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Speech delivered by Prof. W.A. Wiswa Warnapala

Making rope out of coir - the thick and fibrous rind of the nut

Extracts of the speech delivered by Prof. W.A. Wiswa Warnapala, Deputy Minister of Foreign Affairs during the budget debate in Parliament on November 24.

The government of the UNP in 1977 reversed the major economic policies pursued since the 1960s and introduced a set of policies, the main aspects of which included the following: one, reduction in the role of the state; two, open door policy in respect of foreign investment; three, privatization; four, reduction of the welfare services.

A main recipe was to downsizing of the state. In other words it meant that the state should not interfere with the operation of the market forces. Is this possible in a poor country. Mr. Deputy Chairman?

With the emergence of the minimalist state, I emphasize, 'minimalist state, more and more decision making has been pushed to the private sector. In my view the emphasis on the minimalist state should undergo a change. It has to undergo a change in the larger interest of the society.

In the preparation of the budget all these legacies have been taken into consideration. This is the point which I need to emphasize; all those past legacies which were disastrous in character have been taken into consideration.

What is the main thrust of this budget, Mr. Deputy Chairman? It is the development of the rural economy of the country. It is the re-vitalization of the country's rural sector, the potential of which has not been tapped in the past.

It was Mr. G.V.S. de Silva, one of the country's leading economists, who expounded a theory of economic development based on the rural sector. The country cannot move forward without rejuvenating the rural economy and this Budget has a number of programmes to develop the rural economy.

Mr. G.V.S. de Silva in his book, "Some Heretical Thoughts on Economic Development" in 1973 stated. I quote: "The Central economic question in our country today is the development of the rural productive forces".

He asked a question, Mr. Deputy Chairman of Committees.

I quote: "What are the economic relations which obstruct the growth of rural productive forces and which must therefore be changed?

"The relations between the rural economy and the urban economy and the relations within the rural economy itself".

Mr. G.V.S. de Silva emphasizing his thinking on the rural economy stated the following, I quote: "What does subordinating the urban economy to the rural mean in practice?

It means a complete reversal of Government's priorities, policies attitudes and thinking in respect of investment, research and technological innovation, deployment of skilled personnel, internal marketing and the terms of trade, housing, transport, education, health administration and cultural activities.

It means that the government must organize a tremendous shift of resources to the rural economy at the expense of the urban economy.

The only resources that should be allocated to the urban economy are those that would serve the development of the rural productive forces. The urban economy must be reduced to the status of a satellite, the direction and pace of growth of which is solely determined by the development needs of the rural economy."

This was what Mr. G.V.S. de Silva, one of the leading economists of this country said several years ago. Though I do not agree with all what Mr. G.V.S. de Silva said, I accept the need to direct resources and investment in the direction of the rural economy.

This budget, for the first time in the history, has understood the importance of the need to develop the productive forces in the rural sector through a variety of policies and programmes. In this budget, through a variety of policies and programmes, the resources are being diverted in the direction of the rural economy.

This is to be achieved through 'Road Rehabilitation Programme", "Entrepreneur Village Programme," the "Restoration of the Irrigation Tanks", "The Dahas Wev Programme" of the Hon. Minister of Agriculture, Livestock, Land and Irrigation Mr. Anura Kumar Dissanayaka.

All these programmes, if properly implemented, would help to develop the rural economy and alleviate poverty. The rural infrastructure needs to be developed so that the economic and social development in the rural economy could be accelerated.

Agriculture is a sector on which 77 per cent of the population depend. Measures have to be taken to increase the productivity in the agricultural sector. It is the non plantation or domestic agricultural sector which needs to be injected with both capital and technology.

I think that this question has been well addressed in the budget with the number of innovative policies. The rural sector is still starved of capital. A substantial increase is needed to produce results, which ensures much higher productivity and growth.

Mr. Deputy Chairman of Committees, this process of development in the rural sector needs to be strengthened with improvements in the infrastructure, which includes such things as improvement in education, health, roads, electrification, provision of drinking water, sanitation and other basic facilities necessary to improve the quality of life.

