Proceed with caution: Is Sri Lanka’s Approach to Import Substitution Sensible?
A Pathfinder Perspective
In the immediate aftermath of the onset of the Covid19 pandemic and the unprecedented health and economic crises it unleashed, there was a widespread backlash in sentiment against globalization and open economic policies. The greatly increased human mobility associated with these phenomena were blamed for the rapid spread of the virus to all parts of the globe. The supply-side shocks, related even to basic goods, such as food and medicines, as well as demand pressures emanating from a rise in protectionism, were seen as being the result of the complex supply chains that underpinned the web of cross-border production networks that constitute a major part of the global economy on the one hand and the destruction of employment and incomes in an integrated world economy on the other.
However, as time passed, there has been a shift in sentiment. The focus has shifted to seeking ways and means of maintaining the substantial gains of globalization, while reducing the risks that were exposed and amplified by the pandemic. On the health front, the extraordinary achievement of scientists in developing highly efficacious vaccines, in record time, has created the very real prospect of opening up global mobility again. This has been supplemented by the exponential acceleration of remote working and living. On the economic front, the focus has been shifted from efficiency to resilience in maintaining global supply chains. There has been diversification as well as shortening of supply chains. On the demand side, the unprecedented policy actions of Treasuries and Central Banks around the world has propped up businesses and livelihoods to an extent where a relatively strong recovery, though multi-speed, is being seen in the world economy. These trends explain why there has been a shift in sentiment, as mentioned above.
While protectionist pressures are still present, the case for an open and rules-based international trading system is being reinforced, led by China. The Biden administration has also taken measures to revive the World Trade Organization, including through the appointment of a former Finance Minister of Nigeria, and Managing Director of the World Bank, as the first female head of the institution. The dispute resolution panel of the WTO is also being reconstituted. Protectionist sentiments and a shift to autarkic (national economic self-sufficiency) policies were also ascendant in Sri Lanka. The world seems to have realized that it is not advisable to “throw the baby out with the bath water.” It is important that Sri Lanka absorbs this lesson as well.
It would be useful to trace the evolution of the thinking on import substitution and to examine briefly some of its sub-optimal practical outcomes. A paper by Douglas A Irwin, titled “The Rise and Fall of Import Substitution,” (Working Paper, Peterson Institute for International Economics; July 2020) traces the evolution of the thinking on import-substitution. Import substitution policies initially came to the fore in the early 1950s. It is probably no coincidence that they gained salience at a time when decolonization was gathering momentum. The ex-colonies sought to augment their political freedom with policies that reduced their dependence on the metropolitan centres. Many developing countries came to the conclusion that import substitution was the best trade strategy to promote industrialization and economic growth within a global economic system based on colonial structures that was geared very much against them through exploitative trading relations. Raoul Prebisch, based at the UN Economic Commission for Latin America, is widely recognized as the father of the import-substitution industrialization (ISI) strategy. However, he and other leading contemporary figures in development economics, in the 1950s, identified fairly quickly some of the weaknesses of import substitution policies in practice.
Import controls, particularly on manufactured goods, did not necessarily conserve foreign exchange as intended; rates of tariff protection were high, resulting in a misallocation of resources and higher priced and poor quality products for consumers; small and inefficient firms were created that served only domestic markets, and taken together, these policies became an obstacle to promoting exports. These shortcomings are relevant even today. Prebisch’s own views changed by the 1970s. It can be argued that the intellectual demise of import substitution had taken place by the 1970s.
The Pathfinder Foundation believes that there is considerable evidence that openness to trade increases the growth, employment and incomes trajectories of economies. It is noteworthy that the unleashing of the potential of Asian economies (particularly in East and Southeast Asia) was greatly facilitated by two of the key pillars of globalization: liberalization of trade and capital flows. This enhanced the capacity of countries to take advantage of the opportunities created by rising external demand. The successful countries of Asia were able to attract FDI, with its capital, market access and know-how, to drive export expansion and take advantage of this increasing external demand brought about by globalization.
