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A highly competitive export-oriented economy is the only way out: President
View(s):President Ranil Wickremesinghe was the chief guest at the Organisation of Professional Association’s annual conference and awards ceremony held on Tuesday at Cinnamon Lakeside Hotel in Colombo. Excerpts from his speech.
There is one profession you all have left out in the OPA (Organisation of Professional Associations). The professional politicians and I don’t think that you’ll be anxious to have us either, which is quite understandable.
We agreed on some issues, disagreed on many others, but you are people who made lasting contributions to the economy and to society. Today, you are meeting here not merely to witness the 3rd APEX National Awards, but at a time when our country is facing a crisis unprecedented in our modern history and the economic crisis started when our fragile economy was able to recover by 2017 to have a surplus in the primary budget, and then we were hit with a number of other events.
President Ranil Wickremesinghe addressing the OPA event on Tuesday
The 52-day gap when the government was thrown out, followed by the security issue that was the Easter bombing, followed by a political-economic issue of reducing taxes in 2019 and by 2020 we were hit by Covid and as we went along. Wrong decisions were made about fertiliser and a decision to maintain an artificial rate of exchange. All these brought about the crisis which we faced in January and February this year.
This economic crisis, in turn, led to a political protest, first led by youth and the middle class and subsequently taken over by more violent extremists which pushed the young idealists out. We witnessed two outbursts of violence. The Second one was aimed at actually bringing the government machinery to a halt.
I need not tell you how bad the economy is. At one time just as I became the Minister of Finance, I found that I was richer than the Republic of Sri Lanka as far as the foreign exchange was concerned. Most of you were. Because, on that day we had nothing, and I had US$ 1000 at home which I had saved from a trip. So, I was more than 1000 times richer than the Republic. But if you take a person like Mr. Sanjeev Gardiner, he would have been about a million times richer than the Republic.
Nevertheless, that was what we were. There were times when we were looking at getting two to three million dollars just to pay off a bill. We are out of that stage now, fortunately. But we are not out of the woods, yet. We cannot go on as an import-dependent economy with the balance of trade not in our favour. What are we going to do now? That’s the stabilisation. We are now discussing with the IMF to finalise a staff-level agreement and we are at the nitty gritty (stage). So, when you set the criteria and targets, a quarter percent can make a difference between prosperity and disaster. When that is over, the staff-level agreement will come in and that will give us confidence, money will come in from some other donors, some other multilateral organisations, and some investors wouldn’t mind taking the risk. Lazards are preparing the debt sustainability plan, but first, we have to discuss it with our official creditors.
Now there are two groups, the West which thinks of a haircut and the Chinese would like to give additional loans to pay off these loans. So there has to be one approach and we are talking with Japan about how this could be achieved and we’ll talk with China. We’ve already started talks with India and others will follow. The more difficult issue is: how do you deal with private creditors? The money that is invested is not all by multi-billionaires. Lots of money is from the Pension Funds and from other earnings, from banks and a haircut means that those pensioners have to take a dock.
We know the situation where we are in where the EPF today is worth half of what it was three years ago. So will they take that cut? That is what we have to decide. Once we have done that we have to increase revenue. The State Corporations cannot run at a loss so we got caught up on subsidisation they did earlier. We have to increase taxes and the Banks will be very uncertain. There will be bankruptcies and the small and medium enterprises affected. That we have to face; and the government is preparing measures for that. But let’s ensure that this is only for a short-term and not even for the medium-term.
To do so, we must at the same time look at our stabilisation. If we move fast, then this would be a short period. If we still keep arguing, then we are all going to suffer. So you have to change this model. Firstly, we have to pay a large amount of foreign debts. We have to become an export-oriented economy, in which we keep earning more and more foreign exchange. To do that, we have to become more competitive, the state sector and private sector.
