Continuity and change in economic policies imperative
The continuity of the broad principles of economic policy pursued since 1977, despite changes in government, has been a significant positive development. Statements of several important new ministers have initially assuaged the fear that this may not be continued owing to the new coalescing of parties.

Nevertheless, a statement of economic policy outlining the fundamental economic policies of the government is needed soon. Besides the continuity in the broad thrust in economic policies, there is a need to continue with several of the work programmes begun by the previous government. This is especially so with respect to infrastructure development. There are the plans for road and highway construction, energy projects and port development, initiated by the previous government. To abandon these or restart the process could be costly and dilatory of final benefits. These should not be abandoned on the basis of accusations of corruption, as the costs of new initiatives would add considerably to the costs of these projects. Delays in the completion of infrastructure development could be a serious threat to the economy's advancement, as indeed it has been in the past.

It would also be a waste of time were the government to abandon the previous government's economic strategy as outlined in the Regaining Sri Lanka document, owing to political reasons. Considering the fact that the PA government began this strategy document such abandonment is quite unnecessary. What is needed is an adaptation of the strategy without time consuming new studies and preparation of fresh documents. There are significant areas that require rethinking, adaptation and change. However, to await another document with officials spending time in meetings and more meetings to bring out a fresh blueprint would indeed be a serious folly and a recipe for inaction.

It is likewise essential that the new government changes certain policies that were mistakes and inappropriate. There is a broad mandate for such changes in economic policies as well. Once again the initial statements of ministers indicate such changes. Several drawbacks in the previous governments' policies have to be remedied. The inaction on the public transport sector requires to be rectified. No doubt the controversial issues with respect to fares and subsidisation are not easy to resolve, both owing to political considerations as well as financial constraints. Yet these problems need to be resolved speedily. Equally significant is the need to restore public heath services.

The announcement that the new government would increase expenditure on health from less than 1.5 percent of GDP at present to around 2.5 percent of GDP is most welcome. This is certainly a prerequisite to improvement of the health services. However, the health services have been affected by serious fundamental weaknesses. The poor attention of doctors, who do many hours of private practice, dearth of drugs, lack of equipment and needed improvements in technology, recruitment of medical graduates for internship no sooner they pass out, the role of private hospitals in providing services, are among the thorny areas that have to be addressed. Without a healthy nation economic progress could be stultified. The immediate need is to provide an efficient service to the poorer sections of the population, while the private health facilities could cater to the affluent.

Agricultural development policy is the other issue of significance. Food crop agriculture has been plagued with a number of fundamental problems. The danger is that instead of these issues being addressed a short cut to popularity among the rural community through subsidisation would be a step in the wrong direction. It would be a palliative, not the remedy to resolve the fundamental issues of low productivity and poverty in rural communities. The marketing of agricultural produce has been a perennial problem. Government interventions have generally been costly and ineffective. The extension services have been woefully neglected to the extent of it being virtually non-existent. Credit from institutional sources still serves only a small fraction of farmers.

These are not easy problems to resolve. A mixture of reform, such as land policies that address the problem of small size holdings, reforming of extension services, interventions in marketing, development of strong institutions and a judicious use of market forces and subsidies, are needed to build a healthy small farm agriculture. The inherent benefits are large, as the current productivity in agriculture is only a fraction of the potential.

The economic policies of the new government must be continuity with needed change, use of market forces with government interventions, implementation of already begun infrastructure projects and a new emphasis on social policies.

It should not try to reinvent the wheel or waste precious time in new documents. Implementation of key economic reforms and continuation of proven good policies are the keys to the nation's economic success. Let not the constitutional changes and the political bickering detract from the gigantic economic tasks ahead.

Back to Top

Back to Columns

Copyright © 2001 Wijeya Newspapers Ltd. All rights reserved.