BY EDWARD THEOPHILUS

Since 1978 economic policies have been accomplished to satisfy the attitudes or thinking patterns of common people, however, the idea of enhancing the production, and the productivity went out of the minds of policymakers, because of the politics of the country reluctance to show or hear about the shortage of goods and services in the market which reflected the success of a political party that is in power. They did not concern the macroeconomic problems such as terms trade, budget gap, the balance of payment adjustment process, population, unemployment, and many others and they were not problems that understood by voters.   In that environment, economic policymakers’ antipathetic on policy advice for macroeconomic problems, and microeconomic reforms in public enterprises except privatizing handful of government corporations.  Economic policy advisers had a responsibility to push the political authority to promote production-oriented economic policies. The economic environment developing with the COVID 19 pandemic has pressed policymakers to turn for production-oriented economic policies.

The production has a positive relationship with the imports and exports, which contribute to the volume of foreign reserves thereby to the strengthening of Sri Lanka’s rupee. The production would answer to many macroeconomic problems and why policy advisors so reluctant to do the job is a question.

There were many issues in the country after 1978 such as social, cultural, constitutional, religious, and ethnic issues in addition to economic concerns, and the grave issue of LTTE war was reasonably tackled before 2010, and the radical change of economic policy focusing on production-oriented economy ignored scaring to modernization. I have an unanswerable question that what is meant by modernization in Sri Lanka.  When it looks at the history of Japan it clear that modernization had been a long process since the Tokugawa period and modernization was a meaningful process to change attitudes towards the economic, social, cultural, and religious development of Japan.

Do people of Sri Lanka understand the connotation of modernization? My feeling is that modernization has been misunderstood and changing clothing styles and wearing half-naked dresses and singing songs, which based on the copied body. The Meiji restoration in Japan gives a message to the world that modernization is an achievement in all sectors of the economy by great sacrifice and gaining strength to change policies in all areas to generate dynamism. 

Information technology-related products manured invented after the cold war changed the attitudes of people especially by personal computers, mobile phones, Facebook, YouTube, Instagram, the broadband Internet, and many others. However, innovations of technology have contributed nether to rapid structural change nor to reduce economic inequalities but to accumulate wealth to a few owners of modern technology and speculators of the world.

The pandemic of COVID 19 caused by a micro virus that has changed the attitudes of economic policy-makers around the world. The sources of economic strengths in the world such as invisible exports, share market, share brokering and many other areas have been degraded by a micro virus, which forces economists as well as politicians to rethink policy priories.  However, the policy priority for increasing production has not been dismantled or being able to dismantle by the micro virus and the pandemic strengthens the production-based economic policies.

Billionaires emerged from paper profits, short-selling in the stock market, tactics of forward-exchange contracts in the off-balance-sheet process were given heavy losses by the micro virus. Many countries in the world attempt to safeguard new billionaires by helicopter money and creating artificial demand in the market rather than developing economic policies to give justice to the poor. Rich countries and wealthy people are observing sudden changes in the economy with a shaking heart and expecting a surprise uplift disregarding a justice to poor. While the new situation is going on a new trade conflict between China and Australia mixing international politics and domestic production.  China has imposed an 80% tariff on barley imports.  Australia aligned to Asia after the UK joined with the European Union in 1972 under the Callahan government. The Chinese policy may be expanded further to other exports such as meat and other products.  

The high-income countries, as well as low-income nations, have poured a large sum of helicopter monies to economies and economic historian Robert Skidelsky has stated that the world could face a unique inflationary depression as it emerges from lockdown with government spending”.  This idea is relevant to Sri Lanka too as the country distributed helicopter money, which included Rs. 10000 grants that have been funded by printing money, bank loans, foreign aids, and loans.

Before elected to the office, Mr. Gotabaya Rajapaksa stated his willingness to change the economic policies and he reiterated the idea during the past few months.  People of Sri Lanka need to understand that the economic development process is gradual and there are fundamental issues that work against the smooth development of the country. 

The monetary unit has dramatically depreciated influencing to increase inflation and the helicopter of money of the COVID 19 pandemic, further creates pressure to increase inflation.  This situation could be managed only if the economic policy focuses on a strong production-based economy. Like other countries, Sri Lanka after the economic recession in the early 1990s turned to service industries and to continue invisible exports, and both areas have been hard hit by the COVID 19 pandemic.  Resurrecting both areas of the economy will take time, sometimes, it will be a decade long job. The economic revival should be based on strategic change in the rate of contribution to the entire economy from various sectors to the economy.

After the cold war, the nature of economic engagement seemed that people pursued quickly money-generating business and invisible exports such as tourism, foreign employment were attractive area and the weakness of the trend was that the traditional contributing area such as production-related business as farming, small business, production industries has been neglected and the priority of changing economic policies should be increased in the change of contribution ratio from various sectors of the economy.  For example, the plantation and subsistence agriculture has been contributing to the aggregate economy by about 30% and the situation changed by replacing service areas and neglected the plantation and subsistence agriculture.  If the economic policy focuses while maintaining the plantation and subsistence agriculture level and new service areas promoted, the economy would have stronger with an ability to absorb sock from either internal or external sources. If policy-makers critically exam the Japanese economic history it would be clear that while safeguarding the contribution of traditional agriculture and industries to the economy, the policy-process allowed modernization through high technology industries. Sri Lanka’s situation has been new areas opened to the contribution; the traditional area was ignored by policymakers.       

Education needs radically changing to skill-based education and training with quality and practical approaches.  Import substitution would not be successful if the product quality doesn’t maintain.  In this area, Sri Lanka needs strong cooperation with China.

Developing new economic policies, the government needs to consider the following points.

• The government’s budget burden should be reduced by attracting the private sector’s contribution to investment. Since the beginning of the presidential election campaign, PODUJANA PERAMUNA stated that public assets will not be sold to foreigners. It is a good policy, but there is no harm attracting capital of Sri Lankans to government enterprises.  The attracting capital of Sri Lankan citizens is not selling assets to foreigners.
• The government budget policy needs for a balanced budget without begging credits from foreign countries.
• Import substitution policy should be expanded to an export orientation by excess production.
• The government policymakers have no clear inter-industrial plan or input-output plan, the president should advise economic policymakers to prepare an inter-industrial plan for ten years and the plan should be monitored with remedial strategies to correct the policy process.
• The payments for employees should be based on productivity and the payment for employees in various industries must be equal with foreign employees in developed countries, there may be a 10% difference.
• The current per capital saving should increase to 20% of earning including super savings.
• The president of Sri Lanka needs to appoint a presidential task force to re-model economic policies and the taskforce should gain views from various sectors of the economy and potential issues of various policies need to understand carefully listening to different people.
• There may be doctorate holders who obtained the degree withing a thesis and few papers, but remodeling the economy cannot be done by such people.  Re-modeling the economy needs broader experience and the ability to accurately forecast the results of policy actions.