STBC’s new home
The Sunday Times Business Club (STBC) opened a new ‘innings’ on Tuesday – having its first meeting at the Taj Samudra hotel, the club host for 2010. Welcome speeches were made by the STBC patron and hotel General Manager Vimal Seth as club members settled in for a new era in the 15th year of the organisation. Hameedia continues as a co-sponsor.
Two leading economists who outlined the economic policies of the main presidential candidates, the incumbent President Mahinda Rajapaksa and opposition common candidate Sarath Fonseka, both agreed that their respective economic plans will undoubtedly very closely influence businessmen and others in the country.
Speaking at a panel discussion at the Sunday Times Business Club (STBC) on Tuesday at the Taj Samudra hotel, member of the Advisory Council on Economics for the President W.D. Lakshman and lead economist at Lirneasia Harsha De Silva presented the two candidates’ economic plans and identified key points for the future growth of the country. While Prof. Lakshman stressed the President’s policies on indigenous entrepreneurship and his plans to develop Sri Lanka into a fivefold global hub, Dr. De Silva said Sarath Fonseka is promising change by eliminating bribery, corruption and nepotism.
In his presentation, Prof. Lakshman said 2005, the year President Rajapaksa was elected to office, witnessed substantial change through a partial removal of liberalization policies.
The neo-liberal policy framework of liberalization, privatization and integration into the globalization process, which had prevailed in the country since 1977 to 2005, shifted. “Change is significant in 2005,” he said. “One significant change is the concept of promoting indigenous entrepreneurship. Earlier, the system was to maintain level playing fields by letting foreign and local enterprises be on a level playing field with equal kinds of conditions to be faced by both groups. There was a significant change in this position in 2005 by promoting indigenous and domestic enterprises.”
Prof. Lakskman said a very difficult, expensive and devastating 25-year war which nearly separated the country was concluded in 2009. “From this experience, we can draw many lessons and examine what led to the war. The conflict is over and we can see great opportunities that have been created for the country but there are still important threats.” He also said the global economy is emerging from the worst economic downturns which has had disastrous social and economic impacts. As a result, the ongoing recovery process is rather slow with the global economy still trying to get out of the crisis situation.
In terms of socio economic development, Prof. Lakshman said Sri Lanka has tried all known developmental approaches and strategies. The process of integrating into globalization has affected social aspirations in this country. “There is therefore an impatient popular demand, particularly by younger groups, asking for life conditions that are enjoyed by people in advanced countries,” he said. “Politicians who are contesting for positions have to meet those aspirations.” From the 1930’s onwards, successive governments in Sri Lanka have set up certain elements of a welfare state with free education and healthcare and subsidized food items.
Prof. Lakshman said people expect elected governments now to adhere to this kind of social philosophy. The Mahinda Chintana 2010 views its role as being one to guide Sri Lanka to a first world position. “This manifesto indicates its intention of taking the country from the Third World to the First World,” he said. “It is not an easy task and could create many problems.” Prof. Lakshman explained that the manifesto talks about the need for an economic war to propel the country into the First World status but said economic wars cannot be fought on narrow economic fields. “The economic war that remains to be won has to be fought on different fields.”
A holistic perception of development can be seen from the 14 point summary of the Mahinda Chintana 2010 covering economic, social, political, environment and cultural aspects and well as international issues. Prof. Lakshman said the articulated vision is not only an economic vision but also a vision about the future of the country, largely guided by economics and populism.
The President has proposed several short term proposals, he said. “No politician in this country can avoid presenting these promises to satisfy different groups of people. They are essential during an election in Sri Lanka.”
Prof. Lakshman said the Fivefold Global Hub is based on ideas taking into consideration the strategic location of the country. It talks about Sri Lanka being made into a naval, aviation, commercial, energy and knowledge hub through the development of various outlying areas. “The war brought out the need to develop the Eastern and Northern provinces which were devastated by the war. There are also other promised regional projects.”
He said there are of course government expenditure commitments on all these projects which have not yet been developed. The Fivefold Global Hub will take up a bulk of public sector investment for large investments in regional development programmes. If he election was successful, he said there will most likely be a planning document to include expenditure commitments.
The realism of these ideas depends on the budgetary resources that can be raised including tax resources,” Prof. Lakshman said. “There is a Presidential Tax Commission which has to look into opportunities and the difficulties of raising the types of funds required. Foreign resources will have to be raised through loans. We are currently in the middle income level group in the world classification for countries but some foreign aid can still be raised.”
Discussing economic policy issues, Dr De Silva said even though Sri Lanka’s macroeconomy is stable, owing in large part to the US$2.6 billion International Monetary Fund (IMF) stand-by arrangement which brought in the necessary stability to avoid a balance of payments meltdown, he does not know to what extent Sri Lanka can continue with an ‘unrealistic exchange rate.’ Dr. De Silva said despite a relatively stable external situation, exports are continuing to fall.
“The trade deficit is shrinking because imports are falling more than exports are growing.” The looming GSP+ problem is linked to a lot of real economic, production and job issues in Sri Lanka. “Of course external reserves are zooming but most of it is borrowed at very high costs and they are volatile,” he explained. “I am particularly critical in the way some of this money has been brought in. An example of this is the Templeton deal.”
Dr. De Silva said the war was won through a joint effort between the political and military establishments. He also said that the President has stated that 98% of the Mahinda Chintana has been fulfilled. “There are costs attached to coming into office. You need to have giveaways and freebies. The only problem is that if those giveaways are overwhelming, then you cannot implement any of your policies because you have no money left. Establishing 300 large scale industries has not been fulfilled. The President came into office talking about a domestic boom. What has happened to those 300 industries? I don’t think even one tenth of them have been set up?”
Dr. De Silva said opposition common candidate Sarath Fonseka is coming with a promise of change, giving 10 pledges through his election manifesto ‘Vishvasaneeya Venasak’. “Corruption, bribery, nepotism and ego boosting is holding back the development of the country and hurting families. Sarath Fonseka is coming as a change agent and his promises are 10 believable things that can be done.” They include restoring democracy and winning the peace, eliminating fraud and corruption, easing the cost of living, providing jobs for youth and safeguarding the security of the nation.
Dr. De Silva said there are negatives to Mr. Fonseka’s plan. “If you give handouts, inflation will go up to 20%. It happened in 2004 after Rata Perata and again in 2006 and 2007. There is a cost but if you want to change the current government, people will have to bear the short term costs of a difficult year ahead to give these freebies and deal with the consequences.”
Dr. De Silva said evidence that these plans can be implemented lies in the 20 pages of the Common Minimum Programme where every word in the document has been agreed upon by the UNP and the JVP.