UNF showcases 5-point economic action plan

Friday, 14 August 2015 05:18 - - {{hitsCtrl.values.hits}}

Government believes in private sector led growth
Building the economy is foremost in manifesto
Aim is to make Sri Lanka self-sufficient in energy by 2025
Sri Lanka can achieve an investment target of $ 1.5 b by end of the year
Either export or perish

By Charumini de Silva

A seemingly-upbeat United National Front (UNF) on Tuesday wooed the business community with their five-point action plan, promising economic growth, fight corruption, freedom for all, investment in infrastructure and improving education system, while emphasising on building up Sri Lanka within the next five years.

This illustrated action plan was conveyed by a top panel including Minister of Buddha Sasana, Public Administration and Democratic Governance Karu Jayasuriya, Minister of Finance Ravi Karunanayake, Minister of Power and Energy Patali Champika Ranawaka, Deputy Minister of Policy Planning and Economic Affairs Dr. Harsha de Silva and Deputy Minister of Highways and Investment Promotions Eran Wickramaratne at the launch of UNF action plan for the economy organised by the Industry and Commerce Forum.

Making the forum a great platform to explain the measures implemented during the 100-day program and future plans by the Minister of Buddha Sasana, Public Administration and Democratic Governance Karu Jayasuriya said we as a Government believe in private sector led growth.

It is important for Government to provide the infrastructure, but the creation of wealth in the administration of Prime Minister Ranil Wickremesinghe and President Maithripala Sirisena will be in the hands of the private sector.

Revealing the basic principles in a transparent government he said that they will ensure transparency in all their dealings, with rule of law and an independent Judiciary.

“There is a craving in the country for good governance. People want good Parliamentarians to represent them in Parliament. And I’m happy to state that in United National Front for Good Governance (UNFGG) we have members worthy of being called honourable member of parliament or honourable minister,” he added.

Speaking on the promises delivered in the 100-day program, he said that people of this country trusted in this Government to enshrine the good governance within that 100-day period and that they had done their best during the given period to make sure that the land was cleaned.

“It is important that human dignity is respected. There was corruption, there was mayhem, there was waste and there was also politicisation of the entire society. In that society we noticed that the country was surely but slowly moving towards the North Korean type of administration — father, son, grandson like that. That’s why all of us joined hands to ensure that the country is cleaned up.”

The Minister said that although they were not able to fulfil all the promises, most of the promises have been fulfilled 12-2 during the 100-day period.

Justifying the reasons, he said: “There have been lot of instances where the good intention of the Government was blocked. Change of the constitution was hampered particularly not because we did not want to do it, but because of the obstruction coming from the Opposition.”

Jayasuriya said: “We will form a government where will be able to carry through all progressive legislations and a government where we will be able to bring rule of law, enshrine all the basic human freedom. We are looking at a national government. A lot of work needs to be done and for that we need power, unity and everybody’s consent. We are quite hopeful of the way that we are going forward that things can be changed.”

Jayasuriya said that Sri Lanka needed a good strategy and a stable government. He added that the country needed a CEO with a vision and a good board of directors.

“We as a Government are poised for changes. We believe in change where everybody is treated right. Thus, I request you all to help us pull this nation out of a rut of waste, corruption, murder and mayhem, while helping to pull it out of debt and rebuild it on a land of equal opportunities, peace and stability to usher in a land of economic growth with equity, justice and fair play where no one will be above the law,” he said.

Emphasising on an overall picture of the action plan Minister of Finance Ravi Karunanayake said UNP Leader Ranil Wickremesinghe has put forward a five point action plan for the country where they are looking at a quick and rapid development.

He said the combination between President Maithripala Sirisena and Ranil Wickremesinghe has shown the world that there is a new democratic trend in this country. “Today we can see many countries looking to Sri Lanka in a complete new manner. Lending to this country is abundance and this signifies the confidence that has been placed by countries which tells that there is a tomorrow for this country.”

