20 March, 2019

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Some Random Thoughts On Economic Development

By Laksiri Fernando

Dr. Laksiri Fernando

Dr. Laksiri Fernando

There is a need to be optimistic about Sri Lanka’s future. This is also called positive thinking or PMA (positive mental attitude) in psychology. Positive thinking is necessary not only in politics but also or more so in economics. After all it is the economic progress that would enable people to be optimistic about life, their children’s future and the future of the country. Before thinking of global interdependence, the people need to have a good grasp of mutual interdependence within the country. The fate of all peoples are interwoven, whether they be Muslims, Tamils or Sinhalese or whether they believe in Buddhism, Hinduism, Islam or Christianity, or not believe anything.

The most unfortunate condition among the people undoubtedly is poverty; the lack of basic goods and amenities to meet their day to day needs. This is why the corruption, waste and misuse of resources by politicians or officials are henious crimes. Sri Lanka still is a lower middle income country. This is when the whole country is taken together. However, when we refer to the rural Sri Lanka, or areas still not recovered from the thirty years of war, the people live in lower income conditions and some even at the bottom of the pale. There are vast disparities of facilities in housing, health, education, transport or other infrastructure between the rural and urban areas. The most affected are the children and the youth. The most psychologically suffering are the women, given the constitution of our family institution.

Limitations in the State Sector

There is nothing wrong in people making money, if the means are legitimate. This right however should be available to all, and opportunities should be there for the people to undertake income generation activities. It is true that the state cannot supply employment to all. Even at present, the excess-employment in the state sector is considered a burden to the country and its coffers. Therefore, employment cannot be expanded or expanded substantially in the state sector. To some, this is a political point of view or ideology, but that is what dominant today and the facts are also clear.

There is no such a burden to the country, if the private sector expands and opens up employment opportunities. In the past, there were inhibitions on the part, for example, of graduates to work in the private sector. This might be largely changed today. However, there can be a mismatch between the required qualifications in the private sector and the available skills among the unemployed people. One among them can be English language skills. Another can be good maths knowledge, assuming our young people are fast acquiring computer skills.

However, the short term expansion in the private sector is also limited. The Prime Minister in his ‘Economic Statement’ before Parliament recently has expressed that ‘since the state sector was borrowing heavily from banks in the past, there was no much room for the private sector to borrow.’ It is true that without borrowing, the private sector cannot expand. Very few have inherited money to completely start or expand businesses of their own. Private companies and banks are inter linked. However, the banks should also lend to small businesses and joint self-employment projects.

Promotion of Self-Employment

In a country like Sri Lanka, there is much room for small businesses and joint self-employment ventures. What is necessary are required skills, motivation, marketing, support from banks or other lending organizations, and insurance to cover any setbacks or calamities. For self-employment or joint self-employment, the primary requirements are the skills and also the equipment. Training of those skills could be undertaken by technical colleges or vocational training institutes. They could be like the TAFE institutes in Australia. I am not saying they are bad at present, but there can be much improvement. Training in building, construction, interior designing, plumbing, domestic or building electrification, information technology, photography or graphic designing for example could generate self-employment or joint self-employment. What I mean by joint self-employment is ventures initiated by two or more people together to supply services to customers.

What appears to be lacking in Sri Lanka of these ‘skilled workers’ (apart from the required skills!) is the use of advanced equipment and required technology. That is why they waste time and energy unnecessarily. When such equipment is used, the strain on physical labour is eased. Again if I refer to Australia, there are women alongside men who are involved in these self-employment ventures. It is possible that when people get such training, some might go to the Middle East. But some may remain, or even otherwise the country is sure to get foreign remittances. To venture into self-employment, there are other skills required apart from motivation. These may entail book keeping, financial handling or know how on where and how to start. The impartation of this knowledge is up to the teachers and teaching modules.

