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Rajapaksa is right; the government holding back development

30 March 2015 05:53 am - 0     - {{hitsCtrl.values.hits}}


Ex-president Mahinda Rajapaksa in a message read in a political rally held in Ratnapura, last week alleged that the current administration has stalled development in the country. I cannot help, but agree, though grudgingly. 

This government has held back the country’s development. That is already reflected in the projected growth numbers: The Asian Development Bank now says that the country’s economic growth would dip to 7 per cent this year, from 7.4 per cent, last year. 

As recently as two months back, the ADB projected 8 per cent growth for 2015 and 2016. It however assures that the economy would rebound in 2016 to 7.4 per cent, still short of previous estimates.

Senior Country Economist for Sri Lanka Tadateru Hayashi says under the current political situation, investment would be affected this year (though he adds that the medium and long term prospects are good). 

A distressing picture of economic mismanagement of the current administration is gradually emerging. Flagship development projects have been suspended, some others are under review. 

The Colombo Fort City project is suspended, pending a review. A Tata housing development project is being reviewed. Lotus Tower, which is tipped to be South Asia’s tallest building, has run into trouble due to squabbling between two ministries over the ownership of the land. 

The Northern Express way risks being abandoned. The construction of the defence headquarters has been suspended. In the latter case, one is right to wonder as to why the country should spend 50 billion rupees to build a headquarters for the defence forces. 

Investment of that magnitude does not make  sense, unless Sri Lanka plans to become an Asian military power, for which it has neither economic capacity, nor, at least as of now, intention. Such money is better invested to build facilities to teach English and information technology to schoolchildren or to promote R&D facilities of the military, which already engages in small-scale defence manufacturing. 

Australian gaming mogul James Packer was forced to abandon his $ 300 million integrated gaming resort in Colombo, after the government denied him a gaming licence (Despite the fact, half a dozen casinos are already operating in the country). 

Moralists would have a claim, but, for a country that relies on housemaids toiling in the Middle East and tea plucking estate women for its foreign remittance and revenue, it is no less honourable to relieve that burden through a decent income generated from gaming revenue. 

Instead of formulating a tax regime for gaming, which the Rajapaksas were unwilling to do, preferring self-profiteering, the new government killed the goose that laid golden eggs.     

(Then, there are other populist policies, such as the sugar gain tax, which, though we may like deep down in our hearts, is not good economics.) 

However, in most cases, stalled development projects have adverse ripple effects. For instance, when  TATA housing is reviewed, it threatens the future of one of the most ambitious projects in our time: Colombo slum clearance.

Also when the government sends contradictory signals on the now stalled Colombo Fort City project, not only does it dampen the appetite of Chinese investors, who now have deep pockets, to invest in this country, but also creates a far more dangerous ambiguity on the country’s investment climate. 

It is not that the incumbent administration led by the UNP, which is supposed to have good economic managers, is unaware of this. It is wilfully and intentionally risking the country’s economic future for its political considerations. The strategy is to discredit the leaders of the previous regime. 

Nothing wrong in that, and there is plenty of justifiable reasons to do so. 

However, instead of holding the Rajapaksas accountable for abuses and excesses during the previous regime, the new administration is rather naively trying to challenge the previous administration in its strongest point: infrastructure development.  

The misplaced strategy, therefore, is to discredit the infrastructure projects that have been undertaken by the previous administration. That is a losing strategy. 

The sooner it is abandon better it is for the country. It is also a dangerous strategy: It emboldens future protesters. It was not long ago, that the villagers in the hinterland that is now criss-crossed by the Southern Express Way, carried placards saying “We don’t want highways”. 

CWC leader Arumugan Thondaman successfully stalled the construction of the Upper Kotmale Dam during both Chandrika Kumaratunga and Ranil Wickremesinghe administrations. 

The same administration of Wickremesinghe abandoned the expansion of the Katunayake international airport due to local protests.  Whereas Rajapaksa prevailed over the protesters. Some actions of Rajapaksa could have been high handed, however, our development levels call for decisive action, if we are to leap frog in development. 

I cannot help but admire Rajapaksa for doing that, in the same way, I would respect J.R. Jayewardene for breaking, at least to some extent, an entrenched culture of dependency that beset this country, by abolishing an extensive rice subsidy that compelled successive governments to spend on subsidized rice a colossal amount of money, that could otherwise have been invested in infrastructure. In other words, those bloated and politically-driven welfare measures weakened the State by forcing it towards a social overreach. 

