Guest of Honour at the Business Today TOP TWENTY FIVE 2012–2013
On 5 November 2013 at the Colombo Hilton.
Mathi and Glenda as usual have to be congratulated for putting on a good show. If politics consists of bread and circuses, then you would do jolly well providing the circus.
Now what puzzles me is why I am a regular fixture here. I am not one of the TOP TWENTY FIVE and I have no stake in them. Some how or the other Podi Hamuduruwo and I are both here regularly. Both from the Gangaramaya, one representing the Sangha and the other, the laity.
I thought I am invited here as the only discordant voice. But I must say the Leader of the House also joined me but I don’t think he went as far as I am planning to go. But, then we are politicians. All of you the twenty five are fighting for different market shares, but both of us are fighting for the same market share and we are getting ready for the next round. So I look at it in the way a politician does, and very much as he does and being two members in Parliament. From morning to evening, day in and day out, maybe the training we got when we were in politics long ago. But I thought of raising here some of the questions that I hear on the economy, from the people. I thought I should share it with you.
Those who are in the twenties, who come into the job market ask, what are the jobs for us? They want a good future, they want to know their job security. Those in their 30s and 40s who are married, trying to build a house, educate their children and to send them abroad, ask where are the jobs with good pay? When I ask this from you, the third group, the private sector, they ask where is the work force? And then the last lot, many others want to know, where are we going?
There are different views on this, but what I will say is quite different from what the Governor of the Central Bank has to say. But to talk of it I will have to partly rely on the Central Bank statistics though I must concede that I share many of the opinions that have been said by my colleague Dr. Harsha De Silva. When you look at it, these questions, one dominant factor is the increasing reliance we are having on foreign remittances from migrant workers. In 2000 it was about 1.2 billion dollars and 2012 it was over six billion dollars. It is a five fold increase in a little less than one and half decades. That’s a big growth. In 2000 the largest foreign exchange earner was textiles and garments, which was about three billion and now its about four billion – a little bit more than that. That’s the increase, one on 25 percent other – five fold. I would say a little bit more for the apparel garments, they have been affected by the financial crisis and the loss of the GSP. Then we have of course tea the perennial earner, which dug in about 1.4 billion dollars last year. Something that I have always advocated and something to play in, rubber primary and value added, which is now about one billion dollars. It is about four fold from what it was in 2000.
So these are the main foreign exchange earners. For thousand of years we like many other countries exported agricultural products, grains, rice, spices, tea, rubber and coconut. In the 70s we decided that we should go for manufacturing goods and we started at the bottom of the ladder, which is the apparel. And, then we were earning more and more from it. At that time foreign remittences was just an add on and we thought something welcome after the conflict started in 1983. Its first impact that I realised in 1990 during the first Gulf War as Kuwait was invaded and hundreds and thousands of our workers came back, we found it difficult to replace the foreign remittances and President Premadasa sent me with Dr. A. S. Jayawardena to Japan to speak to the Japanese Government on getting additional aid to bridge over the difficult times and we thank the Government of Japan for the assistance they gave.
Today foreign remittances is a global phenomenon. Not only in Sri Lanka, many other countries rely on the foreign remittances. China, India, Mexico, and the Phillipines are some of the main countries, which rely on foreign remittances. In India, China and Mexico, it is not the main source but one of the major sources. What have they done? They have used the foreign remittances to cushion the restructuring of the economy and provided savings, mobilising it to the next level of economic development.
At the time they benefitted from it, they were labour intensive, low wage enterprises as well as capital intensive semi-skilled wages. But this helped them go to the next stage of a skilled work force and higher wages and certainly having stabilised that many of them are moving into new technologies. China in the next decade or more, is aiming at getting a million robos. Now where are we going to be? India has both the low wage labour intensive as well as the new technology. Mexico has become the workshop for the United States and NAFTA. This is one example. The other of course is Philippines which focuses mainly on foreign remittances and they were successful in making their primary foreign exchange earner. But, there were pitfalls. The world bank warned somewhere about 2005 I remember that excellent performances of remittances contributed to the complacency in addressing low productive growth. Remittences should not distract the country from its huge potential of domestic investment and growth. At that time the Mexican administration said echoing this “the Government will continue to look for ways to keep them home by aiming at a strong economy generating well paying jobs. 5 6 7 years down the road nothing happened and you find the present administration saying that they are different. From a government that treats their people as export commodity and a means of foreign exchange to a government that creates jobs at home. This is a country that focused mainly on foreign remittances now say they must no longer treat its people as an export commodity and means of foreign exchange and they have to create jobs at home. But many think they have gone too far down the road and will not be able to create those jobs and the economy may not be able to go to the next stage of development.