Room for SMEs

The promotion of small and medium scale business enterprises (SMEs) in the country is different and complex. It may be true that even at present over 90 percent businesses are SMEs. The reason is that there are no much large scale businesses. Our capitalism is petty-bourgeois! The National Enterprise Development Authority is entrusted with promoting SMEs. Its role however does not appear to be impressive. Most of the SMEs are not well organized enterprises at present. They mostly survive because there are no much competition or they all are the same. There are several ingrained weaknesses identified in the SMEs. (1) There is a gender bias against women. (2) Managerial skills and knowledge of owners are low. (3) There is reluctance to observe labour standards. (4) The absenteeism levels are quite high.

High or dynamic entrepreneurship and innovation are two requirements necessary for successful SMEs. Emerging from an ancient agrarian society, it is understandable that people cannot quickly jump into modern entrepreneurship. However, this transition has dragged on now for a long period since colonial times. It is argued that the state dominance in the economy has dampened greatly the development of private entrepreneurship in the country. Therefore, releasing of market forces to develop entrepreneurship is considered necessary even if the country wants to move towards socialism in the future. It is believed that this is also the secret behind China’s miraculous growth during the last two decades. Why not utilize or experiment the opportunity?

In developing the SMEs, Sri Lanka itself is not a small market. It has nearly a 21 million people. If the SMEs are capable of going beyond, undoubtedly they have to grow beyond SME status. Whether SMEs or bigger enterprises, high entrepreneurship and innovation are important. What is the status of such attributes in the country at present? We know by the end of the 19th century, how certain local entrepreneurs entered the plantation sector as junior partners of the British planter raj. They also handled the transport services. I also remember how the textile industries sprang in my home town, Moratuwa, competitively in the 1960s. Same success could be seen in the confectionaries and soft drinks. There were several foreign franchise industries even going beyond the local market. These are random experiences. Then there was a decline in the 1970s until the open economy opened up for export garment industries and other joint ventures.

Some Disasters

There were some disasters as well. Most of them were related to people’s savings and investments while the Colombo Stock Exchange being dominated by a close group of companies or people. One successful entrepreneurship was related to the Central Finance and affiliated companies. But as we all know, some of the transactions were dubious. There were several other fraudsters like Sakvithi in the financial market. The situation showed that people had money to invest, but expected quick and high returns. The Central Bank or the other regulators were incapable of controlling the situation. There was something wrong with the business ethics as well.

For the enterprises to grow, there should be investments. For the investments to take place, there should be savings in the country. Otherwise, there should be investments from other countries (FDI). Sri Lanka could pursue both avenues. The general tendency in the country in the past has been consumerism. Consumerism do generate demand that could stimulate industries and enterprises. But if there are no local industries to supply for the demand, the tendency is to import. There are traders comfortable in importing. Importation of goods is not bad, if there are parallel exports. Then it is global trade. Otherwise, it is a liability for foreign exchange or country’s coffers.

For the local industries to grow, there should be sufficient savings in the country. These should be channelled through banks and other financial institutions. The stock exchange is also an important channel, although the people or even the entrepreneurs are not familiar with it. For small enterprises, banks might be the best sources of finance for investments.

Importance of Innovation

Enterprises have to grow through innovation. In other words, entrepreneurship should be for innovation. Has Sri Lanka invented anything in particular? Let us take the example of food industry. From Australia, there are two examples that I can give. During its industrialization and growth, Australia has invented Weet-Bix and Vegemite. These are standard breakfast items still popular in the country. Recently there has been a major demand from China for Weet-Bix. I could remember what was known as Thriposha in Sri Lanka in the 1970s. It was introduced as a food supplement for the poor by CARE Canada (during that food scarcity period), but it could have been developed as a popular breakfast cereal by any entrepreneur. It is nutritious, low cost and could have been improved into international standards.

Same could have been said about an alternative to Vegemite. I have been thinking and even experimenting about a Mungmite as a pastime! Mung or green gram has a great potential of converting itself into a processed food item. It can easily be condensed and has a unique taste in its cooked and condensed form. When added with yeast, it could compete with Vegemite or Marmite. I am saying this openly as I have no intention of starting any business! What is important is to think in terms of innovation in promoting economic development.

