SL’s ‘whisky’ economy on ‘arrack’ income – Comment
View(s):Just as the new cabinet – or an extended version of President Maithripala Sirisena’s cabinet of January 2015 – is appointed in the next few days, there are interesting points of view in the Business Times today that point the direction Sri Lanka should follow.
In an out-of-the box approach, Sheriff A. Rahuman refers to a famous quotation from former Finance Minister N.M. Perera who said: “We cannot power a whisky economy on an arrack income”. In simple terms using NM’s analogy, the writer explains quite clearly that Sri Lanka’s model of development is lopsided because its infrastructure is at 1st World costs while its post-installed maintenance and servicing costs are fixed at 3rd World rates.
Dhanuka Bandara, a researcher from the Centre for Poverty Analysis, discusses a recent forum where the crisis in higher education came under scrutiny. Two points of view reflected at the forum explains the dilemma facing university level education today in Sri Lanka – that is creating employable graduates versus what is defined as the “Oxbridge” model of providing a liberal education against focusing on market and economic needs alone.
On one hand it is argued that “contribution to the nation” should not solely be gauged in economic terms alone and that graduates should contribute to the nation through critical thinking, while the other view was that the aim of university education (whether one likes it or not) should be to create “employable graduates”. Both views are valid though many in the private sector which drives the economy more than during the “Oxbridge” era would argue in favour of ‘employable graduates”.
The right fit may be ‘employable intellectuals” who are gainfully employed and at the same time be a vibrant part of the economic, social and intellectual dynamics in the country The third article by a former Treasury official and economist Palitha Ekanayake charts the debt crisis that Sri Lanka is engulfed in and huge borrowing, unprecedented spending and a situation where borrowing is essentially to pay off debt rather than for development. He has made some valuable suggestions on how Sri Lanka should tackle the debt crisis while proceeding on a path of development that would spur local production, create jobs and generate more exports.
Though not by design in the selection of the articles for publication today, these views provide some food for thought on the correct path of development, the education and human resource needed for this progress and handling debt and are rational suggestions to the Maithripala-Ranil coalition government on the way forward.
From a private sector perspective, local and foreign investment will surge if and when the regulatory authorities are firmly back on track particularly in the financial (banking) and capital (stock) markets. Investments will boom if investment processes are streamlined, transparent, without bias and at reasonable tax rates. Also important is swift action against offenders, mostly favoured businessmen in the last regime.
Though news of a free-market-economy-friendly, United National Party-led victory should have triggered a buying surge in the stock-market on Wednesday after the election results were clear, the market reacted cautiously with analysts arguing that crucial economic policy reforms need to be put in place to stimulate investment.
The same applies in terms of FDI – transparent rules, protection to investments and an easy and less cumbersome approval process. Sri Lanka has had two promising chances to transform the country into a successful nation; first in the early 1980s when it was being touted as a financial hub competing with the likes of Singapore, until the 1983-and-after conflict ruined everything and then in 2009 after the Mahinda Rajapaksa administration ended the conflict.
While the 1983 crisis could not have been avoided totally, the opportunity in the post 2009 era to develop the country was hindered by a spending spree unconnected to real, speedy, a-return-on-investment kind of development with grandiose, inward-looking projects like the Mattala airport, a gigantic Hambantota port instead of a downscaled one, a cricket stadium in the jungle and millions of rupees spent on bidding for an international sports event.
This plus billions of rupees either unaccounted for or lost through corruption triggered huge local and foreign borrowing which eventually went to meet interest payments and not capital. Revenue was used as a major portion of debt interest and debt capital payments.
In today’s development financing economics, debt is not a bad word and debt financing is perceived as part of the investment mantra. However the kind of debt Sri Lanka has been sucked in – and conveniently hidden from the masses as economic jargon is too difficult to understand to realise that people would be paying huge taxes on esssentials for decades – is too much to bear.
In fact if the Rajapaksa regime continued with former Treasury Secretary P.B. Jayasundera in the saddle – juggling an empty coffer just like Lalith Kotelawala managing a shaky Ceylinco Group only to see it collapse like dominoes -, it was only a matter of time before Sri Lanka would have faced a Greece-like crisis.
Given its ethnic diversity, there was hope when the two main political parties combined in the 2001-2004 Chandrika-Ranil coalition government that Sri Lanka will move forward, with dignity to all. Unfortunately that process failed. Now in August 2015 Sri Lanka has a better chance in making a coalition government work with President Sirisena being a very conciliatory and rationale leader coupled with renewed determination shown by Prime Minister-elect Wickremesinghe to bring all divisive forces together on one platform to take the country forward. Both are committed to developing a nation built on values, morals and discipline and they speak the same language. As the country’s two top leaders, the whole nation would be watching their progress is being clean, disciplined and above all, the law applying to them as it applies to every other citizen of the country.
If one is to take comparisons in economic development and the people who steered the country, then it is important to consider the transformation to a free market economy from a closed-doors economy in 1997. At the time, the then-ruling UNP had politicians of the calibre of J.R. Jayyewardene, R. Premadasa, Ronnie de Mel, Lalith Athulathmudali and Gamini Dissanayake backed by public servants like Bradman Weerakoon, D.B.I.P.S. Siriwardene and M.D.D. Peiris to name a few. The few respected big names in industry and commerce that come to mind are Hayleys Chairman D.S. Jayasundera, Aitken Spence Chairman Chari de Silva and from industry A.Y.S. Gnanam.
The economy was built on professionalism and a team of dedicated public servants who didn’t cow down to their ‘political’ masters and helped by a private sector driven by values. Today the UNP has some good, forward thinking professionals like Harsha de Silva and Eran Wickramaratne among others to take the country on the right path of development. Add to this a set of forward-looking public servants with skills to match backed by support from chambers and Sri Lanka should be on the right track.
As suggested in these columns in the past, Sri Lanka needs a Council for Economic Development bringing in the best brains of the past who are now retired coupled with new generation geniuses with vibrant ideas. Seniors will ensure governance, values and discipline while young professionals will generate the ideas and formulas for development. This is the ideal way forward.