Wandering Economics

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By 2017-09-14

By Ananda Ariyarathne

Sri Lanka is like a patient who has become the 'guinea-pig' for a set of physicians whose capacities have been proven to be merely academic and therefore have their visions completely shrouded by prejudice. All the remedies that they introduced were ineffective. The 'guinea-pig' has no say. All the medication was prescribed based on the predetermined policies and therefore the actual condition of the patient never mattered. Therefore, the condition could never have become better because the physicians were more concerned about their convictions than the ailments the patient was actually suffering from.

The latest trend is the misconception that the patient can be cured by treating the affected areas separately. The patient is inching closer to the end, in the meantime. Only a few people recall what happened in the 1940s and early 1950s. It becomes necessary to prompt a little here in order to have a proper understanding about the simple economics that have always been linked.


The population that was there was manageable. With the revenue generated, the government could afford to provide food subsidies. People took this for granted. The new government had a smooth run due to the favourable conditions. Ceylon Tea was in demand and therefore the government did not have any issues. However, this situation did not last for long. The first challenge was the stabilization of rubber prices. In order to facilitate this, the government signed the Rubber-Rice Pact with the People's Republic of China.

However, this wasn't a serious issue. The government did not need to keep an eye on foreign exchange reserves. The government somehow managed to raise the funds required to grant subsidies. The Plantation Sector was the backbone of the economy. It did not take long for economists to realise that the foreign companies were making huge profits. The truth started coming out little by little. It didn't take long for economists to realize that the country was losing foreign exchange. The foreign companies stood to gain and they grabbed the lion's share. These companies were called 'sterling companies.'

Sri Lankan politics started heading in a different direction after 1956 and people started becoming overly patriotic. More and more countries from the socialist bloc came to the rescue. Earlier, the UNP had relied on the West in order to strengthen the country's economy. Nationalization became the order of the day.

Can we ever say that the policy makers or the brains behind the show saw what was in store for us? The hidden challenges which did not come into the open, directly linked to the population that had kept on increasing were never understood and nobody bothered to address this issue. The unfavourable prices for primary commodities were studied as a special subject and it was only one out of many. In reality, that caused restrictions in the foreign exchange reserves. Sirimavo Bandaranaike's Government was the only government that bothered to look into this matter.

Symbolic Turning Point

It became a symbolic turning point when more drastic action was taken with the nationalization of the plantation sector. During this time, foreign exchange control became a crucial part of economic development. Import substitution was given prominence.

Local companies produced goods for the local market, and items were exported in order to earn Foreign Exchange.

But can we ever say that we had specifically drawn plans with targets to find solutions for each and every sector where the impact was felt. Development plans were there, of course, but they were never linked or synchronized with the national economy. Those were just sporadic projects. This is the reason why our country is in this state.

We are facing issues because we do not have a national master plan. Let us take a few examples. The country's education sector has dwindled and needs a new lease of life. How many specialists do we require every year? (doctors, engineers, managers, nurses, mechanics, and so on.) In order to get an idea, we need a proper human resource plan. In order to meet the demand, we need to be able to estimate how long a student will take to complete his/her education.

What do we see? There is corruption everywhere. In order to admit a student to a leading school in Colombo, the parents need to prove that they live in Colombo. Parents even go to the extent of preparing and submitting bogus documentation and bribing Principals. Later on, these children apply for examinations from rural areas because the z-score is lower in rural areas.

National Development

National development is connected to regional development and regional development in turn is linked with zonal development.

The most valuable resource is the human resource and when people aren't given opportunities they get frustrated and live an aimless life.

The citizens pay for the education of doctors, engineers, and other professionals, but after graduating, none of them have any openings. Due to this reason, most graduates seek employment overseas and never return. This occurs due to lack of planning.

We have agencies specialising in various sectors, but are we trying to identify resources and then link them to be truly symbiotic?

This is why planning is important. The absence of truly realistic economic sense has rendered us helpless.

Starting with the abuse of human resources, we have shown the world that we are clueless. It is said that only 12% of the land in Japan is arable. However, in the 1960s, Japan had the highest yield per land. What are we doing? If you take a good look, you will be able to see that there are a lot of lands that are not being utilised. They give all kinds of lame excuses. No labour, available labour is too expensive, it is cheaper to buy rice from the shop. In order to encourage farmers they give guaranteed prices. Only around 30% of the population are farmers and the rest (70%) have to buy rice from the market. Because the farmers have been promised a guaranteed price, the price of rice in the market has increased and as a result we have to dole out more money. Will they reduce the price now? No! They will definitely charge more. Then the rice farmers who got more money will have to pay more. Now, what will happen to the rice farmers? They will need more income. Back to square one. The government justifies importing rice in order to bring down the market price. As a result, our foreign exchange reserves dwindle once again. This goes on even though our paddy storage facilities are packed to capacity. This paddy is either sold to companies that produce animal feed or thrown away.

Misusing State Resources

People have started misusing state resources. It is not that we don't have the infrastructure, we just need proper management. The great strategists have decided to outsource projects to foreigners. If the foreigners can do it, why can't we do it? We just need proper management.

Joint ventures and leasing are two completely different things. The current situation is pathetic. Our leaders are trying to justify leasing out assets. Is it possible that our leaders do not understand simple arithmetic too?

Leave alone strategic thinking, there is no thinking at all. You don't need to be a Harvard University graduate to understand these things. It is common sense. For example, in a family, if the father is the only one who is earning money and the family is struggling to survive, the mother might consider going to work. Furthermore, they can cut down on the expenses by preparing meals at home.

Foreign Exchange Imbalance

We need to consult officials from the International Monetary Fund (IMF) and the World Bank in order to sort out the foreign exchange imbalance issue. We need to improve productivity. We also need to focus on rural development. We need to start by improving the living conditions of the rural folk. Have we made an effort to make use of Samurdhi type expenditure?

Our people have no sense of direction. The current situation is pathetic. The key decision makers are relying too much on foreign investment. They are of the opinion that foreign investment will sort out all the issues in the country. If the government invests in 'people oriented projects' then our country can make good progress.

The writer is a Management Consultant and Visiting Lecturer ⁄ Examiner of SLIDA. He is also the author of three books.



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