Sri Lanka has a great potential for its food industry and exports. When I go to a supermarket in Sydney, I can find Dilma tea but not any other Sri Lankan products (MD or other). Those are only available in small Sri Lankan shops. There is something missing in export promotion and marketing. Dilma however is very popular among average Australians. The way the Dilma has developed might be the way the others could develop with high ethical standards.

Finding market opportunities or creating them through marketing is also part of innovation. Sri Lanka should go for niche products and niche markets. I am still sticking to the food industry. Those may be available in the Middle East, India and China or in Australia. Why not allow the entrepreneurs to utilize the Halal market in the Middle East? I think I have seen a news item that it is happening. It should be further promoted. Sri Lanka should shed away parochial thinking. When the products are designed, they should be for the markets and not to our own taste. Why not produce something like ‘TheCola’ (Tea Cola), a cola based on tea. It could be healthier than Coca Cola. There is nothing wrong in marketing such a thing as an Asian product.

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Latest comments

  • 4
    1

    Prof Laksiri. You are right that Sri Lanka should to work on niche markets and value adding to primary commodities. Also should work on its natural comparative advantage which is in Marine Resources. The country needs to industrialize and up-scale fisheries and aquaculture sector in a sustainable way rather than letting foreign trawlers fish in the deep sea.
    Also needs to develop marine security services and restructure swollen military for peace time economy.

    The ocean is the country’s greatest wealth. But Govigama- farmer mentality dominates and land-locked development thinking without innovation is the norm.

    Also, Fisheries Ministers have historically been the biggest crooks and corrupt thugs, who sign away fishing right to foreign trawlers rather than building up fisheries livelihoods. Remember LTTE sank a Chinese Fishing trawler poaching on SL waters some time ago because of poaching, like Indian Fisherman.. Sri Lanka needs to recognize the value of its marine resources and farm them sustainably.

    • 4
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      Shamindra Fernando

      “Also, Fisheries Ministers have historically been the biggest crooks and corrupt thugs,”

      Whom did you have in mind?

      Mahinda Rajapaksa (Minister of Fisheries and Aquatic Resources Development – October 2000 to September 2001).

    • 0
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      Yes, I completely agree with your emphasis on marine resources. Sri Lanka’s territorial sea, contiguous zone and exclusive economic zone are quite vast and also vulnerable. That is why maritime security is important. Internal waters are also vast (especially in the North and the East) and rich with fish resources. Fish cultivation and farming are also possible and exist to an extent. No proper assessments are made to my knowledge. Our oceans also might be utilized for generating solar power. Perhaps there can be some international legal issues involved. Otherwise, floating soar power plants are also possible without obstructing shipping lines or fishing activities of the people.

  • 4
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    Dr. Laksiri Fernando

    RE: Some Random Thoughts On Economic Development

    We have Some Random Traitors, Dimwits, Nitwits, Blockheads, and Simpletons in Parliament ELECTED by the People, to fleece them, and the Economic Development will be random too and downhill too. The current Ecternal trade deficit is around $3 Billion per year and Sri Lanka imports $20 billion of goods and services per year.

    The Average IQ of Sri Lanka is 79.

    The Average IQ of Singapore is 108.

    There is a very good correlation between GDP, wealth of Nations and the average IQ.

    IQ and the Wealth of Nations

    IQ and the Wealth of Nations is a 2002 book by Richard Lynn, Professor of Psychology, and Tatu Vanhanen, Professor of Political Science.[1] The authors argue that differences in national income (in the form of per capita gross domestic product) are correlated with differences in the average national intelligence quotient (IQ). They further argue that differences in average national IQs constitute one important factor, but not the only one, contributing to differences in national wealth and rates of economic growth. Critical responses have included questioning of the methodology and of the incompleteness of the data, as well as of the conclusions.[2][3] The 2006 book IQ and Global Inequality is a follow-up to IQ and the Wealth of Nations by the same authors.

    https://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations

    Intelligence and Poverty of Nations

    http://www.rlynn.co.uk/uploads/pdfs/Intelligence%20and%20the%20Wealth%20and%20Poverty%20of%20Nations.pdf

  • 2
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    – There are 50,000 unfilled skilled vacancies.
    – Then there are 50,000 unskilled women who seek employment in the Middle-East.

