Colombo Telegraph

Economy & Its Woes In The Debt Trapped Sri Lanka

By Siri Gamage

Dr. Siri Gamage

Economy and its Woes in the Debt Trapped Sri Lanka: Is there an Alternative Economic Development Model?

During the Yahapalanaya government of President Sirisena and Prime Minister Wickremesinghe, it appears that a concerted effort is being made to invite foreign investors of various sorts, primarily from the Asian region, supported by multilateral agencies and bilateral agreements. Such efforts seem to follow in the footsteps of export-led growth strategy adopted by former President J.R. Jayewardene presently under a national government of the two main political parties and minority parties. Though the efforts of the government to enter into contracts and MOUs with foreign entities and partners seem to attract political comment, very little economic comment, particularly critical, is forthcoming. Long term social and cultural consequences of promoting foreign investor-oriented and export led growth is also not being critically reflected upon.

In this article, I examine the two main layers of the economy, who benefits from the foreign investor-oriented economic development and the potential for creating a large subservient and dependent class (or classes) with a view to generate further critical/constructive discussion. It is suggested that the political and civic leaders whose loyalties are for the long-term national interest take the scenario discussed here seriously and develop ‘a political and economic strategy’ that can serve the national interest rather than the investor interest. It is hoped that the conceptual distinction made between two layers of the economy –one highly integrated to the global economy and the other not so – can serve as a vehicle for understanding the context and risks of following a foreign investor driven economic development strategy for the unreconciled nation.

Super Economy (Supiri Arthikaya) vs. National Economy (Jathika Arthikaya)

When we talk about the national economy, economists usually talk in terms of various sectors, e.g. agriculture and mining, manufacturing, tourism, services. In this era of globalisation and multinational corporation activities, we have to make a distinction between the Super economy and the national economy. The former refers to the multinational corporate sector with their manufacturing plants, marketing and service outlets, export facilities, offices, and commercial plantations. Multinational companies generally come under the BOI purview, as they are large-scale investors. Such entities can be private sector companies or state owned depending on the country of origin. If the company is from a country like China, the entity can be state-owned. These entities operate under the laws applicable to the BOI sponsored projects, services (such as education and health) and various industries and commercial activities.

The capacity of the government to control such entities is very limited. These entities are responsible to their superiors and shareholders in the origin countries. Decisions pertaining to their operations are taken in the world capitals where their headquarters are located. To protect their interests, they obtain professional services of accounting, legal, and other services from abroad and if necessary locally. This supra layer of economic activity (and service provision) is at the top of the economic pyramid of a developing country like Sri Lanka but in the day to day political discourses inside and outside the parliament this layer seems to be out of bound for critical scrutiny. It is almost taken as a given and a blessing for the country’s economy and future prosperity. Take for example the tourism sector. The more foreign investments coming to the country is considered as a blessing. What harm such ventures are inflicting on the country’s public space, core values and customs, etc. are not even discussed. That is how far we have been brain washed about the merits of foreign investments over decades of governance based on neoliberal, free market economy doctrine couched in the globalisation discourse with a positive slant.

If there is any foreign control of the country’s resources, workforce, and any threat to national sovereignty there is no any other agency that have detrimental effects than this layer. Its impact on the so-called ‘national economy’ that means the rest of economic activities not connected to this layer or global economy is not even mentioned? Yet, the impact of this supra layer and its activities on the national economy can be substantial not only in terms of foregone business, trade and manufacturing opportunities for the local agriculturalists, manufacturers, entrepreneurs but also the extensive competition brought about by this layer plus the import trade to the consumer market. In the political discourse, finger is pointed at a given country if not a given minority ethnic community as the cause for the country’s economic woes.

This supra layer of economic activity is organised around the profit motive. Various entities are operating as part of a regional or global network of similar entities managed by highly efficient managerial staff and a mainly local workforce being employed at subsistence level wages (wages that are just enough to live, no surplus). The entities and their owners appropriate surplus produced by such workforce. Government is receiving a tax benefit but in many instances these entities have been offered tax holidays extending to a period of decade or more. Thus the benefit can mainly be in terms of the employment for the local population and its ability to participate in the consumer market.

