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Perils to sustained growth

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by Dr. G. Usvatte-aratchi

In 2013, Professor A. D. V. de S. Indraratne, the illustrious professor of Economics at Colombo, who was President of the Sri Lanka Economic Association, (they hold the 2023 sessions soon), along with his Committee, was prescient that the fiscal policies of the government might end in disaster and decided to devote the 2013 Sessions to explore ‘perils to sustained growth’ in the economy. The distinguished scholar and diplomat Jayantha Dhanapala was the Guest of Honour. I delivered the Keynote Address. The subject of my lecture was ‘Perils to Sustained Growth’.

Most economists then were troubled by the direction of fiscal and monetary policies at that time. They did not know for certain but were fearful that the massive public works that were undertaken with Chinese loans would not yield the output with which to service those loans. The greater part of the loans was to pay for burgeoning current expenditure. The government would hear none of those and went on with policies of large budget deficits.

A few weeks back, in a press release, the then President and Finance Minister and later Prime Minister of governments, shockingly took credit for reducing the tax revenue of the government year after year. It was shocking because whilst he reduced tax revenue of the government year by year, total government expenditure kept on growing. In a situation where tax revenue comprised more than 98 percent of total revenue of government, rising government expenditure had to be funded at the cost of a rapidly rising debt burden.

The debt from foreign sources had to be serviced with rising export income. Most alarmingly, the proportion of exports to GDP kept falling rapidly. Consequently, a budgetary crisis and a balance of international payments crisis would follow, as the day the night. It precipitated 2021-2022, when a President completely illiterate in economic policy reduced government revenue.

At the same time, he raised the demand for imports with agricultural policies that cut down the domestic food output. The fall in the output of export crops reduced import capacity. Little surprise that in 2022, the government had few choices but to declare bankruptcy.

In my Keynote Address in 2013, I laid bare the sequence of these likely events. I was surprised that policymakers took no notice of the clear warnings presented to them. I was shocked when the then President and Finance Minister, in late 2023, took credit for having actively contributed to that process of decay.

I had laid by that lecture because it was too long and ‘academish’ to be published in The Island, my usual outlet. (Most members of SLEA have higher degrees in economics.) There was no Review in Colombo that may have carried it. It was far too concentrated on Sri Lanka to be published in an international publication. However, after President Mahinda Rajapaksa’s claim, a few days ago, I thought I would seek the advice of the Editor of this newspaper on whether he and his readers would suffer the burden of reading that lecture. With his consent, I decided to publish it.

The text of the speech:

‘And so, we have gone on, and so we will go on, puzzled and prospering beyond example in the history of man.’Thomas Jefferson, 1812.How amazingly right Jefferson was: ‘puzzled and prospering beyond example in the history of man’! Yes, puzzled despite all the ingenuity of all economists since Adam Smith.

The central importance of sustained growth

The economic history of some parts of the world, during the last three hundred years, has been one of phenomenal economic growth. These parts include Europe, North America, Australasia and Japan. In 1,700 all people whether in Africa, Asia, America or Europe were more or less equally poor with a per capita income of about $700 per year at 1985 prices, less than $2 dollars per day. During the next 300 years these economies prospered ‘beyond example in the history of man’.

Much more recently we have had a large part of Asia, including China, Taiwan, India, Malaysia, and South Korea, Thailand and the two small economies of Hong Kong and Singapore grow at phenomenally high rates. In Latin America, after some spectacular growth at the turn of the 20th century, it is only recently that some countries have experienced sustained rapid economic growth. Africa is a late comer and there are signs that sub-Saharan countries finally may have begun to grow.

Sri Lanka has had a record of slow growth, ever since National Accounts began to be estimated but the last few years have shown an upturn in rates of growth. These rates of economic growth shorn of the fluff that the Central Bank tries to cover it with are not to be cavilled at. Your question at this session is how that higher rate of growth can be sustained, at least in the short term.

Let us not underestimate the central importance of fast economic growth to raise levels of living. C. Sivasubramonian (2000), [The National Income of India in the Twentieth Century, The Oxford University Press, New Delhi] estimated that the growth rate of GDP per capita 1901 to 1946-7 in India was 0.9 percent per year and the consequent rise in the GDP per capita was 0.1 percent per year.

