Vichara

At the opening of the 10^th Parliament, President AKD made a policy statement covering a wide range of issues. It was a professional presentation. This note is in elaboration on a few topics in his speech that are related to economic development.

(In this note the President’s statements are in Italics.)

1. if national wealth becomes concentrated among a few, it will not stabilize the economy or society. Our policy, therefore, is that the benefits of the economy must be fairly distributed among the people”

While appreciating the sentiments expressed so emphatically, what is not understood is why this radical change did not come earlier in a country with a literacy rate of 92 % for adults aged 15 and above, and a high income inequality where more than half the total household income of the country is enjoyed by the richest 20%, while the bottom decile (poorest 20%) gets only 5%, with the share of household income being just 1.6% for the poorest 10%. There is a clear correlation between poverty and inequality.

2. While we may hold diverse political opinions, I assure you with full responsibility that we will not allow a resurgence of divisive racist politics in our country.

The opposition points out that the LTTE war dead commemoration displaying LTTE flags and symbols is supporting the resurgence of ethnic and divisive politics.

3. We aim to strengthen these cooperative networks and position ourselves as a strong competitor in the market.

The Cooperative Wholesale Establishment (CWE) was established to cater to the cooperative sector. During the time Philip Gunawardena CWE was linked with the Multi-Purpose Cooperative scheme. It was the CWE and the cooperatives that served the nation during the 1983 riots when the private trade hardly functioned. But surprisingly during the Yahapalana regime, the wholesale function of the CWE was debarred. This unwise and irrational move gave the Pettah mafia a free run in the import trade,e particularly with India CWE should be strengthened and given the right to import and serve the cooperatives.

4. We hope to make a new leap in agriculture. Specifically, we must revive our seed research laboratories. We must develop seed farms. We must reinstate a strong agricultural extension service.

 The Department of Agriculture which was the technical department with specialist officers had a major shock when President Premadasa decided to absorb all  Krushi Viyapthi Sevakyan (KVSs)- some 2300 as Grama Niladharis. Out went the qualified officers who were working at the village level guiding the farmers. For a few years, there was no agriculture staff at the village level under the Agricultural Instructors,

 Another detrimental change was devolving Agriculture and Agrarian Services to the Provincial Councils by the 13th Amendment to the Constitution.”

The Krushi Viyapthi Sevaya should be reinstated. Agriculture which cuts across Provincial boundaries should be made a central government function.

5. We are also focusing on the fishing industry. Our nation’s sea is eight times the size of our land, yet we are only utilizing a small portion of this vast resource. The fishing industry holds great potential for boosting our economy.

The country also has a huge potential to cultivate freshwater fish.

Sri Lanka has 18 major and 18,000 small tanks. The total surface area of all reservoirs is estimated to be 175,774 hectares. These can be utilized to produce fish for the domestic and export markets. Only the total catfish farming area of Vietnam in 2023 was only 5,700 hectares, but the export value in 2022 was $2.4 billion. Catfish are farmed in mud ponds. The area under tea plantations in Sri Lanka is around 203,000 hectares, and the export value of tea in 2023 was $1.31 billion.

6. We believe that the natural resources in our country, particularly mineral resources, hold enormous potential for our economy.we aim to establish a value-added industrial system by integrating both the state and private sector to transform these mineral resources into more value-added products. We have already discussed this with local industrialists in our country.

Sri Lanka is rich in a variety of minerals that have significant potential for value addition. These minerals can be utilized for domestic industries, export, and advanced processing to enhance economic benefits.

Our graphite can be converted into graphene for electronics, medical devices, and energy storage and for manufacturing of lithium-ion battery anodes, a critical component in EVs.

Our ilmenite and rutile can be refined into titanium metal for aerospace and medical applications and for the production of ceramic-grade zircon for tiles and sanitary ware.

Our apatite can be used to manufacture of phosphoric acid and fertilizers.

Potential for the value addition of other products please see:

https://vicharasl.wordpress.com/2024/12/01/minerals-in-sri-lanka/

7. The market does not progress by offering traditional and conservative goods and services. It evolves continuously, leaving behind old products and services, creating new markets for innovative products and services”

It is true that the country has to innovate new products and services, but we cannot leave behind old products and markets. Out traditional products in the present form and in value-added forms will have to be our foundation. We have to focus on all four conventional combinations of marketing, such as old products in old markets, old products in new markets, new products in old markets, and new products in new markets. To foster creativity and innovation, the education system has to be revamped.

