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Wednesday, 13 February 2019 00:20 - - {{hitsCtrl.values.hits}}
By Uditha Jayasinghe
Competitive entrepreneurs will decide Sri Lanka’s future, Prime Minister Ranil Wickremesinghe said yesterday, acknowledging that the country is in the midst of a “bad dose” of fiscal consolidation to repay debt that has hurt growth, but that prospects could be improved through exports and investment.
Speaking at the Entrepreneur of the Year awards ceremony, organised by the Federation of Chambers of Commerce and Industry (FCCISL), Wickremesinghe noted that homegrown entrepreneurs have to become more competitive to foster growth. Taking the example of China, he pointed out how private enterprise could grow in a short period of time, and called for Sri Lankans to get in touch with their entrepreneurial spirit.
“We have to work together to ensure stronger and more competitive enterprises in Sri Lanka. I went to China in 1979, there was no private enterprise; when I went to China in 1987, private enterprise was starting; today when you go to China, everyone is a private entrepreneur. We have had a culture of entrepreneurship in Sri Lanka, so we have to promote entrepreneurship.
As a Government, we can support, but it also needs ability. The ability to compete, the ability to succeed,” he said. “Only by expanding entrepreneurship, and the number of entrepreneurs we have, can we attract other entrepreneurs to Sri Lanka to foster growth. That is what any successful country has done.”
Touching on Sri Lanka’s complex economic situation, Wickremesinghe recalled that during the past decade, investment in Sri Lanka’s tradable goods had been overlooked for investment in non-tradables, largely infrastructure. This focus on infrastructure contributed to creating high levels of debt, which now have to be repaid.
“Sri Lanka’s non-tradable goods has increased at the expense of non-tradable goods. To reduce debt and grow, we must get into tradable goods. But we cannot do this with our small market. We need to export, we need to look at services and other sectors. But even with you expanding, we still need foreign investment. This is why we are asking you to be more competitive. This is why we are coming out with trade adjustment packages, this is why we have Enterprise Sri Lanka, why we are having a new development finance company. All this needs to get going and have our BOI and Tourism Board to attract foreign investment. We need it.”
The Prime Minister conceded that the Government has taken time to tackle the debt situation, but defended it by insisting that they had managed to stabilise the economy, and was now readying to push forward with economic expansion measures. These policies would largely need to focus on aggressive exports expansion strategies, he added.
“I thought I would mention this, as we keep forgetting that we have a big debt and we have to repay it. This is something we in the Government see every day. When Ministers go to the Treasury, they are told ‘no, we need money to service the debt.’ So no one can ignore it.”
Much of the upcoming Budget for 2019 would concentrate on this challenge, Wickremesinghe said. He went onto say that second to debt was the salary burden of the public sector, which could not be reduced, as it would trigger large-scale unemployment which in turn would hit consumption and thereby growth.
“The Budget has about Rs. 2.2 trillion to be spent on debt servicing. This year, foreign debt alone comes to about $6 billion, which is the largest instalment we have ever paid. So we suck that money out of the system, making it a bit more difficult for you to get credit. You know what debt is when your company is saddled with it. We are a country. Just as much as your shareholders can get annoyed, so can our shareholders. We went through a hard time to stabilise the economy, but it retarded our development. If we did not have debt, we could have seen more growth,” he said.
The Government’s fiscal consolidation process is good for economic stability, Wickremesinghe said, insisting Sri Lanka could not “change doctors in the middle of treatment” and should “find treatments that fit the illness.”
“The next few years will decide how we will earn funds to repay debt, how our exports grow, and how we attract investment. That means we have to spend more money on education, so we can have a more skills-oriented workforce, as well as spend more on healthcare and infrastructure,” he said.
Sri Lanka slipped to the 85th position in the 2018 Global Competitiveness Index from 81st in 2017. The report, which was released in October, showed that out of 12 broader pillars, Sri Lanka had improved in terms of infrastructure, health, ICT adoption, skills, and market size; but lagged in the other factors, such as institutions, macroeconomic stability, product market, labour market, financial system, business dynamism, and innovation capability.
In South Asia, India topped by being ranked at 58th, though it has slid greatly from 40th under the old methodology last year. Bangladesh was 103rd, followed by Pakistan (107th) and Nepal (109th).
