By Rajiva Wijesinha –
Reading Ranil’s answers to the Bond Commission was an eye opener because till then I had not realized how shoddy his pronouncements were. Coincidentally, while I was annotating his arguments, I heard a pair of announcers on early morning radio mocking his declaration, now forgotten, that he would provide tabs to everyone. It strengthened the perception that he simply used language as a tool to increase his standing, with little appreciation of the comprehension skills of his audience.
It was in that light that I read his statement on public finance, which was sent me by someone in the Ministry of Social Services. And I realized that that too deserved annotation, to establish how inconsequential it was.
So here we go, the thoughts of Chairman Ranil –
The challenge faced by us today is to sustain what we have built, and strengthening the economy. This task has two prongs. The first is to stabilise the economy creating a country free of debt for our future generations. ‘In the short term however we borrowed much more than we needed at higher rates of interest than the norm, but there were good reasons for this which I cannot share now’.The second is to expand the economy giving all Sri Lankans the chance for prosperity.
We inherited a plagued economy, ‘as the UNP did in 1977 and in 2001 given the mismanagement of Mrs Bandaranaike and then her daughter. This time round, though growth was high and inflation was low, we have no doubt that Mr Rajapaksa was much worse than those two, whom I have now learnt to love and admire.’
Despite the reasons which are beyond our control and challenging domestic and global conditions, we were able to sustain a steady GDP growth rate of 4.4%, ‘as opposed to 7.4% in 2014, but that is a small price to pay for having me in charge’.
For years, the growth of the Economy of Sri Lanka was heavily reliant on huge public investments in infrastructure. Only the industries such as construction industry were strengthened by such investments. Concurrently, the exports share of the GDP of Sri Lanka was decreased gradually.
The ratio of revenue to GDP in 2016 increased to 14.2% from 11.4% in 2014, . For the first six months of 2017, revenue to GDP now stands at 6.7% of GDP from 6% in the corresponding period in 2016. It is expected to reduce the current debt which is 79.3% of the GDP to 70% of GDP by 2020.
When considering the public debt service payments based on the outstanding debt as at end of August 2017, we have to pay Rs. 1,974 billion in 2018. We will have to pay Rs. 1,515 billion in 2019. It means we have to pay more than 3,489 billion in 2018 and 2019 for debt servicing, ‘a conclusion I reached having added the other two figures and then assumed that there must be more somewhere though only God and Arjuna Mahendran know where’.
In order to overcome these unprecedented challenges, the government has initiated a prudent debt management strategy. Our traditional approaches to debt management will have to change to cope with new risks and structural and regulatory changes. Our policies will be targeted on forward-looking liability management strategies. Accordingly, the funds required by the government will be raised with transparency and predictability ‘though we started by doing something totally unpredictable and lacking in transparency, and then repeated the exercise a bit later, though some might say that that at least was predictable – given our penchant for lying, if the Minister of Finance told banks not to bid at high interest because those bids would not be accepted, any fool could have predicted that the opposite would happen’. Under the medium – term debt management strategy, the detailed strategies of government borrowings will be known in advance to the domestic and foreign debt portfolios, ‘though we may occasionally announce that less will be auctioned than in fact we will want after my good friends Kabir and Malik get in on the act’.
Our government is taking a two-pronged approach to address the price stability, ‘and I am proud that in 2015 inflation dropped to 0.9% and it is only teething problems that caused it to rise the following year to 4%’. We expect to provide the opportunity of buying the food items at a lower price throughout the year in order to control the short-term price fluctuations resulting in hardships to the people ‘and you must ignore the fact that soon after I make such sweeping promises the prices of many goods many people need will rise dramatically’.
We will improve the domestic supply chains and distribution networks to do so. In the meantime, we will allow importing of food products and other essential commodities at reasonable costs within the competitive market framework. We have reduced taxes on food commodities substantially over the past three months. ‘I am sorry that despite all this the price of food has risen but we’ urge domestic wholesalers and retailers to pass the benefit of these reductions to the consumers. However, the government will provide the space to the Central Bank to carry out its monetary policy independently to maintain price stability on a sustainable basis. The Central Bank is moving towards a new monetary policy framework targeting a flexible inflation. The aim of this framework is to maintain a low inflation continuously while supporting the economic activities. With this change of policy, our people will get the opportunity to live comfortably with the security of stable prices.