The new government’s attitude towards infrastructure development projects undertaken by its predecessor has emboldened distracters. We would soon witness future development projects being held hostage by a variety of petty interests. Environment lobbyists would be up in arms as long as funds keep coming from their foreign backers. 

They compelled the then government to abandon the first coal power plant which was to be built in Trincomalee in the late 80s. Years later, the entire nation was forced into pitched darkness when the regular power cuts were enforced after hydro power dams ran dry in 1996.

The collective psyche in Sri Lanka’s traditional rural society and urban slums are not supportive of change and by extension, development. They make a receptive audience and ever- ready foot soldiers for any group of vested interests who in the past forced the abandonment of and delay in various investment and development projects.

Of course, some of those protesters have concerns worth attention and speedy resolution. But, few worth enough to abandon major development projects, that would benefit, not just their immediate neighbourhood, but also an entire country. 

The government should view those concerns in a utilitarian perspective: the greatest happiness for a greater number of people (which may come at the short-term inconveniencing caused to a minority).

Not only does the current government mishandle development projects, it also seems to be clueless of the gravity of its conduct.
One classic case is the contradictory remarks made by various ministers on the Colombo Fort City project. President Maithripala Sirisena, who was in Beijing on his first official visit to China was quoted as saying to the Chinese leaders that the suspension of the project was temporarily, assuring that it would soon be resumed. 

A day later, Deputy Foreign affairs minister Ajith Perera contradicted those claims, saying “no decision has been made on whether the project will be completely halted or continued or concerning the issues that have been highlighted regarding the project.” 

Needless to say that the president, who was then attending the Boao Forum for Asia Annual Conference in China would have found himself in an embarrassing position. So could have been Minister Perera’s Cabinet colleague, Foreign Minister Mangala Samaraweera who was accompanying the president. 

UNP government’s rapid reaction may have been intended to appease New Delhi and Washington, which the UNP seems to think will solve all our problems. India, of course, has concerns about the Chinese activity in its sphere of influence. 

Those sensitivities were aggravated by Rajapaksa’s entanglement with Beijing. The US shares concerns over the Fort City project, which is a 250-hectare artificial island which would be a lynch pin in China’s maritime silk-road, which in the long run would challenge the US supremacy in the sea. 
A reasonable government would try to assuage the concerns of its traditional allies and provide guarantees. Instead, the new government is trying to throw the Chinese baby with the bathwater. That again is a losing strategy as far as Sri Lanka is concerned.

Patrick Mendis, a Sri Lankan –American professor and a former US diplomat says that in handing with foreign powers,  Sri Lanka should follow the Jeffersonian dictum, that shaped the foreign policy in the 19th century United State: Commerce with all, entangle with none.

One Asian country that succeeded in doing that was Singapore. The Geo-strategist in Lee Kuan Yew (Who died last week) made sure that the city state derives its strength from its proximity to the populous South East Asia and China, as well as from its strategic allegiance to the US.

Ranil Wickremesinghe seems to have a different take on the matter. He told newspaper editors last week that given Sri Lanka’s strategic location, no country would want to antagonise us. But, what he forgot was that the countries that we antagonise would overlook us and sail further to invest in more accommodating destinations. 

The bottom line is that be it petty political considerations, misguided foreign policy handling, or sheer wishful thinking, this government has risked the economic future of the country. It is holding up the country’s development.  

By doing so, it is depriving Sri Lanka of becoming a success story in an area in which few emerging and newly industrialised economies in Asia succeeded: Now that the Rajapaksas are out, Sri Lanka is in a position to prove that both economic development and democracy can go parallel.

Democracy has been the missing link in Asia’s Tiger economies during their economic take-off.  Neither Lee Kuan Yew, nor Deng Xiaoping (or for that matter, Mahathir Mohammed) could promote democracy alongside prosperity. Nor did they fully subscribe to those values. With a UNP government, which is traditionally liberal, or even with an SLFP government sans Rajapaksas, we can turn a leaf in history. This government should not squander that opportunity.
Follow Ranga Jayasuriya @RangaJayasuriya on Twitter
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