In this interview with the Sunday Observer, former banker, Member of Parliament and Deputy Minister of State Enterprise Development, Eran Wickramaratne outlines his government’s strategy for fostering economic growth by encouraging investments, skills development and industry automation with a key focus on tourism, education and housing. In this context the government has announced a series of targets and ambitious economic development plans. However, dealing with corruption cases and transforming ‘white elephants’ into viable ventures still remain a huge task, he says.
Excerpts of the interview:
Q: The coalition government was formed after January 8, 2015. What has changed between then and the scenario today?
A: The government has stabilized the economy and maintained a reasonable economic growth over the past two years despite the fact that it inherited an economy with huge budget deficits and a negative global image.
Following the establishment of ‘good governance’ under the aegis of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, together with the coalition government later, the international community began to look at Sri Lanka once again from a positive angle; international support was abundantly extended. This helped increase tourist and investor confidence, making the island a major tourism destination in Asia. International funding agencies also supported the government’s new development programs and the economy is being strengthened through a financial support package provided by the International Monetary Fund.
Over the past two years, the government was able to bring down the cost of living, with the price reduction of many essential items, although the prices kept fluctuating during festive seasons. Prices of food naturally fluctuate and settle down, depending on the seasons and the availability of goods.
The government has seriously looked at some of the social issues, such as, the distribution of school uniform materials and fertilizer subsidy and introduced effective measures that help empower the common people.
Q: Can you elaborate on the empowerment measures the government has introduced? How do common people benefit from them?
A: If you take the fertilizer subsidy and school uniforms issues, we have set apart allocations larger than what the previous government had allocated. We have turned these into a monetary allocation. The thinking behind this strategy is two-fold; one is, to empower the recipient, so that the recipient is the decision maker, rather than the government deciding on their needs. The second is, to eliminate leakages within the process.
For example, in physical goods moving down the line, for instance, fertilizer containing 100 units, the final person doesn’t get the 100 units intact. But, when cash transfers take place directly to the account of the beneficiary, the entire allocation would go through the process.
Those who criticize the new system are not the actual beneficiaries. They are the ‘middle men’ in the former system, who benefited immensely at someone else’s expense.
The new system also allows beneficiaries to decide how they could use their money- what kind of fertilizer to buy – how much –and whether they want to use chemical fertilizer or otherwise. This is decentralization.
If you look at the allocations for school uniforms, the mother of the child can decide whether she wants to use the money to buy school uniforms plus other needs of the child, such as shoes, bags or underwear. This is empowerment.
Like in every change there are problems, with these changes too criticism comes from parties who stand to lose. But, we consider these measures as progressive steps. Apart from these, we have moved from hard infrastructure to soft infrastructure. We are looking at people more than at the roads or buildings. One of the key areas under this is education.
As envisaged in Budget – 2017, over 4.5 million school going children in the country from ages 5 – 19 will be provided with a free health insurance policy certificate worth Rs 200,000, per annum. Every schoolchild in a family irrespective of the number of children, will receive this facility.
It covers all students, whether in government or private schools. It is a big relief to parents of the entire student population as they need not worry about the education of their children in the future.
With the introduction of the free medical insurance, the government has given a new impetus to free education. Among the other major facilities for schoolchildren and school teachers, would be the supply of tablet computers; 125,000 tabs will be given to A/L students; 28,000 to teachers and 3,500 to schools.
Q: The government has committed to create a large number of employment opportunities around the country through its many development projects. How do you fill these vacancies? Already, industrialists are finding it difficult to recruit people.
A: The government will focus more on developing human resources to meet future challenges. Sri Lanka is a small country in the Asian context. We do not have abundant human resources. Our industrialists are complaining about lack of people for jobs.
The government’s education policy is focused on developing the future workforce needed by the country as it develops into a middle income country which even now is facing labour shortages and critical skills gaps that hinder economic growth. Sri Lanka can no longer afford to have school dropouts and allow young people to end up as three wheeler drivers, but needs to provide youth ways to improve skills. One such initiative is a law to make 13 years of education compulsory for every child. So the government now plans to bring in a law that makes 13 years of education compulsory for every child in the country. The system will automatically show the path to students - those who do not excel in their studies, would be transferred to technical, vocational, mechanical schools and technical colleges. Prime Minister Ranil Wickremesinghe himself is driving this concept and we plan to bring in the law this year.