In practice, countries as large as China or as small as Singapore have been able to transform their economies through this combination of increased FDI and rising exports. In this context, it is noteworthy that the coastal regions of China, which were significantly more integrated with the world economy, have experienced far more dynamic growth and development than the hinterland, which is significantly less integrated, and more backward. The experience in China vividly illustrates within one country the tangible benefits of policies which are open to greater integration with the global economy.
It is also important to learn lessons from historical experience closer to home. The inward-looking policies adopted by Sri Lanka in the 1970s resulted in a low-investment, low growth and high unemployment syndrome. Long queues for even essential goods were emblematic of this period. The benefits of liberalizing the economy in 1977-78 have been curtailed by the three- decade-long civil conflict and the partial nature of reforms due to a lack of political consensus around policies that attract FDI and promote exports. Weak implementation has also amplified poor overall performance. The time has come to have a concerted and holistic approach to transforming the Sri Lankan economy.
In today’s world of ever-increasing climate and other risks, there is a case for attaching high priority to food security. Well-targeted import substitution policies in agriculture can be justified on these grounds. However, the overarching focus should be on increasing productivity to avoid imposing high prices and poor quality on the consumers. The paddy sector reveals what should not be done. Sri Lanka has now reached self-sufficiency in rice production in most years. However, the outcome has been a long tale of low productivity, low income farmers whose subsistence has to be secured by inefficient and costly subsidies as well as guaranteed prices. Lessons need to be learned from past experience to avoid the same mistakes in the present and future.
In conclusion, the Pathfinder Foundation believes that it is encouraging that the most senior policy-makers have been stressing the need to develop “a production economy” driven by FDI and exports, along with a high-productivity agricultural sector. These goals should not be derailed by vested interests which focus on rent-seeking activity based on import restrictions. History, in Sri Lanka and elsewhere, teaches us that the outcomes will inevitably be bad.
The Pathfinder article is available at www.pathfinderfoundation.org for online reading. reading
SUSTAINING ECONOMIC PROGRESS AND OBTAINING ‘SYSTEM CHANGE’
by Jehan Perera
A year after the protest movement took off into a mammoth public display of the popular desire for change, it appears to be no more. What appears on the streets on and off is a pale imitation of the mighty force of people rich and poor, from north and south, who occupied the main roads of downtown Colombo for more than three months. The government under President Ranil Wickremesinghe is leaving no room for the people to get on the streets again. This has been through a combination of both efficient and repressive policies that exceed those of the predecessor government.
The government has addressed the immediate causes that brought the people out on to the streets. The crippling shortages of vehicle fuel and cooking gas that caused long lines stretching for kilometers are not to be seen. There is enough to go around now as the demand for these basic commodities has dropped considerably following the tripling of their prices. There is an outward appearance of normalcy that belies the economic difficulties that the masses of people are facing. The three-wheel driver lamented that his monthly electricity bill of Rs 700 was now Rs 3200 which made keeping his refrigerator unaffordable. Government officers on fixed incomes are struggling to survive having pawned their jewellery and mortgaged their lands for survival. Those who can leave the country seem to be leaving.
The government has also shown it is prepared to use the security system to its maximum. This has won some supporters especially among the upper social classes and ethnic minorities who are always worried whether mobs of the under classes will invade their neighborhoods and subject them to looting and violence. After becoming president, President Wickremesinghe showed his resolve in bringing the protest movement to heel by sending the police to break it up and arrest the leaders. Protestors have been warned that their protests should not inconvenience the general public.
Those who do not heed the police guidelines have found themselves being tear-gassed, baton-charged and arrested. In contrast to the heyday of the protest movement a year ago, any voice of public dissent is liable to be quickly suppressed. A case in point would be that of the unfortunate hooter. As reported extensively in the media, a government minister who was laying a foundation stone for a religious shrine was hooted by a businessman who was travelling in his vehicle. The media reported that “the police acted swiftly, pursuing and apprehending the suspect. He will now be produced before the court for obstructing a religious ceremony.”
