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Part 2

by Neville Jayaweera

In part 1 of this article I tried, in lay terms, to look at the magnitude of the economic crisis that confronts the Wickremesinghe administration and spelt out some of the measures it is bound to take to overcome it. In this concluding part I shall consider the likely consequences of those measures as well as the minimum steps that the government might have to take in order for itself, and for the country, to survive the shock.

Crisis of terrible proportions

If the government launches the reforms required for correcting the inherited flaws in the economy, and one hopes for the country's sake it will, their immediate consequences will be harsh beyond anything the country has hitherto known while their benefits will also not begin to show for some years.

Regrettably, people will have to pay more for electricity and for water, for bus fares as well as for train fares and while fertiliser prices will also rise, farmers will have to pay back their loans as well. Prices of essential commodities will rise steeply. As unemployment balloons with the influx of retrenched labour, social unrest, crime and lawlessness will also increase correspondingly. Marxist groups will incite trade unions and university students to take to the streets and as the country progresses towards resolving the ethnic conflict, radical nationalist groups opposed to a settlement will also join them. Political and social unrest may reach such proportions as not merely to test even leaders with nerves of steel, but even strain to breaking point the country's democratic framework as well.

Sadly, the burden of these reforms will fall most heavily on the poorest people who must therefore be protected. They will have to be protected, not only on moral and compassionate grounds but on grounds of expediency as well because not to do so can cause Sri Lanka to collapse into total chaos. However, in designing this "safety net", it will not do surreptitiously to restore unsustainable welfare and subsidy schemes through the back door, because that will only set at naught the entire reform package. Balancing these two contradictory demands will be the supreme test that Choksy and his team will have to pass.

As the prices of food and fuel rise sharply the temptation to impose price controls will be very strong but must be eschewed. Some ministers, are reported to have promised to "bring down prices". That will be resuming the journey down the beaten track which brought the country to its present plight in the first place, the policy of band aid and plaster rather than painful surgery. There is only one effective way to bring down prices and that is through more competition and by increasing output and supply.

This is a rough sketch of the predicament that confronts Prime Minister Wickremesinghe and his Cabinet.

"Cargo cult" or "DIY"

Minister Moragoda may cut a deal with the IMF and win some respite but, at best, it will be only a temporary accommodation for bridging the current budget deficit. The real problem is where to find capital to rebuild Sri Lanka's derelict infrastructure - roads, railways, ports, schools, hospitals, power generation systems, water supply schemes all essential for cranking up its economy. As in the past five decades, Sri Lanka will instinctively look to the outside world for help.

However, capital on anything like the scale that Sri Lanka needs is no longer available from donor countries and they may no longer be willing to bail Sri Lanka out, as they did in the past. Today, they have no reason to do so. Times and priorities have changed. After the cold war ended, Sri Lanka no longer presents any strategic advantage to any country, either militarily or because it possesses any critical resource such as oil, or copper, or tin etc.

More especially after September 11th, the world's priorities have been turned upside down. There is Afghanistan needing $30 billion, Argentina wanting $20 billion and President Bush announcing an increase of USA's defence package by a staggering $48 billion. Then, what about paying off all those countries who sided with the Western Alliance in its war against Al Qaeda - Pakistan, India and Egypt? They have absolute priority. Next come Kosovo and Bosnia. True, by comparison Sri Lanka's needs may seem petty cash, but considering the worlds priorities, even that may not be available.

In other words, Sri Lanka has no leverage.

As for direct foreign investment, the global recession has not left much spare capital for risking in countries like Sri Lanka. A recent survey for assessing the environment of Third World countries for investment by private capital, published in the London Daily Telegraph, rated Sri Lanka's suitability alongside Kampuchea, Myanmar and North Korea! Private sector capital never goes where risk is high except to make a fast buck. Furthermore, Sri Lanka's decaying infrastructure will actually discourage investors. Therefore the overall prospects for Sri Lanka are more bleak than the public or even many politicians imagine.

Somewhere Moragoda has referred to the problem of Sri Lanka's "mind-set" as an impediment to progress. The Sri Lankan mind-set that is the greatest impediment is the "cargo cult", i.e. the cult of waiting for the world to send regular cargoes, or waiting for "foreign aid". The days of the cargo cult are over and Sri Lanka has no alternative to going DIY.

