By Cassandra Mascarenhas
Keeping to tradition, the final plenary session of the Ceylon Chamber of Commerce’s Sri Lanka Economic Summit 2012 featured a panel of young Parliamentarians, giving them an opportunity to air their views on key economic issues affecting the country and for the audience to pose questions and express their suggestions on creating a better environment for business to grow.
The panel featured MPs Ruwan Wijewardene, Dr. Harsha De Silva, Udaya Gammanpila, Navin Dissanayake, Sunil Handunnetti, M.A. Sumanthiran and Udith Lokubandara and was moderated by Copyline Group and APEX Consultancy Services Chairman Mano Tittawella.
Q: What steps can be taken to improve governance in Sri Lanka?
Dissanayake: We have to position Sri Lanka as a competitive, business friendly country. We can achieve that if we hit the growth target of eight to 10 per cent. We all know how well China is doing. China is the largest donor to Sri Lanka and I think that in that context, there are synergies between the two countries that need to be tapped into.
The Indo-Lanka FTA has resulted in immense benefits to both countries. We do have a downturn in the economy but it is not huge and is containable – it’s a result of the exports to the West. We need to focus much more attention on dynamically marketing Sri Lankan products and attracting FDIs.
On governance, I see public service as essential to any country to move and get things done – it is a huge task to motivate those in the public sector and I have been much motivated by the private sector. There are issues of governance. We require greater transparency and a greater intellectual shift and I believe that this is possible in Sri Lanka and I think that Sri Lanka as a whole can really move mountains. The political leadership, the civil leadership, the business community and civilians have a big role to play.
Q: With Sri Lanka being in close proximity to the fast-growing Indian economy, what strategies could we adopt as a country to plug into the Indian growth story and what should Sri Lanka’s stance be on the now-stalled CEPA?
Sumanthiran: That implies a certain relationship that the business world in Sri Lanka has in the world of nations and this relationship is built mainly on trust. Economic structures are important but what is far more important is a value system by which a country runs. To have trust in Sri Lankan value systems, our words and our deeds must match and in that context, I want to point out an example why we have not made that possible.
In September 2011, we were supposed to have come to a realisation that there was going to be serious pressure in maintaining our balance of payments. By the third quarter, the Central Bank knew they would come under serious pressure and in a report to the IMF the Central Bank Governor stated as such, but right through that time the same person, the Central Bank Governor, told the country the exact opposite story. That does not infuse any confidence in the Governor. The value system of the country doesn’t seem to have been properly understood by even the business community of the country.
About India, I think the question is a little farfetched. No minister is able to travel to South India on even a private visit. In that context, you are asking me how we can take advantage of the huge growth rate in South India – I think the question is rather misplaced.
Q: I meant from an economic point of view.
Sumanthiran: Our relationship with India will have to be maintained – I am not condoning the violence used against the ministers but this is the reality. If we are to show ourselves to the world as an investment friendly country, the language we use must also be friendly, not angry.
In the wake of that, I read on Sunday the kind of words that have been used to an Editor of a newspaper by the Defence Secretary. That shows something about the country and even the business community stays mum about it and continues with this Economic Summit. Now all this has an impact – you can’t divorce your economic interests from what you try to portray yourself to the world. The Government is scared of the media in India, the opposite is true here.
Q: With the end of the war, Sri Lanka showed a lot of promise. However three years after that, the dream has not been fully realised, with FDIs falling well below expectations. What in your opinion were the missing steps or what were the mistakes made that can be rectified? Secondly, China has been a friend of ours for a long time – how should our country further our friendship with China with particular emphasis on India-China sensitivities?
Lokubandara: Frankly I am of the view that we can be happy about what we have achieved in the last three years. We had to deal with the anti-Sri Lanka campaign led by Western superpowers so we are still struggling to cope with it. Looking at the international context, when we stepped out of the war, we saw a world full of crises. Like it or not, more than 55 per cent of our exports go to the US and EU and in this context we were able to achieve a very modest economic growth in 2009. After that in 2010 and 2011, we had significant growth.
On the second component, I think the biggest problem is our export over-dependency on the US and EU. The present Government’s challenge is to enforce an export market diversification programme by providing incentives for adventurous exporters to venture into new markets.
We always boast about Sri Lanka being an agricultural country but being a country with a high population density, Sri Lanka cannot achieve its development goals through agriculture. We have an industry sector but because our cost of labour is comparatively high; we cannot compete with our Asian neighbours. So the only remaining sector is the service sector and the five hub concept talks about how we can exploit our geographical location.