The contrast with what happened a year ago could not be more stark. The main slogans of the Aragalaya protests was to arrest the rogues who had bankrupted the country and compel them to bring back to the country their ill-gotten gains. The draft Anti-Terrorist law that has been approved by the Cabinet to replace the Prevention of Terrorism Act is, in many ways, a more repressive law that will encompass a much wider swathe of social and political life. Clause 105 in it defines a “person” who can be taken into custody under this law to mean an individual, an association, organisation or body of persons.” Readers of George Orwell’s classic novel of authoritarian government, “1984” would feel a chill if that new law is passed when they think of protesting against the government.
A key demand of the protest movement last year was the demand for “system change.” At its core this was a desperate call for a change of government that had bankrupted the country and accountability and punishment for those who had impoverished the people by their mis-governance, corruption and indifference to the people’s plight. Another terminology for “systems change” would be to say that the people called for a new “social contract.” The notion of a social contract between rulers and ruled was developed over four centuries ago in Europe by Enlightenment era thinkers such as by John Locke in England and by Jean-Jacques Rousseau in France who gave the name “The Social Contract” to his 1762 book.
The social contract theorists argued that people left the state of nature where without government life was “solitary, poor, nasty, brutish and short” (as described by their predecessor Thomas Hobbes). People entered into a social contract with those who would govern them. In terms of the social contract, the people would give up some of their rights and freedoms in exchange for protection and order by the government. In modern democracies, people elect their representatives who form the government of the day and look after the best interests of the people. But in March 2022, the people of Sri Lanka felt hat their government had not lived up to the social contract and demanded they leave office and return their ill-gotten gains.
Those who continue to come out on the streets in protest demand elections and also demand to know why the government has not made efforts to bring back the money that was stolen. What is visible at the present time is that most of the government members who were responsible leaders of the previous government continue to remain in positions of power, either frontally or behind the scenes. There continue to be allegations of corruption and abuse of power. In one appalling instance, two government ministers resigned from a watchdog committee they were appointed to. They complained that they were not getting the information they required to play their assigned roles.
Sri Lanka has yet to address the monumental failure of government that took place in the early part of 2022 that plunged the country from a middle income level to a low income level. When the people went out on to the streets to protest and call for a “systems change” they were demanding that the government should step down and go. But it did not go and instead re-arranged itself and continues to be in power. Much to the chagrin of the protest movement, the government they wanted to go has grown stronger under the leadership of President Ranil Wickremesinghe and is ignoring the demand for “system change” and those who call for local government elections which are overdue.
Speaking to students at Harvard University last week through the internet, President Wickremesinghe made it known that the government would abide by the Supreme Court’s decision with regard to the elections. A confrontation involving the three branches of government would signify a “systems breakdown” in place of the “systems change” that people fought for a year ago. The president has also taken pride in announcing that the government will soon be passing into law the best anti-corruption legislation in South Asia in parliament soon. If the president’s vision of sustainable political stability and economic recovery is not to be a re-enactment of the Orwellian dystopia of 1984, there needs to indeed be a “systems change”, a plan for the future prepared in consultation with the opposition and civil society and a new “social contract” in which elections would be the first step.
Free Education, Social Welfare and the IMF Programme
by Ahilan Kadirgamar
Sri Lanka’s seventeenth IMF agreement sealed last week may well prove to be the most devastating one of them all. The reason is that the agreement comes along with Sri Lanka having defaulted on its external debt for the first time in its history. The IMF amounts to being the arbiter of the debt restructuring process with Sri Lanka’s external creditors, which will provide considerable leverage for Sri Lanka to be held accountable to IMF conditionalities.
The fallout of the IMF package will be wide and deep, greater than the Structural Adjustment Programm e with the IMF in the late 1970s, when our cherished social welfare system came under attack. In this Kuppi column, I address some of the dangers facing our education system. Education is inextricably linked to welfare and democracy, and in the years ahead the nexus of the IMF and the current avatar of the neoliberal state are likely to impose an authoritarian regime of dispossession. The future of Free Education in our country now depends on tremendous resistance by our students and teachers along with solidarity from all quarters of the working people.
