Sugath Kulatunga

On the 18 th of December 18- 2022, I wrote on LBN that President Ranil Wickremesinghe was attempting to Grow More Food by statute. The President proposed to bring in new laws to ensure food security. It never happened and we are still importing eggs from India. I emphasized that what we should focus on is innovation, systems improvement, incentives, and application. A legalistic approach is not an adequate solution.

Now the President is attempting to transform the economy again by statute by the new legal package designed to provide for the National Policy on Economic Transformation and for the establishment of the Economic Commission of Sri Lanka, Investment Zones Sri Lanka, Office for International Trade, National Productivity Commission, and Sri Lanka Institute of Economics and International Trade. This no doubt is another measure to propitiate the IMF.

The Law has two key objectives. One objective is to establish a plethora of new institutions to support the economic transformation. Some of them would replace existing institutions and others will duplicate the work of existing institutions. The immediate problem would be to appoint competent persons to manage them.

The second objective is the Presidents dream or wish list to set legal targets on economic management ranging from setting  public debt to GDP below 95% by 2032,Central Govt. gross financing needs to GDP below 13% by 2032,Annual Debt Service in Foreign Exchange to GDP below 4.5 % by 2027, Net Zero on Greenhouse gas balance by 2050, Exports of Goods and Services to GDP 25% to 60% during 2025 – 2040, Net Foreign Direct Investment not less than 5 % of GDP, in 2030 to Primary Balance in the Govt. Budget to reach 2.3% of GDP etc.

A similar bill setting economic targets titled the Fiscal Management (Responsibility) Act No. 3 of 2003 was brought. by Prime Minister Wickremesinghe on what should be done in the management of public finances.It had three main objectives. By 2006, the budget gap should be five percent of the Gross Domestic Product and the Government that comes after that should maintain the budget gap below five percent. It also called for a passage of a law requiring total outstanding public debt to be reduced to 65 percent of GDP by 2013. When the Government of Sri Lanka guarantees loans, it should not be more than 4.5 percent of the GDP. If the subsequent Governments had fulfilled these three terms properly, this country would never have gone bankrupt. The tragedy is that the very governments of RW merrily violated those condition. If he had even a modicum of commitment to the essence of the Fiscal Management (Responsibility) Act No. 3 of 2003 he would not have resorted to ISBs during the Yahapalana regime.

It is doubtful whether the targets in the Economic Transformation Act (ETA) are evidence based or merely elite driven. In most countries such targets are evidence based indicative targets set in a National Development Plan (NDP). It is reported that in 2018 there were 134 countries having National Plans. Rather than a piece of legislaion NDPs are based on a participative process which gives the Plan wider ownetrship. Such plans have internal consistency and are formulated by trained professionals on planning. They are built through sectoral plana and are based on availability of resources and the capacity of the institutions involved. An NPD would not be complete without an implemention strategy and an action plan.

During the UNP government of 1977 ‘planning’ was considered a dirty word. To ambitious politicians a plan is an obstruction which deprives him of the flexibility of political and business prioritation. India made use of national planning from the time of Independence and benefitted by it. Planning and Plan Implementation units must be restored for achieving develoment results. No amount of legislation can be a substitution.

Sugath Kulatunga