Unfortunately, we failed to exploit this advantage and as we didn’t, two hubs emerged from both sides – Singapore and Dubai. I think we still have the potential, but our curriculum needs to be changed to meet the requirements of this five-hub concept and the Government needs to focus on these areas in the future.
About China, whether we like it or not, India is an emerging superpower and we are very close to India. In that context, we have to look at the future. I think Sri Lanka has a rare opportunity to play the role of the mediator. In order to achieve that status, we have to maintain absolute impartiality and that way we can maintain the friendship of both countries and get lots of economic benefits.
We are a strategically important location to both countries too. Therefore we should exploit this situation and have close relations with both countries by maintaining a transparent, impartial relationship. We can become a soft superpower of the world this way.
Q: Despite the significant remittances, this practice over the years has caused skilled labour drain and has had major social issues. As a politician, what strategy do you suggest to deal with this issue in the future?
Handunnetti: Before I express my views on the question let me say this. We all admit that there is a global economic crisis and it’s an unfortunate situation. The lack of law and order as well as economic discipline is the main reason for Sri Lanka to struggle. Going back to the question, the Government needs to concentrate on sending out skilled labour.
Little effort is being made to promote the education levels in our country. We appoint vocational ministers who don’t do anything and therefore the money allocated for developing such areas also goes to waste. Better policies and a change of attitude are needed and for Sri Lanka to become a knowledge exporter, the people need to be given examples of leaders, private and public, who work competently according to the law.
Q: Keeping in mind the summit’s theme, in your vision what particular segments of the economy should be focused on?
Wijewardene: Governments in the future need to concentrate on education – I disagree. They should concentrate on education now. We really need to start putting our efforts into the education system and into bringing about more skilled labour as most of our skilled labour is going abroad at the moment. We need to urge our youth to speak in English as that is the international language of business and if Sri Lanka is going to be a major player in the global economy, they need to be well-versed in English.
Coming back to the topic, what we hoped that the country would achieve has not materialised, the Government has failed in so many ways. The main reason I say this is because there is an inconsistency in policy making and decision making by the Government. This creates problems and there is no confidence in the country.
What this country needs is a sound policy when it comes to taking the country forward. We have two huge markets and because of our foreign policy that has totally somersaulted; we now have an increasingly hostile South Indian Government to deal with.
Unless a proper solution is given by this Government without dillydallying, this problem will not go away. We need to look at Myanmar opening up as it can be our gateway into tapping into an area of China. The prospect for Sri Lanka to be a major player is clear if we get our policies right and get our law and order sorted out. We are sitting on a bit of a time bomb. The cost of living is so high, the crime rate is rising and by next year, there may be social unrest on our hands.
All political parties should get together and come up with a solution to get this country to the place where it should be. Rs. 600 million is being spent on the upcoming provincial election just to know what the people are thinking about the Government. That kind of thinking has to go away. It’s time for professionals to take over and take this country to where it should be.
Q: We know that the ‘Mahinda Chinthana’ framework places a lot of emphasis on bringing up the villages and I think over the years that merely doing trickledown economics don’t work. Do you think that we have done enough over the last so many years and if not what should we do to actually enhance that process?
Lokubandara: I am an MP representing Badulla, which can be named a rural area. I don’t think we can be at all satisfied about how the rural areas have been treated over the years. With the ‘Mahinda Chinthana,’ the architect was a man from rural beginnings and we see a shift in policies to correct the situation. Looking at the ‘Mahinda Chinthana’ programme in comparison to the programmes before, you can be happy about it, but I wouldn’t say that it’s enough at all. There is a lot to do.
The majority of this country is in the rural area. You have to accept the fact that the villages are seeing positives for the first time. They feel they are being treated equally and that they have access to things they did not have access to previously. I think we are on a positive track and it’s high time for the private sector to also engage itself with the Government to get something positive. Isn’t it time that you all took use of the fact that the President of this country has invited this chamber for every pre-Budget discussion over the past five years?
I think positive steps have been taken but it’s not enough and that is why we feel much more should be done. However, it is not something that the Government should be expected to do by itself. That connectivity is important.
Q: Sri Lanka still has a relatively large debt. Most of this debt has been obtained for infrastructure purposes. Given the debt crisis in most of Europe, what lessons can Sri Lanka take and what warning signals should we be on the lookout for?
De Silva: Greece also borrowed and we lent to Greece even though Greece had no way of repaying those loans at those rates. Even Greece was able to borrow in 2011 so when Sri Lanka borrows for various alleged projects there is nothing to write home about because we are paying pretty high rates of interests. There are other options where one could borrow at one less.
