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Future of Sri Lanka

We must recognise and prioritise our incredible marine life, beaches, rainforests, mangroves, wetlands, water-bodies, and the flora and fauna they hold. We must protect them from ill-conceived and damaging construction, landfills, waste-dumping and sand-mining, as well as from over-using, poaching, illicit-logging and deforestation.

by Anila Dias Bandaranaike, Ph.D.

There is universal agreement that Sri Lanka is in an economic mess on several fronts. Even those in government, playing ostrich until recently, are beginning to articulate this reality. We cannot get out of this mess in a hurry. It will take prioritisation, commitment and time. It will require government, Big Businesses, small businesses and the people, working together in the national interest, to pull us out of it. As to whether that will happen, remains to be seen.

Qualified professionals with knowledge, acumen and experience, have spoken and written in the public domain on addressing our macro-economic problems – slow economic growth, low government revenue, wasteful expenditure, misaligned interest, exchange and tax rates and parlous levels of foreign earnings, reserves and debt. Some have suggested a clear macro-economic path to start the recovery process with debt restructuring. Is anyone listening?

Development Goals vs. Indicators

When the mess gets critical, we lose sight of the forest for the trees. We forget what these economic terms (trees) and statistics are really about. So, focussing on the forest, this article attempts to connect those terms to the human and environmental aspect of this mess.

Sri Lanka has 2 key resources – its people and its environment.

In that context, economic indicators used to measure development – GDP, FDI, export earnings, inflation, exchange and interest rates, foreign reserves and debt – are merely means to an end. That end goal is to improve human well-being, through sustainable development, which protects the environment for future well-being. Economic indicators are just measures of whether Sri Lanka provides adequate jobs, incomes and domestic and foreign goods and services, at reasonable prices, to its people, to improve their well-being. In that process, if all goes well, corporates grow their businesses and shareholders get better returns on their investments.

However, all households have to earn living wages to feed, clothe, house and educate their families and keep secure and healthy. If the majority are struggling to make ends meet, they will leave Sri Lanka, or take to the streets, or plunder the environment for short term gains. Then, businesses suffer from labour shortages, strikes and social instability, governments from low revenue and overall instability and everyone from environmental degradation and inadequate goods and services for their well-being.

In addition to the problems identified by economic indicators (trees), focussing on the forest conveys that Sri Lanka has two more problems. First is Sri Lanka’s severe brain drain. Professionals, skilled and unskilled workers are leaving the country in frustration and despair. Second is under-valuing our fragile biodiversity, resulting in ill-conceived projects destroying it all over Sri Lanka? One example is the Minneriya “Gathering” of elephants. This can earn massive tourism dollars.

Currently however, high water levels, from excess water being diverted from the Moragahakanda irrigation project into Minneriya tank, threatens the “Gathering”. Tourism earnings and other economic benefits from the “Gathering” are estimated to be several orders of magnitude higher than from the irrigation project’s agricultural output. Does government care? Reducing Sri Lanka’s spectacular St. Clair’s waterfall to a trickle, for hydropower, is another example.

So, just as important as regaining macro-economic stability, is the need to value and grow our human and environmental resources.

Environmental Resources

We must recognise and prioritise our incredible marine life, beaches, rainforests, mangroves, wetlands, water-bodies, and the flora and fauna they hold. We must protect them from ill-conceived and damaging construction, landfills, waste-dumping and sand-mining, as well as from over-using, poaching, illicit-logging and deforestation.

Let’s take tourism as an example. Sri Lanka has two strong competitive advantages. First, its biodiversity, just described. Second, its diverse, sophisticated, cuisine – upcountry and low country Sinhala; Northern, Eastern and upcountry Tamil; and Muslim, Malay and Burgher specialities. However, most roads leading to our environmental and culinary treasures cannot handle large coachloads. So, we should target tourist earnings, rather than numbers, and strategise to attract smaller numbers of high-end, high-spending tourists, who love nature, food and new experiences. We should show-case and promote our unique, local cuisine and brews, rather than serve them imported cheese, salmon and wines, which they can get elsewhere. That way, we raise value addition, reduce imports and promote backward linkages.

Innovative entrepreneurs, including foreigners who operate under the radar, are doing just that – offering community and nature-based tourism and local food, from small, exclusive hideaways, at various price levels. But what of our corporates? They build large hotels in resort areas, catering to coachloads of two-week package holidays for Europe’s low-spending workers. When bombs, tsunamis and pandemics occurred, they begged a debt-riddled government for handouts to recoup their ill-thought investments.

Our wild life parks suffer from irresponsible over-crowding and undisciplined safari vehicles. Yet, has the collective corporate voice raised these issues adequately? Government has even sanctioned baby elephants in private captivity for the influential, with little protest from collective Big Business. Tourism is one example, among many.

