Minister Hashim explains how Sri Lanka faltered economically

... urges everyone to stick to one line on national policies



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By Saman Indrajith


Irrespective of whichever party they belonged to, they had to think along one line in national policies. Under the current government the country’s exports had increased to $17 billion which is 18% of GDP, said Minister of Roads and Road Development Kabir Hashim in Parliament yesterday speaking on the export sector when two regulations were taken up.


"We introduced an open market policy in 1977 under former President J.R. Jayewardene and it was called an era of trade liberalisation. By 1993, we revised the country’s duty structure and formed a three band tariff structure at 10%, 20% and 35% to simplify it. In 1994 the government changed and UPFA President Chandrika Bandaranaike Kumaratunga assumed power. At that time they criticised the UNP policies. They came to power promising to abolish the Executive Presidency and rip up the J.R. Jayewardene 1978 constitution and also pledged to do away with our economic policies and introduce a whole new economic policy. They gave the country great hope. But unfortunately none of those pledges were fulfilled. For that matter not even one was fulfilled. In fact from 1994 to 2014 thanks to the UNP, it is the same economic and social structure that is existing," he said, adding that it went from bad to worse because there was no proper economic policy.


Minister Hashim said that those who talked so much about patriotism and a sense of national pride should first have a clear policy. If there was a clear policy anything could be done within its scope. "As a small country we need to first identify our agenda. From 1995 to 2001 the average commodity tariff had been reduced by 50%. The Overall tariff which was at 20% was reduced to 9.4% during the UPFA government. The effective rate of protection, which protects local businesses, was 70% in 1994 had been reduced to 56% by 2001."


 Hashim noted that persons who were sitting in the opposition and talking about protecting domestic production should look back on how they had acted while they were in power.


Then during the Mahinda Rajapaksa era from 2005 to 2014 the tariff that was at 70% had been reduced to 63% clearly indicating that by discarding the open economic policy they the previous government had done more damage to the domestic industry. "However, they very cleverly allowed their family members and friends to import whatever they wanted by exempting them from all tariffs. At one point they imported ethanol and at another they imported dog food. This is how they governed this country during their time without any proper policy. This lack of proper policy affected our local production and industry", he said.


"We trusted the open economic policy and the open market policy. If benefits are to be derived we need to follow a certain economic policy. Although we took certain decisions, we always made sure they were tailored to suit our country."


According to Hashim, the post war growth was very impressive, but just for a year or two. After the war ended in 2009, he pointed out that it was an ideal opportunity to change the country. "Up until 2012 our development rate improved. By 2010 there was an 8% economic growth and by 2012 it dropped to 6.4% and by 2013-14 it had further dropped to 4%. That was mainly because we did not have a definite production base. There were two areas for growth post war, where one was construction and the other services. But both these areas are import based and have no benefit for domestic production. The share of the economy in these two sectors is huge at 16%. The growth in both these sectors are heavily import dependent because it turns out that access to imported raw materials was a major factor in the growth of the construction industry. In the three years between 2010 and 2012 the importation of construction material had quadrupled in quantity and value. So that in a sense drove the economy. But the economy was import driven and not production driven and that was one of the problems. The import of consumer goods during this period had increased by 130%. Hence, you can imagine what happened. That was the best period to increase our domestic production. But, instead we opened the market and made ample room to import commodities. They began importing goods from other countries and it impacted the domestic industry."


He said in 1994 under the UNP the total exports in comparison to the gross domestic production it was 35%. But, by 2012 it dropped to 16.8% and by 2014 to 12% and our export value was $11 billion. In the years since May 2012 exports declined not only as a share of GDP but also exports declined in absolute value. In comparing Sri Lankan exports with global exports from 2004 to 2014 it had been reducing. In 2004 trade to GDP ratio was 88% but in 2014 it came down to 48%.


Taking Singapore as an example, he said the city state export revenue as a small island country with no natural resources amounted to US$ 480 billion but Sri Lanka was still at $ 15 billion. "We have a long way to go. Hence, whichever parties we belong to we have to think along one line in national policies. Now under the current government we have managed to increase exports to $17 billion which is an 18% of the GDP thanks to Minister Malik Samarawickrema and Sujeewa Senasinghe’s efforts to push exports forward," he said optimistically, adding that the country was now moving forward slowly but steadily.


 
 
 
 
 
 
 
 
 
 
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