Empirical economic development strategy

Nimal SHANTHA LOKUPATHIRAGE

Economic development, defined in the simplest term, is to be able to live a happy and a contented life without many encumbrances. The most difficult term is to determine the ways and means of achieving the sustainable economic status in a country.

Are we to emulate the strategies laid out by the developed countries in a copy cat form? Or establish in locally adopted terms? Should we develop an economic strategy based on the local knowledge with an ably supported international experience? Gather the adverse impact of world economic order? Are we perfectly handling the economic system perpetuated by the open economy onslaught? How should we address the globalization and the open economy system? What are the adjustments needed? Is Sri Lanka an agriculturally oriented country? Industrially oriented country? SME Country? How about light industry? Mix of all these? What economic segments do we have to prioritize in development strategies? Have we identified the segments which are crucial and indigenous? Development strategies of a country are intrinsically based on a national economic philosophy. Strategies are necessarily the amplification of the philosophy in which philosophy and strategies are an interwoven process and relatively become inseparable operators.

President Mahinda Rajapaksa addressing the United Nations General Assembly last month

It is the prime responsibility of the intellectuals of our country to determine the national economic philosophy which should be act as the forerunner of all development strategies.

Abundance of natural resources

Sri Lanka is a blessed country with an abundance of natural resources, highly conducive culture for true economic development (people do not have to be excessively motivated or pushed), inherited economic culture nurtured by our forefathers with a realistic climatic condition overtly conducive for economic growth. Legendary development strategies planned and practised since independence of our country have failed to reach a sustainable economic development.

The inevitable question that emerges in the context of development effort in Sri Lanka is as to why we have failed to reach the expected development levels during the past 60 years.

To pose the question in a most poignant manner to elaborate the argument, let us take a major segment of the economy in the nature of fisheries industry. Despite the fact that there is a highly conducive environment, we have failed to achieve self sustenance in fisheries industry irrespective of the obvious and conspicuous fact that the ocean is right round the country, being an island situated in the most advantageous form for fishery, in the most suitable oceanic climatic condition for breeding and amassing of fish, adding to the potential of vast coast line of Sri Lanka of 1770 Km, the continental shelf extends from 22 Km to 40 Km and fresh water extension is approximately 255,000 Ha. Why have we not achieved self sufficiency in fisheries and are still lagging behind other Asian countries that make optimum use of our fisheries resources right under our nose? Why are we still importing canned fish while the Indian Ocean is famous for tuna in abundance? How Indian, Korean and Japanese trawlers prowling in our waters catch fish in abundance and why we have failed to reap the natural benefits? Why an ordinary poor Sri Lankan family cannot afford to buy fish as part of their daily meal despite the fact, that fish are available freely (because fish don’t charge a cent from us for catching them and we do not invest on their well-being or rather feeding them) and a significant portion of population is suffering from malnutrition? Why had we been ignorant of all these facts and still could not achieve the level of self sustenance in fisheries despite the fact that there are six departments, 12 major fishery harbours, 34 anchorages, 705 ferries, 29 boat yards and six accessories industries under the Ministry of Fisheries.

Pragmatic economic philosophy needed

It is of paramount importance for Sri Lanka to develop a very pragmatic economic philosophy before we get on with formulating any development strategies.

In simple terms, this means that we should be able to identify the country as a whole, its natural resources, economic endowments handed down to us by our forefathers, geographical conditions, climatic conditions, marketing status, export potential, international economic scenario and so on. The most important question is that are we cruising in the right direction in respect of our economic development efforts.

A noteworthy feature in today’s economic outlook in the international arena is that some countries are shifting away from their traditional economic systems to more pragmatic strategies within their own context to suit the changing circumstances of domestic and international economic situations. Most significant changes are taking place in China, Vietnam, and Venezuela and to a certain extent in the United States following the recent recession. Recent reports indicate that Cuba intends to shift their policies to the private sector since the revolution in 1959.

