By Kumar David –

Prof. Kumar David

Government bereft of concrete development ideas;We need a Make-in-Lanka strategy

It is disappointing that development options for Lanka are Pontius Pilate mantras; there are no concrete decisions, especially on the industrial side either from the government of the private sector. What are Pontius Pilate mantras? Washing one’s hands off and expecting others to deliver the goods. This government has three mantras it swears by; export orientation, the private sector as the engine of growth and foreign direct investment (FDI). In proportion these are needed but when the government is oblivious to what industries and services to emphasise it is like a blind man in a dark room. Today I will highlight some sectors for somnambulant leaders to think about when they awaken and decide to set up much needed planning entities – an overarching planning body and a few sector specific committees as in places as diverse as Singapore, India and Germany. The business led advisory committees the PM referred to in his address to the Stock Exchange are not bodies of this type.

First I repeat a warning of a few weeks ago in this column about mantras. Enhancing exports and encouraging corresponding production drives is desirable, but obsession with exports and FDI is accompanied by ideological baggage. The stock in trade is anti working class legislation or ‘labour market reform’ (easy firing, curbing trade unions and collective bargaining, hostility to strikes). Other items of ideological baggage associated with these mantras are low income tax rates to befit high earners but high indirect tax burdens on the common people, preferential or nil taxation for foreign investors and removal of capital controls. All this came in the budget presented last month.

Over- reliance on the private sector implies surrender to big business and neglects the interests and needs of less well-off classes. Apart from ideology there is the matter of the product mix of output which should not only earn profits for capital but also satisfy people’s needs. Lanka is weak in food security except rice and marine products; nutrition and protein deficiency is another concern; the dilapidated state of the national housing stock of the poor is a shocker. Resources have to be set aside to improve deplorable public education and healthcare. Colombo needs a suburban railway.

This budget does not chart a development strategy; it was a mere bookkeeping exercise, a reconciliation of revenue and expenditure – alleged creative accounting in the education vote aside. This is acceptable if elsewhere in the government’s action plan a policy framework, a strategy, existed. It does not! In advanced capitalist countries the budget is indeed only a bookkeeping exercise in taxation and balancing expenditure and revenue. Such is the bill US presidents send to Congress or British Chancellors table in Parliament. There are no directives detailing specific investments; these are left to the wisdom of companies. Lanka, in its folly has chosen this incongruent path turning away from the more sensible course that, for example, India (in the Nehru era and now under Modi), South Korea, Singapore and China pursued.

Make in India

Is Modi wedded to capitalist development? Well yes and no. Ranil’s oxymoron “social-capitalism” bears a caricatured but better fit to Modi than to himself. Modi wants changes which will delight business but he also pushes reforms that are needed whatever the system; overhauling the leviathan bureaucracy, cutting inefficiency and curbing the licence-raj. He has initiated a state-led drive that puts Lanka’s pussyfooting to shame. The centrepiece is ‘Make in India’ which seems to be paying off. India has overtaken China as the world’s fastest growing large economy in percentage rates; estimated at 8% for 2016 and set to rise to 10% in 2017. Absolute growth still lags China – the Indian economy grew $6 trillion in 2015, China’s $17 trillion since its economy is more than twice as large. [A curiosity: Even if A is smaller than B, if it grows at a sustained faster rate, it will always overtake B in a finite number of years]. Say India’s economy is half of China’s, but if it grows at 10% while China’s grows at 5%, it will overtake China in 15 years. In reality this won’t happen in the foreseeable future because such large growth rate differentials are not sustainable.

My motive for introducing Make in India (MiI) into the discussion lies elsewhere. Twenty-five priority areas are identified in MiI including: automobiles, auto components; biotechnology, chemicals, pharmaceuticals; IT, electronics, photonics; electrical manufacturing, green energy; textiles, garments, leather products; construction, railways, shipping, ports; tourism, wellness. I have picked those fields in which Lanka may be able to participate to advantage in some capacity. With the world’s fastest growing economy at our doorstep only a bloody fool will fail to cash in. The halcyon days when old regime crooks looted Chinese riches are gone, a new opening for business to rake in profit is opening up. Wonder whether our government and capitalists are smart enough to grab opportunity by the forelock? The upside is that if oxymoron-capitalism lays even modest economic foundations the crumbs will benefit the lower orders.

Sectors

Since the government, its ministries and its agencies are incapable of lateral thinking it is useful to enumerate options. I include areas suitable for stand alone local investment, areas that may attract foreign direct investment and some topics that can be linked to MiI. I included sectors good for private business or for public-private partnerships and possible joint ventures between the Lankan state and foreign capital, a trick at which China excelled in early Deng Xiao Ping years.