Now where are we? Are we following the India, China, Mexico model? Or are we going down the path of Philippines or what we call the Philippines trap. When you look at the structure of Sri Lanka’s economy and look at the manufacturing, there has been no major change up till today. Now you find textiles, garments and apparels dominate the manufacturing sector. Then food and beverages and chemical that is the bulk. That is where we are. Where are the electrical appliances? Where are the manufacturing automotive components? Where are the other goods that you are manufacturing? Where are they? That’s not here. We are still in the same place.
There are many reasons given. But the fact is that we are still in the same place. The Indian economy is not so, the Chinese economy is not so. Singapore is changing. Then we have the service sector expanding naturally, that’s why there are so many financial institutes in the TOP TWENTY FIVE. Most of them cater to the domestic market. So what we focus is mainly on the service sector in the domestic economy. You get the government focusing on the stock exchange. In my view, and many others hot money does not serve us in the long run and you get Information Technology, which has added about 400 million US dollars, which is good. But what have we got? We have an economy fueled by Government spending. Till 2009, it was defence spending and for about two decades, whichever Government was there defence took up lot of the resources except for about two to three years that is 2003, 2004 and 2005. And, now it is fuelled by construction so what is the end result? Financial resources that are required by the private sector both big and small, which are no longer available and are being mobilised to meet the Government needs. This is one of the complaints.
Then if you go the financial institutions as the Minister said, all that are in the TOP TWENTY FIVE and many of the bigger people are better served than those who are in the medium and small sector. So this is one of the reasons. You will have others you will say, electricity prices, loss of competitiveness but we still have not got into the Philippines trap. We may be going on that road and still going down that road but we can still prevent it. But we in my view are stagnating in economic development and we have not moved to the next level. High technology. With the workforce that we have, we have not moved in there. We will not be able to go into the capital intensive industries, but there are new areas, both in the manufacturing and the service sector that we can. For instance in my view, IT and the knowledge industry should by now be earning about 2 billion dollars, not 400 million. So if you look at what our economy is, I am happy that we are getting six billion from foreign remittances. Apparel should have been at least six billion or more. We shuold have logged in at least 20 billion last year. We should have at least got over our balance of payment difficulties. We didn’t get there. And what is more alarming is if this trend continues, the corporates will cease to be the engines of growth. And your jobs will come from foreign employment, and the small and medium sector but if they are getting squeezed out, you will have to look more and more at foreign employment.
Another thing is, if you look at some years, the annual foreign employment is equivalent to the age cohort that is looking for employment. That’s about 275,000. Some say its very good. Even the Sri Lankan job market. But that is not what is happening actually. It is having a – like in Phillipines – an adverse impact. FIrstly as you get some skill, you move out. Beause there isn’t enough. Your income is not big enough. If you take this hotel, you can’t blame any of them. Any of the hotel sector. You work here you get employment you get a certificate and you can’t blame anyone going to Dubai or Maldives or anywhere else to earn some more. Then you are getting people who are skilled who are willing to go for semi skilled jobs. As people who are at engineering capacity who will do something else. You are getting this large brain drain, and when you are looking at those who are going in then you come to this big question. The young people who are going and getting themselves educated abroad or getting themselves educated here are gong out in search of employment. They want to look for greener pastures. Those who haven’t gone there are looking at how can I go to the Middle East or Italy or anywhere else to get employment. So all the young people are leaving this country. So this is going to be a country for old men like all some of us seated here. Do you want that to happen?
In our country like Singapore, Korea or maybe Denmark, Mr Harry Jayawardena knows this well, there is one resource and that’s our human resource. But we are luckier than Denmark and Korea. We are in the middle of the Indian Ocean. We have our location and our human resources and a very resilient nation. I don’t think any other nation would have gone through nearly three decades of war and two decades of breaking up capital, and still have a smile on our face, and still think we can pull through and be big players in the world.
