Wednesday Nov 13, 2024
Wednesday Nov 13, 2024
Friday, 14 March 2014 00:00 - - {{hitsCtrl.values.hits}}
Ukraine was one of former members Soviet Union Republic, economically and politically the second largest behind the Russian Federation. However, Ukraine struggled to bring economic inclusivity and development across to her people since independence in 1991 compared with some the other Eastern European countries.
High youth unemployment which was around 20% and economic and socio-political difficulties were affecting the poor and the middle class as a result of weak domestic economy with high corruption. The country has been ranked 144 out of 175 by Transparency International in its 2013 Corruption Perception Index, with Ukraine among the Eastern European countries.
Ukraine has great potential to be a very wealthy country, with a well-educated work force and best suited commercial agriculture; however, the inherited Soviet institutional framework does not suit the emerging market challenges. The weak political, public and economical institutional framework has led to the current status of turmoil in the country.
Institutional framework of the developed world
With end of World War II, countries like the United States of America and Europe and with the establishment of European Union later have worked on building key political and economical institutional framework for greater inclusion.
For a strong and inclusive society to function, there needs to be set of social and economic rules created and enforced by the state and citizens collectively, without giving any room for tampering. When you look at political and economic institutions in the USA and the EU, one thing that is very clearly visible is the supreme status of this institutional framework, where there is no possible tampering, amending or diluting at any stage. In these countries, irrespective of the status of the individual, before the institutional framework you stand equal and inclusive.
The political institutional framework ensures proper governance that will empower economic institutions to shape the economic incentives to the society to benefits from educational, commercial, banking and finance institutions as well as institutions that drive the new innovations and technology developments. Society has the freedom of choice for rejection or adaptation to set of inclusive
"If the country desires to become a more economically inclusive society, where the benefits of economic growth and development inclusively and equally trickle across all segments of the society covering the length and the breadth of the country, the leadership and the Government have to first recognise the diluted state of the current political and economical institutional framework and take more meaningful steps to firmly restore and put in place a robust political public and economical institutional framework that matches countries like Japan and Singapore, instead of further tampering, amending and diluting it"
engagement in education, investment, or moving into innovative initiatives by adopting new technology.
In Asia we have seen the same that has been strongly put in place by Japan with the end of World War II; with a robust institutional framework, it was able to rise from the ashes of the war to become the second largest economy in the world and create a very transparent and inclusive society. More recently countries like Singapore are creating a very strong political and economical institutional framework to incentivise the creation of inclusive investment climate to create the most sought-after business, banking and trading hub in Asia.
Relationship between institutional framework and economic inclusion
The countries that have achieved a greater economically inclusive society have worked hard on shaping political and economic institutions, mainly to create progressive economic inclusion by close interaction between political and economic institutions. The political institutions will determine the kind of economic institutions that will facilitate greater economic inclusion in any country and good 
economic institutions will alleviate poverty and will herald economic prosperity.
What we have seen in countries like Japan, South Korea, Taiwan and Singapore are the initiatives firstly to establish better political and economical institutional frameworks, having witnessed some of the failures in the countries around them. With the political institutions in place, these countries with a very clear determination shaped and developed the economic institutions that will create greater inclusivity and equality in their respective societies and thereafter they ensured that there is no tampering and altering at the whims and fancies of any individual or a group.
These counties were also very sensitive to emerging changes and technological advances and accordingly amended the economic institutional framework that would facilitate greater transparency, equality and inclusivity.
From weak political and public institutions to strong economic institutions
Sri Lanka is one the few countries in Asia that had the privilege of having a very robust political and public institutional frame work in great shape until 1977. An overwhelming Parliamentary majority at the 1977 election led the then Government elected to power to tamper and amend and the strong political and public institutional framework, highly diluting the strength of these institutions. Today Sri Lankan society is at the receiving end as a result of the tampering, amending and dilution that took place after the 1977 election.
One of the positive factors of change in 1977 is the then regime embarked on creating much more proactive and market friendly economic institutions to trigger significant economic development. The country also saw unprecedented and rapid economic growth and development taking place; however with weak and diluted political and public institutions, the benefits of economic development did not trickle down to the majority of the people across the country and resulted in the gap between rich, middle and poor classes widening after 1977.
The country, despite many developments and progress made on many frontiers, witnessed the erosion of public confidence in political and economical institutions, significantly hampering the creation of a greatly economically inclusive society.
With President Mahinda Rajapaksa coming to power, we have witnessed his great desire to create and restore the lost status of a once-admired political system aa nd desired economic system but he inherited a legacy system that needs significant overhauling .
With the 30-year war that he overcame, creating political stability and improving business confidence were major challenges he faced, which shows the characteristic of a visionary leader. Despite many criticisms, one has to take note of the determined effort to end the war and ending it, creating the political stability with a questionable political structure, and restoring business confidence in the last five years.
But from this point , if the country desires to become a more economically inclusive society, where the benefits of economic growth and development inclusively and equally trickle across all segments of the society covering the length and the breadth of the country, the leadership and the Government have to first recognise the diluted state of the current political and economical institutional framework and take more meaningful steps to firmly restore and put in place a robust political public and economical institutional framework that matches countries like Japan and Singapore, instead of further tampering, amending and diluting it. We have seen the tremors of public unrest in bits and pieces, here and there, as the public begins to lose confidence in the institutions that are there to protect and prosper them.
Joining the exclusivity economic clubs and hubs of Asia
Countries like Japan, South Korea, Singapore and Taiwan have gone through becoming the wonder of Asia decades ago; now these nations have become the bedrock of Asian economic development. What they did right from the beginning was setting up the strong foundations of political, public and economical institutions and not permitting any tampering, amending or dilution of these institutional frameworks. As a result of this there is great internal and external stake holder confidence not only to live in these countries without fear or favour but also believing their rights and aspirations are fully enshrined in the institutional framework.
Sri Lanka as one of the countries in Asia that has faced a bloody youth uprising thrice since 1971 should avoid the recurrence of a fourth youth uprising and it is only possible through the strengthening of the foundations of political, public and economical institutions, which can bring social and economic inclusivity and equality to Sri Lanka and enable it to become the wonder of Asia.
[The writer is the Chairman of Asia’s largest micro finance network BWTP. He is also the Chairman of Lanka Financial Services for Underserved Settlements (LFSUS) and recently incorporated CSR Sri Lanka the national network for corporate social responsibility, serves on the boards of number of national and international financial institutions that advocate and practice financial inclusion. The thoughts and comments expressed here are his own and are in no way connected to the organisations he represents. He can be contacted at [email protected].]
