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The
pressure to 'create' employment The government
is giving mixed signals to the private sector. It cannot simply
expect the private sector to wave a magic wand and create jobs overnight
at any cost, just for the sake of giving employment to people who
in all probability will be government supporters, and still expect
businesses to run efficiently. On the one hand the government is
urging the private sector to improve productivity and be efficient
and compete effectively against the competition in overseas markets.
On the other hand it wants the private sector to stuff their companies
with unemployed youth so that it can claim to have made some progress
in solving the unemployment problem. The bald fact
is that the ruling party is getting desperate - it cannot manufacture
jobs in the government sector like it used to because of pressure
and conditions imposed by foreign aid donors. Although even here
there are exceptions, one being Lake House where insiders say even
though the institution is heavily overstaffed new recruits are still
being hired. The UNP has now come up with the neat trick of getting
the private sector, possibly those corporates and business leaders
who openly identify with the ruling party, to artificially create
jobs. This is simply not how things work in a market economy. Some industrialists
feel that the focus should be on saving existing jobs instead of
twisting the arm of the private sector to artificially create new
ones. They say that dozens of factories have crashed in recent months
putting scores of people out of work. Others are under liquidation.
Labour unions and opposition parties have been making a lot of noise
about these closures recently. The main problem
is that the unemployed youth are simply not employable, at least
not in the kind of corporate culture and work environment created
by the opening up of the economy and the enthronement of market
capitalism as the dominant ideology. For instance,
more than 100,000 youth who fail their GCE Ordinary Level examination
enter the job market annually but cannot be employed because they
do not have the required skills, a key one being an adequate command
of English. A cursory glance at the employment ads in the newspapers
is enough to reveal that there seems to be plenty of jobs available.
It has long been known that the private sector has been struggling
to find recruits with a good command of English which is an essential
skill in the corporate world. There is also a perception in the
private sector that the numerous vocational training schools in
existence are not performing the right way and providing unemployed
youth with the skills required to make them employable. There might
be a need to take a fresh look at these organisations and their
curricula. A more 'market-driven' approach might be useful where
these institutions look at the opportunities available in the job
market and train youth accordingly, instead of pursuing a standard
curriculum that may be long outdated. The attitude
of jobless youth is the other problem. Many unemployed youth, it
is known, prefer to remain jobless while searching for white collar
job rather than take up a blue-collar job. Misplaced pride seems
to be one factor that helps to swell the ranks of the unemployed. Long
term economic impact of HIV/AIDS damaging This suggests
that a country like South Africa could face progressive economic
collapse within several generations unless it combats its AIDS epidemic
more urgently. According to
the new report - "The Long-run Economic Costs of AIDS: Theory
and an Application to South Africa" - most studies of the macroeconomic
costs of AIDS, as measured by reduced GDP growth rates, do not pay
enough attention to the way in which human knowledge and potential
are created and can be lost. This is one
of the key channels influencing long-term growth. In Africa, for
example, where the epidemic has hit the hardest to date, existing
estimates range between a modest decline of 0.3 and 1.5 percent
in GDP growth annually. In contrast, the report argues that the
costs are likely to be much higher. "Previous
estimates overlooked the impact of HIV/AIDS on children if one or
both parents die, how they can suddenly become orphans, how they
become vulnerable to dropping out of school, and how, in this way,
the disease weakens the ability of today's generation to pass on
its skills and knowledge to the next," says Shanta Devarajan,
co-author of the new research findings, and Chief Economist of the
World Bank's Human Development Network. "In those countries
facing an HIV/AIDS epidemic on the same scale as South Africa, for
example, if nothing is done quickly to fight their epidemic, they
could face economic collapse within several generations, with family
incomes being cut in half." The process
whereby AIDS sharply reduces economic growth, even to the point
of economic collapse, brings three factors together in a particularly
devastating combination. First, AIDS
selectively destroys human capital, that is, people's accumulated
life experiences, their human and job skills, and their knowledge
and insights built up over a period of years. It is primarily a
disease of young adults. As these infected adults become progressively
sick and weak, they steadily lose their ability to work. Eventually,
the disease kills them in their prime, thereby destroying the human
capital built up in them over the years through child-rearing, formal
education, and learning on the job. Second, AIDS
weakens or even wrecks the mechanisms that generate human capital
formation. In family homes, the quality of child-rearing depends
heavily on the parents' human capital. If one or,
worse, both parents die while their children are still young, the
