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| Sunday, 13 October 2002 |
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Features |  |
| News Business Features Editorial
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Peace and rapid economic growth by Amrit Muttukumaru The simplistic hypothesis being peddled by the government with the assistance of an influential section of a largely compliant media and a superficial business community, that the cessation of hostilities and the just commenced peace talks in Thailand will lead to rapid economic growth is a fallacy not supported by empirical evidence. If this is the case, how is it that during the relatively 'peaceful' years between 1978-1983, the average growth rate during this period with the exception of 1978 was only in the region of 5.6%? It is also interesting to note that the growth rates subsequent to the ethnic war in 1983 was in the region of 4.5- 6.0% (with the exception of the years 1988 and 1989 due to JVP inspired violence) with 6% recorded in the year 2000! The exception in 1978 which witnessed a growth rate of 8.2% can easily be explained as a result of the initial spurt subsequent to the introduction of the 'open' economy by the UNP. These rates are highly inadequate for sustained economic growth not to mention 'catching up' with even the lesser economies of the East Asian growth spurt. It should also be appreciated that in spite of 1977 being in more spacious times with the intensity of competition being far less than it is today and Sri Lanka being the first country in South Asia to liberalise its economy, our actual performance in the pre-1983 period was far from impressive. After all, the country had 6 long years between 1977-83 to lay a solid foundation for economic take off which would have had the potential to blunt the intensity of the negative fallout from the ethnic crisis in the post 1983 period. This never happened in spite of the perceived 'superior' economic management of the business friendly UNP administration. Hence, for future guidance particularly in the current context with all the hype surrounding the 'peace dividend', the question to be answered is why Sri Lanka's economy failed to register even during relatively 'peaceful' times under an 'open' economic regime in the context of a more favourable external climate, the required growth rates for sustained economic growth not to mention 'catching up' with even the lesser economies of the East Asian growth spurt? Growth The factors that led to the sustained double digit economic growth of countries constituting the Asian 'tiger economies' are (a) a savvy and efficient political leadership, discipline, rule of law, social stability, a responsive bureaucracy, acceptable infrastructure as well as a pool of competent management and technical personnel. Given the ethos of our country and its people, we would add to this list - (b) democratic values which includes fundamental human rights, checks and balances to prevent abuses both within the government and corporate sector, an unfettered media as well as transparency and accountability. Even a cursory examination of both (a) and (b) will reveal that it is the absence of these factors in large measure that has prevented this country in moving forward. We are certainly not looking for perfection. This exists nowhere. However, at least to an acceptable degree it is vital that these attributes are present to fully unleash the potential of our people. For purpose of brevity of this article, we will consider only some of these pre-requisites for closer examination. Political leadership By no stretch of imagination is our political leadership savvy and efficient. For example, consider the preposterous number of ministerial appointments- 62 as against the former PA administration's 79. This is compounded by some irrational allocation of subjects among ministers which constitute a management nightmare- for example, the vital subject of education has been divided among three persons in terms of- education, tertiary education and school education! In a similar vein, industrial policy and industry have been allocated to two persons. On one hand, while making a pitch for investments into the country, the government makes ludicrous diplomatic appointments even to demanding foreign locations. It needs no elaboration to point out that the wrong signal will be presented in terms of our lack of seriousness and professionalism. Rule of Law threatened Any threat to the rule of law leads to a break down in discipline and ferments social instability. In Sri Lanka it is common knowledge that those with political influence can and have got away even with heinous crimes. The absence of accountability in our public life which extends to the highest levels is also a matter of concern. People have also lost respect for the judiciary and its processes. Billions of Rupees obtained particularly from state banks due to political patronage on highly inadequate security remain unpaid. Most of the privatisations undertaken by both the PA and UNP lacked transparency and were tainted by allegations of rampant corruption although in many cases substantiated by documentation, were bereft of any convincing inquiry. In many instances, these privatisations led to the conversion of a state monopoly into a more socially unacceptable private monopoly. Even today, this