Economic restructuring needed for growth recovery: RW

Tuesday, 28 July 2020 02:11 - - {{hitsCtrl.values.hits}}

Warns SL could slip into negative growth, says new growth sectors will need to be found
Calls for reintroduction of fiscal consolidation measures, upgrading of skills, and linking to regional economies
Advocates for balance on CB, against micromanaging monetary authority
Says Govt. has not delivered, civilian Govt. should remain civilian
Believes political parties should still support an inclusive Sri Lankan identity

By Uditha Jayasinghe

United National Party Leader Ranil Wickremesinghe this week warned that Sri Lanka will have to restructure its economy to deal with the fallout from COVID-19 and return the country to strong growth.

UNP Leader Ranil Wickremesinghe

The COVID-19 impact on exports, investment and key sectors such as remittances, apparel and tourism will require deep changes, including returning to fiscal consolidation measures, ramping up skills training, promoting automation, finding new sectors and linking to regional economies, Wickremesinghe told the Daily FT.

“We will have to rethink our economy completely. It’s like you’re in the middle of what is called the ‘fog of war’; you don’t know what is out there, you have to keep moving and hope you can make it. Global trade has to keep moving, and there are new areas that are developing, as well as regions. We have to get into a regional comprehensive economic partnership within South Asia.

“I think South Asia and BIMSTEC are important for us. There may be resistance to the agreements, so we should look at what is needed. We also have to look at trade adjustment programs, because there are areas where we will need help. We have to plan now. Once you’re working at it, your credibility increases and opportunities will emerge,” Wickremesinghe said.

He also stressed that it was essential for any Government elected after the Parliamentary Election next week to look at finding fresh ways of dealing with the global changes brought on by COVID-19, which includes finding ways to attract investment. Wickremesinghe also warned that Sri Lanka was likely to slip into negative growth this year but should focus on the prospects and opportunities that could emerge in 2021.

“I think we have to be ready for a tough scenario. But I am confident that with reforms and restructuring we can face it. The issue is how fast will the West and other key developing countries recover from the present crisis, and engage in driving global investment again? It all depends on how their markets are next year, and the year after.”

“But at some stage, they will look for other locations, because there is a general consensus, even leaving aside political issues, that a country’s manufacturing capacity should be spread out. People are saying it’s not wise to invest only in one country or region. They say don’t keep all your eggs in one basket when it comes to manufacturing, because your manufacturing can be affected by any issue.

“In any case, China was starting to relocate their industries, which is why we were talking to them about bringing them to Hambantota. So, that shift will have to take place, it depends on automation and semi-automation. So, part of manufacturing will go back to their countries, and the others will be out here.”

The former Prime Minister also advocated for a balanced approach to using monetary policy to assist COVID-19-hit companies, pointing out that while the Central Bank has to follow Government policy, it was also necessary to protest against micromanaging its functions.

“Banks must be able to give out money, but then its depositors’ money they give out. If you want them to be more liberal you have to put more safeguards in. As for the Central Bank, the national policy is laid down by the Government, whether right or wrong. The Monitory Board must act within it. But you don’t go to micromanage everything at the Central Bank. You cannot treat the Central Bank as totally independent, nor can you treat it like another cooperative.”

He conceded that the UNP was concerned about losing minority votes and called for political parties to still remain true to the ideal of building a Sri Lankan identity that embraced minorities rather than unleashed unbridled nationalism.

“We are talking about a Sri Lankan identity, and some of the Tamils and Muslims are concerned about identifying themselves with parties that do identity politics, and they think the UNP is safer because we are made up of members of all communities. We are building that up.

“The second option we had, which some smaller parties didn’t agree to, is that we should be the major partner and they should come in as minor partners, as we did in 2015, but some of them wanted to hold their old position at the same time. They were not committing themselves to a common Sri Lankan identity. So, these were the issues we had.”

He acknowledged that losing an estimated two million Sinhala Buddhist voters at the Presidential Elections in November was a serious loss to the UNP and the party was attempting to recover lost ground during the Parliamentary Election.

“Our campaign has also taken note of the rising sentiments, and is trying to respond to them. I don’t think we paid sufficient attention. But there are a lot of people, and we have spoken to many in the Sangha as well, who thought there should be more minority inclusion. We need it, but what we don’t want is identity politics. But if you’re having two parties with a mix of communities, that’s a good idea.”

He also dismissed the Government’s track record over the last eight months, insisting that the new administration was misguided in abandoning the fiscal consolidation measures put in place earlier and warning that it will have a long-term impact on Sri Lanka’s economic health. Wickremesinghe also criticised the appointment of military personnel to key positions in Government.

“They haven’t delivered. Basically, if you couldn’t deliver on salmon and dhal, then what more can you expect? They have not delivered. The people are now getting disillusioned with it. The Government they expected is not what they are getting now. They are certainly not professional. Putting the military in will not resolve issues. What is civilian must remain civilian.”

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