Challenges facing the new government

3 March 2020 12:02 am - 0     - {{hitsCtrl.values.hits}}

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  • The President has made some good appointments, and hope there are many more
  • Developing a national consensus for economic and social development that is understood and supported by all is an urgent need
  • One of the most important tasks of the team of people the President picks would be to bring efficiency to state services

 

Whenever a new President is elected, hope rises among the populace, that the new leader would find a new path to prosperity and a brighter future. This has often happened, only to be disappointed later. However, this time around there could very well be a difference. The new President seems to have the determination of changing things for the better. This could be the case if he is able to overcome some very fundamental challenges the country faces and if the 19th Amendment does not derail the effort. I will only mention a few most important ones, among many. 

 


GOOD TEAM   


The most important of the challenges that needs solutions is finding the required people with the same enthusiasm as the Presidents, to implement the programme of work, in the President’s plan. If anyone thinks that all would be good boys after November 16, we would surely be disappointed. So far the President has made some good appointments, and hope there are many more like them, while at the other end, we hear of gross abuse by local and provincial politicians. Therefore the aspect of ‘rent seeking’ would have to be handled with skill, tact and firmness.   


In a mass based democratic system, various types of people support political parties, some for very undesirable reasons and objectives. It is therefore not an easy task for parties to take action against such individuals under the present circumstances and we would have to wait and see how this plays out.   
Developing a national consensus for economic and social development that is understood and supported by all is an urgent need. In such a situation the chances are that people may forego some immediate needs for a better future, as was experienced in the North East Asian countries.   


One of the most important tasks of the team of people the President picks would be to bring efficiency to state services. The biggest challenge faced by local entrepreneurs are obstacles created by one’s own government and the indifference of state officials. A complete turnaround in attitude is possible with a new national consensus that is understood by observation. 

 

At the very centre of the development effort, and what is clear is that there is a terrible miss-match between the presently managed financial system and the development objectives


FINANCIAL SYSTEM   


The next ‘invisible’ challenge is one that is often not spoken of much due to the fact that many are not interested in the field of finance or are considered complicated. It is at the very center of the development effort and what is clear is that there is a terrible miss-match between the presently managed financial system and the development objectives. This has hampered many governments and often most politicians are unaware of the problem. It is sincerely hoped that the new governor of the Central Bank would be able to induce some new thinking into the Central bank and government leaders.   


As the President mentioned, eradication of poverty is to be a top priority of the government. In short this means including the hitherto un-included. Monetary policy as we have known it over the years has always aligned with the strongest part of the economy and discriminated or even disregarded the weakest part. Therefore this fundamental aspect needs urgent attention or otherwise it would be business as usual, and nothing much would change.   


Officials at the Ministry of Finance and the Central Bank are guided by the ‘Washington Consensus’ which previous governments had accepted as the path forward, and often reminded by the IMF and World Bank. It is certainly not an easy task to change the thinking of officials who have been brought up in the orthodox model of economics and lately, the neo-liberal mode. It is also not often that ‘out of the box’ thinking officials come around to the Central Bank. However, what is clear after re-examining the earlier policy and its outcomes is that a radical change in macroeconomic policy is urgently required.   


Deregulation over the years in the western world, has taken away the Central banks authority over many aspects of control over vital areas of the economy and we are hedged in by the ‘Washington consensus’, which many Asian countries resisted until a certain degree of success was achieved while some disregard such advice even today.   
What is important to understand is that in today’s world many aspects of new economic theory has come up while older theories have been discredited. The question is, do we have the boldness to embark on the new ones? The bottom line is that we have the knowledge and ability to end poverty over a given time frame. Therefore sticking to the old view of ‘markets know best’ with ample evidence of market failure, hardly makes sense.   


While all this is well known by the IMF and World Bank, we are told to follow a system that even in 200 years has not eliminated poverty in the biggest economy in the world. 


AGRARIAN SECTOR   


In the process of eliminating poverty, agricultural development takes center stage. As the plots of the farmers are small, incomes are also small and farmers are mostly caught up in debt traps. The only answer to this challenge is to develop groups of farmers into cooperatives. If the cooperative system is developed seriously, with many cooperatives having their own mill and some coops manufacturing compost fertilizer etc; the farmers themselves become entrepreneurs and would receive sufficient income and contribute much more to the GDP than at present.   


Setting up these cooperatives would have to be done in such a manner that there are no internal divisions based on local issues and would require some extremely dedicated officials to set them up and sort out initial issues that are bound to come up.   


When the IMF asks for structural reforms, what better reform than lifting up millions of farmers from poverty to farming entrepreneurs. Investment in such a programme would not only be an investment in the economy, with an increase in the GDP, but also a radical shift in Macro-economic policy towards the weaker sections of society. 


MEGA PROJECTS   


The government has also to think of some mega-projects that would be able to stabilize the economy, especially at times of crisis. There are many such projects that come to mind which could be implemented. I would like to mention just one such project which I researched a few years ago.   


As energy is of great importance in the industrial development of the global economy and the fact that fossil fuels are to be used for the foreseeable future, refining and storage of fossil fuels is an attractive business. Though we had the oil storage facility in Trincomalee for the past decades, not much use was made of them. At present the storage capacity of these tanks are small, around seven and a half million barrels, compared to Singapore’s storage capacity of about ten times of ours. Singapore started refining and storage in the sixties and by 1968 petroleum exports were around $577 million while all other exports totaled $450 million. Today’s figures are much larger and are in billions and is a major source of revenue for Singapore.   
Therefore it is difficult to understand why Sri Lanka did not develop this aspect over the years? Developing the Trincomalee facility by enhancing the storage capacity and installing a complex refinery would bring Trincomalee into the oil map of Asia. A joint venture between the CPC and IOC would be a good option. The bottom line would be billions of dollars in revenue. The cost of the project could be recovered in a short space of time.   

 

A vibrant democracy depends mostly how well justice is administered. The people’s confidence in the overall system of governance to a great degree depends on the delivery of justice


ADMINISTRATION OF JUSTICE   


A vibrant democracy depends mostly how well justice is administered. The people’s confidence in the overall system of governance to a great degree depends on the delivery of justice. If justice is not dispensed within a reasonable time frame, the level of confidence drops. Other complications start to take root, often holding back the executive and legislative branches from efficient and effective function, as they too are compelled to move at an artificially created slow pace.   


Once the confidence of the people in the overall system is shattered, a certain dysfunction spreads across society which breeds a negative tendency, which would be difficult to overcome for a major development effort.   


This aspect of reform is probably the most difficult to accomplish, as the vested interests are much greater than in any other sphere. Though the average person sees the administration of justice stuck somewhere in the eighteenth century, most in the profession seems to be delighted with the status quo.   


Therefore, unless this aspect of the judicial system is reformed urgently, the government would be carrying an unnecessary burden. 


SITUATION IN THE NORTH   


The question of minorities in the country and how one intends to develop the Sri Lankan nation with a common goal is as important as any other for this country to move forward. The thinking on this seems to be on the lines of economic inclusion. This would undoubtedly become a strength moving forward but at some stage the question of political inclusion would have to be addressed.   


I have only mentioned some of the most important aspects that would require attention of the new administration. There are many more which are as important but would require a separate piece on each of them.   


Development and social-upliftment, though often thought of in good faith, can often be derailed in a mass based democratic system. A good and determined leader would make all the difference.   


Therefore as one could see there is a lot of work for the new President. Let’s hope that he gets a good team of people to implement his plan.    

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