    I just cant see why the unskilled women are not trained to fill the local skilled vacancies!

    Is it because the women aren’t aware? There are no private employment agencies in the rural areas.

    The govt should setup Job Centers in all major towns to so that people can apply for work available anywhere in the island. The Job centre should be where everyone goes after graduation from either secondary or tertiary level schools. They should also offer training at vocational training centers.

    The private employers and govt departments should be encouraged to forward their vacancies to the Job network.

    • 2
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      De Silva

      “”– There are 50,000 unfilled skilled vacancies.”
      “– Then there are 50,000 unskilled women who seek employment in the Middle-East.”

      Thanks for pointing this out.

      This is called Frictional Unemployment.

      What is the purpose of the education system? To train skilled workers or bring them into a position to be trained.

      Unfortunately the the so-called politicians are interested in fleecing the populace and freeing crooks and killers, including the Traitor-President, Gon Sirisena Gamarala.

  • 2
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    Dr. Laksiri Fernando,
    Thank you for making Sri Lankans think about development for a change. Will the new Yahapalanaya Government give the confidence for investors thinking of using Sri Lanka’s resources for entrepreneurship? The resources of Sri Lanka are of course inviting and those interested are waiting for a chance. But the fear factor is not yet removed for the investor. There is no lakh for innovation and technology or capital, but the major fear factor cannot be removed unless Sri Lanka brings to books all those who plunder the Country and are capable of cheating the investor. This fear for the top bad Leaders who are still considered capable of mal-practice. Unless the Government brings them to books and give confidence to investors they are safe with favorable Legislation for investment entrepreneurs within and outside will not dare to start anything. The Politicians have taken all Powers in their hands and the practice of starting a business without support from Politicians has not changed.

  • 1
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    It is time Dr Laksiri speaks on matters of the day. It appears that he is oblivious to the current situation in the country, be it corruption at the highest level, break down of law and order or the rapid;ly deteriorating economic state of the country.
    Of course he dare not comment on the separatist movement raising its ugly head again.

  • 0
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    Dr Laksiri lost his vision of Economic Development.

    He is poor at economy strategy and only he used random thoughts of development is good for Mala.

    Even Mala has gone beyond that!

    What type of Elites in Sri lanka?

    This shows that country status of Economic in anarchy since 2015 January 9th.

    What is their responsibility?

    • 0
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      What is your strategy Adkari? Bond Scam or Blood Money?

  • 0
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    [Edited out]

  • 1
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    prof.L, what are your thoughts on making SL a knowledge economy? there is no ref. to it in your article. are we shy of making use of modern science and tech . for development? without giving wholehearted support to this can we develop as a know. economy? see the 2007 world bank publication on know. economy in sri lanka. look for four pillars of know. economy without which we will remain a backward agri. economy. i wish to know about your views on these matters. SL leaders do not pay even lip service to know.economy. they have no views on that. they dont’ even reject it.
    mr.ruwan is worried about the nonexistant separatist movement. ruwan.. pl. note this knid of movement has no place in SL. praba tried but miserably failed. compared to him wickky is peanuts.as praba could not do it now no one can think about it… all tamils are tired of this demand. give some concrete ideas for development ruwan.

