Money-guzzling State institutions, an obstacle to growth -Part 2

Speech made by Minister of Enterprise Development and Investment Promotion Dr. Sarath Amunugama on "Policy Constraints, Regulatory Barriers and Regional Economic Development" at the Galadari Hotel recently.

Continued from Friday

Western Province has the airports ; it has the harbour. Every investor wants to put up his factory close to the harbour or the airport. Those are the realities. What happened to those investors who went out of Western Province? They are finding it very difficult to maintain their competitive edge.

They prefer to go to India than go out of the Western Province. That is the reality. Some of our businessmen are going to Africa and not to our own hinterland. Why is that? That is because we do not give enough incentives for balanced growth.

Take the Provincial Councils. We have at this meeting many of the Government Agents who have to work closely with Provincial Councils. One of the recommendations of our party is the abolition of Provincial Councils. I think as they are now managed they have earned the contempt of everybody and really deserve to be abolished. The concept of a Provincial council is very good. Yet the way it is managed, now, has led everybody to say that we must abolish Provincial Councils.

I must say that originally when the 13th Amendment was brought in the idea was that technocrats should be Chief Ministers in the different districts; not politicians who lost their seats.

Today, politicians who failed to find a place in Parliament are made Chief Ministers and Governors. But the original idea was to have technocrats who will work with a very small Cabinet and no perks and who will develop the provinces.

Today what has happened: Of Provincial Council budgets as most of you know more than 75% is spent on paying salaries -Teachers' salaries, which was done earlier by one department in Colombo.

They are doing hardly anything else. There is now a committee of chief ministers which is the biggest joke of the 21st century.

Must compete

Really there is nothing to cooperate. They must compete with each other. The only way a province can draw investment is by giving more concessions than its rivals. They should compete: not cooperate.

If one Chief Minister has the courage to say we are not taxing you, we are giving you free electricity, we give you free water; investors will rush to that Province. Why there is unemployment in the Provinces is largely due to the wrong policies of chief ministers and other politicians in Provincial Councils. Those voters must hold these politicians to account for lack of development and employment.

I find today they are talking of new taxes like cross border taxes. Then nobody will come to that Province. If you are going to have so many taxes in the provinces, who will come there? Why should investors come there? Already an investor is at a disadvantage by not having access to the airport and the port. So why should they come to Provinces? Provincial Councils must compete.

If I am the Chief Minster of a Province I know how to make it the richest province in Sri Lanka.

If you give concessions to the private sector they will all come and put up their factories in that province and give employment. So people who are unemployed today in the provinces must know that they remain unemployed because their Chief Minister is not doing his job properly.

They are not giving any incentives to the private sector to come and invest. In fact, they are discouraging investment every time the provincial council meets.

I tell the Chief Ministers: Nobody wants to come to your districts now. Because you are not giving them incentives. Please read the life of President Clinton. He was the Governor of a very small province.

Arkansas is one of the smallest in the US states. Before Clinton became President if anybody said that a man from Arkansas should become a President of the United States he would have been laughed at. But what did Clinton do? He removed all the restrictions. He removed all the taxes. So people from all over the world came and set up their factories in little Arkansas.

Then people started to say that Governor Clinton is an intelligent man. He is different from the rest of the Governors who are more like our Governors. His state grew fast and reduced unemployment. Then Clinton was taken seriously as a thinker and a doer and a person who could end up as President of the United States of America.

The third obstacle I want to mention is Bureaucracy. That is you and myself in the past. We are the worst bureaucracy in the world. When it comes to protocol, when it comes to speechmaking, when it comes to pandering to politicians, we have one of the best bureaucracies. But when it comes to coordination and development, we are the worst. I must tell you I stopped going to coordination meetings for Kandy district. Because there is no coordination: it's a waste of time.

Today to get a project off the ground we have to get about 20 approvals. All sorts of crazy fellows have to give their approval before you can start a project.

The President has monthly meetings where, if an official says no to a project, he will have to give reasons to the President himself. Now they are saying it can be done. Please look into all these things in a way that is pro developmental, not pro prestige or pro bureaucratic.

We have to shake up Public Administration so that people who want to create wealth in this county are allowed to do so. Now a lot of people think that this is Capitalism. That is so. Sri Lanka is a Capitalist country. Commercial agriculture is 100% privatised.

Except for the inefficiently run JEDB and SPC which at the end of the month come to the Ministry of Finance to collect public funds to pay their staff, the private sector runs commercial agriculture successfully.

Inefficient managers

Government enterprises are running at a loss. When I was the Minister of Finance I told them I am not giving you poor people's money. You sell your buildings and settle your debts. Why should a taxpayer pay all those inefficient managers in the SPC and JEDB? We should not pay a cent.

Today telecommunications is the fastest growing sector in Sri Lanka. Banking, posts and telecommunications, tourism and finance constitute the service sector which is growing at 60%. The fastest growing sector in Sri Lanka is the services sector and not the manufacturing sector or the agricultural sector.

The fastest growing areas in Sri Lanka are manned by the private sector. Look at telecommunications. All of you who were in the public service 10 years ago, would have had to wait at least 5 years to get a telephone.

And even after 5 years, and you have written to a big shot in the telecommunication department to install that phone, you get an antiquated instrument. I can remember that when I was a Government Agent I asked for a telephone and got someone else's discarded instrument.

Today if you want a phone before I finish this speech you can get one. People who could never dream of owning a phone use them today. Young people are great phone users. A few days ago BOI signed an agreement with Bharat Telecom, which will be the fifth player in this field.

The most inefficient sectors in our country are sectors where the private sector has been left out. That is Railway, Petroleum and Electricity Board. These three areas where there is no participation of the private sector, are a tremendous drain on our economy. They are inefficient and not cost-effective. The poor taxpayer has to be burdened to keep them going.

Every month they come to the Treasury for money. Do you know that everyday the Petroleum Corporation or Electricity Board loses money enough to build a general hospital? Similarly, we can have over 100 universities a year in Sri Lanka.

So what are we talking about the state sector? In India and China they are dismantling the grip of the state sector on the economy. That is why they are successful.

So the money which we should be spending on infrastructure development, on growth, is given to the inefficient Petroleum Corporation, Electricity Board, State Plantations Corporation and the Railway Department. All these institutions are just guzzling money and preventing that money from going into the areas where investment is needed, particularly in the provinces.

Capitalist society

Today there is no USSR. The communist state which depended on State institutions has collapsed. When we go now to those countries we can recognize the change. Two weeks ago I went to Germany.

As a civil servant I used to go to the GDR and its Ministry of Culture. It was one of the biggest buildings in East Berlin on the Freidrichstrasse. This time when I went there, it was a McDonalds outlet. It is useless writing to Sinhalese papers about Samajawadaya and Castro when the whole world has moved away to a new capitalist society.

If you read the Sinhalese papers you will think that we are in the 19th century. They are teaching such nonsense in our schools. Socialism has contributed much to social justice but as an economic methodology, it is a disaster.

So it is time that we grew up; time we looked at what is happening in the world. Sri Lanka need not be a poor country. Sri Lanka is a poor country because all of us have made it poor. We are keeping it poor. Sri Lanka can be one of the richest countries in the world. We have the potential, we have skilled people, ours is a small population and we have wonderful natural resources.

But all of us have conspired to keep it as a poor country.

So we must all get together and face reality and give our people the future that they deserve.