Economic visions and global nightmares |
| Posted by Administrator (admin) on Dec 28 2008 at 7:29 AM |
Friday December 3, 2004
VASANTHA RAJA
The economic vision of Dr. Sarath Amunugama - Sri Lanka's finance minister - is not far from the models adopted by some successful East Asian countries such as South Korea and China: guarded economic liberalisation with a measure of protectionism.
But fast-changing global circumstances demand wider considerations. The US-facilitated market that helped create 'Asian prosperity' has also given rise to an unsustainable trade deficit in the United States, and the US dollar's value is falling, causing havoc all over the world.
In this context, any vision of economic growth must be firmly based on immediate action to protect ordinary people's living standards and policies for poverty eradication. What is proposed in the new budget is not good enough.
Tariff barriers to promote local producers would be disastrous. It is vital, instead, to aggressively open up the market through bilateral free-trade agreements, particularly with a wide range of Asian countries.
The smooth flow of all useful commodities in free trade amid sharp competition is beneficial to the average consumer, and is important to effectively keep the lid on inflation, so that the state can safely mobilise long-term credit lines and systematically invest in nationwide economic infrastructure.
Economic infrastructure is the crucial intermediate component that determines the general level of productivity of the economy as a whole.
Designing a central-bank-based, long-term, credit-expansive policy to develop Sri Lanka's crumbling infrastructure - not as a bundle of disconnected projects, but as an interconnected nationwide venture that needs expert-planning and rational coordination of diverse ministries - must be central to the state's thinking.
This requires a unified vision of the island's future that goes beyond the interests of the private investor. The private sector can only participate - but not lead. It should be part of the 'engine' of this aspect of the economy, but the public sector should be 'the guide' and the 'driving force'.
The planning of country's infrastructure is directly related to identifying how Sri Lanka should plug into the global market - irrespective of the calamities the global monetary system is presently facing.
One valuable asset Sri Lanka has to offer to the world, for instance, is its scenic and cultural beauty. Sri Lanka already occupies distinction as a top-grade holiday centre in the world. Its real potential, however, is far from being tapped. The potential Buddhism has in attracting a spiritually-starved world, or the potential that Kataragama and Madu have in cultivating regular Hindu and Christian pilgrimages from neighbouring countries, are among many such areas yet to be developed.
It is also important to identify other possibilities being created by the globalization of productive forces, such as 'outsourcing' and 'off-shoring' - above all, the fast-consolidating south Asian regional economy, with India's Sethusamudram project and a possible 'land-bridge' to India as the centre piece. Obviously, all these have implications to the planning of Sri Lanka's future infrastructure.
The state's role in infrastructure development must also accompany further measures aimed at poverty eradication.
Two significant steps taken by India's new Congress administration as part of its strategy to overcome worsening poverty may be of relevance here. One was to abolish the role of national level 'bureaucratic institutions' in tackling the problem.
Instead, the state is to directly provide funds to village councils in rural areas accompanied by new laws of transparency to monitor spending. The other important measure was to commit the village councils by law to provide work for all employable labour in the area, at least hundred days per annum.
Another useful lesson comes from Bangladeshi economics professor Dr. Muhammad Usuf's experiments with his concept of a banking network dedicated to the poorest sections of society. His 'Grameen banks' represent a clear break from the traditional concept of financial services obsessed with maximising profit.
Also, Sri Lanka's 'CWC experience' shows how state-sponsored retail outlets could effectively prevent the private sector from unfair profiteering.
In the Sri Lankan context, what is even more crucial right now is the development of an equality-based vision for a federal state-structure that appeals to all communities. That solution itself is bound to have implications for the island's future infrastructure. [See my "A common vision to break the deadlock" in www.LankaEye.com].
Above all, without a durable settlement to the dormant war there can be no proper planning of the economy.
-www.LankaEye.com
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