Economic policy statement more of a dream than a vision
At last the government presented the much-awaited economic policy statement on July 1. There was little anyone could disagree with in this wide-ranging statement. It was however an utopian and idealistic one, more of a dream than a vision. Transforming the lofty ideals into institutional reality is the Herculean task. Finding the resources for its implementation is impractical in the current fiscal context.

Although the government condemned in no uncertain terms the previous government's Regaining Sri Lanka Strategy, one cannot fail to recognise many an element of that strategy incorporated in the new policy statement. it was a reaffirmation of the broad approaches of macro-economic policy that has been adopted with some significant changes. One cannot help but think that political rhetoric and economic realities are widely different. One could also say that economic rhetoric and economic performance are also quite distinct. Sri Lanka has never been short of the former but very deficient in the latter.

Nevertheless there are some clear differences as well. One of these is the certain statement that the privatisation process is halted and those state enterprises that are running at a loss would be reorganised to be more efficient. In the grand words of the document "Promoting professional conduct in the state sector that can match and exceed private sector efficiency and operate transparently and free from political interference."

Can this be achieved? However, the clear statement that " strategic state enterprises " would not be privatised has merit. Such certainty would clear the air so that trade unions and other political interests would not be incessantly mounting disruptive actions and the workers in these enterprises would know of their future. It is incumbent on those who oppose such privatisation to play a role in running these enterprises more effectively. There is a need to change the organisational structures of these state enterprises, incorporate market-based remunerative packages and systems of human resource management, among other changes, to run these state enterprises more efficiently.

Equally important would be the non-interference by the government and politicians in the running of these organisations. There is no doubt that a technocratic management of corporations with incentive packages to workers on the basis of performance can turn around these loss-making organisations into efficient ones. Profit need not be the sole criterion of efficiency but the bottom line is a good indicator of the direction in efficiency.

Besides, losses in state enterprises are a heavy burden that the general public must bear. If the government were able to achieve efficiency in state enterprises, it would indeed be a reversal of the country's public enterprise history.

There is however another aspect to this issue. The donor agencies, especially the IMF and World Bank, have been insistent that state enterprises, especially the two state banks, be privatised. This has been laid down as a condition for aid. Will the argument of re-engineering and the political realities of the situation make them drop this condition?

More likely we will have to make do with less aid? The other significant departure is the greater emphasis that the government expects to place on small farm agriculture and rural development. This emphasis is much over due. The persistence of poverty in rural areas necessitates such an emphasis that has been characterised as a pro-poor strategy. A specific programme of action that has been planned is the repair and reconstruction of a thousand village tanks. This is a step in the right direction, as it increases the area under cultivation and could increase productivity, employment and incomes of farmers.

There would have to be a strengthening of rural infrastructure and agricultural services, especially credit, extension services and marketing. These require both financial resources and committed and honest personnel. These are difficult conditions to achieve especially in our highly politicised and corrupt society. Furthermore, an approach to these issues on the basis of subsidies would be in the wrong direction and an unsustainable one.

The greater emphasis on education and health is also imperative. Once again the issue is whether the government would have the financial capacity to increase expenditure on these. Where would the cutbacks in expenditure be to increase these social expenditures? As the statement rightly points out government revenue as a proportion of GDP has been decreasing over time and dwindled to only 16 per cent last year. In the first quarter of this year revenue has fallen drastically and is only 29 per cent of the budgeted figure.

Meanwhile government expenditures especially on subsidies are increasing. The all-important question is how the government would find the resources to foot the bill on its ambitious programme of agricultural upliftment, its pro-poor policies and social development?

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