Forecast 2016: A Roadmap for Sri Lanka:

Loss-making public enterprises, a huge fiscal burden

by Asanga Abeygunasekera

Prime Minister Ranil Wickremesinghe told the Sri Lanka Economic Forum 2016 that the government's objective is to make Sri Lanka the most competitive nation in the Indian Ocean and develop the island as a mega city in the region and it's time for us to think how we are going to do it. The Forum included global leaders such as Ricardo Hausmann, Joseph Stiglitz and George Soros. Prime Minister Wickremesinghe said, "Sri Lankans who voted for change and those who didn't vote should unite to build this nation to the level achieved by nations such as Singapore."

George Soros said that we should lower our expectations as there is a clear sign of global economic slowdown this year. The $27 billion Soros Fund Management (SFM) hopes to invest $300 million initially in the economy.

Economist Montek Singh Ahluwalia said, tax revenue as per GDP was 12 percent when it should be 20 percent and called on Sri Lanka to get its fundamentals right. Comprehensive tax reforms are needed to increase revenue to 18-20 percent of GDP in the next few years.

Containing the fiscal deficit to 5 percent of GDP should continue to reduce and stabilise the economy. To reduce fiscal deficit, it is important to focus on increasing revenue and decreasing government expenditure - a difficult task to undertake in the present political context.

Losses incurred by public enterprises are a huge fiscal burden that need to be addressed. Offering employment merely to satisfy the electorate should be stopped. The Ceylon Fishery Harbours Corporation, which had over 800 employees in 2009 when this writer was Chairman has today, 1,800 people for the same number of harbours. Once a profitable Corporation, it is today incurring losses with a large workforce. A large Cabinet with nearly 100 ministers leads to a waste of State resources.

Standard of Living

Wickremesinghe participated in the World Economic Forum in Davos - a conference where he could interact with the top minds, investors and political leaders - to plan his strategic economic agenda for the nation.

For the first time in 10 years, Sri Lanka had a high level of political representation at Davos.

The government should focus on improving the citizens' quality of life by providing the best possible solutions to problems, instead of discussions about unfruitful political gossip. Unfortunately, most newspaper headlines have been about public misbehaviour of politicians and not projecting Sri Lanka's achievements.

An average of 7.5 people, were killed in road accidents daily last year - an increase, compared to 2014. Given the numerous references to Singapore at the Sri Lanka Economic Forum, an illustration of an example from Singapore is in order. On December 25, 2015, the Prime Minister of Singapore, Lee Hsien Loong, opened the Downtown Line 2 (DLT2), an extension to their public rail network, that would ease traffic.

Lee said, "With a new MRT line and extension to be opened next year the network will double to 360 km by 2030. It will be comparable to London, New York and Tokyo. This means eight in 10 homes will be within a 10 minute radius."

There are several important lessons and practices we could learn from Singapore.

The World Economic Forum has categorised Sri Lanka as an efficiency-driven economy (stage 2) in this year's global competitiveness index. It is an achievement, for Colombo which has moved up from factor-driven (stage 1).

Almost all South Asian countries are still in stage 1 or in transition. Sri Lanka should aim to move from efficiency-driven to the next stage of transition, and then to the innovation-driven stage by 2030. A goal to double per capita to reach $7,000 by 2020 and improve all sectors of the economy, should be set.

Given its tremendous human resource potential, the nation has the capacity to execute it. However, to become the region's top workforce not merely in terms of size but also quality, this valuable resource needs training. Investment in research and development and improvement in our educational systems and universities should be the government's priority.

The Moratuwa University could be our own MIT or IIT.

Improving transparency and strengthening mechanisms to fight corruption are important areas that need focus. Optimising the productivity of government's loss-making institutions, strengthening and encouraging the private sector to expand, combating sexual abuse, and enforcing child protection rights should be addressed. Sri Lanka has the potential to achieve great heights.

With the correct process in place, and collective effort to create a better political culture, the country could spur economic growth to overcome challenges, internal and external.

This article was first published by the Institute of Peace and Conflict Studies (IPCS) New Delhi for 'Dateline Colombo'.