Ranil outlines way foward for country, biz

Wednesday, 24 December 2014 00:00 -     - {{hitsCtrl.values.hits}}

Leader of the Opposition, Ranil Wickramasinghe yesterday addressed members of the business community at the Cinnamon Lakeside along with Opposition’s common presidential candidate Maithripala Sirisena. During his speech he addressed the concerns and issues the business community will face in the future in growing Sri Lanka’s economy. Following is the full speech:   By Marisa Wikramanayake Honourable Maithripala Sirisena, the common candidate, members of parliament, members of the business community – I wasn’t sure if you wanted to be called captains of industry but I thought members of the business community would be better – friends, invitees. Last week you listened to Moses, who didn’t come down from the mountain but he came over the satellite. And he told you that money is the god of our times and that Rajapaksa is its prophet. I am sorry but we are not in any position to match that level of hospitality. I hope you enjoyed yourselves because that (hospitality at Momentum Forum) was all from the money you had to pay upfront just to get your jobs done. I am sorry that we can only give you a cup of tea or coffee and some sandwiches and I hope that that will suffice for another hour or so. Anyway let me start now. I won’t start about the Momentum but there is no momentum. But let me give you my impression of the economy. Not exactly mine but what was said by Razeen Sally – may the BBS bless him. To be sure, the Government’s headline economic numbers are exaggerated, as many serious observers have pointed out. But this masks something more alarming. Post-war growth is debt-fuelled and driven by an expanding, inefficient public sector, not by productivity gains. A borrowing spree finances fiscal largesse, and it increases reliance on volatile international capital markets for debt financing. This is not Ranil Wickremasinghe speaking. Highly interventionist microeconomic policies favour subsidised and loss-making domestic industries. Trade protectionism has increased, competitiveness has declined and foreign investment is stagnant. Infrastructure projects have had massive cost overruns. Meanwhile the defence budget has increased and the military has diversified into business activities. There is widespread perception that the benefits of growth have accrued disproportionately to those with privileged political access. The Rajapaksa slant on foreign policy runs directly counter to Sri Lanka’s global economic interests. The US and European Union account for two-thirds of Sri Lankan exports. Sri Lanka has everything to gain from closer economic relations with India, particularly with the four states of neighbouring South India that constitute a market of 300 million people. Now this is what Razeen Sally says and what many of us agree with. It is shown by the fact that today in the Global Competitive Index 2013–2014, Sri Lanka is number 65. The good news is that we have overtaken Rwanda which is number 66. We are, generally, better than India but India is number 60. And China, 29. In the World Bank Group Doing Business Index 2014, we are 99 – a number you can’t forget. This is what we are. It’s with that background that a new government under President Maithripala Sirisena will form the 100-day government and a new government that will be elected after Parliament gets to look at the strategy. And once we do this – there is a 100-day government, a transition government where all parties will be involved and yet we are prepared to give you something that you want. After the next elections, the party with the largest majority will have the Prime Minister who will be in charge of government business. And the party that comes second will not have the post of the Leader of the Opposition. I have held that job for far too long - we will make it the Deputy Prime Minister. Any party that wants to be in the government is welcome. I think for two to three years we have to get down and put the country into order through economic policies. What are the issues we have? Immediately more than anything else we have to think of the people. The cost of living is high and incomes are low and that is one of the issues we have to tackle because we have slowed down in aggregate demand. That’s what has happened to our economy. We have high indirect taxation, high consumer debt and gold prices have come down. Personal loans which were Rs. 705 billion are now down to Rs. 630 billion. Higher purchase and pawning, which is the highest factor among them, have come down from Rs. 335 billion to Rs. 200 billion. So this is the background in which we have to operate. Some people are asking why are you giving Rs. 5000? They promised Rs. 3000 and everyone applauded it – we are just doing Rs. 2000 more to get it to 5000. But we have to boost government sector incomes as a means of combating the slowdown in aggregate demand. It’s a one-shot enterprise effort which has to be done. And secondly, we have also come out with certain proposals regarding pawning because the Central Bank will have to re-finance all those and that way there will be money in the market and the demand will go up. That way by Sinhala New Year time, the paddy prices will increase and this is a short-term strategy of kick-starting the economy which has stalled. And those of you in the retail sector know that things are not moving. So first let’s get things moving. That’s how we look at the first part of it. We are talking about all this low inflation, low income rate and did you know we have the lowest revenue growth in Asia? We have 5.3% of the GDP. We need to be between 8.5 and 12% of the GDP. Either someone is not paying taxes or not collecting taxes. Then you come back and say that you are balancing the books by reducing expenditure. So what are we left with? Today we are spending 1.6% of the GDP on education – others are spending 3.1 to 5%. It should be 6%.   