Sunday Times 2
Connectivity: To be or not to be
View(s):By Dr. Sarala Fernando
“Connectivity” was the word most linked with the globalisation era, envisaging the bringing down of barriers in areas as diverse as manufacturing, transport, infrastructure, trade in goods and services, technology and the movement of people, all covered under World Trade Organization (WTO) and United Nations Conference on Trade And Development (UNCTAD) deliberations. With rapid communications and the reducing cost of computers, the perennial hurdle in the North South divide, i.e. the transfer of technology, has now been crossed.
Hambantota Port along China’s “One Belt: One Road” initiative
However, it is on the physical movement of people that the entire globalisation movement has come a cropper. In Western countries that earlier championed globalisation there is now a reversal, calls for walls against foreign migrants and restrictive foreign worker visas. At the heart of the challenge to globalisation is the loss of decent jobs, – a trend identified by the International Labour Organisation (ILO) since over a decade. Leading economies such as in the US are fighting back to regain global standing with structural changes in manufacturing from human assembly lines to mechanical robots and bringing back the emphasis to job creation in small business, working even out of homes.
Somehow in Sri Lanka we do not seem to have grasped the nature of the changed times. Our policy makers are still talking of free trade agreements and intent to bring large scale manufacturing like the Volkswagen plant – a non-starter. Foreign investment is a two edged sword – will international hotel brands bring new client bases or just add competition to the local hoteliers who through sheer grit had maintained their overseas relationships through the difficult years of the conflict? What is worse, this new wave of foreign construction projects from hotels, malls to condominiums, is constricting the labour market such that foreign workers need to be brought in in their thousands.
The growing domestic trade union resentment and adverse political consequences are clear to everyone. Even well to do residents are mobilising against the building of 50 storey complexes on residential streets like Ward Place and Horton Place already paralysed with the daily office traffic. With the limited stock of electricity and water, why are these monstrous new developments allowed to hook on to the mains thereby squeezing existing residential needs? Some say these hi-rise buildings will be mainly empty, bought by speculators hoping to make a profit before the property bubble bursts… Such infrastructure- led growth may contribute to Gross Domestic Product (GDP) but will come at a huge cost in a democracy where the vote is taken periodically.
China alone is pursuing its own vision of globalisation and has scored a major diplomatic triumph judging by the unprecedented high level participation at the recent “One Belt: One Road” conference in Beijing. This initiative invokes the old Silk Road by land and sea and the building of massive infrastructural projects across continents, including power plants, solar farms, motorways, bridges, ports and high-speed rail links with support from China’s banks and work force. China argues that the new development will also benefit the participating developing country partners through increased investment, new manufacturing, job creation and export opportunities.
Thus the creation of a Special Economic Zone adjoining the Hambantota port has potential if local jobs can be created and its exports can benefit from the GSP+ free entry to the EU, open until the recipient reaches upper middle income level. However, others point to untenable foreign debt obligations for the developing partners, a dilemma already faced in Sri Lanka. Moreover, the revival of the North after the ending of the armed conflict has taught us that development is not enough – so it is legitimate to ponder whether there could be a back lash against the Chinese vision? Here in Sri Lanka for example the resistance has come from local environmentalists and worker rights lobbies criticizing the unregulated activities of the Chinese State Owned Enterprises (SOE).
There is another aspect of “connectivity” which comes to mind at this time when the government, is apparently contemplating a free exchange regime. The regional strength of ASEAN is often admired but the close integration runs the danger of what is called the “contagion” effect which can result from speculation on currency markets. I was serving in Bangkok at the time of the Asian Financial Crisis in the mid 1990’s. The Thai Government had to float the baht due to depletion of foreign reserves and inability to defend the peg to the US dollar. The impact was stunning as before that it seemed Thailand was in a sound high growth path attracting high levels of foreign investment.
As the contagion effect spread, most of ASEAN recorded depreciations of currency which had its impact in Sri Lanka. Sri Lankan exporters worried about the competitiveness of their products began to press our government to also devalue.
Our Central Bank, then in safe hands of Governor A.S. Jayawardene, held steady. At the time of the crisis in ASEAN, Sri Lanka and the rest of South Asia had not liberalised the capital account so there was no immediate danger to our banking systems. But certainly there had been pressure, prior to the Asian financial crisis, from the multilateral lending agencies, for South Asia to move on the same path as ASEAN. Are we now seeing a repetition of this same pressure and the same imminent danger in the calls for a free foreign exchange regime?
“Connectivity” is also a notion often repeated in India-Sri Lanka relations. Prior to independence there had even been talks about a possible union, some arguing that Sri Lanka was too small an economic entity to survive. The success of Singapore and Hong Kong defies such thinking, yet they too choose to put aside confrontational politics with the neighbouring big power to follow the path of economic accommodation for mutual benefit.
Our bilateral relations with India have been haunted by ancient historical events and a troubled relationship with neighbouring Tamil Nadu which have influenced resistance to proposals for connectivity, for example the building of a land bridge, espoused by both governments at different times. Yet, with both governments committed to open economic policies, the economic integration is proceeding silently and at a fast pace as Sri Lankan businesses are being bought over or managed by Indian companies. Indian cooperation has become essential in strategic areas from coast protection to petroleum storage and distribution.
There are already Indian workers everywhere, from professionals under BOI arrangements to informal workers in restaurants and even seasonal farm workers and toddy tappers!
In other words, we may not need a physical bridge or even an Economic and Technical Corporation Agreement (ECTA), the bridge of economic integration is already being built. The larger question then for Sri Lanka is how to protect our national independence as economic integration proceeds so that we will not be, for example, subject to blockade of essential supplies like some landlocked neighbours.
A consensual foreign policy involving both government and opposition is essential in order that whichever government is in office there is agreement on how vital national interests should be protected within a sustainable relationship with our great neighbour.
At this time of Vesak we need to remain mindful that the Buddha incorporated into the Dhamma, one of the earliest visions of connectivity with the natural world, reinforced today by pronouncements from the Indian Supreme Court, for example, on protection of the cow, clean air standards and lately even river rights. Board Of Investment (BOI) promotional campaigns may boast of Sri Lanka’s core strengths in location, educated work force etc – yet Sri Lanka’s real strength is in its rich heritage, tangible and intangible, and curiously it seems only crooks and thieves have realised this, if we are to go by the daily accounts of illegal treasure excavations and thefts of antiques, unregulated harvesting of sand, rocks, trees and plants and decimation of animal populations.