ailment continues. For example, the proposed unsolicited US $600 Million crude oil refinery cum power plant at the Sapugaskande site of the state owned CPC, allegedly involving a relatively unknown corporate entity lacks transparency and is devoid of any competing proposals. It is also strongly alleged that there is a nexus between elements of the underworld, the police and the political establishment. Under the circumstances, need we be surprised that all forms of crime, violence and indiscipline are rampant in this country. This has now extended in a frightening manner to schools as well. For example, the newspapers of 24 September 2002 reported: "School boys attack lady principal- Seven female students injured". Violence has also raised its ugly head in night clubs in five star hotels sometimes also involving the progeny of some high profile politicians. For example, the 'Daily Mirror' of 23 September 2002 reports that "the incidents take place in the early hours of the morning mostly between leading businessmen and their gangs...". The antecedents of some high profile investors currently driving our local bourse is reflective of the pathetic state of affairs of this hapless country. Poor infrastructure It is a severe indictment of successive governments that 54 years after independence, the country still does not also have the minimum physical infrastructure necessary for sustained economic growth. This includes- power, transport, roads, a competent pool of management and technical personnel and a responsive bureaucracy. It is sad that after 25 years of liberalisation, the country still does not possess at least one regionally recognized business school and technical institution let alone world class entities with internationally recognized personnel. In its place we have a multitude of largely half baked institutions with highly limited facilities mostly affiliated to relatively obscure foreign entities charging exorbitant fees. Due to general ignorance, the resultant gullibility and the absence of a regulatory agency, Sri Lanka has also become a haven for various individuals of even mediocre background and sometimes even with preposterous claims of expertise to conduct 1-2 day courses mainly in 'leadership' and 'human resources' also in 5-star hotels charging mind boggling fees. These factors will continue to be a severe constraint for economic growth. Good governance The absence of good governance needs no elaboration. The result of this is seen in the pathetic plight of this country with the substantial breakdown of the economy, rule of law, law and order, discipline and indeed the social fabric of the nation. The essence of good governance is transparency and accountability. This as is obvious is virtually absent in this country. For example, the government has the audacity to attempt to introduce legislation for no less than 36 Bills fundamentally affecting the country and its people virtually in the absence of any tangible public exposure and debate. The same applies to other legislation as well. The government is allowed to do this due to the ineffective and pathetic leadership of civil society which is largely unassertive and servile. In spite of all the terrible allegations of abuse of power and rampant corruption often with substantiated evidence also involving the most senior echelons of state power, there has never been any convincing inquiry to date. The picture in terms of corporate governance is also very bleak indeed. The last thing our largely small trader mentality, state 'hand out' dependent, 'tender' driven and 'conflict of interest' ridden corporate sector demands is a level playing field with checks and balances to prevent abuses. A shocking feature of this is the impunity surrounding it. This can readily be amply substantiated. Real peace It will now be clear that for sustained economic growth, apart from relative 'peace', there are other essential pre-requisites such as: a savvy and efficient political leadership, discipline, rule of law, a responsive bureaucracy, acceptable infrastructure, democratic values, checks and balances to prevent both state and corporate abuses and above all social stability. Unfortunately, in spite of all the sunshine stories in a largely compliant media, Sri Lanka is even today severely debilitated in many if not all these requirements. Even the premise of 'ethnic peace' seems premature at present. The key element in the peace process is educating the masses. This is largely absent. The only 'education' being carried out both by the state and leaders of civil society is for the general notion of 'peace'. Of course everyone is for 'peace'! No one has ever been against 'peace'. The question is, are the people ready for what it will take to usher in real peace which will include: * Self-governance Let alone the people, we are not certain as to whether even there is consensus on this within the government itself. Even the leadership of the business and professional community as well as civil society groups have never articulated this. Can we please have an unambiguous public statement at least from leaders of the bussiness community in regard to such issues? Only then can the international donor and investment community at least to some extent gauge the reality in terms of ushering in real ethnic peace. |
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