At that rate you would have needed 700 years for GDP per capita to double! Contrast that with the experience between 2000-2001 and 2010-2011 when per capita GDP grew at 6.0 percent per annum. [These numbers are from Jean Dreze and Amartya Sen (2013), An uncertain Glory, India and its Contradictions, Princeton University Press, Princeton, NJ]. If that rate of growth were sustained over 35 years, living standards would rise eight times during the lifetime of an individual. However, recently we have seen perils to those high rates of growth.

‘… bang, confidence collapses, lenders disappear, and a crash hits.’

Perils to sustained growth have been studied over a long period of time. In the 20th century itself it was a major field of study. In those times this subject went under the title Trade Cycle. The last volume I remember is Robin Matthews’ ‘The Trade Cycle’ that came out in the year after I graduated. Wesley C. Mitchell’s ‘What Happens during Business Cycles’ had come out beyond the Atlantic much earlier in 1951. The subject is now studied as ‘Crises’, much of that literature coming out in America.

The most recent major study is Reinhart’s and Rogoff’s ‘This Time Is Different’ [2009], in which they studied debt default, whether domestic or foreign, which brought about crises that broke the process of sustained growth. Disruptions to growth arising from such crises are now the major threat to sustained growth, at least in the short and medium terms.

It was Reinhart’s and Rogoff’s conclusion after careful study that ‘… failure to recognize the precariousness and fickleness of confidence, especially in cases in which large short-term debts need to be rolled over continuously, is the key factor that gives rise to the ‘this-time-is-different syndrome’. Highly-indebted governments, banks, corporations or households can seem to be merrily rolling along for an extended period, when bang, confidence collapses, lenders disappear, and a crash hits.’ As you know this happened in the US and Europe in 2007-2008 and it almost took place in India in July-August this year.

The development of crises in the modern sense [the term has a respected longer-term usage] started in the 1970s. President Nixon freed the dollar from the price of gold in 1973. Petroleum exporting countries amassed large volumes of savings looking for financial investment opportunities. So was born the phenomenon of ‘petro-dollars’.

As emerging developing countries grew fast on the strength of exports, they amassed huge surpluses on the external account which formed sovereign wealth funds. The sum of such sovereign funds now probably exceeds $ 15 trillion sufficient to swamp any probable attempt to defend a rate of exchange of a country against adverse movements. And the electronic transfer of funds made it possible to jump from one market to another to profit from even small differences in interest rates, giving a new meaning to D. H. Robertson’s 1926 terms ‘money on wings’. Market opportunities became well known to advisors with the incredibly rapid transfer of information.

With these developments, major economic policies of countries, except those whose currency was acceptable for payment anywhere in the world and those others with huge exchange reserves, found their major domestic policies, ransom to market forces in international capital markets. India with $285 billion in foreign exchange reserves dared not defend the rupee against capital flight in mid-2013. Don’t take seriously the bravado here that $7 billion can do anything to protect the Sri Lanka rupee against even a small shift of short-term capital out of the country.

We spend more than we earn

I have used that extended quotation in the previous but one paragraph because the fundamental problem in our economy is that our economy spends more than it earns [GDP]. That gap is closed with resources from overseas. [This is explained extra-ordinarily well in Arvind Panagariya [2008], India, The Emerging Giant, Oxford University Press, Oxford].

A part of this gap is closed with savings of citizens of this country working overseas and remitting those savings to their home country, with foreign investments directly in the economy, another part with spare resources from accumulated foreign savings if any, and, in its absence, loans from overseas. In our case, in the domestic economy, the private sector does not invest all that it saves.

The government borrows a part of private savings to cover its own expenses. The balance savings it needs are borrowed from overseas. Our economy during the last five years has been accumulating foreign savings by borrowing from abroad, mainly to hedge against fast movements of short-term capital which comprise a part of our national debt. The flow of debt accumulates to form the foreign debt stock of the country. That part of the foreign debt owed by government has been high and fairly stable over the last few years.