Building the economy

Karunanayake said building the economy is the foremost in the manifesto. In this process one of the biggest attractions that we have got is the younger generation having confidence in the UNP. This has been further strengthened by the UNF and that has basically galvanised the support to the younger generation helping them basically to go forward many progressive steps for a better tomorrow.

“A million jobs in five years is not an impossible task for a developing economy. We did it in 1948, 1977, 2001, and you would see people led country development is what we intend for.”

Pointing that there is no point investing capital expenditure all across the country for the sake of it he said that they believe the country needs to be divided into specialised areas.

“We have identified certain economic trading areas and to those areas we will put every single opportunity and investment to facilitate them well and for investors to concentrate on those areas instead of duplicating their investments. Economically devastated countries like Germany, Japan, Georgia, Singapore and Qatar, all of them have come through to rapid development and today where are those countries? That’s what we need to invade.”

12-1

Fighting corruption

“Many of you all are accusing us asking why the process gets slow in bringing people to the spotlight. Unfortunately all these appointments are at the Bribery Commission and were done not with independent commissions. There is certainly a delay there. That’s why we have said we require independent commissions,” he added.

The Minister said religious freedom needs to be completely fortified. “While Buddhism gets foremost place and all other religions have equal share, religious freedom needs to be fortified.” He also said that women rights to be enshrined as well.

Developing infrastructure and education

These are two very important areas. Any developed country has about 6% GDP spend on education; unfortunately in Sri Lanka have had a reducing tendency on education. “Today we spend only 2.2% of GDP. Thus, it is our intention to reach realistic levels, we are strongly ensuring fully education and we want the private sector to come involve.”

Sharing the experience in managing the economy, he said: “It was like a grenade handed over without a pin. Many of you all thought it would explode, but today you could see the rupee is in a stable position, reserves are in a healthy position, overall the revenues are going up, costs are coming down and as a result there is hope for tomorrow.”

Karunanayake said the combination of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe had certainly paid dividends. “We would like to see this on a continuous process. We have been going in byroads and it is time that we try the expressway. We are a Government who’s willing to learn from the people, together we can make that difference,” he noted.

Shedding some light on the opportunities and challenges, Minister of Power and Energy Patali Champika Ranawaka said Sri Lanka should take on the opportunities that are rising from the monsoon Asia where all economic activities and geopolitical theatre of action are taking place.

He said the world economy is heavily dependent on fossil fuel, and with the deflation of resources and global warming it is going to have a major impact on the economies.

“The world has come to a stage where days or more realistically the decades of fossil fuel powered economic activities are numbered and the world will witness the extortion in an economic phase in the next two to four decades time.”

Referring to a study done by the ADB he said if global warming is continued at present level will cause a global economic shift by as much as 6.6% per annum by the end of this century. This would result in Sri Lanka’s rice production go down as much as 30% and tea production by 5%. The direct impact of this will entail on the climatic pattern of the country.

However the Minister said the long-term strategies of the Government will certainly be improved by pragmatic measures to mitigate and build country’s resilience against such climatic situations.

The middle income trap

It is a situation where a country is rapidly achieving some middle income level and stagnate at the level without graduating to the next higher income level. It is a well-known fact that out of many countries only a few have managed to graduate to the higher income level.

The Minister said the question however is whether Sri Lanka’s economy has already got into it or whether it is likely to get into it.

According to the ADB report, in order to avoid the middle income trap a country should maintain a GDP growth rate of 4.7%. Sri Lanka is amongst the countries that would possibly be in the low middle income trap by 2020. However, the study had identified Sri Lanka as one of the Asian economies that soon would come out of the low middle income trap.

Ranawaka said as a nation we have been able to maintain impressive figures in human development indicator. “Looking at those facts you would see that engaging in more and more similar types of economic activities we cannot bring about the rapid, sustainable development which we as a nation are interested in achieving. Thus, the key ways to achieve this state is by transforming our economy into a knowledge base, advance technology led, innovation driven.