The scorching option

Prime Minister Wickremesinghe and his team have a scorching option, between the frying pan and the fire!

However, as their predecessors did, they may be deluded into taking what seems a soft option. Exploiting the cease fire which will soon be in place, they can paper over the economic problem as others did before them, back off from risking the painful DIY adjustments and limp along in power, registering a 3-4% annual growth rate whereas only an annual growth rate of a staggering 9-10% over a minimum period of ten years can rescue the country. The majority within the government and even the opposition, ignoring the need to lay a foundation for a lasting prosperity and choosing instead their own continuance in positions of privilege, may opt for what they think is the soft option. That however will be the greater disaster for it will only postpone the day of final reckoning and make the prospect of Sri Lanka eventually sliding into chaos and mayhem irreversible.

On the other hand, if the UNF government has enough conviction and resolve to take the hard option, that of carrying through a programme of radical economic reforms, which will also generate great turmoil, it will at least lay the foundation for a lasting prosperity for our people, not just a tinsel prosperity based on foreign aid and borrowings but a sustainable one, built on our own blood, sweat and tears.

There is no way of softening the truth - either option will saddle the country with enormous hardships. Except that, with the seemingly soft option, the hardships will be interminable and there is only the prospect of the country sliding into what the Heritage Foundation calls a" failed state", i.e. an entity which though at one time a viable polity, has since disintegrated, examples being Somalia, Mozambique, Rwanda, Kampuchea and Afghanistan. Whereas if it chooses the hard option, though the immediate effects will also be great hardship, at least there is light at the end of the tunnel.

A plan

Obviously, Choksy and his team will not undertake these reforms at one stroke. That will spell disaster. In the case of a patient who requires surgery for the removal of a cancer, as well as a heart by-pass, and the removal of stones from the kidney as well, and is at the same time anaemic and diabetic (which is a fair analogy of Sri Lanka's condition today) the surgery will be undertaken step by step and under close monitoring by a team of surgeons and physicians which in this case will be Choksy, Gunawardena and Moragoda, lead by the Prime Minister himself. They know that haphazard and ad hoc measures will only make the country ungovernable, as is happening now in Argentina.

Sri Lanka has had two Economic Plans in the past. The first, a Ten Year Plan in 1959 under Mr S. W. R. D. Bandaranaike and the other a Five Year Plan in 1970. Under Mrs. Sirima Bandaranaike. Neither of these plans even left the ground.

Today Sri Lanka needs a plan of an entirely different kind. It will be a plan for carrying through the most radical economic surgery ever undertaken in this country. Such a plan, rather than be a wishy-washy catalogue of hopes and aspirations must set out targets for doing the painful and unpopular things, so that the sacrifices and hardships people have to bear will not come out of the blue but will be announced to them well ahead and they will not feel that they have been duped.

Coalition of political forces

However, a plan alone will not do. Prime Minister Wickremesinghe, or for that matter any other Prime Minister, or President, will need the support of the broadest possible coalition of political forces that can be put together. This means that Wickremesinghe will require at least the support of the PA and if the PA knows what is best for itself, it will extend that support and stand with the UNF.

In the coming months, if it wants to, the PA will have enough opportunities to embarrass and undermine the UNF. It can stoke discontent and isolate the UNF. But to what purpose? Should the UNF fail and be turned out of office what chance has the PA of surviving or of doing better? In fact by that time the economy would have deteriorated so much that there will be no prospect of even the PA and the UNF together being able to salvage the country. The problems the UNF faces are not just the UNF's only, they are the PA's as well. They are the whole country's problem. The burden of turning the economy round is enormous and only the two parties together can carry it.

Perhaps, the need to douse animosities and somehow to form a joint front with the PA, may explain Prime Minister Wickremesinghe's conciliatory gestures towards the PA on a number of issues over which he can easily run the PA and its leaders to ground. Mr. Wickremesinghe has already gone the second mile and it is now up to Mrs. Kumaratunga to reciprocate in full measure, if not out of instinct, at least out of prudence and expediency and for the good of the country.

