This marks the fourth in a series of articles that analyse the economic aspects of the Presidential Election 2020.
The first one highlighted the significance of the moment taking a parallel from the development of Korea. (Mirror Business March 19, 2019). The second one elaborated the roles of China and India. (April 01) and the third if elected how Gotabaya Rajapaksa, whose name right now tops the list of possible candidates from one of the two major political camps, would fit into
This article might balance the last one by discussing the fit of Prime Minister Ranil Wickremesinghe, if elected would be to the possible economic framework 2020-25, or possibly for a longer period.
Just like former Defence Secretary Gotabaya Rajapaksa, Prime Minister needs no introduction. (Lesser known fact about the two individuals: Both born on the same year with a gap of three months) He was first elected Member of Parliament (MP) for Biyagama, when his party under Junius Jayewardene got a landslide victory in 1977. Appointed first as the Deputy Minister of Foreign Affairs, he was soon promoted to the post of Minister of Youth Affairs and Employment, which made him one of the youngest cabinet minister of Sri Lanka.
After serving as Minister of Education and Minister of Industry Wickremesinghe became Prime Minister for the first time after President Ranasinghe Premadasa was assassinated by the Tamil Tigers and serving Prime Minister Wijetunga was appointed acting President.
His personal website and Wikipedia page are still not updated on the fact, but since then Wickremasinghe has sworn in five times as the Prime Minister - the last being after the constitutional crisis of 2018, actually ending it. Totally he has served more than 90 months as Prime Minister in different periods and enviably as the most politically powerful PM in post-1978 period. Even Ranasinghe Premadasa, when Prime Minister was not as powerful as Wickremasinghe today. To his credit, this was not a power bestowed upon him. Wickremasinghe has smartly worked to win it.
Unlike in Gotabaya Rajapaksa’s case, Wickremasinghe’s economic policies are somewhat clear. At least, many like to think so. Placing him among 100 most influential Asian leaders, Time Magazine in 2002 called him market-friendly. Especially as his second term as Prime Minister from 2001-4 he tried hard to implement some policies that could be termed neoliberal.
This was in fact, the need of the hour as he had to show some positive results to fight the negative growth of minus 1.5 percent the year before he assigned power - happened first time since independence. His government ceased all new State appointments not to inflate the already outgrown state mechanism. It also privatised few loss making
Wickremesinghe also kept the expenditure for conflict under control by agree with Tamil rebels for a ceasefire - which later boomeranged on him. Many treat this limited exercise as a failure, but the reasons that toppled the short term UNP government were entirely political and nothing to do with economy. Still that has made him in certain changes in his policies. When he became PM again in 2015, his economic policies were surely more populist than before.
If we were to treat Wickremesinghe a neoliberal, depending more on this second term as the Prime Minister, than the once that followed, we have two parallels in the region, Mahathir Mohamad in Malaysia and more recently Narendra Modi in India.
Neoliberalism in South-East Asia: Mahathir Mohamad
Mahathir Mohamad served as Prime Minister of Malaysia from 1981 until his ‘retirement’ in 2003, by which time he was the world’s longest-serving elected leader. A medical doctor in profession - studied in Singapore, a state he always saw as his rival - he entered Parliament in 1964. He served as Minister of Education and Minister of Trade and Industry before being elected as the fourth Prime Minister of Malaysia. He is considered the father of modern Malaysia, the one who transformed this small, poor country into a regional economic power and made it back to the Asian tiger club.
Politically his approach has initially been nationalistic. It was always pro-Malay (and anti-Chinese and other races living in Malaysia).His first book ‘The Malay Dilemma’ was intended as a solution leading away from violence towards a harmonious, integrated Malaysia (albeit one where political and economic power is firmly concentrated in the hands of the Malays). He advocated sufficient discriminatory government support for Malays so that their economic interests would not be dominated by the Chinese. (Interestingly Mahathir’s father Mohamad bin Iskander was an Indian from Penang with a Malay mother and ancestors from the southern Indian state
Under Mahathir, Malaysia has created its national automotive industry with the Proton brand, converted Kuala Lumpur to a financial centre, made its territory a hub for new technologies, built cities, created jobs and raised the standard of living of the population. During the end of its governance Malaysia had the lowest unemployment rate in the world.
For the entire period, country’s thriving economy, referred to as the “Malaysian model of development”, is seriously disrupted only by the monetary and financial crisis that began in Thailand in the summer of 1997. Even with that Malaysia’s per capita GDP has been around US$ 8,000 by the time of his retirement. It is predicted to be a first world country within the next decade.