To foreign markets and the short end of the market

There has been a marked shift to borrow from overseas and to borrow in the short term. This drive has been motivated by the need to keep interest on government debt in check because interest payments on government debt like all other government expenditure must come out of the Consolidated Fund to which all receipts of government in turn are credited.

Interest rates overseas continue to be lower than at home and interest rates at the short end are usually lower than interest rates at the long end. But these shifts to foreign sources and the short end itself are themselves fraught with serious risks. Any rise in interest rates in other markets shifts money sitting here short term immediately to fly to those other markets. Any loss of confidence in direction of domestic economic policy has the same consequences. To that degree, domestic economic policy is ransom to foreign investors.

Our governments have spent more than they collected in revenue for many years. In 2012, the ratio of total revenue of government to GDP was 13 percent and of total expenditure to GDP 20 percent. The ratio of government revenue to GDP has fallen consistently for several years. There has been some check on the growth of public expenditure, obviously not so severely as to bring down considerably the need to borrow from overseas. In any case, it is hard to make a case for cutting down government expenditure in this economy.

We know too much about the dreadful neglect of education and health in the aggregate and the dire need for reconstruction and development both in the Eastern and Northern Provinces and in the plantations in the central region. There must be immense restraint on the desire of an essentially populist government to control government expenditure in this manner.

Government cannot really cut down expenditure anymore without raising the ire of the public to boiling point. We are too close to what happened in Greece and Spain to risk that. Government must seriously consider why government expenditure on defence and public order and safety must remain at 15 percent of the total both in 2009 and 2012.

It certainly cannot raise government expenditure without first raising government revenue. It is the same populist inclinations which make it hard for government to tax people on whose vote it depends to win elections. Government has taxed heavily consumption of high-income groups. Without taxing the general public, it is in no position to raise revenue to pay for higher expenditure. And a populist government will not do it. That is the point at which long term growth becomes hostage to short term stability.

(To be concluded)



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The Truth will set us free – I

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Sri Lanka becoming a Macbethian sick state?

The traditional ritual of anointing medicinal oil (or ‘hisa thel gaema’ in Sinhalese, literally, applying oil to the head) is unique to the Sinhala Aluth Avurudda observances. This year, the ritual was performed at the auspicious moment of 9:04 a.m. (Sri Lanka time) on Wednesday April 16. It was observed at appointed venues across the country at the same time. The anointing was done, as usual, mostly by Buddhist monks in their monasteries.

Where they were not available for the purpose, a senior citizen would do the needful. The oil anointing ceremony was held to invoke blessings of good health on all the individuals who subjected themselves to the ritual. Prime Minister Harini Amarasuriya was shown participating in the oil anointing ceremony at the historic Kolonnawa Raja Maha Viharaya. There were many social media videos showing similar oil anointing scenes that included even elephants and hippos in a zoo receiving the compassionate treatment; this is not seen as going too far with traditions, for extending loving-kindness even to animals is taken for granted in the majority Buddhist Sri Lanka. Watching this ritual (that used to be so familiar for me in my childhood and youth) from abroad I couldn’t help my eyes filling with tears, feeling kind of homesick, in spite of me having spent more than forty-three years of my adult life living and working away from my Mother Country Sri Lanka.

Though usually Buddhist monks do the anointing, it is not considered a religious practice by the ordinary Buddhists. It is only a part of the completely secular Sinhala Aluth Avurudda festival. The most important annual religious festival for the Sinhalese (especially Sinhala Buddhists) is Vesak, which will be held next month. However, the oil anointing ceremony impresses on the Avurudu celebrants the great importance of maintaining their physical and mental health throughout the coming year, reflecting the high level of attention that our traditional culture pays to that objective.

Prof. Snyder

However, the actual discrepancy that is noticed between the ideal and the reality in the mundane world, as in other countries, is a different matter. Shining beacons like ideals of a long-evolved culture are important for what they are; their importance doesn’t go away because those ideals are only imperfectly realised by the people of that culture. But the values endure.

