Sri Lanka cannot be a China or Vietnam: An Economic Science lesson to political liars-Dr. Indrajit Coomaraswamy
Posted on July 4th, 2016

Courtesy Adaderana BIZ

Sri Lanka is currently stuck in a position while being unable to compete against countries with lower labor costs or labor productivity. If to emerge from this trap, Sri Lanka has to go for reforms immediately, warns an economic academic.

Dr. Indrajit Coomaraswamy points out that Sri Lanka is unable to compete with countries like Bangladesh with lower labour costs since the island’s labour costs are higher.

Furthermore, since Sri Lanka is trapped by being unable to compete with countries like Thailand where labour productivity is higher, it has to immediately go in for wide reforms in its labour force to increase productivity, adds Dr. Coomaraswamy.

Sri Lanka cannot become a China or Vietnam

Dr. Indrajit Coomaraswamy identified the government’s foreign loan funded infrastructure development projects and the utilization of neglected capacities as significant reasons for Sri Lanka’s development growth after the end of the war.

Though the lower foreign borrowing countries like China and Vietnam follow a policy of economic growth through state investments, it is difficult for Sri Lanka to widen its state investments any further through foreign loans since the island’s foreign borrowings are nearly 75 per cent compared to its GDP.

Similarly, the neglected capacities have been utilized to their maximum by now, points out economic academic Dr. Indrajit Coomaraswamy.

The way forward for Sri Lanka

Under such a situation, Sri Lanka should plan its future economic growth through a policy of promoting increased private sector centric exports and attracting more direct foreign investments, says Dr. Coomaraswamy.

Hence, Sri Lanka’s policy planners should immediately introduce economic reforms which could promote exports and attract more direct foreign investments, he added.

Attracting direct foreign investments towards a 10 per cent economic growth is something feasible and productivity should be enhanced in ways to expose the creativity of Sri Lanka’s labour force, Dr. Coomaraswamy added further.

Interim budget and relief package

Sri Lanka’s macro-economic stability has been weakened due to the unbearable relief packages provided through the recent interim budget and hence it is vital that Sri Lanka reconsiders whether it is treading on the right path, said Dr. Coomaraswamy.

It is not so easy to find the funds for the relief measures provided through the interim budget and this would force the increasing of taxes and interest rates, control expenditure or to some similar mixed decisions, he pointed out.

12 Responses to “Sri Lanka cannot be a China or Vietnam: An Economic Science lesson to political liars-Dr. Indrajit Coomaraswamy”

  1. Dilrook Says:

    If relief measures are cut, the UNP government goes home with him. He has to spell out the reforms in detail to promote increased private sector centric exports and attract more direct foreign investments. Does his foreign investments include investments like Galleon Fund?

    If he believes 10% economic growth is possible, he is living in a fool’s paradise. It is not possible given the global economic outlook. That will put Sri Lanka ahead of China, India, Vietnam and even all the countries in annual GDP growth!

    He is also way off the mark when he says unlike China and Vietnam, Sri Lankan state cannot invest in infrastructure in a big way. He may be unaware that all investments in infrastructure was made by the state in Sri Lanka.

    His lamenting that Bangladesh has a lower labour cost to Sri Lanka without understanding the basis of it. Bangladesh has a lower quality of life than Sri Lanka. In order to sustain the higher quality of life, Sri Lankans need more money. Otherwise Sri Lanka will go backward towards Bangladesh! Very high population density in Sri Lanka (thanks to illegal South Indians illegally migrating to the island in drones) has increased land cost for companies and employees. That also raises factor costs. Labour reforms cannot fix that.

    Vietnam has entered into TPP with USA and Pacific Rim countries. That reduces the cost of its exports as it gets duty waivers. Vietnam’s closeness to China, Singapore, Japan and Korea also give it a tremendous advantage. That too cannot be improved by labour reforms.

    Looks like Sri Lanka has fallen from the frying pan to the fire.

  2. mario_perera Says:

    Sri Lanka was, is, and probably will be (at least in the lifetime of many of us) an agonizing body delivered to surgeons called ‘governments’.

    The governor of the Central Bank is yet another scalpel (albeit a very important one) in the hands of such surgeons.