Neoliberalism in South Asia: India’s experiments
All South Asian economies have unpleasant experiences in post-colonial economic mismanagement. Only few have ever experimented with neoliberalism and that too for short periods. In India, first it happened under Congress party rule of P V Narasimha Rao in 1991.
It was a complete transformation of country’s economic policies, with the goal of making the economy more market- and service-oriented, and expanding the role of private and foreign investment. These moves that led to economic liberalisation have been credited by its proponents for the high economic growth recorded by the country in the 1990s and 2000s.
More recently, neoliberalism came from pro-Hindu Bharatiya Janata Party (BJP). Narendra Modi, then BJP leader, became India’s 14th Prime Minister in 2014 at very mature age of 63. A former Gujrat Chief Minister (he held the post since 2001) he represented then the largest party in opposition both at national and regional levels. BJP, established in 1980 and grew in strength on the wave of the Ram Janmabhoomi movement has ruled India several times albeit for relatively shorter periods. BJP-led National Democratic Alliance (NDA), headed by Prime Minister Atal Bihari Vajpayee, from 1998-2004 was the first non-Congress government in India to serve its full term.
It is always known for a more aggressive stance on defence and terror as well as neo-liberal economic policies. Its 2004 campaign was based on the slogan ‘India Shining’ which depicted the NDA government as champion for a rapid economic transformation of the country. The largest democracy in the world changed its ways for the second time in 2014, with a far more vibrant leader.
More important is what circumstances brought Narendra Modi to power. Previous government of Manmohan Singh, the very individual, who is credited with lifting the country’s economy from the brink of disaster in 1991 as finance minister to Rao, has been badly unpopular in 2014. That is the decent way of saying he, ironically one of the most senior, experienced and qualified political leaders internationally, has been a failure.
India’s economy was no more what it was in early millennium years. Growth has fallen. It was only 5 percent for the year 2012/13 – the lowest in a decade. Inflation remained high. ‘Foodflations’ were not uncommon. Rupee has depreciated sharply against the dollar, adding further turbulence. Dr. Raghuram Rajan, a former IMF chief economist, after taking over as the Governor of the Reserve Bank of India in September 2013 has launched a rigorous and comprehensive recovery efforts. Modi entered to clear this mess.
Narendra Modi: Is he a successful case study?
On election, Modi immediately liberalised India’s foreign direct investment policies, allowing more foreign investment in several industries, including defence and the railways. Other proposed reforms included making it harder for workers to form unions and easier for employers to hire and fire them; some of these proposals were dropped after protests.
The funds dedicated to social welfare measures too were greatly decreased by the Modi administration. The government also lowered corporate taxes, abolished the wealth tax and reduced customs duties on gold, and jewelry.
In October 2014, just few months after being elected, Modi government deregulated diesel prices. Modi also introduced the Make in India initiative to encourage foreign companies to manufacture products in India, with the goal of turning the country into a global manufacturing hub. By introducing Goods and Services Tax, the biggest tax reform in the country since independence, the government subsumed around 17 different taxes and became effective from July 2017.
The government also demonetised INR 500 and INR 1000 banknotes, with the stated intention of curbing corruption, black money, the use of counterfeit currency, and terrorism. This was perhaps a less popular move and registered a setback in economic growth. It brought a steep decline in the Indian stock indices and and sparked widespread protests throughout the country. However, in the subsequent year, the number of income tax returns filed for individuals rose by 25 percent, and the number of digital transactions increased steeply.
Five years later we see Modi has been successful enough. Over the first four years of Modi’s premiership, India’s GDP grew at an average rate of 7.2 percent, higher than the rate of 6.4 percent under the previous government. With the exception of 2017, India’s economy has been the world’s fastest growing major economy, surpassing China. Per capita GDP has risen from US$ 1,576 to 1,939 within four years.
In 2014 only two States/union territories of India has surpassed Sri Lanka in per capita GDP. They were Goa and Delhi. Both can be easily explained. Goa economy is growing as a major tourist centre and Delhi is recently industrialised. By now, the number has grown to four to include Sikkim and Chandigarh. Haryana and Telangana not too behind. A re-election of Modi government - which looks likeable at the moment of penning this might bring another four states including two Southern states, namely Karnataka and Tamil Nadu at least on par with
Ranil Wickremesinghe: Is he a neoliberalist?