    -DAYAL

    • 1
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      Dayal,

      As far as I am aware, there are several interpretations about what we mean by a knowledge economy. Knowledge based economy is a more popular and a rational proposition. First it was mooted to highlight the possibility to avoid reproduction costs or reduce them to the minimum. In agriculture, you have the diminishing marginal returns. In industries you have at least equal costs in reproduction. In knowledge reproduction, you have almost no additional costs. A simple example is a video. You have initial costs. But to reproduce thousand copies, your additional costs are minimal or almost nothing. Actual knowledge goods are different. A better or another example can be a software for Sinhala-Tamil translation. We don’t have such a thing at present. If we produce one, after the initial costs, the reproduction costs are minimal. It can be adopted to different purposes. One could be to translate simple letters. Others could be to translate more advance official notices or legal documents etc. Not only that, when ‘knowledge goods’ are produced, they can enhance and facilitate the production of both industrial goods and agricultural production. A knowledge economy does not mean, no agriculture or no industries. It means the ‘production of knowledge’ becomes fundamental to all other economic, social and even political activities. In the latter respect, it means knowledge based society.
      If we were to transform the Sri Lankan economy into a knowledge based economy, we have to enhance (1) English knowledge (2) IT (3) science and (3) other technologies. I am talking from a public policy perspective. I frankly has not seen the WB report on the subject pertaining to Sri Lanka that you have mentioned. I’ll look for it. These agencies normally talk in general terms without much practical guidance. I am not blaming. Practical steps should come within the country. Even to enhance English, IT, science or other technologies, there can be software. It is good to promote to have a five year plan for a knowledge based economy. Some other proposals I can off hand make are (1) to have university education completely in English without delay (2) to redesign the courses in the so-called arts streams to make them job oriented (3) to make links between industries/businesses and higher education institutes and (4) increase investments in R&D and set up a task force for necessary implementation. These are again some random thoughts!

      Laksiri

  • 2
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    Why don’t you discuss about the mammoth government bureaucracy which sucks the major part of the revenue. They are the luckiest in the world who get cars, drivers, houses and millions through duty free permits.

    • 4
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      Nimal

      “They are the luckiest in the world who get cars, drivers, houses and millions through duty free permits.”

      And the fees they charge under the desk to deliver services.

    • 0
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      Nimal,

      When you (I mean I) write a readable article, you cannot include everything. That is why we have the opportunity in the Colombo Telegraph for the readers to make comments or make additions. I cannot off hand say whether the size of our bureaucracy is too much. Perhaps it is. The reason can be the archaic and bureaucratic procedures. I completely agree with you that duty free cars should be scrapped for all. Official cars can be for official purposes for the moment. Housing may be ok in outstations. However, we have to understand that we cannot make overnight revolutions. If we try to do so, the whole system might collapse. For change, critical discussions are prerequisite. Thanks in that sense.

  • 0
    0

    Any type of Revolution is not going to collapse of System at once.
    Look at “Rainbow Revolution”( Ranilblow) was initiated , encourage and support by Dr Lakasiri has to learn more lessons that 2015 January 9th is almost country come to the point of collapse of that undermined previous development by MR alliance has done good work since 2009 May 19th.

    That is way you have come to conclusion of “Random thought of Economy”
    but is not going to save our nation by tactical solutions of economic dose proposed by Dr Laksiri.

    Dr Lasiri has change into new set of mind , which that I can give food for thought of Dr Kissinger by World Order “…and almost of this period, the community of nations that they are aim to uphold reflected an American consensus an inexorable expanding cooperative order of stats observing common rules and norms, embracing liberal economic system, forswearing territorial conquest ,respecting National Sovereignty and adopting participatory and democratic system of governances….” World Order by Kissinger.

    The current UNP regime in power of state even lost this ideals by Ranil W… “type of governances”, is not that democratic governances, it first lost respect National Sovereignty by selling all national assets to Indian and USA companies.

    See that ongoing CB Bond scam is more or less roots of corruption by “Rainbow Revolutionary leaders” is one key person is Ranil w….of UNP liberalist ideology politician and his class.

    New UNP leaders are working on “footnotes Economy” is I call “Random thought of Economy” of New Set of leaders visionless policies of new set of politicians that belongs in current key leaders of “Good Governances” that including MS and CBK.

