Skills for Growth and Competitiveness in Sri Lanka

July 10, 2014

Luxshmanan Nadaraja / World Bank

  • Demand for job-specific skills is growing in Sri Lanka, which intends to become a more competitive, middle income country. As its economy has grown, the composition of its gross domestic product has shifted from agriculture to higher value added industry and services, which will require a highly skilled workforce.
  • Sustaining Sri Lanka’s goal of an annual real GDP growth of at least 8 percent is at the heart of the Government’s development plan, the Mahinta Chintana. Its ambitious vision rests on Sri Lanka becoming a hub in five strategic areas (maritime, aviation, commercial, energy and knowledge). This will further increase demand for a highly skilled workforce.
  • Although Sri Lanka has achieved universal access to education, employers are questioning the quality and relevance of the education and training system. There is a shortage of skills in demand and the supply of skills are often not market relevant, according to a new World Bank report. The report carries out an assessment of the skills supply system identifies main constraints in the skills development system and strategic priorities to address the issue.

The supply and demand for skills in Sri Lanka

Sri Lanka is gearing up to rise to the ranks of a Middle Income Country with a goal of sustaining an annual real GDP growth of at least 8 percent. The country’s development plan, the Mahinda Chintana outlines the ambitious goal of becoming a maritime, aviation, commercial, energy, and knowledge hub for Asia. To realize this ambition, Sri Lanka will need a highly skilled workforce.

While Sri Lankans spend more time in the education system when compared to their South Asian counterparts, when it comes to labor market demands, employers find the supply of skills does not meet the market needs. Thus the quality and relevance of the education system is questioned. In addition to the skills mismatch, the shortfall of skills in demand in the labor market undermines productivity and challenges the growth ambitions of Sri Lanka. The report finds that lack of skills is one of the most important constraints for firms’ growth and development.

The report provides background information on current economic and labor market trends in the context of supply and demand for skills in Sri Lanka. It uses rich data from various sources, including the national skills measurement surveys of households and employers designed as part of a World Bank-financed multi-country skills measurement initiative, Sri Lanka Labor Force Surveys, , the assessments of workforce development policies and cost and finance of the TVET sector.

Life cycle process of skills development

The report takes the premise of skills development as a cumulative life cycle process that begins during early childhood development and continues through general and higher education, technical and vocational education and training (TVET) and on the job training (OJT). While there is a depth of knowledge on the general and higher education sectors of Sri Lanka to inform ongoing policy discussions, there is a dearth of evidence to inform policy debates related to the incidence, determinants and effects of TVET on how different groups, especially youth and females, perform in the labor market.


The report highlights the need for a skills development agenda to be an inherent part of an overall education strategy. Basic cognitive skills such as literacy and numeracy are typically acquired at primary school. Job specific skills are acquired in TVET , higher education and in OJT. Soft skills could be acquired at any stage, most often through interactions with family, peers and colleagues.

The report identifies that in order to design a responsive reform agenda policy-makers first need to understand both demand-side pressures for skills development and constraints in skills supply. The primary focus of the report is with pre-employment training provided by formal TVET and OJT provided by firms. It brings out findings from an employer survey in the context of demand for skills. The transition from a factor-driven to efficiency-driven labor market, Sri Lanka’s workforce needs skills like computer knowledge, ability to operate latest equipment and fluency to communicate in foreign languages to meet the demands of international clientele. Adaptability is another ‘soft skill’ in demand.

" While a good job can move a family out of poverty, a right job can transform the entire society…Over 50 percent of firms state that the system does not produce skills that are relevant. Moreover, about 33 percent consider the lack of adequate skills as one of the major constraints on operating and growing their businesses. "

Francoise Clottes

World Bank Country Director for Sri Lanka and the Maldives

Luxshmanan Nadaraja / World Bank

Challenges to Formal TVET

Every year an estimated 140,000 students complete general education without having acquired job-related skills. The Government of Sri Lanka recognizes the potential role of the TVET system to close the gap. The system’s current deficiencies create a challenge. The report outlines these deficiencies in terms of organization and management effectiveness; access and equity; internal efficiency and effectiveness (for example, quality of instruction, unit costs, and resource utilization) and relevance or external efficiency.

Since 1990 Sri Lanka’s labor force has been growing by 2 percent a year, from 6 million in 1990 to 8.46 million in 2012. The working age population (aged15–59) is now expected to grow more slowly, from an estimated 13.3 million in 2011 to 13.9 million in 2026, and then gradually decline. Sri Lanka now faces such labor market challenges as graduate youth unemployment, low rate of female participation in the labour force and underemployment of educated females and youth.

Given the current demographic trends, there is an urgent need to invest in skills development to increase productivity.

To realize Sri Lanka’s goal of becoming a competitive, middle income country, a concerted multi-sector effort is needed. To build the skills needed to be relevant and competitive in the global economy the report identifies the following strategic priorities.

Strategic Priorities

Priority 1 - The preparation and implementation of an integrated skills development strategy is essential if workers are to acquire job-specific skills.

Priority 2 - The quality of current TVET services needs to be improved so that it becomes both more attractive for youth and more relevant for employers

Priority 3 - As the economy moves forward, the TVET system will need to become more diversified; active engagement with employers would make the system truly demand-driven

Priority 4 - The effectiveness of the TVET system will depend on whether it is adequately resourced and whether the funds allocated are used efficiently

Priority 5 - Flexible and accountable governance mechanisms are needed at all TVET levels, with their components coordinated not only with each other but also with all system stakeholders

Priority 6 - The needs of the informal sector should be specifically targeted

Priority 7 - The needs of companies regarding enterprise-based training should be evaluated and addressed.