The news of this happy occasion and my awareness of a deepening political and cultural malaise in my beloved Motherland back home reminded me of a book I read during the Covid-19 lockdown period of 2020-2022: OUR MALADY by American historian and public intellectual, the Yale University professor Timothy D. Snyder published in 2020. The book, whose subtitle is ‘Liberty and Solidarity’, is about the weakness of the American healthcare system that he himself got a taste of, privately.

Professor Snyder came to know first-hand how America failed its citizens in the public healthcare sphere as an inmate of a hospital ward, where he was admitted to the emergency room at midnight on December 29, 2019. He was complaining of a condition of severe bodily ‘malaise’. Doctors later told him that he had an abscess the size of a baseball in his liver. The emergency operation to remove the abscess was done after seventeen hours of his having had to wait confined to a hospital bed!

‘Rage’ is the word he repeatedly uses to describe how he felt during his hospitalisation. He was not raging against God or any particular person or a group or the bacteria that caused his illness. ‘I raged against a world where I was not’, Snyder writes in the Prologue to the book (implying how much he was angry about there not being a healthy enough healthcare system to look after Americans who fell ill like himself. The book grew out of entries he made in a diary that he maintained while recuperating in hospital. Proficient in a number of European languages including English, French and Polish, he adopts a sort of poetic idiom to deal with his naturally dull subject.

He imagined he was not suffering in solitude, though. He thought about other Americans in his situation, and empathised with them. The absence of a sound healthcare system is America’s malady according to Snyder. Probably, the current situation in America is different, having changed for the better. We must remember that the time he is talking about was the last year of the first term (January 20, 2017-January 20, 2021) of the 45th US president Donald Trump of the Republican Party.

Currently, Trump is serving as the 47th US president. The ideas that professor Snyder develops in the book have global topical relevance, I think. They are organised into four Chapters or ‘Lessons’ as he dubs them, which in my opinion, have implications that could be utilised even by the citizens of the Macbethian ‘sick state’ that Sri Lanka has become today, complete with a Macbeth (though a muppet) and a shadowy but more determined Lady Macbeth.

Timothy Snyder offers the four Lessons for his fellow Americans, and by extension, to fellow humans around the world including us, Sri Lankans. Perhaps these are uniquely American issues, with little direct relevance to a small country like Sri Lanka with no stake in the international pharmaceutical industry. But then no country can escape from the implications of the following facts (taken from Wikipedia): In 2023, the global pharmaceutical industry earned revenues of US $ 1.48 trillion, whereas the top 10 arms manufacturing companies earned only US $ 632 billion. In the same year, the global life and health insurance carriers industry, which is the biggest industry in the world in terms of revenue, earned US $ 4.3 trillion.

Our own late medical professor Senake Bibile (1920-1977), a pharmacology expert and a rare philanthropist and compassionate social activist of the Trotskyite Sama Samaja party persuasion who always had the welfare of the suffering poor at heart, met his death allegedly in mysterious circumstances in Guyana where he was attending a UN conference, promoting the domestic drug policy that he had developed for Sri Lanka, as a model for use in other countries and by the World Health Organization (WHO), United Nations Conference on Trade and Development (UNCTAD), and the Non-Aligned Movement (NAM) for developing policies for ‘rational pharmaceutical use’.

It goes without saying that Sri Lankans are also highly vulnerable to the deleterious effects of the inhuman excesses of the purely profit oriented international Big Pharma; these harmful consequences get transferred to the innocent citizens magnified several times through the unholy alliance between the local corporate drugs mafiosi and corrupt politicians. Be that as it may, Snyder adds another three equally important related points, covering all four, each in a Lesson that must receive the utmost attention of all adult Sri Lankans: health care for children and children’s education, truth in politics, and the supremacy of the doctors’ role in a malady situation. We will look at these briefly, intermittently taking our eyes off America to reflect on our own country Sri Lanka.

Lesson 1 is ‘Health care is a human right’.

Despite its wealth, professor Snyder complains, America is a sick nation; life expectancy is falling for Americans. Moody’s Analytics suggests that US millennials will die younger than their parents or grandparents, though there is no lack of money spent. What is causing this decline in life expectancy? Snyder’s unsettling answer is that the American healthcare system prioritises profit over people’s lives. America still lacks a universal healthcare system, in spite of being a supporter of the Universal Declaration of Human Rights and this leads to unequal access to health care, as Snyder asserts.

