Prime Minister Ranil Wickremesinghe, on third-generation economic reform: Viewpoint

When we came to power, on the 8th of January 2015, Sri Lanka was caught in a tremendous and dangerous international quagmire. This was the result of a lack of foresight by the previous government. At Sri Lanka’s request, the recommendations made in the UN Human Rights Council had not been implemented and the danger of sanctions was looming over us. But that has changed – as a result of our efforts and a sincere exercise, we have been able to come out of that. The entire market of the world is now open to us. And so, now we have the opportunity to present our vision and our economic strategy for development. Our standing in the world is now secured, sustainable and strong. Based on that, we believe we can build a strong economy for Sri Lanka.

To take us on that journey, to enable us to climb to those heights, I believe the right political climate has now been created in the country. The two main political parties in the country have come together to form a national government of consensus. The main objective in forming a national government is to provide a common platform to deliver long-term social economic solutions that can solve the key problems of the country. This would be towards achieving stability and embark on a speedy journey of progress. We may not get another opportunity such as this. We plan to put in place mechanisms that will seek not only to strengthen the economic sphere, but also many other sectors such as political, social, education and health. Within the next two years, we plan to consolidate our plans and take the journey forward.

People are concerned about their level of living. Can they enhance their income? Can they give a better education for their children? Can the children find suitable employment following education? Up to now, as a nation, we have failed to provide answers to those questions. We have been unsuccessful. Hiding behind slogans and making excuses for the shortcomings will only conceal the actual facts further. But it cannot be sustained in that manner. People are tired of what they have gone through – they seek genuine, real time change. That’s why they elected us to power – to make that anticipated change a reality. They believe that we can make changes for the better, and that through social various implemented economic modifications, we can make their lives better. They believe we can make Sri Lanka the most open and competitive economy in South Asia.

When looking back at our history, we can be proud of the open market economy practiced during the time of Manawamma, and the period of prosperity under Maha Parakramabahu. We traded in spices, precious stones, elephants and rice with the world. We were considered a key import and export hub. We believe that with the planned economic remedies, we will be able to bring back such an era of prosperity for the nation once again. In order to be able to do so, we must be able to get the economic foundation right. Multi-disciplined economic strength, local competitiveness, international trade and investments must be in our sights. A knowledge-based social market economy built on social justice principles must be fostered. The key areas to build this economy are the availability of global opportunities for education, strengthening of the health system to face health concerns of the 21st century and the ability to ensure mobility successfully. Accordingly, I believe that is our collective responsibility to make the best use of the opportunity we have been given.

In such a setting, we plan to pay attention in the medium term to a few important areas of concern: generating 1m job opportunities; enhancing income levels; development of rural economies; ensuring land ownership to rural and estate sectors, the middle class and government employees; and creating a wide and a strong middle class.

In enabling us to achieve these targets, we need to be conscious of the current state of the global economy. When we became a nation in the lower middle-income bracket, we lost the right to claim financial aid and benefits. Accordingly, we cannot spend more than we earn anymore.

In the backdrop where interest rates have gone up in the US Federal Reserve and economic uncertainties have emerged in China, we are not likely to witness a favourable global economic climate. We will have to rely on strengthening the local economic growth and stability within the near future, given the global economic realities of slow growth.

The current, unusual disparity between an unexpected low augmentation and a deficiency in the balance of payments must be taken into consideration. The current framework of policies is not export-focused. Due to the taxes imposed, we have been on a road to a closed economy reminiscent of the 1970s.

Exports have been going down. In 2000, the exports stood at 30% of the GDP. By 2014, this had gone down to 15%, indicating a reduction of 50% percent, which is considered very low. We occupy a lower rung in meeting specialised exports needs of the world and technology-based exports. Our contribution to the global market of exports is very low. We must address these issues and adapt a competitive foreign exchange policy that will encourage and empower exports. We need to make fundamental changes to our journey forward. We must make changes that are unique to us, yet in keeping with the global economic direction. We cannot get there with antiquated thinking, nor can we get there by providing plasters over issues, burdening the country with more loans. This is the last opportunity in which we will get to make this journey.

Seventy years ago we provided aid to the UK during the Second World War. The former President of Singapore, Lee Kwan Yew, who visited us during the 1950s, is on record saying that he envisioned Singapore to become like us at the time. Back then Singaporeans came to us in search of employment. Today, we go in pursuit of employment to Singapore and Malaysia. Today, we are in debt to the whole world. Singapore celebrated 50 years of independence in 2015 and was able to celebrate its golden jubilee of independence as a regional economic power. Singapore has no natural resources, not even water, yet was able to achieve the highest echelons of success while we, blessed with many natural resources and human capital, went down. Where did we go wrong? Let us learn from the lessons of the past. We will celebrate 75 years of independence in the year 2023. If we walk the right path, we have the potential to become one of the strongest economies of Asia. So let us seize the opportunity – let us rise higher towards our goal.

It has been 40 years since President J R Jayawardena introduced first generation economic and social reforms. Since the days of the Second World War, we have lived with a false notion that the government must somehow intervene in the economic process. This has resulted in many drawbacks. The government took over many private enterprises at the time, and heavy taxes were imposed on the private sector that negatively affected imports and exports.

President J R Jayawardena changed this process in 1977. All political parties today have accepted the changes. The second-generation economic reforms took place under the aegis of President Premadasa. The investment climate and the stock market were dynamic and free to grow in leaps and bounds. State enterprises that were considered not relevant to be managed by the government were given to the public. What has happened today? Once recognised as the most open economy of South Asia, we have today been given the infamous title as the most corrupt economy of Asia. We need to address the challenges that have been placed before us and steer the country in the right direction with the third-generation economic reforms that would herald in a new era.