“We can deal with the ‘streets’ but we want to be democratic about it”– Eran
A dysfunctional political system has given Sri Lankans ‘freedom’ for some seven decades, noted a top economist urging the citizens to ponder all current economic indicators ‘rationally’.
Eran Wickramaratne
Dr. Indrajit Coomaraswamy, Governor – Central Bank expressed these sentiments at the Ceylon Chamber of Commerce Economic Summit – a two day event held this week in Colombo. He told a gathering of local and foreign participants that the Government is making positive changes in its approach to policymaking including macroeconomic management, monetary, trade and investments.
While determined to execute the best for the country, these would be done democratically, government ministers promised at the summit.
Eran Wickramaratne, State Minister of Finance, giving the keynote address noted that while the government is trying to dodge silver bullets, they will deal with issues in a manner as is expected of them.
He told the Business Times on the sidelines of this conference that dictatorships bring short term economic efficiencies to a country but they curtail fundamental rights of the people.
He told the gathering at the inaugural session themed “Accelerating Growth, Pushing for Performance” it’s not that the government cannot deal with the issues on the street, but they want to deal with them as per the mandate given by the people.
He was alluding to the Ceylon Petroleum Corporation (CPC) strike that was ongoing from early this week along with the SAITM (medical university) issue. On Tuesday the Sri Lanka Army said that they will distribute fuel in a challenge to agitators. Oil distribution is a mandatory service, and the government on Tuesday night declared that whoever fails to report to work will be terminated from service.
Mr. Wickramaratne told the Business Times that this regime will deal with issues according to a democratic framework, but cautioned that this should not been seen as a sign of weakness. He stressed that this Government will continue for its full term at least until February 2020 when it will be completing four-and-a-half years.
He added that the government is ‘trying’ to correct the past mistakes and mistakes like Hambantota port aren’t easy. “I don’t agree with the Hambantota Port. But we must find a way to correct it,” he told the gathering and vowed to sign this deal. On Tuesday the Cabinet of Ministers approved the Hambantota Port concessionary agreement.
- Corrupt business
Mr. Wickramaratne said that business is corrupt which is why the government is also corrupt. “We need to take this systemic corruption out,” he said highlighting that setting up a government e-procurement agency is a first step in combating this.
Public procurement is a big business, he told the Business Times noting that money spent on public contracts belongs to taxpayers and it is incumbent on governments to minimise the money spent on public procurement and achieve value when procuring goods and services. He said that this is an activity that’s most vulnerable to waste, fraud and corruption due to its complexity, the size of the financial flows it generates and the close interaction between the public and the private sectors. Analysts at the summit agreed saying that savings achieved from better deployment of funds billed for public procurement can have a positive impact on the economy.
Public procurement transactions are typically governed by well-defined procedures in other countries, Mr. Wickramaratne said noting that optimisation of government procurement procedures can reduce transaction costs significantly, and e-procurement has the potential to significantly improve transparency, efficiency and effectiveness in public procurement. “Let’s face it. Business is corrupt and that is why the Government is corrupt. One way of dealing with systemic corruption is to reduce the discretion of politicians and high-placed officials. That is the way forward,” he said. He said that countries in the region such as Bangladesh, Bhutan, Nepal and even Afghanistan had gone ahead of Sri Lanka on e-procurement drastically reducing the number of days.
Mr. Wickramaratne said that the Parliamentary Accounts Committee (PAC) appointed an all-party committee chaired by him to look at how leakage of Government revenue can be minimised. “Three institutions (Customs, Inland Revenue and Excise Department) bring in 80 per cent of Government revenue and 300 institutions bring in only 15 per cent. There is an all-party consensus that by using information technology the country can reduce the leakage.”
The new Exchange Management Act had been tabled in Parliament to replace the Exchange Control Act which removes criminalisation of exchange control violations, he said. “We are doing away with the decades-old Exchange Control Act. This is a conceptual move away from control to exchange management. It is a conceptual move away from the Government thinking, it is the owner of hard-earned foreign exchange of exporters and this exchange is actually owned by the exporter, not the government,” he said. “We are moving away from outward control to incentives for exchange to be brought to the country,” he added.
Mr. Wickramaratne added that the IMF was satisfied with the Government’s progress as confirmed by the release of the latest tranche under its Extended Fund Facility.
“People are asking why we are having an IMF programme. It brings financial discipline and helps safeguard the country’s credit rating as well as that of banks,” he added.
- Rational questions
Dr. Coomaraswamy in his speech egged the gathering to answer some rational questions. “Ask yourself, are the macroeconomic fundamentals improving? Is macroeconomic policymaking being made in a more sensible and stable way? Is the investment climate improving and going in the right direction? Are the transactions cost coming down?” Dr. Coomaraswamy said during his keynote speech.
“Are we going in the right direction? If we are, I would urge you to put your money here rather than Bangladesh, Fuji or Ethiopia. I must say it sometimes upsets me a little bit when I see foreigners investing in our stock market and Government securities. We floated an international sovereign bond and it was oversubscribed by seven times. Yet the domestic private sector still has its wallets tightly buttoned up. This is something I don’t understand very much,” he said.
Dishing out statistics since 1990, the Deputy Minister National Policies and Economic Affairs Dr. Harsha de Silva addressing the summit said that Sri Lanka has messed up the export equation.
“Export contribution to GDP growth from 1990-1994 was 2.24 per cent for Sri Lanka whilst for Vietnam it was 2.57 per cent During 2010-2014, the export contribution was only 1.53 per cent whereas Vietnam has increased to 6.30 per cent. Between 1990 and 2014, exports contribution to Lankan GDP growth was just 1.07 per cent which was the lowest among a sample of 10 Asian countries.
“Unless we add technology and improve the complexity of our products we cannot be competitive in global markets. So we have to re-orient from what we are to what we have to become. People are asking ‘where are Foreign Direct Investments’ but we need to ask why should FDI come here and for what when the focus in the past has been more on a non-tradable economy.”
He noted that the growth model pursued by previous president Mahinda Rajapaksa’s regime was unsustainable as shown by the drop in per capita GDP growth to 3 per cent from a high of 9 per cent in post-war Sri Lanka. “This was despite the so-called peace dividend which was to be around 2 per cent GDP growth,” he said.