Amana Global, a fully owned subsidiary of Amana Takaful PLC last week organised their first ‘Leadership Series’ evening meeting at the Hilton Colombo Residences in Colombo. At the event, Deputy Minister Eran Wickramaratne made the keynote address on the topic of ‘Sri Lanka towards 2020’ – outlining Sri Lanka’s investment strategy and policies needed to support it. His address was followed by a panel discussion participated by Tax Accountant Ranel Wijesinghe who was a former President at the Institute of Chartered Accountants and CA Sri Lanka President Arjuna Herath. The discussion was moderated by Economist Anushka Wijesinghe. Here are some of the comments made by participants at the event.
We know that even in the first 110 odd days, the Government has been able to embark on a journey to establish a certain framework. The first thing we attempted to accomplish was to establish the rule of law. Despite all the bounce on the road, it is a change for the better. It is a change in which the democracy of this country has opened up and widened.
As our government came in, there were very high expectations. One of the important things that we wanted to set right, for the climate of good governance to have an Executive, Legislature and Judiciary that were independent to each other.
The country’s debt repayment had reached ‘gigantic’ proportions. We are virtually using all our revenue in government to repay debt, which as most of you would recognize, is an unhealthy situation to be in.
The future economic model we need is an investment and exports led model. We need to attract local and Foreign Direct Investments (FDI).
We also have a huge investment gap. As you know, the savings rate in Sri Lanka is very low, only about 15 percent of GDP, whereas India and China have 30 to 35 and 50 percent of GDP.
They have internally generated funds for their investment.
We need to take vast strides in the public service and radically re look at recruitments in the public service. While they are poorly paid, we have also not attracted the best people into the public service. The social contract between citizens and public servants need to be re-looked at and we may need to have a sea change in the way we look at public service. These are challenges for a new government but they are important ones. We could take Singapore as an example and look at their investment strategy. We can reap advantages from the geographical location and the sea route. The previous government had a 5 hubs strategy and where the logistic hubs is concerned, we have clear commercial advantages for entrepot trading, Freeport and bonded areas. But we need to have an efficient port.
As far as labor is concerned, I am told that we would run into labor shortage for low-skilled jobs. So do we open our doors to foreign labor? These are issues to debate.
More than five years after the war, as of December 2014, Sri Lanka had only managed to attract USD 1 billion as investment. In addition, Sri Lanka’s investment on per capita basis is two to three times lower than countries such as Malaysia, Thailand, and Vietnam.
The reason for such a low investment is due to the fact that even though investors worldwide had opportunities and diversity, Sri Lanka had failed to meet their requirements. “The rule of law becomes one important aspect in that. The other sector that we need to make vast strides is the public service of this country.
He stated that the best brains were not attracted into the public service in the recent times as they were not paid well, and due to the inability to act independently due to political pressures. “We need to radically relook the public service. The social contract between the citizen and the public servant needs to be redrafted and we need to look at investing in the public sector,” he added.
“A private sector cannot grow without a public service which is modernized and public servants who sit across you and speak the same language,” he said
The deputy Minister pointed out that Sri Lanka had quite a few advantages when it came to attracting foreign investments, mainly due to its geographical location. He stated that Sri Lanka had the potential to be the most efficient port to ship out goods sourced from the South Asian countries to Europe five days earlier.
On the role of government in development and privatization, we have to understand that we operate in a political economy and there are limitations what you can and what you cant do. We have government institutions that have fallen apart. The politicians have become king in this process. We need a robust private sector. Question is how much and how quickly can they be done.
On the question of unsolicited proposals, the reality is there will be unsolicited proposals but what we need to do is this. We need to take in the unsolicited proposal idea and turn them into competitive bids. There are many systems how we can do it. The World Bank has one; there are Swiss Challenge system and many others in which you could turn unsolicited proposals into a competitive bid while giving some advantages to the originator of the bid.
As far as investments are concerned, given the risk that is perceived at the moment, the government needs to play a role in managing the risks in large scale investments. In the past, it was a case of structuring projects to suit individual requirements but that didn’t happen as a framework and policy.
So we clearly need a requirement where governments get involved, structure projects that will reduce the risks and give the required returns. I clearly see a scenario where Public-Private Partnership could play a major role in that. As lot of the time, given the market size and the risks involved perceived at the moment, there is need for government involvement in projects.
If you take a classic example of road development, we had a scenario where we borrowed and built them, but do we have a scenario where road development is structured in a way that revenue is yielded through a scenario where advertising rights particularly highway merged with the development and reduce the investment and risks that is required bringing about the required returns.
You need to package it and put it out for bidding. Investors have a herd mentality and hence when you have particular investor coming in, you have a second investor who will follow.
Meanwhile, we should diligently look into the services sector. One of the reasons Japan looked at Singapore and moved into the country was the country’s balance of payment was so bad, lopsided towards inflows. Their currency was becoming uncompetitive. They decided they need to set up shop outside the country.
They wanted to do exports from outside destinations so that their currency would be strengthened. China also has a surplus on inflows and their currency becoming uncompetitive. Now we have opportunities with countries like that who look for outsourced destinations instead of their manufacturing hubs. And FTA’s and agreements in relation to fulfilling that requirement may add lot of strength.
In terms of the country producing the talent, we wanted to be a knowledge hub and I think there is possible scope for that, to attract students from across the region and if so striking public-private partnership with top class universities across the globe. Do we have the size here? Is it economical? Is it viable? But if you take Qatar, it struck a big relationship with MIT. Today Qatar has become a hub for MIT. If we can attract an institution of that nature, can we not be a hub as well?
In a broader sense, we must know the root of liberalization.
We have been for far too long been intimidated and mesmerized with the growth statistics by having a huge public investment exposing the country to debt servicing. We have grown with debt money and whether it is right or wrong we have to debate that growth strategy.
The earlier Chairman of SLPA said there were humongous opportunities in Hambantota but I asked him the question have these opportunities been profiled on a website open and frank and in a transparent manner. And I didn’t find an answer.
We must do the maximum we can to re-attract the experts of Sri Lankan origin. I feel that we have not done that adequately.
Somewhere in 2000, Malaysia had one of the best proposals to re-attract Malaysian experts back to their country. They looked at the economy, identified scape which was preceded by looking at an economic strategy. We should look at the technology, and we should know what are the resources you need and if you don’t have them, the next thing I feel is to re-attract those living overseas.
They did not bring down anyone and everyone. They brought all those who liked to come back. Malaysia did not have a war. We had a war. I know there are large number of people who now think that the country is better to come back. More so because they look at this country as a country where there is freedom of expression, a country that is amending its constitution, and a country which is going to be a reconciled country where there is harmony. That is the soft infrastructure that is fundamentally important.
Secondly, we have to be conscious, on the one hand, of the WTO type agenda driving liberalization and not professional services in this country. On the other hand we have to be careful of certain elements in this country who had the voice and the ear of the previous government and the president in particular and lobbying against anything and everything, such as CEPA.
We should look at the economy like what Thailand did a few years ago. Thailand in the late seventies and the early eighties looked at the economy like Malaysia did and they found that certain sectors of the economy do not need huge foreign direct investment. They took poultry, as the per capita consumption was very high, tremendous opportunity was there. They said, for poultry production, 60 percent shall be MTS (Minimum Thai Shareholders).
This is a combination of liberalization of professional services and also limiting the FDI.