Implementation, a national economic development imperative

9 August 2017 12:01 am - 0     - {{hitsCtrl.values.hits}}

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We need to move beyond policy dialogue and economic summits, towards time-bound action plans and implementation. There clearly is a mutually respectful dialogue between the public and private sector today. The debates, arguments, criticisms, bouquets and brickbats, in any private or public fora, the analyses on electronic and print media and at the many workshops, seminars and summits, demonstrate a healthy dialogue – in essence, people are empowered. That is a key component of good governance. However, we must recognize that time is of the essence.

 

Flashback to 1977, dawn of ‘open or market economy’ – J.R. Jayewardene era

As we celebrate 40 years of an open or market economy today, the cumulative years of a middle-aged man or woman, we recall the period during which, our own, home-grown President J.R. Jayewardene ignited our transition from a closed, inward-looking, insular country, to an open, outward-looking, export-led economy. We set up free trade zones and established the Greater Colombo Economic Commission; we modernized our harbour, built a new airport and damned the Mahaweli and much more.

India can only celebrate 26 years of an open or market economy, just seven years past teenage, (when I last made this comparison in print media, I referred to India as a 14-year-old teenager) in an open or market economy, though now we listen intently to them, whether about economic reform and liberalization, state-owned enterprise (SOE) reform, public–private partnerships (PPPs), bank reform (many months ago I was at the Central Bank, listening to the chairperson of the now transformed State Bank of India) and much more. I admire them all.  


Reminiscing 1989-1994 – Premadasa, Wijetunga, Wickremesinghe era

As I recall the culture of a dialogue between the public and private sectors, on economic policy, strategy and implementation and on investment and fiscal incentives commenced during the time the current prime minister was the industries minister during the President Premadasa era, when many of us in the private sector joined hands with the then minister to develop the ‘strategy for industrialization’. 


CCC’s 17th Annual Economic Summit 

The Ceylon Chamber of Commerce (CCC), as it does in exemplary fashion each year, concluded the 17th Economic Summit, a key annual event of the ‘Voice of Business’ on July 26. I attended the event to be part of and to encourage the participation of almost 18 senior bankers of Bank of Ceylon, who attended the event. Chartered Accountant Lakshman Watawala was the pioneer of this annual event in the year 2000, when I was also on the Main Committee of the CCC and I recall being a presenter and panellist at many. It was as always, a pleasure to meet and talk with the many wonderful people of the CCC. 


Ideas, practical examples and role models of Indian thought leaders

While listening to the speakers from overseas, particularly the gentlemen from the public and private sectors in India, telling us what we have told ourselves many times before and what many presenters from overseas at many Annual Economic Summits previously had advised us, I performed a quick Google search of the topics and presenters of the CCC Economic Summits, over the last 12-15 years. I noticed that several speakers and several topics were revisited. I then happened upon an example about India’s private sector leaders, which I had shared with the readers as far back as in December 2005, under my column, ‘The Thought Leadership Forum’, in Daily Mirror Financial Times, the predecessor to today’s Daily FT. I thought this light-hearted article may yet be relevant today, for politicians both in the government and opposition, policy planners, public officials, academics, protesters, detractors and private sector leaders. Hence, I reproduce, below, that article in its entirety. 


J.R.D. Tata and lessons for Sri Lanka

During the course of an assignment for the Asian Development Bank, connected with the North Eastern State Roads Project, working along with road engineers, road planners and transport economists from Australia and New Zealand, where my role was on financial management assessments and institutional development and capacity building, I was stationed in Shillong, Meghalaya, one of the eight states of the North Eastern region of India, which borders China, Bhutan, Myanmar and Bangladesh.


I often stayed at Taj Mahal on Mansing Road in New Delhi. Many Sri Lankans who have stayed there would agree with me that it is an indigenous Indian hotel that provides world-class service on a consistent basis, which perhaps prompts even other hotels to talk about it. No wonder then that political leaders, business leaders and celebrities of all types stay there.


J.R.D. Tata and House of Tatas

This of course is not the only achievement the House of Tatas is famous for. Apart from diverse business interests, Tata Group had great thought leaders. Presidents and prime ministers of India interacted closely with them. Political leaders of India respected these business leaders for their objectivity, honesty and integrity and above all, their leadership in thinking and doing. 


Reading Indian newspapers, whether editorials or news items or magazines of Indian origin, is always an intellectually stimulating experience for me. On one such occasion a few months ago, I read an interview J.R.D. Tata had given Times of India in July 1981, which the Taj magazine – the magazine of Taj Hotels, Resorts and Palaces – had reproduced with these opening words from Fatma R. Zakaria, now its Editor – “Twenty four years later, the issues discussed and the views of J.R.D. Tata are as relevant as they were in 1981. We therefore publish the long and comprehensive dialogue so as to initiate a debate on the subject once again.”