    The choice of the scalpel is more dependent on the imagination of the surgeon than on his reason.

    Both President and Prime Minister were engaged in a do or die tug-o-war for the selection.

    The rope broke. so a patch-up operation had to be undertaken in all haste because ‘time and tide’ was waiting for neither of the two. The result is this ultimate choice: the choice of necessity and against expediency.

    The Prime Minister is a ‘book cricket’ politician. the ground realities escape his vision. One will recall his mind-boggling negotiations with the LTTE (his scalpel of that time was G.L.Peiris of ‘His Excellency Dr.Balasingham’ fame). The then P.M.was committed to the hilt to have his way. In the end, this led to his downfall because CBK sacked him unceremoniously and with him his government.

    This time, this die-hard book cricketer-politician committed himself to the hilt to save his ‘machang’ of bond scam.

    One could well say with S.A.Kumar: why this kolaveri machang?

    As the song says: well will he ever learn…when will he eeeeeeeVER learn.

    Mario Perera

  3. Ananda-USA Says:

    Irreparable Damage: Tea Exports Decline Irreversible; Rs 42B Drop In 2015 – CTTA

    by Amavasya Sirisena
    The Sunday
    July 03, 2016

    Tea exports which was once the number one foreign exchange earner for Sri Lanka prior to 1977 is now in a lamentable position, with tea industry bodies opining that the unfortunate decline is irreversible.

    Recently-held 122nd Annual General Meeting of Colombo Tea Traders’ Association (CTTA) highlighted the numerous odds that the tea exports of Sri Lanka has been experiencing over past two to three years, lamenting that Sri Lanka which was once the world’s leading tea exporter with nearly 23% of the total world exports, has now fallen behind China, India and Kenya.

    Speaking to The Sunday Leader CTTA Chairman Anselm Perera pinpointed that, “the tea exports are on the decline because all over the world no commodity was getting a good price. Crash in the oil markets affected the Middle Eastern economies and with Russia been engrossed in conflict our single biggest market also was affected. It is bit difficult for us to come back to the position in where we were three years before, with the oil prices remaining at this level.”

    He further stressed that, “the tea export revenue which was 1.5 billion dollars plus in 2014, recorded a clear decline of nearly US$ 300 million during last year.”

    According to Central Bank’s latest Annual Report for 2015, export earnings from tea, the second largest export commodity in Sri Lanka, which accounts for about 13 per cent of total export earnings, declined significantly by 17.7 per cent to US dollars 1,340 million, recording the lowest value for the last five years. Geopolitical developments, currency depreciations in importer countries and the substantial decline in revenue from oil, resulted in a significant decline in demand for Ceylon tea from major buyers such as Russia and some countries in the Middle East. Accordingly, the average export price of tea declined significantly by 12.2 per cent, to US dollars 4.37 per kilogram in 2015, from US dollars 4.97 per kilogram recorded in 2014, while the export volume also declined by 6.2 per cent to 307 million kilogram.

    Perera lamented that the US$ 288 million (Rs 41.79 billion) drop affected the industry badly as this could have be an extra income for the producer.

    Discoursing on the issues that the tea industry of Sri Lanka is suffering from, Perera emphasized that, “long credits, slow movement of money plus low prices are some of the issues that we encounter right now that highlight the importance of improving the quality of our tea.”

    “Our future plan is to improve the quality of tea. Meantime we are focusing on promotions to see new markets. Now we have taken steps to improve our ties with China which is undoubtedly a big market. Sri Lanka which produces 320 to 340 million kilos of tea cannot consume all that since our population is nearly 21 million. In such a case, we have to increase awareness and look for new markets. Meanwhile, we are in the process of targeting tea markets in South America, Europe, USA, Japan etc,” added Perera.

    Speaking at the event, Plantation Industries Minister Navin Dissanayake also stressed on the need of improving the quality or the purity of our tea, which is the backbone of our model since the quality of Sri Lankan tea is continuously coming down. He further stated that it is highly important to have a quality charter from the producing of tea to the factory process right up to the branding and packing up of tea. Having stressed on the importance of having a quality charter, the minister stated that he is planning to have the quality charter in three to four months time. The minister also exemplified the importance that should be given to the concept of tea hub, which is a policy decision as well as a decision that should be discussed and encouraged.

