Looking ahead, the future looks obscure. Other than the IMF spelt plan, we do not have a clear economic vision. Politically, all sans the TNA, are digging their heels in their own corner. Yet, policy-wise, none distinguishable from the other. The TNA that never bothered with the economy and only concerned with the territory and self autonomy is the only ‘odd’ one out.
The other political parties thus are engaged in national politics. As such, one can only sympathize with the tight rope they dance on - trying to attract local vote blokes without alienating the outside world.
The Opposition’s Game
The Government’s efforts to implement the IMF programme is a case in point. The Opposition is of no help at all, which is quite typical in Sri Lankan politics. Instead, the Opposition sits on the sidelines and heckles and criticizes the Government. The SJB is on record that if they were in power, they would have negotiated terms and conditions first with the IMF.
However, what is the ‘better deal’ we could have negotiated at the time is questionable. Whilst the Gotabaya Rajapaksa Administration was servicing the foreign debt, the SJB was pushing the Government to default. When that Government did eventually concede and defaulted, the consequences were disastrous. Immediately, we lost all creditworthiness.
This was catastrophic, especially at a time when our revenues that got disrupted after the Easter Attack and the pandemic were yet to be restored fully. In any case, our expenditure bill is higher than our income. As such, we rely heavily on credit.
Thus the only way out of that hole we dug ourselves into was to somehow get the IMF’s bailout. Whether we were in a position to negotiate with the IMF was questionable. One may recall that while the IMF was sympathetic, they were not exactly enthusiastic about coming to Sri Lanka’s rescue.
This was not the first or second time that Sri Lanka went before the IMF but the 17th time. Each time before, after receiving the first few initial tranches, then Sri Lankan Governments had conveniently breached the agreement. The IMF was therefore very keen that this would not be the case this time as well.
The Ranil Wickremesinghe’s Government had to work very hard to convince the IMF that the Government was committed to see through the entire IMF programme. It would be very interesting to see how the Government would deliver on their pledge - especially with the general perception being that the IMF is an arm of the Western imperialist.
More than the imperialism theory, IMF prescriptions irritate the voter. Also, whilst these conditions may resolve immediate issues, whether its consequences long term would benefit the nation is a hotly debated topic by the opposition. For a demagoguery as our society, heavily promoted by politicians for their own political gain, financial discipline - whether insisted by the IMF or not - is quite abhorrent.
Therefore, when Governments approach the IMF, the need is to ensure a smooth cash flow. The dire consequences if the Government failed in this endeavour was experienced in 2022. Hence, a Government’s number one priority is the smooth cash flow. Towards this objective, our Governments are ready to sign any pact even with the devil.
After overcoming that obstacle, the next challenge is to win the forthcoming elections. This forces the Government in power to renegade its pledges to multilateral finances as the IMF. However, as elections draw nearer, it remains to be seen how strong the Government’s resolution will hold.
The Opposition is gleefully feeding the anti-IMF rhetoric. All the Opposition is interested at this point is the political mileage they could gain at the expense of the Government’s discomfort at enacting IMF’s stipulations. A smarter Opposition might see the wisdom in helping the Government to overcome the present challenges so as not to inherit it.
However, as a shortsighted nation, it is of little wonder that our Opposition’s only goal is gaining power by discrediting the present power. Whether once in power, given the current situation, if the Opposition can do a better delivery remains to be seen.
Confusing SOE with Nationalism
Indeed, the IMF’s prescription for the patient is not a sweet-spicy lozenge. It is bitter medicine all the way through. IMF’s insistence that the State ease its burden on the enterprises it owns and restructure it.
It just so happens that many view State Owned Enterprises (SOE) as a symbol of nationalism. A brief and quick analysis into this misnomer would be: during the days of the forced occupation by various European forces, namely the British, the local entrepreneurship that existed for millennia got wiped out. The new brand of entrepreneurs for a long time was almost entirely European.
This new business world was dictated by extremely racist terms. For instance, the caucasians were levied a ridiculously low tax rate as they acquired our land to invest in export agricultural crops. Conversely, the locals had to pay exorbitant taxes to utilize our own land for the same purpose. Unless, one adapted European ways from dress onwards, one was literally ostracized from the administrative system. The locals who managed to break into this racist world were naturally few.
Therefore, the past generations grew up equating entrepreneurs and proprietors with the enemy. The socialism that became a trend after World War II did not help this lopsided view. Hence the immense difficulties overcome by our local entrepreneurs to challenge the Europeans on their terms were never acknowledged or appreciated.
It is most unfortunate that neither the ordinary voter nor the politician understood the ground reality that the established markets were with the West. The only sustainable way forward would have been for us to work with these markets and steadily establish ourselves through technology and knowledge transfers.
Instead of being shrewd and sharp and rebuilding our economy so that we matched our financial independence with the territorial integrity we regained in 1948, we decided to take the bull by the horn. This led the State to take over ownership of privately owned enterprises. Many of these businesses were owned by the West. Thus, this move came to be known as nationalizing.