The issue then is if we can be happy with what we have achieved. We used our geographical location from ancient days and we must be able to use it again. It is about positioning Sri Lanka in the global marketplace and we need to be able to integrate with goods and services, with product markets. The share of Sri Lanka’s exports has fallen and that goes to show that Sri Lanka over the last 10 years has declined and disintegrated from what we want to be.
What we need to do is to have an attitude change. The five hub concept is a good one but that’s on paper – where are the policies to implement those, do we have the polictcal will to do this?
Why has the CEPA not been signed?
We also need to look at capital markets. Have we opened them up sufficiently? Can we invest overseas? That is what will stabilise the balance of payments.
My last point is that you can say the debt to GDP ratio has come down. Taking loans is not bad but what are we taking loans for?
I challenge the fact that the loans are being taken for development purposes. We are running a revenue deficit which means we are not making enough in taxes for our day-to-day expenses which means we are covering those as well through those loans.
Q: Do you not have a responsibility to pass regulations that ensures that no one is above the law?
Sumanthiran: Nepotism and lack of rule of law is a very serious concern.
Dissanayake: Yesterday we saw a relatively well to do young man sentenced to death. It is said that the system is wrong and is in turmoil. I beg to differ that it is not the case. There are issues certainly – governance, corruption, etc. The positioning of Sri Lanka in the global context needs to be looked as a fundamental aspect. It all depends on perceptions. I think Sri Lanka is strong and resilient. With the enormous talent and business leadership, I’m sure we will do well.
Q: From a business point of view, we need a clear set of rules, we need predictability. Do we at least accept that we need to move forward?
Wijewardene: The rising crime rate has been partly involved with politicians. If you take the Tangalle incident where the Chairman of the local council raped and killed a foreign lady, he is still the chairman. The head of the party should take immediate action and throw that person out of the party. We don’t need people like that.
Dissanayake: Once he is convicted of the crime, the leader of the party will remove him – the system is in place.
Handunnetti: What is the point? We are always criticising the situation but what is the origin of that terrible situation? The worst thing we took on was the executive presidency and without demolishing the executive presidency we will never right these wrongs. We don’t have a problem with the person, it is with the position. Thugs at the grass root levels get their courage from the fact that they will be bailed out from the powers at the top. The executive presidency has never been so badly used in any other country.
De Silva: When we talk about rule of law, it applies to economics as well, especially property rights. Look at the expropriation law – there was a complete breakdown of governance there. The rules changed suddenly and you were then told that you didn’t have time to appeal or take your case through the legal system.
Gammanpila: This is a common allegation we have witnessed throughout history. I disagree with Sunil about the executive presidency. We have been practicing it since 1978 but there are countries that have been practicing it for hundreds of years but none of these countries have campaigns against it. By making certain amendments, we can make it suitable to this country.
Q: What is the view of the JVP to change the archaic labour laws?
Handunnetti: We have two issues there. Not just females but children and people not suitable for certain jobs are also being employed and overworked. Today the problem in the business community is how to do business and likewise the problem that citizens have is how to live.
Q: How can we change perceptions so that people will come back to Sri Lanka with confidence?
Sumanthiran: I would like to draw attention to the futile strike calling for budgetary increase in education and research excellence. This is why the intelligentsia of the country have gone on strike. We are talking about the importance of skills and training and they are saying the same thing. Here is an ideal opportunity for the business community to call for increased spending on education and research excellence.
Handunnetti: A lot of people wanted to come back to the country but did we take advantage of any of those people who were willing to come back and work? What do we have to offer for them? We have never discussed this although we always ask them to come back.
Q: Do you agree that Government involvement in business is a deterrent to the private sector? Why doesn’t Government divest itself of all business?
Lokubandara: I don’t see how it is a deterrent at all. We see State institutions that are doing very well and whatever sector the Govt has gone into, it has performed well.
Gammanpila: The private sector is the engine of growth. Firstly, there are certain sectors in which the private sector are unwilling to get involved in due to high risks and low profits and so the Government is forced to provide that service.
De Silva: I disagree almost entirely. For instance, with Sevanagala, the Parliament passed Rs. 557 million to run this company last month. There is a list of enterprises in which the Government has made tremendous losses. The Government should play a lesser role is business but ensure that there is more regulation so that people are not taken for a ride.
Handunnetti: We always talk about China. The Communist Party is not involved in business but it promotes and facilitates business and that is how it should be. courtesy: Financial Times