Mahinda Chinthana – step in the right direction?

This policy is not about the promotion of economic growth, it is evident that the matter is at the very heart of the policy vision.

Sri Lanka’s economics has been complicated and contrasting. Beginning with a thriving commodity export base and healthy foreign reserves and once forecast to be in the mould of Japan, Sri Lanka was then a leading economy in the Asia before the South Asian Tigers emerged. Since then it has been a complicated journey until the late seventies export led growth provided some direction. Now in pursuit of double digit growth it was refreshing to listen to respected Sri Lankan-born economist Dr Howard Nicholas a well known author of several books on development issues and a senior lecturer of the Institute of Social Studies Hague when he addressed the Institute of Chartered Accountants at its recent 27th National Conference.

Follow East Asian experience
Dr Nicholas who made a detailed presentation on Sri Lanka’s chequered economic history was more concerned in explaining why Sri Lanka’s growth process continues to falter and what lessons can be learnt from the experience of the successful rather than questioning why Sri Lanka failed.

Countries whose experiences are considered particularly pertinent in this regard are the so called East Asian Tigers which include Japan, Korea, Singapore, Taiwan, Hong Kong Malaysia, Indonesia, Thailand and China whose performance has outstripped others over the last 25 years and more focus will be on this model and its associated growth policies.

He was not impressed with the “Washington Consensus” theory of privatization, deregulation, trade liberalization and the weakening of the government dished out by IMF and the World Bank as a panacea for all economic deficiencies. East Asian Tigers didn’t pursue this policy but focused on industrialization and generating profits for reinvestment thus creating employment. He felt that Sri Lanka needed a shift from the policy prescriptions of the IMF and the World Bank and adopt a more consistent growth oriented strategy over a protracted period of time though Sri Lanka’s growth track record over the last 25 years is not too bad when compared to some of the developing world but is clearly behind the successful South Eastern economies and even India. Sri Lanka’s problem was not only the failure to adopt a consistent growth strategy but the adoption of strategies and policies which were positively inimical.

Mahinda Chinthana in the right direction
Dr Nicholas who has had the experience of working with former finance ministers like Ronnie de Mel and Prof G L Pieris commenting on the “ Mahinda Chinthana” strategy said at least it has been set down on paper, presents both a break with the failed growth policies of the recent past and a movement in the right direction. That is to say, this strategy has the potential to put Sri Lanka on a fast track to growth, although as will also be argued, there are several possible pitfalls facing its implementation, not the least of which are contradictory monetary policies.

This policy is not about the promotion of economic growth, it is evident that the matter is at the very heart of the policy vision. Moreover it is apparent that the very essence of this policy vision is export oriented industrialization (supported by an agriculture sector which is oriented to domestic production). This is a move in the general direction of the East Asian approach. Strengthening of the domestic agriculture results in cheap food, stable diets and low wage costs leading to competitiveness. However Dr Nicholas lamented that from recent times Sri Lankan governments are more preoccupied in managing the political balance. He was critical of the privatization of development banks like DFCC and NDB and was also not against interfering with the exchange rates which he felt at times was necessary to protect economic interests but did not favour controlling inflation at present levels.

Chris Atkinson, President Microsoft South East Asia began his key note speech by raising the question “The world is flat! Where is Sri Lanka” by making reference to business book of the year Thomas Friedman’s “The world is flat”. Today the world has been flattened due to the fall of the barriers and the global village has been provided connectivity by the power of software as a multiplier for growth. Drawing examples from Malaysia, China, Vietnam, India, Egypt and Jordan he posed a challenge to Sri Lanka’s business community to flatten Sri Lanka!