“Develop sufficient spaces within economies to face complexities”

We have to ensure that we develop sufficient spaces within our own economies so as to be able to comfortably face the inevitable complexities in the face of global challenges, President Mahinda Rajapaksa said.

“In our view, individual policy interventions or ad-hoc measures which target just one or two outcomes are often flawed and almost always, do not provide the desired results. Such responses are essentially short-term, and sometimes lead to new difficulties. Although it may sound simplistic, I must say that, for growth to be sustained, we as nations, must get our basics and fundamentals right,” President Rajapaksa said delivering the keynote address at the Commonwealth Business Forum in Burswood Complex, in Burswood.

Speaking on the topic ‘The Indian Ocean and the Pacific Rim: Fastest Growing Markets,’ the President said: “In a world that is increasingly complex, where markets and economies seem to be in a constant state of uncertainty and turmoil, the only geographical area that appears to be somewhat stable is the Asia and the Pacific region. In fact, today, it is the Asian and Pacific economies that are universally accepted as playing the key role in global growth and stability.”

Asia’s fast growth track is also evident from many of its indicators that we see at present. But, we must appreciate that this continuous transformation would not take place unless the Asian nations continue to take the right steps. That is why the current political and economic leaders have a great responsibility in guiding the Asian nations to prosperity in a sustainable path, the President added.

Following is the full text of his speech:

Mr. Chairman, your excellencies, ladies and gentlemen, at the outset, I wish to express my gratitude to the organisers of the Commonwealth Business Forum for inviting me to share my thoughts on the topic ‘The Indian Ocean and the Pacific Rim: Fastest Growing Markets’.

In a world that is increasingly complex, where markets and economies seem to be in a constant state of uncertainty and turmoil, the only geographical area that appears to be somewhat stable is the Asia and the Pacific region.

In fact, today, it is the Asian and Pacific economies that are universally accepted as playing the key role in global growth and stability. It is therefore not surprising that the much talked-of BRIC nations, consist of three countries from the Asian Region, India, Russia and China, and that further confirms the growing importance of the region.

Asia’s importance

Asia’s importance which has been clearly visible over the past couple of decades is probably best reflected in the recent research findings of an ADB study. According to the study conducted by the ADB this year, Asia’s share of the global economic output was as high as 58 per cent in the year 1700.

Thereafter, over a period of 260 years, that is from 1700 to about 1960, Asia’s share declined steadily, and fell to around 16 per cent by 1960. However, over the past 50 years, Asia’s share has been steadily climbing once again, and the ADB projections are that by the year 2050, Asia’s share of global output could reach around 53 per cent. These projections are indeed remarkable since the turnaround is expected to be recorded in just 90 years, while the decline was experienced over about 260 years.

Asia’s fast growth track is also evident from many of its indicators that we see at present. But, we must appreciate that this continuous transformation would not take place unless the Asian nations continue to take the right steps. That is why the current political and economic leaders have a great responsibility in guiding the Asian nations to prosperity, in a sustainable path. Such a journey will encounter many risks and challenges, some of which I will now briefly outline.

Key challenges

My dear friends, going forward, one of our key challenges will be how we balance ‘regulation’ against ‘innovation’. At the same time, our nations will have to continuously stimulate our economies, and not allow our systems to falter or fail. We will also have to face the challenge of dealing with commodity markets that are increasingly being used as financial markets by a large segment of investors.

Today, we see hedge funds investing in orange juice, wheat flour and rice as financial instruments. Such investment appetites place enormous pressures on global commodity prices, which, in turn, challenge the political and economic structures of many nations.

We must also understand that the fast growth in many Asian nations raise expectations of its people, who look for better standards of living and greater well-being. Fulfilling these expectations is another major task for Asian political and economic leaders. At present, many advanced nations suffer from high unemployment which has resulted in the first signs of political and social unrest being felt in those societies.

Such situations, if allowed to escalate unchecked, could give rise to more serious political problems which could further threaten global economic stability. It is therefore imperative that the more advanced nations respond quickly and effectively to deal with the rising inequalities and unemployment levels in their societies, without allowing that situation to reach unacceptable proportions.

