Neil Karunaratne, courtesy of the Daily Mirror, 30 March 2015, where the title is “Holding Back Development.”
Ex-president Mahinda Rajapaksa in a message read in a political rally held in Ratnapura, last week alleged that the current administration has stalled
development in the country. I cannot help, but agree, though grudgingly. This government has held back the country’s development. That is already
reflected in the projected growth numbers: The Asian Development Bank now says that the country’s economic growth would dip to 7 per cent this year,
from 7.4 per cent, last year. As recently as two months back, the ADB projected 8 per cent growth for 2015 and 2016. It however assures that the economy would rebound in 2016 to 7.4 per cent, still short of previous estimates.
Senior Country Economist for Sri Lanka Tadateru Hayashi says under the current political situation, investment would be affected this year (though
he adds that the medium and long term prospects are good). A distressing picture of economic mismanagement of the current
administration is gradually emerging. Flagship development projects have been suspended, some others are under review. The Colombo Fort City project is suspended, pending a review. A Tata housing development project is being reviewed. Lotus Tower, which is tipped to be South Asia’s tallest building, has run into trouble due to squabbling between two ministries over the ownership of the land.
The Northern Express way risks being abandoned. The construction of the defence headquarters has been suspended. In the latter case, one is right to wonder as to why the country should spend 50 billion rupees to build a headquarters for the defence forces. Investment of that magnitude does not make sense, unless Sri Lanka plans to become an Asian military power, for which it has neither economic capacity, nor, at least as of now, intention. Such money is better invested to build facilities to teach English and information technology to schoolchildren or to promote R&D facilities of the military, which already engages in small-scale defence manufacturing.
Australian gaming mogul James Packer was forced to abandon his $ 300 million integrated gaming resort in Colombo, after the government denied
him a gaming licence (Despite the fact, half a dozen casinos are already operating in the country). Moralists would have a claim, but, for a country that relies on housemaids toiling in the Middle East and tea plucking estate women for its foreign remittance and revenue, it is no less honourable to relieve that burden through a decent income generated from gaming revenue.
Instead of formulating a tax regime for gaming, which the Rajapaksas were unwilling to do, preferring self-profiteering, the new government killed
the goose that laid golden eggs. (Then, there are other populist policies, such as the sugar gain tax, which, though we may like deep down in our hearts, is not good economics.)
However, in most cases, stalled development projects have adverse ripple
effects. For instance, when the TATA housing is reviewed, it threatens the
future of one of the most ambitious projects in our time: Colombo slum
clearance.
Also when the government sends contradictory signals on the now stalled
Colombo Fort City project, not only does it dampen the appetite of Chinese
investors, who now have deep pockets, to invest in this country, but also
creates a far more dangerous ambiguity on the country’s investment
climate.
It is not that the incumbent administration led by the UNP, which is
supposed to have good economic managers, is unaware of this. It is wilfully
and intentionally risking the country’s economic future for its political
considerations. The strategy is to discredit the leaders of the previous
regime.
Nothing wrong in that, and there is plenty of justifiable reasons to do
so. However, instead of holding the Rajapaksas accountable for abuses and
excesses during the previous regime, the new administration is rather
naively trying to challenge the previous administration in its strongest
point: infrastructure development.
The misplaced strategy, therefore, is to discredit the infrastructure projects that have been undertaken by the previous administration. That is a losing strategy.
The sooner it is abandon better it is for the country. It is also a
dangerous strategy: It emboldens future protesters. It was not long ago,
that the villagers in the hinterland that is now criss-crossed by the
Southern Express Way, carried placards saying “We don’t want highways”.
CWC leader Arumugan Thondaman successfully stalled the construction of the
Upper Kotmale Dam during both Chandrika Kumaratunga and Ranil
Wickremesinghe administrations. The same administration of Wickremesinghe abandoned the expansion of the Katunayake international airport due to local protests. Whereas Rajapaksa prevailed over the protesters. Some actions of Rajapaksa could have been high handed, however, our development levels call for decisive action, if we are to leap frog in development.
I cannot help but admire Rajapaksa for doing that. In the same way I respect J.R. Jayewardene for breaking, at least to some extent, an entrenched culture of dependency that beset this country, by abolishing an extensive rice subsidy that compelled successive governments to spend on subsidized rice a colossal amount of money that could otherwise have been
invested in infrastructure. In other words, those bloated and politically-driven welfare measures weakened the State by forcing it towards a social overreach.