Few Asian leaders, not excluding Mahathir and Modi, have ever become strong neoliberalists. They only managed a balance. That is the maximum you can expect within an Asian culture. Lee Kuan Yew was fortunate Singapore was small enough, masses understood him and he was always on control. He also successfully crushed the opposition. Everyone else had to deviate from strict neoliberal policies for being election. One has to keep masses content for that. Wickremasinghe was no exception.
In a speech titled ‘This is how I will make my country rich by 2025’ delivered at World Economic Forum on ASEAN in Ha Noi, Viet Nam, Prime Minister Wickremesinghe illustrated some key aspects of his long term economic policies (full speech is available on the web). He has been careful enough not to use the four letter term “Neoliberalism”. Instead he cloaks behind the more politically neutral term ‘social-market economy’.
“Our economic policy, Vision 2025, is firmly embedded in several principles, including a social market economy that delivers economic dividends to all. In the first place we need to ensure we have a skill pool that matches the job market’s demands. Sri Lanka’s education system is being transformed through progressive and important policy reform: the minimum length of schooling has been increased to 13 years, while better education is being brought to rural areas through the ‘Nearest School Is the Best School’ programme, and Sri Lanka is investing in more teachers and better training. Also, opportunities for vocational training in selected areas during school education will be introduced.”
“With a domestic market of 20 million consumers with a modest per capita income, Sri Lanka recognises the importance of external demand for sustained, high and long-term growth. This is why the country is rolling out a plan to strategically position Sri Lanka as the hub of the Indian Ocean, securing opportunities for local businesses in global production networks and ensuring that the country is capitalising on opportunities to enter new global value chains. This outward-looking approach will increase the efficiency of the domestic economy, contributing to a better life for all Sri Lankans. Sri Lanka is mindful of the shortcomings in its macroeconomic policies and institutional capacities that are required to respond to the challenges. We have encouraged strong public-private partnerships, and enabled institutions to become more transparent and efficient.”
This per se means little. It could have come from anybody contesting for the Presidential Election. So it is essential that we question what chances Wickremasinghe gets to implement market friendly policies.
Conclusion: So, will he be back to a mixed bag of economic policies?
Sri Lankan economy is not in its best shape. It is more like a long-term bedridden patient in a government hospital. We, the relatives, are complacent as she shows no immediate danger of demise. She talks, listens to others, understands them, make requests, takes her medicine, eats and sleeps. Still she is a sick woman, who cannot stand on her own feet. Like many patients she too shows signs of recovery time to time. Then we get so excited we hope she would soon be dismissed from hospital. Sadly, these ‘good times’ lasts too short.
We live with an exceptionally high Debt/GDP ratio (nearly 80 percent in 2017) and debt servicing cost (about US$ 4.5 billion in 2017). Central Bank of Sri Lanka future estimations for the last few years has been way away from the actuals. State Owned Enterprises (SEOs) continue to make heavy losses year after year. Sri Lankan Airlines, Ceylon Electricity Board and Ceylon Railways, all supposed to make profits in the monopoly environment has added an aggregate burden of Rs. 70 billion to national budget. We have to run a government too large for a country like ours. Everybody expects a government job, completely ignoring the far better opportunities in the private sector.
In short, let’s admit that an economic crisis is in pipeline for the last few years. The only reason that it didn’t happen so far, was the receipt of IMF assistance at right time. But it might soon grow to a situation even IMF either cannot handle or will soon be not interested, having intervened for so many times for
Let’s also admit that Ranil Wickremesinghe is not the most popular politician in Sri Lanka. Even within his own camp his popularity ratings are, to say the least, not too good. So in a situation where economy is waiting an imminent crisis, we just cannot expect him to push market-friendly policies on the constituency. That simply will
So, if we were to explain it in the language of mathematics, the probability of Ranil Wickremasinghe becoming our ‘Diyasena Kumaraya’ ie. a neoliberal leader in 2020 just like Mahathir or Modi under present circumstances is less. Still there is a difference between zero probability and a less probability. It would be an interesting task to analyse under which conditions that less probable event takes place. A more down to earth analyst might research something else - what mix bag of economic policies Wickremasinghe might offer and if at all, how that could be different from what he offers now. I am sure the Sri Lankan constituency is interested in the results
(Chanuka Wattegama is an academic and independent policy analyst. He can be contacted via email@example.com)