BY CHANUKA WATTEGAMA (Chanuka Wattegama, an academic and a policy researcher, can be reached at firstname.lastname@example.org. The article has significant input from Buddhi Prabodha Karunaratne (email@example.com)
SRI LANKA’S ECONOMY, AS I HAVE BEEN WRITING REPEATEDLY, HAS BEEN A LONG-TERM BEDRIDDEN PATIENT IN A GOVERNMENT HOSPITAL. WE, THE RELATIVES, ARE COMPLACENT AS SHE SHOWS NO IMMEDIATE DANGER OF DEMISE.
AS ONE EXPECTS, HIS NEW-FOUND INTEREST IN ARTIFICIAL INTELLIGENCE (AI) IS SEEN ACROSS ALL PLANS. THIS IS AGAIN TAKING MATTERS TO A NEW LEVEL. MOST ‘DIGITAL ROADMAPS’ PROPOSE IMPLEMENTATION OF INFORMATION SYSTEMS THAT DRIVE ON THE NATURAL INTELLIGENCE DISPLAYED BY HUMANS.
IN TYRION LANNISTER’S LANGUAGE, HE HAS A STORY. AND SO FAR IT IS THE ONLY STORY THAT STANDS FOR SRI LANKA’S FUTURE 202025. DHAMMIKA PERERA, IF HE CAN BE CALLED SO, CLAIMS TO BE THE ONLY POLITICIAN (OR ONLY INDIVIDUAL IN THAT CASE) TO PRESENT A MASTER PLAN TO BEAT THE MIDDLEINCOME TRAP IN SRI LANKA.
WHAT ABOUT RAISING THE PER CAPITA GDP TO US $ 8,000? WELL, THAT HAS TO COME FROM THE MINISTERIAL PLAN FOR THE TREASURY. DHAMMIKA PERERA DOES NOT FOCUS ON JUST ONE SECTOR. (A POINT I DISAGREE WITH HIM) HIS PLAN IS TO DOUBLE THE OUTPUT OF ALL THREE SECTOR.
Dhammika Perera’s stance on standing for Presidential Election 2020, till the moment of penning this, is noncommittal. This, one fully understands. Neither he represents a political force nor has ever been a political figure.
His entry to the race for the highest post in the country, if that were to happen, will never be in the traditional way. It will be a paradigm shift. Paradigm shifts don’t happen preannounced.
So, the news, were it to come ever, might come in the most unanticipated moment, in the most unforeseen manner. We would be as surprised as Gendry Baratheon when he was made the Lord of Storm’s End, following the Battle of Winterfell by Dany.
Are such paradigm shifts possible? Could a professional with absolutely no previous political experience so suddenly jump into the fray and expect the constituency to vote for him, making him the president? Why not?
When (then General) Sarath Fonseka stood for the race in 2010, nearly 4.2 million voters endorsed him despite being a complete political novice. (I exclude the local and South Asian cases of Indira Gandhi, Rajiv Gandhi, Sirima Bandaranaike, Benazir Bhutto, Sheikh Hasina, Khaleda Zia, etc. all who were from political families and all filled political vacuums.)
Said that, it is not the norm in this part of the world. Most professionals still first attempt the safer option through the national list, before contesting on ground even for a parliamentary seat, let alone presidential.
In the industrialised world, it is different. Most interesting cases are those of Ross Perot and Donald Trump. Perot has been an American business magnate, the founder and former Chief Executive Officer of Electronic Data Systems and Perot Systems.
In 1992, Perot announced his intention to run for President of the USA. This was unprecedented. He was immediately accepted by a large section of population for their fear against traditional politicians.
A June 1992 Gallup poll showed Perot leading a three-way race against President Bush and presumptive Democratic nominee Bill Clinton. They showed Perot getting support from 39 percent of the voters (versus 31 percent for Bush and 25 percent for Clinton). Unfortunately, Perot severely damaged his credibility by dropping temporarily out of the presidential contest in July and remaining so for several weeks before re-entering.
He later claimed his withdrawal was due to the Republican operatives attempting to disrupt his daughter’s wedding. Then it was too late. Perot ended the third candidate with 19 million in popular vote, while Clinton won with 45 million.
Donald Trump’s case is better known. Before entering the race as the Republican candidate, he was the principal owner of ‘The Trump Organisation’ – a group of approximately 500 business entities, with more than half directly using his name and with an annual revenue of over US $ 600 million.
Trump’s success was because he entered as a candidate of a major political party. Still it was Perot who paved his way, way back. An individual whose net worth is estimated to be US $ 3.1 billion, Trump in 2017 became the wealthiest person ever to assume the presidency and the first without prior military or government service.
This precedent per se is adequate for a local political party to seriously consider a replication. With Sri Lankan voters gradually moving away from party politics they were used to since 1940s to 2015, this could be perhaps the best time for a high-risk experiment, aiming a high gain.
This article, in that backdrop, analyses the fit of Dhammika Perera to be the seventh Executive President of Sri Lanka. It is the third in a series. Earlier the cases of Gotabhaya Rajapaksa (April 8) and Ranil Wickremesinghe (April 23) appeared in the very space.
