As we enter the new year there is greater confidence in the continuity of economic policies and the role of the private sector. Economic fundamentals too have improved. The easing of the budget deficit, the better financial discipline announced in the 1998 Budget, and a continued commitment to privatisation, enhance the prospects of economic growth.
The lowering of interest rates has also boosted corporate profits in the past year and corporate savings are likely to assist in increasing private sector investment. The lower interest rates are likely to be sustained owing to the lower borrowings of the government and the monetary policies pursued by the Central Bank.
If government decision making could be expedited and vacillation and reversals of government decisions avoided, business confidence could be considerably improved. The importance of improving bureaucratic efficiency and quick decision making by the administration is becoming more and more apparent. The business community hopes that these weaknesses would be corrected and that the government would play a more pro-active role.
Security concerns are uppermost this year. The celebration of the golden jubilee of our independence has raised greater concerns regarding possibilities of terrorist attacks. A solution to the ethnic and terrorist problems does not appear close at hand despite considerable political attention to its resolution.
Whatever may be the government's gains in the war in the North, security in the East continues to pose serious problems to people living there. Apart from that, the fears of reprisals in other parts of the country are an overhang which has serious impact on our tourist industry and foreign investment.
The economic and financial crises of many Asian countries are likely to have repercussions on the world economy. World economic growth, particularly, Asian economic growth, is likely to be much less than in the previous years of the decade.
Lower economic growth in the rest of the world, especially in our major trading partners and investor countries, implies lesser export growth and lower investments. The slower momentum of world economic growth and the economic adjustments of the crisis ridden countries could have an adverse impact on us.
Foremost among these adjustments is the depreciation and devaluation of East, South East and South Asian currencies. In one way or the other their currency depreciation will have direct impacts on us. We export similar industrial products to the same markets and price competitiveness is severe.
The countries which depreciate significantly can steal a march on those which do not by reducing their export prices in foreign exchange value, while providing higher incomes to domestic producers. This is the rationale for the competitive devaluation of the Asian countries.
Admittedly, devaluation has its downside too, with producer prices likely to increase with higher costs of imported inputs and higher living costs. Yet these processes take time and in any event export prices are not likely to rise to the same extent as the currency devaluation. More important is the undeniable fact that markets once lost are difficult to regain.
Discussion of the theoretical issues of a devaluation can lead to diverse conclusions. Such discussion does not matter. What is vital is an assessment of the devaluation in terms of our own export-import structures, internal capacities to re-adjust to these changes by other means, the nature of our markets and an understanding of the processes of adjustment which our competitor economies are undergoing. There is a need to understand the specifics and make a quantitative assessment, upon which must be based the decision making. To confine our thinking to a competitive devaluation could be misleading and possibly even dangerous. Devaluation is a general measure which affects all exports and imports equally. This is the problem in opting for a devaluation in an economy which is as much dependent on its exports as imports.
In an export-import dependent economy there are serious repercussions on the costs of production and cost of living, which can over time negate the benefits to exports. Besides this, though a devaluation may retain our competition in export markets, it could impose severe burdens on economic classes least capable of bearing them.
Selective controls, tariff measures and selective subsidies are means by which this problem could be encountered. Unfortunately the IMF and World Bank as well as the World Trade Organisation (WTO) will frown on measures such as selective import controls and subsidies to correct the problem emerging from the international situation. Nevertheless a solution appropriate for the Sri Lankan economy must be found. It is hoped that the gains in the economy in the previous year, improvements in the policy framework and government's management of the economy would contribute to a more rapid momentum of development.
An early response and countervailing measures to the currency devaluations in the region and an improvement in the security situation could make 1998 a much better year for the business community and the people at large.
In light of the very rapid growth and increased integration of international capital markets - and mindful of the need to ensure that the Fund was able to discharge effectively its mandate of overseeing an international monetary system increasingly dominated by capital flows - the Board took up the issue of capital account convertibility in February and in April 1997. In their discussions, Directors agreed that an open and liberal system of capital movements fostered economic growth and prosperity by contributing to an efficient allocation of world saving and investment.