    The “Random thought of Economic” is roots for chaos threaten side by side with unprecedented interdependence of NATIONAL ECONOMIC ,the impact of that SRI LANAKN STATE OF Nation sovereignty, an Economic Sovereignty WILL BE DISINTEGRATED.

  • 1
    0

    Dear Dr. Laksiri Fernando

    We should forge our own way towards ‘development’. Sri Lanka was once an independent and self sufficient island. We never asked to be invaded and exploited by three different nations, not to have our national security determined by how many guns the International Community shipped to their
    freedom fighters, that is, those proxies they hired to push their agenda.

    What we need is clear leadership for our development, not the start and stop policies and wars that other countries try to prevent us from winning anyway. You must agree that leadership is lacking, so is a coherent development framework.How do we reach full employment? Better health care, safer roads, better opportunities and reduction in poverty?

    These books may shed some light on our plight : Maybe these are on your bookshelves already?

    Encountering Development: The Making and Unmaking of the Third World Kindle Edition
    by Arturo Escobar

    From a review
    ” Inspired on the work of Foucault, the author examines the evolution of the discourse about development as a form of how the West keeps exerting power and influence on the Third World. The ethnocentric views of development and interventions that come with them – propagated by Western governments, multinational companies, development institutions and academia –
    puts Third World cultures and traditional populations as something that should be significantly changed to achieve the so-dreamed “development.” Although the results of these western-driven interventions over decades have usually been catastrophic for Third World’s populations and cultures, Western “experts” keep coming to the Third World and elaborating new forms of discourses on development, now addressing objects like sustainable development, women and development and poverty erradication – all ethnocentric and based on western values. “

    Another on:

    Promises Not Kept: Poverty and The Betrayal of Third World Development 7th Edition
    by John Isbister (Author)

    Reviews:
    “There are specific reasons why the majority of the world is still poor
    (and it wasn’t what I learned growing up).”

  • 1
    0

    Here’s another one:

    Economic Democracy: A Blueprint for World Peace and Prosperity
    by JW Smith

    Reviews on Amazon
    “Dr. J.W. Smith charts a clear and brilliant path away from war and terrorism towards a peaceful and prosperous world economy. Alanna Hartzok, UN ECOSOC NGO Representative –Alanna Hartzok, UN ECOSOC, NGO Rep”

  • 0
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    “Some Random Thoughts On Economic Development”

    srilanka cannot develop economically as long as it is at a competitive disadvantage with india.Same thing would have happened to taiwan and HK if they were behind china competitively,but since they are not they have developed.

    our greatest threat as well as opportunity is india.It is a great opportunity for us if we can be more competitive,but if we are less competitive we are sunk.

  • 0
    0

    dr.LF,
    pl. look for the world bank publi. on knowledge economy in srilanka. it is available in the internet.they are talking about four pillers and scores obtained by countries. SL gets about 4 out of ten. i would like a schoar like you to look into it. it is easy to say it a WB trick or something. the term KE appears here and their in SL policy documents. i do not want to elaborate. SL should not miss the bus and that is my point. ADB was implementing a huge project-education for KE in SL a few years ago.pl. go thro’ the internet.
    thanks for your prompt reply.
    -DAYAL

  • 0
    0

    prof.LF,
    some more on know.economy. by definition know. economy uses knowledge for the production, both goods and services. KE has to assimilate internationally available knowledge, disseminates it through out the society and creates its own knowledge for local production-say tea, rubber, coconut etc.it applies knowledge for production purposes.the 4 pillars of KE are:1)high quality education, 2)innovative regime, 3)sound infrastructure for ICT and 4)conducive environment for business (stated very briefly). our country has to improve all these pillars to develop as a developed the SL KE. if we do not want all these that is another matter. i think our policy makers should concentrate on all these. my request to prof. is to make use of your good offices, writings etc. to promote this because your ideas are considered seriously by them. i give lot of importance to your ideas.
    -DAYAL

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