Garvin Karunaratne Former Government Agent, Matara District

The British Parliament deciding to recommend that the EU should impose sanctions on Sri Lanka tells me  that our leaders have to be prepared. If we are to face the onslaught we have to become self sufficient as far as possible fast and get our economy on a self reliant basis.

Sri Lanka is to be punished for not allowing the UNHRC investigators to come in. We did no wrong in defeating the LTTE.

As I write these words the blacks in the USA are rioting on the streets in Ferguson, Missouri because a US policeman had shot an unarmed teenager and the Courts have decided  not to hold the policeman responsible.  I can state that in quelling  all three rebellions in Sri Lanka in 1971 in 1989 and  again in 2009, there is only one instance of an  army officer  going on the rampage. That was the shooting of the Manamperi Girl at Kataragama in 1971. Two officers Wijesuriya and Galappatti  were held responsible and incarcerated and both of them died in prison.  Thus it is time for the British Parliament to impose sanctions on the USA if they need to play a role in policing the world for human rights violations. .

The rumblings of the British Parliament against Sri Lanka is a forewarning for us to be ready.and  In nostalgia I quote a paper written by me earlier, Economics turned on its head-” which though written in 2013,  provides ideas for our leaders to consider.

In  most of my recent papers I have provided ideas as to how we can get back to self reliance and self sufficiency which alone will equip us  to withstand any attack..

Economic strategies to bring Sri Lanka out of the economic stalemate of today have come to the fore with the economic pundits of the world coming together at our Economic Summit 2013. They all talk of traditional economics and forget that in his latest book, Professor Jeffery Sachs admits that Economics as an academic discipline was turned on its head by Milton Friedman. (Price of Civilization 2011)

Many leading figures lamented on the foreign debt that is unbearable in that servicing that debt costs almost our entire revenue, making it necessary to obtain further foreign loans. This has been Sri Lanka’s predicament since the mid-eighties.
Professor Premachandra Athukorale, the economist from the Australian National University has advised the Government to get to the barracks and allow the Private Sector to take full control. He is of the opinion that the Government is in full control. He forgets the fact that the Government got to the barracks in 1977.
Former Central Banker Anila Bandaranayake has said that there is a lack of consistency in the Government’s message and the private sector gets mixed signals… The Government is very negative and defensive and the Private Sector is very silent. For example, there has to be a discussion whether the Government and Forces will do all the businesses or the Private Sector… Private Sector businesses were not working collectively towards improving the country’s business environment (The Island 19/7/13).
The strategies looked into in detail appear to be to increase exports. It was Professor Indraratna who has urged increasing imports to meet the shortfall in foreign exchange.
Once our Treasury Secretary had rightly lamented that the Private Sector has not pulled its weight despite many incentives. It is important to note that the tax rate in Sri Lanka is lower than in the USA and the UK.

Austerity measures

Everyone is aware that the Treasury Secretary is trying his best to reduce the deficit. We have many austerity measures in place. But austerity in itself does not bring about growth.
They all seem to forget the major causes that have brought the economy to its knees. Everyone seems to be finding more and more water to put into the bucket that has gaping holes. Why is no one trying to patch up the holes? I read through most of the news about the Economic Summit but failed to find anyone trying to patch up the holes.

Chandra Maliyadde, once Secretary, Ministry of Plan Implementation has stated that at the end of 1976 the total outstanding foreign debt to IMF/World Bank was only $ 75 million and he has raised the question as to how it has now increased more than 500 times in 35 years.

Sri Lanka was a country that did not have pains and aches during the time of Prime Minister Dudley Senanayake in 1965 to 1970. The bread queues and shortages during the time of Prime Minister Sirimavo were due to sanctions placed by the Western imperialists. The USA did not continue with giving us flour under concessionary terms due to the socialist policies of taking over the plantations etc. The Government was compelled to pay compensation to the foreign companies for taking over estates in foreign exchange. Further the price of oil tripled in the early Seventies. Despite this, the fact remains that Sri Lanka, last lived within its resources when Dr N.M. Perera was the Minister of Finance. After 1977 the rot set in and Sri Lanka commenced borrowing to live. It has lived on credit ever since.” (Pg.164 – Karunaratne; How the IMF Ruined Sri Lanka”)