Directors also recognized that capital account liberalization should be an orderly and sustainable process and part of a broad and well-sequenced reform effort involving sound macroeconomics policies and strong financial systems.
They expressed the view that the Fund, given its mandate and its universal membership, should play a central role in promoting capital account liberalization and fostering the smooth operation of international capital markets.
The Fund should also be prepared to advise its members in determining how the removal of restrictions should be sequenced with supporting structural and macroeconomic reforms.
Likewise, the Fund was well placed to assess whether temporary imposition of controls was appropriate to address surges in capital inflows and outflows.
Although the absence of a formal mandate to foster capital account liberalization had not prevented the Fund from playing an important role in encouraging and supporting members' efforts toward liberalization and in monitoring international capital markets, Directors noted that global integration was no longer limited to goods and services and now encompassed capital flows.
Most Directors, therefore, supported an amendment of the Fund's Articles to include the liberalization of capital movements in the Fund's mandate.
They also agreed that an extension of the Fund's jurisdiction to capital movements should allow for flexibility in implementation through transitional provisions and approval policies. In addition, they underscored the importance of ensuring adequate co-ordination with other international organizations.
With respect to the scope of jurisdiction, many Directors favoured extending the Fund's jurisdiction to capital movements in a comprehensive manner covering capital transactions and payments in both inward and outward directions. At the same time, Directors preferred to exclude inward direct investment transactions from the Fund's jurisdiction, since such transactions are normally restricted for reasons other than macroeconomic and balance of payments management .
Several Directors also pointed to the need to define clearly the scope of the Fund's jurisdiction on capital movements with respect to other international organizations and agreements.
The Board recognized that an extension of the Fund's jurisdiction to include capital movements. would require approval policies that would enable members to impose temporary restrictions on both capital inflows and outflows to address emergency situations.
In light of the potential volatility and size of capital movements, Directors generally supported greater flexibility in approving temporary restrictions than under the policy presently applied to payments and transfers for current international transactions.
Directors also agreed that there would be a need for nontemporary approvals of restrictions or exclusions imposed for national security and prudential reasons.
Directors agreed that an extension of jurisdiction over capital movements would need to provide for appropriate transitional arrangements to ensure that liberalization was sequenced with structural measures, particularly in the monetary and financial sectors, and that the pace of liberalization took account of the distinct circumstances of individual countries. It was also recognized that members should not use such transitional measures to delay capital account liberalization unnecessarily.
Directors noted that the Fund's established mechanisms of annual consultations, surveillance, and technical assistance would be the primary means of ensuring that capital liberalization was neither premature nor unduly delayed.
In their discussions, the Board considered the likely effect of capital account liberalization on the demand for Fund financing . Some Directors were of the view that , because of countries' access to capital markets, capital account liberalization would be likely to reduce such demand, while others expressed concern that the size and volatility of capital flows could increase the need for the Fund's financing in individual cases. It was agreed to return to this issue at a later stage.
In a significant development, the Iterim Committee at its April 1997 meeting endorsed the concept of an amendment to the Articles to make the promotion of capital account liberalization a specific purpose of the Fund and to give the Fund appropriate jurisdiction over capital movements. The Committee asked the Board to continue its work with a view to making specific recommendations on key elements of an amendment by the time of the Committee's next meeting in September 1997. The scope of this jurisdiction would need to be carefully defined, the Committee observed, and sufficient flexibility should be allowed through transitional provisions and approval policies. (IMF Annual Report 1997)
SAN FRANCISCO - Has the thrill gone out of visiting Timbuktu? Was the Antarctic anti-climactic this year?
For world travelers grown world weary, there is a fresh tourist buzz on the horizon: pay up, strap in, count down and blast off.
