A high-ranking London-based economist warned
last week that Sri Lanka will not achieve its anticipated annual
growth targets — eight to 10 per cent — if it did not urgently
undertake economic reform, implement electoral change and take
meaningful steps towards resolving the ethnic crisis.
Dr. Indrajit Coomaraswamy, a respected Sri
Lankan professional who heads the Commonwealth Secretariat’s
economic affairs division, also urged the public to take a
proactive role in guiding politicians down the "correct path".
"I think the private sector, civil society and
media can do more," he said in an interview with the Sunday
Island. "The latter should focus less on personalities and petty
conflicts within politics and look at the country’s big issues.
They should investigate how these could be sorted out and what
type of politics can resolve the problems."
"The media also needs to encourage people to
apply pressure on politicians to address the challenges of the
day in a constructive spirit."
Coomaraswamy, who holds a BA (Hons) from
Cambridge University and a DPhil from Sussex University,
previously worked at the Central Bank of Sri Lanka (CB). He was
seconded for service in the ministry of finance and planning. He
first moved to the Commonwealth Secretariat’s London
headquarters in 1989, as chief economics officer. In 2001, he
was promoted to director of the economic affairs division. On
two occasions — in 1995 and in 2003 — he worked on the economic
reform programmes of incumbent Sri Lankan regimes.
The economist maintained that he was breaking
one of his own rules by speaking out.
‘I have always felt that a public servant should
not be seen or heard, but should work behind the scenes," he
said. "But this seems to be a good time to express some views on
the major challenges that confront us.’
He emphasised that Sri Lanka was at a
crossroads. The building blocks were in place for the country to
make rapid progress and several governments have aspired to
achieve annual growth targets of eight to 10 per cent.
"In my opinion, however, we will not attain this
growth rate if we don’t tackle three major issues," Coomaraswamy
asserted. "The peace process, economic reform and electoral
change. There’s plenty of understanding in terms of what has to
be done. The problem is implementation."
He said nobody was off the hook: the government,
the opposition, all other political parties, the LTTE, the
media, civil society or the people.
"Sri Lanka has a lot of good people but we don’t
have an overall political consensus that can enable us to take
Commenting on the economy — his primary area of
expertise — Coomaraswamy cited Sri Lanka as a good example of a
country that had experienced sustained terms of trade decline
over several decades.
During the post-independence period, Sri Lanka
had successfully injected money into the social sector —
particularly health and education. The participation rate in
formal education was impressive but the country was not able to
create conditions for gainful employment.
There were reasons for this. At the time of
independence, Sri Lanka had a population of about nine million.
The country also had surpluses in the plantations sector. So,
they taxed the surpluses and financed social sector investments.
But in the 60s and 70s, the country experienced
a rapid population growth of three percent or more.
Simultaneously, the surpluses in the tree crops sector got
"The resources were sucked into the social
sector investments," he explained. "We didn’t have enough left
over for investment in capital stock, like infrastructure and
equipment, which would have created jobs."
Sri Lanka’s performance in comparison with South
East Asia was disappointing, he admitted.
"We could have done as well as them," he
stressed. "By allowing this (civil) conflict to go on for as
long as it has done, we really have not done ourselves any
Meanwhile, current progress in India has now
provided us with an economic opportunity. Sri Lanka must take
advantage of the Comprehensive Economic Partnership Agreement.
Coomaraswamy observed that we had already dropped a catch in the
1980s, when civil conflict prevented the country from capturing
Japanese investment. During that period, countries like
Malaysia, Thailand and Indonesia had significantly transformed
their economies through Japanese business.
Cost of living
The cost of living is a problem for many Sri
Lankans because the country was a low productivity economy and
wages were low.
"We cannot significantly increase the overall
productivity or competitiveness of the economy without tackling
two very large wells of low productivity," Coomaraswamy
explained. "The public service and the traditional agricultural
Over the years, the public service has been used
to meet the shortfall in sustainable employment.
