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The need for planning and a holistic vision for the country’s development was the key message of Dr. Lloyd Fernando’s comprehensive paper provocatively titled “5-Point Plan and the 10-Point Agreement” presented at the Roundtable discussion organised by the Gamani Corea Foundation in collaboration with the Marga Institute at the BMICH on August 31st.

National Planning Council
Dr. Fernando proposed a National Planning Council chaired by Prime Minister Ranil Wickremasinghe, serviced by a Planning Secretariat headed by a renowned economist and comprising professionals from state institutions, the private sector and civil society organisations. Such an organisation he contended was essential in view of “the complicated decision-making process associated with the paradigm of development”. It should include, inter-alia, ex officio members, renowned academics, researchers and representatives of various chambers of commerce and industry as well as professional associations. He likened it to the first planning council formed under S.W.R.D. Bandaranaike and serviced by a Secretariat headed by Dr. Gamani Corea.

Seven pillars
Dr. Fernando presented seven pillars of development: savings/investment, macro-economics, infrastructure, commodities and services, cross-cutting issues, education and health that must be addressed in a coordinated manner, supported by efficient institutions and good governance. He emphasised the need for a coordinated holistic approach to resolve the multiplicity of complex problems. The system of planning and implementation should be based on principles of good governance and management principles namely, productivity, predictability, transparency, equity, vision and participation. Good governance was not merely an ethical or moral concept but a technical imperatives of development.

Infrastructure development
A key issue in Sri Lanka’s recent infrastructure development in highways, harbours and the airports, is not only the size of investment, but also appropriate project selection, technology and location. Infrastructure development must take into account forward and backward linkages.

A harbour, for instance, could bring in tremendous benefits, not only in the form of earnings from ships that call over for port facilities, but also from facilitation of exports and reduced cost of imports. Exports have backward linkages to the domestic producers and forward linkages to foreign buyers. More efficient handling of imports could make them cheaper for consumers.

Inter-institutional relationships
Dr Fernando pointed out that a fundamental problem the government must address in setting up special economic zones is not only how to deal with intra-institutional structures and systems of management, but also inter-institutional relationships, particularly those involving regional authorities. What is the role of Provincial Councils, District and Divisional Secretariats, Local authorities and regional offices of government departments in running special economic zones?

Poor state of finances
Discussants pointed out that the weak state of finances has to be addressed. The taxation system and tax administration must be reformed to yield revenue of about 15 percent of GDP from the current 12 per cent that is barely adequate to service the public debt. Direct and indirect taxes must fall on the affluent who evade taxes.

Complex and difficult situation
Dr Indrajit Coomaraswamy pointed out that the macroeconomic policy-making landscape was complex and difficult due to adverse trends in global markets and recent electorally motivated and irrationally over-exuberant fiscal measures. At present, the economy is confronted with the unusual combination of below potential growth and pressure on the current account of the balance of payments, the currency and reserves. The strategy of borrowing and defending the exchange rate by depleting resources is unsustainable.

Dr. Coomaraswamy pointed out that balance of payments pressure is usually associated with an overheating economy, but at present it is with low growth due to a lack of structural reform after the stabilisation package in 2012, an uncertain business environment with inconsistent and unpredictable policies and political uncertainty over the last 9 months.

Low growth and trade deficit
The combination of low growth and external account pressure can occur when there is a major exogenous shock, such as a sharp rise in oil prices and /or a collapse of key export production/markets. While tea and rubber exports have been experiencing difficulties, this has been easily offset by the substantial foreign exchange savings by low oil prices. Therefore the current combination of low growth and external account pressure cannot be attributed to an exogenous shock. The massive boost to consumption given by the non-productivity linked giveaways in the 2015 Budge and the Interim Budget this year increased disposable incomes to increase consumer imports, particularly motor vehicles. Meanwhile exports have declined. The policy challenge posed by this combination of low growth and pressure on the external account is being greatly compounded by elevated risks in global markets due to the anticipated US Federal Reserve interest rate increase and economic slowdown and market uncertainty in China.

New approach to infrastructure
A discussant stressed the need for a new approach to infrastructure development. Unlike under the previous government, when huge sums were spent on infrastructure projects that were unlikely to bring commensurate returns, new infrastructure development must evaluate the costs and benefits of such investment. The Government must explore ways and means of obtaining some returns from the huge amounts that have been spent on poor yielding infrastructure. For instance, the Mattala Airport could be a focus for a new thrust in regional tourism.

Agricultural development
A new and realistic approach to agricultural development must take into account the agricultural labour deficit in the country. The vast extents of land owned by the government in the North and East must be released for cultivation of crops on a large scale using modern technology that is less labour intensive. Agricultural production should be agro business enterprises that process produce and market them domestically and for exports.

Need for serious and rational approaches
Dr Godfrey Gunatilleka who chaired the Roundtable said that the rich discussion had brought out the need for serious and rational approaches to face the challenging economic tasks. Some form of planning and a vision would be an essential foundation for policy implementation. The Gamani Corea Foundation has an agenda of similar roundtable discussions of economic and social issues that would hopefully have a policy impact.