Sri Lanka in a post COVID-19 world
File picture of an empty hotel
The purpose of this article is to present five simple strategies that could set Sri Lanka on an alleviated growth trajectory in a post COVID-19 world.
This pandemic is unique because economists, statisticians and data analysts cannot formulate a credible model to define when the world will normalise. Without knowing when normalcy can occur, the global cost of the pandemic cannot be worked out.
No one doubts the fact that the pandemic will end. In a motor race, when there is an accident, a safety car is brought out. While the safety car is on the track, no one can overtake. Hence, the lead that everyone built up is brought to nothing and when the safety car exits the circuit and racing recommences, even the car that was running last, has another chance to improve track position.
When COVID-19 leaves us, we should be able to change our growth trajectory and grow rapidly. This article presents five strategies that could change this growth trajectory.
Post COVID-19 world
Many futurists are envisioning a world that is less consumeristic and more savings oriented. A world where food security is more important. A world that is more crisis-ready.
People would be more health and wellness focused. Maybe even more spiritual. Definitely more sustainable, with a lighter carbon footprint.
The pandemic is likely to enable Sri Lanka to negotiate a moratorium on her debt which could be around US$5 billion. The saving from the reduction in oil prices could be as much as $2.5 billion. On the other hand, our exports of $10 billion will decline, as will our earnings of $2 billion from tourism and our foreign remittances of $7 billion. However, the net position for Sri Lanka could be neutral or even advantageous.
Proposal 1: Private sector to fund/partly fund expenditure on health care.
Sri Lanka will need to spend money on healthcare which will include Personal Protection Equipment (PPE) for health care workers and social workers. Equipment such as ventilators will also be needed. Emergency facilities will be needed as backup.
If the Sri Lankan private sector can fund or at least assist to fund this expenditure in return for a 3-times tax deductibility of the money each individual company spends, this could take some load off of this expenditure from the Government.
The Government could then concentrate their expenditure on safeguarding and supporting the lower income groups and the companies that need support.
Proposal 2: Ensure the value
of exports is greater than the
value of imports
My view is that effective import substitution can lead to a material difference in our balance of payments. Vehicles, which are seen by every government as the “Evil’ that rapes Sri Lanka of her foreign exchange, only accounts for $700 million (Jan-Nov 2019), whilst the value of food and beverage imported in the same period was $1.3 billion.
Whilst tourism will require some imported food, there definitely seems to be potential for effective import substitution. Similarly, whilst Sri Lanka exports $5 billion of garments we have also imported $250 million worth of clothing and accessories. If Sri Lanka allows exporters to sell more than the 5 per cent of exports currently allowed, in the local market, a large proportion of this expenditure could be saved. Allowing BOI companies to sell more on the local market can be applied across the board, and similarly, non-export companies must be incentivised to become export substitution industries. Benefits given to exporters via BOI and EDB could be granted to them, in an attempt to reduce imports. Sri Lanka will also need to restructure the exports to cater to the post COVID-19 world. We will need to monitor and adapt to changes in demand and the trends of the new era.
Proposal 3: Restructure State-Owned Enterprises (SOEs) for greater transparency and efficiency
I cannot fathom the political sensitivity of SOEs, but I am cognisant of it. Hence, I am only proposing to bring the SOEs under holding companies that are incorporated as Public Limited Company (PLC) under the Sri Lanka Companies Act Number 7, of 2007. The holding companies could be for Tourism, Health, Financial or ‘Other’. These holding companies could be 100 per cent government owned. Temasek Holdings Pvt Ltd, the model used by Singapore, could be a model that we could follow.
The PLC structure will bring the SOEs under a PLC, which dictates governance norms via the Companies Act. Using the governance norms used by the private sector will bring in greater transparency and efficiency into the SOEs. This restructuring will enable any Government that wants to broaden the equity base of the holding companies or to bring in strategic investment to the SOE to do so.
Proposal 4: Suspend all capital expenditure
Sri Lanka can pursue all available grant funding such as the infamous and much talked about Millennium Challenge Corporation (MCC) grant. Apart from grant funding, Sri Lanka can achieve CapEx via Build Operate Transfer (BOT) project undertakings. Airport upgrade and new highways can be funded through the BOT route.
Proposal 5: Restructure,
retrain and re-legislate
Legislation should be passed for public servants to ‘Work from Home’ (WFH). Their tasks can be set and work can be monitored digitally. This can bring in more transparency and also efficiency. Further, all offices can be downsized, leading to further efficiency. Government employees can be given mandatory training in IT, HR, Customer Service and fields that are defined as important and useful. They can even be trained in entrepreneurship with a view to restructuring the Government Service when such politically sensitive exercises can be entertained. We have around 1.5 million trishaw drivers. They could train as primary health care workers. Farmers could retrain to enable them to be more tech savvy and use more modern techniques.
Conclusion: An enabling platform
These proposals are not meant to be exhaustive and they are presented as broad concepts. The platform that can enable these proposals to be evaluated is technology. The Sri Lanka Information Communication Technology Authority (ICTA) has developed and is implementing a very effective technology platform that will enable many of the proposals presented here to be implemented. The fast-tracking of the ICTA initiative through increased funding will in turn fast-track Sri Lanka’s revised development trajectory. The second enabling platform is political consensus. When faced with combating an international crisis, Sri Lankan politicians’ collaboration on broad policy will be of huge national benefit.
(The writer is a Co-Founder of Innosolve Lanka (Pvt.) Ltd, a start-up dedicated to introducing sustainable mobility solutions in Sri Lanka. He is an economist by training, with wide commercial experience including 20 years in the automotive industry.
He can be reached at sheran68@icloud.com)