The Sunday Times economic analysis

Don't look back in anger

By the Economist

Some economists have characterised the post independent period of the country's history as one of "missed opportunities". The disappointment could be much more if one has read the Prime Minister's recent policy statement that briefly indicated the state of the country's finances and the state of the economy. Never in the economic history of post independent Sri Lanka did the country register a decline in growth. No, not even in the dark days of JVP insurgencies in 1971-72 or 1988-89. These were years of enormous disruption of economic activity. Yet the economy registered at least a very low rate of growth. Not so last year, when the value of the total goods and services produced during the year declined by about one per cent from that attained in 2000. Despite the gloomy situation and outlook, we must not look back in anger and vitiate our efforts by condemning the previous government or by attributing the bad performance to internal and external shocks over which we had no control. Let us accept the economic situation, recognize its gravity and brace ourselves to make sacrifices that would put back the economy on a growth path once again. The task is not easy. The poor state of the government's finances and an inhospitable global economy makes it doubly difficult. There are no quick fixes. It is not possible to achieve results in a hundred days. We can however take steps in the right direction. The single most serious constraint to growth in most of the post-independent period has been the politically motivated economic decision-making. Economic policies whose objective is to gain immediate popularity and political gains can hardly achieve the end results of higher economic growth and development. This is more so in the situation that we find ourselves today, when the treasury is empty, the public debt enormous, foreign reserves low, export markets dwindling and war expenditures high. Increasing government revenue must he high on the list of priorities. Yet increasing taxes is a politically unpopular move, as the increased taxes should fall on items to contain consumption rather than be a disincentive for investment, enterprise and effort. This means higher prices on consumption items and that is a difficult proposition for Sri Lankan governments. Some innovative means by which such taxation is palatable has to be devised. The revenues derived from personal income taxation are low. It is no secret that many high-income earners avoid paying taxes. Bringing them into the tax net would be one means of enhancing revenue. 

Equally important are efforts to cut down government expenditure. This is no easy task either, as cuts in expenditure would have to be on items that would result in unpopularity. An example would be the need to cut the huge expenditure on Samurdhi. As many as 55 percent of the country's households obtain Samurdhi benefits. There is no justification for such large numbers receiving poor relief. The poor are estimated at around one fourth the population and unemployment is estimated at around 12 percent of the labour force. Obviously the undeserving receive such assistance. Similarly other expenditure cuts too would be necessary. There is a need to contain defence expenditures, prune the public service and find means of reducing debt-servicing costs. The pertinent question to ask is whether the government would have the political courage to make the unpopular decisions to increase revenue and decrease expenditure. It is a particularly difficult task for a coalition government relying on the support of several parties to maintain its thin majority in parliament and facing provincial council elections. The postponement of the budget till after the provincial council elections is an indication that the government intends to take some tough measures. Can it? Will it? It is important for the population at large to understand the gravity of the economic situation. 

The government must explain the need to make sacrifices to tide over the difficulties we face, rather than be an exercise in courting popularity. The gover-nment must not waste time by repeatedly lamenting about the last seven years in the manner that the pre-vious government spent valuable time conde-mning the previous 17 years. The economic problems are with us, whatever their causes. Firm actions on a carefully planned manner are vital. Still there is no evidence of this.

The dilemma of independence

By Victor Ivan

Most countries shed blood to win freedom. This gives an added value and meaning to the word, and a set of social attitudes and a political system that enable people to live without shedding blood. However, Sri Lanka gained its independence without shedding a drop of blood and we have been unable to evolve social attitudes in a political system required for the completion of that independence. As a result we have become a country of unending bloodshed.

From the British we also received the constitution. Although the constitution contains extremely modern ideas that a constitution should contain what it did not include was a framework that would bring together divided ethnic communities. The first framework of the Indian constitution was brought into existence in prison. It was made considering other modern constitutions and problems that could arise in the future. India proceeds with that constitution. However, we have not only abandoned the Soulbury Constitution but have also abolished the republican constitution of 1972 framed by Colvin R. De Silva and now we have come to a position in which we are thinking of yet another constitution. As a country we are still moving in the dark.

At the time of independence Sri Lanka was ahead of all other countries in south Asia. However, now we are far behind all those countries.

Sri Lanka's per capita annual income for the year 2001 was 2,500 dollars. In Singapore it was 26,300 dollars. In Thailand it was 16,500 dollars. In Malaysia it was 10,300 dollars. Until the beginning of the 1960's Lee Kwan Yew of Singapore dreamt about making Singapore a Sri Lanka. However the leaders of Sri Lanka have now to dream of how to make Sri Lanka a Singapore.

Today Sri Lanka's rate of economic growth is minus 0.6. Sri Lanka recorded the highest rate of inflation for the year 2001 which is 15%. In India it was 4.3%. In Singapore it was 1.2%. In Thailand it was 1.7%. Interest rates paid by Sri Lanka annually for loans obtained from foreign sources have come to equal the sum received from foreign sources as loans and aid equals the amount of interest aid annually for loans received from foreign sources.

The expenditure incurred for the war by the government alone has been estimated to be about Rupees 5000 billion. In 2001 the expenditure was 1000 billion. The population of the country is less than 20 million. The number of those killed due to the war and rebellions in the South may be about 100,000. Those who were made destitute are more than a million.

