Strategies for immediate aftermath of political and economic disruption

At present, Sri Lanka is faced with an unprecedented set of challenges brought on by its own historical behaviour. 
For years, the citizenry has enjoyed unsustainable subsidies (mainly fuel and fertiliser) and self-destructive policies for short-term relief, kicking the tough decisions down the road. Exacerbating this situation is the country’s legislature, where most of its members are clueless as to how to react and respond to these issues in a timely and pre-emptive manner. 

Since the end of the war in 2009, successive parliaments have not been able to pass meaningful and long-term focused policies, which will address the basic socioeconomic issues that are faced by the citizens of this country. The policymakers only seem to be interested in passing populist short-term policies, which help them stay in power.

On the rare occasions when Parliament did pass meaningful and sustainable policies, such as use of plastic crates for vegetable transportation (2011) and limiting the number of students per classroom (2016), the policies were not implemented, due to the interests of small groups with powerful political backing. Had we implemented the plastic crates then, we would have had a lot more fruit and vegetable stocks available at the point of sale now and would have lowered the pressure on price increases.

It would also be cheaper to transport one teacher to a rural school than bring a van full of students every day to a school on the outskirts of Colombo. Imagine the amount of fuel we would have saved nationally. In fact, the legislature is nothing more than a dysfunctional spectacle, where politicians pass legislation that keeps them in power and protects their corruption and that of their supporters. 

We must remember that it is the citizenry of this country who elected these members (some of them multiple times) to the legislature, in full knowledge of their corrupt backgrounds. We are thereby responsible for tolerating this legislative dysfunction for many years.

The country is currently placed at 102nd out of 180 countries in the corruption perception index, with a rank of 37, which is below the global average. Many key ministries, departments and state-owned entities in Sri Lanka like the CEB and CPC are paralysed due to corruption, which has rendered them ineffective. The Sri Lankan society at large is corrupt; the bus conductor and the taxi driver never return the commuter’s change and supermarket chains round-off the bill to the rupee at the cost of the consumer. This has resulted in significant reputational disruption in Sri Lanka.

Complete system change
In addition, external forces that are beyond our control seem to have converged. The increase in world market price of gas and fuel makes it even more expensive for a dollar-strapped economy such as Sri Lanka. This has resulted in the further depletion of our foreign reserves, which has finally led to the unthinkable sovereign default. This situation, coupled with the Easter Sunday terrorist attacks and pandemic, has amplified its negative effects on the economy, resulting in significant hostile disruption. The effects of this are the slowing down and erratic fluctuations caused to the growth of our economy. This phenomenon is shown by the graph.

It is quite clear that the incumbent government has not been able to activate any plans to start transformational or creative disruption to counterbalance any adverse unplanned disruption. Therefore, it seems like the whole economy is under attack, resulting in a severe contraction of normal business activities and life in general. A real-life economic ‘shock and awe’ effect is felt by all.

In mid-March of 2022, a call to protest was launched across social media platforms. The trifecta of lack of electricity, gas and fuel can be seen as the straw that broke the camel’s back, bringing millions of citizens (a majority of them youngsters) out in protest. The protestors demand the resignation of the current president, Cabinet and parliament. 

In fact, they are agitating for a complete system change -- a transformational disruption to the current status quo. The government, which was caught off-guard, tried to resolve it by using the historically practiced and proven method of unleashing violence on the protesters. However, this violence was captured by thousands of cell phone cameras and millions of photographs, showing the real faces of the culprits of violence. This infuriated the youngsters and had a multiplier effect on the citizenry, boosting the protests to its current levels islandwide. Since mid-March, the government has not been able to produce a tangible set of policies that will address the socio-economic concerns of the people. This is a strange situation, as no think tank created within the government has produced any real policy recommendations.

