Photo courtesy of UN Habitat
During this campaign year there are various discourses by political parties and alliances about how to develop the country or bring development in order to address the current problems faced by the people, institutions and the government. The Central Bank has its own formulae to address the debt problem. The NPP, which is headed by President Anura Kumara Dissanayake, has suggested improvement of local production along with support for export oriented manufacturing. Local participation in such efforts is also to be encouraged. One of its aims is to support those who are struggling to maintain a descent quality of life with social welfare. In this article I will explore the types of development suitable for a country such as Sri Lanka that has pursued neoliberal economics policies since late 70s. Not many people talk about whether the current predicament is due to the following such policies.
Neoliberal economic policies and their effects
Neoliberal economic policies can simply be described as free market policies where the government facilitates economic development led by investors – local and foreign – to provide solutions to consumer needs. Unlike in centrally controlled countries such as socialist-communist ones or those led by dictators, ideally the government is supposed to keep its controls to a minimum and let the private sector do the job. This means that any regulations and red tape delaying approvals for development projects are to be removed. In case of foreign investors, mainly Multinational Corporations (MNCs), incentives such as tax holidays, concessionary infrastructure facilities and water and electricity are also offered. Such companies import the raw materials, manufacture products such as textiles by using cheap labour in the country and export to economically developed countries in Europe, USA and elsewhere. The profits go to share holders in these countries. The benefit for the country is that hundreds and thousands of women and to some extent men from disadvantaged economic backgrounds, including rural and peri urban areas, get a living wage. In the meantime, government borrows money from international lending agencies through bonds, governments and associated entities to meet the needs in the country. If such borrowings are not invested in consumer goods imports but used for long term development projects that can yield benefits to the country, there is some justification in doing so. However, if the governance is corrupt and such borrowings have led to enormous waste as we have been told lately then such a policy needs to be re-examined to find corrective measures.
The question is whether this neo liberal economic prescription that has brought the country to a perilous situation based on private sector investments, large and small, can liberate the economy and country if continued; whether borrowings from foreign lenders to meet daily needs of the country should continue; and whether there are alternatives to these mainstream prescriptions by multilateral bodies and economists trained overseas to advocate the same. In my view, there are alternatives available from the Global South for a country such as Sri Lanka to overcome current problems.
Sustainable development
First, any development has to be sustainable for the long term. A problem with short term projects with foreign funding and expertise is that they are there for a few years. When the funding dries up, the project collapses leaving only the remnants such as vehicles and infrastructure. Such foreign funded projects also create a dependency. Often foreign experts develop project goals, define needs and prescribe the solutions. Local experts also collaborate to rubber stamp such projects for a consultancy fee paid by the foreign sponsor.
Sustainability depends on whether the development project goals are achievable based on identified needs, the necessary resources are locally available, the expertise and human resources exist and a social license or community approval is there. The latter aspect can be ascertained if we have a government that consults people in the target area before finalising plans for a given project or programme.
If the plan by NPP is implemented, local area committees will have a say in drafting, developing and approving development projects and programmes. If not, political interference by those in power can dictate what development projects and programs are designed, funded and implemented without community consultation or agreement.
MNCs and the private sector
Many argue that we cannot do away with large scale private sector investments to develop the country as they bring in much needed foreign capital and know how. This used to be the argument when we started this journey since the late 70s under President J.R. Jayewardene. A critical evaluation of this path to development is important before continuing the same path and neoliberal prescription. We need to ask a few questions here:
- How much of profits have been exported?
- How much of public assets have been leased or alienated to MNCs?
- How many Sri Lankans have found employment in the projects and are their wages and conditions are satisfactory?
- How many Sri Lankan investors have benefitted?
- Are these manufacturers destroying local manufacturers and their opportunities to compete in the local and foreign markets?
- Is there a level playing field in the treatment by government to foreign MNCs vs local entrepreneurs?
- Have other countries in Asia, Africa and Latin America moved further to adopt other development policies to satisfy national interests? If so can we also follow such new development lines?
To continue in the same neoliberal, open market policies without such a critical re-assessment is to follow a development policy blindly thinking that it will bring a different result to the ones that we have seen over the last few decades.
There is another argument. One can say that the prescription is right but the implementation is the weaker point leading to wasteand corruption. This also can be examined by a panel of learned professionals who are patriotic enough to do so with the national interest in mind.
It is here that an Economic Planning Council with sufficient autonomy should be set up.
Small producers
In addition to the large scale manufacturers and producers, many small producers are engaged in production and manufacturing activities. They have been neglected over the decades and they need support if the country is to move forward. For example, in the agriculture sector an assessment has to be made about the range of products, volumes, prices and structural problems faced by such producers and what support is needed to allow them to grow. I believe the NPP government has policies in this direction.
New technologies need to be applied to preserve food and export it. In shops run by immigrants abroad one can see a range of such products for sale. At present, there is so much food waste.
Organic food production is growing around the world. This needs to be encouraged.
If local production, industry and manufacturing can be improved with government assistance, the women who go overseas for domestic work can remain in the country and live a satisfactory life with their families around.
Import restrictions for the products manufactured locally should be considered. When free trade agreements are signed with other countries, this should be kept in focus.
Participatory development
Community participation at the grass roots level is important for sustainable development plans, programmes and projects to be successful. When local inputs and a social license are provided to local development programmes and projects, they can make the difference between success and failure. True consultation is the key. Decisions have to be made locally in the area where the programme or project is to be implemented and moved up the ladder for government approval. Full disclosure about who invests, what resources are needed, who will be the main officials and locals involved, what outcomes are expected and within what time period is important.
Conclusion
As Sri Lanka is entering a new era with the election of NPP government and it reflects the transfer of power to disempowered segments of society due to the elite rule since independence, it is important to examine a different development paradigm to move the country forward.
If the decision makers rely on prescriptions by foreign funding agencies, economists and other professionals trained in Western countries in neoliberal economics and locals who do not know the difference between different development paradigms, we may be walking again towards a dead end.
It is important that the new government examine and institute an alternative development paradigm, policy and a plan while keeping essential large scale foreign funded production and manufacturing enterprises for the time being until other development efforts are brought to a reasonable level.
Expertise of those who are knowledgeable about alternative development paradigms, plans and models should be obtained to draft a 10 year development plan for the country. Necessary institutional changes at national provincial and local levels should be made.