Whither Sri Lanka’s Wonder Of Asia Ambition?
By Edward Theophilus
Obviously, the current peaceful conditions in the country could save massive volume of military spending and use such spending for economic investment purposes as the war infrastructure development is not an urgent aim of the country at this moment though Sri Lanka is quite vigilant on the possibility of re-emerging of LTTE and hidden activities of them. It does not mean that Sri Lanka should abandon military spending and concentrate only on recurrent spending that will create a healthy infrastructure network in the country supporting to all investments. Military spending are essential to maintain long term stability and peace in the country as well as entire region while encouraging development expenses.
However, the political structure of the country visibly demonstrates that although president Rajapakse was able to defeat terrorism giving the right leadership to none politically motivated arm forces and to unite all Sri Lankans irrespective of differences in race, religions, political or any other, it appears that defeating selfish attitudes and negative approaches of government politicians with a view to achieving economic objectives of the country is a gigantic challenge and president himself too admitted that development challenge is a daunting task than the defeating terrorism .
Under the constitution established by former president Mr JR Jayewardene, the current president was given an excellent authority to make decisions on non political areas such as defence, national unity and religious harmony. Despite manipulated and misguided criticism on the executive presidency, Mr Rajapaksa has proved how monumental political authority given by executive presidency could strategically and responsibly exercise for the benefits of Sri Lanka’s community. After the civil war, president has to make political related decisions, which are crucial to economic progress of the country.
The issues related to the economy are highly concerned with the spending pattern of the country. How did president spend money for military purposes, now he has to spent money for economically right purposes? Can president give leadership to economically right spending is a real question. As under the civil war in the country, president Rajapakse was able to clearly identify the enemy, who should be destroyed to achieve the peace and now Mr Rajapakse needs to identify the enemy, whom should be destroyed to open the way for rapid economic progress.
The major economic target that planned in the country is to increase the current per capita income to USD 4000 as soon as possible. It is not an unrealistic target because present trend in agriculture, fisheries and tourism and construction area clearly denotes that USD 4000 per capita income is easily achievable target in 2012. In fact, according to purchasing power parity and operations of black economy, Sri Lanka has already achieved USD 4000 per capita income and the practicality of increasing foreign reserve position further betokens that USD 3.0 billion reserves in early 2009 has increased to USD 7.0 billion in the end of 2010 and the Governor of Central Bank forecasts that foreign reserves of the country may be increase to USD 10.0 billion in the near future. Therefore, it is observed a strong foreign exchange inflow to the country after the civil war. However, to achieve the status of real emerging economy, Sri Lanka should increase its per capita income to USD 12000 with annual 12% sustainable economic growth. It is a hard task, two decades ago it was completely unimaginable but it is not an unachievable task, if the country has the best economic management further opening the economy to the world.
According to economic theory, if a country’s economic growth is annually 1%, it will take 70 years to double the economy. If Sri Lanka has an annual sustainable growth of 12%, the economy would be double within 5 years agreeably on the basis of multiplier principle. This is not an automatically warrent situation, but all politicians, common people and everybody in the country must be dedicated to achieve the target. If Sri Lanka actually become an emerging economy with 12% sustainable economic growth and USD 12000 per capita income in 2015, there is no doubt that it would be achieved a developed nation status with USD 20000 per capita income and USD 25.0 billion foreign reserves in 2020. Then we can clearly say that Sri Lanka is the wonder of Asia Pacific region.
The current president, who destroyed the lethal terrorist net work within a short period, has an ability to formulate indispensable policies for rapid economic development achieving carefully targeted economic outcomes. Singapore, which became a new nation in 1965, achieved tremendous economic targets within 10 years becoming a developed nation. The economic history of Japan and South Korea reveal that economic targets were easily achieved by post war strategies with the support of American investments. Japan enjoyed economic benefits for centuries as a result of wise policy actions initiated during Tokugava period and Meiji restoration, however, such prosperity down to ash during the world war.
Japan, South Korea and Singapore had favourable international conditions to attract investment, nevertheless, Western attitudes towards Sri Lanka do not appear much favourable and while conducting a massive economic development task, Sri Lanka needs to fight with negative political sentiments being invented by western political hegemony.
From the point of views of developing countries, western developed nations dislike when poor countries attempt to gain a rapid progress. The major contributory factor for these negative attitudes as they have an irrational fear that when poor countries gained the economic prosperity it might be caused to loose the market for their finished products. Although many western countries consider the armed struggle in Muslim countries as terrorism they do not make similar approach or judgments to reject terrorist activities in Asian countries interpreting terrorism as liberation struggle. As Sri Lanka rejected western attitudes and post war suggestions, it should understand that western capitalism would not support for development efforts in Sri Lanka as they extended to Japan, South Korea or Singapore. The withdrawal of GSP assistance is classic example when compared to favourite nation status offered China during Deng Shea Ping regime by USA. According to Malaysian examples, it can reiterate that these western countries will pursue Sri Lanka, where displays growth signs with a view to looking for markets.
