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A Sri Lanka-South India sub-regional economy

Excerpts from the address made by the Prime Minister Ranil Wickremesinghe, at the India Today conclave Taj Place hotel, New Delhi, 28th February, 2003.

While the US took two centuries to emerge as a global economic giant, India as a country, began the process of industrialisation only five decades ago. However, in that short time, resources were mobilized, entrepreneurial skills encouraged, wealth created, living standards improved.

The political accomplishments of India, are too often overlooked. At the time of independence, the enormous challenges of building a nation from states larger and more diverse than Western Europe, often with well established Royal lines in government were met and overcome by Jawarahal Nehru. The design and introduction of the Indian Constitution is in itself a historic landmark that has provided the foundation for the world's largest democracy. A nation built on the liberties and freedom enshrined in the Constitution. A task which has proved to be more difficult in our own small nation of Sri Lanka.

As in any vibrant democracy, there are loud and emotional disputes from time to time. But India's democratic traditions have proved, over time, the strength, to address and resolve these disputes. This is all the more remarkable when you consider the breadth of the political spectrum from centre right through to communist parties running their states successfully. The roots of democracy in India are deep and strong. In Sri Lanka, we share the same unshakable commitment to democracy, despite years of war and civil unrest. We have also experienced a similarly enthusiastic political give and take, and are no doubt, the better for it as a country.

India's Challenges

Today India is in the process of making a major transformation that is changing the economic landscape of India and the region. It is also changing the global economic map. Because of the massive size of this country, the changes that are taking place are only beginning to emerge in national and international statistics. But when one looks around this country and talks to its people, it is possible to understand the changes that are taking place.

The predominant challenge facing India today, is that of breaking away from the economic dynamics in which much of the Third World operates. It is only through this transformation that it will be possible to provide the people of India with the quality, and levels of employment that will permit them to earn a decent living, and augment the living standards of the country. There is no doubt that, this can be done. The Leaders and policy makers realise what needs to be done to meet this challenge. The people must support this endeavour.

The USA became a global economic giant through its ability to create a seemingly endless supply of new commercial opportunities that could be seized by its people. This was possible largely because of the strong foundation of free markets, a workable legal system and widespread access to education. This environment was particularly conducive to entrepreneurs who could compete effectively in America's large internal markets, and later, overseas. India, I believe, has much the same foundation on which to build, and it would be possible to expand economic opportunities for people at large to invest, and share in the returns of higher growth.

In Sri Lanka, we have found India's achievements to be reassuring and supportive of our own efforts. We too face major challenges in creating sufficient productive employment for our people. And we have come to understand this can only be achieved through a very strong environment for investment and productivity growth.

Meeting the challenge of high growth in today's world means coping with the rapidly changing demands of the global economy. For India, as in my own country, this means ensuring that our economic strategies become much more democratic - opportunities must be created so that our people can invest and participate, directly, in the process of economic growth and development. High rates of growth cannot be sustained with only a few large players. There must be ample opportunities for new small and medium scale businesses to sprout up and, for some, to grow large and eventually succeed.

Of course, our role as government will need to change dramatically if high rates of economic growth are to be sustained. We must do much better in providing the laws, institutions and policies necessary to support much more flexible and productive economies.

Today, with the emergence of peace after nearly two decades of war, Sri Lanka is building a new, high growth economy. We are embracing the commercial opportunities offered by the more open world economy, and by the vast job ahead - of reconstruction and rehabilitation of our economy. Despite the fact that the ceasefire only reached its first anniversary last week, the men and women of Sri Lanka are getting back to work, re-building their lives and re-building the country.

Sub-Regional

We have recently launched a far-reaching economic reform agenda similar in many ways to that being implemented here, which we have called Regaining Sri Lanka. It also aims at removing the impediments of achieving much higher economic growth, and relies on using all of our resources much more productively. As in the Indian Prime Minister's Economic Advisory Council Report, the Regaining Sri Lanka program entails fiscal consolidation as well as reforms that will permit markets to work more effectively.

We feel that one of the great strengths of this program is that it is home-grown, reflecting the long liberalization process that Sri Lanka embarked on in 1977 and taking into account many of the lessons that we have learned along the way. We believe that we need to strengthen this process by focussing on implementation.

This has been one of our weaknesses for many years. Many reform programs have been launched in the past, but results have rarely lived up to expectations. We have found that the greatest challenge is not in the design of policy reforms and programs, but in effective implementation.

Increasingly, we are looking to the emergence of an integrated sub-regional economy encompassing Sri Lanka and South India. This area comprised a common trade and cultural region for over 3,000 years. Today, both countries are pursuing a number of exciting initiatives to overcome these barriers, and allow our people to take advantage of the complementary assets of this combined economic region.

* India and Sri Lanka already have a free trade agreement in place and the import duties on a wide range of goods are being reduced. But last year Prime Minister Vajpayee and I agreed to extend and deepen this FTA. Our countries are now beginning to discuss an agreement for Economic Cooperation that will broaden the range of goods traded freely. It will also liberalise the trade in services, and reduce barriers to investment.

* Perhaps the clearest symbol of the restoration of links between India and Sri Lanka can be seen with the planned erection of the land bridge between Rameshwaran and Talaimannar. According to legend there was a land connection across the Palk Straits joining our two countries. When this project is completed, trade between Sri Lanka and South India will be much more cost effective.

For our part, we envisage a road running south to Colombo, and on to the new proposed port on our southernmost tip of the island. That in itself will capture new trade, which in turn, will encourage trade with south Indian ports. But the road link will create new opportunities for businesses on both sides of the straits as the road extends up to Bangalore, Chennai and ultimately, Mumbai.

For us, from our strategic geographical position, we can offer an easy route into India for many of those traders sailing the far southern seas, who currently by pass our region. Equally, businesses in South India will have more cost effective access to world markets through sea transport through the Ports of Colombo and Trincomalee. The benefits will be enormous to southern India in particular.

For Sri Lanka, it will provide additional jobs, business opportunities and a chance to work with an increasingly significant economy. The South Indian economy and the Sri Lanka economy are complementary to one another. A genuine case of the small and the large working closely together for mutual benefit.

As we step back and look at the scope for exploiting synergies and strategic alliances in a rapidly growing South Indian-Sri Lankan sub-regional economic centre, it is not difficult to see this as becoming a major catalyst to economic growth throughout India and the larger South Asian region. One has only to look back to the economic impact that the Pearl River Delta - Hong Kong and Guangdong had on the growth and development of China, to get a sense of the opportunities that we see.

Looking a bit further afield, it is possible to see a dynamic South India-Sri Lanka sub-regional centre playing a major role in the economic prosperity of South East Asia.

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