In the morning, the Hon. Dinesh Gunawardena mentioned most of these things. This Budget has given enough attention to these issues as well.

Recognizing the fact that Sri Lanka has a small and medium enterprise economy, several important measures have been taken in the budget. It is here that the partnership between the private and public sector could be strengthened.

Therefore, the budget has rightly recognized the need for a mechanism to promote SME entrepreneur competitiveness.

Today there are 125,000 SME entrepreneurs in this country and therefore this sector has to be provided with number of incentives. The Hon. Minister, in his speech mentioned the need to transform the SME sector as the nerve center in our development process.

The establishment of an Enterprise Development Bank has been proposed and this in my view would help the SMEs to improve their international competitiveness.

In the past not much attention was paid to micro-business and enterprise development in this country. There were no concrete proposals or investments made by the Government. The present budget in my view has devoted much attention to the SMI sector.

The aim again is to raise the level of productivity in the rural sector. In the area of economic policy several institutional changes have been proposed in the budget.

1. National Council for Economic Development

2. Strategic Enterprises Management Agency

3. Administrative Reforms Committee

4. National Productivity Agency

5. National Council for Administration

It has been stated that they have been created to improve both the efficiency and good governance in this country. In the history of this country several committees have been appointed to look into the administrative reforms.

In my view, Mr. Deputy Chairman of Committees, administrative reforms have to be in the context of constitutional reforms. Two new constitutions have been enacted after Independence but no corresponding administrative changes were introduced.

Under the 13th Amendment power was devolved to provinces but corresponding administrative changes were not made. By rationalizing functions of government agencies by improving procedures and by emphasizing on the use of IT facilities, the public administration of this country could be modernized in order to inject more efficiency and effectiveness into the public administrative institutions of this country.

A complete reorganization of the administrative institutions is necessary in the given context. It is necessary primarily in the context of constitutional reforms which we have experienced since 1972. I hope that the National Council for Administration which has been proposed in the budget would undertake this task.

All these innovations show, that the equality of treatment has been given to the public and the private sector. Role of the State has not been totally eliminated in the budget. One thing, about which we need to be cautious Sir, is that a developing country should not leave everything to the market forces.

I emphasize, in a developing country everything should not be left to the market forces. Some people are of the view that the role of the State should be reduced, if one wants to realize the benefits of globalization. A state, in my view, has a bigger role to play so as to see that the poor people are not marginalized.

Budget has recognized the role of the State includes the provision of classical public goods such as education, health, law and order, supervision of markets, protection of the environment, provision and social welfare and investment in areas of public interest.

Mr. Deputy Chairman of Committees this is the social purpose of the modern State. Harold Laski was the major exponent of the theory of the social purpose of the State.

The essential functions of the State needs to be maintained in the context of globaliztion. In many parts of the world especially in certain developing countries the problem is the weakness in the role of the State.

It is only the State that can limit the impact of globalization on income inequality through taxation, wage controls, policies and social welfare programmes.

This budget has assigned that role to the State. It has been accepted that Sri Lanka needs a strong private sector as well as a public sector in order to achieve poverty alleviation and growth objectives.

Yet another important feature is that all sectors have been equally treated in the budget. Mr. Deputy Chairman of Committees, all sectors have been equally treated in the budget. Certain innovations have been made in the social sector.

The need to manage public enterprises properly has been taken into consideration. Various institutional changes have been recommended to achieve this objective. Medium term budgetary framework which was tabled along with the budget is a public expenditure programme for the next three years. Medium term budgetary framework has identified the areas in which investment is to be made.

There are interesting and useful proposals, but they need to be properly implemented if the objectives are to be realized.

On the basis of this medium term strategy allocations for education, health, infrastructure development, enterprise development, culture and religion and public administration have been considerably increased as Hon. Dinesh Gunawardena explained in the morning.

This shows that the budget strategy is based on the development of the infrastructure to accelerate economic development in the country. It is said that public investment will be raised to 6.4 per cent of the GDP.

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