Thursday Nov 21, 2024
Thursday Nov 21, 2024
Tuesday, 6 January 2015 00:41 - - {{hitsCtrl.values.hits}}
Prosperity for All’. It focuses on the contents of the manifestos and not on various public statements made by the two candidates and their supporters.
Overall both manifestos (though the ‘Mahinda Chinthana Path to Success’ is much better formulated and presented as well as being more substantive than ‘A Compassionate Maithri Governance a Stable Country’) tend to give credence to Lee Kuan Yew’s perceptive observation that Sri Lankan elections were ‘auctions of non-existent resources’.
As has been customary, the manifestos are essentially populist and do not attach priority to a commitment to macroeconomic stability or some of the key strategic issues which need to be addressed if the economy is to be placed on a path of accelerated growth and development.
"As a lower-middle-income country, Sri Lanka has now entered a new paradigm. It can no longer live beyond its means on the back of very concessional foreign financing, as has happened in the past. The country is no longer eligible for foreign aid. It is important, therefore, that the electoral auction of non-existent resources, which is currently underway, is no more than the usual attempt to delude the electorate. It is unlikely that the electorate does not see through this charade. There would be merit in knowing how many voters are actually influenced by unrealistic manifestos"
The PF hopes that both candidates understand that without addressing these twin challenges, it will not be possible to meet the expectations of an increasingly aspirational society on a sustained basis.
The key to macroeconomic stability and a move away from repeating cycles of high inflation and balance of payments pressure, with their associated stop-go policies, is fiscal consolidation. Both documents contain a series of populist measures which are not costed; and there is very little discussion of how they will be financed.
It is surprising and regrettable that the documents contained some outdated import substitution ideas and institutional arrangements, such as a National Planning Council. Of course the PF wishes to remind the political leaders and policy-makers 
of leading political parties that the National Planning Commission of India, which was a remnant of a by-gone era, has been scrapped by PM Modi. The Government of India was more or less the last bastion of ‘Planning Economies’. The PF hopes that both candidates understand that without addressing the macro-economic stability and fiscal consolidation, it is impossible to meet the expectations of an increasingly aspirational society.
In addition, while there have been a number of proposals for structural and institutional change, there is no coherent and joined-up approach addressing some of the key issues raised in the PF blueprint. These include:
Shifting from a growth model based on debt-led infrastructure development to one which is driven by FDI-led export expansion.
One hopes that both sides recognise that full implementation of their manifestos is likely to fuel inflation, generate balance of payment pressure and constrain growth by undermining fiscal discipline. The PF has consistently argued that Sri Lanka currently enjoys the most propitious set of circumstances in 50 years to achieve an accelerated development path. It is difficult to be optimistic that these manifestos will serve to fully realise this potential, if all the promised give-aways are implemented (in the case of the Government one would also need to take into account the measures introduced in the Budget Speech 2015). One could argue that the opportunity to engage the electorate and explain the choices and trade-offs which need to be made to realise the country’s potential has been foregone. At the same time, one needs to recognise that this would involve a significant deviation from the populist political culture of the post-independence era.
However, it is important to recognise that a change in the political mind-set is necessary to turnaround the mediocre post-independence economic performance which has seen Sri Lanka decline from being second in Asia to Japan on many socio-
economic indicators in 1948, and ahead of South Korea and Singapore in the 1960s, to lagging behind several East and Southeast Asian countries today.
At some point the country needs to move from an ‘entitlement’ culture to a more productivity/competitiveness oriented mind-set and ‘entrepreneurial’ culture. It is to be hoped that whoever wins the election embarks upon such a journey.
As a lower-middle-income country, Sri Lanka has now entered a new paradigm. It can no longer live beyond its means on the back of very concessional foreign financing, as has happened in the past. The country is no longer eligible for foreign aid. It is important, therefore, that the electoral auction of non-existent resources, which is currently underway, is no more than the usual attempt to delude the electorate. It is unlikely that the electorate does not see through this charade. There would be merit in knowing how many voters are actually influenced by unrealistic manifestos.
The tabulation seeks to set out the actions recommended in the PF’s blueprint as well as those contained in the two manifestos in relation to the areas covered by the former.
Conclusion
The time is now ripe to unleash the considerable potential of the Sri Lankan economy. The PF has written extensively on this subject (see www.pathfinderfoundation.org). The advantages include the restoration of peace, the strategic location, the literate and trainable work force, improved infrastructure and the beginning of a new political cycle after the election.
Both manifestos contain a number of proposals which would serve to increase the productive capacity of the economy. However, the overall approach is influenced to a significant degree by the populist politics which has held Sri Lanka back for too long. The country needs to move beyond these elections and focus upon macroeconomic stability and the structural reforms which are necessary to create a stable growth framework that is essential to meet the needs of a society which is increasingly aspirational.
(This is the 67th Economic Alert of Pathfinder Foundation. Readers’
comments are welcome at
www.pathfinderfoundation.org.)