They, Wickremesinghe and Kumaratunga, both know that neither of their parties, separately and independently of each other, can pull the country out. The impending crisis is of such proportions that there is no space for those who want merely to carp and jeer. The question is, will these two leaders be able to persuade their contentious followers, at least in their own interest if not for their country's sake, to quell their prejudices, transcend their hurts and weld themselves into a single cohesive formation?

Mobilising for the economic war

Finally, even more important than putting out a plan and getting the UNF and the PA together is the need to motivate and mobilise the people for the economic war which will be every bit as grim as the shooting war already in hand. This new war requires as an absolute first priority, telling the truth. The truth is hard to bear but it will be even harder to bear when it materialises in peoples' lives out of the blue and they have no understanding of its causes and origins.

The government must take the people into its confidence by telling them the whole grim truth, in all its dimensions, in all three languages, in detail, without jargon, without ascribing blame, without judgement or condemnation, and through every communication channel available.

By telling the truth I do not mean ministers giving press interviews, or going on tele or rolling out press handouts, or relegating it to the Information Department or to Press Officers. Telling of the truth has to be conceptualised and overseen by a minister from the inner cabinet, intelligent and capable of seeing the big picture and equally of keeping the campaign constantly focused and energised. It must be strategised like a military campaign, targeting separately every vital group, the workers, the farmers, the public servants, the business people, the religious community, the students and most of all, the housewives, so that their collective energies, which would otherwise be deployed for agitation and protest, may also be harnessed for the great rescue operation.

Very importantly, telling the truth must not appear as a crude propaganda exercise in defence of the government or as a boost for any particular political leader. It must be primarily a programme for educating the public, for raising their level of understanding so that when the crisis hits them they will not attribute to the incompetence of the government the difficulties they are called upon to bear.

Unless the government raises the awareness of the people dramatically in this way, they are bound to fall victim to the slogans of rampaging agitators and to that extent not only will the government's ability to cope with the crisis be hampered, but the prospect of Sri Lanka lapsing into chaos and mayhem also hastened.

Their finest hour?

Developing a coherent economic plan, putting together a coalition of political forces and mobilising the people for waging the economic war, will require from Prime Minister Wickremesinghe and from President Kumaratunga qualities of vision and character such as have not been demanded from any Sri Lankan leaders in the past five decades.

Somewhat aptly, Mr. Wickremesinghe described his predicament as a "crown of thorns". If he presses that metaphor further he must also expect the "agony of the crucifixion" to unfold soon, but if he were to submit in humility to that excruciating experience as well, he can also look forward to the "resurrection" to follow. Looked at in that perspective, Mr. Wickremesinghe's crown of thorns may be transformed into a heroic moment rarely given to any Sri Lankan leader. For he has now the opportunity to pull the wreckage of Sri Lanka from out of the rocks and bring it home.

In other times, in another place, Winston Churchill and Margaret Thatcher, faced such a challenge and they brought their battered ship home in triumph. Closer home, though on a much lesser scale, Presidents Jayawardene and Premadasa in their day did likewise, though through different storms and different perils. President Kumaratunga, for all the criticism heaped on her, was not without her own triumphs especially in the area of Human Rights and Foreign Relations.

Fortunately, and this even his sternest critics must concede, (the present writer has been one of them) the good news is that, courage and resolve in the face of great odds, as well as financial incorruptibility throughout his career and the ability to think as a technocrat rather than as a common or garden politician have always characterised Mr. Ranil Wickremesinghe's politics. These are rare qualities, not lightly to be ignored. Likewise President Chandrika Kumaratunga's famous ability to inspire and lead people will be as essential to the tasks facing the country as are Prime Minister Wickremesinghe's own rare assets.

Now, if Prime Mister Wickremesinghe and President Kumaratunga can together inspire their followers to sink their differences and see the country safely through the gathering storm, regardless of all that is past, future historians will say of them, that this was "their finest hour". If on the other hand they fail that test, not only will generations to come hold them in reproach but the rest of Sri Lanka's years will most likely be spent in "shallows and miseries". 

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