Friday Apr 19, 2024
Friday Apr 19, 2024
Tuesday, 12 July 2016 00:02 - - {{hitsCtrl.values.hits}}
It seems that the local pundits are more worried about the doomsday prophecies after Brexit than the economic collapse happening right here in Sri Lanka. Unlike the majority of Sri Lankans who vote mostly based on diesel prices, government salary hikes and free lunch packets, the British seem to place more value on their national sovereignty.
Brexit marks the historic shift in global power balancing. As Tony Blair once said: “The EU is about power, not peace”. The Fuhrer’s dream of a European Super Power and the French vision of a Non-Imperial European Empire has hit a massive roadblock. Of course the lost elitists are quick to attribute the whole thing to bigotry and xenophobia, you know those standard words they use whenever they lose their argument.
Brexit is a good hashtag (#) for the Lankan Government to tag their failure with for a few more months. But is Brexit as bad as they say it is?
The sentimental reaction in the financial markets in the wake of the referendum is already normalising. The FTSE 100 has fully recovered all of the ground it lost and the pound strengthened against the dollar and euro in less than a week (despite being trapped in a bear market since last year).
The UK and EU are now entering a long period of exit negotiations. Despite the fearmongering by politicians, trade deals with the EU and the UK are unlikely to get directly affected until those negotiations are finalised. The UK is an irresistible trading partner for the rest of the EU more so than the EU to the UK. It is naïve to think that any of the parties will completely shut off their trade deals unless the unelected EUreaucrats would want to punish the UK.
What we need to understand is that Brexit is primarily a revolt against the unwarranted political establishment rather than on trade. So chances are our trade with the EU and the UK will not get significantly affected by Brexit, at least not anytime soon. Besides, there aren’t any large Sri Lankan factories in the UK that export products to the EU.
One of the key slogans of the ‘Leave’ campaign was that they want their country to have the freedom to explore and build new and ambitious trade partnerships with the rest of the world. Brexit in many ways is a strategic move to reposition the UK against the emerging global market forces.
The US is and will be in socioeconomic turmoil in the foreseeable future. The EU is a sinking ship with multiple holes in the hull with more and more bankrupt countries dragging it down. The Middle East will continue to be unstable. They know that future growth is in Asia and Africa. The EU regulations were the only iron chains that held them back from following their ambitions. We will now see the UK voraciously trying to build stronger partnerships with India, China and other smaller emerging economies in the Global South. They will undoubtedly repurpose the Commonwealth, and that’s where Sri Lanka stands to gain. Instead of wasting public money on the childish act of trying to influence another nation’s referendum and then whingeing about it, Government officials should now design competitive investment products targeting UK investors and make the best use of this window of opportunity.
Another key driver for the ‘Leave’ strategy is to get back full control of UK borders. With the free flow of people within the EU, the UK 
had to close its doors to non-EU migrant workers. Once they get their post-Brexit immigration policies realigned, it is sensible to expect more opportunities for skilled and highly-skilled Lankans to work in the UK.
Over the past 10 years the demand for UK universities drastically fell, largely owing to the border control restricting students to work in the UK after completing their degrees. Once the UK universities are no longer required to give preference and discounts to EU students they will start giving more opportunities to Asians. As much as I hate to see brain-drain, this will at least increase remittances.
UK universities will have a renewed interest to setup offshore campuses in South Asia and Sri Lanka could potentially create special incentive packages for such investments and jump the queue before others do.
While the ‘Stay’ campaign predicted that a Brexit would bring a possible recession upon the UK, the opposite could’ve been the more likely scenario. Looking back at the lacklustre campaign by both ruling and opposition party leaders, one wonders if they too secretly hoped for a Brexit.
The EU’s Debt-to-GDP ratio is over 90% and will continue to rise above three digits. The total government debt at the end of 2015 is a staggering € 9.4 trillion ($ 10.4 trillion) (Source: Eurostat).
The European debt crisis due to incredible bailouts of Greece, Spain, Portugal, Ireland, etc. coupled with the failed ‘Euro’ (currency) and the EU’s flawed institutions and fiscal policies will only get worse as more and more EU member states bleed. Exiting from this ‘tricky’ situation not only allows the UK to control their own economic destiny but will force the EU to make radical reforms before more countries exit. A fresh recession in the Eurozone will be disastrous to the rest of the world including Sri Lanka and Britain might have just saved us.
Brexit or not, the Sri Lankan economy is in turmoil. We have borrowed too much, more than what we can pay back. There is no coherent plan for the next five years and as a result we have been downgraded and forced to raise taxes. Brexit must have sent a strong shock down the spine of the political elite in Sri Lanka. Our disproportionate dependency on these old, fragile, ailing, utopian markets led by weird, self-obsessed, supremacists is too dangerous.
While we are struggling with unmanageable debt and the Government is spending lavishly on unnecessary luxuries, a recession in one of our key export markets is all we need for Greek-style bankruptcy. Hopefully this alarm will cause the Government to rethink its strategies (if they have any), get their act together and develop and execute a coherent development plan which will make us more self-sustainable and attuned to the new global norms, with more balanced international trade and risk spread.
(The author is the former Head of Partnerships and Innovation at the British Council in Sri Lanka and the Founder of Social Enterprise Lanka. He can be reached via email at [email protected])