Welfare and democracy
Social welfare in Sri Lanka reaches back to the 1940s. It included food subsides, free education and free healthcare, which were all universal schemes. The IMF packages and the World Bank programmes since the neoliberal turn in the late 1970s have consistently attempted to weaken such universal social welfare programs in the interest of creating a market economy, including through the commercialisation of education and healthcare. Neoliberal ideology privileges the individual, and by the same token places the entire burden of wellbeing on the individual. As the British Prime Minister Margaret Thatcher—who, along with US President Ronald Reagan, initiated the neoliberal age on a global scale—famously said, “there is no such thing as society”.
This rejection of society is at the heart of the attack on social welfare, as the IMF and World Bank are now in the process of changing the very idea of social welfare itself into a narrow concept of targeted cash transfer programmes. This attack on the social aspect of welfare entails both granting enormous discretionary power to those in power to determine which individuals can obtain minimal support, in addition to the monetisation of such entitlements, which over time would likely be reduced or inflated away.
Historically, universal social welfare came after the policy of universal adult franchise in 1931. Furthermore, universal free education policies, as they emerged in the mid-1940s, were framed in terms of strengthening the ability of Sri Lanka’s citizens to exercise power through their democracy. In this context, today’s attack on universal social welfare is a key part of the agenda of an illegitimate and undemocratic regime in power. Moreover, the regime’s vision of the education system derives from the IMF’s technocratic assumption that the goal should be to create subservient employees for a market economy, rather than democratic-minded people who can become agents of social, economic and political change.
Austerity, dispossession, and resistance
The attack on education is not only ideological, in terms of the neoliberal emphasis on individualism. The austerity measures that are inherent to the current IMF programme are also material. They are bound to reduce the allocations for education. The Government is being forced to find avenues to create a primary budget surplus by next year. This will further lead to initiatives for the commercialisation of education; for example, the expansion of fee-levying programs in the state university system, loan schemes for education, and the initiation of private educational institutions, including private universities.
The logic of the IMF programme and the unfolding developments will dispossess people of one of their most important social welfare entitlements: education. There is already evidence of rising school dropouts, of children not being sent regularly to school, children fainting at school due to the lack of food, and children having to labour for their existence. University students are finding transport costs unaffordable and even lunch packets are becoming out of their reach. These are the consequences of a contracting economy due to the austerity measures that have been imposed. Indeed, our economy has contracted by as much as a fifth over the last few years. The critical gains of social welfare made after the Great Depression of the 1930s in our country are now in danger of being completely rolled back because of the ongoing economic depression along with the IMF programme making it worse.
The dismal prospects for our country can only be addressed by solidarity and resistance. We need to regain our sense of social belonging, which was undone through the very attack by neoliberalism on the idea of society, while taking forward the struggle for democracy. The great struggles last year that dislodged an authoritarian populist president provide hope that despite decades of neoliberal policies, working people’s capacity to envision society, solidarity, and resistance are very much alive.
We are going through the most painful period of our postcolonial history. It is a moment in which, even as our economy is collapsing, our elite are working in cahoots with the IMF and global finance capital, which have achieved a stranglehold on us by leveraging the default and the bankrupt state of our country. In the context of this existential danger, for those of us concerned about safeguarding free education and, for that matter, any meaningful system of education, this time around that struggle must begin from a broader defence of social welfare and democracy.
The author is attached to the Department of Sociology at the University of Jaffna
Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.
The Box of Delights – II
Seeing through testing times and future
Text of the keynote address by Prof Rajiva Wijesinha
at the 8th International Research Conference on Humanities and Social Sciences,
University of Sri Jayewardenepura on 16 March, 2023.
Sadly, too, the GELT materials we produced are now forgotten, though in the end they were taken up by Cambridge University Press in India and prescribed too at some Indian universities. But in this country producing materials is a way of making money and so, though three years ago the UGC asked about using our materials again, they were prevented from making use of these, and individual universities demanded autonomy and nothing went forward as swiftly as our poor youngsters needed.
