symposium concluded, the message was clear: financial literacy is not a solo journey but a shared narrative.

In a world where money talks, Union Assurance has mastered a profound lesson: sometimes, the most powerful currency is a story well told. Sri Lankans are not just learning about finances—they’re rewriting their financial destinies with the support of Union Assurance.

By Sanath Nanayakkare