Our ambition is to make Sri Lanka a prosperous country by 2025. For this vision to become a reality, our activities should join hands with the external world. Sri Lanka is a small island right in the middle of a large world ‘whatever the middle of a round entity can mean, since I will not mention the Indian Ocean or Asia given that my vision is global’. For thousands of years we have benefitted from being located strategically. Unfortunately, we seem to have forgotten this competitive advantage of the location.
… we have to leave behind the decades of inward-looking policies that shrouded our capacity to grow ‘which is precisely what my mother’s cousin J R Jayewardene said 40 years ago, but you must bear with me for saying it again since obviously he did not change things as he claimed’.
For decades, we have relied on the same exports products such as garments, rubber, and tea. These have been the giants of our exports economy. But now, we should diversify our exports by adding value added goods and services something ‘I signally failed to achieve when I was Minister of Industries, after the long tenure of my mentor Cyril Mathew.’
We have relied on the public sector for too long ignoring the private sector. We have scared away private investments with unclear policies and complicated procedures for too long. The effort of our government is to create an economy firmly based on foreign and domestic private investment, driven by a dynamic and forward – looking private sector. ‘The fact that our ratings have sunk to negative, all of them, Moody’s and Fitch and S&P, is neither here nor there’.
To kick-start this transformation, we will implement a comprehensive economic strategy over the next three years. We intend to raise per capita income to USD 5000 per year, ‘and as a start we increased in from $3821 in 2014 to $3835 in 2016’. We hope to create one million new jobs, ‘and it is not our fault that the number of employed dropped from 8,424,000 to 7,948,000 between 2014 and 2016.’ Our target is to increase foreign direct investment to USD 5 billion per year ‘and again it is not our fault that this dropped from US $1.635 million in 2014 to $1,079 million in 2016’. We plan to double the exports to $ 20 billion per year, though doubtless on our gung ho free trade strategy imports will also double. The trade deficit has in fact risen from $ 8,287 in 2014 to $ 9,090 million in 2016.
The goal of these development strategies is improving the lives of the average Sri Lankans, meaning Ravi and Arjun and Arjuna and Kabir and Malik and others like them. Thus we will strive for two basic economic outcomes: Increasing and improving jobs ‘as happened to Arjuna and Ravi when they gave up their government jobs and found jobs in my office’.
For this, our crucial need is to enhance education and skill development to enable all citizens to contribute to a knowledge-based economy ‘and that is why I have put my good friend Akila Viraj Kariyawasam in charge of education, since he at least will be enhanced even if no one else is’.
Unemployment rate among the youth, those who have passed GCE A/L, and females, estimated at 18.5%, 39.9% and 6.5%, respectively. This illustrates the current structural deficiencies in the domestic labour market and the issue of skills mismatch. Recognizing these shortcomings, the government will be initiating a number of basic educational reforms. We will guarantee 13 – years of education for everyone, ‘by which I mean keeping them in school for 13 years so that they can go to tuition classes in even greater numbers than happens now’. After the GCE Ordinary Level examination, students will be directed to higher education, vocational education, jobs and training. Furthermore, Information and Communication Technology, which is a need of the hour will be included in the school curriculum and the intake to universities in such disciplines will be increased ‘something that has been actually happening for years now but under Akila Viraj this will be more successful’.
This also aligns with government’s broader objectives and effort towards a digitally empowered economy. This approach will provide the opportunity for the youth to engage in better jobs while getting their skills developed. The Government will encourage the private sector to develop the skills of the market by investing on skills development and joining hands with the public – private sector initiatives. Recent estimates show that 23% of the population will be elderly by 2042. With the rapid increase of the aged population, skill development programs will also target older workers. And also, action will be taken to tackle the drop in productivity due to outdated skills. The government is planning to formulate policies to have a balance between the needs of foreign employment and domestic labour market. As the first step, labour shortages in the market will be filled ‘by importing foreign labour’.
Currently, 60% of the employed population is engaged in informal and illegal economic activities. 40% of the employed population is engaged in vulnerable categories of jobs. We will take steps to uplift the standards of all jobs and to secure the social recognition and safety by providing internationally accepted certifications and licenses. This will result in minimizing the informal nature of the jobs. A contributory pension scheme will be introduced for those who are employed in the informal sector. This will result in minimizing the likelihood of poverty after retirement.