We have to transform into a highly competitive export-oriented economy. There is no other way out. We are a country with 22 million people. We have to find markets outside. We have to compete with other countries. We have to look at new markets. The only way out is through trade integration. There is no other way. Either bilateral Free Trade Agreements or regional trade agreements, which is more for South-East Asia and East Asia. But we have to do this within our own region by 2050. Going from Saudi Arabia to Indonesia there will be an additional 500 million people, maybe more. That is a big market. So we are having a market at our doorstep. I know that you have had many arguments with us on integrated trade agreements, but you will not lose out on it. If you don’t go for that market you have no future. All you have to do is look out and go out.
The government has to come out with plans to help you. We have to find these big markets to become competitive and there are areas to look at like logistics. We can serve the whole region, if the Colombo harbour, Hambantota and Trincomalee harbours are properly developed. One of the areas, as you mentioned here, is agriculture. With 500 million additional people to feed, why not modernise our agriculture, not (rely on) traditional agriculture? There are many of you here who can help to take part. The services, the new technologies, developing tourism to a different level. We have to get ready for the 4th Industrial Revolution and you all know what those technologies are. How it can be used and how you can make money.
That’s what we want you to do, but it means the complete restructuring of our economy. When the government sector falls, we must have enough money and income to fund education and health, a new system of education, social mobility comes from education, health system and housing; those are basic needs. We moved towards the social marketing economy. That is restructuring what we have. Then the governance itself, everyone admits this model has failed. Now, are we going to do the same politics again? To bring the same model back? This is the question for all those in politics both inside the parliament and outside.
How are we going to restructure the whole system? Firstly, let’s have the 22nd Amendment and pass it. The Minister is handling that and I am all for it. Then, we are trying to make Parliament into a Government by having Oversight Committees, by having a National Council. The Oversight Committees have only Members of Parliament but they can invite five youth representatives, who can ask questions from the parties with the permission of the Chairman. While they cannot write into the report, they have the right to put an addendum to the report as to their views.
That is far-reaching. No other country in the world has allowed the Oversight Committees for young people to participate. We have to make a success of it. Other committees – there are about five committees covering Public Finance, the COPE, Committee on Public Accounts, we will look at a Ways and Means Committee, committee on Banks and Financial Services, committee on restructuring of State Owned Enterprises, so they have to work together with the Government. Parliament becomes the Government. They become part of the Government and with us willing to invite some of the members of the committees to come for Cabinet meetings. The National Council which will consist of all the party leaders to see where we can reach consensus and try to reach a common minimum programme.
We also have to think of our electoral procedures. The Preference vote system has caused a lot of damage to the voting system. In this Parliament, we must have the capability of coming up with a new system. We cannot be passing it on to others. The baby is ours, and if we took it we’ve got to carry it. And if possible, from there to go in for a new Constitution.
But there is much more. So parliament is a large amount of legislation because climate change alone will take a few months for the legislation to pass. The rights of women. However, parliament can’t do all these, so we thought we will ask the country. Former Speaker Karu Jayasuriya and Mr.Victor Ivan came up with the idea of Jana Sabhas to get the ideas of the people and pass it on. That is a good concept. Especially those who came out to the road who wanted change, can come there and talk. Then there are also those who did not want change and they too can come there and talk with the others who want the change. It is not something that we politicians can do and don’t think we have the credibility. Therefore, the credibility is what we have established by giving it to outsiders. So in this, where you all can join in, first on the economic side and secondly on the social side. We need a strong civil society, civil society that is able to influence and where the youth is not left out. We want all to come and join.
We must sort out the problems among the ethnic groups as this has gone on for too long as the war was over in 2009 and there is no need to fight again. Let’s be as Sri Lankans and we are also looking at the Diaspora. It’s a strength and a source of investment. So I have decided to set up a Diaspora office which will deal with the Diaspora separately and the groups that they have.
This is a part of new Sri Lanka where we are widening the horizon of economic activity and for governance and I am sure you all will take part wholeheartedly and let’s all get together because this is the last chance we have. If we don’t pull it off, I don’t think there will be a fourth National APEX Award.
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