National economy is not given the priority that it should be given. Instead of making the national economy the vanguard of economic development by allocating necessary policy, planning, project formulation and funding, it is left to mend for itself in an incoherent manner. A few companies that are primarily family based continue and sometimes expand, e.g. Maliban, Dilma tea. But the political leaders are more inclined to chase the investors from overseas with dollar investments rather than encouraging local investors. Assistance is provided to local investors and companies, mainly to market their products and services through seminars held overseas. Banking sector provides loans but the emphasis put on the national economy is secondary compared to the emphasis given to the supra layer. This sort of economic philosophy cannot revive local industries, service sector, and manufacturing unless teamed up with the supra layer actors in some fashion. Therefore the talk about joint ventures. However, in joint ventures the foreign partner holds high hand. Unlike other countries in Asia with a diaspora spread across the world, Sri Lanka does not seem to tap the expertise available in the Sri Lanka diaspora overseas other than paying lip service. Some countries have a separate ministry to handle diaspora activities (this is not a suggestion to add another minister to the already inflated cabinet).

The argument put forward by advocates of the free market, neoliberal economic model that promotes further expansion of the Supra economic layer of the economy and further incorporation of the national economy in the global and regional economies (similarly designed) is that the foreign investments are needed to generate more employment and income for the locals. Without such investments, our land, water, roads, workforce (untrained) etc. will remain idle (no talk about the capacity of local entrepreneurs to do the job by linking up with foreign entrepreneurs and companies). For example The Island (29.04.2017) under the heading ‘Korea Exim Bank, ADB to draw blueprint for Colombo-Trinco economic Corridor’ reports that these entities whose investment capital comes from the rich classes of the world believe that ‘it becomes increasingly important to synergise industry, infrastructure, logistics, and urbanisation to create more jobs and income’. The experts working for Korea Exim Bank will target four areas. 1) Urabanization strategies and creation of small cities, 2) trade facilitation at international level, 3) investment promotion and investor outreach activities, 4) promotion of entrepreneurship and innovative industries and enhancing the competitiveness of small and medium size enterprises (SMEs). This is only one example among many that attempts to further integrate Sri Lanka’s economy, particularly it’s under developed areas with the global economy. A further discussion on the need for developing export-oriented economic development for Sri Lanka is found in Kumar David’s recent article in Colombo Telegraph (30.04.2017) with the title ‘Sri Lanka’s Muddled Politicos can Learn from Andhra’ where he seems to agree on the need for large-scale foreign investment with the backing of a council of subject experts organised at the top.

This model is not a new panacea for the country’s ills. Since 1977 we have been under the spell of a similar economic development model. We need to question what progress we have made, where are we headed, who benefitted? If we follow Wallerstien, capitalism requires further deepening where it is developed and expanding where it is not developed. Sri Lanka’s investment drive involving countries such as China, India, Japan and to some extent others like Indonesia, Malaysia, South Korea, Singapore is in line with this logic.

Lanksns, particularly those with a modicum of ability at critical thinking and analysis need to see through the long-term negative outcomes of such economic model nakedly followed by other Asian countries that we try to emulate, and inturn these Asian countries are emulating from the industrialised West and the USA. Countries like South Korea, Malaysia, Singapore, and even cities like Dubai no doubt exemplify a high degree of incorporation to the global economy, development of supra economy and national economy) and in the process improve their infrastructure, employment and income generation for some segments of the population including the working class, professional class etc. Likewise, local entrepreneurs have enhanced their operations together with foreign joint ventures servicing the economic activities such as trade, construction, manufacturing.

But have these societies created more egalitarianism and humanism in the end? Have these efforts made by the political leaders with the support of economic experts made these societies more unequal? Sure, they have developed more roads, ports, cities, high-rise apartments, metro lines, railways, office buildings, shopping malls, tourist hotels and more. But who is accessing these facilities more and who has the rich pockets to sustain the high lifestyle promoted by the entities associated with the supra layer (other than public transport and shopping malls)? It is the high end of the social class scale –both local and foreign who tend to benefit disproportionately from the further expansion of the supra layer or economy. In Dubai, while visiting a highly developed part of the city (Colombo’s mega city to be developed by the Chinese will look like this in time to come) I asked an expatriate who generally lives in the posh apartments or gated residential communities. He told me that it is basically the expatriates working for multinational companies, as the rent is unaffordable by the workers from South Asia etc.

The societies that we are trying to emulate in the economic arena are not renowned for providing welfare for the needy in their own countries. Investment-oriented economic development model facilitates the interests of the foreign investors and to an extent the local bourgeoisie and their political masters. The professional class also benefits to an extent by allowing them to earn fees for their services and getting their children to obtain an education in a foreign country (or in a local service facility) to be able to work for the global corporate sector for higher pay and conditions. The lower middle class and the working class plus the poor –by far the majority segments of the population in the country- are at best able to earn a living wage only. Members of these classes abound in the streets and trains in the above referenced countries that we tend to emulate – working as domestic workers, cleaners of shopping malls, drivers, labourers in construction sites etc. If we follow the same model of economic development, we will increase the dependence and subservience of the majority population to the local and foreign investor classes and the professional class while sacrificing our natural resources for the economic gain of these upper classes.