We were a trading nation since the era of ancient kings. Sri Lanka was the hub for transferring goods and knowledge from East to West, and West to East. We should learn from the history on exports and private sector growth which are key elements for becoming a higher middle-income economy.
People living in developed and developing East Asian and South East Asian countries such as China and Thailand have better jobs and higher living standards than the average Sri Lankans. I remember travelling to villages in these countries in 1979. They did not have many comforts or western foods enjoyed by Sri Lankans by then, ‘those, in particular western foods, being the best measure of a country’s development’. But today, the situation is different ‘even though in 1977 we were in power and changed things radically. But even though we were overtaken during the period in which I was a Minister, I was not to blame for this decline’. How Sri Lanka lost its pace of development while other countries were progressing? This is a question that we should ask from ourselves. They embraced open economic policies focused on exports. Meanwhile, we looked inwards and adopted closed policies. Therefore we missed 30 years of valuable opportunities. ‘Except for the last three of those years, the 30 years from 1979 were a period of UNP and Chandrika Kumaratunga rule, so you may wonder what will be different now. The answer is that we are going to move to a totally capitalist economy, with no trace of the socialist policies that even my icon J R Jayewardena paid lip service to’.
…other middle-income countries such as Thailand and Vietnam are exporting a more diversified range of high-value products such as automobile parts, machinery and electronics. They are leaving us behind. We will have to catch up to our competitors. We have to change all these things if we are to strengthen the economy and to create more jobs ‘and I have therefore entrusted the Ministry of Industries to my good if greedy friend Rishard Bathiudeen, who is very able which is why I chose him, not because that was the price he demanded to cross over. Under him we will develop a wonderful Industrial Policy, though we have not yet actually started on this. Though I failed to do anything when I was Minister of Industries, he will do much better under my expert guidance.’
We are making great progress towards mutually beneficial Free Trade Agreements with Singapore, China, and India. These deals will give our economy a massive boost by opening huge new markets to our entrepreneurs, ‘even though we are embarking upon this before we have enough entrepreneurs to take advantage of this while those who can export to us know exactly how to take advantage of the markets we offer.’
We are also formulating a new National Export Strategy and a new National Trade Policy. The government is also establishing a National Single Window for Trade facilitation, and creating a new development bank for development financing with an export-import window ‘since the other banks set up for development have proved ineffective and I believe in multiplying institutions so that there can be jobs for more and more of our boys, like the three Bank Chiefs who fell so easily into Ravi Karunanayake’s trap.’
For our export-led economic strategy to be a success, we must target and obtain much more Foreign Direct Investment and Local Private Direct Investment in high-value products. Foreign Direct Investments have been the engine of growth for East Asia and South East Asia, and Sri Lanka can certainly attract similar or higher levels of investments ‘though we have sadly failed in this and have had to have recourse to China even though we blackguarded the last government for excessive reliance on China.’
We will contribute to raising Sri Lanka’s Ease of Doing Business ranking from 110 in 2017 to 70 by 2020, ‘instead of going backwards as we have done thus far in our tenure, the ranking being 99 in 2015.’
Moreover, we will implement a comprehensive industrialization strategy that connects manufacturing with other sectors. Since economic liberalization in 1978, our progress in human development aspects have been on par with advanced economies ‘and I will conveniently ignore the fact that our social indicators were much better than most Asian countries in those distant days whereas we have now lost that advantage after the economic liberalization of 1978 which I now crow about though earlier I said that we continued with a closed economy at this time.’
…our industries have declined. The contribution of industrial activities and the manufacturing sector to economic growth has remained stagnant during the last two decades. Industrial activities contributed 27.6% of GDP in 2000 and only 29.7% in 2016. Inability to remain competitive, lack of value addition and lack of sophisticated technology are the main reasons for this situation. We will revitalise the manufacturing sector by introducing a clearly defined industrialisation strategy ‘a catch phrase I am repeating to convince everyone that this is true though we do not have a clear industrial policy at present.’
In 2016, we have attracted more than 2 million international visitors generating an estimated revenue of USD 3.5 billion. The industry provided 320,000 local jobs in 2015. In the coming years, we will strengthen the tourism sector so that we can work towards our goal of attracting five million tourists to Sri Lanka every year ‘and for this reason I have appointed as Minister of Tourism the best man for the job, with a host of new ideas which he has the managerial capacity to implement, my old friend John Amaratunga.’
