Economy growth on auto pilot
There is hardly any integrated management of the Sri Lankan economy. Yet it does perform to a modest extent as the controls and management of several sectors are largely in private hands. This augurs well for the economy, as we are a people preoccupied and sidetracked by political concerns and the main thrusts of the government, as well as those in opposition are power politics.

Short-term political gains predominate over formulation and implementation of economic policy. Sound economic policies bring results over the mid-term and long run. They often have immediate disadvantages, much like medicines that are painful or bitter to administer, but are in the interests of good health in the long run. Such policies are not the central concern of political parties and governments. It is only as a response to economic and financial crises that governments take action to avert the immediate crisis. Fundamental problems of the economy are shelved, as policy imperatives are politically distasteful and unpalatable. It is for this reason that many actions of governments are dictated to by multilateral agencies and donors.

Even though one may complain that the formulation of economic policies at the behest of these agencies is a subversion of the sovereignty of the people, without their dictates we may find ourselves in a worse state of affairs. This year the economy is not in crisis as the agricultural, industrial, construction and much of the services sector are in the hands of private management.

These sectors have to face the consequences of government policies, yet are able to cope with these and grow. In contrast, those sectors in the hands of the government are in chaos. The Petroleum Corporation and The Electricity Board are the current examples. From time to time other services, such as the universities the government railway, doctors and nurses, are on strike. These disruptions affect the people and the productivity of the economy. Yet the economy ticks owing to much of the real sectors performing reasonably well.

This problem is highlighted in the case of the state banks. The high incidence of default that state banks have incurred and as a consequence the need to re-capitalise them is well known. Much of the bad debts incurred have been due to directed lending to politically significant borrowers and to public corporations. There have been various reforms undertaken at the behest of the World Bank and IMF.

However, the political interventions have continued, albeit a little tamed by the rules and regulations of the signed memorandum. What has been lacking is a focus on management reforms. They have not dealt with the issues of "privatising" management. The principles of recruitment, salaries, promotions, and incentives for good performance should follow the principles of good management followed by the competing private banks. This applies to other state enterprises as well.

The controversial question however is whether a state enterprise in our political milieu could implement such flexible and discretionary policies. Even the country's legal system treats actions in state businesses and commercial institutions differently to those in the private sector. We are not proposing privatisation in a subtle way by putting forward these facts. Privatisation is a complex issue and must be embarked on after a full consideration of a multiplicity of factors. There could be good reasons why some key enterprises should remain under state ownership and control. What we are putting forward however are the difficulties in managing state enterprises in our highly politicised context. Unless we are able to find ways and means of making state enterprises efficient and well managed and not a source of continuous disruptions, the economy can hardly be expected to perform any better.

The Minister of Finance Dr Sarath Amunugama soon after his appointment made an interesting statement, that the economy would grow at 5 per cent without the government. This is precisely what we have been able to achieve. Maybe more critical commentators would say that we will achieve a 5 per cent growth, in spite of the government. The indisputable fact is that a 5 per cent growth will continue to keep our people in poverty.

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