Delay also affected the curriculum reform I initiated when I chaired the NIE AAB [Academic Affairs Board]. I had told the then Education Secretary Tara de Mel that we should move immediately, but for once that normally efficient lady was diffident, and said we should wait. Six months later she told me to go ahead, and we did, swiftly, but then Chandrika Kumaratunga lost a year of her Presidency through carelessness and the new President and his Minister simply did not understand the need for continuity, and the vital changes we had embarked on were forgotten.
But Mahinda Rajapaksa and Susil Premjayanth did continue with perhaps the most important initiative begun under Tara—the English medium in secondary schools in the government system. That had begun in 2001, but was sabotaged by Ranil Wickremesinghe, who became Prime Minister at the end of that year. But his Minister of Education, Karunasena Kodituwakku, a former Vice-Chancellor of this University, was more enlightened, and ignored Ranil’s instructions that he halt the programme, and it continued. He was lucky not to be tear-gassed, but, in those days, there were some restraints on unbridled authority with the forces then more supportive of alternatives.
But the teacher training programme I had started with support from Paru and Oranee, had to stop. The NIE then took that over and completely destroyed the learner friendly approach we had initiated, with its hierarchy promoting formulas, such as three Ts and then five Es and seven Ks, gloriously asserted in lengthy sentences such as ‘Also the teacher should closely observe the children learning, identifying students’ activities, disabilities, providing feedback, developing the learning capacities of the students and making implements to extend the learning and teaching outside the classroom are some other tasks expected from the teacher.’
As I commented on this in English and Education: In Search of Equity and Excellence?, ‘It might seem churlish to cavil about the two main verbs in this sentence, were this not an instructional guide to English teachers, with three language editors who have doubtless been well paid for their pains, or the lack of them.’
Training then was in the hands of the NIE, and the programme began to flounder. But, fortunately, the contract to produce books had been for two years, and Nirmali continued in charge of this, so at least a good foundation was laid, though after that the Ministry and the NIE took over and the usual tedious stuff was reintroduced. Our efforts to introduce wider knowledge, and creative thinking, were abandoned totally, unsurprising given the ignorance I had found in those entrusted with producing textbooks at the NIE (which managed once to produce a history syllabus which left out the French and the Industrial Revolutions in the whole secondary school curriculum). Let me, to prove my point, give you an extract from what the NIE managed to produce
‘Red the story …
Hello! We are going to the zoo. “Do you like to join us” asked Sylvia. “Sorry, I can’t I’m going to the library now. Anyway have a nice time” bye.
So Syliva went to the zoo with her parents. At the entrance her father bought tickets. First, they went to see the monkeys
She looked at a monkey. It made a funny face and started swinging Sylvia shouted.
“He is swinging look now it is hanging from its tail it’s marvellous”
“Monkey usually do that’
And, so it seems does the NIE, was my comment. Unfortunately, I cannot in a speech make clear the carelessness with regard to punctuation and spelling, but a printed version will show just how appalling the NIE usage of English is and the callousness of inflicting half-baked stuff on our children.
Despite all this English medium has survived, but that it could have done so much better is obvious from the continuing proliferation of private English medium schools. Interestingly, the former Permanent Secretary to the Ministry of Education, Dharmasiri Peiris, whom I met after many years, reminded me that in the early nineties he had wanted me to work at the Ministry to remedy the situation, but he had abandoned the effort when officials at the Ministry opposed this, understandably so given that I do not tolerate nonsense. And though Tara was made of sterner stuff, and did make use of my services, two changes of regime before things could be consolidated meant that our children still get short shrift as far as English Language Learning is concerned.
I have spoken thus far of English at university level and in schools. I have also worked on English for vocational training, first thirty years ago when the World University Service of Canada commissioned a basic textbook for those starting on vocational training, then more comprehensively when I chaired the Tertiary and Vocational Education Commission.