Massive resort hotels dominated our tourism sector in the past. But current research shows that 90% of Sri Lanka’s hotels have less than 10 rooms. This is an Airbnb economy ‘though I have no idea what that means since I only stay in 5 star hotels, paid for by my country or my party’. This is an economy where every individual with a spare room has the capacity to earn cash. We will streamline the informal sector and ensure the quality and standards. Tourists are not just coming to Sri Lanka for the standard hotel holiday. Therefore, the government will take steps to develop tourist attractions. Sri Lanka will be made a destination where tourists should come for unique experiences. Travellers have focussed on a number of sectors such as our culture, cuisine, traditions, wildlife, Ayurveda and meditation. The contribution of all stakeholders in the public and private sectors is required to boost the tourist attraction. 4-year tourism development strategy which we prepared consulting all relevant stakeholders will provide the base to achieve the tourism vision 2025. China and India are our biggest and most rapidly expanding markets. We must shift our tourism strategies accordingly. We have to expand our connections with the countries from which the well-spending tourists are coming. We have to liberalise access to sea and air services. Therefore action will be taken to develop air access domestically and internationally, while facilitating cruise services and the establishment of yacht marinas.
Our goal is to provide shelter for all in 2025. .. The government will play the central role in setting the framework for housing development, but a lesser role in providing investment. We will enable the people and private sector to take control of investing on housing ‘meaning that they must pay unless they get Arjun Aloysius to fund them as Ravi did’.
We recognise the need for sustainable investments in socio-economic infrastructure such as education, health, electricity, roads and highways ‘though earlier I was dismissive of the physical infrastructure developed by the last government. Referring to roads and highways and electricity as socio-economic sounds better, given that I was rude about what is termed ordinary infrastructure development. And though we will borrow to do this, you should not worry about the debts we will contract, as opposed to past debts.’
Potential areas for expanding PPP include healthcare, leisure, tourism, education, ports and aviation, transportation, highways, information and communication technology, and energy. .. We hope to harness the power and energy of PPPs to improve efficiency and productivity of agriculture. The agriculture sector is saddled with major issues such as low productivity, lack of diversification, inefficiency in water management, and poor management of weather disruptions. Weaknesses in the sector contribute to food insecurity and regional poverty. We will revitalise this sector through investments in agricultural research, extension services, water resources, and infrastructure facilities ‘by encouraging private investment as I noted above though only God and Arjuna Mahendran my adviser know who will come in unless we lease them land for 99 years as we did so successfully with China in Hambantota.’
We are in the process of launching several new schemes to support technology based SMEs ‘even though we cannot give everyone tabs as I pledged earlier, but as I anticipated, that promise has been forgotten, by the media certainly’.
A number of projects which accelerate our journey towards a stronger economy are being implemented. We are building a well-planned expressway system from Hambanthota to Kandy. We have obtained funds for that ‘and do not ask what we are paying for these’. We started a joint venture in Hambanthota Port this year ‘though that was of course a waste of money to build’. Discussions are being held to start a joint venture in Mattala Airport as well ‘though that too was a waste of money.’ We have started working on Hambanthota economic zone ‘which the last government was also working on, but we will do better’. Millaniya Trade Zone has been planned already. Wayamba Industrial Zone has also been planned. The constructions of those zones will commence next year ‘and this is a commitment I plan to honour unless something goes wrong as happened with the Volkswagen Factory silly little Akila Viraj promised.’
Tourism Zones in the Southern have been planned. Acquisition of lands is taking place now. We will start working on tourism zones in Iranavila and the Eastern Province soon. The Budget 2018 which will accelerate these programmes will be presented in Parliament next month. The Budget will provide the opportunity to extend the development which was limited to the Western Province, to all over including Southern, North-Western and Central Provinces. Those who can develop with skills and effort will be encouraged by the Budget. Others will also be supported. This is a very challenging journey towards prosperity. This is a plan to enrich the country by 2025. This is an effort to make Sri Lanka again, the economy and trade hub of the Indian Ocean. I urge all of you to join hands with me in this challenging journey towards prospering our motherland.