An evaluation of Prime Minister's economic policies

BY DR. H. N. S. KARUNATILAKE

THE Prime Minister's economic policy is in the document entitled "Mahinda Chinthanaya". This document is not only very comprehensive but contains material that is not found in the document released earlier by the principal rival candidate Ranil Wickremesinghe.

The Prime Minister advocates a National Economic Policy and there could be no dispute on this issue. All sensible economic policies has to have a national orientation.

All countries have national economic policies and one cannot think of any country that does not follow national dictates. In fact what is the purpose of economic policies if they do not have a national orientation?

The Prime Minister goes on to state that what is most significant is to increase domestic production with or without the assistance of foreign investors and to engage in productive activities of all kinds in a most advantageous and fruitful manner.

By this means the main objective is to reach a growth rate of eight per cent annually over the next six years. With proper coordination and management of the economy the later figure could be achieved without much difficulty.

The Prime Minister goes onto state that efforts would be directed to ensure that the benefits of this growth rate would trickle down to very poor segments of the community.

This is a sensible approach because there is no point in letting the rich grow richer in a society where wealth is concentrated in the hands of just a few and only a very small number pay income tax.

The Prime Minister would also see that in order to achieve this objective and to promote exports the local entrepreneurs would be provided with the necessary capital, credit and know-how. He gives an assurance that none of the enterprises that are now owned by the State would be privatised.

The Prime Minister's objective is to ensure that the national fiscal programme and policies would be maximised.

Through prudent fiscal management the Budget deficit would be reduced to the bare minimum within the framework of a national economic policy, while the deficit itself would be subject to constant review. Steps would be taken to ensure that the tax system is further simplified.

Banking arrangements would be modified under the "Lanka Puthra" programme that will introduce new banking arrangements that will help the small and medium entrepreneurs to reach levels of excellence especially in regard to international standards.

It is also proposed to establish an Agricultural Bank for the small-scale agriculturist. The Prime Minister will help the small retail and those in the wholesale trade by taking action to resolve their problems.

He will also take steps to restore all the co-operative outlets so that consumers would be in a position to get goods at reasonable prices and steps would be taken to ensure that they are free from political interference. It is proposed to have a co-operative store in every village.

The provision of adequate water resources which is the principal requirement for cultivation would be guaranteed and a plan for the development of irrigation resources would be introduced. The policy is to link all these to the major rivers.

It is also proposed to complete the "Thousand Tank Restoration Programme" as quickly as possible. Simultaneously work will commence on the long awaited development programmes linked to the multi-purpose schemes such as Moragahakanda, Uma Oya, Deduru Oya, Menik Ganga, and Yan Oya. Fallow land will be brought back into cultivation and a National Land Policy would be put into operation.

Local seed production would be given priority and strengthened and research centres for superior seed production would be encouraged. All fertiliser would be made available to farmers at Rs. 350 per bag 50 kilos to give inducements to the farmer.

A new fertiliser factory would be set up to produce fertiliser and through the co-operatives, insecticides and weed control materials would be made available at economical prices.

The Prime Minister will provide agricultural tools and hand tractors to clients on hire at concessional rates. The existing duties on the import of tractors will be totally removed.

Every farmer will receive a mammoty of his choice at no cost to him. Agricultural insurance and pension schemes for farmers would be introduced at the earliest opportunity. For farmers who cannot repay their debts, their debts would be written off.

Through the involvement of the Agriculture Department and the Trade Ministry, a buffer stock of rice 100,000 tons - would be maintained. The rice mills that are currently in a state of neglect will be rehabilitated.

The production of special varieties of tea will be encouraged and producers would be given incentives to increase output.

During the cultivation season the import of the following crops, potatoes, onions and chillies would not be permitted. Post harvest losses of fruits and vegetables would be minimised and new packaging materials would be introduced.

Provincial distribution centres would be established and the exports of these products to foreign countries would be promoted.

Steps will be taken to give one acre of land from properties vested in the LRC and Janawasama to those who are interested in cultivation and measures would be taken to increase assistance by 25 per cent, while the cess on production once again will be released to the relevant estates.

The emphasis will be on value added teas and the production of these varieties will be encouraged in the private sector with the necessary capital assistance.

Steps would be taken to promote the production of coconut outside the coconut triangle, especially in the South and the East and the coastal areas. Assistance would be provided for the replanting of coconut and financial assistance will be commensurate with annual increase in costs.

Sugar cane cultivation will be promoted among the small sugar cane farmers. The country is self-sufficient in milk production only to about 15 per cent, which implies that the bulk of milk and products are imported.

We must stop the subsidies on imported milk products given to multi-national companies. Our policy should be to strengthen the hand of the milk producer by giving him assistance in the form of loans to purchase milk cows.

He intends paying the farmer Rs. 25 per litre of milk from January 2006 and in three years the price per litre would be increased to Rs. 35. In regard to the fisheries sector steps would be taken to provide in three years 500 multi-purpose ocean going boats.

In addition the fisheries equipment that has been lost will be replaced on concessionary terms. One hundred fisheries harbours will be set up.

From the foregoing it will be seen that the policies in regard to agriculture and fisheries are far more comprehensive than that proposed by the main rival contestant.

This is the context of the countries that were behind us some forty years ago such as China, Japan, Singapore, Malaysia and Thailand. This lag was largely due to the fact that we did not have definite goals and strategies in view.

The Prime Minister will afford special concessions to the gem industry to enable them to bring in maximum benefits.

In regard to small and medium industries that are the backbone of our industrial structure, this category of industry would be served by the 'Lanka Puthra' banking service that would be introduced very shortly.

For selected projects that are internationally competitive, the government has made a separate allocation of Rs. 500 million. Through the SME Bank these entrepreneurs will receive special loans.

Sri Lanka has great potential to develop the tourist industry. But yet this potential has not been fully and scientifically exploited.

Our expectation is to formulate a tourist industry that is favourable to the environment and to generate a viable industry. It can be expected that by the year 2010, 1.5 million tourist arrivals can be expected. Additionally, we must promote tourist arrivals from China, the Middle East, India and Russia.

The Prime Minister suggests that early steps should be taken to diversify the sources of power that should include the establishment of coal-fired power plants along with the existing hydro stations that should conform to the generation plans of the Ceylon Electricity Board.

Under the 'programme of electricity for all' it shall be the prime task to provide electricity to the most remote villages. In this context the Ceylon Petroleum Corporation would not be privatised. It is proposed to establish a new oil refinery at Hambantota, along with a storage complex.

Making an overall assessment of the proposals in the document, despite the irresponsible criticisms that have been made especially by the UNP, it is easily the most comprehensive document that has been released so far.

Most of the promises made could be implemented with the minimum expenditure such as the establishment of medical centres, co-operatives in every village and fertiliser stores in every village. Some of the stores earlier belonged to the PMB could be established with minimum expenditure.

Most of the promises in the 'Mahinda Chintanaya' does not involve additional expenditure and this is the key feature in the document. Many of the proposals involve bank financing. The expansion programmes for Samurdhi banks and new loans and insurance schemes does not involve extra expenditure.