The ‘Yahapalana’ government has completed a year in office. Technically, the heads changed in early January 2015, but until the August general election, it was more an interim ‘warm-up’ period. Then began the real journey, following a clear mandate at a general election. A stable parliamentary majority of nearly two-thirds of representatives – what else could one ask for?
So how was the year for the country? Can we be happy about how it went?
What follows is my personal analysis on 10 key business-related aspects. Inevitable, maybe, a comparison with ancien régime. With this brief analysis, I build my report card. You are free to call it incomplete. I will be happy to trigger a discussion rather than arriving at conclusions.
01
Political Stability: GOOD (at least for the moment!)
Not that we carried high hopes, particularly not under the “cohabitation” arrangement. But so far, the government has done fairly well. Credit should go to both the president and the prime minister who, with great difficulty perhaps, led two opposing political camps towards a single goal. The North and East are back to near normalcy. We talk of conflict in the past tense. Yes, there are inevitable disputes, but what matters is overall political stability. It still looks good enough for investors.
02
Economic Growth: UNSATISFACTORY
No detailed analysis necessary. Growth is weak. We did reasonably well after a setback in 2009 for a little more than thee years. Then, since 2013, issues started. The downturn continues. We are currently in a payback period. Citizens, time toreturn the luxuries you don’t deserve. You just cannot expect miracles when in deep manure. Still, it could have been better, had the government tried harder. Well, it is not fair blaming just the present government, but it should take its due blame for creating this mess.
03
Economic Discipline: WE DESERVE BETTER
Dr. Razeen Sally, an economist who now heads IPS, minces no words: “Macroeconomic management has always been something close to a disaster in Sri Lanka; it was so under the Rajapaksa regime and that has continued to be the case with two very bad budgets last year. With public expense increases, salary increases and more expenditure entitlements along the way, which of course made Sri Lanka more reliant on debt including foreign commercial borrowings, which is increasingly vulnerable at a time when interest rates are probably on the rise and money is flowing out of emerging markets”, I can add little. The problem is that the government seems to care more about its political future than ensuring fiscal discipline.
04
Business Environment: SO FAR SO GOOD
Perhaps it is too early to do a detailed analysis. Some barriers to commercial activity have been cleared. There is less nepotism or favoritism. No new enterprises by security forces. More opportunities for the private sector. We still do not see the space businesses typically enjoy under rightwing governments. SMEs complain about new taxes. Unfortunately the government is placing the entire fiscal burden on the shoulders of the private sector without resorting to any cost-reduction measures on the overspending public sector.
05
State-Owned Enterprises: NO SERIOUS CHANGE
A few facts. In 2014, SriLankan Airlines’ losses topped Rs29 billion. In 2015, losses declined to Rs10.6 billion. Sounds good – but a loss is a loss. The CEB’s operating loss of Rs14.6 billion has changed to an operating profit of Rs20 billion – but profitably is linked closely to good weather conditions. Railway losses too have declined from Rs11 billion to Rs7.7 billion. Improvements, no doubt, but SOEs still burden the nation heavily. It is still a long way to full profitability.
06
Infrastructure Development: SLOW, BUT…
Infrastructure development had a setback under ‘Yahapalanaya’ (despite the fact that the government claimed to have spent Rs553 billion in 2015 against Rs442 billion the previous year.) This is the time to prioritise. Highways to Jaffna and Kandy are important, but a coal plant on the East coast at Sampur is critical. It’s time mega infrastructure projects are prioritised. It does not look like this government is too inclined for a comprehensive strategic development programme, just like the earlier one, and the one before.
07
Social Infrastructure: NO CHANGE
Hardly anything has changed in education and health. Despite pledges to raise state expenditure for education and health to 6% and 3%, respectively, last year’s figures too were more like 2% and 1.5%, respectively. Only a marginal improvement.
08
Controlling the Cost of Living: COULD HAVE BEEN WORSE
No government has been entirely successful in this, so we have to talk in relative terms. New taxes do push prices up. Vehicles prices have already taken a leap. The government has made a conscious effort to maintain low prices – at least for a selected section of the population. Their motivations may be political, but these have insulated the poor from macroeconomic shocks. Even with inflation rising, the poor is not worse off.
09
International Trade: YET TO SEE.
We did have higher expectations for this, particularly under a ‘market-friendly’ government. So far, we have seen only the preparation. We are about to enter into new trade agreements with India, China and Singapore. But to trade what? The government should explain what Sri Lanka can offer them. It can’t be finished products. Maybe raw material and cheap labor – but the challenge is that we don’t have a reputation for either.
10
Corruption: HAS ANYTHING CHANGED?
This is sensitive, and rarely is there data to back suspicions. There is only one way to determine that things have changed: are better controls in place? If not, assume no change. Should we be as naive to assume a group of good boys?
The bottomline is, despite the political change, little has changed for better. Yahapalanaya’s first year was a continuation of the same mix of economic policies. Interestingly, these very policies were the ones they questioned. As the next Presidential Election is scheduled for no later than January 2020, the current government has only three more years. Let’s hope for change. Otherwise, Yahapalanaya or not, we would be getting closer to a ‘Greek crisis’. Sadly, that destiny is one thing that has not changed with the heads.