The economic and social disparities thus created and the curtailed political and human freedoms of the reference countries we try to emulate speak volumes about the absurdity of the foreign investment-oriented economic development model that we so highly speak about for Lanka’s development. I am not arguing that we should not have foreign investment in sectors and places where necessary on a limited scale. My argument is that if the country follows the current model based on the political push being given by the Prime Minister and those around him (see Kumar David’s article), we will surely end up with highways, factories, enhanced ports, high rise buildings etc. but in the end lose the plot when social problems start to creep in. We need to think about the long-term consequences.

We don’t talk anymore about the Sarvodaya philosophy but foreign scholars and students take our ideas and admire them. Neither do we talk about the cooperative principles and the movement with people participation. Our left parties (or whatever remaining of it) do not talk about how to re-organise the production and manufacturing systems – unlike their counter parts in Cuba etc.? They don’t talk about ways and means of encouraging grassroots democracy. We don’t want to explore good ideas and models from the NGO or INGO sectors. Instead we brush them off with the same brush. Our economists are busy playing the games of statistics and econometrics with no clear ideas for locally-driven development without being subservient to foreign capital and investors that appear as multinational companies and various state entities from those countries whose investor class have accumulated more capital. Our social scientists are busy reproducing knowledge (throries, concepts, methods and research agendas) while denigrating our own indigenous knowledge. Our educationists are busy advocating the benefits of foreign/international education to fill the gaps left by our ruling class in the university intakes.

Our technocrats and bureaucrats are busy in managing the workforce that we send to countries that have ‘advanced economically’ in various parts of Asia and elsewhere. Our political leaders are busy negotiating another deal for more investment, more infrastructure development, more transfer of land, ports, and other valuable entities to foreign hands. Our religious leaders are sleeping at the wheel as if no harm will be dawned upon the country if it follows the same model of export-led growth that JR initiated and his nephew is reviving in a hurry.

It is only a handful of critically thinking individuals who seem to engage with this impending outcome in a far-sighted manner. Many are focusing on the personalities or day-to-day politics or indeed the issue of the day without spending much needed intellectual energies on this long-term scenario. Means of empowering the working class, lower middle class and the poor are limited to a few trade union activities primarily focused on wage increases –nothing more. Yet a political project based on an alternative economic and social vision is highly required with the participation of thinking classes (this may or may not include Viyath Maga) and the nationalist political and civic leaders.

It is here that the Joint Opposition (JO), the JVP, left parties, worker organisations, civil society organisations looking for Yahapalayanaya etc. need to reflect deeply and postulate an alternative economic development model based on national sovereignty, welfare and well-being for all, protection of the environment and public spaces, egalitarianism, and even the political and human rights. I have attempted to highlight the need for postulating an ‘alternative economic development model’ based on our own foot that does not require us to be subservient to foreign investor capital and investor classes plus the entities that have made us more dependent rather than independent (e.g. IMF, World Bank, ADB, and a whole set of other suppliers of foreign capital). There are ideas for such a model from highly placed critical thinkers in the global south including from India (e.g. Amarthya Sen, Arundathi Roy). Sociologists like Raeywin Connell from the University of Sydney (read her Southern Theory 2007 and other writings) have been arguing about the need to place more emphasis on the thinkers in the global south and their ideas by social scientists rather than reproduce the economic and social theories plus jargon from the global –imperialist north. Some of my publications also (see Research Gate for details) touch on this subject.

Our social scientists including Dr. Dayan Jayatilleka need to spend more time articulating the potential vagaries of the foreign investor-oriented model being promoted currently for the many rather than unsuccessfully attempting to divert attention on personalities in the political arena. If the current model is continued, elitism and privilege for the upper classes including the professional class will be enhanced, control of public lives and limitations of political and human rights will be increased. Ultimately, Sri Lanka for sure will be fair game for the global investors –amidst competition from key players – as it will become a big shopping mall connected by highways, by-passes, metro lines and luxury cars while making a large segment of the population subservient and dependent. That is where the long-term risks to national sovereignty and independence really lie. Whether the country is governed by a Rajapaksa, Sirisena or a Wickremesinghe this much needs to be understood by those working in the space of national interest.

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