Sri Lanka’s Economic Independence: A Distant Dream?

Political independence in 1948 economically meant little to Ceylon. It was more a declined economic opportunity – to be a part of a trade empire on which the sun never set could have been far advantageous. Still independence was no excuse for failure. Not every post WWII-independent Asian nation took the wrong turn. Then most were behind us. Now they have surpassed us not just in GDP terms, but even in human development – what we used to boast about. Memoirs of Lee Kuan Yew, who once dreamt emulating the Ceylonese economic model, describe why and how we failed, in style.

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The true independence, if anyone cares to celebrate, gained not in 1948, but in 1170 AD – give or take few decades. That was when Parakramabahu the great –the greatest to ever rule us – not only liberated the isle from the mighty Chola Empire but converted it to an economic powerhouse. Contrary to popular belief, agrarian self-sufficiency was not Parakramabahu’s goal. His futuristic strategy was to be the trade hub of South Asia. Indian, Roman, Arab, Javanese and Chinese traders were frequent visitors to Serendib. The twelfth century ‘granary’ of Asia, probably was the equivalent of modern Singapore.

The dark ages that followed the fall of Polonnaruwa kingdom saw less political stability, more power centers, more civil wars and less trade. Arya Chakravarties of Nallur, arguably the most powerful in the interim period were said to have a large naval force, but still no records that business was their forte. Meanwhile in the South it was more a battle among each other.

Like it or not, it was the Portuguese followed by Dutch, who brought the lost glory. Spices suddenly became hot products; cutting a cinnamon plant was punished by death. British, after capturing Kandyan kingdom in 1815, introduced coffee, tea and rubber – the new economic crops. This gave birth to two classes of entrepreneurs – first British but towards the end of nineteenth century, domestic. The transition from feudal to modern economy materialized many dreams – highways and railways, commercial sea ports, administrative system, fixed income jobs, developed corporate sector, postal service, communication system followed by even quality education and proper healthcare. By the middle of the last century Ceylon successfully eradicated a predicament as serious as foreign invasions to ancient rulers: Malaria

Thus strictly speaking, it was not the Europeans who robbed our independence. Rather it was them who brought it back directing us to a new age. Otherwise Seylan could have easily ended up another Burma, Cambodia or Nepal.

Post independence economic reveries were short lived. The Colombo Plan, which aimed to ‘uplift’ neighbours to our own level, is long forgotten. First Central Bank chief John Exter’s objections to subsidies in the middle of rubber-crisis were met with a Hartal to be followed up with the first populist government in 1956. The rest is history.

To cut short, Singapore had Dr Goh Keng Swee and we had Dr. Nanayakkarage Martin Perera. Both were products of London School of Economics – students of legendary Harold Laski and no doubt, brilliant economists. Strangely they acted in ways diametrically opposite. Their footprints were long seen in the respective economies. By mid 1970s Singapore had a first-rate airline and one of the busiest airports. We had kerosene smelling t-shirts, transparent sarongs (aptly named ‘Ganta mark’) and maniocs – to be eaten twice weekly.

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J.R. Jayawardena, sadly the typical scapegoat for every woe, was the one who took us out of that mess. 1978 economic reforms were the beginning of a new era. It made possible almost every economic benefit we enjoy today; banking facilities, garment industry, tourism and information and communication technologies. Post-1978 Economic liberalisation brought more employment opportunities than ever imagined. The impact was so strong that even the SLFP, a political party that traditionally vowed closed statist economic policies, had to embrace open economy in 1994. JVP- the extreme statists hitherto, settled for a hybrid.

Unfortunately, J.R. Jayawardena could not complete the revolution he began – in the backdrop of ethnic tensions and the second JVP insurrection. Reforms in education, power, railway and even agriculture sectors hardly happened. (Interestingly, Dr. Sarath Amunugama, a former finance minister later called four of such sectors as ‘paraassayaas’ or demons, that suck the blood from the national economy) Decision making power, in spite of the 13th amendment, has sacredly maintained at the centre. Enthusiasm in infrastructure building was lost on the way. A sizable fraction of state income has continuously been spent in education and healthcare subsidies. Government grew till it provided job opportunities for every one in sixteen of the population – again, a large section is political henchman. Money printing, at the cost of thumping inflation rates became the norm of the day.

The only break in this vicious system was the two brief years from 2002-3. At least the first year saw a systematic approach in building the economy. We saw Sri Lanka starts shining after a long period of suppression. Then the masses rejected the system – it did not meet their short term goals; government jobs and fertiliser subsidies.

This brings us to the days of ‘national economy’ – whatever it means. Patriotism has many facets. We are back to 1970-77 times, sans queues and barriers. Government takes pride in the number of jobs newly created within, and has absolutely no shame in imposing high taxes (tax on petrol is 189%) and printing money to support war efforts. We believe in isolated economic models that can be ‘plugged out’ from international trade. Protectionism is more a religion. Be Lankan; buy Lankan is the theme of the day. Just like in any sub Saharan African state the opportunities for new ventures are traded under the table. Private sector is looked with suspicion. Bribery remains the best strategy, and centralised now, the process perhaps is less cumbersome. (Just bribe one big man, not five on the way!) The masses are insensitive, as long as they receive their fair share. Money is not the only commodity that makes a mass exodus; brains too do so.

