National Prosperity Turning the Tide

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By 2018-01-11

By Ananda Ariyarathne

"It is not an alarming realization that 'governance' should ensure the best living conditions of a nation and obviously that should be the main objective of any government. If there are no standards or guiding principles, which would assist a government in achieving such an objective, there shall be no difference between the scenes that can be seen in a primitive environment and in a so-called materially developed scenario as both shall be measured by the minimum essentially required standards.

What matters shall be the level of material benefits available and the ability of the potential beneficiaries to enjoy those. That aspect is directly connected with the availability of the minimum essential requirements and the ability to be benefited out of those. Variances among the standards are unavoidable as they are caused by the disparities in the availability of Input Resources and how they are exploited."

Role of the Government

A Government cannot escape the responsibility as it plays the role of a 'manager' of the whole operation. It is no rocket science for a government to take stock and then develop plans to make the best use of the resources available to make the whole operation a profitable venture.

In Sri Lanka, what we see is a scene of a 'management' consisting moaners and cursers who are ever ready to blame those who were in their position, in the past. For over seventy years after getting the 'Independence', we have not got our arithmetic straight.

Development is an expansion of activities and the required sustenance shall not fall from the sky. As we do not make profits and savings, the cost of management becomes a burden. The whole problem is within our National Budgeting. We have a system of 'borrowing to pay back earlier borrowings' and blame the pervious governance for those borrowings. It has been the only material achievement that is visible here. The 'gap' is filled by irrational taxation which contributes towards an escalation of prices and accordingly the 'inflation.' To overcome those the only honourable sounding term we know is 'privatization' instead of rehabilitating our management system.

If we need to rehabilitate our method of budget management system we should improve the economic standards by way of empowering people to stand on their own feet. That in turn, becomes possible only if the Human Resources are meaningfully utilized.

The 'Cardinal' factor in this regard is the ability of especially a country like ours to produce our needs and wants locally as much as possible by which we can stretch our foreign exchange reserves. The excessive borrowings have made our currency weaker which has led to a high rise in inflation.

The ideal scenario would have been a 'Government's Ability' to build up a stable and favourable environment for all the people by facilitating the required infrastructure. Such can be achieved only by maintaining a balance within the Government spending mechanism that is while facilitating governmental resources equally facilitate the non-Governmental resources as well. But to facilitate both with a balance without a burden for the country's economy the government should have a 'Revenue' of its own and it generates revenue through 'Taxation' which can be both direct as well as indirect.

Absences of effective measures have caused a continuous tide of economic misfortunes as results of wild goose chasings. Now the solo answer is a national priority to turn the tide.

Conflicting strategies used in Taxation

Taxation is officially announced by the Annual Budget, and it shall become effective only if it has pro-active features. Rebates and exemptions shall definitely encourage tax paying companies and individuals. Particularly if the exemptions are given to the sectors such as Export Promotion, agriculture and rural industries so that we can enhance rural productivity. Especially in agriculture where food is produced for local consumption as well as for exports. In the same manner, the labour oriented industries in rural regions can contribute towards foreign exchange earnings while providing employment opportunities to the people in the region.

Imagine the input of cash regularly in to the rural economy through the salaries and wages earned by those rural people. Their increased purchasing power shall encourage even self -employment to a great extent. It is important for us to become aware of the fact that such developments can reduce the 'migration of workers' into urban areas seeking employment which they contribute negatively.

Generalization and blanket approaches are lame excuses as it depends purely on the affordability of the tax payer on one hand and on the other the utilization of the collected revenues should be strictly objective oriented.

Survival depends on solutions. That principle has not changed from the most primitive society to most sophisticated types we live in. Collecting and gathering helped the primitive societies and with the ever increasing population it became unavoidable to ensure that all the members are benefited. As all those were guided by objective oriented principles, the utilizations also ended up as anticipated. Now that the objectives are multifaceted, the allocations cannot be specific. That is how the element of 'Generalization' comes in. It is relevant not only at the stage of collecting revenues but also at the stage of disbursements. As the picture has become more 'Macro' in both the collection as well as disbursement it may sound and look like something impossible.

What is more important is the 'Collection' aspect and how far justifiable are the strategies used? This is exactly where the systems and methodologies used in 'budgeting' become out of context.

Taking a Cross-Section of the society, how many can us see as revenue generating? What is the level of contribution on the part of each such 'section'? Just imagine the revenue generating capacities of the mega companies which are shown in the share market? We come down to the point of recognizing the share market behaviour as the reflection of economic prosperity. But the earnings made by the human resources which make things happen and keep such mega companies active and live are shown as operational costs of those mega companies in their books.

The point raised here should not be misinterpreted as a position that mega companies should not be there or they should not make profits. It is the principle that matters. The workforce's salaries which are shown as operational costs give a legitimate reason for the mega companies to raise the prices in order to ensure the levels of profits. Further a pay increase for the workforce will simultaneously increases the operational costs as a result the companies will increase prices for their goods and services. So the same workforce as local consumers are compelled to pay more and any pay increases made will end up having no use and resulting only in adding on to the inflation.

But, the question is, whether the whole wealth of human resources are employed by the listed companies. How about the others who have nothing to do but are either unemployed or inadequately employed? What are the numbers? Are they not taxed? Such may not be taxed directly but through indirect methods.

The mega revenue generating companies are given Tax Holidays while the Government is facing an ever increasing public expenditure requirement. On the other hand, the efforts made in investment do not increase proportionately. The Hi-Tech industries may bring in huge investments but are very poor in employment generating capacity. Plantation agriculture is on a downward trend and the utilization in that sector and there are no signs of better revenues for the population engaged in that sector. In the subsistence agriculture where it is more a self-employment based activity and due to the rising labour costs, more and more paddy lands are going fallow.

On the contrary, import of food items including the basic rice even is indirectly encouraging the trend. In other words, the productivity in the subsistence agriculture sector is deteriorating. The encouragement of free economic Venture is encroaching into the little available opportunities in the fisheries even. The accepted practices will choke the local human resources out. All those make the vast majority of the population left in a helpless and uncertain economic framework.

The types of duties levied end up in increasing the prices and the real value of the currency is on a downward trend. And we call it inflation.

How can the Budget be more pro-active

There should be a national master plan developed to identify the potential areas of development concurrently National Resources has to be identified. Already there are many expenditure budgets for Agriculture, Agrarian, Irrigation, Livestock, Poultry, Marine and Inland Fisheries and others but how many 'Budgets' are there to develop irrigation? How many acres are cultivated? And how much yield is being achieved is not known. We can generate revenues by developing a 'Revolving Fund' by retaining a percentage of profits generated by harvests which will make us 'Self Sustaining'.

Such a possibility would reduce the burden of the Government on one hand and on the other; the newly generated business can become the base for a Reasonable Revenue Tax that can strengthen the coffers.

What's missing is pro-active thinking... if we do not wake up now...we will fail as a nation...

A Graduate from the University of Ceylon, Peradeniya and read for MBA at the PIM, is a Management Consultant, specialized in 'Sick Unit Rehabilitation' has four books already to his credit, and three more being readied for publishing, a serves as a visiting lecturer and an Examiner at SLIDA

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