Market economy should benefit all: Opposition Leader
24 Oct 2012 - {{hitsCtrl.values.hits}}
Following is the speech by Leader of the Opposition Ranil Wickremesinghe, at the Business Today TOP TWENTY FIVE awards ceremony.
Venerable members of the Sangha Honourable Basil Rajapaksa, Pavithra Wanniarachchi, Ministers, Honourable Deputy Minister, Members of Parliament, the Mayor, members of the business community and friends.
I think you politicians have got fixed by Parthipan. Generally, it’s 25 of us speaking and about two of you; and the rest of you listen. But this time you got to listen to 25 businessmen and just two politicians speaking. Is it that you want to make us feel what it is like when you sit at all the functions and have to listen to all the long winded speeches that we have to make.
Anyway, you have got your message across and for some reason I found that that I was invited for the second time, which I’m generally not. But I must first say that Business Today must be commended for this ceremony, which you have done to recognize and reward all those who have done well in the corporate sector; by something given by the private sector to the private sector. Anyway, I saw you at work this time also with the Commonwealth Parliamentary Association. That was a job well done, I must say, especially the party, the street party afterwards. I must say that many of the delegates went back regretting that they couldn’t stay much longer but then the treasury were thankful that they didn’t wait any longer because our deficits certainly would have gone much further.
Anyway, I have listened today to the reports and the performances of the companies. I must say that Harry Selvanathan did make a good point when he said why don’t you have something for the Government. Because sometime back it would have been very difficult. There wouldn’t have been 25 ministries. But now it’s a100, I think it’s worth giving it a try.
Well, for those who have performed, some of you have gone through difficult times; some have known what life was like before 1977 when we had gone into a market economy. Some of you have contributed to building it up as Pandithage said through the difficult years; and sometimes you have to close the door and do business from the side. And we had to go through this whole episode of renaming ‘Bombay Onions’ ‘Big Onions’. Anyway, we’ve got over all that.
Change of criteria
But still while commending you all for all that you have done I still thought I have one or two issues that I would like to raise. I was reading through Business today and I have no problem with the criteria you have selected; but I looked at how that criteria has changed over the years; not only in Sri Lanka but also abroad, which is a reflection of how the global economy and the market economy has changed. Even now capitalism has changed as we all call the ‘Market Economy’. A few days back I was reading an article on what is called Modern Capitalism. It was very good; it dealt with American Capitalism. What it is today; it is unique. I don’t think it can be duplicated anywhere else in the world. How democratic socialism went out of vogue and what we have got in the last 10 years. Firstly socialism with Chinese characteristics. That is the biggest form of capitalism you have today and in state capitalism also. Social market economy, and that is where the financial markets dominates and is called stock market capitalism. These seem to be the three. And It dealt with how the countries in Asia, the smaller countries in Asia, Africa and Latin America have developed; how modern capitalism came first through European money which brought in the plantation sector. Then the export sector, either with the local money or with foreign money. And now where do we go? We have gone to one extreme –fortunately we are not there and I hope we don’t get there – of the economies which rely on drug money hot money and black money. Now where are we? Well we have I feel excessive dependance on the financial market depending when we read on the newspapers and the media a lot on the stock exchange and the public borrowings. Well, to me our stock exchange is very much a casino with a laundry attached. That’s where the black money from Malaysia and India is turned into white. And this year we’ve also added an altar because now twice a year we sacrificed the chairpersons there.
Banks with big corporates
Now we also have some things which have been concerning me and I thought I should mention it to you all. It is something seen in some of the other economies but also seen in Sri Lanka. Of course many of you did mention how much of credit is available for the Small and Medium Sector. But I find this development has always been in Sri Lanka like elsewhere, where the banks are with the big corporates and the capital requirement of the Small and Medium Sector has suffered. I’ve gone through many towns, many cities met with those who run the high street, they are the people who matter and they are complaining of their lack of access to capital. That’s something you have to recognize. Because in today’s society it’s the Small and Medium Enterprises that provide the jobs; whether it be in manufacturing, whether in be tourism or in trade. They are the job creators and that goes down from the United States to Japan to other parts of the world. And that’s where we’re having a problem. Excuse me for saying so, because I believe that is where not enough money is going. If all that money that was given out from the banks to margin trading but is instead given out to the Small and Medium economy all of us would be better off today. There’ll be more money in the pockets of the average persons in the country.
Govt. expenditure & debt mgt
Second is if you look at the composition of government expenditure, which is alarming to me. In 1990 when we were doing the economy, I must say, the biggest expenditure was the categories of what we call goods services transfers and subsidies. Second came interest payment and third came salaries. In the last two years it has changed. First is interest payments, second is salaries and third is the rest. And today you have come to a situation where goods services transfers and subsidies are just about half of interest payments. What does this mean? It basically means two things. One is the social sector expenditure is going down; we have seen the crisis we’ve had of the university teaches, the Minister had to handle that. We have seen the problem of health expenditure; but if this is the composition of government expenditure it’s going to get worse. And we are a country that has depended on free education and free health. So unless you chain the composition of government expenditure what you spend more, you spend more on these sectors it’s going to be downhill for the majority of the people. How do you change it? This itself is the problem, because you have this big public debt.