In a post war era, nothing could be important as reaching an understanding and a final consistency over development strategies for Sri Lanka. Economic development is the much awaited, long aspiring and yearning event in every nation of the world, especially the countries in the southern hemisphere and so does Sri Lanka.

Obsolete measuring method

The term ‘development’ is synonymous with the actual developed status of the lifestyle of the countrymen who are leading a contented lifestyle with available basic necessities and definitely not with the so called elite bourgeois lifestyle.

Measuring the economic development by way of Gross Domestic Product (GDP) is presently being considered as an obsolete method by some of the modern economists who prefer to measure the development of a country by the contentment of the countrymen of a country, which is called the Gross Domestic Happiness (GDH) as in Nepal.

The legendary narrative of Sri Lanka economic development strategy since independence have manifested an obscure failure in attaining a desired status of a developed nation, particularly in eradicating poverty.

It resembles an epic poem with a long narrative full of heroic deeds, but little in gain. Although much development efforts have been made with great enthusiasm, we still have failed to achieve much needed status of a contented nation. Contextually the most distressing fact is, that we had not been successful in formulating a national development strategy, a Sri Lanka model, which implicitly suits Sri Lanka.

Identify the economic philosophy

The fundamental requirement is to identify the economic philosophy, which is adapted to be a part and parcel of the natural environment of our country which is special, endemic and exclusive.

In the past, we have tried, experienced and failed in capitalism, socialism and mixed economy and endeavoured to copy to the letter certain economic systems successful in some developed countries.

Ironically, economic policies should be based on an economic philosophy that is reflective of the nature of the country, its people, its environment, its resources, culture and so on and it is essential to evolve a paradigm shift in formulating development philosophies, strategies, programs and plans.

Economic philosophy is defined as a pragmatic approach to the development effort. Noted economic philosophical laureates like, Adam Smith, John Maynard Keynes, John Stuart Mill, Karl Marx, Milton Friedman, Paul Samuelson, Kenneth Arrow, John Rawls, Murray Roth Bard, Amartya Sen, Bernard Williams and E F Schumacher have defined, envisioned, categorized and explained the philosophy of economics based on various theories and they have taken different views.

Economic theories are basic fundamentals on a broader spectrum, when in reality it is the case of a transformation of these theories to suit the necessary adaptation in a given environment. Even though their views are of paramount importance as theories and fundamentals, policy makers should strive to arrive at a consensus as to what fundamentals of an economic philosophy, should be based on an economic development program in the context of the entire perspective of the nature of the economic foundations and the fundamentals of a country.

The prime concern is to devise an economic model that is exclusively suited to the local environment rather than depending on the hitherto practised systems be it classical, neo classical, market oriented or any other theory.

Adam Smith viewed the ideal economy as the economy which is a self regulating market system and other classical economists presented variations on Smith and focused on the tendency of markets to move long run equilibrium. Marxist economics which descends from classical economic focused on the labour theory of value which is considered being the exploitation of labour by capital.

Neoclassical economics systematized supply and demand as joint determinants of price and quantity in market equilibrium, affecting both the allocation of output and the distribution of income. All these theories have been practised and adapted, by and large in a variety of degrees of magnitude and proportions in the past with little success.

Traditional centralized economic systems

Then there are significant changes from the old system in China and Vietnam where shifts from traditional centralized economic systems are apparent.

A recent report reveals that Cuba is to lay off a huge number of state employees in the biggest shift to the private sector ending the egalitarian days in which “employees will essentially take over the administration of their own work places and earn their salaries directly from their takings or revenue rather than being a salaried state employee. This implies a significant shift in the ideological underpinning of the system”.

But Cuba will remain a one party Communist state for the foreseeable future. Some are arguing that Cuba is following Chinese and Vietnamese models but the report says that policies would be unique to the Cuban system.

Another noteworthy change is Hugo Chavez leading Venezuela away from the free market capital model towards what he calls “21st century socialism”. Interestingly in Venezuela there would be workers co-operative enterprise system with the socialist model.

All these features in the international scenario indicate a policy shifting towards a more workable proportion and unique to each country. So it should be the prime concern of those to devise a truly Sri Lankan development model.

