Professor Ricardo Hausman, from Center for International Development Harvard University
Tonight (Jan. 9) I am flying back from Sri Lanka to Boston after a 3 day visit. The <http://cid.harvard.edu/> Center for International Development at Harvard University (which I am so happy to lead), helped organize the Sri Lanka Economic Forum, together with the Prime Minister’s Office and George Soros’ Open Society Foundation. We had a half day open seminar and a day and a half closed door seminar with policymakers including all the economic area ministers, the governor of the Central Bank and the senior staff. Besides George Soros, the meeting had a great set of word class economists and policymakers including Joseph Stiglitz, Montek Ahluwalia (India), Alan Hirsh (South Africa), Erion Veliaj (Albania), Robert Conrad, Christopher Woodroof, Filipe Campante, Frank Neffke, Ljubica Nedelkoska, Daniel Stock and Tim O’Brien.
In addition, I had three very good and substantive meetings with the Prime Minister Ranil Wickremasinghe. I was also privileged to have not just the PM, much of the cabinet, our international guests, some 600 local participants, be present during my talk on the economic challenges of Sri Lanka but also President Sirisena.
I mentioned 5 challenges that Sri Lanka must face if it is going to sustain a process of accelerated and inclusive growth. First, I pointed out that the country was giving signs that its growth rate was limited by the growth of its export (and remittance) income. Second, and related to the previous point, the country faced the challenge of structural transformation, with too much employment in low productivity agriculture, very large gaps in productivity between agriculture and the rest of the economy and a relatively static composition of its exports, composed mainly of tea, rubber and garments. Third, the country faced the challenge of efficient urbanization with something between 20 and 40 percent of the population living in urban areas (depending on definitions) instead of the 60+ expected of countries at Sri Lanka’s income level. Fourth, and related to the previous points, the country faced the challenge of regional and social inclusion, as the structural transformation and urbanization process is bound to have some lagging regions and sectors (tea, rubber, simple garments), while others such as BPO, Knowledge PO, IT, tourism and more advanced manufactures would expand, in different regions, hiring different social groups. Finally, to accompany and even lead this process, the state would be hampered by a tax revenue of barely 12 percent of GDP.
The closed door meetings had some spectacular presentations by Sri Lankan officials and local experts on these issues.
Today, I visited three plants: two in garments and one in tires. The two garment plants were quite different but incredibly impressive. Both – owned by MAS holdings – are the most advanced I have ever seen and supply Nike, Victoria’s Secret and others. The tire company is the world leader in solid tires.
For a country that started so much poorer than Venezuela when I was born and that had a 26-year civil war that ended in 2009, the country has made incredible progress. I flew to Sri Lanka on January 5th while the Venezuelan National Assembly was being sworn in. The following day, Maduro announced a new cabinet. I was struck by the dramatic difference in the quality of the debate between Sri Lanka and Venezuela. While the debate in Sri Lanka featured real challenges with tough choices, the statements of the new ministers in Venezuela exhibited plain lies (such as the “economic war”) and absurd theories (such as the idea that inflation is caused by xwgjrnswqe$@/ or something like it).
A country can be destroyed by people acting on lies and wrong ideas. Today, the Sri Lankan parliament was convened as a constitutional assembly in order to pass a constitutional reform that would reduce the powers of the President in order to prevent a new Chavista-like abuse of power as that which is attributed to previous president Rajapaksa. What a sight: a President that is willing to forgo powers to make sure that future presidents do not abuse it. That is one thing that the Venezuelan National Assembly could do: re-establish the division of powers by re-appointing the Supreme Court, the Attorney General, The Comptroller General, the Electoral Council, free all political prisoners, re-establish freedom of the press and hold ministers accountable for gross violations of the law. Sri Lanka is one more country that was dramatically poorer than Venezuela 20 years ago but now offers a better quality of life than what Venezuela can offer. We must change this!