Sri Lanka and the globalised world lessons from our neighbours

22 February 2012 07:54 pm - 3 - {{hitsCtrl.values.hits}}

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Our country’s decision to develop rests on getting three very important things right.
1)    The first thing is to get the right infrastructure to connect more of our people with the tools and platforms that help them collaborate and compete with the rest of the world. These can be cheap internet bandwidth and mobile phones to modern airports, roads and a consistent supply of power.
2)    The second is the right educational system to get more of our people innovating and contributing to the world’s pool of knowledge.
3)    Third is the right governance – from fiscal policy to the rule of law to the quality of the bureaucracy. This point is often lost. With all the discussion about globalisation and how companies need to compete, people lose sight of the fact that globalisation is also a competition between one country’s public sector and another’s. That is, you need a quality bureaucracy to channel, govern and enhance the creative energies of a country so our people as individuals can not only imagine new products and services but also bring them to life and take them to the marketplace.
These reforms were initiated by a small handful of leaders in countries such as China, Russia, Mexico, Brazil and India. These small group of reformers often relied on the leverage of authoritarian political systems to unleash the state-smothered market forces of their societies. They pushed their countries into more export-oriented, free-market strategies based on privatisation of state companies, deregulation of financial markets, currency adjustments, foreign direct investment, shrinking subsidies, lowering of protectionist tariff barriers, and introduction of more flexible labour laws – from the top down without ever really asking it’s people.
What all these leaders confronted was the irrefutable fact that more open and competitive markets are the only sustainable vehicle for growing a nation out of poverty, because they are the only guarantee that new ideas, technologies and best practices will easily flow into their country and that private enterprises, and even government, will have the competitive incentive and flexibility to adopt those new ideas and turn them into jobs and products. This is why non-globalised countries, those that refused to do any macroeconomic reform – North Korea, for instance – actually saw their per capita GDP growth shrink in the 90’s, while countries that moved from a more socialist model to a globalising model saw their per capita GDP grow in the 90’s. As David Dollar and Art Kray conclude in their book, ‘Trade, Growth and Poverty’, proclaim that economic growth and trade remains the best anti-poverty programme in the world.
The problem for any globalising country – like ours – is the thinking that we can stop from the 100 foot reform stage. But as the world started to get smaller, enabling China to compete everywhere with everyone on a broad range of manufactured products, enabling India to export their brainpower to everywhere, enabling corporations to outsource any task anywhere, and enabling individuals to compete globally as never before, the ‘100 foot macroeconomic reform’ alone is not sufficient to maintain a sustainable growth path. A deeper process of reform is required – one that would transform education, infrastructure, and governance in a much more profound manner.
Enter the ‘10 foot reform’
Many of the key elements were best defined by the research done by the World Bank’s International Finance Corporation (IFC) and its economic analysis team led by its chief economist Michael Klein in 2004. What do we learn from their work? To begin with, you don’t grow your country out of poverty by guaranteeing everyone a job. If it were just a matter of the number of jobs, solutions would be easy. For example, state owned enterprises could absorb all those in need of employment. The real issue is not just employment, but increasingly productive employment that allows living standard to rise. State owned enterprises and state subsidised private firms usually have not delivered sustainable productivity growth, and neither have a lot of other approaches that people assume are elixirs of growth. Just attracting more foreign investment into a country doesn’t automatically do it either, and even massive amounts of investment in education won’t guarantee it.
Productivity growth and, hence, the way out of poverty, is not simply a matter of throwing resources at a problem. More important, it is a matter of using resources well. In other words, countries not only grow out of poverty only when they manage their fiscal and monetary policies responsibly from above, but also within a system that encourage innovation and growth from a micro-level. In recent years a lot of attention and moral concern has been devoted to the problem of persistent poverty, particularly in Africa.
That is a good thing. But persistent poverty is a practical problem as well as a moral one, and we do ourselves no good to focus on our moral failings and not the practical shortcomings of the countries and governments involved. Poor people grow out of poverty when their governments create an environment in which educated workers and capitalists have the physical and legal infrastructure that makes it easy to start a business, raise capital, and become entrepreneurs, and when they subject their people to at least some sort of competition from beyond – because companies and countries with competitors always innovate more, better, and faster. (The writer is an online marketing strategist)

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Comments - 3

A W Abdulkany Thursday, 23 February 2012 06:59 AM

The lessons from the naighbours all fine and should be emulated in the long run. Not that our econominists are not aware of it. The bureacracy is in confusion now. They are not in the mind to implement new strategies to elevate the prevailing condition to the level of our south east asian neighbours. All of them are involved in overcoming the current situation Sri Lanka is faced with. After the degfeat of the terrorism, the country is facing numerous problems especially from the West and particularly from the US. The bureacracy is unable to put their heart and mind to the ecnominc problems we facing right now. Peace in country is not sufficient peace in the mind of all rulers should prevail. no big articles will serve the purpose; we are in the process of attacking and trying to solve the day to day problems the country is facing; may be fault of the System.

PKR Thursday, 23 February 2012 07:59 AM

Good article with eye opening remarks.

IndikaF Thursday, 23 February 2012 10:08 AM

A Very Good Article indeed. Sad that our government authorities won't understand this. Even if the do, they do nothing about it, so does the people. Kind of sad but it is the reality which we should strive to change with leadership.

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Sri Lanka and the globalised world lessons from our neighbours

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