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FINANCIAL
EXPRESS: Sri Lanka’s rebirth
Sri Lanka has been deservedlyयथायोग्य praised for the progress it has made since the end of the war
against the separatist अलगाववादी Tamil
Tigers in 2009. The economy has grown at an average annual rate of 6.7%, and
education and health statistics are impressive.
All developing countries face myriadअसंख्य challenges, but this is
especially the case for a country that has suffered an intense 30-year civil
war. The government will need to set priorities प्राथमिकताओं; but success will require a comprehensiveव्यापक approach.
Underlying wars such as the fight with the Tamil Tigers are,
typically, social and economic grievances शिकायतों such as real or perceivedमाना जाता है discrimination, and the
failure of government to address wealth and income disparities असमानताओं adequately पर्याप्त रूप से. Thus, more than
transitionalसंक्रमणकालीन
justice is required in Sri Lanka (or, to take another example, in Colombia,
where peace with the FARC guerillas seems increasingly likely). What is
required is full integration of the Tamils, Sri Lanka’s embitteredकड़वा हुआ minority, into the
country’s economic life.
Markets on their own won’t solve this problem. Sri Lanka will
need balanced affirmative-actionसकारात्मक कार्रवाई
programmes that address the various dimensions of economic disparity and are
attunedअभ्यस्त to the
inequalities within the Tamil population. It will do no good to give a leg up
to Sri Lanka’s many rich Tamils, while leaving poor, lower-caste Tamils
further behind.
Economic integration of the northern Tamil region will require
heavy public investment in infrastructure, education, technology, and much
else. Indeed, such investments are needed for the entire country. And yet tax
revenue as a share of GDP is only 11.6%, about one-third that of Brazil.
Like many other developing countries, Sri Lanka simply enjoyed
the fruits of high commodity prices in recent years (tea and rubber account for
22% of exports). Sri Lanka should have used the commodity boom to diversifyमें विविधता its export base; the
previous government of Mahinda Rajapaksa did not. With export prices down, and
with tourism likely to suffer from the global economic downturnआर्थिक मंदी, a balance-of-payments
crisis loomsअस्पष्ट देख पड़ना.
Some suggest that Sri Lanka turn to the International Monetary
Fund, promising belt tightening. That would be hugely unpopular. Too many
countries have lost their economic sovereignty in IMF programmes. Besides, the
IMF would almost surely tell Sri Lankan officials not that they are spending
too much, but that they are taxing too little.
Fortunately, there are many taxes that the authorities can
imposeथोपना that
would increase efficiency, growth, and equity.
Sri Lanka has abundantप्रचुर sunshine and wind; a carbon tax would raise considerable
revenue, increase aggregate demand, move the country toward a green economy,
and improve the balance of payments. A progressive property tax would encourage
more resources to go into productive investments, while reducing inequality
and, again, boosting revenues substantiallyकाफी हद तक.
A tax on luxury goods, most of which are imported, would serve
similar goals.
Some in the country, citing inadequate inflows of foreign direct
investment (despite marked improvement in the business climate), argue for
lower corporate taxes. But such tax concessions are relatively ineffective in
bringing in the kind of long-term investment that Sri Lanka needs; so to
embraceआलिंगन them
would needlessly eviscerateअंतड़ी निकालना the already weak tax
base.
Likewise, another frequently proposed strategy, public-private
partnerships, may not be as beneficial as advertised. Such partnerships usually
entailमिलना the
government bearing the risk, while the private sector takes the profits.
Typically, the implicit अंतर्निहितcost of
capital obtained in this way is very high. And while the private sector can,
and frequently does, renege इनकार on its
contractual obligations संविदात्मक दायित्व (through bankruptcy)—or
force a renegotiation under the threat of reneging—the
government cannot, especially when an international investment agreement is in
place.
Twenty-first century development strategies need to be
different. They should be based on learning —learning to produce, learning to
export, and learning to learn. There can be leapfroggingमेंढक कूद खेलना
: in Sri Lanka’s case, the benefits (apart from direct
employment) to be gained from certain low-skilled manufacturing stages like
garments may be limited. Given its education levels, Sri Lanka may be able to
move directly into more technologically advanced sectors, high-productivity
organic farming, and higher-end tourism.
But if Sri Lanka pursues कर्मों such activities, it will need to ensureसुनिश्चित good environmental
policies for the entire island. That will necessitate sound urban planning. Sri
Lanka is fortunate to have a low level of urbanisation today; but this is
likely to change in the next two decades. This gives the country the
opportunity to create model cities, based on the adequate provision of public
services and sound public transport and attunedअभ्यस्त to the cost of carbon and climate change.
Sri Lanka, beautiful and ideally located in the Indian Ocean, is
in a position to become an economic hub for the entire region—a financial
centre and a safe haven for investment in a geopolitically turbulentअशांत part of the world. But
this won’t happen by relying excessively on markets or underinvesting in public
goods. Fortunately, with peace and the emergence of representative political
institutions, Sri Lanka today has a better opportunity than ever to make the
right choices.
The author, a Nobel laureate in economics, is university
professor at Columbia University and chief economist at the Roosevelt
Institute.
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