Governor of the Central Bank of Sri Lanka, Dr. Indrajith Coomaraswamy stated that the Government was in the process of attempting to deepen and widen the agreement with India to include services, investment, training and technology, in addition to goods.
Dr. Indrajith Coomaraswamy expressed these sentiments upon addressing the inauguration ceremony of the Sri Lanka Economic Summit of 2017 as the keynote speaker of the event.
His speech addressed the three aspects of changing approaches to policy, changing focus, and changing business models, in order to transform the economy.
Addressing the first aspect of changing business models to transform the economy, Dr. Coomaraswamy stated that even though the country could not afford to focus on low labour cost manufacturing, Sri Lanka could still become competitive in other areas of manufacturing.
He urged the public to not focus on the negatives, and instead rationally ask themselves if we were going in the right direction.
If we are going in the right direction, I would urge you to put your money here rather than in Bangladesh or in Fiji or in Ethiopia, he said.
Dr. Coomaraswamy also remarked how upsetting it was that foreigners were investing in the Sri Lankan stock markets and yet the domestic private sector still had their “wallets tightly buttoned down”.
Speaking on transforming the economy through policy change, he stated that the country needed a much more “forward-looking” monetary policy.
“What we really need to do is to get away from the past practice of having an overvalued exchange rate” Dr. Indrajith Coomaraswamy said, citing the overvalued exchange rate as unsustainable, and explained that the exchange rate must be set in such a way that it was market-oriented.
During his keynote address, the Central Bank Governor also proceeded to commend how the Customs process was being improved through computerization and technological involvement.
Speaking on trade policy and the Government’s relevant role, he stated that the Government had for the first time put out a trade policy framework which was a “coherent and well-written” 20-page long document that outlined the Government’s trade policy.
He added that the Government had also introduced an anti-dumping bill in order to provide domestic producer protection which he said was now well-underway in terms of legislation.
“There is no [other] country in the world which has got preferential access to China, India [as well as] Europe,” he said, and added that the preferential access must be leveraged in order to attract investment to the country.
Addressing the importance of the private sector, he then proceeded to highlight the fact that the private-sector catered towards invaluable services such as banking, telecommunication, health and education, and added that it was also the dominant producer of exports in almost every single economy.
Export transformation is absolutely crucial for us to address debt problem and achieve 6-8% growth going forward, the Governor said.
Meanwhile, the State Minister of Finance, Eran Wickrsmaratne, upon addressing the gathering at the inauguration ceremony of the Summit, spoke about ‘transformation’, citing its meaning to be “a lot of hard work,” and explained that it was about possessing the data, the knowledge, the skills, and the ability to actually deliver an output.
“We have a Meteorological Department which tells us about the flood after the flood has come”, the State Minister said, drawing attention to the difficulty posed in the obtaining of data and information, and emphasized that Sri Lanka needed to be more scientifically based.
“We need the information; we need the research.”
The economy is getting into place, Wickramaratne stated, acknowledging that there were issues, but that on the bright side, inflation was going in the right direction and the current account deficit was steadily reducing.
Furthermore, the State Minister also declared that the Hambantota Port Bill would be signed, stating: “We have negotiated, and we have negotiated hard.”
I do not agree with investments in Hambantota, he said, adding that he thought they were “big mistakes”.
However, measures must be now taken to ensure that the maximum advantage is derived from the already buried investments, he stated.
Providing statistics, Wickramaratne illustrated that the budget deficit had come down from 7.6 in 2015 to 5.4 in 2017, and added that it was well on the way towards the long-term target of reducing to 3.5.
“It’s not that we cannot deal with the issues on the street,” he said.
“We are trying to deal with the issues on the street in keeping with the mandate that we have received – that’s really the struggle in this period in which the country is transforming this economy.”
The State Minister then mentioned that the Foreign Exchange Bill would be passed during the course of this week, simultaneously doing away with the “decade-old Exchange Control Act,” and cited it as a “conceptual move away from exchange control to exchange management”.
He also stated that the new Inland Revenue Act presented in Parliament would take away discretion from ministers, and move towards a rule based system.
The Audit Bill and the Customs Ordinance will be put forth in near future, he added, in an effort to cite how the legislative framework was being reinforced before delving into the next budget.
In closing, he drew attention to the procurement process, and stated that e-procurement should be introduced as practiced in countries such as Bangladesh, India, Nepal and Afghanistan which had progressed ahead of Sri Lanka.
Meanwhile, Deputy Minister of Policy Planning and Economic Development, Dr. Harsha de Silva stated that Sri Lankan economic growth had been reasonably strong, but added that the country had “messed up [the] export equation”.
“Unless we fix it we are not going to go anywhere,” he said.
Reiterating the sentiments brought out by his preceding speakers, he also stated that Sri Lanka must refer to data, analyse data and figure out what was right and wrong, without making baseless decisions.
“SL to me is not a South Asian country. Sri Lanka to me is an Indian Ocean country. Unless we are able to leverage that god-given advantage, we will meander along.”
Speaking at the first session of the Sri Lanka Economic Summit of 2017, the Minister of Public Enterprise Development, Kabir Hashim, in response to a question directed at him, responded by stating that there were state-owned enterprises which, due to poor management, lack of financial discipline, and politicization, were raking up large losses on account of mismanagement.
However, he pointed out that all state-owned enterprises were not there to merely make profit, explaining that they also had a social role.
The question therefore, he said, was whether the loss was on account of said social role or mismanagement, of which he cited the latter to be problematic.
Furthermore, Hashim also expressed his lack of faith in privatization “in the real sense”.
Citing an example to show that there were instances where the state also had the capability to be competitive, he pointed out how the American state of Chicago outsourced the state’s garbage collection programme to a private company it collapsed, resulting in the Government vesting it back, whereupon the collection became much more efficient than it was in the hands of the private sector.
He therefore explained that the authorities were now looking into public-private partnerships to professionalize management.