International Monetary Fund Chief, Dominique Strauss Kahn was quoted in the media as saying that the global recession would be over very soon and the emerging economies could register some 8% growth rates during the current year itself.
It reminds me of an interesting Indian story received sometime back from a well known Indian Economist Dr. S. Gurumurthy- a true story as to how an Indian business establishment got affected by the ‘global recession’.
The story is about a man who once upon a time was selling hotdogs by the roadside. He was illiterate, so he never read newspapers. He was hard of hearing, so he never listened to the radio. His eyesight was weak, so he never watched television. But enthusiastically, he sold lots of hotdogs.
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| IT in the classroom |
He was smart enough to offer some attractive schemes to increase his sales. His sales and profits went up. He ordered more and more raw material and buns and increased his sales. He recruited few more supporting staff to serve more customers. He started offering home deliveries. Eventually he got himself a bigger and better recognition in the society. As his business was growing, his son, who had recently graduated from City College, joined the father.
Then something strange happened. The son asked, "Dad, aren't you aware of the great recession that is coming our way?" the father replied, "No son, but tell me about it." the son said, "the international situation is terrible. The domestic situation is even worse.
We should be prepared for the coming bad times and we need to cut down on our costs to save for the future" The man thought that since his son had been to college, read the newspapers, listened to the radio and watching TV, he ought to be knowledgeable and his advice should not be taken lightly. So the next day onwards, the father cut down his raw material orders and buns, took away the colourful signboards, removed all the special schemes he was offering to the customers and was no longer enthusiastic.
He reduced his staff strength by laying them off and he had only very few who could not manage the show as they had constant fear of losing their jobs. Very soon, fewer and fewer people bothered to stop by his hotdog stall, and his sales started tumbling down rapidly and the profits crashed to all time low. The father said to his son, "Son, you were right. We are in the middle of a recession and crisis. I am glad you warned me well ahead of time."
What can we take home from this story? Or rather what is the moral of this story? How many times do we confuse intelligence with good judgment?
US Treasury Secretary, Timothy Geithner in his speech ahead of the G7 Industrialized nations’ meeting said that they needed the rest of the world economy to emerge from its slump as much as other economies need the US economy; and also they bear a substantial share of the responsibility for what has happened. It’s not that difficult to understand as to how the emerging economies like China, India and even Sri Lanka could assist US to restore the financial stability and confidence in the western economies.
As for emerging economies, China's GDP increased by 6 % whereas the US economy was down by 3%. India's economy also grew. If we consider “BRIC economic block’ Brazil's economic growth rate stood at zero percent in the recent past, but they do possess huge un-tapped natural resources such as gas, oil, largest amazon rain forest, other minerals etc. Notably Brazil and China have become the largest trading partners after 50 years replacing the US. It is reported that if not for China’s $850 billion investments in US treasury bonds, the dollar would have been under tremendous pressure and the economy would have been in much more difficult situation.
That would have prompted Geithner to visit China recently and request them to continue to invest in US treasury bonds. On the other hand, consistently high and sustainable growth rates have been the order of the day for Indian and Chinese economies in the recent past. Foreign capital has played a major role in driving the economic development in particular the export growth in both countries. Between 2000 and 2007, China’s inward investments increased by almost 50% to $68 billion in 2007 whereas its outward investments in 2006 was $17.6 billion only. According to a research done by an Indian Professor of Economics, China’s foreign exchange reserves are earned, whereas India’s are borrowed. In summary, “BRIC block” accounts for more than 15% of the $60 trillion global economy, which will command the world economic order by 2020.
In one of my articles published in the Sunday Times titled “Home grown economic model to spur Sri Lanka” I argued the need to adopt a more socially- oriented market economic model for Sri Lanka as opposed to Free Market economic model. I have predicted that more Foreign Direct Investments (FDI’s) may flow into the country followed by IMF funds once infrastructure is in place. Sri Lanka has a superb window of opportunity viz other countries if we are able to obtain FDI’s and fast track “ongoing infrastructure development projects”.