8.Management of the market plays a crucial role, and cooperative networks contribute significantly to this. Therefore, we aim to strengthen these cooperative networks and position ourselves as a strong competitor in the market.”

In this endeavor, the role of the CWE should receive attention. The original objective of the CWE was to cater to the cooperative sector. It was the CWE and the cooperatives that served the nation during the 1983 riots when the private trade hardly functioned. But surprisingly, during the Yahapalana regime, the wholesale function of the CWE was barred. This idiotic and irrational move gave the Pettah mafia a free run in the import trade, particularly with India. The original role of the CWE should be restored and given the funds to engage in wholesale import, storage, and distribution of essential commodities through the cooperative system.

9. We must foster a mindset of staying and thriving as small and medium-scale entrepreneurs within the country. Providing the necessary technical knowledge, capital, and access to markets is a responsibility the government takes seriously.”

Most SME entrepreneurs are not aware of the opportunities available for investment. In India and Pakistan, the State Banks and the government have established comprehensive portfolios of feasibility reports for reference and adoption by investors. In the 1980s, the EDB had a special unit responsible for the formulation and evaluation of export-oriented projects, which worked with the private sector to identify and implement pioneering projects. EDB also provided venture capital to these projects. The EDB should reestablish this function, which was abandoned. 

Small and Medium Industries sector is considered the engine of economic development. There are many concessions accorded to this sector like low-interest loans. At present, the Banks confine themselves to only the evaluation and approval of SME projects. They do not play a role in the identification of projects and developing project profiles and feasibility studies to make them available to prospective investors. This is the policy followed by established development banks in India such as the National Bank for Agriculture and Rural Development (NABARD) and the Small and Medium Enterprise Development Authority (SMEDA) of Pakistan.

We should have an institution to build a comprehensive portfolio of feasibility studies and provide venture capital and consultancy services to the SMEs..

Vide: https://www.lankaweb.com/news/items/2022/01/08/a-case-for-feasibility-studies-and-venture-capital.

10.We intend to overhaul our diplomatic services entirely. While maintaining our commitment to fostering international relations, we are also committed to going beyond traditional diplomacy to assist Sri Lankan industries in finding and accessing global markets. To achieve this, we are realigning the operations of our diplomatic missions”.

The President is very diplomatic. Our foreign missions are white elephants and employment exchanges for political interests. During the separatist war, the main task of our missions was to keep the countries of their assignment informed of our side of the story and respond to false propaganda against Sri Lanka. Our predicament at the UN Human Rights Council is proof that most of our missions failed even at that task.  These missions in important locations have commercial secretaries, but the diplomats nor the commercial officers play any substantial role in the promotion of exports and investments of the motherland. They need to work in close collaboration with the BOI and EDB, which can backstop them. Our missions should be given targets on trade and investment promotion and ensure that they achieve them.

They should also report on new relevant research findings in the host country.

11. We cannot benefit from an economy that excludes the people. An economy that turns people into mere spectators will not bring us any gains. In every aspect of the economy, people should become active participants according to their abilities.”

Every government has been narrating this yarn, but little was done to achieve this objective. There should be a set process and a mechanism to permit people to participate, particularly in the formulation of policy. It is proposed that a special website be created in the Ministry of Planning where proposals for new policies are published. This should be done as a concept paper/white paper by the subject Ministry. Interested citizens can blog on them and make relevant suggestions for consideration. Subject Ministries, too, should have websites on which citizens could participate.

12. We believe it is essential to rebuild a competent, people-centric public service that prioritizes the well-being of the citizens

With the 1972 Constitution powers of appointment, transfers, and disciplinary control of public servants were vested in the Cabinet of Ministers. The Public Service Commission was abolished and replaced with a State Service Advisory Board and a State Services Disciplinary Board. Public officers ceased to be ‘obedient servants’

of the public, but the minions of the Ministers. The1978 Constitutions did not change the status.