I was reading the Roadmap on Public Debt Management and they are talking of reducing the deficit; the same thing the IMF says. You have to reduce it. You can’t cut the interest payments or debt servicing, you can’t cut the salaries bill, whether you think they are gainfully employed or not. Then the cuts come in the other sector. That just is not going to work. Then they are saying cut the expenditure on the transfers to the corporations. But what are we doing? They are transferring that expenditure also on to the people, instead of trying to make those corporations efficient and see how it’s been made viable the easiest way, the IMF way now is to transfer that off and the price increases. These are two of the problems we are facing, which means: firstly, not enough credit to the small and medium entrepreneur and secondly, the additional expenses. Then how do we repay the debt? That’s the big question. Because today our revenue and our debt service is virtually the same. Actually we are rolling over the public debt. We are borrowing to repay which is what we did with the last sovereign debt in July; of the billion Dollars 500 has gone to repay the 2007 loans. So this is a serious situation which we are in. And unless we find a way of moving out then the burden is going to more and more on the people. We’ve see n what’s happened in Greece. We’ve seen what is happening in Spain, We’ve seen what’s happening in Portugal and many other countries. Now this is the big question that all of us have to face. And I thought I should mention something which all of us overlook, because we are all shot termists now looking at the performance of one year and not how do we go beyond that. We are told to be more competitive and to earn more exports. Where do you earn the exports? The world market is a billion people in the western world whose incomes are coming down. What do we sell? How do we sell it? We can’t sell very much more to Europe. We’ve lost the GSP Plus facility. I got involved in how to save it. Finally I fell fowl both of the apparel sector and of G L Peiris. Nevertheless, there is very little that we can do there.
Secondly, what are we going to do in the US market. I can’t see how we can enter that. Thirdly, India; even the private sector has to decide whether they want to enter the Indian market or not. One half says very loudly no SEPA; we don’t want it. We don’t want the Indians coming in. The other half says silently no, we want SEPA. And everyone wants to see how we can make quick money out of the Indian black money that is being laundered here. So we’ve got to decide where exactly, because these are the markets that are available for us. So what are the markets that are available?
Secondly, just look at Mianmar. 2015 at the elections they will get concessional aid maybe as much as 10 billion. Once the elections are done fairly and squarely they can take the GSP facility, they get something in the US market and they get something in the Indian market. That’s what we are going to see from 2016 onwards. As some of the Europeans point out its useless getting into Mianmar now because they are not ready. They haven’t got the basics. They require two three years. And then what are we going to do? Where are we going? That’s what we have to think. I for one am very skeptical about the IMF. As I said last year Bretton Woods institutions without Bretton Woods is of no use. What are they saying throughout the world? Cut your expenditure. Now we have come to the bone. As politicians can we cut into the bone? We can’t.
So what can we get from the IMF? They can’t sort themselves out as to where the voting power should be. It’s dominated by the European voting power and is at the moment dependent on Asian money. That’s what we are. So I would forget about them. I don’t think they can give any solutions. Unfortunately, we have the habit where that everything said by an IMF representative here or by some IMF guy who comes here is highlighted in the media in the same manner in which Moses and the 10 commandments were treated at that time. That’s unfortunately been a habit. I don’t think they know where they are going. And certainly they can’t tell us where we are going. We have to now innovate we’ve got to think out of the box. All countries are thinking out of the box. You’ll be surprised at the reports that are coming out of England. The Vickers Banking Report wanted ringfenceing of the banks. Then Paul Volcker the Former Chairman of the Reserve Bank of the USA said that’s not enough, you’ve got to separate them.
Go back into an earlier system they had of separating investment banking and retail banking. Now you’ve got the key commissioner report which says there shouldn’t be quarterly reporting on the stock market. You focus too much on the short term profits and you forget about the medium and the long term. So that’s one country that is trying to work its way out. America is working its way out in a different manner, including fixing all the British banks whenever they can; so they still keep the monopoly in banking. So we’ve all got to think out of the box. Where are we going? How are we going to get there? Because I still feel that we have the capacity to innovate. And from here we have innovators and we have entrepreneurs both here in this room and outside there; maybe in Nugegoda maybe in Nittambuwa, maybe in Beliatta – I don’t know where the Minister belong whether in Nittambuwa or Beliatta or both – down in Madawachchiya which has been long quoted now in the parliamentary debates, who can make it. But we’ve got to think what we are going to do. So I’m sorry that I had to sound the discord note here amongst all those who thought it is maybe better.
Market economy benefits
But I was one of those who had faith in the market economy when many others didn’t. When we went through those dark years; we paid a price to get the market economy back. Because I wanted the market economy to benefit everyone. You can’t have two classes of people either here or in England or in America so that’s a big debate. So we must have the market economy to benefit all. We cannot have people thinking our children can’t be educated here. We cannot have people come into the view that there are no health services here. We talk of shortage of labour. Then why on earth are people paying three or four hundred thousand rupees to go abroad? There is something wrong; either there is no job satisfaction; if all the Sri Lankans are back here we still have unemployment. But those are great skills to be brought back but can we pay the prices? or do we go to a higher level of economic activity?
So this is why I raised the question. I don’t want to keep you all much longer. But just to thank you again for having invited me; and there’ll be many who will go along saying “what nonsense this man is talking” but I hope there’ll be at least one who would think of what I said; because like Harry I believe we can make it. I may differ on how we make it, but we can make it if we can think straight. Thank you.
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