NZ mantra for SL?

Thursday, 24 October 2013 00:51 -     - {{hitsCtrl.values.hits}}

  •  New Zealand’s former Finance Minister shares lessons and suggestions as to how Sri Lanka can avoid middle income trap and become competitive
By Shabiya Ali Ahalam Ruth Richardson, former Finance Minister of New Zealand, the third ranked nation in Ease of Doing Business, yesterday shared with the Daily FT a good mix of proven and credible measures that Sri Lanka can follow to avoid the middle income trap as well as become a competitive nation. “In my view the only countries that are going to go above the middle income trap are those that have rule of law and civic society, open competition between freedom of entry into economic and political systems and individual freedom to create an innovate,” Richardson said in a frank, exclusive interview with the Daily FT. In Sri Lanka for the first time, Richardson, who served as New Zealand Finance Minister between 1990 and 1993 and us now heading a public policy consultancy firm, also called for prudent macro-economic management and minimalistic government role in business. “The government is not good at business. That is not ideological; it is a statement of fact. The government has critical roles to play, which is to maintain fiscal policy, to set the right environment for business transaction and to ensure rule of law. Those are critical roles they have to play. Not take the lead in the business environment. It’s about trust. Internationally it is demonstrated that more the state occupies the economy, the least capable the economy is of growing in a dynamic way. It’s not about the left or the right, it is about what works. The government should understand that the motor of growth is the private sector,” Richardson said. Noting that Sri Lanka’s budget deficit and Government debts are high, she said the only way out of this state is via greater private-led growth rather than the Government crowding out the business community. “Fundamentally, governments have been unable to control their budgets in a responsible way. They are built by debts and entitlements that they can no longer fund. Eventually you get this terrible compounding of an economic crisis that produces a social crisis, which in turn leads to a political crisis,” said Richardson, who will deliver the keynote address at the ceremonial inauguration of the 34th National Conference of Chartered Accountants (CA) today in Colombo.  The theme for the event being ‘Innovate to Grow,’ Richardson will be speaking on ‘The Case for Creative Capital’. “There is a lot of evidence that states taking up reforms witness resistance, but the benefit and the dynamic you unleash in the form of reform make it more than worthwhile. With reforms, budgets can be balanced; new opportunities for growth can be created and the economy and widened,” she added. The former Finance Minister of New Zealand also said Sri Lanka has to look at what is standing between where it is now and the future. “I know that economic reform is hard, I have done it. The job of a politician is to transform and be fit for purpose and ensure that the people of the country are well placed to take advantage of the opportunities. These are tough days for the Government and they have to make tough decisions. It will be a real pay off when such decisions are made. Sri Lanka can do it, but needs to be in the process of change so it can be in step with new moments,’ she added.