Promoting Employment Intensive
Growth in Sri Lanka
Seminar on National Employment
Policy
October 2011
Prof. Sunil Chandrasiri
Dean
Faculty of Graduate Studies
University of Colombo
Promoting Employment Intensive
Growth in Sri Lanka
1. Why employment intensive
growth is important?
2. Macro level evidence
3. Priority Sectors
4. Policy implications
Stages of Development
Innovation Driven
Business Sophistication
 Innovativeness
Efficiency Driven
 Labour
Market Efficiency
Goods market efficiency
Technological Readiness
Factor Driven
* Health & primary
education
Sri Lanka
52 out of 142
countries
Sri Lanka - Stage of Development 2011/12
Overall rank 52 out of 142 countries
Institutions
Sri Lanka
6.0
Innovation
Business
sophistication
5.0
4.0
3.0
Infrastructure
Macroeconomic
stability
2.0
1.0
Market size
0.0
Technological
readiness
Health and
primary education
Higher education
and training
Financial market
sophistication
Goods market
efficiency
Labour market
efficiency
Factor Diven
Employment Intensity of Growth
1996-2002 2002-2010
Primary sector
1.23
0.17
0.52
0.38
0.94
0.13
1.16
0.14
Secondary
Tertiary sector
All sectors
Sub-sector experience- Elasticity
Sub-sector
2002-2010
1. Agriculture -2004-09
0.57
2. Manufacturing
0.50
6. Construction
0.80
7. Wholesale and retail trade
0.35
8. Hotels and Restaurants
9. Transport and Communication
0.18
0.21
10. Banking, insurance and real estate
0.49
12. Private services
0.07
Growth of Real Value Added and Employment – 2002-2010
16
5
14
Emp growth (%)
12
10
8
3
6
6
7
4
2
4
2
1
8
0
0
5
10
15
20
25
GDP growth (%)
30
35
2. Manufacturing; 3. Construction: 5. Hotels and Restaurants 6. Transport, Storage
and Communication; 7.Banking:
1. Agriculture; 4.Wholesale and Retail; 8.Private services
40
Priority Sectors- Employment Intensity
Sub-sector
2002-2010
1. Tea
2.22
2. Rubber
1.06
6. Coconut
1.69
7. Textiles and Garments
0.44
8. Jewelry
9. Hotels and Restaurants
1.1
1.41
10. ICT
1.41
Note: Health & Gem sectors: not estimated
No data
Growth Implications of Priority Sectors
Sector
Growth of
Exports %
Employment Female
Elasticity
Employnt %
1. Tea
7.3
1.40
55
19.6
5.6
5.1
0.96
2.45
0.53
40
35
48
30.5
0.63
40
0.79
1.1
30
15
1.41
45
12.8
1.41
30
2. Rubber
6. Coconut
7. Textiles & Gmts
8. Food & Bevgs
9. Gem & Jewelry
10. ICT
11. Tourism
Government Policy Support
Sources: Key policy documents at national and Ministry
level
National Level
1. Promote Investment
2. Control Inflation
3. Promote employment
4. Fiscal and monetary
policy
5. No mention about
wage policy
Sub-sector level
1. Productivity
enhancement
2. Tax incentives
3. Skills development
4. Technology support
5. Export promotion
6. Value addition
Government Policy Support contd
1. Sub-sector specific policy support system is
comprehensive and action oriented
2. Both national and sub-sector specific policies
do not cover wage policies, employee welfare,
quality of employment, and industrial labour
relations
3. Priority sectors have the capacity to promote
job-rich growth
Summary -Overall
1. Employment intensity in secondary sector
is higher
2. Presence of medium and long-term
development targets
3. Influence of institutional factors on growth
of employment
4. Presence of low-productivity and low –pay
policy
Summary – Sector specific
1. Policy support for export oriented-growth
in promoting employment
2. Emphasis on productivity , skills
development and R & D orientation
3. Influence of institutional factors on growth
of employment
Recommendations – National level
1. Application of sub-sector approach to promote
growth and employment should be continued
2. The wage levels and employee welfare should also
be included in policy documents
3. High-productivity and high-wages policy needs to
be promoted at national level
4. Export oriented growth promoting employment
should be further strengthened
Recommendations – Sub-sectoral level
1. Agriculture- Application of sub-sector approach
to promote growth and employment should be
continued
2. The wage levels and employee welfare should also
be included in policy documents
3. High-productivity and high-wages policy needs to
be promoted at national level
4. Export oriented growth promoting employment
should be further strengthened
Conclusion
The small open economy of Sri Lanka is well poised
to
make a transition from factor driven to
efficiency driven stage.
Policy support for job-rich
growth would
promote Sri Lanka as one of the key investment
centers in Asia.