Speech by UNDP Country Director Douglas Keh at the 23rd Annual Meeting of the Organisation of Professional Associations of Sri Lanka

Oct 1, 2010

I would like to begin by thanking the OPA for the opportunity to be with you today, for the chance to participate in your discussions on a topic of central importance to the future of Sri Lanka.   The UN Development Programme, or UNDP, is not a humanitarian agency.  UNDP supports Governments in planning for the long-term.  Our principle goal as an agency is to help governments develop the capacity to reduce poverty.  This entails introducing lessons learned in other parts of the world, sharing international best practices that can be adapted to the particular needs of Sri Lanka.  So it is my pleasure to contribute to your discussions on, Vision 2020: The Way Forward, for it is a subject that underpins the very raison d’etre of UNDP in your country.    

When I arrived in Sri Lanka three years ago to join the UN Development Programme, the mood in Colombo was very different from today’s.  Suicide bombs were going off on buses, in train stations, maiming and killing innocent civilians.  Claymore mines were taking the lives of passers-by on the road from the airport and throughout the North and East.  The peace that had been in place for several years was badly fraying.

The international community in those days was in full humanitarian mode – tents, blankets, and food rations were the basic units of our dialogue with the Government.  Planning horizons spanned days and weeks, not months, not years, not yet.  I remember my first visit to the North, to Jaffna, waking in the middle of the night, and wondering how the wind could have picked up so much that it could now rattle the window in my hotel room, making it shake.   I got up and walked over to the window that first night in Jaffna.  A few seconds passed, as I marveled at the consistency of the window-rattling.  Five seconds quiet.  Three seconds rattling.  Five seconds quiet.  Three seconds rattling.   Only then did I realize that the vibration was caused by waves of shelling across the elephant pass.  A live conflict was taking place just over there.  

We meet today in a gratifyingly different context.  Today, there is no fear of being killed by a claymore .  Today, Sri Lanka is a country on the move.  Everywhere we look, there is building, growth, and change in the air.  Foreign direct investment is on the rise – and will serve as the principle driving force for positive change – and development- in the decade to come.  Sri Lanka’s stock market was among the most active and most successful in Asia over the past twelve months.  Sri Lanka’s foreign reserves are today at record levels. Students graduating this year from the University of Colombo must consider themselves very lucky indeed, for rarely in the past three decades, their entire lives, have the prospects for employment been so promising. 

With this backdrop, it is difficult to stand before you today and not feel a very real sense of hope.  Hope that peace can entrench itself in the months, years, and decades ahead.   Hope that this nation can realize the potential that its natural endowments created for it long long ago. 
At the same time, many questions linger.  Not so much questions about what opportunities will emerge.  Rather, questions remain as to how those opportunities can be capitalized upon, what will bring Sri Lanka from this post-war phase to the next unwritten chapter, what are the prerequisites for sustainable development and growth.  What could go wrong from now? 

Fortunately, with more than a year now past since the end of the conflict, some indications are beginning to emerge on the Way Forward, the very fitting topic of this 23rd Annual Session.   Sri Lanka finds itself in the company of a small group of countries in which a long-enduring conflict was ended categorically and convincingly.  Here in Sri Lanka, albeit after thirty years, the conflict has come to a very clear and unequivocal end. 

There are various other countries where, for whatever reasons and at whatever pace, conflicts have come to an end, thus opening new possibilities for growth and stability.  It is from this group, and its experiences that we can arrive at some initial conclusions on the direction that Sri Lanka may take in the years ahead.  Countries like Viet Nam, South Korea, and Chile have all gone through some aspects of Sri Lanka’s post-war experience today.  Their lessons learned provide useful insights as Sri Lanka and its Government articulate a “Vision” for the future.

Firstly, Sri Lanka fits easily into this elite group of successful post-war countries insofar as it too has long invested in education.   Sri Lanka’s human capital will provide a strong foundation for industrial growth and development in the years to come.  The question is, What more, if anything is needed if you have a well-educated, highly literate workforce?   The other countries I’ve mentioned also had relatively well educated labour forces.  But they also learned that high rates of literacy were simply not enough.  What they eventually discovered was a great need for more advanced technical training and problem solving in particular sectoral niches.

What these other countries discovered was that even a literate workforce can face big challenges for one simple  reason: the incentives that drive productivity during conflicts are not always those that necessarily contribute to growth in a more dynamic, conflict-free environment.   In most conflict settings, job mobility, both vertical and horizontal is very limited, as people want to stick with what they have in a context of unpredictability and risk.  Without real prospects for upward mobility, workers can be forgiven for becoming complacent.   Analytical skills are rewarded less than the ability to follow instructions, keep one’s head down, and dutifully cater to the status quo. 