The new government’s attitude towards infrastructure development projects
undertaken by its predecessor has emboldened distracters. We would soon
witness future development projects being held hostage by a variety of
petty interests. Environment lobbyists would be up in arms as long as funds
keep coming from their foreign backers.
They compelled the then government to abandon the first coal power plant
which was to be built in Trincomalee in the late 80s. Years later, the
entire nation was forced into pitched darkness when the regular power cuts
were enforced after hydro-power dams ran dry in 1996.
The collective psyche in Sri Lanka’s traditional rural society and urban
slums are not supportive of change and by extension, development. They make
a receptive audience and ever- ready foot soldiers for any group of vested
interests who in the past forced the abandonment of and delay in various
investment and development projects.
Of course, some of those protesters have concerns worth attention and
speedy resolution. But, few worth enough to abandon major development
projects, that would benefit, not just their immediate neighbourhood, but
also an entire country.
The government should view those concerns in a utilitarian perspective: the
greatest happiness for a greater number of people (which may come at the
short-term inconveniencing caused to a minority).
Not only does the current government mishandle development projects, it
also seems to be clueless of the gravity of its conduct. One classic case is the contradictory remarks made by various ministers on the Colombo Fort City project. President Maithripala Sirisena, who was in Beijing on his first official visit to China was quoted as saying to the Chinese leaders that the suspension of the project was temporarily,
assuring that it would soon be resumed.
A day later, Deputy Foreign Affairs minister Ajith Perera contradicted
those claims, saying “no decision has been made on whether the project will
be completely halted or continued or concerning the issues that have been
highlighted regarding the project.”
Needless to say that the president, who was then attending the Boao Forum
for Asia Annual Conference in China would have found himself in an
embarrassing position. So could have been Minister Perera’s Cabinet
colleague, Foreign Minister Mangala Samaraweera, who was accompanying the
president.
UNP government’s rapid reaction may have been intended to appease New Delhi
and Washington, which the UNP seems to think will solve all our problems.
India, of course, has concerns about the Chinese activity in its sphere of
influence.
Those sensitivities were aggravated by Rajapaksa’s entanglement with
Beijing. The US shares concerns over the Fort City project, which is a
250-hectare artificial island which would be a lynch pin in China’s
maritime silk-road, which in the long run would challenge the US supremacy
in the sea.
A reasonable government would try to assuage the concerns of its
traditional allies and provide guarantees. Instead, the new government is
trying to throw the Chinese baby with the bathwater. That again is a losing
strategy as far as Sri Lanka is concerned.
Patrick Mendis, a Sri Lankan–American professor and a former US diplomat,
says that in handing with foreign powers, Sri Lanka should follow the
Jeffersonian dictum, that shaped the foreign policy in the 19th century
United State: Commerce with all, entangle with none.
One Asian country that succeeded in doing that was Singapore. The
Geo-strategist in Lee Kuan Yew (Who died last week) made sure that the city
state derives its strength from its proximity to the populous South East
Asia and China, as well as from its strategic allegiance to the US.
Ranil Wickremesinghe seems to have a different take on the matter. He told
newspaper editors last week that given Sri Lanka’s strategic location, no
country would want to antagonise us. But, what he forgot was that the
countries that we antagonise would overlook us and sail further to invest
in more accommodating destinations.
The bottom line is that be IT BECAUSE OF petty political considerations, misguided
foreign policy handling, or sheer wishful thinking, this government has
risked the economic future of the country. It is holding up the country’s
development.
By doing so, it is depriving Sri Lanka of becoming a success story in an
area in which few emerging and newly industrialised economies in Asia
succeeded: Now that the Rajapaksas are out, Sri Lanka is in a position to
prove that both economic development and democracy can go parallel.
Democracy has been the missing link in Asia’s Tiger economies during their
economic take-off. Neither Lee Kuan Yew, nor Deng Xiaoping (or for that
matter, Mahathir Mohammed) could promote democracy alongside prosperity.
Nor did they fully subscribe to those values. With a UNP government, which
is traditionally liberal, or even with an SLFP government sans Rajapaksas,
we can turn a leaf in history. This government should not squander that
opportunity.
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