“Our R&D work should develop innovative solutions to address the problems faced by our farmers, SMEs and micro entrepreneurs while developing technology solutions to achieve self-sufficient food, pharmaceuticals and energy.”

The Minister said the aim is to make Sri Lanka self-sufficient in energy by 2025.

“Our development plan in extracting natural gas from Mannar basin is to initially convert it for fossil fuel plants there in Kerawalapitiya and Peliyagoda and later convert it to the transport sector to natural gas.”

He pointed that the oil exploration would essentially be a major leap and perhaps the most important turning point in Sri Lanka’s forward march to become a developed nation.

“We are a nation with unparalleled pioneering scripts. Based on our own philosophical foundation and benefitting from modern technology are necessarily inherent in our blood. Thereby, let us result to make it happen,” Ranawaka noted.

Sharing views on future investment plans and Government initiatives Deputy Minister of Highways and Investment Promotions Eran Wickramaratne said despite having set investments targets little over $2 billion, Sri Lanka had only been able to attract investments worth of $700 million during the first half of the year.

Sri Lanka recorded $1 billion investments during last year.

However the Deputy Minister said he was confident that by the end of this year with the return of their Government that they will probably increase their investments by 50% from $1 billion to $1.5 billion.

Looking at this projection he said Sri Lanka could nearly increase it to $3 billion by 2017.

“I’ve been to Singapore and I’ve tried to understand why 2,000 Japanese companies have located in Singapore. Clearly, we do not have all the advantages, like in Singapore at this point, but we have some very good advantages. One of it is our location and having the most efficient port in the South Asian region. There are tremendous opportunities to get our goods to Europe in a much efficient and faster manner. The airport is there, we have capacity in Hambantota.”

Noting that Sri Lanka hardly drew any investment from the EU or the USA during the last decade, he added that country’s future depends on being able to attract investments locally and internationally.

High science investments

“We need to attract manufacturing, high science investments like automation, aviation, transportation, energy, industrial processors, safety, defence and space. These are high science and this country has never attracted anything high sciences. We live in the South Asian region, we need to find our niches and our niches must be in higher living standards. Thus, creating an enabling environment is key, it is the rule of law and the acceptance of the international law.”

Another key point that Sri Lanka needs to look into is consistency in policy. He said investors are keen on economic policies of a country and in order to attract high investments policy consistency, particularly on tax policy is crucial.

“We also need to have consistency on our exports. The doing business environment has improved, but needs to improve more. We will reform the BoI so that it becomes the central agency for both local and foreign investments,” he noted.

Developed countries, middle income countries and even South East Asian countries if you look at their export structure 30%-40% of all their exports come out of SMEs. But in Sri Lanka only 4% are from SMEs. “We have to change this by finding new markets, products and new companies. It is not just looking at the big companies, it’s looking across the board.”

Elaborating further on exports, Wickramaratne said finance companies will definitely not take the full risk; after all they have the depositors’ money. There are country risks, default risks, operational risks and logistical risks. Therefore, the time has come for Government intervention, time has come for Sri Lanka to think of either guaranteed structure or to look at an EXIM bank.

“This is something we need to do. We need to have bold initiatives to pull this country from where it is and these things would not cost a lot of money. Our export structure is about $11 billion and countries which are in the middle income the governments support 10%-15% of exports. The capital requirement to set up the Exim Bank would be around $150 million. It’s all a question of priority. We put $250 million in phase 1 of Mattala Airport; we were going to put another $300 million on 2nd phase. Why not support our exporters, our companies, and our creative ability?

“It takes vision, understanding and experience in implementing these initiatives. I think this is the direction the country should go. If you want the economy to kick off we need to be practical in supporting our companies and exports.”

The Deputy Minister highlighting on future infrastructure said that the emphasis on the future has to be public transport.

Noting the importance of developing urban centres he said the complacent transportation is just not going to work in transporting people into different destinations.

He said the speed in city of Colombo is reducing by 1km per hour despite wider roads, better roads and better surfaces.

