By Hema Senanayake –

Hema Senanayake

Dilith Jayaweera who owns the Derana TV network, is a candidate for the presidential race. Rightfully he thought that must make his views known to the people. So, he put forward his election manifesto a few weeks ago. I am not interested on many things he mentioned in that document as many of them are just promises. But the very title of that manifesto is really interesting and must be analyzed, because such analysis might establish a fundamental methodological approach in analyzing manifestos of other key candidates when they are made public.

Dilith says that he would create an “Entrepreneurial State (Viyawasayakathwa Rajjaya)”. What is this? The word “Viyawasayakathwa” means “Enterprising or it denotes enterprises.”  To be fair with him “Rajjaya” cannot be the government, instead it could mean the country. If the word “Rajjaya” means the government then there is no value in his proposition because the government is not an enterprise or even, you can’t run the government like an enterprise at least by balancing income and expenditure. Therefore, he intends to create an Entrepreneurial State but essentially not a “Entrepreneurial Government.” My analysis is based on this understanding.

If Dilith intends to form a government that aims to establish an efficient Entrepreneurial State which means that businesses are going to thrive in the country, then nobody can oppose it because it essentially insists to expand the entrepreneurial base. In fact, that is what every government or any new president who is elected should do including the president of NPP if elected. This means this is the only way to resolve our economic crisis and to ensure stable, resilient and faster economic growth. Why has this become the only path?

First let me explain what the expansion of entrepreneurial base does for the economy and the country. It increases something known as total proceeds or sellable output or total sum of sales. This is critically important for any country to have a robust economic growth. The term “Total proceeds” can be understood as follows. If an entrepreneur produces something, he can sell it either to a consumer or another entrepreneur and if the second entrepreneur uses the first entrepreneur’s produce as an intermediary input to produce his final product. So, the second entrepreneur can sell his produce to consumers. This means that an entrepreneur can sell his produce either to a consumer or another entrepreneur only. Then the sum of all entrepreneurial sales is known as the total proceeds or the value of total sellable output or total sum of sales in the economy.

Total proceeds do two basic things in the economy. It allocates consumption money for households, and it allocates money capital for investments. Perhaps you may now think that the government also pay salaries for a significant number of employees for their consumption. However, what the government pay to those employees are basically derived as taxes from the total proceeds even though the point of taxation may differ. So is the capital allocation. It originates from the country’s total proceeds. Therefore, we can understand that without the continuing increase of the said two allocations no economy will grow. Therefore, when the entrepreneurial base is expanded it is commonsense to understand that total proceeds are increasing ensuring that there will be a stable economic growth. This process is completely different from borrowing and spending by the government to show artificial growth in the Gross Domestic Product (GDP) because any expenditure done by the government is added to calculate GDP ignoring the fact whether the funds are borrowed or not.

Therefore, if Dilith Jayaweera’s concept of Entrepreneurial State is fundamentally focus onto expand the entrepreneurial base rather than expanding the government, his vision is highly appropriate. This should be the focus of all other candidates too. However, the question is how any new president is going to achieve it. What are the policy strategies to have a “Entrepreneurial State?” These strategies are what we want to see in all candidates’ manifestos.

Presidential candidate Ranil has intimated that his manifesto is the IMF Agreement. He has said repeatedly that it is the only way to come out of the crisis and to ensure economic growth. Therefore, it is very unlikely that Ranil is going to put forward a new visionary manifesto. What he can do is to prepare a manifesto type document based on IMF agreement as he did in preparing the “Economic Transformation Act.” If IMF agreement is taken as the only solution, it does not allow for any new visionary thinking. However, IMF agreement has set the necessary macroeconomic targets which cannot be ignored by any serious candidate. For example, it has mentioned about the reduction of Gross Financing Needs of the government, External Debt Service Ratio, Current Account Deficit, and increasing Primary Balance, Gross Official Reserves, overall debt sustainability including severe foreign debt restructuring etc. In addition, IMF categorically wants to reduce corruption vulnerabilities. Therefore, the question arises is not to do away with the IMF fiscal policy targets and other macroeconomic targets, but the question arises is who can do it better.

Ranil has shown, what he can do. He has no heed for corruption. Another recent incident was the tourist visa documentation scandal involved with foreign based company. Some parliamentarians have suggested that the deal could siphoned USD 1.2 billion out of the country in a year. This is terrible. He has no respect for determinations of Supreme Court, and worse is that he allowed parliament to reject Supreme Court decisions insisting that the legislature is superior to judiciary. All these mean that he is not capable of ensuring harmony and optimum business confidence which are intangible parameters that affect to have the best possible macroeconomic stability.     

If Dilith Jayaweera is to create an “Entrepreneurial State”, then obviously he and his team (if he has one) must think of doing better by changing the macroeconomic policy framework already set by the present government and IMF.  The same thing is applicable to the SJB and NPP. This cannot be done arbitrarily. Hence any new President is required to think how he and his team could do better in regard to the set fiscal policy and monetary policy targets. Any candidate who thinks that there is a space for improvement will be a better candidate. Those candidates will optimize the business confidence and will bring in more non-credit based dollars ensuring faster increase in Gross Official Reserves through proper exchange rate administration policy. This approach will surely expand the entrepreneurial base of the economy resolving our economic crisis sustainably.