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Dark Clouds Over The (Investment) Horizon Do We Care Enough To Blow Them Away
Dark Clouds Over The (Investment) Horizon Do We Care Enough To Blow Them Away
It is perhaps the dark clouds that appear over the horizon in Sri Lanka that
made Jayakala Mahesvaran speak nostalgically about the return of the LTTE.
It is a reference to the dark mood that prevails in the north and the east after
the electorate voted against the present Government at the last Local
Government elections and made reconciliation among communities as well as
settlement of grievances in such areas impossible.
Promises,promises!
Failure!
Another result of the absence of reconciliation and the inefficiency ofthe new
Government is the continuance of political instability and insecurity that has
prevailed in the country for several decades, leading tolow levels of export-
oriented manufacturing investment, particularly by Foreign Direct Investors
(FDI)who could bring in locally-scarcecapital, new technologies and access to
global markets. It is the inadequacy of such investment for creating
manufacturing production capacitythat has led to a serious decline in exports
(33% of GDP in 2004 vs. 13% of GDP in 2017).
Some successes!
But it is not correct to say that the Government has failed entirely in its efforts
at promotion of investments and exports. It has succeeded in drawing up a
fairly satisfactory set of policies for this purpose. They include a
comprehensive Vision 20/25 document, a Policy on Trade and Investment,
awell-prepared National Export Strategy (NES) that correctly aims at
simplification of complex regulationsand an Enterprise Development
Programme targeting mainly Small and MediumEnterprises(SMEs).
However, they are not without shortcomings. One of them is the emphasis on
tradeand not on investment. The Enterprise Development Programme
appears totarget SMEs, the failure rate of which is very high due to anabsence
of adequate knowledge of financial, human resource and marketmanagement
on their part;those who are not genuinealso may exploit theincentives offered.
The low productivity of these due to theirsmall scale of operations/high unit
costswill not enable them to be competitive inexports;it is thelarge firms,about
10%, of themthat undertakeabout90% of exports in SL.It is necessary to
correct these weaknesses, for these programmes to succeed.
The import tariffs are very high, encouraging production for the domestic
market; theselead to an absence of competition (among firms) thatnormally
pressurises them to invest and add value to products towin well paying
customers abroad and avoid competition from rivals.
Apart from private sector investmentthe Government too has to be active with
capital expenditureand greater attention to carefully selected areasthat
maximise the welfare especially of the poor without going feverishly after
large/expensive construction projects that could generatebribes and boost
heavy importsas well asfor improvingthe dark mood ofthe people especially in
the north and the east.They arementioned below.
New Constitution
It is essential to create a new Constitution and other laws to introduce good
governance/law and order,to build a stable socio political environment with:
A system to achieve a better conviction ratein the courts of lawto improve law
and order.
New articles in the Constitution and other lawsthat create special institutions
that report only to parliament to deal with rampant corruption and other
forms of crime and toempower them to bring the accusedbefore special courts
and impose the strictest of punishments to those found guilty especially in
view of the insecurity created by themagainst investment.
Productivity of land
Reform of the
system of education
Conclusion
The failure of the Government to carry out its promises at the elections in
2015/16 hasraised several dark clouds over the horizonthat indicatethe
country may be carriedback to a state of inter-communal clashesand lower
investment, particularly by FDI.
The present Government could help in introducingall thiswithin the rest of its
period in power by emphasising on the key result areas indicated
above,without stooping tocorruption and unnecessary politicisationas in the
case of thepublic services; if this is doneeffectively it may even win the hearts
and minds of the people.