Strong paradigm shift necessary

Sri Lanka has experimented with the socialist model of centrally planned socialism and the free market capitalism without much success which inevitably have forced us to formulate a system with a strong paradigm shift necessarily endemic to surmount the economic dilemmas acting as a harbinger to the eradication of poverty.

Even the Millennium Development Goals adopted and enthusiastically followed by United Nations has failed to achieve the desired results by the half-way mark. In the recently concluded meeting, UN admits that that the progress has been dismal and that many goals would be missed in most regions.

There is a greater need of economic transformation in Sri Lanka. Poverty exists in many aspects.

High cost of living, high foreign debts and local debts, balance of payment deficits, high interest rates, infrastructure development in terms of roads, highways, rural road network, port and airport facilities, development of the North and the East of Sri Lanka, nutrition, substandard education facilities, dominant bureaucracy, red tape procedures, investment help facilities, basic health facilities for rural population, proper public transportation system, water pollution, air pollution, species getting extinct are some of the problems Sri Lanka is plagued with and warrants immediate transformation of the entire system based on a pragmatic economic philosophy.

Imminent deviation

However the careful assessment of the current development landscape at present, suggests a major and imminent deviation in development policy formulation, which is highly warranted, in the wake of the domestic and international economic situation which may bring about the desired effect to the Sri Lanka economy.

Major issues in formulation of a pragmatic economic model for Sri Lanka involves in identifying economic segments that has to be earmarked for development.

Primarily segments should be identified, that are to be prioritized in the development plans and strategies for the allocation of resources accordingly. In terms of transport what segment should be prioritized and developed - rail or road transport.

Rail transport is more viable

According to the certain studies, development of rail transport is more viable for Sri Lanka than the road transport as road transport needs heavy infrastructure developments, draining out of foreign reserves in importation of vehicles and fuel, cause heavy ecology problems, causing an unprecedented rate of accidents thus causing repair and medical expenses. And above all some studies show that passenger/fuel consumption ration is more efficient in rail transport.

According to the Petroleum Ministry Secretary they have been able to save Rs 160,000.00 per month by transporting petroleum using the railway.

The program was in effect since July 2010 and distribution of petroleum by rail has been increased to 72 percent of the total distribution quantity as against the 35 percent transported before July 2010. Advantages are identified as cutting transport cost excessively hitherto done by bowsers, less evaporation of fuel, less pilferage, no illegal dilution, no traffic congestion and less road accidents.

Some of the development segments tentatively identified for development strategies are:

* Agriculture/Irrigation/ Production/Storage/distribution/Commercial Cartels

* Infuse local wisdom with strong sense of social consciousness

* Light Industries (Village Based)

* Service Sector - Tourism/Telecommunication/Computer Programming Market/ International presence in the software industry

* Infrastructure facility (Not capital intensive)

* Empower the Income Tax Department for its optimum efficiency

* Empower Customs Department for its optimum efficiency

* Good Governance sans corruption

* Port and aviation development

* State of the art collection and distribution system of local produce

* Empower co-operative establishments to suit the competitive environment

* Cutting down unnecessary expenditure

* Restructuring the local money lending systems for Agriculture and Business

* Identify the freely available sources and make optimum usage, such as fisheries and fruits (Beli, Jak fruit, Wood Apple and so many.)

* Streamline the production of inventors, financing and patent system

* Participative development strategies with intellectuals, research institutes, Universities

* Produce and provide commodities or industry products based on market sentiments, locally and internationally.

* Agriculture graduates who pass out from Universities should be provided with land and necessary finance for agriculture projects.

* Be sensitive of international market sentiment- commodities produced with carbonic manure secures a greater demand in the international market with an enhanced price tag.

