Sri Lanka’s economy on risky terrain

30 Dec 2014 - Editorial

Over the past several years, since the end of the war, Sri Lankans have been assaulted with advertisements of economic progress. The Rajapaksa regime has loudly proclaimed the advent of a new era of development, making much of showy spectacles such as the construction of Hambantota port and new features being added to the city of Colombo. More abstractly it touts figures such as 8 per cent GDP growth, a lowered budget deficit, inflation under control, and higher foreign exchange reserves as evidence of its economic prowess. Nevertheless, the regime has failed to articulate an ideology or framework that can manage the increasing inequality created by neoliberal policies which are marketed as new financial investments, despite the populist rhetoric espoused in the Mahinda Chintana. The lack of any sort of measure combined with the emphasis on brochure-like images of development conceals the global forces that continue to impinge on the lives of everyday Sri Lankans. The regime claims that it is providing Sri Lankans economic progress, but what it actually offers is increasing economic disparity.

Given that there are a plurality of issues we can address-from the cost of living to universal access to state services to workers’ rights-it is worth acknowledging the often neglected implications for labour, though with due recognition of the struggles people undertake in other spheres. Under the current regime, many Sri Lankans continue to depend on low-wage work, including increasingly under-protected labour markets driven by manpower recruiting agencies. Construction work on massive infrastructure projects is temporary, when it is not altogether excluded by company labour imported from other countries. Migrants headed mostly to Gulf countries continue to provide seven billion dollars a year in remittances. Garment factories are closing down, despite the fact that people are desperate enough to accept even substandard work. Even the regime’s budget proposal to increase allowances for state sector workers founders on the ambitions of its elite-driven projects. As evidenced by the initial electricity tariff hikes last year, the goal to promote tourism through high-profile luxury projects seriously undermines the accommodation of average Sri Lankans’ more basic lifestyles including energy use. The contradictory aspects of the regime’s plans at every turn undermine even the simpler benefits ordinary people could get from the development of infrastructure.

At the same time the Rajapaksa regime is not responsible for everything. In fact, the more frightening thing is precisely the fact that it is not in control. In order to build massive infrastructure, the regime is relying on new loan facilities that depend more and more on unstable financial markets. In addition, the non-bank financial institution consolidation proposes to increase the asset base of these institutions, despite the fact that serious questions remain about crony capitalism and the regime’s accounting practices, as evidenced by the scandal two years ago which resulted in the resignation of two Securities and Exchange Commission chairmen. And yet these developments are part of the larger unfolding of financial capitalism across the globe in the wake of the global financial crisis of the late 2000s. The regime willingly accedes to these globally-imposed conditions. Whether a crisis occurs today or tomorrow, however, it will only sharpen the pressures Sri Lankans already feel. The recent Household Income and Expenditure Survey notes, for example, that by now over a quarter of household expenditure goes to loan repayments, debt, and pension contributions. The gap will only continue to grow.

Amidst these economic conundrums, where is the opposition? The sad fact of the political thinking in the country today is that the opposition led by Maithripala Sirisena has mostly relegated itself to the far too modest task of exposing the accounts of the regime’s family members and cronies. “Family bandyism” is the response to the question of how to analyse the massive economic issues described above. The opposition criticises the regime’s inflation of contracts given to international companies. It points out the ways in which debts have been shifted around to state enterprises such as the Ceylon Electricity Board, masking their real impact on the statistics. All this economic malfeasance however is individualised as the decisions of the current regime, rather than seeing how it operates in the larger context of neo-liberalism which is articulated as financial capitalism. In contrast, we argue that the regime’s “cronyism” is precisely the effects of financial capitalism as reflected through popular perceptions of corruption. This connection occurs throughout the world. It is a well-known fact that bankers and financial speculators in Western countries, for example, have come under severe scrutiny for their unethical practices.

In the case of Sri Lanka, given the structural problem of a state living loan by loan dependent on elite assumptions about which projects such as luxury hotels and casinos to create, the opposition accordingly must broaden its discourse beyond critiques of cronyism in order to make itself more relevant to people in their everyday lives. With regard to labour specifically, how can we challenge the shift in construction toward manpower recruiting agencies, and the relative absence of stable forms of employment?

How can we promote the rights of migrant workers, most of whom have been excluded from meaningful work-whether in the state or private sector-after returning from abroad? How do we address the growing gap between people’s incomes and necessary expenditure on basic goods by considering the absence of fruitful employment, an issue that goes beyond easy rhetoric about creating a “knowledge economy”?
The opposition will have to carefully consider the labour force that is involved in whatever new projects or development schemes it implements, in addition to critically thinking about the mechanisms through which it funds them, whether aid, loans, private investment, or some combination thereof.

The upshot is that the recently released “Maithripala Manifesto” claims it will reassess all current mega infrastructure projects, such as the Colombo Port City project. It even proposes the creation of a National Economic Planning Council, among other independent institutions, reflecting the broader sensibilities of implementing the 17th amendment. This is in contrast to the current executive presidency, which has so thoroughly failed even its stated goal of consistently implementing policy. Even still, the opposition’s ideas must be specified and pushed further in order to cultivate the democratic means by which people can participate in the development decisions that affect their lives. Accordingly, it is imperative that we remain vigilant even in the event that Maithripala wins.

In contrast, however, if the Rajapaksa regime wins, it will likely go beyond simply promoting its existing economically inadequate policies. It will baldly suppress those who speak out against it. As everyone already knows, the current regime has little patience for dissent. Even as it complains of foreign conspiracies, it will target those who criticise the real sources and nature of Sri Lanka’s problems. Why is the government floating Euro-denominated bonds through state banks to foreign speculators if it is really concerned about Sri Lanka’s independence? Why is the regime trying to diversify the market and make it more attractive for financial speculators? Why is it seeking high-profile projects such as casinos to attract elite tourists, neglecting those who most need its help, or even actively engaging in dispossessing them of their land and livelihoods? Why does it pay lip service to organised labour?

As mentioned earlier, to some extent these are questions not even the Rajapaksa regime can resolve. It is not in control when it comes to the more pervasive issues of Sri Lanka’s economy. Nevertheless, it is more than capable of crushing dissent and closing down the political space, as evidenced by the fate of protests in Katunayake, Weliweriya, Chilaw and other places, names that can be added to an ominous chain of signifiers.
Thus the Rajapaksa regime must be cast out-not simply for its family bandyism, cronyism, whatever else people call it-but because it is playing a much more dangerous game with people’s livelihoods and their ability to articulate those changes, especially in the event of a not unlikely crisis in the near future. It is time then for Sri Lanka to wake up quietly yet confidently, rather than be jolted awake by a nightmare that quickly becomes reality.

This editorial also appeared in The Sunday Times