transmission of knowledge and potential productive capacity across
the two generations will be weakened. At the same time, the loss
of income due to disability and early death reduces the lifetime
resources available to the family, which may well result in the
children spending much less time (if any at all) at school. Third, the
chance that the children themselves will contract the disease in
adulthood makes investment in their education less attractive, even
when both parents themselves remain uninfected. With too little
education and knowledge gathered from their parents, as well as
being deprived of parental love and guidance throughout their childhood,
the children of AIDS victims later become adults who themselves
are less able to raise their own children and to invest in their
education. The process
is insidious, since the effects are felt only over the long-run,
as the poor education of children today translates into low adult
productivity a generation later, and so on. But if nothing is done,
the report warns, the outbreak of the disease will eventually precipitate
economic collapse. "Economic
analysis for practical policy-making often pays too little attention
to the wider economic context," says Hans Gersbach, co-author
and Professor of Economics at Heidelberg University, Germany. "We
have attempted to go beyond conventional reasoning where the long
run effects of AIDS are concerned. The threat of a downward spiral
in levels of human capital and productivity when a society is assailed
by an epidemic like AIDS must be a centrepiece of a broad macroeconomic
perspective." In the early
phases of the epidemic, economic damage may appear to be slight.
But as the transmission of capacities and potential from one generation
to the next is progressively weakened and the failure to accumulate
human capital becomes more pronounced, the economy will begin to
slow down, with the growing threat of collapse. This raises important
social and fiscal implications for economic policy. The first is
the threat of worsening inequality. If the children left orphaned
are not given the care and education enjoyed by those whose parents
remain uninfected, there will be increasing inequality among the
next generation of adults and the families they form. Social customs
of adoption and fostering, how ever well-established, may not be
able to cope with the scale of the problem generated by a sharp
increase in adult mortality, thereby shifting the onus onto the
government. The government itself, however, is likely to experience
increasing fiscal problems and so be unable to fully finance this
additional task. Second, by
killing mainly young adults, AIDS seriously weakens a country's
tax base, and reduces its ability to finance public expenditures,
including those aimed at accumulating human capital, such as education
and health services not related to AIDS. In this way,
the damaging impact of HIV/AIDS on economic growth over the longer
run is intensified. As a result, national finances will come under
increasing pressure. Slower economic growth means slower growth
of the tax base, at the same time as governments face growing demands
to treat the sick and care for orphans. "This
report confirms how important it is for policymakers to act swiftly
and effectively to prevent the spread of HIV/AIDS, and to treat
those with the disease." says the study's co-author Clive Bell,
a visiting World Bank Research Fellow, and Professor of Economics
at Heidelberg University. "Keeping infected people alive and
well, especially parents, so they can continue to live productive
lives and take care of the next generation, is not only the compassionate
thing to do, but it is also vital for a country's long-term economic
future." The Bank is
active in fighting HIV/AIDS in all regions. Over the last few years,
it has committed $1.6 billion in grants, loans and credits for HIV/AIDS
programmes worldwide. The Bank is
especially engaged in Sub-Saharan Africa, where more than 29 million
adults and children are infected with HIV/AIDS. As of July
2003, the Bank had committed more than $800 million for HIV/AIDS
programmes in 23 African countries. All of the poorest countries
in Africa are on track to receive grants from the World Bank for
their HIV/AIDS national programmes. Policy guidance and special
initiatives are offered for middle-income African countries with
high HIV prevalence, such as Swaziland and others parts of Southern
Africa. In these countries, the Bank is providing implementation
and technical support, and knowledge services to complement financing
from the Global Fund For AIDS, Tuberculosis, and Malaria, and other
sources. "While there is much economic analysis that shows how costly it is to provide prevention, care and treatment to the millions that are infected and affected, there are far fewer studies that show how costly it is not to act." says Debrework Zewdie, Director of the World Bank's Global HIV/AIDS Programme . "This new study will help fill this gap, and its approach should persuade governments of the need to draw up a plan of action and act on it." Right
of reply In his opening
paragraphs, Mr. de Silva states that some of my suggestions are
within the easy reach of construction professionals and goes on
to chastise such professionals. I wish to advise Mr. de Silva that
my article was addressed in respect of projects undertaken in Sri
Lanka which are funded by multilateral funding agencies. Also in
such cases the procurement procedures are not in the hands of the
construction professionals. Such systems are entirely in the hands
of the funding agencies and the government bureaucrats negotiating
the loan agreements. Perhaps if construction professionals were
at the negotiating table, a different result, as suggested by Mr.