Then the country could drive the economy out from the current temporary downturn and improve the quality of life of rural people and also reduce the regional disparity of income and opportunities available for rural forks. I also argued that there was nothing wrong in borrowing long term concessionary funds for capital development projects if the repayment terms include grace periods and low interest rates. (The foreign debt in $ terms as a % of GDP has now come down to 37% compared with 72% in the 1990’s, but in the mid 70’s it was only 20%.) It could come by way of capital flows for the reconstruction and rehabilitation projects in northeast areas in addition to southern infrastructure development projects. The real challenge here would be to find counterpart funds from the government budget in order to obtain funds from the international lending organizations. On the positive side, in terms of the famous Harrod- Domar model of the development economic theory, it is likely that more FDI’s may flow into the country followed by these funds, as the entrepreneurs’ profits or in other words the return on investment of those funded projects would essentially be higher with more efficient infrastructure in place.
According to Central Bank reports, since 1977 there had been not a single year with a positive trade balance. Also, there was always a deficit even in the current account of the Balance of Payments.
It would be recalled that Sri Lanka’s total debt as a % of GDP exceeded 102% in 2003 and 2004 and since then the country has been achieving higher growth rates and as a result the overall debt as a % of GDP is now around 86%.
I am of the opinion that the main challenges faced by us namely, the economic downturn and the Northeast problem could be addressed through a vision-driven approach as opposed to adopting a problem-driven approach hitherto practiced. Also it is a necessary pre requisite that we create and build a new socio/political culture based on our traditional values, heritage and our expertise and it is necessary to make attitudinal changes in the hearts and minds of the people.
The President says he is committed to uplift the quality of life of the people of our country. This could be achieved through empowering youth. We need to build a new (economic and social) model that is equitable. The youth and the professionals would play a vital and pivotal role here. They have all the necessary talents and our youth could enter the global arena when they are equipped with IT/ English knowledge to supplement them in their fields of expertise.
During the height of the southern violence in the 87-89 period, the then administration had been accused of not providing enough facilities by way of education, health and vocational training opportunities for rural forks and the phrase “COLAMBATA KIRI GAMATA KAKIRI” has been used in the media to illustrate the point. With the launch of groundbreaking Sinhala Language Interface Pack (Tamil version to come) for the Windows Operating System with the assistance from Microsoft owner Bill Gates, “GAMATA IT” programme would open the doors for people in rural communities. Eventually, they would learn computers in their local language, and learn how to access the Internet; as well as tackling the reluctance in using computers due to a lack of proficiency in the English language.
Not only the most popular packages such as Microsoft office-word, excel, power point etc, they could also learn Adobe, 3D Max etc, also. I could imagine village youth using software packages like “3D Max” and developing design models for new development projects undertaken in their own areas; for example Hambantota/ Weerawila airport, Solar power electricity generation stations, Waste disposal/Garbage recycling plant etc. The work load done by the Information and Communication Technology Agency (ICTA) of Sri Lanka, to revolutionize the IT knowledge of the rural population is commendable. Since Microsoft is not an open source system, maybe the ICTA could negotiate and get further concessions from Microsoft. A word of caution here that at some point of time the rural youth should get used to software applications in the English language as well.
Otherwise they will not be in a position to learn and apply English words and technical terms quickly in day- to-day work thereby throwing away/job opportunities that may come their way to earn more revenue. GAMATA IT programme could really add value to the agro based economy in the rural villages and transform the dualistic nature of hitherto underdeveloped basic agricultural activities into a vibrant agro based industrial sector.
Isn’t this youth empowerment? Isn’t this the opportunity our present day youth have been waiting for to participate by making use of their talents to economically and socially develop our country? Isn’t this enhancement of quality of life of our people on a sustainable & equitable manner?
(The writer is a Director, Strategic Planning /Projects at one of the plantation companies, and Chairman, Independent Audit
Committee of two quoted
companies). |
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