* Encourage local rice varieties which are disease free and grow with carbonic manure

How could we utilize our natural resources? i.e. exporting minerals, sand in the raw form or developed form (Welding Rods for example) (Our country is endowed with the world best quality mineral, resources such as apatite, calcite, dolomite, feldspar, kaolin, clay, mica, quartz, silica sand, rutile, zircon and ilmenite, which are handpicked for quality by the engineers who are involved in Aerospace Industry)

Only graphite and mineral sands such as monazite were mainly exported. Why shouldn’t we explore the possibility of starting a manufacturing concern out of this nature’s quality gift?

Sri Lanka is blessed with 103 rivers flowing in to the sea and more than 32,000 tanks and reservoirs handed down to us by our forefathers. Are we properly utilizing their potential?

The road transport or railway? (It is revealed by surveying of facts that the Railway Power Locomotive uses only four Litres per kilometer to carry 4000 people) What should be our National Transport Policy?

ICT and E-government applications

Utilize the importance and the role of the Information and Communication Technology and e-government applications in the development agenda of our country, where knowledge based activities have become increasingly important and persuasive.

Eradication of poverty should be given the highest priority in any development strategy as the ultimate goal of development, focusing on the very poor and socially marginalized people in the society. Strategies should be focused on empowering the poor to earn a living rather than compensating them in indirect ways such as grants.

What about the indigenous knowledge and our cultural economic system? How far can we go with this high spending, over consumption living system?

What about the moderate living system we have been practicing throughout generations which were perpetuated by our cultural system? Simple living style that would enhance the savings!

How about liberating people from over consumption and over spending and lavish life style? What about the unprecedented buying spree enjoyed by a certain segment of the society while the majority cannot even think of managing their basic day to day needs in life.

Three pronged market system

Can we educate the entireties of the Sri Lankan society by launching an awareness program of the futility of uncharacteristic life style? How could we lead them to a moderate life style? The change in life style of the average citizen would definitely revolutionize the entire development program in Sri Lanka. Few advantages among many is,

1. Less import and less forex expenditure

2. More domestic savings

3. Less health expenditure

To overcome the pathetic living condition of the majority of the population it is inevitable to regulate the market oriented economy in Sri Lanka. Since the open economy system has become sine quo non status, a system has to be adapted to regulate to suit the local conditions. How about a three pronged market system to be adopted to manipulate the prevailing and persistent ailments of the open economy system? They are,

1. Private Sector

2. Government sponsored marketing system (CWE, Economic Centers)

3. Cooperative system

It is the duty of the Government to rule the country for the benefit of the general mass of the country.

The Government adapts and deploys various modus operandi to contain the inflation, provide unprecedented welfare schemes such as free education, free health service etc, regulation measures of import and exports, incentive schemes for entrepreneurs and cultivators, price control methods and mega development projects and mega infrastructure development projects.

In spite of these courses of action it has been noticed right throughout the development process that the fruit of development has not trickled trickle down to the ordinary mass to improve their life style. How could we over come this problem?

An efficient system should be in place to regulate the tax collection system in Sri Lanka. Since it is the main revenue flow of the Government immediate steps should be introduced to improve the entire tax collection system.

There are more than a million of tax evaders who should be brought to the tax paying system. The Government can employ at least a sufficient number of unemployed graduates to the Inland Revenue Department to arrest this soaring phenomenon.

The Government should be able to employ graduates to generate funds for the development strategies of the country rather than merely employ them to solve the unemployment problem in the country. And at the same time the present complex system of taxation should be simplified with a view to manage and control the revenue improvement.

Sustainable economic model needed

Globalization has definitely distorted the development endeavours of the developing countries and their economies which has resulted in debasing self sufficiency, mind conditioning the people to depend on foreign markets, unprecedented and uncontrolled advertising campaigns.

As described early in this note, it is of paramount importance to formulate a sustainable economic model for Sri Lanka.

It is time that we ponder over the new economic vista for our country.

If you do not believe what I try to drive home, take the word of the President of Sri Lanka who addressed the International forum of United Nations with following recently.

“We believe that for the rebuilding and healing of our nation to succeed, the process must evolve from within.

If history has taught us one thing, it is that imposed external solutions breed resentment and ultimate failure.

Ours, by contrast, is a home grown process, which reflects the culture and traditions of our people.”