Steps would be taken to introduce a strong new economic system that can face 2050 without implementing economic reforms that offer no solutions to the current economic crisis, President Ranil Wickremesinghe said on Monday (05).
Pointing out that the country’s economy cannot be recovered through outdated economic systems, the President said that the first, second, and third thing needed to build the Sri Lankan economy is foreign exchange.
The President also pointed out that in order to recover from the economic crisis Sri Lanka is currently facing, the debt must be restructured and a correct economic system should be introduced.
Accordingly, President Wickremesinghe also expressed confidence that it will be possible to get assistance from the International Monetary Fund to overcome this situation, adding that the government has reached a staff-level agreement with the IMF.
He further said that Rs. 300 billion will be spent on the power sector alone next year and that alternatives should be sought to cover that cost.
The President said that measures should be taken to introduce new alternative energies to the power sector, and the government is ready for that and plans to focus on green hydrogen energy instead of renewable energy.
According to the President’s Media Division (PMD),the President made these remarks while inaugurating the Sri Lanka Economic Summit 2022 in Colombo yesterday (05).
The Summit is considered the foremost and most anticipated annual economic event in Sri Lanka and was held under the theme ‘Resetting from Turmoil to Opportunity’.
Regional Vice President of the World Bank for South Asia, Mr. Martin Raiser, Chairman Ceylon Chamber of Commerce Vish Govindasamy, Parameswaran Iyer, CEO of NITI Aayog India also spoke on this occasion.
MP Eran Wickramaratne, MP Harsha De Silva, and the Central Bank Governor Dr. Nandalal Weerasinghe were also present at this occasion.
Following is the full text delivered by President Ranil Wickremesinghe:
“Martin Raiser the Vice President of the World Bank, president of the Chamber of Commerce, distinguished guests and friends.
In the opening remarks, our Compare said this year has been like no other year, which is correct. Just to think back, not a single year in the 20th century or the 19th century, I would say was like this.
What we have is not a civil war. We had civil wars around this region earlier, what we had it not terrorism. What we have is not world war. We’ve gone through all this. We’ve gone through uprisings, we’ve gone through riots. This was just a collapse of the economy. It was an economy waiting to collapse.
In the 4.5 years the prime minister, it was an effort to try and take the economy out in a different direction.
We were able to get a surplus on the primary budget, but it was warfare. Politicians wanted to protect their power, businessman wanted to protect their profits and many others wanted to see what the country would give them, provide for them free of charge, without having rendered any services. So in the long term, this formula can’t hold. When Sri Lanka became a commercial economy, a modern commercial economy, after the Colebrook–Cameron reforms and opening up the abolition of Rajakariya, the British came in, but not only the British the Sri Lankan’s also came. They had no banks, they had no means finding money, and there was no World Bank to give them assistance on a concessionary term. But what did they do? They build up a big business empire. While the British planted tea, we planted coconut, we exploited our graphite. And then in 1948 after the war was over, we stood second to Japan.
But we started destroying it from the sixties and the seventies. We started rebuilding an economy, which was affected by a war, and thereafter the way we went, is best not described here. So it is not surprising that this economy collapsed in the two years of Covid, reduction of revenue and the policy measures that were taken. So from the turmoil, we have to get out. We are still working our way through.
We’ve been able to stabilize with our own effort. The last a few months from July onwards, from August onwards, we had to do it on our own, of course, with the help that the multilateral gave us. We’ve got into a staff level agreement with the IMF, I thought Harsha will get up and say can you table the copy now.
We are now discussing with our creditors, bilateral creditors, not the Paris Club, but with India and we had very successful talks and we have started talks with China and they’ve asked us to talk with the Exim Bank and the talks are going on. The talks with China started later because they had to start after the party conference. They wanted it. So we started the talks. Haven’t seen a major issue that has come up so far. We hope we can conclude it fast, but that doesn’t mean that we are out of the woods. We start next year with a big hole of about 3 to 400 billion rupees. That’s what the CEB is going to cost us.
We start from there. How do we handle it? If you want the government to fund it, then we have to get the printing presses going.
I mean, we are paying not only for the increase in price of coal and fuel, but also for bad management.
Now, this is the first issue we have?
Are we to adjust the prices and face the consequences? Or, we to do nothing and hope someone will help us? Now the first question that all of us have to answer.
If you have to go ahead, there is only one thing you can do. There are no options, and I presume I’ll get blagarded again for that. Second, we have to look at our banks. We have to save our banks. Easier said than done.
I need not talk to you about the position in the bank, you all know it better than me, but it’s two fold. One is, all of you want to know what’s going to happen to the interest rates? I wish I know. The governor has told me that the inflation has peaked. It’s coming down. You all understandably want some relief with the interest rates to carry business on.
I understand that and appreciate the viewpoint. It’s not easy to carry business on with such high interest rates. On the other hand, the Central Bank also has to handle the economy. So maybe sometimes early next year we will have a meeting of minds of both these propositions. One strengthening the economy.
Secondly, seeing what relief we can give the private sector. But that also means to understand that the bad debt that is being carried by the banks is mainly from the private sector or the government sector. Keep the government sector aside. We’re dealing with it. How do you handle it? Look, one of our major areas of are the small and medium industries. You can’t allow them to collapse, but they’re in a bad way.