What J.R.D. Tata said in 1981

In response to a question as to what the private sector’s contribution to tackling poverty would have been if the private sector was allowed to play its legitimate role during the preceding 30 years and the government had a more flexible policy towards it, J.R.D. Tata’s view was as follows: 


Private and public sectors parts of a single dynamic organism 

India, after it became independent, practiced what was then termed a mixed economy – where private enterprises would play an important and continuing role and the private and public sectors would be looked upon not as separate entities but as parts of a single dynamic organism. From the mid-50s to 60s, the mixed economy concept was good. Industrial production rose at an annual rate of 8 to 9 percent.


Ideological opposition to private enterprise, crippled economy

Subsequently, “Due to an ideological opposition to private enterprise and misconceived interpretation of socialism, drastic policy measures and controls crippled the economy. For the misdeeds of a few, the business community as a whole was blamed and anti-private sector propaganda gathered momentum – the nationalization of major industries, government monopoly over finance, an absurd obsession about the dangers of concentration of economic power in private hands, etc., restricted initiative, investment and growth. With a flexible and pragmatic approach, the economic scene would have been different.”  In particular, he said, “Investment in industry would have been much greater; employment would have grown more quickly in all sectors; production would have increased considerably and shortages removed; government revenue would have materially increased, which, in turn, could have been used in development programmes. And these conditions could have gone a long way in alleviating poverty. In short I say free the economy and see the difference.”


Rapid employment generation requires massive programmes of public works

When asked whether, in order to generate rapid employment, a government has to protect the small sector, the cottage sector, J.R.D. Tata had this to say, “I hold the view that the quickest way to provide extensive fresh employment in India is for the government to undertake massive programmes of public works – roads, water projects, afforestation and building works. The forests of this country are being devastated; afforestation is a prime need all over the country. 


Housing – buildings of various kinds, schools and hospitals, all would require largely unskilled work. Generating massive and rapid employment by creating industries in every village is not a practical solution. Any industry however small needs skills. You have to first train and develop people. Develop them as fast as you can but it will still take years.”


Role of foreign capital and technology in accelerating economic growth

India needs to open its doors more widely to foreign investment, he had said. “Unfortunately successive governments have been reluctant to do so. The economic scenario for the next 50 years, will call for massive investment but not all of it could be financed by domestic savings, which at 22 percent is already high for a developing country. The government has to liberalize its approach to attracting foreign direct investment if India is to grow as fast as it can.”


Foreign collaboration is key; do not reinvent wheel

In addition he had said the technological progress is a worldwide process and interchange of which between nations is wholly desirable. Foreign collaboration was important in avoiding having to “reinvent the wheel” and in transferring evolving technology.


Local entrepreneurs prefer a competition-free protected market

“Many of our entrepreneurs bask happily in a protected market,” he had said. He had gone on to say, “There would be little risk and much to gain in allowing foreign capital to contribute to this great endeavour of ours. All the assets and jobs created would be Indian. The improved technologies brought by foreigners would automatically advance our own and would release a large proportion of our own resources for employment-intensive development, particularly in agriculture and agro-based activities, essential to the rapid development of our rural areas.”


A growth rate of 6 percent annually for 50 years is quite possible

As far back as 1981, J.R.D. Tata had apparently recommended a 6 percent annual growth rate for the next 50 years. When asked whether in the light of the fact that the annual growth rate in the last 30 years was only 3.5 percent, this target was feasible, his view was that India had stagnated at 3.5 percent.  If this was what was achieved despite faulty planning, poor implementation, neglect of rural India, excessive priority given to heavy industry, restrictive economic policies often based on ideology rather than on pragmatic considerations, restrictions on the growth of the private sector through all – embracing controls and licensing, the poor performance of the public sector, frequent breakdowns in infrastructure, then achieving 6 percent was quite feasible. In contrast, he had said that South Korea, Israel, Mexico, Brazil, Spain, Singapore Taiwan and Hong Kong, had in the last 30 years achieved a growth rate of between 6 and 9 percent. Japan during this time had a 10 percent growth. He had gone on to say that all these countries had relied on private enterprise and that governments in these countries were geared to encourage and support private enterprise.


To improve performance of public sector, stop govt. interference

On the topic of improving the quality of the public sector, his view was that one of the biggest handicaps of public sector enterprise was that they were run largely by the ministries and were constantly interfered with. There is no continuity of management. Poor performance in the public sector is partly due to the manner in which they are treated and controlled by the government. It creates in them a sense of insecurity and fear.  This kills initiative and no one wants to take a decision. He goes on to say that (perhaps at that time) in France, Germany and Italy, the governments treat the public sector enterprises as the private sector and leave them alone. If the management does not produce results, then they sack them.


(The Thought Leadership Forum, an awareness enhancement initiative, was launched by the author, Ranel Wijesinha, a Chartered Accountant, in memory of his father, Attorney-at-Law, the late E.G. Wijesinha, on November 16, 2005. The above article, ‘J.R.D. Tata and lessons for Sri Lanka’ by Ranel Wijesinha was initially publishes in Daily Mirror Financial Times on December 22, 2005)

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