The Sunday Times FT - Time to test Chinthanayas, theories and myths

The lower the price; higher the demand (price elasticity of demand) states economic theory. Price is a competitive weapon for market share growth and optimum sustainable market growth requires the right balance and mix of price, product, package, place and promotion states marketing theory.

Under the Chinthanaya the above theories are on test with the recent price hikes in petroleum and electricity, lower cost of railways versus higher priced private bus transport, the Ceypetco/LIOC price war, and the new CWE retail stores selling dry goods at low prices to wholesale trade. Is the Chinthanaya evaluating these theories through one eye forgetting the resultant impact as a whole? For instance what is the long term effect on the relevant institutions, banking system and national budget outcome by subsidising electricity, petroleum and the basket of 20 dry goods sold though the CWE. Will these follow the Railways and the CTB? It also appears that mass consumption items with a significant impact on household spend is more prone to adopting price as the determinant of choice rather than the five “p’s”. This is seen by the long queues at the CWE special outlet and low turn out at LIOC filling stations until LIOC reduced the price difference to one rupee per litre.

GDP growth and GDP per capita are indicators of economic activity, development and progress of a nation according to economists. In Sri Lanka is the enhancements in these economic indicators driven by the war related destruction of infrastructure being subsequently redeveloped adding value? For instance, the A 9 highway was developed with international financial institution support during the ceasefire and now both sides have destroyed it with bombs and mines and will soon require to be redeveloped.

The war for victory, territory and territorial integrity are popular drivers of national sentiment and the Chinthanaya supports it with focus. Victory at any cost, to preserve ego and promises if supported by significant diversion of planned economic infrastructure spends and delays in mobilizing aid and key project initiation, which sustainable globally competitive economic activities will provide new employment avenues and growth impetus in the decade following the victory.

We in Sri Lanka establish new ministries led by new ministers, new regulatory authorities and attempt to protect and expand the value of the environment. The political power houses under the very eyes of the controlling arm continue to denude the forests and especially deplete the stock of rare ebony and other trees, extract river sand excessively and leave large holes excavating gravel illegally. A new Disaster Management Act was passed to address issues of natural and man made disasters, a new Authority formed and of course a new minister appointed to assure effective management. The Chinthanyas create disasters, and the human tragedy unfolds and there is none to the rescue of the affected parties as the ministries gather data, government agents are given accountability without resources, the armed services block relief from reaching the affected areas and even limit the access of the ICRC to help clear the dead and severely injured.

Chinthanaya promises jobs for all unemployed graduates and at nationally broadcast ceremonies with smiling faces new graduate teachers are appointed. Some of these graduates leave lucrative private sector jobs to take the state sector pension entitled teaching jobs that commits a 50 year expense liability on salaries, benefits and pensions. In the midst of these the media continues to report the lack of English and IT teachers and children holding classes under trees with 30 students sharing one text book. Will this Chinthanaya bring economic benefits of the investments?

Chinthanaya subsidises fertilizer, and with good weather bountiful crops emerge with which the market collapses. There are no facilities for storage, value addition, packaging, distribution and technology advancements.There have not been any focus on producing exportable varieties and conversion to other products and as product substitutes have not been supported.

The farmers in the end remain in abject poverty and debt ridden, whilst some others in the chain make hay while the sun shines.

An article in the Economist (September 2-8) titled Economic focus/On the hiking trail describes the interesting issues reviewed by the Central Bankers and Economists at the annual symposium of the Federal Reserve Bank of Kansas City. They reviewed effects on wages and skills in developed countries with outsourcing, how to ensure that the benefits of global economic integration are sufficiently widely shared, and effects of current account imbalances with globalisation. It is over to you Mr. Governor of the Central Bank, Chairmen of the leading chambers, the leadership of the Associations of Economists and the OPA --- why not organize a conference on the Chinthanaya and its impact one year after endorsement by the majority of citizens of Sri Lanka and address the issue “Quo Vadis?”