Our Perspective


The National Budget 2017: A youth perspective

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To say the least, 2016 was an eventful year.  From the Brexit to the presidential elections in the US and the refugee crisis in Europe reminds us of the extremely volatile and challenging world left behind for us as a result of our older generation’s choices.

While the decisions made by our adults have direct influence on our lives, it is rare we get a chance to voice our opinions in the decision making process itself. Sometimes it is due to the fact that some of us are below the age limit that grant us our voting rights.  Lack of appropriate communication mechanisms to reach out to our decision makers could also be a contributing factor or it might all boil down to the prevailing traditional view that we are not yet matured or experienced enough to have an opinion about the key decisions that will have a lasting impact on our world.

Things are not so different for the youth in Sri Lanka either. In November 2016, The National Budget speech 2017 was presented to the Parliament, a key policy statements that defines how Sri Lanka would achieve its economic, social and political ambitions in the year 2017. Some of the proposals put forward in the budget will influence our choices in education, jobs and the overall quality of our living standards. The objective of this article is not to undertake yet another budget analysis. Neither is to take a stand on whether the budget is good or bad but simply to layout some of the proposals that would be of interest to our youth. 

At the outset, the national budget for 2017 has allocated LKR.11, 350 million as new expenditure proposals for the empowerment of youth and women in the country. This is roughly about 8 % from its total expenditure on new proposals.  In comparison to the 2016 budget this is an approximate increase of almost 6 %. Interestingly, one can also observe that almost 60% of this allocation is given to each MP to be provided as Rs.1 million per one Grama Niladari division to selected youth. How and on what basis they will be selected for the loan scheme by the MPs are unclear.

It is evident that the key focus in the budget for youth is improving the employable skills and creating more jobs as almost 98% of this new expenditure proposals are geared towards improving skills and creating an enabling environment for businesses. While employability is a key factor that would concern us, there are few other things that might peak our interest. For example, our education and health would eventually determine the type of jobs available for us. Furthermore, the investments in innovation and technology will influence the type of jobs that would be created for us and would also affect our overall living standards. Most importantly, our plans to preserve and protect the environment will determine the means available for us to lead a happy, peaceful life.  Therefore, the proposals that are put forward in the budget that would have a significant impact on these topics are highlighted below.

Education and health

As Sri Lanka move towards becoming a middle income country the quality of our human capital becomes an important factor that decides on how soon we achieve this status. Sri Lanka is no longer attractive for businesses that focus on labor intensive jobs. In simpler terms this means there are other countries that would do the same amount of labor intensive work for much lesser pay. Hence, if we are to avoid what economists call as the middle income trap, it is imperative we make substantial investments in education and health, preparing our youth to be competitive in skilled, technology intensive sectors.

The Budget 2017 allocation as new expenditure proposals for education including higher education is LKR.21, 690 million.   As a percentage of the new proposals this is roughly about 0.15% of its total expenditure on new proposals. Furthermore, compared to the 2016 budget this is a decrease of about 0.15%. In general, the main expenditure items seem to be in infrastructure development. The Investment in structural changes in education to be more aligned with the changing needs of the country seems to be neglected.

The total new expenditure proposals on health is roughly about LKR.3150 million. As a percentage of the new proposals this is less than 0.1% of the budget’s total expenditure on new proposals. The majority of this expenditure items are directed towards infrastructure development and prevention of Chronic Kidney Diseases (CKD).

Nevertheless, things are not all bad news. Some of the new proposals especially in higher education sector seems to be promising. The proposal to provide a loan scheme for the students who are unable to get into the state universities is indeed welcoming given the fact that about 80 % of the students who sit for their A/L  ae unable to enter in to  a state university. The proposal to initiate a scholarship scheme to enable best performing undergraduate students of the state universities to enter into top universities around the word such as Harvard, MIT and Oxford is another praiseworthy proposal. In addition, the proposal to address the shortage of good quality teachers mostly in Science, Mathematics and English in the county, especially in the rural schools with an introduction of 100 percent interest subsidized loan scheme is also worth noting.

Jobs

We all study hard with the hope of securing a well-paid job. However, not all aspires to work for someone else. Even though it is an extremely small number, some prefer being job creators than job seekers. This budget seems to favor those who prefer being their own boss.  Inability to access seed capital is one of the key barriers that limits the growth of Small and Medium Business enterprises. For youth entrepreneurs this has become a significant obstacle. The formal banking rules are designed in a way that it adversely selects the individuals who already have access to finance. In order to obtain a loan from a bank, the loan applicant needs to pose collateral which is either 100% or more than the loan value.  Many of the SME’s who actually are in need of additional finances unfortunately are unable to fulfill this requirement. In this context the proposal to continue encouraging university students to engage in business startups by providing full interest subsidy for loans worth to be highlighted.

The proposed intension of inviting the private sector to provide training for youth in apparel, health care, hospitality and construction by providing a stipend of LKR.10, 000 for each trainee also needs to be underlined as it could be an effective method to ensure the private sector participation in skills development.

While it might be not directly applicable, the proposal to hold a global marketing campaign to boost exports and Foreign Direct Investment is also worth noting. If successfully held, a marketing campaign of this manner would define the type of investment that would flow into the country and would have direct implications on what type of jobs will be available for us in the future.

 

 

 

Technology and innovation

Innovation and Competition is increasingly considered as the two sides of the same coin by many policymakers. For example, the US Department of Commerce estimates that 75 % of the growth in the American economy since World War II is due to technological innovation. In China aeronautics, clean energy and IT some of the key sectors targeted for innovation.

The 2017 budget has pledged to commit LKR.1, 400 million as new expenditure proposals for science, technology and innovation for development focusing on investments in Bio technology, Nano technology, and Robotics and Genomic science. As percentage of total expenditure on new proposals this is less than 0.1%.  It is unclear whether considerable analysis is undertaken to identify whether these sectors are indeed suitable to invest in Sri Lanka however, these were some of the sectors that I personally liked as a student and wished that we had enough job opportunities one day in this country

Environment

Environment is a topic which is given the least significance from the perspective of protecting and sustaining our natural resources. The proposals in this section are mostly focused at encouraging the use of clean energy in the private sector and in the households. Apart from that, solid waste management, garbage disposal and organic agricultural practices are some of the other topics that were touched upon. The proposal for issuance of visa on arrival for tourists is also worth underlining. It is no secret that this proposal will indeed boost the tourist arrivals to the country and in return increase our revenues. However, it is also important to carefully assess whether the limited natural resources we have could be managed sustainably as the number of tourist’s increase.

In conclusion, the budget 2017 propose a significant allocation for youth empowerment. However, empowerment of youth cannot be looked only in terms of employment as there are number of other factors, such as health education and innovation that would influence youth’s ability and choices of employment. Unfortunately, all these new expenditure proposals are less than 1% as a percentage of the total new proposals put forward by the 2017 Budget. Therefore, whether allocating such a significant amount in youth focusing on improving their employability without considering the contributing factors that would influence its final outcome needs to be thought through.

 

The author has referred to the following documents whilst writing the blog. The Budget speeches of 2016 and 2017, “Growth slowdown redux: new 29 evidence on the middle income trap.” By Eichengreen, Barry, Donghyun Park, and Kwanho Shin, The World upside down, China’s R&D and innovation strategy by Guilhem Fabre, St´ephane Grumbach.

 

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