BY EDWARD THEOPHILUS

Public sector investments from 1956 to 1977 had a tremendous growth, the major reason for the increasing trend was the political pressure towards the elected governments from public and trade unions while restrictions for private investment have been decreed by the government. Investment role and ownership patterns have been misinterpreted by Marxist political parties stressing more government investments in the country. After 1956, the government nationalized several private investments emphasising and giving a public feeling that the role of investment was the job of the government.  

Left political parties and associated trade unions were misleading people forcing the government to take the entire responsibility for investments in the country. In this situation, Governments did not provide comfort for private investors. Misguided information from left political parties forced the government to take additional responsibility, and trade unions’ pressure forced the responsibility for investments to be taken by the government.  The policy framework was reluctant to give investment responsibility to private investors. Now president Wickramasinghe openly states that the restructuring of public enterprises must need to get away from the current economic crisis and this view has been in the country for more than three decades, but the Rajapaksa administration used the view as a beggar’s wound to stay in power.

When left political parties and trade unions pressure the government the vital factor was how to find capital for investment the predicament of the government to find capital was disregarded many times insisted to borrow and the pressuring groups also intended to tax the private entrepreneurs. The negative impact of such action did not consider the awkwardness of the government. Ideologically, there was a conflict when reducing private investments and how to find sufficient capital taxing private investors. The only role of the government was not investing in business enterprises and spending on other government services such as health, education, defence and foreign services should have been considered in addition to investments.    

The misleading views of left political parties and trade unions launched the country to further difficulties and the Rajapaksa regime used the misleading views to stay in power. The policy framework was not a positive environment for private investors and the government had to take entire responsibility for investments without sufficient resources. After 1960, the government permitted domestic investors in various areas where many successful entrepreneurs originated and the trend was disturbed by the political union of SLFP, LSSP and CP. The investment trend was disturbed by this political union, which had no clear views on how to find capital for investment. Several private investments were nationalized giving a bad example for the private investments and a higher level of political risk for domestic and foreign private investors.

Trade unions and the misguided public had deluded views on investments and pushed for public investment without a clear understanding of investment management and finding working capital. Investment policies of the government should have a closer association with a macroeconomic policy of controlling the total population to less than 15 million including all ethnic communities. This vision was not successful and there was a huge gap between investment and the increasing rate of population. Geometric growth of the population created many macroeconomic problems relating to unemployment and others in the country. The major difference in growth between Sri Lanka and Singapore was this factor and the government did not adopt proper policies to overcome the problem relating to population growth now it has increased to 22 million and people are encouraged to go overseas for making money.     

The best solution to the climacteric of government enterprise management in the current environment is to privatise public enterprises (Restructure) including government banks and balance the government budget with the repayment of debts with an agreement of bondholders, then the government can achieve an excess budget, which supports improving the foreign value of a local currency and gradually builds healthy foreign reserves, which means the total value of reserves to the US $ 25 billion.

Sri Lanka has been given good policy advice by international donors and such advice has been disregarded by the misguided policy framework of the government and dishonest motives of politicians and bureaucrats, the public sector has been relegated to a climacteric environment by disregarding good advice.  When considering this line, the current crisis in Sri Lanka could consider it is created by humans than the international situation after Covid 19. Politicians and bureaucrats should have educated people that public investments need to be privatized and the economic responsibilities must share between the public and private sectors.   

Many politicians in the country have dishonest motives, for example, the family members of the Rajapaksa have been using political power to achieve individual aims than the requirements of the country.  When there are dishonest politicians who blindly support corrupt practices the climacteric of government business management would be natural.

The most important requirement at present is government should get away from business management and give the responsibility to capable private sector individuals and organizations they may be local or overseas. The selling of public enterprises should be in dollars which injects dollars fund into the economy.  In the late 1980s and 1990s, many Western countries associated with this policy action, although Sri Lanka initiated a market economic system in 1978, it failed mainly to indiscipline and dishonesty in the government management.

The international environment has secretly influenced Sri Lanka since 1948 for the policymaking process. The international environment regards as America and capitalist group and Russia as the leading socialist group.