So what are we going to do? How do we stop that? There are different ways. Because you have to remember one thing there is a social cost in foreign employment. We see that here not only in Sri Lanka, in many other countries as well, like in the Philippines, there is a social cost. Remember for those who go for a foreign employment, it’s a sacrifice made by them, for a better future for themselves and the country. Are we giving it to them? I dont think so. If you are a corporate entity, we are like an investment company where a lot of people are putting money away for the future, thinking that they can get it back with a good return. If you go down the Philippines road we are not going to do that. That is the question that I have to ask. I would differ from the Minister, I don’t expect all of you to be like Buddhas, as Ven Assaji was saying the other day, if you can be like Anatha Pindika, its good enough, he lined the whole of Jethavanaramaya ground with gold coins for Lord Buddha, but I don’t think you are going to do that either. So we’ve got to realise that there is a certain direction that the political process has to be. This is where I think the Minister and I both agree that the primacy of politics takes over from the primacy of the markets. I think that is one thing that we have. We don’t subscribe to the view of primacy of markets. I think we have to think anew as to how we are going, where we are going, if you are to prevent falling into the Philippines trap.
We need a ten year programme, a road map, to leap frog to the appropriate stage. Look at the markets. The markets of the world are changing. But you have to make the world a market. And you can do that in many ways. You may go for products like apparels where we are big players or you can go for niche markets, like some of you are doing. Whether you are sending out Dilmah tea, or running hotels in different parts of the world, running business, many of you are doing some small niche market venture, but look at it and today with all the new technology available, nanotechnology, biotechnology you name it, we can get there. So let us take a look at what is needed in the next twenty years. Where do you want to go 20 years since? Look at their technology and how we go. And plan for the first ten years. If you make the first ten years, your next ten years and above will be no problem at all. Look at a higher investment in education and health. Investment by the government, we believe in the 6 percent, but investment by the private sector in different ways.
How can you do it? Both have to do it. Education and training system and investment by the private sector is also essential, because education and training is life long. What we learn as we go in is not what we will know at the end of it. Then the job creation. We have to create enough jobs and at a level that will keep people back or those who have gone out will come and stay here at the next round. We have to do that. And there has to be a good renumeration. They are also stakeholders, they also want a return, they must all share in the wealth. To talk of the 20 percent the Minister was referring to, I should ask the question, the first top percent. The one percent. Anyway they all want a share in the country’s wealth.
A social safety net which is viable both in terms of the economy, we shouldnt give what is more than what is required and in terms of the beneficiary, who we select them to be and good governance. All that is necessary, to get the investments in. What we have here won’t do. We have to get foreign investments in. We have to get the technology and take that leap forward. So this is what we are looking at. That’s why we call it social market economy. And in different names, different ways. But it means everyone must be a stakeholder. All of them here. Everyone here must be a stakeholder. It is not only the TOP TWENTY FIVE or the few of us politicians, ministers and the oppositions. All of us have to be stakeholders. It also requires a change. It requires a consensus in the political players as to the economic policies, basic principles, for a decade or more. And the principles of good governance. But there has to be enough room for us, the main political parties to compete with each other, on the margins, so that we can still compete for power.
But this is necessary, that is why we called for a social market on an EU model and next we looked at some constitutional changes. Now as one of those who introduced the 78 percent, it was necessary at that time. The thinking was very polarized. As the Minister said, Danapathiya Banga Wewa. As President Jayawardena said, ‘ We won the robber ballots we will look at the social equity’. You need a system that could make the changes. We have to make the changes. Now in your system, where can you build a consensus, in politics but at the same time compete at the election to increase our market shares. That’s what we have looked at. I am not saying that you have to go back to what was there earlier. I don’t say so. But as times change, the systems of government must change.
So are we looking at politics first and then trying to fit the socio economic needs, or are we looking at a political framework taking into account the socio economic needs . So I am looking at the problem from a different aspect, the Minister looked at it from another aspect, but this is what we have preached and I thought as the discordant voice here I should say these few words and thank all of you for having listened to me.