Editorial

All eyes were on Davos, the picturesque Swiss town that overlooks the snow-capped Alps where at this time of the year, the world’s business hot shots try to solve the global economic problems in four days. Sri Lanka was represented by the Prime Minister no less and the big guns in the political and commercial fields.

The annual event is a meeting place for the capitalists of the world to get united and discuss what has gone wrong with the world. It is dominated by the West which the new Government is targeting with great hope and anticipation to lead Sri Lanka’s economic ‘takeoff’.

That those very economies are in trouble — the US recently raised its interest rates to attract funds in other countries back to the US — is not good news for countries like Sri Lanka looking for foreign investment to bolster its fragile economy that still relies very heavily on traditional exports and foreign remittances – all having cheap labour and poverty as their root.

Critics of the Davos gathering titled ‘The World Economic Forum’ point out that while the West, especially Europe is on the brink of a structural collapse with a troubled Euro currency and sharp disagreements on how to handle the refugee influx from West Asia, Islamic radicalism, coping with nervous markets of listed companies and a shaky Stock Exchange, China, the new economic powerhouse is largely absent from this summit other than for a few individuals like the billionaire Zhang Xin, CEO of SOHO, China. China too is experiencing an economic meltdown and it is now said that when China sneezes, the West can catch a cold.

It was like Hamlet without the Prince of Denmark, so to say, to discuss the world economy without China. News outlets like Russia Today were even more critical of the ‘show’ pointing out that the three keynote speakers on the opening day of the summit, viz., from General Motors (GM), Credit Suisse and Microsoft were companies that were caught in embezzlement proceedings at one time or the other. The point being made was that these were the ‘captains of industry’ in the capitalist world, all up to some racket or other.

This is the world Sri Lanka’s new dispensation is running after for salvation. Local analysts would argue however, that the capitalist system was able to nab these wrongdoers, prosecute and punish them. They do concede that in Sri Lanka, those systems are not in place or even if they are, they are meant only for the ‘sprats’ citing the example of the recent Central Bank bond scandal that was swept under the carpet because influential players, most of them who were in Davos, were involved. At least they would learn from Davos that there is no such thing called a laisser faire economy in the modern world, and that companies, banks, individuals and markets must play within rules and regulations.

One can only wish the Sri Lanka team back from the cold, ‘Good Luck’. The task before them is a daunting one. Take the case of the Development Strategies and International Trade Minister who is hopeful of US dollars five billion coming into the country in FDIs (Foreign Direct Investments) in the next five years — Sri Lanka got less than a billion last year — while his Cabinet colleague, the Minister of Megapolis, says the Government hopes to invest US$ 30 billion in the next five years on its ambitious development project in the Western Province alone. That is why Sri Lanka has to go back to China for project assistance, and probably the PM’s frustration with India for not chipping in manifested itself when he addressed a media conference at Davos.

Meanwhile, world leaders have bigger issues on their plate. Peace and stability in West Asia, especially in Syria is paramount. The resultant refugee crisis creating social and economic disturbance ‘at home’; the ideological clash between Saudi Arabia and Iran for influence in the region; the Israeli-Palestinian issue; and the renewed ‘cold war’ between the US and Russia are all in the melting pot. Oil prices are crucial to the direction of the world economy.

As Sri Lanka desperately looks for cash cows, these developments that have created global turmoil are bound to have their impact on the country’s emerging economy. The year 2016 does not look very promising whether we view it from Alpine heights or from the Hambantota seashore.

First world social indices, third world economic indices
On the positive side of things however, has been a recent UNDP (United Nations Development Programme) report that shows that Sri Lanka continues to lead South Asia in the area of human development. The populous South Asian region is a difficult region to tackle issues relating to human development given slow growth rates, large populations and political instability for decades. Out of all the countries in the world, Sri Lanka has not fared too badly either.

The 2015 UNDP Global Human Development Index Report released this week worldwide has shown that Sri Lanka ranked 73 out of 188 countries and territories and is therefore in the “high human development category”. The ranking is just one higher than last year but an improvement nevertheless.

The country is routinely positioned high in various human and social development indices but continues to fail in economic terms. Decades of investment in health care – even before Independence in 1948, and also education by successive administrations have been the singular factor for this success story. Universal adult franchise from 1931 – the vote – and democracy are linked to this. However, such good scores on the human and social development indices have not been correspondingly matched by good scores on the economic factors. This caused the Minister for Special Projects to remark at the recent launch of the report that “Sri Lanka is a country with First World social indices and Third World income”.

A South Asian economist interviewed on the cover page of our ST2 section compliments Sri Lanka on these human and social indices but cautions the country about its proposed mega projects like the multi-billion dollar Megapolis development of the Western Province. He says this could lead to the neglect of the rural economy and the creation of slums in the big cities that would attract all the employment – which he has seen happening all too often elsewhere.

This trend can already be seen by plantation youth flocking in search of employment in air-conditioned offices in the big cities leaving the tea estates sans a labour force. As the Government prepares to unveil its major Megapolis project plans next week, this is food for thought.