Daily News Editorial

Aid and development

04 November 2016

Sri Lanka is on a rapid path to development, but local funds are often not available for big projects that cost millions of dollars. With Sri Lanka reaching Middle Income status sometime back, foreign aid per se is often in short supply. In fact, this is the status quo for many developing countries. Caught between these two ends, most developing countries opt to obtain foreign loans for their development projects. It is the best option to raise funds in the short term.

It is up to the individual countries to make the best use of these loans, some of which are obtained on commercial rates. Foreign loans, as a rule, must only be used on the most essential projects. Nevertheless, the previous Government squandered millions of dollars obtained via loans from China and various other countries on “white elephant” projects such as the Mattala Rajapaksa International Airport which had no commercial viability. This is a criminal waste, since the loans have to be paid back by the people regardless of a given project’s viability.

On the other hand, there should be no dispute about the fact that development has to be continued regardless of which party comes to power. It is just a matter of identifying which projects deserve to be on the broad development agenda. For example, there was a general consensus among all political parties on the need to build a network of expressways around the country. By a lucky coincidence of events, the first expressway was built during the previous Government’s tenure, but any other Government too would have carried out the project. In fact, a part of the Outer Circular Highway (OCH) project initiated by the previous Government was completed and opened after this Government came to power. This goes on to show that regardless of the party in power, development should continue unabated. This policy has generally been followed by all Sri Lankan Governments.

It is thus vital to keep politics and development on separate tracks since all Governments and political leaders agree on the need for development. It is however perfectly acceptable to point out shortcomings of projects such as Mattala which could have become a huge drain on our financial capacity and resources if not for Prime Minister Ranil Wickremesinghe’s recent initiative where foreign investors have been invited to make Mattala and Hambantota Port viable entities. For example, a Chinese concern will acquire an 80 percent stake of the Hambantota Port. These measures are estimated to save at least US$ 1 billion that would have gone for debt servicing.

China has been one of Sri Lanka’s closest friends and development partners. It has been involved in many projects in Sri Lanka from the 1960s. There are many allegations against the former Government that it had obtained huge loans from China for projects with little or no return on investment and that major acts of corruption have taken place in implementing these. A debate has been created in the media and society about statements made by Finance Minister Ravi Karunanayake in this respect.

Now the Chinese Ambassador to Colombo Yi Xianliang has weighed in on the matter, saying issues concerning development and business should not be politicised. The Ambassador has rightly pointed out that Sri Lanka should have consistent policies, regulations and laws which do not waver with political upheavals in order to attract foreign investment and spur economic growth. This must also apply to sectors such as health, education and foreign relations. As the Ambassador pointed out, investment promotion policies, management systems and legal systems should also be further improved.

Sri Lanka should now aspire to end the “aid mentality” and focus more on trade and investment. This is in fact the mission of Prime Minister Ranil Wickremesinghe, who has emphasized at many forums abroad that Sri Lanka was open for trade and investment. This rationale is the thrust behind moves to sign Free Trade Agreements (FTAs) with China and Singapore as well the Economic and Technical Cooperation Agreement (ETCA) with India, with which Sri Lanka already has an FTA. The authorities must strive to enhance Foreign Direct Investments (FDIs) flowing into the country.

As the Prime Minister stressed recently, Sri Lanka is strategically located between the two Asian powerhouses Dubai and Singapore, which should make it an ideal investment destination with an educated workforce. Sri Lanka is also regarded as the gateway to South Asia, home to one fifth of the world’s population. Sri Lanka and all SAARC countries must work together to increase trade within the SAARC region, which is now minimal.

Global cooperation is the way forward for development. South-South cooperation is also vital – developing countries can and should help each other in numerous ways, even if they might not have excess funds to be given as grants or loans. There is enough room for competition as well as mutual cooperation among the developing countries, all of which aspire to achieve prosperity.