Editorial - The balancing act

4 September 2012 08:40 pm - 0 - {{hitsCtrl.values.hits}}

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United National Parliamentarian Lakshaman Kiriella recently challenged the ruling party to point out a single factory that was built by the government of President Mahinda Rajapaksa. If you keep aside the political rhetoric of this statement by MP Kiriella, it gives an insight to the Rajapakasa government’s economic policy.
Although President Rajapaksa can proudly point at the expressways, ports and airports he has built; going with MP Kiriella’s statement, it is doubtful whether the President can claim a factory or manufacturing facility under his government.

It was quite visible that the Rajapaksa government has been following a service-oriented economic model which has mainly given emphasis on the development of tourism, ICT and Financial Services sectors. The five hubs mentioned in the Mahinda Chinthana which focuses on sea, aviation, commerce, energy and knowledge in fact clearly reflect the government’s inclination to a service sector based economy.

However, there were rulers in Sri Lanka who on the contrary were completely focused on making Sri Lanka a manufacturing nation. President Ranasinghe Premadasa was one such example.

There is no argument about the need for better roads, ports, airports, hotels and power stations. But in spite of these accomplishments, if the Rajapaksa government doesn’t pay any heed to the economic and social value of manufacturing, not only the government but also the entire country would soon be in trouble.

At present, the services sector accounts for over 60 per cent of Sri Lanka’s Gross Domestic Product (GDP) and the percentage is increasing. Although the advantages of a service-based economy are more attractive as a result of it allowing faster economic development and opportunity to keep the country’s natural environment relatively clean, there are certain disadvantages which can’t be neglected at all.

Specially given the foreign policy of Sri Lanka and the squabbles with developed countries in the west, a prudent person will always see the value of striking a balance between the services and manufacturing sectors. If Sri Lanka becomes a service sector oriented economy, she will have to depend on other countries for goods.
In addition, the trade gap will shoot up as the country will have to import more against fewer exports. In fact, Sri Lanka’s trade deficit stood at US $ 4.7 billion at the end of the first six months of the year 2012. Compared with the first six months of 2011, it had grown by 11.8 per cent. Thus it is quite clear that Sri Lanka can’t afford a further increase in trade balance.

Besides, the government also needs to realize the political cost of following a service-oriented economy as it has always been a tricky question how fast the economic benefits of such an economic model trickles down to the masses.

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Editorial - The balancing act

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