Having discovered that what were termed NVQ Levels 1 and 2, supposed to prepare youngsters for vocational training, hardly existed, I started Career Skills courses at those levels, to develop other soft skills and in particular English capacity, and these rapidly became the most popular courses in the system. After all, I had done a trawl and found that parents wanted something for their children to do in the fallow period after the Ordinary Level examination. Uniquely, Sri Lanka wastes the time of its youngsters by delaying the resumption of school, a boon to the tuition industry which embarks on recruitment and hooks youngsters for the next few years.
Needless to say, when I was sacked, the English courses were abolished, and successive Ministers of Education, who now have charge also of vocational education, bleat about the need for more English but do nothing to promote this. Least of all do they think of learning from the past, and far from reinventing the wheel, they simply talk about movement while allowing all means of transport to be dismantled, with parents and children who have been left in the lurch turning if they can to private education, tuition in particular.
As your former Vice-Chancellor perceptively put it, when I was last here, the education system is abandoned by those who have the means to pursue alternatives, and it is only the most deprived who cling to it. And whereas any country with a conscience would do its best by the deprived, decision makers in Sri Lanka do not care about them – like the Mr Lokubandara, who ranted against English in the state system and sent his son to an international school, and then when I reprimanded him told me sanctimoniously that it was his wife who had insisted on that.
Is there then no hope? I fear not, and now I can understand the despair of Mabel Layton in Paul Scott’s brilliant analysis of the failure of the British in imperialism, and her lament that “I thought there might be some changes, but there aren’t. It’s all exactly as it was when I first saw it more than forty years ago. I can’t even be angry. But someone ought to be.”’ I rather fear then that your Vice-Chancellor’s observation will prove even more apposite in the years to come. There was a brief moment three years ago, when covid first hit us, when I thought the system would bestir itself to provide alternatives, but I fear nothing of the sort happened.
But let me end now with what should have happened. Given that the onset of covid saw closure of schools and institutions, there should have been efforts to develop curricula appropriate for a time when face to face contact would not be easy. And this required, as I started by saying, thinking as learners do, and tailoring the content of curricula, as well as systems to convey it, to the abilities of learners, not teachers.
This was particularly important in the context of 2020 in which learners had limited access to teachers. But our decision makers could not think on these lines, nor understand that the key to this was simple materials, that are not just user friendly but that will allow learners to gain not only knowledge but also relevant thinking skills on their own. Provision could and should have been made for guidance, but this had to be minimal, and also provided through small group clusters, where students could learn from each other, in addition to getting guidance at a higher level as available. I recall vividly the brilliant initiative of Oranee Jansz, in insisting that all GELT students not only did a project, but that they dramatized this. This proved a wonderful motivating factor, and students in the remotest of areas worked hard together, and the synergy they developed, to use one of Oranee’s favourite words, led to rapid learning by even those who had been initially very weak.
Such a system was especially important for youngsters in rural communities, and could have been activated in 2020, at a time when communication was difficult, and where the panacea authorities developed, of online contact, was not easy, and in many instances not even possible. But as I have noted, those rural communities are of no concern to our decision makers, whose main motivation is to have their children advance through educational systems different from those the majority of our children have to undergo. They are not at all like Oranee, or one of the academics I remember most fondly from my time at this university, Prof Wickremaarachchi, who started an accountancy course in English medium only, and noted that one had failed as a teacher if one’s students did not end up better than oneself.
To continue, in the midst of a country in a desperate plight, with the positives this university could develop, I will revert to the last time I was here, in December, and highlight again the initiative I mentioned when I began, to work through the national library system to promote English through entertainment for early learners. The project which has been developed suggests at last, after two decades, an effective approach to extending opportunities and means of learning.
This can easily be taken further, at all levels – and work on this has begun – to fill gaps that the state has sedulously ignored for several decades. Costs would be minimal, if only innovators such as the personnel here responsible for the initiative were given a free hand. I can only hope that, with the support of the hierarchy here, and the other players who have combined to take this forward, from the Governor of the Northern Province to the Chairman of the National Library Services Board, that this initiative will lead to the proliferation of user friendly materials and personnel able to use them productively.
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