“As you look at the roads, 9/10 vehicles are driven by men. Where are the women in this country travelling? They use the public transport, but it is unfortunate that there is no secure, timely, comfortable transportation system,” he said.

Wickramaratne pointed that it is high time Sri Lanka address this issue in a serious manner. “We looked at plans with the University of Moratuwa, if we invest over the next 15 years we will have a public transport system in this country, the best in the world – it is possible. Interesting part is 50% of these investments come from the private sector so the government actually has to partner 50%.”

Housing

“The majority of the people in Sri Lanka do not own a house. The reason I argue is not just infrastructure, if you want political and social stability, we need to have a stake in the system. While the economy grows the challenge for politicians ourselves is to make sure that everybody benefits. The house is a wonderful way of giving social stability. It is not just jobs and income, that’s how democracy will be preserved,” he added.

Deputy Minister of Policy Planning and Economic Affairs Dr. Harsha de Silva said Sri Lanka had messed up its priorities in the past and it is high time that the ship was turned around.

Pointing that the only way out of the mess is to export he said, “Either we export or perish — that is the simple fact of life. With 20 million people, we cannot depend on our economy to sustain high growth.”

He warned that unless Sri Lanka plug itself to the world and start producing products and services that are competitive with the rest of the world, there’s high tendency that the economy could fail.

“We cannot go down the same road. We have to turn this ship around. If you look at where growth is coming from, the growth is coming from the non-tradable sector like construction, real estate, transport services and telecommunications, retail banking and wholesale trading. That is not going to give us a competitive country.

Hence, the UNF has come up with a new plan, where we are going to create the most competitive country, the most competitive economy in this part of the world and that is what we are here to do. If we can achieve that, we can propel this economy to a fast growing, competitive economy.” Dr. de Silva said.

Q&A Session

Q: Does the economic plans of the UNP take into account on the risks of the climate change and environmental issues to face future? It seems like only focused on economic growth, FDI and export market. How will be these objects be balanced?

Ranawaka: In our manifesto, we have addressed all these issues. In energy sector beyond 2030 we are trying to achieve 100% renewable sources in producing energy in this country. But before that we are trying to achieve 100%, try to export our hydro carbon potentials to other countries. As far as climate change and global warming is concerned, our emission level is very low compared to other countries. In year 2007 the IPCC had identified the carbon budget, according to which one person can emit? Two tonnes of carbon in order to maintain the required level there in global warming. But our emission level is less than one tonne, so we have enough space to emit further. But we have to take this more on high ground to propagate this idea of green economic policies to other countries. In agriculture, in energy fields in the manifesto clearly states that we are going to tap on the green economic policies in time to come.

Q: Exporters are suffering due to non-refund of VAT for long-period of time. Countries such as India whom our exporters compete especially on agriculture exports even have schemes to support exporters. What would you do to address this under a UNP Government?

Karunanayake: Well, the interim government is in the process. We cannot rectify a 12 year mistake in 189 days, but we are definitely with the will of the people when we get elected on 17th this will be rectified as quickest. There have been many default actions that have taken place and we will rectify that as soon as possible. The past practice should not be something taken forward. That’s all I could tell you as futuristic statement.

Q: What are your plans to make CEB profitable before we talk of self-sufficiency?

Ranawaka: During the past six months, CEB earned Rs. 18 billion as profits. We have already achieved that.

Q: The previous regime was severely criticised by then opposition the UNP over the construction of Hambantota Port and Mattala Airport, which are not generating income or profits. Does UNP have solid plans to convert them into profit making project if you all are elected?

Karunanayake: We have invested Rs. 86 billion for the first phase development in the Hambantota port and Rs. 110 billion for the second phase. Revenue coming on value added basis is only Rs. 200 million. If you go on this basis it will take 400 years to repay that loan. All we could say is we can put this into good constructive use. Now that it is made, we have to put it to constructive use. We have already spoken to major shipping industries, ship building, dry-docking and I think in the next couple of months you would see the progress of those.