Cause and solution

We have to get to the cause of the problem instead of working at the peripheries, if we require a solution and sad to say none of our economic pundits are addressing this.
The major change that took place was the imposition of the Structural Adjustment Program by the IMF on Sri Lanka in 1977. As stated by me, The fundamental flaw in IMF policy was that instead of a growth strategy, the Structural Adjustment Program was actually a strategy that when implemented caused unemployment, caused the closure of local manufactures, made the country indebted, devalued the local currency, and increased poverty among the majority of the people. In detail, foreign exchange had to be liberalized – every citizen was allowed foreign exchange, every importer was allowed unlimited foreign exchange. The Central Bank no longer controlled the use of foreign exchange… when the funds were insufficient the IMF advised that the Government should get loans from the IMF or foreign sources.” (From: Papers on the Economic Development of Sri Lanka, Godages). It was the IMF policy to make a country indebted so that it will be subjugated and become a colony” one again where goods produced by the Imperial Countries will be marketed.

This we do even today. We came to a position where to find funds to service the foreign debt we had to get further loans and all the reserves we boast of today are borrowed funds. Our economic pundits are taking further methods of borrowing foreign funds like getting our banks to get foreign loans. Right now our National Development Bank, National Savings Bank and the Development Finance Corporation of Ceylon are expected to raise $ 1.5 billion from international capital. Let not what happened to Argentina happen to us where in 2002 when the peso was devalued the entire economy crashed due to the fact that foreign loans were allowed for banks and people.

Import substitutes

The fundamental fact remains that under IMF policy- the Open Economy imposed on us we spent on luxury imports, luxury living and luxury travel and raised loans for this purpose and now the foreign debt is well over $ 22 billion. Funds incurred for the war with the LTTE and the Hambantota Airport and Port are different in that we have used those funds for a particular purpose. It is ours to get them going efficiently.

In this predicament utterances that deserve attention do come from non-economists. Our Defence Secretary has once lamented that we are importing tamarind. We are importing endless and unnecessary things. We are even importing tomatoes sauce and fruit juice when within a few months we can set up a cannery that can produce all the tomatoes sauce and all our fruit juice. We did that earlier because the Marketing Department of the Government had the cannery that made us self-sufficient in fruit juice, tomatoes sauce, etc. I worked in that Department and we did it so that no one can doubt whether we can do it again. I am prepared to put my neck on that any time.

What did happen will illustrate the futility of our IMF policy which we follow today on depending only on the Private Sector. Earlier I quoted economist Bandaranaike lamenting that the Government should get to the barracks. The Government got to the barracks when the Marketing Department Cannery was privatized and now we import instead of producing.

One has to travel by car in India or Thailand to be following lorry after lorry of sugar cane or manioc. There is no other answer we have to make it ourselves. No Norwegian or Indian is coming to help us. But we take no action, over it. Woe be unto us if we yet depend on outsiders. India has clamped the 13th Amendment and has taken our sovereignty away and we yet lament. These days US Vice President Bigen is in India trying to open up India for US multinationals to come in and invest” and take away profits.

We have to plug the holes in the bucket instead of pouring more and more funds into the bucket.

In nostalgia, I can narrate what I did as Government Agent Matara in 1971-1973. We made seaworthy fishing boats, established from scratch within around three months and sold them to cooperatives. The Chief Officer of this was a raw graduate who later became a Secretary of an important Ministry. The Government Officials found the method of making first class crayons and The Deniyaya Cooperative Union under Member of Parliament Sumanapala Dahanayake rolled up his sleeves, tucked his sarong and worked with youths all barefooted. We all worked for 24 hours for a few weeks to establish the Coop Crayon Factory, done against the wishes of the Ministry of Plan Implementation which did not want us to attend to import substitution industries. The Chief Officer of this was also a raw graduate. Coop Crayon was sold island-wide. Today we import crayons!

Instead of trying to find more and more water to pour into the bucket, let us all get together and mend the bucket. Let us find the tamarind trees and if there is no one to pluck, the Army can be enlisted as was once done to get the Army to cut sugar cane in Kantalai. That was in 1962. I too will be there to bear the burden if ever such an attempt is made.
To personages like our President who defeated the LTTE, the only terrorist outfit that had a Navy and an air force this I think is a far simpler task.

Let us take action to be self reliant and self sufficient as fast as we can,  Following the Open Economy since 1977 has been a disaster.

Garvin Karunaratne

Former Government Agent, Matara District

December 1, 2014