Many analysts highlighting the state of our economy offer “solutions” such as either more borrowings or attracting more Foreign Direct Investments (FDI) while others say the only “solution” is to go to the IMF. It is a hackneyed joke that if you put your neck out the window to say hello to the IMF they [...]

Business Times

Sri Lanka’s lopsided economy


Plantation workers who get a pittance.

Many analysts highlighting the state of our economy offer “solutions” such as either more borrowings or attracting more Foreign Direct Investments (FDI) while others say the only “solution” is to go to the IMF. It is a hackneyed joke that if you put your neck out the window to say hello to the IMF they will put the noose round you.

Let us examine the solutions offered. More borrowings; always with strings attached will leave us more impoverished. Project loans; obviously this begets the question as to why developed countries should help us develop ourselves and lose their markets in the process. They haven’t done this in centuries and would never do this now. They won’t forgo their supplies of cheap raw materials and other resources. They do not want any more countries competing with them and doing away with their prosperity earned by exploitative means, do they!

“The comfort of the rich depends on an abundant supply of the poor” – Voltaire

Today, a key European state is the largest repository of ill-gotten wealth, both, of those of corrupt politicians of poor countries and of that earned by their exploitative economic system foisted upon these countries through a UK-based NGO. Never mind money laundering as long as the black money and the drug money end up with them. It’s ongoing at this very minute.

Trickle down theory

First it was development projects and investment in infrastructure (with all the inputs coming from them) as a panacea for underdevelopment, then it was the Trickle Down theory (in order to feed birds, feed cattle whose droppings the birds can feed on), now it is FDI’s. In support of the last one China, Vietnam and Singapore are being mentioned as success stories and we are being assured of the same success. They can’t be serious, can they?

Any development project, take any; water supply, road building, electricity, house construction, medical treatment, medicinal drugs, fertiliser, anything. These are all capital intensive products manufactured and executed by European labour paid Euro 3000 (Rs. 600,000) average wage per month. This cost of production is inbuilt into their project or aid product and whatever that comes out of these projects will carry the Rs.600,000 – wage as cost of the end product . Now the output from this project (unit of electricity, drop of water, mile of roadway, medical tests, drugs etc) is sold to Sri Lankan consumers (average wage Rs.30,000) who have to bear this inbuilt cost at 600,000 / 30,000 (20/1 factor) , or as Dr. NM said the Whisky / Arrack factor, if the project is to be amortized within its usable time span. Is this affordable/ possible? The highway levy of Rs.400 for a 120 km distance will not see the investment being recovered. But Rs.400 is already too much for the Sri Lankan. Therefore the highway is not sustainable.

Replicate this throughout the economy with respect to any project or manufacturing facility, brought down from a developed country and installed here whether it be biscuits or bathroom cleaner, soap or shoes, tiles, toothpaste or tableware. No project will be beneficial to us. No high-rise apartment complex, no Mahaweli Diversion scheme, no hospital, no La-la shopping mall. None. Today almost every simple product picked up from a shelf in the most basic Kade in the village is hit by this 20/1 factor. Even a cup of yoghurt. Every press of an ATM button sets us back on the 20/1 factor.

The same applies to the grandiose refurbishments effected in and around Colombo and those in the offing. Whether these projects “succeed” or fail the patrons would have incurred the 20/1 cost factor and the country’s economy would be the poorer.

Then there is the insidious side to the open/free market economy. When the chairman of a bank decides to buy a luxury car (the benchmark today is Benz, BMW, Audi, Lexus, Peugeot, Land Rover etc luxury brands from super rich countries) who pays for it? The bank’s clients of course on the 20/1 factor. When the chairmen of milk, baby food, pharmaceuticals, sugar, rice, dhal (you name it) producing/marketing companies do the same to keep up with the bank chairman’s status who pays the 20/1 factor? Is it not the poor undernourished child sucking at the dried up breast of the undernourished, emaciated mother in Moneragala or Mullaitivu? When a courier company collects and delivers using top of the line European delivery vans who bears the 20/1 factor? Is it any wonder that we are still forced to run 50 year-old engines to haul our trains. I hope an economist will crack the above conundrum and show us how this can be done.

Daily protein

After 40 years of the open economy the basic requirements of our folk such as food (minimum daily protein is unaffordable resulting in a mentally underdeveloped/retarded population), clothing (affordable only by cutting down on other essentials), shelter (extended families is the norm due to non-availability of affordable housing), health care (corporate hospitals, big pharma and the doctors exploiting is vulgar at best), education; the big lie and rigging of documents starts with the conception of a child. And I have seen signs on school vans “school transport from Aluthgama to Nalanda”: Transport (seeing is believing) has all gone out of their reach and through the roof! I believe more than 80 per cent of the population is struggling to maintain their position and most of them are able to do it only by getting themselves into debt.

Consider the aberrations in the name of the free market. Anderson Flats and Elvitigala Flats are subsidised to the owner/occupant by the government. But we find most owners of those flats own cars. Are we in effect subsidising the Japanese car manufacturers and their economy? When luxury products/ services are dangled and sold by high powered advertisements many succumb to pressure and those that cannot afford them resort to corruption as is abundantly evident today. Some sell the family silver in a foolish attempt to keep up.

Now let us look at GDP – if I were to enter a private hospital and spend a few hundred thousand rupees our GDP goes up but to what benefit to the local economy? Every input into the hospital system is tied to the above 20/1 factor. Even the hospital labourer ends up paying for his basic daily requirements churned up on the 20/1 basis.

No country became rich securing FDI’s or getting IMF and World Bank loans. The oil producing countries did so by selling their primary produce for a basket of currencies (levelling out the 20/1 factor), not at US$2 per barrel which was the “Cost of production” in 1973 and the developed countries cried foul saying that oil was being sold way above their cost of production. If they had waited for IMF loans and FDI’s we would still be getting oil at US$ 2+ a barrel.

Unfortunately they too are not rich in the true sense of the word as they only gathered money and have no technical/scientific expertise or skills. When the money runs out (we already see Saudi Arabia posting deficit budgets) they will have to go back to their camels and tents

Our universities have produced top class engineers for the last 70 years (not forgetting other professionals) but we still entrust our sewage, electrical, civil, mechanical projects to foreigners.

Tightening the screws

Now some western missions with a politically-connected NGO are shamelessly tightening the screws on us. An impoverished, abjectly poor country is being arm-twisted to start importing from their countries (on the 20/1 factor) stating that it is against the WTO agreement. Surely they can request their countries to amend the WTO rules to pay us on the same basis that oil is priced. Then we can buy from them to their hearts’ content!

One has only to see the hapless workers on tea estates (fighting for Rs. 25,000 per month), one of the pillars of our economy to see our earning capacity from our exports. Replicate this across the rubber tappers, the coconut tree climbers, the fishermen, the rice farmers, the garbage collectors, vegetable growers etc. We import used tyres, used machinery, used tools used spare parts etc. Is it into this pitiless economy that the ambassadors of the developed countries are trying to introduce a car owning-culture? Our economy is not only lopsided, it is also pathetic.

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