Exorbitantly priced commercial medicine has a devastating effect on the protection of the health-care rights of the people. It has robbed the American citizens of their health, in Snyder’s view. The American health-care system’s profit-focussed approach and lack of investment in protective equipment for medical professionals jeopardised their safety during the Covid-19 pandemic. In America, 20 million people lost their jobs and over 150,000 died from pandemic. Health insurance became too expensive, and health care unaffordable. Without a diagnosis, many became dangerously ill or unknowingly infected others with the virus.

Though poor, Sri Lanka beats America in respect of looking after public health. It has a better record in providing satisfactory health care for the citizens. The state runs an almost 100% free medicare service for all the citizens. There is a (kind of) parallel paid private hospital system as well, that caters to the better off segment of the population that can resort to it if they prefer to do so. This potentially eases the burden on the free state medical services, which can then focus more on attending to the needs of the economically weaker section of the population.

The maintenance by the state of such a public welfare-based healthcare system is desired and supported by our dominant socio-cultural background that strongly resonates with the humanistic spirit of the Aluth Avurudda that prioritises health over all forms of wealth. This is embodied in the principle Arogya parama labha ‘Good health is the greatest wealth’, the antithesis of the American attitude towards citizens’ health.

Sri Lanka was among the handful of countries that contained the Covid-19 pandemic most efficiently, minimizing deaths, whereas in America, according to Snyder, flaws in the healthcare system were aggravated by the contagion. This led to more deaths in America than in other wealthy nations like Japan and Germany. But the not so well-to-do Sri Lanka escaped with a minimum number of Covid-caused fatalities amidst obstacles mounted by antinationalist ill-wishers as I saw it at the time. That is Professor Snyder’s Lesson 1, which is about the human right of easily accessible health care. Sri Lanka is actually ahead of America in this respect in spite of relative poverty.

by Rohana R. Wasala

(To be concluded.)

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Four-day work week; too much rigidity; respectful farewell  

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Large crowds attracted by the Dalada Vandana in Kandy. (Image Courtesy Hiru News)

I received a video that announced Japan was considering changing to a four-day work week. Suspicious of such news in my cell phone, I googled and found that certain countries had already opted for work weeks of four days and thus three-day weekends. This change too is a consequence of closedowns of work due to the Covid pandemic.

“Several countries are experimenting with or have implemented four-day work weeks, including Belgium, Iceland, Spain, the United Kingdom and Portugal. Other countries like Germany, Australia, Canada, the Netherlands and the US have also shown interest in, or have tested the four-day work week model.”

The video I got was about Japan changing its government work week to four days from mid-April with many projected objectives. One is to improve government employees’ work-life balance and to address the country’s declining birth rate. Also, the hours of the work day are to be reduced so parents can spend more time caring for their kids termed: ‘Childcare partial leave’. Flexible work hours for women to be implemented so choosing between careers and family will not be necessary.

In Germany experimental trials were carried out in 2023-24 involving 43 companies; 73% plan to continue with the new work structure. Noted for productivity and efficiency, Germany has in addition to one day less working, on average only 34 hours per week. A five-day week of 9 to 5 has 40 work hours per week. Fewer hours at work has been found to promote smarter and more focussed effort with employees happier and more engaged.

Long ago in the 1970s Cassandra shifted from employment in the private sector to a semi government job. She was shocked at the laissez faire attitude of her co-workers in an information centre. Most came to work at around 9.00 am: discussed the bus journey and home; had breakfast; read the morning newspapers; did a bit of work and were ready to have lunch by 12.00 noon. Two hours for this and half for a small snooze. Work till 3.30 pm or so when books/files were closed and grooming selves commenced, to depart at 4.30 pm sharp.

The work ethic in a remote government school and a private school in a city were as opposed to each other as the proverbial chalk to cheese. Do minimum against teaching; don’t care attitude to dedication and commitment; take leave to maximum vs hardly taking leave in consideration of the fact parents of students pay fees; non disciplining principals to dedicated pedagogues who set an example.