The Mattala airport is another case of Rs. 46 billion spent of taxpayers’ money on a place where it is illogical to have an airport. Now that it is already built all we could to do is to get hold of aircraft manufacturers, so that they can have their repair centre in that area. Unfortunately we are finding that the heat is too much in that area. There are many things that can be done, but it takes some little additional time. These are the ill-conceived plans that have taken place for country which has limited capital expenditure.

When you put them into one particular area, you basically over burden a particular area and today we are paying the price for it. Now that it is built it certainly is incumbent on us to convert this into a very progressive economic centre. Between the port and the airport we will certainly ensure things are brought in from a regional perspective rather than from an internal domestic perspective.

Q: What’s the Government vision on ICT and recent signing of a large project with Google?

Jayasuriya: It is definitely an area where we are giving highest priority. I would like ICTA CEO Muhunthan Canagey to answer this question.

Canagey: Soft infrastructure is way forward for digital economy and we at ICTA are making sure that soft infrastructure is taken place. The Google Loon project is of course a $1 billion project and that could be added to the FDI in another way although it’s not a cash inject, but a technology inject in the form of infrastructure development in a national level. This will transform the entire platform of digital services of the country, taking all Government services to every rural village, citizen and bringing them a part of eco system. While we do this, steps have been taken for fibre optic to bring in across from Thalai Mannar so the country would have the next high wave of internet. We can call it the internet super highway, not just locally but to the international space as well. In terms of the cost, the Government is not spending a single cent.

Q: In the five point plan, one cannot see plans to develop the CSE. Is it because you don’t see CSE as an investment that would create wealth for the citizens?

Karunanayake: It is certainly being looked at; we said developing strong financial markets. It is certainly something we want to convert into a vibrant place, but we don’t want pump and dump situation here. We have brought into stable level. Fundamentals are all there. From now onwards we are going to take off and that’s what we have done all this time. Now it is ideal time for you all to invest and you will see the dividends that are coming from it. We also want more people get involved in the stock exchange. Today 5-6% owns about 80%-85% stock and this needs to change. We want to see wider participation in the capital market, not few individuals.

Q: Colombo is an unplanned city. The country needs more planned cities. What are your thoughts on this? Any plans of smart cities like Barcelona, Singapore?

Wickramaratne: I agree with the comment, but that doesn’t mean you cannot put order into chaos — you can. There will be around 83 smart cities in the world by 2020 and certainly I’m hoping that Sri Lanka will have one. There are very old schools in Moratuwa which has not been invested in. I was talking to the professionals and academics there and turn it into a smart city. What we are not doing is that we don’t use the resources we have and harnessing it directly for locality for improving the city. I have done the preliminary paper work of creating the first smart city. So we have certainly started thinking of it and of course the implementation is after 18 August and that will depend on you.

Karunanayake: I think we have been looking at this in a big way. We are bringing in a megapolis in the Western Province to amalgamate all and to make one big city. Prime Minister has been very keen on this area and a lot of study has been carried out. I’m sure you will see that after 18th.

Q: Attracting FDI needs focused economic strategy by bringing together different institutions. How will you coordinate this in going forward?

Dr. de Silva: The Ministry of Policy Planning Affairs would coordinate a lot of the current decentralised agencies and several pieces of legislations are being amended soon after the new Government take office. The Development Special Project will cut through the red tape and bring in the focus to issues that we need to currently deal with particularly in terms of landed environmental issues. The Prime Minister is very keen to ensure that we have an easy and a transparent, efficient system where investors can come, apply, and either be told yes or no in a specified period of 40 days to start with. The 40 day implementation plan will get going soon after the election. There is a fair amount of work that needs to be done.