de Silva, could have been achieved. Therefore no one should run
away with Mr. de Silva's idea that the construction professionals
are responsible for the procurement of contracts not being on a
level playing field. Registration
of contractors Negotiation
of loan agreementsI wish to say that I do not believe that the World
Bank, the Asian Development Bank or any other funding institution
debars local consultants and contractors from tendering for projects
funded by them. However, on contracts above a pre-determined threshold,
pre-qualification of consultants and contractors are required. The
elimination comes from this exercise. I must also advise him that
the criteria for those procedures have not been prepared by ICTAD
or the government of Sri Lanka, but such pre-qualifying exercises
follow the criteria prescribed by the funding agencies, and it is
observed that such systems are the normal international pre-qualification
systems. However, I cannot but agree very much with Mr. de Silva,
as I have said earlier, that most of these constraints could be
overcome or at least alleviated if construction professionals could
be included in the negotiations. I think the attitude of the negotiators
should not be a reason for qualified technical professionals to
leave the country in search of greener pastures, as stated by Mr.de
Silva. I consider those as the weaker professionals or selfish ones.
If more of our professionals have the country at heart, if they
have some degree of patriotism and are committed to build our economy
through construction, they should remain here and give of their
best. Then collectively we would be closer in achieving our goals,
not only for the industry but to the benefit of the entire country. Procurement
proceduresMr. de Silva's proposal that Sri Lanka should "limit
the influence of lending agencies and take control of the procurement
of contracts", and his suggestion that "the controlling
power of all contract procurement should be vested with the government",
is exactly the practice in Sri Lanka today. However, the government
in doing so must, to an extent, satisfy the guidelines laid down
by the lending agencies, which is a procedure not by choice but
by necessity. If Mr. de Silva feels that we should accept the loans
from these agencies and then tell them to mind their own business
from that point onwards, on the grounds that we are paying interest,
I think the ERD should use Mr. de Silva as their buffer when negotiating
loans. Mr. de Silva's viewpoint on corrupt procurement practices
introduced by ICTAD seems to be a blind and unsupported statement.
With regard to the 30% advance payment, I do not think that foreign
consultants were entitled to this and I also do not think that foreign
contractors were entitled to this. This was a system not devised
by ICTAD but a procedure adapted consequent to a cabinet paper which
was approved as far back as 1998. He goes on
to philosophise on what should be done, what should not be done,
how things could be done, the consequences of existing conditions,
how conditions should be drafted to give more inputs to local contractors
and consultants and so on. Such philosophies are not new. We have
several armchair critics that come from various circles, but very
few from those who are capable of implementing such philosophies.
Mr. de Silva reflects very well the image of an army deserter in
exile directing the commander of the army when to call the shots.
If we are to achieve our goals we need the united effort of professionals
and institutions. They need to stand together and walk together.
This no doubt is a daunting task and it will be very difficult to
see the light at the end of the tunnel, if strong construction professionals
continue to chicken out, and leave the shores in search of greener
pastures. Howeve,r I will continue to relentlessly cry the cause
of the domestic construction industry loud and clear until I am
no more, and that too not from down under or another part of the
world but from our own Mother Sri Lank Business editor’s note: Further correspondence on this issue is closed. |
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Copyright © 2001 Wijeya Newspapers
Ltd. All rights reserved. |
AIDS
victims of one or both parents to love, raise and educate them,
and so undermines the basis of economic growth over the long haul.