It is sad that the government was not able to understand that we live in an age where any socio-political issue can be weaponised to create major disruption, including in some cases, change of government. The last year saw a string of such protests from all over the world, primarily driven by social media; the farmer protest in India and the BLM and Me-Too movements, which started in the US and became global protests are examples that almost everyone recalls. The loose band of #GoHomeGota2022 organisers claims to use creative disruption to bring about system change. Understanding where the disruption to our economy is happening is a key to developing new strategies to kick start the economy to overcome the current situation.

The sovereign default and the debt restructuring are a good place to start, be it a painful one. The renegotiation of our debt must be expedited as it will help stabilise the dollar exchange rate. This in turn would make it possible to plan for our imports and exports. Restoring one of Sri Lanka’s key sources of foreign exchange - the tourism sector, should be a priority. 

It is clear to everyone that SriLankan Airlines will never be able to bring in the number of tourists that are needed to sustain the industry in this country. Again, we are stubborn to the point of self-destruction by not enforcing open sky policies even at this dire stage when airlines are cutting frequencies or pulling out of Sri Lanka altogether. 

Policy framework change 
In addition, the current policy framework must be changed very quickly, as the next most important activity. This measure will ensure at the very least, the cost recovery of fuel, gas and electricity or the recovery of its full economic value based on global prices. This will impact both goods and people-transport cost. However, people will develop efficiencies over time and alternate methods to overcome the initial shock. Only then will innovation and sustainable development transform this area.

This must be immediately followed with the restructuring of the CEB and CPC to ensure uninterrupted supply of electricity and fuel. These two state-owned enterprises must be restructured, considering national security interests, where no individual or a group of people within these organisations can trigger an all-island blackout or disrupt the supply of fuel to power plants and other critical infrastructure, where fuel is required for back up and standby power. 

Regarding the CEB, orienting them away from fossil fuels to renewables must take precedence along with changing from a manual load balancing process to an automated load balancing system, which would allow for the input from distributed sources of renewable electricity generation. This will help maintain or stabilise the cost levels of electricity.

This will immediately help all the industries in Sri Lanka to establish a stable cost structure for the coming 12 to 24 months. It will also allow industries to, where possible, restrategise and renegotiate their supply chains, bringing in additional efficiencies to their internal processes to become competitive again in the local and global markets. This in turn will influence the balance of payments by regrowing our exports, which have been affected by the changes to the current cost structure. The current destabilising, continuing fluctuations in the exchange rate and cost of materials have created havoc in all industries, pushing most businesses into bankruptcy.

Given the decision to restart the importation of chemical fertiliser for agriculture purposes, it is important that the government does not subsidise the fertiliser. The fertiliser must be made available at world market prices to the farmers who can afford it. For food security to become a reality, we must at least consume 30 percent of our food that is in season, locally grown and locally sourced. Towards this, we must further diversify our diet to include such local foods, which were consumed by our grandparents. 

Other farmers need to look at alternate crops and alternate sources of fertiliser and combinations of them such as using fish-based fertiliser in conjunction with our fishing industry. Farmers could also use plant-based fertiliser by developing such businesses at village-level, where plant material is freely available and animal-based fertiliser working with poultry and dairy farms. 

An immediate reversal on the ban of slaughter of cattle must be considered, given its impact for the growth in milk production and reduce the price of protein-based foods. We must turn to the vast resources of our ocean (economic zone and the extended economic zone) for seaweed-based fertiliser. This reorientation of our fertiliser base will help grow several businesses in this industry, which did not exist in Sri Lanka before the disruption.  The system change so desired by the young people of this country will have to start by fixing how we produce and consume products and services to meet our basic needs. No amount of other small incremental changes to win over political support will fix these issues. It is sincerely hoped that the public will understand and demand real change as discussed above. Or else, the next generation will have to be on the streets until there is real change.
(Roshanga Wickremesinghe is the author of the book ‘How Small Countries Can Compete and Grow - A Case for Sri Lanka’. He is founder of R & R Associates Consulting, a sector independent strategy consulting practice)