In a dynamic, peaceful, economy, in contrast, the incentives that motivate people are the central tenets of capitalism:  the prospect of getting ahead, getting a raise, getting a better job, all through hard work, integrity, and perhaps most importantly, innovation.   But that capitalistic principle – that the unharnessed search for profit creates positive change – is not typically ingrained in countries that have experienced sustained instability.   So change in many cases must start at the grassroots level, change in how people think, how they are motivated, by what - and how they are rewarded.  

The need to introduce new incentive systems is in this regard not limited to the lower rungs of the industrial hierarchy.  It also applies, sometimes mainly, to management.  The various post-war economies that I have referred to above - Viet Nam, South Korea, and Chile - all had a dearth of experienced managers who could plan, implement, monitor, and evaluate performance in the new post-war setting.  The ability to plan ahead, and anticipate shifts in consumer preferences, was noticeably rare at the outset of their post-conflict experiences.  

At the end of the day, management is an art not only of anticipating the future but also of handling people, setting a good example, and achieving that elusive combination of the proverbial carrot and stick.  Sri Lanka’s vibrant private sector has clearly demonstrated that it knows how to manage.  But as investment flows to Sri Lanka open up new market niches and create the need for a higher degree of expertise in many sectors, there will be pressure for the country’s core of strong managers to diffuse their skills and working ways across a broader spectrum of industries and individuals.  How Sri Lanka handles this test, this challenge to its management capacity, will influence its ability to navigate the risks and opportunities ahead. 

Industrial growth in post-war countries tends to follow a well recognized path.  Usually, sustained growth following a conflict is driven by a small number of industrial sectors that tend to radiate skills and capital to the rest of the economy.   This process of industrial development has at its helm strong leadership that ensures that the limited selection of priority sectors receives priority.  That means priority in attracting investors, priority in getting access to training, and priority in terms of preferential trading arrangements with other countries – all of this demands assertive government leadership.   Leadership that encourages and rewards integrity, transparency, and strong business ethics has proven particularly successful at sustaining growth in post-conflict environments.

A few months ago, the New York Times, my hometown paper, cited Sri Lanka as the best destination to visit in the world for 2010.  In Sri Lanka, tourism will be central in the country’s  growth paradigm not only because of the unequalled natural endowments that give Sri Lanka a true “comparative advantage” in this sector, but also because  tourism can help shape Sri Lanka’s profile in the eyes of the world.  The infusion of capital into tourism will lead to new demands, pressures, and required adjustments.  Already, the 60% increase in first-time arrivals since 2009 has reaffirmed the adage that stability is good for business.  

But there will be growing pains as well.  How the country responds to the growing pains in tourism will offer lessons in many other sectors as well.   The pressure on tourism infrastructure could have several undesirable consequences, beginning with a rise in cost. As in any expanding business, the initial phase of expansion brings with it risk that heightened pressures and expectations will not be met in due course.  Once the brand loses its shine, it’s hard to change opinion even after structural and personnel improvements have been made.  The next five years, in this regard, will be a crucial window of opportunity for Sri Lanka to demonstrate to investors that it is truly open and ready for business.  But that window will stay open forever.  The global market is simply too competitive for that to happen. Mr. President, Distinguished OPA Members,

In my statement to you today I have sought to highlight the experience of several other countries that have gone through post-war transitions to enjoy long-term growth, sustained reductions in poverty, and vibrant and relatively stable economies.  I have spoken about the importance of workforce training and management skills.  I have talked about reorienting incentives in post-conflict labour markets.  I have talked about the risks inherent in rapid growth. 

And that’s it.  What I’ve covered today is just a smattering of the myriad issues that must be tackled in the months and years ahead.  I said nothing about macroeconomic management or the global recession.  I didn’t give any consideration to the central role played by women as key members of the labour force and leaders in the community and government – that was a major, albeit deliberate - oversight.  Neither did I mention any of the sensitive political issues currently on the table: the need for reconciliation between the various ethnic and religious groups in Sri Lanka, and how the leadership chooses to meet that need, will obviously influence perceptions of business risk and the investment climate in Sri Lanka.  If there’s anything the human race has learned after millennia of warring with itself it is that while peace is hard to achieve, it’s very easy to lose.

Another big challenge ahead will be overcoming the regional disparities in income distribution.  Last week’s meeting on Sri Lanka’s excellent track record on the Millennium Development Goals, had just one blemish, that of the growing inequality between the western and the southern province on the one hand, and the rest of the country on the other.

Many challenges ahead.  Yet many opportunities as well.  Today, it must be very exciting to be Sri Lankan.  You, the Members of OPA, are fortunate to be at the vanguard of the societal evolution that is about to unfold in your country.  You are the leaders who will have a big say in the direction that the country takes in the years ahead.  It’s a big responsibility, but something tells me that after so many years of sacrifice, you are finally due for some sustained good luck.  As I often say, the stars are aligned for your Sri Lanka right now.  I wish you the best as you move ahead.