BY Amila Muthukutti
Be it an individual or government, they have to plan well, if they need to accomplish something successfully. President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe recently launched the good governance government’s policy framework titled ‘V2025: A Country Enriched’ explaining the nation how the government will bring economic prosperity over the next few years.
However, such kind of economic policies are not so unfamiliar for citizens in Sri Lanka, since almost every government that ruled the country has launched similar policies. This might cause a doubt among people whether V2025 is also just another policy or not, just like the ones that were introduced in the history.
We need a new policy, mainly due to two reasons. The first is, the previous policies were not successfully implemented. The second is that the socio-economic environment is changing unprecedentedly, which needs updated economic policies to resolve timely problems.
Furthermore, the country, being in a crisis situation where the mountain of debt, lack of foreign direct investment, political instability and natural disasters play a negative role, urgently requires an economic policy like this to wisely change the direction of the economy, avoiding possible economic repercussions in the future.
It is stated that their vision is to make Sri Lanka a rich country by 2025. The way in which they are going to do this is by creating a knowledge-based, highly competitive social-market economy and by positioning the country as an export-oriented economic hub at the centre of the Indian Ocean. It is amidst these setbacks that Sri Lanka has been able to regain GSP Plus. Put your political ideologies aside, in order that we can have a bird’s eye view on two selected terms: knowledge-based economy and export-oriented economic hub.
Knowledge economy is an economy in which growth is dependent on the quantity, quality and accessibility of the information available, rather than the means of production. The main contributing factor to the economic growth is knowledge, especially knowledge about markets, new technology, new products and patterns of consumer demand so and so forth. We know different ways whereby we add values to products.
Nevertheless, values can be added to humans only by quality education for which the public sector must join hands with the private sector. The literacy rate is not just sufficient to build this knowledge economy. For this purpose, the government must further encourage private sector investors to pour money into education, especially vocational education.
The export-oriented economy has been a hot topic among the public over the years, as the nation feels its importance like never before. It is needless to state here that exports are mainly backed by the regain of GSP Plus and marginally encouraged by rupee depreciation because rupee depreciation in my view is not a sustainable solution for a rise of exports and seemingly, the country is not yet ready to fully harness the GSP concession, owing to so many reasons such as severe labour shortage in the apparel sector.
The export-oriented economy can be created only by diversifying export items as well as destinations, new free trade agreements (FTA) with strategically important countries and most importantly empowering the local producers financially to become exporters.
When a policy is put into action, constraints have to be clearly identified and then avoided. The policy document says that a steady decline in government revenue generation over time has resulted in a steady increase in public debt accumulation, particularly concentrated on high-cost and high-risk non-concessional foreign borrowing. Accordingly, the government has to be ready for financing in order to settle debt. Almost everything that the government will do economically will be connected with this debt settling in the future.
V2025 further states that the fragile financial standing and the poor quality of public service delivery of state-owned enterprises (SOEs) are additional constraints to productivity and growth. It is a known fact that public enterprises play a pivotal role in the country’s economy, as many companies listed in Colombo Stock Exchange (CSE) are fully or partly owned by the government directly or indirectly. If we have a look at the banking industry in the country, the majority of banks are fully or partly owned by the government. Hence, their underperformance has been a constraint to the economic growth, making news on a daily basis.
No matter whatever the visionary policy is, it needs public support, in order that it becomes a reality. It has to be noted here that due to political parties struggling for power, public support has been badly divided into different parts, which try to take the country on different paths. However, what policymakers should not forget is that policy suggestions can never be put into practice without the public support. That’s why, I emphasize here that Vision 2025 needs to be communicated to the public properly.
It is when the public feels that this policy will bring economic prosperity to the country that they start supporting for its implementation. Accordingly, the government’s next duty should be to convince the public and get their support.
(Amila Muthukutti is an economist)