Sri Lanka celebrated its 71st year of independence from the British colonial rule on Monday. Despite the reservations we may have about the country’s post-independence journey so far and its despicable politics, freedom from subjugation to foreign rule should be celebrated. But in the present world context, the true meaning of independence and freedom will only be able to be felt to the extent of which a nation has gained its economic independence.
Economic independence, in its essence, is the control of the sources of wealth of a nation by a majority of its citizens. As some would be quick to jump to conclusion, it should be established that economic independence does not mean a closed economy or is not an anti-trade notion.
Economic independence gives a nation and its people a sense of security, contentment and freedom of thought. That is why economic independence is more important than political independence. Political independence is just a façade if a nation and its people cannot make independent economic decisions.
Although Sri Lanka said to have gained its political independence in 1948, as long as the country runs a massive trade deficit—the difference between a country’s import costs and export earnings—can it be considered economically independent?
It must be said that a trade deficit is always not a feature of lack of economic independence. But unfortunately, in Sri Lanka’s case, it holds true. Sri Lanka needs to export more and cut some of its unnecessary imports.
But in a world where interdependence is a norm and trade is at centre stage, how realistic is it for a nation to strive for a trade surplus? Well, there are enough and more countries in the world that report trade surpluses year after year and there are also others who report small trade deficits compared to their GDPs.
It is important for Sri Lanka to find a realistic economic model that suits our conditions and assures economic independence rather than going after economic ideologies, may it be free market capitalism or social market economy.
When you are in debt up to your neck, talking about economic independence is simply useless. Since 2009, Sri Lanka’s debt burden has increased exponentially and the country is currently in a debt trap. Taking loans are fine as long as the moneys borrowed are invested in activities and projects that yield returns to service the debt.
But when the borrowed moneys are spent on white elephant projects that are ego-driven, the end result generally tends to be disastrous. Some of the infrastructure projects in Sri Lanka are prime examples of such follies.
Another factor that prevents Sri Lanka from gaining its economic independence is the loss-making state-owned enterprises (SOEs). Treasury Secretary and Finance and Mass Media Ministry Secretary Dr. R.H.S. Samaratunga during a workshop for SOE heads last year said successive governments had pumped in a colossal Rs.1,150 billion for the upkeep of the strategically-important SOEs up to 2017.
Sri Lanka has about 400 SOEs, of which 55 are considered strategically-important and are generally referred to as state-owned business enterprises (SOBEs).
Dr. Samaratunga said during 2017 alone, the General Treasury had to inject Rs.41 billion to these 55 SOBEs. But only 39 of these SOBEs made profits, which amounted to Rs.136 billion, while the remainder 16 made a cumulative net loss of Rs.87 billion
He noted that although the SOEs occupy a significant presence in the economy, the return on asset of these 55 SOBEs was merely 0.64 percent.
According to Dr. Samaratunga, reasons ranging from the general lack of governance practices, lack of accountability mechanisms, issues associated with lack of clear policy and legal frameworks and weak supervisory roles played by the management and board of directors of these entities have contributed to the plight of the SOEs.
It is no secret that the brand of politics Sri Lanka has been practicing for the last few decades has been the biggest obstacle against bringing these SOEs on to the right track. If proper director boards and qualified professionals are appointed to manage the SOEs and they are allowed to take business decisions without being hindered by political influence, turning them around wouldn’t be such a difficult task. What we should understand is that it is in fact not the SOEs that have failed but the political system of the country.
Privatization and public-private partnerships could be the most touted solutions for the loss-making SOEs. But Sri Lanka has to be very careful going on this road by looking at the countries that had already taken this path—whether they have achieved the desired objective.
There are countries in the world that have very efficient SOEs that contribute to the economic and social well-being of the people and to their economic independence. Singapore could be a prime example for that.
Hence, it is paramount for Sri Lanka to have leaders and policymakers who don’t have ideological baggage but have pragmatic and innovative approaches towards the country’s socio-economic realities, for it to achieve economic independence.