Says if bribes culture remains in Sri Lanka, no prospects of Japanese investment coming into Sri Lanka

By Sanath Nanayakkare

Japan, a country that always stood by Sri Lanka, putting its words into action – extending its support to the country by being a genuine partner in many socio-economic spheres in the past few decades – remains ready to carry the torch of its diplomatic legacy into the future, for the wellbeing of Sri Lankan citizens.

The above is a concise summation of the insightful speech made by Mizukoshi Hideaki, the ambassador for Japan in Sri Lanka at the JICA Chair Programme held on October 1, at Galle Face Hotel, Colombo.

The intellectuals in the audience were seen listening to his speech with great ardour as the diplomat is widely known to have done his utmost for Sri Lanka, especially in the past two years to help the country get out of the deep abyss it had fallen into. The fact that the ambassador will be saying adieu to his diplomatic posting in Sri Lanka in just three weeks added to this enthusiasm.

The reproduction below contains a few excerpts from his speech.

“Why recount this tale in Sri Lanka today? Because in the heart of Japan’s historical narrative lie universal lessons of overcoming adversity, embracing change, and fostering growth. Sri Lanka, at this juncture of economic hardship, stands where Japan once stood. Today, as Sri Lanka is trying to overcome the worst economic crisis in its history and turn a new page towards the future, I wish to draw parallels, illuminate paths, and inspire ideas that can potentially guide Sri Lanka toward a future of prosperity and stability.”

“Our journey through history is a testament to resilience, innovation, and foresight. Beginning in the late 19th century, under the pressure to open the country from Western powers, Japan embarked on a path of rapid modernization and industrialization, fundamentally altering its society and economy. This journey was not without its challenges, as the scars of World War II testify. However, the occupation by victors of WWII was the Japan’s 2nd chance of transformation. The post-war era opened the doors to an unprecedented period of economic growth and prosperity, a phase often referred to as the ‘Japanese Economic Miracle.’

“In terms of economic modernization, the government actively promoted industrialization. This included the establishment of a modern banking system, the construction of railroads and telegraph lines, and the adoption of Western technologies. The government fostered high quality silk industry for export and encouraged zaibatsu, or powerful business conglomerates, which played a crucial role in Japan’s industrial growth until World War II.”

“In education, a national system was established, inspired by American and French models, which emphasized universal education and literacy. This was a revolutionary change, as it provided the general population with access to education, fostering a more informed and capable workforce.”

“Thanks to improvements made by the past efforts, Japan now ranks in the 20th position out of 180 countries as least corrupted country according to the Corruption Perception Index by Transparency International in 2023.”

“For Sri Lanka, in the process of rebuilding its economy, there are several lessons to be learned from Japan’s experience, but I would like to highlight three key points.”

Taking advantage of External Pressure:

Firstly, taking advantage of external pressure. Looking back at Japan’s history, most reforms in Japan that were achieved would not have been possible without pressure from the international community. The reformist leaders of Japan, whether during the Meiji restoration period or under occupation after WWII, had made wise decisions for the future of the country decisions under foreign pressure.

Today, Sri Lanka is trying to reform the economic system under the agreement with the IMF. Reforms such as tax reform, electricity reform, or SOE reform may be challenging and not always popular to citizens. However, viewing the utilization of such external pressure for the betterment of the country should not be seen as a weakness but as a testament to the wisdom of leaders. India which went into financial crisis in 1991, went through structured adjustment of the IMF and World Bank. The economic reforms which have achieved at the time transformed India into a fast-growing economy. From an international perspective, agreements with the IMF serve as backing for Sri Lanka’s commitment to pursuing rational and consistent economic policies.

Japan recently announced the resumption of 11 yen loan projects that have been suspended since May 2022 due to the default of Sri Lanka ahead of any other foreign countries. It is important to recognize that this resumption was done on the basis of Sri Lanka’s agreement with IMF and official creditor countries.

2. Building up Competitive Industries:

2nd lesson from Japan’s experience that I can think of is importance of building up a competitive industry for economic growth. Sri Lanka is now at a crossroads. This economic crisis can be utilized as a golden opportunity to transform and grow. Japan’s experience of the economic miracle shows that it is important to formulate its industrial policy to foster a competitive export industry. What can be the strong and competitive industries for Sri Lanka?

Sri Lanka’s economy has stabilized under the IMF programme. The inflation was contained to single digit and the GDP growth turned positive from the 4th quarter of the last year. I commend the immense efforts of the government and the people of Sri Lanka to bring about this economic stability in a very short time. However, once Sri Lanka lifts its import restriction, there is a danger of foreign currency shortage happening again. Therefore, after achieving the stabilization, it is essential to build up a competitive industry that can push sustainable development of the country and earn foreign currencies. In building up industries, Sri Lanka may learn lessons from Japan’s industrial policies. It is important not to protect a loss making industry with government money but to ensure a smooth transition from uncompetitive industry to more competitive industry.

3. Overcoming Corruption:

The third point I would like to raise is overcoming corruption. I would like to touch upon corruption problems because it is important for the development of Sri Lanka. As Sri Lankan people having chosen a new leader, Anura Kumara Dissanayake, so committed to overcoming corruption, there is a unique opportunity to eradicate this malady that has been spoiling this country for a long time. Observing Sri Lankan politics since I came here, I would like to point out two aspects of problems of corruption in Sri Lanka.

“First, corruption is a source of distrust of leaders of the country by the people, and it discourages people from being responsible citizens of the country when leaders are corrupt. It gives convenient excuses to tax payers for tax evasion. Secondly, it is very harmful when Sri Lanka wants to attract foreign investment. A transparent and predictable business environment is essential to gain trust from foreign investors.”

“Japanese companies are nowadays strictly observing the compliance obligation and therefore never offer bribes or kickbacks. If that kind of culture remains in Sri Lanka, there is no prospect for Japanese investment coming into Sri Lanka. I am saying this because I would like to see more Japanese investment in Sri Lanka to support economic growth. Sri Lankan people have chosen a leader who has promised to eradicate corruption as his No.1 agenda. I have mentioned earlier that Japan ranks in 20th place out of 180 as least corrupted countries. Sri Lanka’s ranking is No.101. I hope, Sri Lanka will draw lessons from experiences of various countries, including Japan, to develop effective anti-corruption mechanisms. Last week I met Dr. Nandika Sanath Kumanayake, the new secretary to the President who has studied in the National Graduate Institute for Policy Studies (GRIPS) in Japan and completed MA and PhD, and he is an expert on the corruption issue. I offered him to share the experiences of anti-corruption measures that Japan has been taking to date.”

“There are many other lessons that can be drawn from Japanese experiences and we are ready to provide opportunities for Sri Lankan people to learn from them through JICA programs and other means.”

When The Island asked the departing ambassador what advice he could give Sri Lankan politicians, bureaucrats and business leaders to take this country forward post-crisis, he replied, “Rise above narrow self-interests and act to serve your country in the best way you can.”