Colombo Telegraph

ETCA Needs Painstaking Explanation

By Kumar David

Prof. Kumar David

ETCA is receiving much coverage, some rational, a lot ignorant, and a not insignificant portion simply to stir up anti this-government sentiment. My piece last week (“Dealing with the elephant next door”) despite its title, was not about ETCA but generic about international economic and technical cooperation. Nevertheless it attracted e-mails, phone calls, a TV debate and even a seminar. Perhaps this was because the newspaper version of this piece appeared on a page facing Kishani Jayasinghe’s dignified response to the flood of hateful vituperation heaped on her for singing Danno Buddunge in operatic style. Whether one is a fan of some style of rendition is beside the point, what is alarming is the depravity of the verbal abusers. Ms Jayasinghe did right to bring this to our notice and set off alarm bells about dastardly compatriots who resort to vileness when their prejudices are transgressed.

The relevance of this is that though I suffered no verbal abuse, some commentators were narrow-minded, xenophobic and frog-in-the-well about Lanka’s place in the world. My opponent in a recent TV debate, with dead-pan face, labelled ETCA a dark and dangerous US-Indian plot, hatched in cahoots with Sirisena-Ranil, to push through an imperialist economic takeover of Lanka. He knew full well this was all bollocks, but his aim was to take the gullible in the TV audience for a ride. Painstaking explanation of investment and technical cooperation basics is therefore indispensable since, for historical reasons, visceral anti-Indianism is ingrained in the Lankan psyche.

Complaints

The most frequent complaint about trade with India is that our products suffer unfair obstacles at the hands of bureaucrats who wish to prevent penetration of Indian markets.The categories most mentioned, tea and garments, are not examples that can take India by storm overcoming competition in price and quality. One or two Lankan supermarket chains have broken into India in a small way; possibly they had to first face an uphill battle. Be all this as it may, let us take the complaints of our exporters at face value, as our ETCA negotiators are obliged to, and demand that attention be given to ensuring that obstacles are eliminated and negative lists minimised. What we need is firm constructive engagement if we are to get the best out of ETCA.

A second less convincing complaint is the poor merchandise trade balance that we run up against India. What can one do if there is local demand for Indian goods (foodstuffs, 3-wheelers, busses and lorries) but our products cannot, even sans unfair impediments, command a market in India? Lanka’s garments, handicrafts, brassware and jewellery cannot match the glittering array of merchandise adorning emporia in Delhi and Bombay. We do not make vehicles, electrical white goods or industrial products to penetrate India, or for that matter China or the West. We have nothing even remotely resembling the powerful vantage that produced-in-Mexico has secured in the USA. This brings me to the core investment argument; unless Make-in-Lanka succeeds, we can do little to improve our trade balance with India or anyone. We will remain exporters of tea, cinnamon and a sprinkling of low-value-added goods until we attract technology and investment on a larger scale.

The way out is to grow our industrial product-base (I include processed fruit, food and fish) and to emphasise niche areas. This country is ideal for aqua-culture (fish farming), to mention one. If you dislike India, ok find the capital from somewhere else, ok break into global markets without piggy-backing on the Indian battering ram. If China will invest in industry and help us ride into Western markets, instead of simply pouring ever larger mounds of useless concrete, that’s fine. But get real, is this credible?

There are difficulties in negotiating with India, its bureaucrats are tough and well briefed, its businessmen abrasive bastards, but it is only through this baptism of fire that we can reach a mutually beneficial agreement. Local commentators are running scared and conceding defeat in advance. Then what; where is capital and technology to come from after we kick out the burgeoning option at our doorstep?

Labour and glorified labour

Glorified labour refers to the professionals who are fighting tooth and nail to protect their incomes. Dentists used to charge unconscionable rip-off fees in the US a decade ago. I don’t know how, but Philippine qualified dentists manged to break open the closed shop (there must have been an accreditation process) and hey presto you can now get a tooth ripped out or a cavity stuffed at a tolerable price in California.

Sure there’s a social problem and it’s a tough one. You can’t import stacks of professionals into a country, even if they are thoroughly qualified and competent in a local language, and drive the wages of incumbent practitioners to rock bottom. The guys will howl, demonstrate and the odd one may ingest KCN. But jokes apart, one cannot put the professional classes to the wall. At the same time, consumers who make up the majority must secure some advantages of competition. There has to be dialogue; a via media allowing a certain number of overseas professionals to enter the local market has to be worked out. Other countries have done it; so can we.