Short-term debt That’s our basic investment. Our most valuable resource is our people. We are not investing in them so we are only carrying out debt servicing. When doing debt servicing, basically, in that scenario where we have a lot of short-term debt. That is the problem that we have. So let’s start tackling the revenue issue. Let’s find ways of paying off the short-term debt and getting into long-term debt so that there is less pressure on us. And then we are looking at the financial sector consolidation. The government says that they are not making enough of a return so we should consolidate everyone to get a better return. But it means less jobs because there is another part of our policy which is to make more branches and have personal accounts. If everyone has personal accounts then electronic downloads come in for the payment of your taxes, your electricity bill and so on. The other thing is I have a chart here on bank lending. The bank lending is not going to the small and medium enterprises. Last year the bulk of the bank money went to the government sector. So obviously if you are in retail and you are wondering why things are not moving, I will tell you: because there is no money in the overall economy. And you have this lopsided revenue collection where you are collecting about Rs. 250 million from VAT and excise but only about Rs. 200 million from income tax. These are fundamental issues that you have to tackle. You have to get more and more money into the small and medium banks here. So this is why we have put some short-term policies which people are now questioning us on. As Maithripala Sirisena said we have to look at the 99.9%. They are our consumer base. Without them, none of us can survive. Unless you are the Rajapaksas. What is our long-term plan? We have to have growth – we have committed ourselves to a million good paying jobs in five years’ time. We have to go for it. So for the whole country we have to get the political parties together. I am sorry but I say we are not turning our savings into productive investments. This is not only an issue within Sri Lanka – this also goes for other countries. But what we need is the next generation of economic reform which we have not been doing for the last five years. We are adding up numbers and the numbers don’t add up and the IMF says that last September or something that the exchange rate was all right. I don’t agree with them and I don’t think the majority agrees with them either. They come here and write books and go off and that’s why I said I won’t waste my time with the locals here – I will deal directly with Washington. And that you will see when the government comes in, where we will deal and who we will deal with. So we will have to go in for the second generation of structural reform which will provoke competition, innovation and productivity. Are you ready for it? And investment in infrastructure – everyone is thinking of concrete. So our first priority is investment in our soft infrastructure. We need people with technology skills. We have not got enough people to run our technology businesses, we haven’t got enough engineers, we haven’t got enough middle level managers; we haven’t got enough technicians. How can you start nanotechnology? Have you got ten people here? How can you go into pharmaceuticals? You must think of salary scales – you have to pay them. But you have to pay them because they are going to say, “Look, we also need money.”   Megacities Others are asking me, “What is this? You want to stop the port city?” Look, economic growth today is being driven by megacities and our idea in 2002, 2003 was to create a megacity in the whole of the Western Province. Chennai wouldn’t be the largest city – the Western Province was going to be the largest metropolis in the Indian Ocean. At least 30%, one-third of our population lives there, from about 8.5 million to 9 million people. So we got the Singaporeans down and the BOI at the time, we got the megapolis assessment team down and they gave us a plan. Not an infrastructure plan but an economic plan – how cities drive economic growth. How they become megapolises. If you don’t have that, you don’t have growth. Just like we aimed at the Mahaveli scheme, we wanted to do that. And it was not implemented. Things were taken in parts and done here. There was an idea that when Fort was full that we would fill part of the sea up and develop it. That was to be done at a later stage. That came earlier. But we had two criteria that were in our manifesto. You must pass the environmental impact report or assessment