Daily News Editorial

Towards better economic prospects

29 October 2016

Prime Minister Ranil Wickremesinghe made a very assertive and bold statement in Parliament that the Government will not let the debt burden fall onto the shoulders of the next generation. No Sri Lankan leader has made such a clear-cut statement on this vexed issue that has adversely affected the economy.

All Governments have obtained loans from foreign countries and agencies, mainly because financing is often not available locally. Governments resort to this practice to speed up development projects, lest they be delayed while waiting for local funds to flow in. However, it is generally understood that such loans should only be obtained for urgent and essential development projects.

This principle was violated with impunity by the previous regime, which borrowed heavily for “white elephant” projects such as the Mattala Rajapaksa International Airport and the Magampura (Hambantota) Port. Since these projects hardly make any money, at the present rate of payback it will take hundreds of years to end the loan commitment.

This is indeed a bleak prospect and some “thinking outside the box” was clearly in order. From the time they came to power in January 2015, both President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe have stressed the importance of turning these two white elephants to viable entities.

Now the Government has embarked on just such a step, with the Prime Minister’s announcement of initiating a Public-Private Partnership for the Hambantota port and the Mattala airport for developing the area as an international air-sea hub. Along with expanded the Bandaranaike International Airport, Colombo Port, Western Region Megapolis and the Colombo International Financial City, this is projected to save US$ 1 billion the country was about to lose, Prime Minister Wickremesinghe has said. Chinese, Korean and Japanese investors have expressed strong interest in investing in the special economic zone to be put up in 15,000 acres in Hambantota.

Presenting details of the Government’s 1,500 day economic development programme, the Prime Minister added that a considerable share of the country’s debt could be reduced in this manner. This is a victory for the country’s economy and the people who expect some relief from the High Cost of Living. The Government has explained that the proposed VAT increase to 15 percent to partially offset the debt burden will only be a temporary measure, until adequate funds are generated locally, making indirect taxes such as VAT unnecessary. We hope that this day will dawn sooner rather than later.

This is not the only highlight of the Premier’s path breaking speech – he explained that revolutionary thinking, bold policies and initiatives are required to take forward Sri Lanka’s economy. We should let go of stereotype and hackneyed ideas and embrace bold new initiatives. Trade and investment will be the keys to a more prosperous future. This is where the proposed (and much misunderstood) Economic and Technical Cooperation Agreement (ETCA) with India, Free Trade Agreements with China and Singapore and the proposed restoration of the European Union’s GSP Plus facility for exports come into play. It is vital to develop our exports which are hovering around US$ 11 billion at present by using such initiatives. There will also be a campaign for securing more Foreign Direct Investment and tourist arrivals. The key driver for all these initiatives is Sri Lanka’s strategic position as a gateway to South Asia.

The Prime Minister, elaborating on what he called the “third generation” of economic reforms (after the first and second generation of economic reforms initiated by Presidents J.R. Jayewardene and Ranasinghe Premadasa), said the Government’s aim is to put the income potential of Sri Lankans on a faster trajectory by doubling the current level of Per Capita Income. However, at the current rate of 5% economic growth it will only be achieved in year 2033 – personal income levels can be doubled by 2025 only if the growth rate is 7% per annum. The above measures will go a long way towards achieving this target.

Sri Lanka must align itself with future trends to move forward – the digital and knowledge economy should be a priority. The modernization of education will play a key role in this regard. Hence the Government’s plan to distribute tabs among A/L students and also have a limited number of “smart classrooms” with digital interactive screens with a view to expansion islandwide. In parallel, the Government has already taken measures to make education compulsory until Year 13.

We must heed the lessons of the past in order to secure our future. As the Prime Minister has rightly pointed out, Sri Lanka has missed many opportunities to achieve truly viable economic success in the past 68 years following Independence. We should not let this opportunity before us slip once again.

In the Prime Minister’s own words, “we need to focus on the path forward, on our ability to compete successfully in a dynamic global market place and carve out our niche among the prosperous nations of the world”.