Cassandra supposes, and correctly, that with the change of government and a system change, even though many offices are overstaffed, employees put in a solid day’s work. The public is better served, most definitely.

Hence how would it be for Sri Lanka to lop off one work day a week? There will certainly be benefits, but aren’t many of us complaining about the presence of too many public holidays; we enjoy 24 to 30 a year including every full moon Poya Day. A travesty!

Pope Francis

The utter mayhem of Poya weekends

Those who lived through the period when the calendar in this overzealous Buddhist country went lunar (sic) and made the four Poya Days of a month and half the pre-Poya Day as the country’s weekend. It was a total mess since many a week had more than five week days in it till the moon changed from one phase to another. Ceylon was completely out of sync with the rest of the world. That was in 1966 with Dudley Senanayake as Prime Minister. Mercifully, in 1970, the Saturday Sunday weekend was reverted to, and sanity regained.

Conclusion is that making our week of four days’ work and weekend three days has to be carefully considered, tested and implemented, or kept as it is. Better it would be if government offices were pruned of excess staff recruited on politicians’ orders and genuinely legitimate officers made to work efficiently.

VVIP Mother in queue

A photograph made the rounds on social media of a frail looking, white haired lady in a queue in Kandy moving slowly to pay homage to the Sacred Tooth Relic. It was said to be President AKD’s mother who was hospitalised just a couple of months ago. Admired is her devotion as well as the fact she came incognito; not informing her son of her intended travel.

But Cass is censorious. Here was a genuine case of needing a bit of stretching of points and helping her to fulfil her desire to pay homage with ease. After all, he is working hard and very probably long hours to get this country on an even keel. He needs appreciation and if he refuses advantages, let a less able person benefit.

A truly honourable Pope

Roman Catholics across the globe mourn the death of the 266th Pope on the Monday after the Easter weekend; and the world respects and reveres him. People comment he must have willed himself to live through Easter, even presenting himself to crowds gathered in the huge grounds of St Peter’s Basilica.

Pope Francis was born Jorge Bergoglio on December 17, 1936, in Buenos Aires, Argentina. He was inspired to join the Society of Jesus or Jesuits in 1958 after a serious illness. Ordained a Catholic priest in 1969, he was the Jesuit provincial superior in Argentina from 1973 to 79. He became the Archbishop of Buenos Aires in 1998 and was created a cardinal in 2001 by Pope John Paul II. He was elected in the papal conclave following the resignation of Pope Benedict XVI as head of the Catholic Church and Sovereign of the Vatican City State in 1913, claiming many firsts: a Jesuit becoming Pope; first from America, from the Southern Hemisphere. He chose his papal name in honour of Saint Francis of Assisi, kind to all living beings. “Throughout his public life, Francis was noted for his humility, emphasis on God’s mercy, international visibility as pope, concern for the poor and commitment to interreligious dialogue. He was known for having a less formal approach to the papacy than his predecessors.”

We remember his visit to Sri Lanka from January 13 to 15, 2015, when he travelled to the Shrine of Our Lady of Madhu and canonized Sri Lanka’s first saint, Joseph Vaz. He conducted a Mass and bestowed blessings to the multitude at Galle Face Green. As he entered and left the Green, he placed his hands on the heads of infants, children, the very poor, the old and infirm; never mind oil and dirt on heads. A truly great and good person.

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Kashmir terror attack underscores need for South Asian stability and amity

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Security forces in India-administered Kashmir following the recent terror attack on tourists.

The most urgent need for the South Asian region right now, in the wake of the cold-blooded killing by gunmen of nearly 30 local tourists in Indian-administered Kashmir two days back, is the initiation of measures that could ensure regional stability and peace. The state actors that matter most in this situation are India and Pakistan and it would be in the best interests of the region for both countries to stringently refrain from succumbing to knee-jerk reactions in the face of any perceived provocations arising from the bloodshed.

The consequences for the countries concerned and the region could be grave if the terror incident leads to stepped-up friction and hostility between India and Pakistan. Some hardline elements in India, for instance, are on record in the international media as calling on the Indian state to initiate tough military action against Pakistan for the Kashmiri terror in question and a positive response to such urgings could even lead to a new India-Pakistan war.

