By Neville Ladduwahetty

President Ranil Wickremesinghe eloquently outlined the current global economic crisis affecting the developing world, in particular the Global South, during his speech at the Berlin Global Dialogue. In the course of his presentation he conveyed the fact that while the developed countries may have the strength and resources to weather the challenges, the Global South is not equipped to meet them.

Attributing the current crisis as being due to a combination of systemic inadequacies in the global order and geopolitical rivalries among the major powers, he concluded by stating that if another crisis is to be avoided it is imperative that these powers engage in a constructive dialogue. His plea was that: “We require a constructive dialogue between the West and China. We need a constructive dialogue between the US and China. We need a constructive dialogue between the EU and China. Otherwise we will not move forward. So this is the stark reality. It is a question of how we get together and how we work, and who is going to take the lead in 2024” (Observer, October 1, 2023).

CURRENT GLOBAL LANDSCAPE

With regard to the global landscape he stated: “The Global economy has had many shocks in the past two decades. Starting from 2008, we went through the European debt crisis, then the Covid pandemic, the economic shocks that have come from it, the whole issue of funding for Climate Change, and the Sovereign Debt crisis”.

“In all these instances, it is the developing economies and the Global South that have suffered extremely. We are now faced with stubbornly high inflation in advanced countries, oil prices edging towards US$ 100 a barrel, and monetary tightening by global Central Banks”.

“One example is that Sri Lanka’s exports to Europe have not increased at all this year. That is an indication of how we are being affected as we try to recover from the crisis we face. The confluence of factors face serious risks for many developing countries. In the Global South, we are facing rising import costs, food, energy insecurity and the problem of our exports. The resulting Balance of Payment stress translates into a weaker economy for all of us”.

“The difference between the advanced economies and the developing nations is that you all have the buffers and reserves to deal with these chocks. We do not. It is from here that the sovereign debt crisis started” (Ibid).

SYSTEMIC INADDEQUACY to ADDRESS CURRENT CHALLENGES

Commenting on the existing financial architecture the President stated: “The many crises and shocks we have discussed today are interlinked. First, we all agree that the core of the international financial architecture today was designed almost 80 years ago. The world has seen dramatic changes since then with many emerging economies in Asia, Middle East, South America and Africa becoming global economic powerhouses…. The international financial architecture available makes the debt restructuring too complex…. The IMF has no mechanism to face this new situation…” (Ibid).

OPTIONS for DEVELOPING COUNTRIES

In the context of the global situation cited above, what options are open to the developing countries. Can they afford to wait until the existing financial architecture and institutional reforms are implemented in time to meet the impending challenges knowing that such reforms would be spearheaded by the developed countries to further their interests as it is with the existing financial architecture. Since the developed countries would be preoccupied with their own priorities, it is unlikely that the needed reforms would be developed in time to make a difference globally.

Under the circumstances since the developing countries cannot wait until the development of the needed reforms, the challenges are bound to overpower the developing countries which in turn would affect the developed world as well. Therefore, the only option for the developing countries is either to act collectively or individually, to develop the architecture needed to meet the challenges.

Since it is unlikely that the developing countries would engage in a dialogue to develop a collective framework that would enable them to survive the rigors of a potential crisis in time, it is most likely that each of the developing countries would opt to make their individual hard choice. Consequently, the choices made by some of the developing countries would be for non-alignment or hedge their fate with each of the major powers while others would opt to bandwagon, or connect with one of the major powers and become a vassal state. These policies would change with the political formations in the developing states; a tendency that would be induced by the major powers hoping to extend their spheres of influence.

As for Sri Lanka, its stated policy is to be Neutral in order to cope with the pressures arising from the rivalries among the major powers due to Sri Lanka’s strategic location in the Indian Ocean, while maintaining friendly relations with all States in respect of commercial and cultural endeavours.

OPTIONS FOR SRI LANKA

Since no country has been spared the impact of the global economic crisis, some more than others, Sri Lanka has to seriously revisit some of the policies it has been pursuing to revive its economy. One of the key policies to revive the economy is to focus on an export driven economy. In a background where Sri Lanka’s imports exceed exports, and it is hoping to relax import restrictions even further, such a policy depends on the success of not only adding value to imports but also finding markets for the exports. In view of the shrinking global markets such a policy could turn out to be a costly undertaking.

Another stark reality is that Internal expenditure exceeds Revenue. In such a background how realistically possible is it to attract Foreign Direct Investments or Investors? In order to address this deficit, it is reported that the Government hopes to lift the ban on imports in order to increase revenue concerns of the IMF (The Morning, October 3, 2023). Implementing such a policy would mean a drain on Dollar reserves to raise Rupee revenue and in the process tempt further corruption; a charge already associated with Imports. Exploring such options in the current context is unthinkable unless the imports are only for value addition.