We, the Sri Lankans like to boast that we are in par with the most developed countries so far as literacy is concerned. However, our social attitudes and conduct do not suit our social literacy. Although there are countries which find it difficult to rise up due to natural disasters that cannot be overcome easily, we have turned minor matters into major problems.

Sri Lankans would prefer to spend their time in pleasure rather than in fruitful work. When there are cricket matches the pattern of life in offices too change. Sri Lanka has the highest number of holidays. Sri Lanka may be the country where the employees take the most number of no pay leave in addition to the leave available officially. After the Sinhala New Year, the shops in Colombo close for several weeks.

However, the life and conduct of a Sri Lankan going abroad change in a revolutionary manner. He becomes a person who respects the rights of the others, works tirelessly, observes the laws and regulations well and becomes an efficient and productive person. So far as competence is concerned, too, he shows his abilities.

Such contradictions are observed in politics too. There is almost no country in the world in which the people are so sensitive as those in Sri Lanka. However, what prevails in the country is a backward and lowly political culture.

We in Sri Lanka gave up feudalism not because we wanted to give it up but because the whites wanted to give it up. We got our freedom not because we wanted to get it but because the whites wanted to give it. Consequently, what flows in our veins is blood of feudalism although we want to appear capitalist and democratic. 

We are still not disciplined enough to respect the rights of other communities while protecting the rights of our own community. 

Although more than five decades have passed since independence, the country has not been able to get a set of political leaders who are respected beyond their narrow ethnic limits. The leaders D.S. Senanayake, Dudley Senanayake, S.W.R. D. Bandaranaike, Sirima Bandaranaike, J.R. Jayewardene, R. Premadasa were leaders respected by the Sinhala people, but they were not leaders respected by the Tamil or Muslim people.

Leaders like G.G. Ponnambalam, S.J.V. Chelvanayagam and A. Amirthalingam may be considered leaders respected by the Tamil people, but they cannot be considered leaders respected by the Sinhala or Muslim people. Even persons like Rohana Wijeweera and Prabhakaran who chose a revolutionary path won the confidence of either the Sinhala or the Tamil youth, but were not leaders who had the confidence of the Sinhala, Tamil and Muslim communities.

The future of Sri Lanka depends on our ability or inability to overcome the fundamental problem relating to human relationships. 

The writer is the Editor of Ravaya

Bollywood, holy men and eunuchs ... it must be an election 

The state elections will not only help to determine the fate of India's Hindu nationalist government but they will also reveal the national mood at a time in which India is embroiled in yet another stand-off with its arch enemy and rival Pakistan. 

The state is currently run by the Bharatiya Janata party (BJP), which also holds power in New Delhi. In theory, the BJP should romp home. But recent opinion polls suggest that the ruling party is in trouble, despite its attempts to revive one of the most contentious issues in Indian politics, Ayodhya. Over the weekend, around 4,000 protesters belonging to a militant Hindu organisation marched on New Delhi demanding the construction of a temple in the town. The demolition of a mosque in Ayodhya by Hindu zealots in 1992 prompted some of the worst communal rioting ever seen in India. But it also helped propel the BJP into national office on a wave of Hindu nationalist sentiment. 

India's BJP prime minister, Atal Bihari Vajpayee, appears to have given this weekend's protestors short shrift, and refused to give in to their demands to build a Ram temple on the disputed site by the middle of March. But Ayodhya is a tricky issue for Mr Vajpayee. 

On the one hand it is an undoubted vote-winner, at a time when anti-Pakistani (and anti-Muslim) sentiment in India is rampant. On the other hand, the prime minister is increasingly reluctant to give in to the often-unreasonable demands of his Hindu revivalist allies. 

The BJP, meanwhile, faces a renewed threat in Uttar Pradesh from the Samajwadi party- not least because the party is supported by India's biggest film star, Amitabh Bachchan - the subcontinent's grey-bearded answer to Sean Connery. 

Mr Bachchan is already campaigning in the state. He yesterday entertained tens of thousands of supporters with a mixture of poetry, songs, and political points in the town of Etawah. "I have not seen such a huge sea of humanity in more than three decades of my public life," the Samajwadi party's ecstatic leader, Mulayam Singh Yadav, declared. 

Yadav's party has been campaigning hard for the votes of Uttar Pradesh's large Muslim minority, many of whom appear to have fallen off the electoral roll. The BJP has its own share of glamour in the shape of the Bollywood actress Hema Malini, popularly known as the Dream Girl. 

If this were not enough, at least 18 eunuchs have unveiled their candidature. Eunuchs have been the surprise addition to India's political scene over the past two years, with eunuch legislators winning elections in several north Indian constituencies. Their argument - and it is a good one - is that eunuchs are less likely to be corrupt than ordinary politicians since they have no children and no family interests to advance. 

There is of course one final ingredient in the mix - violence. The Asian Age reported yesterday that there had been at least five incidents of pre-poll skirmishing in the state, and concluded that the elections could end up "as one of the most violent ever". 

Several voters have already died - one was beaten to death by iron poles - for refusing to bow to the wishes of local political parties. Many of the politicians who have announced their candidature are themselves criminals, Indian newspaper reports suggest. 

The results of this fascinating contest will start pouring in from February 24. It is no exaggeration to say that India's future as a secular democracy will be shaped by the outcome. 

- The Guardian, World Despatch