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People’s expectations post 8 Jan: Opportunity must not be wasted?

Comments / {{hitsCtrl.values.hits}} Views / Friday, 18 December 2015 00:00




Maithripala Sirisena, with the support of Ranil Wickremesinghe’s UNP, the country’s largest political party, won the election on the promise of “Yahapalanaya” or good governance. Ten months have passed since Maithri’s election. During this period, the Labour Force Participation Rate (LFPR) had increased by 100 basis points (bps), from 53.3% to 54.3% as per end second quarter (2Q) statistics (which is the immediately available data), while the unemployment rate (i.e. those who are 15 years and above and who are seeking work) had also increased, from 4.3% to 4.5% between those two comparative periods, i.e. last year end vis-à-vis 2Q end of the current year. LFPR comprises those who are of working age (15 years and above) who are employed or who are seeking employment, while the unemployment rate is those who are of employable age (15 years and above) who are seeking work, but, ipso facto who have been unsuccessful in this endeavour. One reason for the increase in the LFPR may be due to the rising CoL. State-owned Census and Statistics Department’s (CSD’s) low inflationary data may have to be taken with a pinch of salt. It has excluded alcohol and cigarettes from its inflation measurement basket, among a host of other goods and services. Nevertheless, according to unconfirmed reports, the Government wants to increase its inflation measurement basket by taking in another 100 goods and services, thereby upping the total figure of such items to 400 (over the present 300 number), to have a fairer gauge of inflationary movements in the economy.



If unemployment was one of the reasons for MR’s defeat, it rising from 4.3% at the end of MR’s term to 4.5% in the six months of the Maithri-Ranil duo’s term in office doesn’t augur well for the two politically, nor for the economy at large. Enhanced foreign direct investments (FDI) or public investments, or a mix of both may be the solution. While FDI has been revolving round the pathetic 1% GDP figure despite the war ending more than six years ago, with seemingly not much of a change despite the regime change 10 months ago, public investments, however, have fallen. Latest Central Bank of Sri Lanka (CBSL) statistics showed that capital and lending expenditure minus repayments in the first half (1H) of the current year had had declined by 14.38% year on year (YoY) to Rs. 238.2 billion. On the other hand current (consumption) expenditure had zoomed by 19.2% to Rs. 769.3 billion in the comparative period, while revenue has lagged behind, though growing by 11.44% to Rs. 605.8 billion, yet not sufficient to even meet the State’s total current account bill, leave alone its capital account bill. It is said that one reason why Ranil Wickremesinghe lost the April 2004 General Election was because, unlike his uncle, President J. R. Jayewardene, he was unable to launch a massive infrastructure development project like the Accelerated Mahaweli Development scheme which provided employment to thousands.


Support from our international friends

It was possible for Jayewardene to implement the Accelerated Mahaweli because of the grant aid he got from the West and at the very worst, concessional aid (as opposed to foreign commercial loans) from first world countries. J.R., the farsighted man that he was, won the gratitude of Japan with his famous speech at the San Francisco Peace Conference of 1951, where he appealed to universal religious values in the Buddhist idiom, pleading non-hatred and mercy for defeated Japan, in the context that the then Soviet Union together with its satellite Warsaw Pact countries and aggrieved Asian countries were demanding war reparations. Japan never forgot that favour extended to them by J.R. and when J.R. won the 1977 General Election, Japan, by then an economic powerhouse and the second largest economy in the world, poured in aid to Sri Lanka, in the form of infrastructure development assistance. J.R., as a young minister of Sri Lanka’s first Cabinet of 1947 was also an admirer of the USA in particular and the West in general, of their democratic institutions and in the US case, its free market economy which he implemented no sooner he was elected to power. J.R. from the beginning had seemingly played all the right cards, though that phrase may be unkind to describe him, because those were the things he believed in his heart and were not premeditated or executed with any ulterior motives. So, when he became the Head of State, the world that matters, i.e. the developed world, was fully supportive of him. J.R. said that his first priority was jobs, his second priority was jobs and his third priority was also jobs. At the time of his election, Sri Lanka’s unemployment was virtually at the double-digit range.


Policy consistency

He knew that it was only through the opening up of the economy, inviting foreign investments and embarking on massive infrastructure projects like the Mahaweli with foreign aid (as Sri Lanka lacked the capital), could the country’s unemployment rate be reduced and he did just that. Ranil too enjoys that goodwill, particularly stemming from Japan, because of his uncle. He’s also looked upon favourably by the West. It’s up to him to leverage on those advantages in order to kick start the economy. To say that Japan and the West, unlike in 1977, don’t have the money, may be a fallacy. Even during the time J.R. was elected, the West was in recession, made worse by the Iranian crisis after the Shah was toppled, followed by the Iran-Iraqi war which sent oil prices soaring. But those mishaps didn’t stop the West and Japan from providing economic aid to J.R.’s Sri Lanka. It may be argued that as Sri Lanka has now graduated to a lower middle income country, it doesn’t qualify itself for any bilateral or multilateral assistance. But then look at a country like Greece, classified as a high income country by the World Bank (as opposed to Sri Lanka being classified as a low middle income country), it’s still getting billions of dollars worth of aid from the IMF, the European Union and the European Central Bank to bail out its economy. Why cannot Sri Lanka also receive at least a fraction of that aid? The new Government has, according to political observers, distanced itself from China, a country with which the Sri Lanka of the Rajapaksas cosied up to, to the chagrin of the West, Japan and India. The new regime, post Rajapaksa, has all but severed such ties, whilst also building up on the premise of reconciliation, but what has it got in return from its friends, the West and Japan? International jurists to sit in judgement over Colombo on alleged war crimes committed by it in its war against LTTE terrorism? No restitution of GSP+ at least up to now, no infrastructure development program and no balance of payments support and the continuation in the ban of fish exports to the EU, harbingers of political and economic crises to come. One of the first things that the new regime did, after it was elected to power, was suspend the Chinese funded $ 1 billion plus Colombo Port City Project. The renegotiation with China over the Port City was necessary. Sovereign rights to perpetual ownership, sea rights and airspace had been bartered away on a platter. This was unacceptable. But there was no need for all the hullabaloo. China has been a friend and stood by us in our time of need. So has Japan, the West and India. Colombo ought to get more in return than the $ 1.5 billion swap arrangement with the Reserve Bank of India, moneys which, sooner or later will have to be returned.


Way forward

No real tangible benefits have yet been forthcoming to the real economy. This is the time for our friends to stand up and be counted. There are also things that Ranil and Maithri will have to put right. Be Charming and forceful like J.R. when dealing with one’s friends, to ensure that the economy gets what it needs. Go beyond J.R. to the realm of moral power (“just and righteous society”) to “Yahapalanaya” (good governance) which became the winning factor at the 2015 January election. Be strong like Lee Kuan Yew against corruption, conflict of interest and nepotism, which even J.R. failed to subdue, if not now, later, but sooner rather than never. Have a good team in place, another “Ronnie de Mel, Ranasinghe Premadasa, Lalith Athulathmudali, Gamini Dissanayake” combination, not infighting and disunity. A house divided is bound to fall. Build the house on a firm foundation of good governance in deed as much as in word. Finally, the real social and political change is yet to come to give real meaning to the word revolution in political parlance.

(Source The Great November Revolution by Dinesh Weerakkody)

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