"We now have a public service that is very
large," he lamented. "On a per capita basis, it is one of the
largest in the world and its absorbing a large amount of
resources at very low levels of productivity. As a result, the
overall competitiveness and productivity of the economy is
getting dragged down."
Meanwhile, Sri Lanka also needs to raise
productivity in the traditional agriculture sector. There has
been considerable land fragmentation, resulting in a mass of
very small holders with insufficient cash flow. Investments were
needed and one of the options was to create farmer companies.
Thailand’s experience is instructive in this area.
"These are not easy things," he acceded. "They
can’t be done quickly. But we have to make a start. And for
that, we need political consensus on a strategy."
Coomaraswamy said reform has to be managed
carefully. One has to design well-targeted safety nets, to
cushion people during the transition.
"The international community is willing to
support such a process," he noted. "They have supported economic
reform with safety nets in several other countries." Assistance
includes generous severance or redundancy packages as well as
re-training programmes for outgoing personnel.
Such safety nets have been offered to Sri Lanka
but reform has rarely progressed beyond a certain stage.
"It is easy to derail this process because of
the time inconsistency between reform and the eventual benefits
that accrue," Coomaraswamy explained. "Derailment happens
consistently in Sri Lanka in an ever-repeating cycle."
Usually, a government comes into power and finds
that the public finances are out of kilter. To stabilise the
economy, it takes tough measures that soon become unpopular.
Before its actions bear fruit, it gets voted out. Or it holds a
luxurious bonanza on the eve of an election in order to mitigate
unpopularity. The public finances go out of kilter again.
"Caught in a repetitions cycle we are not
addressing the underlying structural problems," Coomaraswamy
warned. "We must explain to the people that their standard of
living will not improve unless we use resources more efficiently
and that requires significant reform. Because this process is so
difficult, we need cooperative politics that cuts across party
However, economic reform cannot succeed without
"It is not a good idea to embark on an ambitious
public sector reform programme without removing the risks
associated with the civil conflict," Coomaraswamy cautioned. "Labour
displaced from the public sector must be diverted to the private
sector. And peace is a prerequisite for a buoyant private
"You just can’t crack this problem of low
productivity and low wages without achieving peace."
The peace process, he asserted, was a complex
issue. While there was some cause for optimism, it was a long,
difficult road towards a final solution. Coomaraswamy said his
main concern was inter-community relations.
"We (Sri Lankans) don’t seem to be developing
the right mindset to create an enabling environment for a
durable peace that is fair by all communities," he mused. "Every
community is preoccupied with its own rights. It is almost a
Coomaraswamy is Tamil but married to a
Sinhalese. "I should put myself into the shoes of a Sinhalese
person and ask, what are his fears why does he have these fears
and how can these fears be addressed while the legitimate
aspirations of the Tamil community are also met," he explained.
"Similarly, each community must look at problems
from the perspective of the other — Tamils, from the point of
view of the Sinhalese; Sinhalese from the point of view of the
Tamils. And both these communities must take the Muslim
perspectives into account."
Coomaraswamy fielded a proposal, whereby small
groups of people would be organised throughout the country and
to explore issues from the viewpoint of other communities. The
idea, he said, was to explore what compromises could or should
be made to address each other’s concerns, without totally
undermining one’s own position.
"It should be done in both government-controlled
and LTTE-controlled areas," he said. "The LTTE must play its
part. Civil society or the peace movement can take a lead. All
stakeholders must be involved."
Sri Lanka’s large peace constituency was not
"thinking through fully" how to propel the peace process
forward; or how to create an enabling environment that is
conducive to a durable peace.
Turning his attention to the electoral system,
Coomaraswamy noted that the current arrangement ‘did not seem to
give us outcomes that were conducive to effective governance’.
"We need to fine-tune the electoral system in a
way that minority interests are taken into account while also
having better (electoral) outcome in terms of governance," he