Zegrahm Space Voyages, a division of Seattle-based adventure tour operator Zegrahm Expeditions, is taking reservations for what it bills as the world's first tourist space shot on Dec. 1, 2001. For a cool $98,000, you can book your own recliner on the as-yet unbuilt Space Cruiser, a shuttle-like craft that will whisk travelers to the official "astronaut altitude" of 62 miles (100 km) above sea-level.
"This is the most exotic, exclusive travel opportunity ever," said Scott Fitzsimmons,
Zegrahm's vice president and its main spokesman for outer space travel. "The interest has been staggering — mostly from tour companies who realize that the future is not here on Earth but up in space." Zegrahm's low-orbit holiday might seem like a pipe dream, but company officials swear it will occur and a lucky few will earn their wings as the first tourist astronauts.
The plan got a vote of confidence this year when the alumni travel program at Stanford University, one of the country's most prestigious schools, offered its members a chance to book a spot on "undoubtedly the most expensive program we've ever offered."
TECHNOLOGY vs CASH?
Expensive indeed. While Zegrahm envisions a seven-day package including hotel, meals, lectures and training, the real thrill is the 2-1/2 hour flight culminating in just 2-1/2 minutes of continual weightlessness.
Fitzsimmons says the flight's out-of-this-world pricetag is unavoidable. "You've got to remember, every time the space shuttle takes off it costs $500 million," he said.
It still costs a lot to build an entirely new spaceship. Zegrahm has joined forces with Vela Technology Development Inc. to construct the two-stage system, which they say will be spaceworthy in three years. Late last month the space travel partnership selected its prime contractor: AeroAstro LLC of Herndon, Virginia, a satellite specialist with clients that include Los Alamos National Laboratory, the Massachussetts Institute of Technology and Boston University's Center for Space Physics.
The design is aimed at making space as comfortable as possible for people accustomed to traveling first class. First, there is the "Sky Lifter" — a conventional aircraft powered by jet engines that will carry the tourist capsule until it reaches an altitude of 50,000 feet (16,600 metres).
Then the patented "Space Cruiser" will detach and continue on its way. The snazzy 60-foot (20 metre)-long delta-winged craft, which will carry six passengers, will be equipped with both rocket and jet engines and will travel at a maximum speed of 2,300 miles per hour (3,680 kph).
NOT A LEAP OF FAITH
"It is important to say this is not a leap of faith," Fitzsimmons said. "The technology for all of this exists."
In the cruiser, made of lightweight carbon-fiber composite, each of the space tourists in their personal flightsuits will have a porthole and a reclining seat that can be stowed flat when weightlessness is achieved.
"You'll be able to sommersault, twirl and soar through the cabin," Fitzsimmons said.
For those who might fall prey to the wrenching nausea astronauts experience as space sickness, there will also be a toilet aboard — but no movies or inflight service. "No meals or drinks are planned. You have to cut down on the amount of stuff floating around," Fitzsimmons said.
Not everyone dreaming of a vacation in space can afford the Zegrahm program, even with its installment payment plan. So, for the budget-conscious adventure-seeker, there is another option: the Civilian Astronauts Corps.
"We hope to get off in 1999, so we'll beat them to it," said Harry Dace, a businessman who joined with a NASA aeronautical engineer to form the Houston-based CAC.
The corps, recruiting members for $3,500 apiece in hopes of getting together the $8 million it will take to finance their dream, promises astronaut wannabees four minutes of weightless and the thrill of a ride on a rocket roaring twice as fast as a speeding bullet.
"Our trip will be a real joy ride," Dace said. "We were joking around and saying that probably a few minutes into the flight some of our members are gonna be thinking this was the worst idea they've ever had."
Other groups are also joining the race to put civilians into space, many of them spurred by the "X Prize," a $10 million award that will go to the first private citizen who can launch three passengers to an altitude of at least 62 miles and repeat the feat within two weeks.
Others are taking a longer-term view.
"We're looking to space tourism from other companies to build interest in our project," said Ian Randal Strock, vice president of Lunar Resources Co., a Texas company with hopes of building a commercial moonbase resort.
"It is all just a question of who gets there first." — Reuters
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