So you’ve got to find a solution there. I think the state and the private sector, the big players, medium players all have to see how can we save our small and medium enterprises?
There are the larger ones, too, but these are the ones that can get wiped out. Can we go on without them? The success of the open economy was that a large number of small and medium enterprises came along. People made their way. They came up to the middle class they went beyond that. Some became billionaires. But that’s how the system works. Now what I am going to do with it? So these are two major issues that we have to resolve as we go along.
What do we do after stabilization? What is the plan for reform? Frankly, I have no plan for reform.
I don’t know in the crisis, if reforms can work. to reform, we must have an economy.
What do we face in the future? Whatever relief we get from our debtors, multilateral debtors, creditors and also from the private creditors we have to pay this money back longer term. Then remember, for the next few years we have to borrow money.
Our trade balance is not in our favour. So are we going to rebuild the same structure and come down again much faster? Therefore, I thought it’s not worth reforming it. So I personally have no plans for reform and the government will not have plans for reforms. We want to build a new economy an economy that will face 2050. Is the private sector ready for it?
That’s the only question I have to ask you. Are we ready for it? Are we going to take up the challenge?
Shall we take the pain that comes with it? Or are we going to hide again?
The Ostrich cannot put its neck under the carpet all the time and sometimes it has to come out. What have you got? We have to earn Foreign exchange, Foreign exchange, foreign exchange.
Why can’t we have a balance of trade? Why can’t it be in a surplus?
Can you put into a surplus?
If not, we can’t survive.
If you want to survive and you have to compete with the world, then we have to be competitive, not competitive. We’ve got to be highly competitive.
We’ve got to join the rest of Asia. You’ve got to compete with China. We’ve got to compete with Japan. You’ve got to compete with Korea. You’ve got to compete with India. Can we build that?
Can we create sectors which are competitive?
Are you ready to take that challenge?
Are we ready to go to 2050 or do you want to go back to 1950? These are the two options that are available for us.
Then we’ve got to build a highly competitive social market economy. But it must benefit all not only a few. All of us are going through these troubled times. Some were finding it very, very difficult.
And are we ready to do those reforms? If you already there are many opportunities. We talk our renewable energy. I won’t talk to renewable energy. I will talk of green hydrogen. That’s where the potential lies. We seem to be having immense surplus of renewable energy which can be turned into green hydrogen.
Why don’t we develop and become a logistics center? When I last tried to develop the Colombo Harbour and tried to give out the East Terminal, there was a big debate, as to I am trying to sell the country. Now we have given the West terminal out. Very good, but if you really want to get going, you have to give the East terminal out. We’ve given the first choice to Japan. If they don’t, we’ll ask the others to come. Colombo port must be the busiest port in South Asia. The small port won’t do so when you get full. We are now thinking of expanding the Colombo port all the way to Ja-Ela.
A logistic center, already about 30 acres have been cleared in Colombo North 20 or 30 acres to start on part of it. There will be more land becoming available to connect it.
Look at Hambantota and Trincomalee, you have the three best ports available in the region. Think of logistics think of green hydrogen, and then modernize our agriculture. Small holding agriculture may be modernized the agriculture and get ready for exports. It can be done, but it requires high technology and more than that, the willingness to go ahead.
Land must be used to the maximum benefit of the economy and the people.
Now, this is where the chamber is one day going to come to me and say, Why are you doing this? They have had a contract and they must have the right to use the land. And my answer to that is you have not used it to the fullest benefit of the economy. So therefore we’ll have to give it to someone else. There has to be more changes in the land law, and especially to give land to the smallholders. Otherwise, they will not put the money in. They won’t put their effort in. So these are some of the changes you have to make. You have a highly competitive manufacturing industry. Very highly skilled, semi-automated may be automated. All these are necessary. You’ve got to think out of the box. You have to look at what we have, what you can do to all this we require education.
Higher education, school education. We have to become educational hub, and I must thank all parties in Parliament who agreed. Let’s open the higher education sector to the private sector and to universities. Let’s have that. Now this means Are we ready to think how there’s much more to be done. Are we ready to think out of the box? Are we ready to take the challenge? Are we ready to go forward? And everyone has to think private sectors to think Trade unions, others. So we’ll all have to get together. And that’s what’s called the social contract, what do we build and how do we all benefit? So this is the challenge that is there.
As far as the government is concerned, yes, we have an idea of what the long term plan should be. We’ll put it out for discussions. We prepared well. Ask all the political parties and the different players in the economy to give their views but are you ready to go? If you have against it, come up with a viable alternative? That’s all that I’m asking. It is not for me, it’s for you all. It’s for all the young people are looking for a better future. Anyone who can go out there basically voting with their feet. They are saying you have not succeeded to all of us. Him and me all. Not to the government, to the government and the opposition and to the Parliament as a whole. Not only the parliament for all of you as an establishment.
Instead of pointing fingers at each other, the younger people have decided to work with their feet and they’re getting out in thousands and hundreds of thousands. You may not have any more, so we have to realize that we have to make amends that we have to go ahead. We may all not be here by 2050, but for those who are there and the younger people, a better future. So our program for the future will be called next 25 years. What will we be when you’re 100? Thank you.”