It is clear that my approach to cross-border manpower movement is different from that of the government which has given a watertight guarantee to the medical profession that foreign doctors will not be allowed under ETCA. I don’t see why not. Certainly not on moral grounds; half the doctors and engineers of my vintage are now in USA, Canada, Australia or the UK. Then is it to protect the public from poor quality services? That’s a yarn that’s hard to sell. Some Indian specialists are outstanding, its medical and technical degrees from the best colleges are good, and Indian medical tourism is the world’s largest attracting business from the West and from Lanka. In any case there will be a vetting process by immigration authorities, like elsewhere in the world, before work visas are issued.

There will have to be similar stringent conditions applied to manpower at the lower levels. However, why bother, Prime Minister Ranil believes that ETCA will create one million jobs! Phew if he scores a quarter of that number, ECTA will be a resounding success irrespective of all else.

But something does not add up in these debates. On a drive to Anuradhapura I was amazed to see on the walls of factory upon factory notices in Sinhala asking for male labour. The notices did not mention skills so I don’t understand the claim of huge youth unemployment in Lanka. Have the Sinhalese areas also been exposed, like the North, to youth employment-bashfulness thanks to remittance money, in this case from the Middle East? Speak to any construction company, building contractor, small or medium size electrical contractor about the availability of masons, carpenters, electricians, welders, fitters, plumbers and a host of skills. The universal groan is that there is dire shortage; most have taken off to greener pastures in the Middle East and Africa; employment mobility has come to stay. It is good for Lanka to avail itself of controlled access to foreign skilled labour on a short work-visa basis. Train more locals? Sure but some will leave for greener pasture anyway.

Information Technology

I will close with a long extract from a recent Economist. It relates to e-commerce only, but the full flavour of the IT revolution in India is evident in the story. Lanka’s IT vendors must hitch to this star for their own benefit, otherwise ETCA or no ETCA they will eventually perish.

“It is a quiet morning on the outskirts of Bombay, the air still mild. Dusty streets are dappled with sunlight; a stray dog rummages through rubbish. A delivery boy named Anil is racing on a motor bike borrowed from his uncle, his backpack as large as he is. He has been up for hours, planning his route and carefully filling his bag with the packages to be dropped off first, stacked near the top. Anil enters a block of flats, squeezes his backpack into a narrow lift and delivers a shirt to a 21- year-old taxi driver. In a neighbouring tower he hands a smartphone to a 16-year-old who uses several apps to do shopping for his family. A short ride away, a 78-year-old grandmother is a pleased customer—with help from her grandson she has bought clay pickling jars that she couldn’t find elsewhere and some high-quality saris at a knockdown price. For Anil it is gruelling work. But he is betting that e-commerce in India has nowhere to go but up, and he wants to ride up with it.

“In the next 15 years India will see more people come online than any other country. Last year e-commerce sales were about $16 billion; by 2020, according to Morgan Stanley the online retail market could be more than seven times larger. Such sales are expected to grow faster in India than in any other market. This has attracted a flood of investment in ecommerce firms, the impact of which may go far beyond just displacing offline retail.

“India’s small businesses have limited access to loans; most of its consumers do not have credit cards, or for that matter credit; e-commerce companies are investing in logistics, helping merchants borrow and giving consumers new tools to pay for goods. Amit Agarwal, who runs Amazon.in, holds out the hope that “We could actually be a catalyst to transform India: how India buys, how India sells, and even transform lives.” The jewel in the crown, Amazon, wants to make India its second-biggest market, after America.

“As global markets dip and Silicon Valley unicorns stumble, the international funding that makes this possible may dry up. If the prospect of changing India, a billion deliveries at a time, is a beguiling one, it is not for the faint-hearted. India’s visionaries keep their spirits up by remembering the example of China. Chinese ecommerce grew by nearly 600% between 2010 and 2014, making the country the biggest e-commerce market in the world today. It managed this largely through the growth of indigenous companies: mighty Amazon merely nips at the heels of home-grown giants Alibaba and D.com; eBay has all but left the stage”.

I end on a cautionary note again. It will be tough ride to get a well-structured and beneficial economic and technical agreement inked; it will be tougher to ensure fair implementation. But make no mistake, there is no other way: “There is a tide in the affairs of men which taken at the flood leads on to fortune; omitted the voyage of their lives is bound in shallows and in miseries”.

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