We still cheer for independence and a government that failed to carry out a single economic reform since the day it took office in November 2005.

Is our economic independence a distant dream? You tell me.

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J R Jayewardene: 102th Birth Anniversary of the father of modern Lanka

Junius Richard Jayewardene (September 17, 1906–November 1, 1996), famously abbreviated in Sri Lanka as JR, was the first executive President of Sri Lanka from 1978 until 1989. He was a leader of the nationalist movement in Ceylon (now Sri Lanka) who served in a variety of cabinet positions in the decades after independence. Before taking over the newly created executive presidency, he served as the Prime minister of Sri Lanka between 1977 and 1978.

J.R. Jayewardene, who was the eldest in a family of 11 children, was the son of Hon. Justice Eugene Wilfred Jayewardene KC a judge of the Ceylon Supreme Court. He was schooled at Royal College, Colombo where he played for the cricket team, debuting in the Royal-Thomian series in 1925. He became a lawyer after attaining a distinguished academic record at the University College, Colombo and later at the Colombo Law College.

Jayewardene did not practice law for long, however. In 1938 he became an activist in the Ceylon National Congress (CNC), which provided the organizational platform for Ceylon’s nationalist movement (the island was officially renamed Sri Lanka in 1972). He became its Joint Secretary in 1940. He was elected to the colonial legislature, the State Council in 1943.

After joining the United National Party on its formation in 1946, he became Finance Minister in the island’s first Cabinet in 1947. He played a major role in re-admitting Japan to the world community at the San Francisco Conference.

Jayewardene’s acute intelligence and subtle, often aggressive political skills earned him leading roles in government (1947-1956 and 1965-1970) and in opposition (1956-1965 and 1970-1977). In 1951 Jayewardene was a member of the committee to select a National Anthem for Sri Lanka headed by Sir Edwin Wijeyeratne.

As Finance Minister in D.S. Senanayake’s government, Jayewardene struggled to balance the budget, faced with mounting government expenditures, particularly for rice subsidies. His 1953 proposal to cut the subsidies – on which many poor people depended on for survival – provoked fierce opposition and the 1953 Hartal campaign, and had to be called off.

No government gave serious thought to the development of the industry as an economically viable venture until the United National Party came to power in 1965 and the subject of tourism came under the purview of the Minister of State Hon. J. R. Jayewardene.

The new Minister Jayewardene saw tourism in a new dimension as a great industry capable of earning foreign exchange, providing avenues of mass employment, creating a manpower which commanded a high, employment potential in the world. He was determined to place this industry on a solid foundation providing it a ‘ conceptional base and institutional support.’ This was necessary to bring dynamism and cohesiveness into an industry, shunned by leaders in the past, ignored by investors who were inhibited by the lack of incentive to invest in projects which were uncertain of a satisfactory return. The new Minister Hon. J. R. Jayewardene considered it essential for the government to give that assurance and with this objective in view he tabled the Ceylon Tourist Board Act No 10 of 1966 followed by Ceylon Hotels Corporation Act No 14 of 1966.

This was the beginning of a new industry ignored by the previous governments but given a new life by Minister J. R. Jayewardene. As a result today tourist resorts exist in almost all cities and today an annual turnover of over 500,000 tourists are enjoying the tropical climes and beautiful beaches of Sri Lanka not to mention the enormous amount of foreign exchange they bring into the country.

In the general election of 1970 the UNP suffered a major defeat, when the SLFP and its newly formed collation of leftist parties won almost 2/3 of the parliamentary seats. Once again elected to parliament J. R. Jayewardene took over as opposition leader and de-facto leader of the UNP due to the ill health of Dudley Senanayake. After Senanayake’s death in 1973, Jayewardene succeeded him as UNP leader. He gave the SLFP government his fullest support during the 1971 JVP Insurrection (even thou his son was arrested by the police without charges) and in 1972 when the new constitution was enacted proclaiming Ceylon a republic. However he opposed the government in many moves, which he saw as short sighted and damaging for the country’s economy in the long run. These included the adaptation of the closed economy and nationalization of many private business and lands. In 1976 he resigned from his seat in parliament in protest, when the government used its large majority in parliament to extend the duration of the government by two more years at the end of its six year term without holding a general election.

Jayewardene won a sweeping election victory in 1977 to become Prime Minister. Immediately thereafter, he drew up a new national constitution which created an Executive Presidency with drastic and unchecked powers, and, on its adoption into law, became, in 1978, the first Sri Lankan Executive President. He moved the legislative capital from Colombo to Sri Jayawardanapura Kotte. He opened the heavily state-controlled economy to market forces, which many credit with subsequent economic growth but also with the greater divisions in society.

On the economic front, Jayewardene’s legacy was decisive. For thirty years after independence, Sri Lanka had struggled in vain with slow growth and high unemployment. Since Jayewardene’s reforms, the island has maintained healthy growth despite the civil war.

Jayewardene married Elina Rupasinghe, with whom he had two sons. One of his sons, Ravi Jayewardene was an officer in the Sri Lanka Army and went on to be a presidential adviser on security.

http://en.wikipedia.org/wiki/Junius_Richard_Jayewardene