and a feasibility study. If your project doesn’t have that, we will stop that and we will review the whole thing and then decide what has to be done. In the case of the Port City when I asked for the environmental assessment and the feasibility study, the government has so far not given it. They promised and they said that there would be a lorry load of it and I am still waiting for the lorry to come. So they will have to be treated as we said that it would be treated but that’s just one part of it. And certainly, there was something to do with the development around Independence Square but we didn’t pay much attention to it. There was something about hopper boutiques around there but the place where we got our independence is too sacred for hopper boutiques. But we have to create this megacity and the first thing that the head of the Singapore firm said that we had to do that we haven’t done is focus on the water supply and the sewerage. We have no sewerage systems beyond McDonald’s in Pitakotte. And this was going to be done in another five to six years time and they waived that plan and said, “Do this first.” Because then the cost would be low. We have gone and given land away everywhere, we have planted and given land away for buildings and now the cost for doing that infrastructure will be virtually double. And now we have some roads and we have to raise the roads and send it into the city so we have highways which have exit points but you can’t enter them which you can see happening at Dematagoda. Now in-between the roads, you have just gone and given away arbitrarily the government lands and now there are high-rise buildings on them so how are you going to sort those issues out? So now we will get the megacity going, we will get them to devise it and we will go ahead with the megacity. It’s not two billion. At the end of it you will have to put in about over 200 to 300 billion. And we will have a separate vehicle, the Megapolis Development Corporation which will have in conjunction I think, municipal bonds with the government. It’s a 20-year program. But why not have it? By 2023, we are going to be celebrating 75 years of our independence. We should do something for our sake – show an economy that is working. We want higher incomes for our people; the development of technology has to increase and modernisation. Agriculture has to be modernised. As we bring people into the cities and create urban centres in the North and Kandy. By the way, one of the things I promised we will do– we will give a hundred factories to Hambantota which has nothing. We will fill the Hambantota Harbour with ships and the Mattala Airport with planes. I must help my friend Mahinda Rajapaksa after his retirement to fulfill his dreams.   Foreign trade relations We have to find the markets and we must get back to our markets. The Western markets which we require. We must get the GSP+ from Europe, we will negotiate that and get the ban restricted on the fisheries products but one issue that I have to talk to the private sector about is that when you renegotiate the GSP+ , are we going with the status quo mandate or are we trying to get into the Philippines model? Because there have been new developments since the last time so there are issues that have to be dealt with and with the US, it was the personal relationship with President Bush that got it. Let us see what we can do – a lot of it we will have to wait to see with the new election in 2016 with the new President of America. This [US] Congress is difficult to deal with – it’s basically stuck between the President and the Congress but we have to start working on it from now. And India itself, how do we increase our trade relations with India? There are some concerns, some technical, some not. I am concerned because of the rising Non Tariff Barriers and that has to be taken up with India. That’s also one of the issues. But we have to get into a market and to me the biggest market is going to be SAARC and the countries of the Bay of Bengal - that is India, Bangladesh, Indonesia, Myanmar and Pakistan and then the European markets. And if the port in Myanmar is built by the Chinese then we have access to the southwest part of China because it has road access. Getting into the west part of China is more difficult – the Japanese, the Americans have been trying to get established. But services will be one sector we can look at as far as China is concerned. So this is the plan. We want to go ahead. We want to make a start. We believe Sri Lanka can establish itself. We have always been the best economy in South Asia. The oldest commercial economy – the modern commercial economy in Asia – began in Sri Lanka in 1885 when the Colebrook-Cameron reformed the parts of the economy. Why are we lagging behind? I have great confidence in our people. I know that given a challenge they will do it. We established an economy in ’77 that withstood the war. Now let’s take on the world. And don’t be frightened about it. There’s a place in our plans for all of you. To do that we need a new political culture and for that we need Maithripala Sirisena as the President of the country, getting politicians to do their jobs so we can sit down and enjoy ourselves.

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