THE VISIT OF MIKE POMPEO, THE SECRETARY OF STATE AND MISCONCEPTIONS ON INVESTMENT IN SRI LANKA
Posted on October 31st, 2020

BY EDWARD THEOPHILUS

When it talks about investment nobody can ignore the views of Schumpeter, who is regarded as a classical economist that investment is built upon on the level of returns that an investor gains and expected, which is based on the cost of investment plus the risk that could be tolerated by an entrepreneur. Investors are compensated by the return from the investment.  Beyond the classical era, the attraction of investment to a country has been generally dependent on the return from the investment. Mr. Mike Pompeo indirectly confirmed the view of Schumpeter at the interview with Ms. Indiwari Amuwatte that the making of investment would be a pure decision of entrepreneurs, and there are no easy ways either government or government-sponsored investments in America. Theoretically, it is a liberal concept of investment that interprets no government intervention or influence for investments from the point of view of America.      

The wording of Mr. Pompeo summarized the concept of investment in the USA, and it was a challenge to the attitudes of Sri Lankans concerning investment, and from the point of view of China. American aspect of the investment is when the private investor cannot invest the government participates such as space discoveries.  

Before and soon after the independence from the British imperial administration, Sri Lanka’s economic policies were built on the idea of Schumpeter, and it was changed after the political remodeling in 1956.  The role of the private sector took to the government hand through various strategies such as the nationalization of private investment (transport system and ports), direct government investments in public corporations, and contributions to public companies. The strategic changes of government investments have achieved negative repercussions on macroeconomic factors, such as budget deficit in the fiscal system, problems in the balance of payment adjustment process, terms of trade, borrowing for investment by the government, and many other issues created in the economy. The most hated economic issue was the public enterprises becoming refugees of the government.

Politicians and people of Sri Lanka trusted the government investment, but it seemed that the policy was economically challenging the beginning from the 1970 decade, creating fiscal and monetary problems that were difficult to comprehend and coped by politicians and the public. It seemed that except for a few educated people public did not concern about the matter.

Under the political administration of Mao Test Tung, China followed opposite views to American aspects of investment, and Den Zio Ping attempted to change the Chinese aspects of Investment by promoting cooperation with the US  relating to trade and investment, American policy allowed to give the most favorite nation status to China looking at changes, however, China did not deviate from the fundamental views of Marxism and attitude of hegemony and continued investment with the ownership of private and public.  China also helped many countries in Asia, Africa, and Latin America. During the regime of Xi Jinping, billions of dollars invested in developing countries, and they were made in public enterprises. The volume of Chinese investment in Sri Lanka, Pakistan, Nepal, and other countries is with public enterprises and they could be considered more than American investments in those countries. The other vital aspect of Chinese investment was the strategic cooperative partnership based on the consciousness reached by two countries.

Mr. Mike Ponmpeo stated that American investment in any country is decided by respective investors and the investment decisions are purely investors’ judgments despite the decisions of the government. The nature of the Chinese investments demonstrates that China wishes to engage in government investment, most probably the Chinese decisions associated with protecting of Investors and attracting comforts from the respective governments. However, it could be seen that the Chinese government adopted the capitalist system establishing government companies for investment in developing countries such as private companies for the management of investment in the Port City, Hambantota Port, and others. It is seen that there is a fundamental difference between Cina and the USA concerning the policy approach, and Mr.Mike Pompeo openly expressed American views despite the expectation of people.  

I have not visited China, many of my friends who have experience in living in China told me that they cannot see a vast difference between modern China and democratic countries, and investment in China dependent on the view of Schumpeter and practically people of China have capitalist views like in the USA.

In this background, why politicians created public opinion against the management of investments by private investors, and continuing government investment than they are privatizing to get out from economic burdens to the government? This is a root cause of economic problems in Sri Lanka and I pointed out the issues in many of my articles.    

The views of Mr.Pompeo showed the disguised direction to Sri Lanka that the country is in misguided footage, that the public investments must stay as they are, and despite the global policy changes after the cold war that the ownership of the public enterprises should be changed by privatizing or offering shares to private investors as it happened in many western countries.  Sri Lanka could have to get out of the problem in the 1990 decade, but the cunning politicians and public managers killed the opportunity at the birthplace.

The investment talks of Mr.Pompeo directed excellent advice to the country that it needs to make wise decisions. To increase or stabilize the exchange value of Sri Lanka’s monetary unit, and to gain relief from the repayment of a massive quantum of debt could be achieved if the government of Sri Lanka offers the ownership of public enterprises to the Chinese government than borrowing for the management of public enterprises.  The same process could be done by American investors too. Chinese public investment and American private investment could play a similar role. The difference is the approach of both countries.  This action will give a massive reduction of foreign debt and increase the efficiency of public enterprises with management acumen and investment stewardship of China or America.  The journalist, Ms. Indiwari Amuwatte made an excellent contribution to Sri Lanka directing the innovative questions to Mr.Mike Pompio.

If the government of Sri Lanka allows China to gain ownership of public enterprises the volume of foreign reserves in Sri Lanka could be increased to dollars 25 billion and the volume of the foreign debt of the country would be reduced by 50%.  In this way, Mr.Gotabaya Rajapaksa can uplift Sri Lanka with less foreign debt, a higher value of Sri Lanka Rupee.

Mr.Pompeo made a good idea on American investment and private investors in America could work consistent with the view of Mr. Pompeo, and the government of Sri Lanka could make toward a positive approach to make to change ownership of them.  I don’t think American investors will behave like the characters in the famous novel Ugley Americans”, they will be more responsible in the current environment.  The experience of the Asian crisis in the late 1990s guides Sri Lanka to manage investment policy.    

The views of Mr.Pompeo on the investment would be beneficial to the US, China, and India as well as Sri Lanka. If Mr. Gotabaya Rajapaksa promotes his policies to create producing and production economies with balanced growth in sectors and provinces the country would be a developed nation.

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