  4. Ananda-USA Says:

    AMAZING how one non-citizen Tamil hora who insider-traded us out of $2 billion USD in bonds while being Central Bank Governor, is replaced by another Tamil with connections to Raj Rajaratnam currently exquisitely clad in a striped suit and is serving time in federal prison as a guest of the US government for … you guessed it … insider trading!

    The principle seems …. you see…. is to replace one insider-trader with another insider-trader. No wonder they say birds of a feather fuck together! Ooops … excuse me sirs … I meant “flock” of course!

    All this is happening while bypassing a perfectly qualified candidate, the current Deputy Governor of the Central Bank, a long time public servant without any allegations of misconduct in office, just because he is apparently a holdover from the previous GoSL and presumed by virtue of his longevity to be a Rajapaksa loyalist! Perhaps he is disqualified because he is a Sinhala man!

    Is it not TRULY AMAZING how we Sinhala Buddhists have fallen from grace in our own Motherland?

    In the words of our seriously flawed esteemed President Palwatte Gamaralage Maitripala Yapa Sirisena, we SINHALESE are no longer SUDUSU people, while those from minority communities …. even non-citizens … are MORE SUDUSU to govern us than we are!

    The last time we became SUDUSU-NATHI PEOPLE like this was two centuries ago in March, 1815, when another TREACHEROUS GREEDY CABAL of our esteemed gamaralas handed over our Motherland to the British colonialists!

    Aiyoooo …. Sirisenaaaa!

  5. Ratanapala Says:

    This man has come to fulfil Ranil’s agenda from where Arjuna Mahendran left. His talk of 10% growth is to hoodwink the nation. He is promoting unimpeded globalisation which the world right now has recognised as the reason for 1% owning the 99% and vice versa. Soon big changes will come to change this status quo.

    Presumptive Republican nominee for US Presidency Donald Trump is promising to bring back the jobs that went to China under globalisation. Britain has come out of Europe. In the coming years the world will see more countries turning inwards to safeguard the rights of their citizenry. The end of the Multicultural, Multi-Ethnic experiment is becoming a reality. Soon Europe will implode and go their separate ways to protect their identities.

    Sri Lanka’s future lies in going for self sufficiency in basic necessities and self sufficiency in security. Dr Coomaraswamy is right in the first part when he says that Sri Lanka cannot be either Singapore, China, Vietnam. We have missed the boat by several leagues thanks to the Tamils and India’s measures to see that Sri Lanka does not prosper and the 30 year war they brought upon Sri Lanka.

    The current government is intent on destroying our agricultural sector. Why should we sell our fish to Europe and get Euros and then in a roundabout way “import” fish to feed ourselves. Sri Lanka should feed ourselves from what we grow and harvest from our seas before we export. The intention of this Yahapalana is to impoverish the population to the extent they will become wage slaves of the Global Coroporates.

    This is what we need to avoid to stay as one country free from foreign domination, undivided and unitary.

  6. anura seneviratna Says:

    Not sure this another destroyer Coomarasamy is given the job at the central bank, if so this is the blatant Tamil racist policy against the Sinhela nation always held by this backdoor PM of SL. The investigative journalist Paul Harris said “It’s the greatest giveaway in history” to Ranilan’s generous offers to invasive Tamil terrorists when in power last time round and Paul H. was asked to leave SL in 3 days. Do we truly know WHY this PM does all these against SL?

  7. Christie Says:

    As long as we do not stand up to the Indian Empire our economy will only be good for the Indian colonial parasites like him.

  8. Christie Says:

    Mr Samy, the island nation is an Indian colony. The economy is in the hands of the minority Indian colonial parasites like you.

  9. Ananda-USA Says:

    When Sri Lanka was a British colony, the British ignored Sri Lanka reservoir-based agricultural irrigation systems created by successive Sri Lankan kings to grow rice on a massive scale. Under their yamapalana governance, these systems were not maintained and fell into disuse and Sri Lanka became a net importer of rice from Burma … yet another British colony.

    As a sea-faring nation with a merchant navy the British made their money by engineering artificial shortages in countries and importing those goods from other countries in their own ships.