Human Resources

We urgently need labour market and education system reforms. Labour market reforms must address labour shortages, low wages and inflexible labour laws that hurt both employers and employees. Big Business has not put adequate collective effort into reforming archaic labour laws for longer term benefits, rather choosing, with a short-term horizon, to forever work around them. Education system reforms must address inadequate skills in problem-solving, in language and communication, and in computer use. Big Businesses complain about employee quality, but only some put their money where their mouth is.

Let’s take private company wages as an example. Salaries of the few who meteorically rise, are phenomenal. But for the bulk of qualified young executives, salaries are just about enough to live with their parents and take public transport to work. Can we blame brain drain to greener pastures? What about cutbacks during the pandemic? Many businesses were hit by it. But some – health care, online consumer sales and other online activities – thrived. Although social life was curtailed, none at high income levels suffered any material change in their levels of creature comfort. The worst hit were lower income workers, especially daily wage earners. Some had no work and no income at all. Yet, some big companies, even those which thrived, prioritised their bottom lines, and cut wages and benefits to the most vulnerable.

Big Businesses changing gear and thinking in the longer- term interests of their human resources could mean less focus on the immediate bottom line, as well as paying higher non-regressive taxes and higher living wages, training costs and social security benefits to their employees, if they wish to retain them. There is no easy way out.

Big Business Input

Published national data, on the output and employment structure of the Sri Lankan economy, show that large formal businesses total less than half of Sri Lanka’s economic output and about a third of employment. However, their collective voice wields much more influence than their share of those pies. Government and Big Business need each other to survive and to move forward for their own and the national interest. Hence, the collective voice of Big Business can, if they choose to do so, push for better governance and informed investment and development decisions.

But do they? The last 2021 Budget was clearly a disaster, and later proved itself so. However, at a public webinar, along with corporate leaders, a senior EDB official praised it highly. Yet, he resigned his post very soon thereafter. I was once at a formal reception of big business leaders, where some, who had been poking fun at the Central Bank Governor, fawned over him when he joined their group. I may not have agreed with the Governor’s policies, but he did not deserve such blatant hypocrisy. In the last 15 years, I have not seen the Chambers take a strong collective stand against any ill-conceived government decision on any issue.

One example was the Act allowing government takeover of “Non-Performing” companies. Another is the current foreign exchange debacle. The Central Bank Governor cited exporters not converting their earnings to rupees as the reason why banks are facing exchange shortages which, in turn, affects their ability to open LCs. Export groups publicly denied these allegations, but none bluntly stated the real reason – Central Bank’s unofficial directive to banks to artificially hold the exchange rate at Rs. 203/dollar, when it should be much higher! This ill-conceived directive has also affected migrant worker remittances to Sri Lanka. They now resort to alternate unofficial mechanisms to ensure a realistic conversion rate for their hard-earned dollars sent to Sri Lanka. Will business Chambers speak out, before the Governor cites migrant workers too, like exporters, of being unpatriotic?

If Sri Lanka is to get out of this mess, there has to be a paradigm shift in thinking and action among the Big Business community, away from rent-seeking, to pushing for longer-term collective development that will benefit, not just them, but all stakeholders. Straight talk from Big Business may be the only way to get governments to listen and act. If companies fear to speak out individually because of retaliation from government, they must do so collectively, disagreeing and providing constructive criticism, when necessary, through their various Chambers and other business groups. No government can penalise Big Business working together, without detrimental consequences to itself.

Sri Lanka should focus, in the shorter term, on macro-economic stability, and, as importantly, in the longer term, on safeguarding and growing our human and environmental resources. The Big Business community must collectively push for this, in their own longer-term interests.

The “Road Map” presented recently for Sri Lanka to get out of this mess, was definitely a map – it showed us ALL roads to ALL places. Its presentation of 85 colourful slides, each crammed with graphs, charts and words, only conveyed utter, obfuscating, confusion. If meant to show the way forward, 20 succinct slides could have done it. I sympathise with the officers who were commissioned to prepare that “Road Map”. I hope members of the Big Business community, including business chambers and relevant organisations, will use their influential, collective voice for some straight talk, to help the architects of that “Road Map” find their way back into the light and lead Sri Lanka out of the darkness we are currently in.

(The author retired as Assistant Governor of the Central Bank of Sri Lanka (CBSL) in 2007. As Director of Statistics, CBSL, she spearheaded the compilation of Provincial GDP data and the collection of survey data on living conditions in all nine provinces, following a lapse of 20 years since 1983. From 2015 to 2020, she was a member of the three-member Independent Delimitation Commission)

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