Confidence and the economy

My dear friends, economies operate on the bedrock of confidence. If confidence levels decline, rational economic activity that we take for granted, is damaged at the very foundation. In that regard, it is essential that world leaders search for proper responses and act decisively to regain and restore confidence.

The biggest concern amongst economic players today, is that clear economic decision making has been too little, and too late. It is therefore time for advanced economies to respond to the growing crises, and to do so quickly and collectively. Otherwise, we would find that the situation would become much worse, and perhaps even reach a point of no return.

Over the past six years, we in Sri Lanka have been successful because we have been able to provide a policy consistency and clarity in our economy. The ‘Mahinda Chinthana,’ the policy agenda of the Government, clearly spelt out our vision and the programme of action that we needed to follow. We have acted quickly and confidently, in keeping with our culture and the aspirations of our people and faced challenges directly.

We gave equal priority to the several macro-fundamentals of our economy, including unprecedented investment in infrastructure, resulting in substantial improvements in the recent past, which are worthy of mention; economic growth up from 6% to 8%, unemployment down from 8% to 4.3% inflation down from 28% to 6%, debt to GDP levels down from 103% to 79%, budget deficits down from over 10% to 6.8%, foreign reserve levels up from 1 ½ months of imports to 5 ½ months of imports, Global Competitiveness Index improving from 79th position to 52nd position, Doing Business Ranking, improving from 102nd level to 89th level, infrastructure development effort continuing without interruption, poverty down from 22% to 8%, political stability being maintained in times of great political chaos in the world.

We believe one of the reasons why Sri Lanka has been able to achieve these improvements was the clarity and confidence we provided to our stakeholders. We implemented balanced policies that embraced all vital aspects of the economy simultaneously.

It is worth noting that these achievements were possible in the context of conditions of peace and stability which we attained in Sri Lanka after the eradication of terrorism. An end to terrorist violence was absolutely essential to move the country forward along the path of economic and social development.

Multipronged initiatives

Our initiatives today are multipronged. The spirit of inclusivity to which we are deeply committed is the basis of all our programmes of reconciliation. Resettlement of those displaced by the conflict, re-integration of ex-combatants, a political dialogue with representatives of all communities and strengthening of electoral mechanisms, especially at the grass-root level, are aspects of this process.

The economy of the area, previously affected by the conflict, is growing today by 22%. We await the submission next month of the report of the Lessons Learnt and Reconciliation Commission, a home grown institution which I appointed to help leave behind us the pain and anguish of the past and guide the nation towards an era of peace and prosperity.

In our view, individual policy interventions or ad-hoc measures which target just one or two outcomes are often flawed and almost always, do not provide the desired results. Such responses are essentially short-term, and sometimes lead to new difficulties. Although it may sound simplistic, I must say that, for growth to be sustained, we as nations, must get our basics and fundamentals right.

At the same time, we have to ensure that we develop sufficient spaces within our own economies so as to be able to comfortably face the inevitable complexities in the face of global challenges.

Medium to long term strategies

It is now time for the world in general, and Asia in particular, to search for and implement appropriate medium to long term strategies. Such an approach would help countries to develop the ability to move along a focussed growth path, even when the challenges become tougher. The successes Asia has been able to enjoy over the past several years have been many. The results that Asia has been able to display have been impressive.

The growing level of prosperity that Asia has been able to provide for its people has been satisfying. Asia now needs to continue this journey in a sustainable manner. To do so, it will be vital that Asia maintains its growth momentum and remains financially strong. That is a responsibility Asia owes to its people.

About one half of the world’s population live in Asia. That is why our actions will be highly relevant in a global context, and that is why if we maintain our success rate, the beneficiaries will be the greater part of humanity. If we are successful and continue to be successful, we will enhance the living conditions and sustainability of all these people, and we will leave behind an inspiring and everlasting legacy.

In conclusion, I wish to take this opportunity to extend a warm invitation to all of you to come to Sri Lanka in 2013, when the next CHOGM will be held in Colombo. I firmly believe that it will be a memorable experience for you.

My dear friends, it is my fervent wish that our collective efforts in relation to delivering prosperity to our people would endure the test of time.  May the blessings of the Triple Gem be upon all of you!