In order to achieve economic targets, Sri Lanka’s planning framework should be fundamentally focused on certain conditions, in which the macroeconomic stability that concerns with control of government expenses, directing investment to productive sectors, balancing savings and investment, reduction of government debts, generating balanced or surplus budget and balance of payment, maintaining a lower interest rate controlling inflation, maintaining sufficient skilled workforce for development needs and preserving sustainable high growth. When the government makes right policies for this stability, it would definitely be a problem to self centred politicians, who are in the government and in the opposition.
There is an anti development political force is activating in Sri Lanka since independence. This anti development political force consist of misguided communist ideology based traditional left parties, which are currently being dead, self centred corrupt government ministers and MPs, certain opposition politicians without nationhood attitudes, who are ready to betray the country for money, extremist Buddhist political parties, who attempt to transform the religion to politics (JHU) but not searching for attaining nirvana, the JVP which has no vision or mission but oppose to all good policies of the country, Sinhala, Muslim and Tamil political parties, which are based on race controversy. These political parties are recalcitrant of the country, whom against the development, many Buddhist, Muslim, Hindu and Christian organizations directly or indirectly join hand with these extremists for opportunitism. To stimulate the development in the country, the president should not allow this force to come up as they have chemicals to mislead general public.
When look at the operational pattern of the country, the major constraint to sustainable economic growth and macroeconomic stability is the budget deficit. In 2009 Sri Lanka’s budget deficit was Rs 437361 Million (USD 4733 million) of which was contributed by loss making public enterprises with Rs 215117 million (USD 2151 million). In terms of market economic policy, the role of government is not to do business in the market but development of good growth oriented policies and maintaining good regulatory framework that would support to maintain controls and stimulants. If the government sell off these loss makers to private investors, it could be use the revenue from asset sales to retire a considerable amount of public debts and generate additional tax revenue from private own corporate.
In 2009, total expenditure volume of the budget was Rs1201927 million (USD 1201 million) of which Rs 322952 million (USD 322 million) was capital expenditure and the majority quantum of current expenditure directed for maintaining political administration. Loss making public enterprises and political administration with colossal expenses are the major cause for budget deficit of the country and if president directs orders to change this expenditure pattern Sri Lanka could overcome the serious issue involve in macroeconomic stability.
The size of Sri Lanka’s economy is about USD 60.0 billion if it accounts the performance of black economy into formal statistics. The government revenue in 2009 was Rs 702644 million (USD 702 million, it is less than after tax profit of a good company in western country. When compared to emerging economies in the world, Sri Lanka’s government revenue base is too small and country’s government revenue from USD 702 million to USD 10000 million should be increased expanding revenue base through taxation reforms and effective administration, operating user pay system in education and health services (giving due subsidies to needy) and transferring too welfare oriented economy directing to a fairgo by fairly sharing the costs of government. Consider the revenue base in Australia where the majority contributions to the government revenue are tax revenue from companies’ especially corporate giants such as banks, telecommunication, mining and farms, personal income tax of employees and collection of goods and services tax. Sri Lanka has been linear on collecting tax revenue for a long time as it had over expectation on foreign grants and loans and such a dis-enthusiatic environment led to tax evasion to generation negative attitudes toward the payment of fair share for government services.
The expected high growth should be a balance growth with fairly distribution of revenue. The fairly distribution of revenue will be effective only through empowering of low income earning population by technical vocational education and training. In 2009 agricultural sector contributed 12% to Gross National Products while industrial sector made 28.6% and service sector’s contribution was 59.3%. After the civil war the contribution from agricultural sector could easily be expanded as a large volume of lands in north and east are available for production purposes. Tourism and Hotel sector contributed only 0.4% to the economy in 2009 and this ratio should be increased 10% and transport, telecommunication and banking and finance sectors should be expanded to contribute 15% and 20% respectively. The performance in 2010 is appear to be quite bright and Central Bank has not issued official statistic to analyse the situation
The weight of public debts of Sri Lanka is 36.5 of GDP, which creates unbearable debt service. The best option is to retire a considerable amount of foreign and domestic loans generating firm revenue from privatising public enterprises. The maintaining public debt less than 10% GDP is not harmful to the country.
To achieve the status of Wonder of Asia, president needs exercising a dictatorship to a certain extent. South Korea, Singapore and Malaysia achieved rapid economic growth under a kind of dictatorship and Japan had virtually one party system. When there is destructive political force and self centred and corrupt political and general administration in the country, such negativity could be eliminated from a certain kind of dictatorship and after 60 years political independence; it is proven that multi party parliament democracy is a failed political strategy in Sri Lanka.
- Asian Tribune -
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