However, it was not only the Western owned companies that were ‘nationalized’. Even innocuous business entities such as the Buhari - a Muslim food joint renowned for its biriyani - were ‘nationalized’. Under the Land Reforms Act, Sinhala planters were stripped off their properties. The fact that they were staunch Buddhists who did much to protect Buddhism, establish Buddhist schools and contributed to the rural economy was completely disregarded.
It is noteworthy that in the decades following 1948, it was not the racial tensions that had the real negative impact on the economy. It was the hatred cultivated against the economically strong bracket.
To make Sri Lanka great again
Had that local business community were protected and strengthened, Sri Lanka today would have been a very different country. It is noteworthy that to date, entrepreneurship is not looked at seriously in Sri Lanka.
Even the JVP’s claim that a Government under them would support new startups is woefully inadequate. The kind of data they promise to enable new entrepreneurs is already made available by the Central Bank.
It is important to understand the distinct difference between data and information and information and knowledge. Thus, investing money earned after working years as a taxi driver in Italy is not enough to be successful as a restaurant owner in Sri Lanka regardless of the statistics made available.
We need a much better plan to hone our entrepreneurial skills. Studying success stories of fellow countries that rose from the ashes after European forced occupation would help.
However, it is important to understand that times have changed. Furthermore, each country has different parameters. Singapore for instance is a port city. Sri Lanka may have a number of port cities dominating its four corners. Simultaneously, Sri Lanka is also an agrarian based economy that has been our backbone for millennia. Even during the toughest times, Sri Lanka managed to stay on her feet because of this economy that sustains over 60 percent of our population. The success of our apparel sector proves our capabilities to establish the manufacturing sector. Therefore, blindly copying those strategies that worked for other countries’ or hypes as ‘make Sri Lanka a Singapore’ will not work for us.
To move forward, we need to first engage in an important exercise. Even as we celebrated our 75th Independence anniversary we do not have a clear idea as to our missteps. Instead, we fuel ourselves with half-baked theories.
Where did we go wrong?
We failed to look after the two most important segments of a nation. One was the economy and the other was our education. It does not appear that we had a firm grasp of the importance of both. We certainly did not understand the correlation between the two. Thus, even to date, we have not taken the necessary measures to make the two subjects relevant in each other’s spheres.
From the economic front, we could not decide on the direction. When we regained independence in 1948, we had an open economy. However, that economy was designed to boost the British coffers. Our primary focus was to boot out all traces of Western ownership out of the island. Yet, we overlooked the most crucial factor, which is that the markets are still held by the West.
Thus, we did not realize the damage that when we nationalized the oil companies in the early 1960s, we lost a bigger portion of forex when the West reacted and closed their market doors on our face. By this time, our forex reserves were already in the red. Both the global slump in the 1950s as well as the end of the Korean War had reduced the demand for our rubber, tea and coconut oil.
If China did not reach out with the rice for rubber pact, we would have been in serious trouble. However, it is not clear if we understood the strategy. We tried to do the same thing with tea and swap for industrial goods from other non-Western countries.
Ceylon tea was a valuable commodity with a well established brand. While we settled for less quality standard machinery, these countries re-exported our teas. This denied us the direct opportunity to earn forex - especially at a time when we really needed it.
It is noteworthy, the two main parties pulled the country in two opposite directions - West Vs. anti-West foreign policies and Open Vs. Closed economies. This continued right up to 1977. However, none considered a more national based education system.
The education system left behind the British was again to serve the British agenda. As such, the curriculum was geared to meet the British goals. To meet the needs of the industrial era, the curriculum focused on training the mindset and skill set accordingly.
Most damagingly, none bothered to change the narrative created by the British to justify their unjustifiable acts. We are taught that we are a small nation and thus must not antagonize the world. Even when outside forces intimidate or insult us, our reaction is to appease timidly than address it with dignity.
Though politically divided, the education system has continued. We still have not realized that in turn we are colonizing ourselves. To get ahead in society, we currently need English. Rural economy, culture not specialized industries such as puppeteering, intricate wood carving and pottery are fast disappearing. Our cottage industries are now almost non-existent.
We believe that to step into the next era, which is dominated by robotics and artificial intelligence, we need a good grasp of English. We cannot be more wrong.
English is an ambiguous language. Conversely, Sinhala is a rule based language. As such, it is easier and requires less memory to teach Sinhala than English to a machine. If we shift our focus to Sinhala, we can make a faster stride in this field than most other countries. For that, we need confidence essentially to reach to the point of development the world is at right now in this field, we would have to reinvent the wheel. Still, the rewards would be humongous.
Our main problem is that despite talking of a system change, we do not have the courage to do more than tinker with the existing system. It is much easier to lay the blame on the political arm and talk of getting rid of the entire lot. That would be just plain silly as the only result from such a move would be anarchy. We only need to see what happened in countries like Iraq and Libya to understand the danger of such a scenario.
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