On the other hand, and considering the global situation it would be more prudent to focus not on exports, but instead on reducing imports. For instance, exports from India to Sri Lanka in 2022 were around $4.5 Billion whereas exports from Sri Lanka to India was only $850 Million. If the imports from India were to decrease, it is imperative that Sri Lanka focuses on reducing imports which translates into developing Internal Strengths

SELF-RELIANCE as the MEANS to DEVELOP INTERNAL STRENGTHS

Self-Reliance is a civilizational core value of Sri Lanka. The essence of self-reliance is to develop internal strengths through which the dignity of an independent Nation State is restored. Therefore, as a nation all citizens of the Sri Lankan Nation should pledge to respect and honour the dignity, heritage and identity of all Sri Lankans in order to create a stable and peaceful society as a united endeavor. In addition, the three major communities should engage in a comprehensive dialogue committed to explore arrangements that offer greater dignity and respect for all in preference to current arrangements. Such an arrangement would be for all three communities to share power at the Center and participate in governance processes with the Districts under District Development Committee made up of Public Servants, Chairmen of Local Governments and Members of Parliament in the District becoming the peripheral instruments to implement Government policies.

SUGGESTED FIELDS TO BUILD INNER STRENGTH:

The focus of Agriculture and Irrigation should be to produce all agricultural, horticultural, dairy and poultry products including inputs needed to sustain food security within Sri Lanka, and for export. While high yield varieties of paddy together with inorganic fertilizer for reasons of compatibility are needed for food security, indigenous varieties of paddy using organic fertilizer should be cultivated and marketed as health products for local consumption and exported at premium prices to compensate the cultivator for the lower yields. Irrigation Department to restore ancient tanks in preparation of the consequences of Climate Change.

Instead of divesting Small and Medium Enterprises (SMEs), their ownership should remain with the State while Management is offered to the Private Sector with selection being based on the effectiveness of the proposals submitted.

The performance of each SME should be reviewed regularly by the relevant Parliamentary Oversight Committee. Local investors to be provided with incentives for investment in renewable energy. The Government should take steps to double the generation capacity of Victoria Hydro Power Facility. Review the rationale of the logic to transfer water from Randenigala to the North via the Upper Elahera Canal at an enormous cost and implement alternatives suggested in previous articles. Allocate unused land acquired by the Land Reform Commission to restore lost ground cover in order to increase precipitation and control runoff to minimize flooding and landslides.

All Acts of Parliament relating to fishing, exploration and exploitation of marine resources in the Exclusive Economic Zone should be updated to include provisions of the UN Convention of the Law of the Sea in other to maximize benefits from these resources and impose penalties for illegal activities such as bottom trawling in the Exclusive Economic Zone.

Regulation of mines and mineral development to be under the Direct Control and Operation of the Government with the guidance of the Geological Survey and Mines Bureau using resident labour of the area to ensure maximum value addition prior to export. Call for Expressions of Interest to add value to the mineral sands that are being exported.

All projects that could be executed with the capabilities and resources within Sri Lanka to be implemented with locally raised funds arranged by the Developer with the Local Banks and underwritten by the State. Projects that are beyond the technological capabilities of Sri Lanka to be implemented on the basis of Expressions of Interest called for by Sri Lanka on the basis of Domestic Policy priorities.

Encourage and facilitate the development of Indigenous Crafts and Cottage Industries. Government to promote community based cultural activities as part of fostering a common Sri Lankan heritage.

CONCLUSION

In light of the global landscape presented by President Ramil Wichremesinghe at the Berlin Global Dialogue, where the developed countries have the reserves and the resources to meet forthcoming challenges while the developing countries do not, it is imperative that most developing countries explore and prepare themselves how best to face the challenges and survive. What is presented herein is an opinion as to how Sri Lanka could adapt itself to meet the challenges bearing in mind that what is needed is not reform and revitalization of existing outdated formulations and structures that have made Sri Lanka vulnerable to shocks, but a paradigm shift, in thinking because the prevailing political and economic global landscape has no known historical parallel.

For instance, all in Sri Lanka are focused on devolution in the form of the 13th Amendment in full or in a diluted form because of the insistence of India. Consequently, the reaction from most would be to reject any other option. Despite such a response, what is proposed herein instead, is to share powers of governance among the three major communities at the Center. Therefore, the decision that has to be made in particular by the Tamil community is whether their aspiration for “dignity and respect” as referred to by Prime Minister Modi, would be fulfilled by managing one of the nine provinces in an agreed form whether to be associated meaningfully in the governing processes of the whole of Sri Lanka.

When making that choice it should not be forgotten that divesting Central power to the periphery often results in disparities within peripheries and among peripheries as has happened in India and the USA. So long as the choice is made by the Tamil Community in Sri Lanka, it should not matter to India because the Tamil Nadu State would accept the choice made by their kin in Sri Lanka. Since no attempt has thus far been made to explore such an option, President Wickremasinghe should invite the political leadership of both Tamil and Muslim Communities and have a comprehensive dialogue as to how Power Sharing at the Center could be arranged in a form that would be acceptable to all in preference to the 13th Amendment.

These proposals to revive the economy are based on Self-Reliance as the means to develop internal strengths. The most recent living example of developing internal strengths is the building of the East Container Terminal. This project was to be implemented jointly by Japan and a Local Agent. The strong protests by the Unions forced the Government to reverse its decision and award it to be constructed by Sri Lanka Port Authority. The initial phase of this project would be commissioned in 2024. This reflects what can be achieved by having confidence in the abilities of Sri Lanka’s own Peoples backed by the power of the core civilizational value of self-reliance to develop internal strengths. This approach should be initiated to meet current and future global challenges.

Neville Ladduwahetty
October 4, 2023.