Business Times

State enterprises should not be privatised:Top global economist

By Jagadish Hathiramani

There is no evidence that initiatives such as micro finance have significantly reduced poverty. These can only offer real change when combined with job creation programmes, according to top global economist Dr. Jomo Kwame Sundaram, the Assistant Secretary General for Economic Development at the United Nations.

Dr. Sundaram made this observation during a presentation, entitled “A National Development Strategy for Sri Lanka?" Organised by the Royal Asiatic Society, the event had the stated goal of showcasing policy alternatives which countries such as Sri Lanka could use to make themselves more fiscally stable.

One such alternative suggested was removing social safety nets. Instead of targetting the poor when offering eductaion, dole, etc., programmes like free education for all and pension for eleders should be made universal.

This, according to Dr. Sundaram, would allow these programmes to be perceived as a right and the most deserving would not be ashamed of utilising such programmes to increase their lot in life.
He also suggested that state owned enterprises should not be privatised. Instead, they should be given measurable performance targets, such as export targets, while still being protected. So, in time, these organisations will gain the necessary experience to compete better while also forcing down cost of production, etc. He also noted that privatisation had only shown to compound problems such as underpricing state assets, politically motivated sales, etc., and that public monopolies were often shown to become private monopolies.

Dr. Sundaram also spoke about the danger of relying too much on foreign worker remittances, saying that countries such as the Philippines had not progressed development-wise over the last 50 years despite the larger amounts of foreign remittances flowing into that country.

He also gave the example of the Indian state of Kerala where foreign worker remittances were used to buy agricultural farm land, which in turn only served to drive land prices further up. He also commented that countries should not manage exchange rates just for the sake of managing it, but should be aware of the bigger context in terms of the policy space. He further seemed to suggest that weakening one's currency would only help buoy exports and that countries, like Sri Lanka, which imported a lot of goods should take a bigger picture view of imports and maybe plan to become more self sufficient in the future.

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