The Sunday Times Economic Analysis

" We have not achieved double digit economic growth because we have neglected innovation and entrepreneurship in financial planning and economic policy making not realising the importance of both in the development of western economies”
- Dr. Nalini Jeyapalan

The Central Bank's Fifty-Sixth Anniversary Lecture on August 24, was unconventional, provocative and entertaining. A lively discussion with diverse views on the Central Bank's role for the future followed Dr. Nalini Jeyapalan's discourse on the subject. Dr. Jeyapalan a former Central Banker. who received her Ph.D. from Cambridge University during its time of peak reputation for economics, had left the Bank 36 years ago for an academic career in the United States.

She returned to tell the Bank that its priorities had been one of "putting the cart before the horse". She delivered the lecture in animated style and flourish. The audience was enraptured not merely by the style of presentation but by the unconventional ideas she kept trotting out from time to time.

Her central contention was that the Central Bank should not be obsessed with ensuring financial stability and controlling inflation, but focus its attention on the development of entrepreneurship in the economy. She advocated that the Central Bank should establish a new department that she suggested be called, The Department of Innovation and Enterprise (DIE). In her words: " We have not achieved double digit economic growth because we have neglected innovation and entrepreneurship in financial planning and economic policy making not realising the importance of both in the development of western economies." Her lecture urged strongly the need for entrepreneurial skills. "Entrepreneurs" she said, " are the main source of economic growth; they generate income and wealth of a nation; and they create jobs."

The importance of entrepreneurship for economic development was recognised by all. The divergence in views arose when she thought it was a prime duty for the Central Bank to take the responsibility to foster it. The Central Bank quite obviously disagreed with the view that it should be responsible for developing entrepreneurship in the country.

The other idea that did not find favour with the Bank was her contention that financial stability was not as important as growth. She said: " It is my contention that by attempting to stabilise prices and money supply in the context of a developing economy, the Central Bank may even hinder rather than assist the process of economic growth."

The Bank adopted an unusual format of having its Director of Economic Research, Dr. Thenuwara, a Young Turk himself, to respond. Doubtless, he did a magnificent job, having prepared his presentation in response to the prepared text provided to him earlier by the professor and handed over to participants after the lecture.

His arguments were twofold: that the international experience showed clearly, as he demonstrated with statistical tables, that economies that achieved high growth did so under relatively stable prices. He pointed out that in the case of India, the economy, (more precisely; her political economy) could tolerate inflation only up to about 5 per cent. Economies that had high rates of inflation had lower rates of growth and even experienced some disastrous scenarios, as in the case of some Latin American countries.

The second disagreement was that the Central Bank was not necessary best fitted to foster entrepreneurship. He pointed out that there were a number of government and semi government and private institutions that were already involved in such work whose task it was to foster entrepreneurial and management skills, and if they were unable to do the task of encouraging and building up entrepreneurship, there was no special reason to think that the Bank would succeed. Dr. Thenuwara could have also pointed out that unlike in Dr. Jeyapalan's halcyon days in Ceylon eight Sri Lankan universities taught management and business at undergraduate level and at least four of them awarded postgraduate degrees in business and management.

He said that Professor Jeyapalan had suggested the Bank should establish a new department and recruit an expert on entrepreneurship; he would if efficient find greener pastures elsewhere as Dr. Jeyapalan herself had done 36 years ago and the department would die. The presentation of Dr. Thenuwara also demonstrated that although the country had experienced a severe brain drain there were some good brains left behind.

The drama of the 56th anniversary lecture discussion was played without the Prince of Denmark. He was apparently involved in other state business.
In answer to the enquiry of a former Governor of the Central Bank present at the lecture as to where the Governor was, a soft voice answered that he was meeting a Minister of State, one of the large number that continues to grow weekly–about three since the lecture. By his conspicuous absence he was setting a precedent as former Governor's made it a point to be present at the Anniversary lecture. So much for entrepreneurship and the evolution of Central Banking in 56 years.