    So they destroyed paddy cultivation in Sri Lanka and imported rice from Burma. Likewise, they discouraged spinning and manufacture of traditional cotton cloth in India, exported the cotten to fuel their vast textile mills they built in the Midlands of Britain, and imported that cloth as a high priced finished product back into India. Gandhi recognized this ploy and used the boycott of this imported cloth as a weapon to get India’s independence. When they had no demand for a product in a country …. they created one …. as they did by growing opium in India and Burma and importing it into China …. thereby converting the Chinese into a nation of drug addicts. When China, under the Chinese Dowager Empress resisted this destruction of their people, the British, in concert with other western powers, launched a war on China, reaping the Boxer Rebellion by the Chinese people.

    I whole heartedly agree with Ratnapala, our agricultural resources and products should be used first to feed our own people and only the balance should be exported abroad.

    In the not too distant future, as the world population begins to exceed the world’s capacity grow food and weather becomes more erratic due to global warming, food will become very scarce globally and will be worth its weight in gold. To protect our people then, we have to protect and develop our agricultural resources and technologies, and enact the laws necessary to permanently protect them. Japan is one other country that fiercely protects it’s agriculture and the livelihood of its farmers, even to the extent of prohibiting the importation of rice from abroad.

  10. Cerberus Says:

    I am not a Ph.D in economics. However common sense tells me that trying to lower the labor costs in Sri Lanka is not the answer. What Dr. Indrajith is telling is that the only way to get cheap labor is to import it from India and Bangladesh. Hence the urgency for the ETCA.

    The original plan of Ranil was to impoverish the economy, and remove all the social welfare networks so that the poor people will grovel for jobs. Then the Corporations can pay very low wages and if our people are not willing to work bring in labor from Tamil Nadu as happened in 1815.

    Indrajith is trying to kill two birds with one stone.
    (1) Increase the number of Tamils and Muslims in the country to displace the Sinhalese. This will help his sister Radhika’s objectives also to create a federal state.
    (2) Sell the land and the State Corporations to the Multinationals who will suck it dry as they have done in many other countries.

    What we should be doing is more grass roots projects to empower the villagers not impoverish them. President Mahinda Rajapaksa had a right idea with the Divinaguma programs etc. However all the good work he was doing were stopped by the Yahapalanaya. I feel the new CB Governer is not going to last long if his mindset is to privatize and reduce labor costs.

    Any fool can grow the economy if the labor costs are low. The trick is to do it with an educated labor force with higher labor costs compared to our neighbors or else become self sufficient like Cuba who today have one of the best medical services for the people.

  11. Dilrook Says:

    Ananda, food security will certainly become a huge problem in time to come. However, feeding locals first doesn’t make business sense. Fish exporters get much more money exporting the catch than selling locally. It also helps local vendors increase prices. It cannot be controlled. The only way is to raise buying power of locals. If it is sufficiently high, exports will reduce.

    Food diversity is also needed. Alternative protein sources are needed than everyone relying on fish and lentils. Beef and pork industries must be developed. These are neglected since 1948 but hold tremendous potential. When those who like to eat these and afford, pick them, the demand for other protein sources reduce allowing everyone to eat something. Milk industry should be freed from foolish laws introduced in 1956 to protect cows and calves at the expense of people. Farmers should be fully empowered to do whatever they wish with their cattle. Cow was never a holy animal in this country.

    With under-5s malnutrition running at more than 20% Sri Lanka cannot afford nonsensical restrictions on protein sources. Child malnutrition has a direct bearing on productivity, intellectual abilities and health of labour force.

  12. Fran Diaz Says:

    For protein, Sri Lanka has always been a mainly fish eating country, isn’t it ?
    From the humble ‘karawela’ and the ‘haalmassa’ to the more expensive larger fish such as seer, the choice is generally for a fish dish to go with rice ‘n curry.

    As such, local canned fish should be made available for local consumption as well as for export. Many varieties of fish may be canned and even turned into pet food.

    Canned fish can be kept far longer than frozen fish. Also, freezing facilities for fish could be done with solar energy ?

    There is also a huge demand for coconut products abroad, preferably the organic variety.

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