Commitment to market-oriented economic policies is necessary

One month ago, the founder of the SLPP, Basil Rajapaksa in an interview with News 1st expressed his opposition to the privatisation of SOEs despite President Ranil Wickremesinghe’s intention to go ahead with the initiative to reform loss-making State entities by transferring the ownership to the private sector. Even though almost two years have passed since Wickremesinghe assumed Presidency, not a single SOE has been privatised to the great disappointment of many who expected radical reforms with regard to SOEs. Perhaps the bottlenecks created by elements within the SLPP who do not share the pro-market views of Wickremesinghe might be impeding the reform agenda.

Rajapaksas have always been keen on having influential commercial enterprises under the ownership of the Government in order to consolidate their power and authority. During the reign of Mahinda Rajapaksa, even hitherto privatised entities like Litro Gas and SriLankan Airlines were brought back to State ownership to reward his kith and kin. If the economic reforms are to be successful, both the Executive and the majority group of the Legislature need to share the pro-market economic ideology. To create such a convergence, it would be prudent for the President and the UNP to join hands with the SJB – an offshoot of the UNP with similar views on the economic policy. 

Such an alliance would also be favourable to Wickremesinghe politically as the SLPP has virtually been decimated in terms of public opinion. Most of the SJB MPs were brought into politics by Wickremesinghe and both parties could realise synergies through an alliance between them. Similarly, the SJB too would stand to gain by converging with their former allies in contrast to getting into partnerships with individuals like Professor G.L. Peiris and Nalaka Godahewa who have no worthy vote base. 

Sri Lanka has not had an Executive and a Parliamentary majority devoted to market-oriented economic principles for more than two decades. The two-year UNF administration (2002-04) headed by Wickremesinghe saw a number of pro-market economic reforms getting off the ground as part of its policy framework – the Regaining Sri Lanka. However, when the JVP-inspired UPFA came into power in 2004, the market-oriented economic reforms were phased out. The JVP-influenced UPFA immediately halted privatisation, abandoned cost-reflective market pricing of utilities, expanded the costly fertiliser subsidy program, and enlarged the public sector by recruiting graduates who could not find employment in the private sector. 

Mahinda Rajapaksa administration continued more or less with the same set of policies for more than a decade. Sirisena-Wickremesinghe Government could not undertake any meaningful economic reforms, mainly due to the backward, old-fashioned ideas of the gentleman from Polonnaruwa, who had been an admirer of the Communist leader Fidel Castro in his youth. Moreover, the UNP did not have an outright majority in the Parliament and hence had to depend on SLFP MPs who scuttled the market-based programs intended by Wickremesinghe such as shipping liberalisation, Public-Private partnerships, and dismantling trade protectionism.

An alliance between the UNP and SJB would embolden the adherents of open market economic principles. A politically strong outfit which advocates liberal economic ideas augurs well for the successful execution of the IMF-mandated reforms while greatly supporting the efforts of economic recovery. Meanwhile, the NPP, which is cited as an alternative, has not evolved from its anti-market ideas in the past. Recently, Sunil Handunnetti, a prominent NPP politician, warned investors against purchasing Government-owned enterprises, emblematic of its legacy of opposing economic reforms.

Given the Island has been governed by political alliances opposed to market-based economic policies for almost two decades, an Executive as well as a Parliamentary majority committed towards the Centre-Right or Liberal Democratic ideals could serve the best interest of the country in terms of economic development. More than ever, Sri Lanka needs to be governed by a political outfit which possesses a clear and unambiguous economic program that is consistent with the prevailing international order.