Those wishing South Asia well are likely to advocate maximum restraint by both states and call for negotiations by them to avert any military stand-offs and conflicts that could prove counter-productive for all quarters concerned. This columnist lends his pen to such advocacy.

Right now in Sri Lanka, nationalistic elements in the country’s South in particular are splitting hairs over an MoU relating to security cooperation Sri Lanka has signed with India. Essentially, the main line of speculation among these sections is that Sri Lanka is coming under the suzerainty of India, so to speak, in the security sphere and would be under its dictates in the handling of its security interests. In the process, these nationalistic sections are giving fresh life to the deep-seated anti-India phobia among sections of the Sri Lankan public. The eventual result will be heightened, irrational hostility towards India among vulnerable, unenlightened Sri Lankans.

Nothing new will be said if the point is made that such irrational fears with respect to India are particularly marked among India’s smaller neighbouring states and their publics. Needless to say, collective fears of this kind only lead to perpetually strained relations between India and her neighbours, resulting in regional disunity, which, of course would not be in South Asia’s best interests.

SAARC is seen as ‘dead’ by some sections in South Asia and its present dysfunctional nature seems to give credence to this belief. Continued friction between India and Pakistan is seen as playing a major role in such inner paralysis and this is, no doubt, the main causative factor in SARRC’s current seeming ineffectiveness.

However, the widespread anti-India phobia referred to needs to be factored in as playing a role in SAARC’s lack of dynamism and ‘life’ as well. If democratic governments go some distance in exorcising such anti-Indianism from their people’s psyches, some progress could be made in restoring SAARC to ‘life’ and the latter could then play a constructive role in defusing India-Pakistan tensions.

It does not follow that if SAARC was ‘alive and well’, security related incidents of the kind that were witnessed in India-administered Kashmir recently would not occur. This is far from being the case, but if SAARC was fully operational, the states concerned would be in possession of the means and channels of resolving the issues that flow from such crises with greater amicability and mutual accommodation.

Accordingly, the South Asian Eight would be acting in their interests by seeking to restore SAARC back to ‘life’. An essential task in this process is the elimination of mutual fear and suspicion among the Eight and the states concerned need to do all that they could to eliminate any fixations and phobias that the countries have in relation to each other.

It does not follow from the foregoing that the SAARC Eight should not broad base their relations and pull back from fostering beneficial ties with extra-regional countries and groupings that have a bearing on their best interests. On the contrary, each SAARC country’s ties need to be wide-ranging and based on the principle that each such state would be a friend to all countries and an enemy of none as long as the latter are well-meaning.

The foregoing sharp focus on SAARC and its fortunes is necessitated by the consideration that the developmental issues in particular facing the region are best resolved by the region itself on the basis of its multiple material and intellectual resources. The grouping should not only be revived but a revisit should also be made to its past programs; particularly those which related to intra-regional conflict resolution. Thus, talking to each other under a new visionary commitment to SAARC collective wellbeing is crucially needed.

On the question of ties with India, it should be perceived by the latter’s smaller neighbours that there is no getting away from the need to foster increasingly closer relations with India, today a number one global power.

This should not amount to these smaller neighbours surrendering their rights and sovereignty to India. Far from it. On the contrary these smaller states should seek to craft mutually beneficial ties with India. It is a question of these small states following a truly Non-aligned foreign policy and using their best diplomatic and political skills to structure their ties with India in a way that would be mutually beneficial. It is up to these neighbours to cultivate the skills needed to meet these major challenges.

Going ahead, it will be in South Asia’s best interests to get SAARC back on its feet once again. If this aim is pursued with visionary zeal and if SAARC amity is sealed once and for all intra-regional friction and enmities could be put to rest. What smaller states should avoid scrupulously is the pitting of extra-regional powers against India and Pakistan in their squabbles with either of the latter. This practice has been pivotal in bringing strife and contention into South Asia and in dividing the region against itself.

Accordingly, the principal challenge facing South Asia is to be imbued once again with the SAARC spirit. The latter spirit’s healing powers need to be made real and enduring. Thus will we have a region truly united in brotherhood and peace.

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