Vide: https://vicharasl.wordpress.com/2022/11/12/plight-and-prospects-of-our-public-service/

12. Providing the Necessary Economic Support to Eradicate Poverty.

Poverty needs to be eradicated.

 in the forthcoming budget, we will ensure a fair increase in wages for public sector employees ( should be linked to productivity improvement

Poverty cannot be completely eradicated but can be reduced. Abject poverty has to be eradicated. China has been very successful in reducing poverty. While safety nets are essential to take care of the poor, they can also create dependence. The better way is to create employment opportunities for the poor, provide them with the necessary support and guidance, and motivate them to become entrepreneurs. For example, when there was a demand for eggs and eggs had to be imported, a selected number of welfare applicants could have been given day-old chicks and a loan to start a small-scale poultry project. This would also support the reduction of malnutrition.

Many of the beneficiaries could be paid a wage for some productive work like tree planting and cleaning the environment. Paid work, instead of a handout, empowers individuals and enhances the dignity of labor. Give a fishing rod rather than some fish.

13. We promised the people that we would manage the economy in accordance with the parameters agreed upon by the International Monetary Fund.

Article 21 of the Memorandum of Economic and Financial Policies MEFP the government clearly spells out the specific policies envisaged. It states:

We will phase out the administrative measures imposed to support the balance of payments, including those introduced on an emergency basis, once conditions allow. These measures include import restrictions, exchange restrictions, multiple currency practices (MCPs), and capital flow management (CFM) measures.”

(Main CFM measures introduced or tightened in 2020-2022 and currently in force include: (i) a repatriation requirement for exports of goods and services; (ii) a surrender requirement for exporters on proceeds from exports of goods; (iii) a surrender requirement for banks on purchases of export proceeds; (iv) a surrender requirement for banks on purchases of inward worker remittances; (v) suspension of outward remittances on capital transactions; (vi) restrictions on purchases of Sri Lankan ISBs by local banks; (vii) restrictions on outward transfers of funds for emigrants)

The agreement to exempt exporters from the repatriation of export proceeds has cost us ove 50 billion US$, whereas the IMF is giving us 3 billion US$.

The bulk of the 50 billion USD would be on the export of garments on which the country has spent over 40% of that in scarce foreign exchange.

IMF Proposals The good and the bad.

14. Our economy can undergo a significant transformation is science and technology.

Sri Lanka should have a science and technology policy that takes into account the the link between technology, industrialization, and education.

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Education has to prepare individuals with the skills and knowledge needed to participate in the future demand in the labor market.

Science and Technology create new industries an drive industrial systems. All Three education, technology and industrialization have to be interrelated.

Industrialization shapes educational priorities. Technology depends on education and innovation.

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 The triad of education, technology, and industrialization together are the foundation of  sustainable development. Investing in this triad ensures a skilled workforce, continuous innovation, and the ability to adapt to evolving industrial needs. This synergy fosters economic resilience and societal progress in an increasingly interconnected world.”

15. Digitalization is crucial, especially for providing services to citizens and advancing the economy to a new level. To elevate our country from its current state to a new level, the hallmark of that future will be Digital Sri Lanka.

Digitalization enhances efficiency, reduces cost, and improves productivity and connectivity. It is a necessity and not a mere option.

The importance of digitalization cannot be overemphasized. It is noted that the subject is in safe hands.

16. While our people can bring about positive changes in political leadership and the civil service, we also need a transformation in the mindset of citizens to build a strong nation. Without this positive shift in citizenship, we will not succeed in achieving the broader goals of political transformation. Therefore, we must make a concerted effort to foster good citizenship, positive attitudes, responsible actions, and proper behavior.

In this essential endeavor the example must come from the politicians and civic leaders. These worthy behavior should be inculcated from childhood. It is suggested that the subject of Civics be reintroduced in schools.

Vide: https://vicharasl.wordpress.com/2022/12/26/civic-education-sugath-nga/

17. I am reminded of Martin Luther King Jr.’s words:

Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.”

Over 2500 years ago, Gauthama Buddha said

Na hi verena verani
sammantidha kudacanam
averena ca sammanti
esa dhammo sanantano.¹

Vichara