By Abishek Ranjan
The economic condition of the Northern Province does not receive as much attention as the political situation in the region. The Northern Province, which comprises five districts, has a poor economic record compared to other provinces of Sri Lanka.
Elections have only served to undermine these issues, since both mainstream and minority parties emphasize political issues. For Tamil parties, issues such as devolution and accountability have become more important than bread-and-butter economic problems. Even though both minority and majority parties talk of development, these appear to be framed within a political framework. Thus while the question of land ownership dominates, issues of land distribution and reform, agriculture, and industrialization do not.
The scale of the region’s economy needs to be appreciated. In 2014, the Northern Province accounted for 5 percent of the total Gross Domestic Product (GDP) in Sri Lanka. However by 2021 it had fallen to 4.2 percent. The decline can be attributed to several factors, including the pandemic and the subsequent debt crisis.
In 2022, Mullaitivu was identified as the poorest district in Sri Lanka, followed by Kilinochchi. Understanding the economic sectors and challenges faced by the Northern Province is essential for addressing economic recovery in the country.
The economy of the Northern Province is still centered around rural areas. Most people are engaged in agricultural activities, while some are involved in the fishing industry. Many businesses in rural areas are run by local people, and many have more than one source of income. Bicycles and motorcycles are the primary modes of transportation in the Northern Province, even though cab services do exist in places like Jaffna.
The North’s social and geographic makeup generated several unintended consequences. For instance, it caused a significant amount of people to migrate, mostly towards the capital city or abroad, reducing rural population density. It is rare to see people stay back. This has caused a shortage in skilled labor. In addition, low population density has been a deterrent for private companies to invest in the region. This underscores the need for further State intervention for the economic development of the Northern Province.
According to Dr Ahilan Kadirgamar, a sociologist and anthropologist who currently lectures at the University of Jaffna, successive governments in Sri Lanka adopted two approaches for economic recovery in the Northern Province after the war. The first was an infrastructure drive in the Northern Province. Although the government succeeded in building roads and infrastructure in the postwar period, roads and infrastructure in the Northern Province are still lagging compared to other provinces.
During a recent visit to Karainagar in Jaffna, this writer observed the state of infrastructure development there. There is no clean drinking water available through pipelines. In such villages, the government does not seem to provide proper water.
If people need clean water, they must buy it and fill water tanks. The cost of this is many times higher than what a family in Colombo spends on water per month. Similarly, there are areas in need of infrastructure development. The reason is either that the government’s efforts in developing infrastructure are not enough or that facilities have not yet reached the people in need. There seems to be a definite urban bias here.
The second approach adopted by the government was the introduction of microcredit schemes. The government expected economic growth and development through increased investments in businesses by way of loans. However, for people who had suffered from restricted cash flows for over 30 years, the sudden influx of large amounts of money led to mismanagement and as a result many became indebted.
The failure of these two approaches is due to the government’s overall lack of understanding of the economy and lifestyle of the people in the Northern Province. The Northern Province does not have industrial plants or extensive agricultural lands. There are many small-scale producers. Providing services for production and marketing to these traders can create a production structure. If the government invests in such infrastructure, the contribution of the Northern Province to the national GDP can well increase.
As production increases, new and more efficient technologies can be introduced steadily. By providing the necessary training to the workforce, their efficiency can also be increased. This will create a skilled workforce in the long term, reducing unemployment, which is one of the major problems in the Northern Province today.
Private companies focusing on profit are reluctant to invest in low-growth and low income areas. Therefore, the government can attract private investment by offering tax concessions and exemptions. Simultaneously, the government should develop infrastructure facilities. Roads need to be rehabilitated to improve transportation. Public transportation should be streamlined. Basic amenities like water and electricity should be available nationwide. They are not available as they should be in the north.
Through these means, large industries can be established in the Northern Province, creating new job opportunities. This will increase the incomes of people and improve their living standards. According to Dr Kadirgamar, this represents the most viable way out of poverty and indebtedness in the region.
The biggest challenge facing Sri Lanka’s economy in general is the lack of foreign exchange. Although the Northern Province may not be able to generate substantial foreign exchange immediately, in the long term, producing agricultural products, dairy products, and distributing them throughout Sri Lanka can reduce import costs and conserve foreign exchange, moving the country towards a self-sufficient economy.
It must be noted that the Northern Province did make a substantive contribution to the nation’s agricultural landscape. With the economic reforms of 1977-1978, however, the country was opened to cheap imports of vegetables and other crops, mostly from India. These depressed farmers’ incomes and reduced many of them to poverty.
These developments expressed themselves politically as well. At the 1982 presidential election, for instance, many electoral divisions in the Northern Province, including in Jaffna, voted for the SLFP rather than the UNP candidate.
The reason was simple. Though associated with Sinhala nationalist politics, the SLFP was seen as having protected domestic producers in the region when it was in power in the 1970s. The destruction of agriculture in the North in the 1980s by contrast contributed to a heightening of the ethnic conflict. With agricultural incomes almost completely depressed, people had no choice but to resort to violence.
Such developments show how simple economics can trump ethnic divisions. To give another example, in 2021, when the country was again governed by a party associated with the politics of Sinhala nationalism, a group of Jaffna potato growers welcomed its measures to protect domestic agriculture in the region and curtail imports.
And it’s not just agriculture. By utilizing the vast coastal area in the Northern Province, fish exports can be increased. By taking formal contracts and security measures for Indian trawler boats that hinder fishermen and introducing new technologies in the industry, the government can help boost efficiency in the sector.
Moreover, theNorthern Province has an environment highly suitable for the growth of palmyra trees, also known as the “tree of life.” Every part of the palmyra tree can be used. Properly managing these can meet the needs of the local population while allowing the export of handicrafts to foreign countries. Encouraging such small-scale industries can provide additional income opportunities for women-headed households, addressing another issue in the Northern Province.
For the Northern Province to achieve economic stability, the government needs to introduce several investment programs without relying on private investments alone. These must be implemented with a good understanding of the livelihood, lifestyle, and culture of the local people through direct discussions with them.
The Northern Province has not yet fully recovered from the effects of the war. Therefore, the government should focus on sustainable and long-term development rather than immediate economic growth, after considering the above points.
Abishek Ranjan is an undergraduate at the University of Colombo School of Computing. His interests range from economics and technology to media and communication. He can be reached at r.abishek0723@gmail.com.
Factum is an Asia-Pacific focused think tank on International Relations, Tech Cooperation, Strategic Communications, and Climate Outreach accessible via www.factum.lk.
The views expressed here are the author’s own and do not necessarily reflect the organization’s.