Q: The government has started many initiatives to improve the investment environment of the country. But some proposed investments, for example, the one by China in Hambantota, have been heavily criticized by certain sections of society. Your comments?
A: I believe, Hambantota port is a ‘white elephant’ – I say that because it is an investment that can’t be paid back in a reasonable period of time. Generally, in business investment you pay back in, may be 25- 30 years, if it is an infrastructure investment. A non-infrastructure investment would be paid back in 5 to 10 years. With the current rates of return, even in 200 years we cannot pay back the loans of the Hambantota port. So it is a white elephant.
When you have a ‘white elephant’ you have two choices. The first is to bury it and forget about it. The second is to write off the investment and see if it can be used to generate a marginal income – so our choice is the second. We want to see if we could generate a marginal income from Hambantota through a new venture, even though it is a ‘white elephant’. We say, a ‘wrong investment decision’ is a wrong investment decision.
When the government plans to set up a viable commercial venture and make a marginal income through Hambantota, and you find workers taking two ships into custody, it is totally unacceptable. The loans obtained to build the port and the airport are not being paid by the people in Hambantota, but by the tax payers around the country.
These people have been paid salaries for two years by our government through the tax payers’ money. The damage they are doing is, sending a message to the world saying foreign investments are not necessary. Their action is most detrimental to the entire country.
Hambantota port can easily be closed down but its impact will affect business in the Colombo port, one of the strategic ports in the world. Hambantota port does not belong to the people in Hambantota, just as Colombo port does not belong to the people of Colombo, and Kankesanturai port does not belong to the people in KKS. They are national assets. They belong to all the people of this country and when we take a decision we have to take decisions based on returns to the whole population.
That’s why we have tried to attract investments. But then, for the port business to take off ,you need more businesses around it – to create imports and exports you need factories around it, a container terminal, and to invest in the container terminal – you need another 500-600 mn dollars while we are already steeped in a debt of about USD 1.2 bn.
We can’t take anymore debt. We need equity. That’s why we are going for this structure like SAGT (South Asia Gateway Terminals) or CICT (Colombo International Container Terminal) in Colombo. We are going for a similar operational structure – the government takes a share, investors put the money.
Therefore, we have equity in the project. Then the company will continue to invest on an ongoing basis. There is a framework agreement at present.
The factories have to come in, and we need to create trading and manufacturing zones. For manufacturing plants to come up we need land.
When these factories open where is the labour? Labour has to come from there - if there’s no labour investors won’t come or they’ll bring their labour - there’s nothing to hide.
These are realities we have to discuss and we can make whatever choice we want.
China can bring investments – their economy is large - and if the lands are available, they can shift their factories here and export from Hambantota.
Q: Your government promised to tackle corruption and bring to book the corrupt people of the former regime. But no firm action has yet been taken. What is the reason for the delay?
A: Corruption is corruption whoever does it. We need to build better systems. In the present scenario, proving corruption is a difficult task, particularly, since big scale corruption is international.
In SriLankan Airlines, for an example, I know the airline is massively corrupt. I know that, being a banker, I’ve seen the transactions, I know the prices.
For example, eight aircraft which are contracted at USD 1.4 mn each, per month – the current market price being 9 lakhs to a million dollars. So each contract is overvalued by nearly 500,000 dollars. I know it is corruption but how do we prove it? Who took the money? Where did it go? This money is international - it makes things more complicated because it is outside the boundaries of the country, in other jurisdictions where we don’t have capability to act.
We should go behind it but it will take a long time. We might eventually get at it. Judging by how other countries tackled such corruption, it may take 10-15 years.
There is also small scale corruption which we call ‘in country’ – they should be brought to book. It is disappointing that investigation and judicial process takes a lot of time.
The judiciary is slow in any case. The judiciary also should take some responsibility – you can’t blame the government alone.
The professionals also should take responsibility. Justice delayed is justice denied. People feel strongly that for a long period of time the system was dominated by corruption.
My call is to set up a separate court to try people against whom there are allegations of corruption.