Optical products: This is not photonics but conventional illumination, fittings, shades and chandeliers. There is local manufacturing capacity already in place; quality and diversity can be pushed skyward. It is an export oriented field and with Indian upper and middle class lifestyles rising a new market is emerging. Illumination products are not high-tech and not difficult to replicate. There is potential for joint ventures with those Indian manufacturers who agree to part-outsource. This is a global growth industry, for example an entire town (Guzhen) in Guangzhou Province, China, is devoted to optical production. Guzhen’s eleven-story expo-emporium is a window into some 500 optical product manufacturers; it is a stunning display.

Photonics: My piece on James Clerk Maxwell – 15 November – dealt with linking into the infant photonics industry in India. India has only 25 photonics (light emitting devices, optical fibres, lasers, connectors, and components) manufacturers. Compared to China its capability is minuscule but domestic and export potential is sizable. If where China has gone is where India will have to go, the sky is the limit and Lanka can cash in as a partner.

IT, IoT and Data Mining: Lanka turns out large numbers of IT graduates, at various levels, in private colleges and universities. To save space for less known options I will say no more than complain that compared to other Asian countries we are making scant use of our IT potential.

IoT stands for Internet of Things (IoT) – products packed with sensors wirelessly connected, or via smartphones, to service and alarm centres, order spare parts, transmit alerts, enhance inventory control and assist supply-chain management. Software inside products talks to big or small platforms. This is a new game and there is progress at many levels – product, platform and communications. Most developers spin off part of the work to smaller software companies at home or abroad. Imaginative software houses in Lanka can make a bid provided quality is kept up. Government can help with promotional activities and exhibitions.

Data Mining – open-data availability is exploding in many countries including UK, Scandinavia, and now India. The size and number of databases coming on line is massive and can be used for GPS, mapping, transport timetables, tele-medicine, traffic monitoring, data logging and numerous other apps. Apps can also use proprietary software to tailor overlaying products for small and medium size firms. For example, locals allied to foreign development houses could undertake map-making and vehicle GPS for foreign, Indian and Lankan cities. The data is available; it is the overlying apps that are needed. We need to get into bed as subcontractors for established developers.

Health Tourism: Private hospitals have core facilities but a state sponsored health tourism programme is missing; for example coordination of health service provision with long-term stay facilities and tax collection. Even better, the programme can be predicated on a compulsory requirement that private hospitals open-up parallel medium or low priced outpatient, hospitalisation and surgical facilities for locals. Private hospitals are beyond the reach of the less well-off, hence currently they do not help reduce the huge load of public sector base hospitals – people need to queue up from 4am!

Food quality: Smart chopsticks check food at consumption; poor quality reused oil and other chemical indicators of deterioration are flashed by optical tools embedded in the chopsticks. Other personalised carry-into-the market devices bounce back light from, say an apple, to tell you its country of origin, sugar and acid content and state of ripeness or rottenness. The software is probably based on machine learnt neural networks. These are just two examples. The investment level is small, the market export oriented.

Arrack, cigarettes and the sin industry: China is the world’s largest cigarette market with an insatiable demand. How about repaying debt in cigarettes – ok not funny! Not only Scotland, France, Australia, Spain and Italy, but also newer Chile, Argentina, New Zealand, Georgia and Albania are into a huge wine and sprits market. What joy if we could capture 1% for our best arracks; we will be swaggering all the way to the bank.

Value added agricultural products: What about tea, cinnamon, fruits and our one time expertise in agricultural research? Thailand has superb quick-cooked-and-frozen sea food exports – shrimp, squid, crab and small to medium sized fish. The great benefit of this industry is its backward depth, meaning aqua cultivation. Conventional fishing cannot satisfy local demand so export success implies large scale aqua-culture. In China the visitor sees aqua farms as often as normal agriculture and in interior provinces with populations of tens of millions, no sea or river products are on the menu – it is all aqua farmed. Lanka with bountiful rainfall and lots of flat terrain is perfect for aqua-culture but the state has to take a lead role in encouraging small and medium sized producers in start-up and help in penetration of export markets.

Toilets: Modi is campaigning against India’s millennial tradition of alfresco crapping. The country is becoming a huge market for sanitary-ware and sewerage products. Lanka has firms in ceramic and sewerage related lines; excretion, no I mean expansion, is the name of the game.

I will sign off on this cheerful note. I have by no means covered all or the best possibilities and some of my suggestions may be infeasible. The point is that unless we start thinking in the concrete we will get nowhere.