Wickramaratne: The problem in this county is not with the institutions, but with the human resources. I agree the institutions are important, but the problem is deeper than that. Human resources is one of the most important factors which drive the economy of a country and make a country competitive in the global market. About 1.5 million of Sri Lanka’s workforce is engaged in the public sector. The State sector employees have an attitudinal metrics problem and reforms should be made targeting to change the way these state employees look at issues and their attitudes towards issues. If you really want to take this country to the next level, you have to think radically about the human resources. No country will flourish with a private sector unless there is an efficient, top performing public service with public servants who are really passionate about what they are doing. Thus, providing more training with international exposure and paying better wages will improve the sector to support national growth. They are poorly remunerated. They have no motivation. There is hardly any investment in training. So a public sector reform is a must.

Karunanayake: Don’t wait till the FDIs come. Get our private sector have a wakeup call. This is the time to take opportunity. We are going to have expressways to run across the country. We are trying to get the local companies opportunities. We have foreign companies giving us the loan, giving the contract to local companies to do it 100%. If we can do it 100% why do we need the foreign partners? This is where we want to have the private sector to have a wakeup call. After all we want to develop our entire concept of the five point business plan is to develop the local industry if we can’t do that we can get technical assistance and if we can’t do that we will look at the FDIs. You could see, it’s a very business friendly government that’s coming there and this will be fortified into the future.

Q: Over the last several years BoI has not been a true one stop shop (OSS). What steps have been taken to change this?

Upul Jayasuriya: After 18 August we are planning to bring in this 40-day limitation for a project to be approved. We have already started this and that is how the first proposal that came into BoI for the establishment of Volkswagen plant in Sri Lanka came only about a month back. On Thursday we will be signing the agreement. We are a country that has changed a separate set of laws that apply to the foreigners. No other country has this kind of law, particularly the land laws. In Singapore you can have any investment and 100% ownership. In Malaysia the government is inviting to make it the second home with five million investments. But in Sri Lanka nobody can own a property or investment. This has to change. Everyone loves Sri Lanka but in order to attract investments we need to learn the lessons from the region. We have already consulted several companies. We need not 300-400 acre zones we need 2,000 acre zones and put all infrastructure in one place. In the meantime we have to change the attitudes starting from the BoI staff. If the attitudes of the officers do not change then they will change.

Q: SriLankan Airlines is going under utter loss since the previous Government took over from Emirates. What’s your strategy to make it a profit making one since it’s the national carrier that always represents the country? What’s your stand on the Colombo Port City project?

Karunanayake: Last year during the past regime the loss of SriLankan Airlines was Rs. 32 billion. During the first six months we have managed to bring the loss down to almost about 60% of that with effective planning. The Prime Minister has appointed a special committee on that and no sooner with the will of the people after 18 August we would see a complete revolutionised process for the national carrier. It will fly where it is got to fly, bring the tourists from where it got to bring and not fly the word for the sake of flying. So you bring that financial discipline into it. Overstaffing will be brought into meaningful staffing and two three airlines will be amalgamate to one and it will have its budget airline in a different concept. But certainly we will ensure that will be a thriving cargo and passenger.

Opportunity is there but we are flying to the wrong places. On the port city project, when we saw half-baked approvals that have been given put us into very difficult position. We have requested them to come forward with some basic requirements. The way forward of this has been discussed through the UDA. It has been shifted to the UDA and there are narrowing of gaps that are there, but the overall picture would at least get another two to three months. I don’t understand why this has been a damper on private sector spirit, because this is something that the Government didn’t get on. The past Government give unsolicited proposals without vetting the impacts on the national economy as well as the Colombo city. Well, today we are paying the price for doing so. This type of things needs to be more scrutinised to rectify. As there are certain committed costs that are there and breach of such clause would impact about $500 million. Therefore we got to see how and what way we got to take it forward.

Q: We have a bloated public sector with 1.4 million. How do you anticipate to transform the public sector?

Jayasuriya: Well, Sri Lanka has the world’s largest public sector. The world average is for every 280 people there should be only one public servant, but in Sri Lanka our average is 15. So you can imagine the size of the public sector. We have to do a complete study of the whole situation because eventually you are paying for this. I believe that if you have the large public service, then you should have the best public service. Thus, the Government will do a complete study on the sector to make the ideal reforms.