Globalisation of Sri Lanka
by Dr. S. Colombage
Globalisation of Sri Lanka, Its good and the bad and the role of the public sector. SLISES, Colombo
Author: A.D.V. de S. Indraratna
At a time when the entire world is overwhelmed by globalization as a panacea for all economic ills, Professor A.D.V. de S. Indraratna critically looks at this process in his monograph entitled "Globalisation of Sri Lanka, Its good and the bad and the role of the public sector". The integration of the world economy is gathering momentum.With the liberalization of the economy in 1977, Sri Lanka entered into the arena of globalization and thus, she has 24 years of experience in this process. The author has taken the initiative to look back this process objectively so as to highlight what has gone wrong and what the public sector should do to correct the situation. It is a daunting task to address this timely and critical issue but this monograph succeeds authoritatively by presenting a lucid picture from a Sri Lankan perspective..
The author starts by defining globalisation as the process of integration of national economies. In the chapter on historical background, it is explained how the information technology (IT) developments in the last two decades have powerfully fuelled globalization during the last two decades. As a result of the fast developing IT, the world trade rose 2.3 times as fast as the world GDP in the last decade.
Sri Lankas experience in the liberalization and globalisation process has been diverse. In the first phase of liberalization in 1977-82, the country achieved internal balance in terms of high economic growth and low unemployment, but the budget deficit was unattainable and inflation became excessive. In the second phase of 1983-94, the economy suffered an internal imbalance in the form of low growth, widespread unemployment and high inflation while there was also an external imbalance with a large current account deficit. The socio-economic problems aggravated during the third phase of 1994 to date with low growth, high budget deficits, wide external deficit and high inflation. Fiscal profligacy continued unabated, allegations of waste and corruption were galore. Privatization was intensified during this recent period, but the author notes that it did not generate or bring much funds either to the Treasury or to the capital market as envisaged. There has been hardly any infusion of capital or technology to the domestic economy.
The author questions whether globalization has brought about any beneficial effects to the country in the form of increased trade, capital inflow, technology transfer and labour migration. He observes that Sri Lanka did not get opportunities to expand her trade, as there was no level playing field in foreign trade arena. Because of the export illusion and rush for garment exports, other economic activities, agriculture in particular, received a step-motherly treatment. Foreign direct investment did not help much to diversify the export base and to infuse technology into domestic economy. The author also highlights the economic consequences of the recent shocks like the terrorist attacks on the Colombo international airport and the US twin towers. Globalization has multitude fallouts like increasing poverty, rising crime and violence, environmental degradation, changes in life styles and erosion of cultural values.
The author emphasizes the need to restore good governance and proper economic management to rectify the present situation. In this process the public sector has an important role to play by supporting the private sector to modernize and industrialise the economy. The government should give clear directions to attract FDI and technology. There is also a need to monitor the activities of multinational corporations (MNCs). The role of public sector in regard to FDI and MNCs becomes all the more important in view of trade-related investment and intellectual property rights measures introduced by the World Trade Organization. The author also stresses that the government should play an active role in export diversification and poverty alleviation. The author concludes by reiterating the fact that a strong and efficient public sector is imperative to foster pro-poor economic growth with appropriate national policies in a country like Sri Lanka.
It is a short, but a comprehensive monograph on the whole question of globalisation. This is an eye-opener to the general public and particularly to the policy makers. In my view, all those who are interested in the subject should read it.