While avoiding predicting the possibility of him being elected, the analysis attempts to evaluate what would be the socioeconomic impact to come with Dhammika Perera at the top position, at this juncture.
A man with a master plan to beat middle-income trap
Why should one take Dhammika Perera seriously? Because he is the first and still the only locally brewed dollar billionaire? Because he has been named the wealthiest individual in Sri Lanka since 2013 by Forbes? Because he is an achiever who reached the top rung starting from very humble beginnings? Because he is one individual who has experience both in the private and public sectors at higher management level? May be.
Still, more than anything else, he has a ‘plan’. In Tyrion Lannister’s language, he has a story. And so far it is the only story that stands for Sri Lanka’s future 202025. Dhammika Perera, if he can be called so, claims to be the only politician (or only individual in that case) to present a master plan to beat the middle-income trap in Sri Lanka.
The ‘middle-income trap’ is the technical term that explains the inability of some countries to climb from being a middleincome country to achieve the high-income fully-developed status, despite the fact that they have made significant progress in reducing extreme poverty and experience structural change and growth.
Data explains this best. Thailand has reached a per capita GDP of US $ 4,000 in 2008. Eleven years after, it has only reached the point of US $ 6,500. This is more prominent in South America and Africa, where almost all countries that reached the US $ 4,000 mark around 2005-10 are still, a decade later trapped around US $ 6,000.
This is not the case of high achievers. China is the best example. The Middle Kingdom crossed the US $ 4,000 mark only in 2010 but since then, it has more than doubled to US $ 8,826 in 2017. In the other extreme, the Maldives, with all its political turmoil, has reached a figure over US $ 10,000, the same year.
So, it is totally irrespective whether the country is large or small. The difference comes from the existence or not of a strategic plan. The Maldives and Mauritius, two small economies, are doing great in some industries like tourism. India has opened its markets in 1992 and still has barely reached a per capita GDP of US $ 1,940, in 2018.
Millions of poor still struggle with their daily lives in overly populous metros in the sub-continent while only three states, Goa, Delhi and Sikkim have surpassed Sri Lanka. Many others, including Tamil Nadu, are close with their higher growth rates.
Meanwhile, China, with a comparable population, does far better with a central plan that has produced fully industrialised cities like Shanghai, Shenzhen and Guangzhou, which India would take at least another 20 years to produce.
No, it’s not the size or history or even natural resources, though some of these matter sometimes. Nothing else. It is how a country strategizes itself in the global economic map that takes it forward.
Thus, the importance of having a master strategic plan is a point that we all can agree with Dhammika Perera. If we were to move a step ahead, he could be a great implementer too, having done it once for himself. Simple logic. Only who knows how to be successful himself knows how to make a country successful. He may not be the only selfachiever on the fray but he surely scores a point there.
Central plans, do they still matter?
Central planning is nothing new. Sri Lanka had a five-year plan for the period 197276 that didn’t really materialise itself. India since 1951 has had 12 five-year national plans developed, executed and monitored by the Planning Commission. The first one of these came immediately after independence, under the socialist influence of the first Prime Minister Jawaharlal Nehru. The original objectives and formats have changed giving more weightage to market economics but central planning still happens in India.
The most famous and perhaps most discussed and criticised central planning happened in Leninist and Stalinist Russia/ USSR. Named Gosplan, the first was created in 1921. The role of the institution increased in 1929, when the first five-year plan for rapid industrialisation and a significant reduction of the private sector in the economy was implemented.
Gosplan was at the head of the government planning apparatus and was by far the most important agency of the economic administration. The task of the planners was to balance the resources and needs to ensure that the required inputs were provided for the planned outings.
Gosplan has been criticised by liberal economists, mainly the Austrian School of Economics, which included Friedrich Hayek, Ludwig von Mises and Joseph Schumpeter. The key criticism was against its practicality and inability to deliver the outcomes sought.
Whether Gosplan was a success or a failure depends on what economic stand you take. Still, one can say Gosplan I would be writing this in German, not English. It was the artillery and automobiles Gosplan created, not just the extreme weather, defeated Hitler in Stalingrad in WW II.
It was Gosplan that made the USSR the first country to enter the space age with Sputnik in 1954, followed by the first animal in space Laika, first human in space Yuri Gagarin and first woman Valentina Terechkova.
By the time of WW I, Russia was the poorest economy in Europe. There was hardly anything beyond rural agriculture. Nearly 25 years later, not only Russia’s role was critical in allies winning WW II but also the war brought half of Europe indirectly under the USSR. Stalin led his country through the postwar reconstruction, during which it developed a nuclear weapon in 1949.
In spite of all atrocities, great terror and labour camps in Siberia, recorded during the period, the USSR was an industrialised superpower by Stalin’s death in 1953. These were true achievements of Gosplan. Just because we have not adequate data to reach concrete conclusions on central planning, it is unfair to term Gosplan a complete failure.
Lankan economy right now: More disturbed after 4/21 incidents
Sri Lanka’s economy, as I have been writing repeatedly, has been a long-term bedridden patient in a government hospital. We, the relatives, are complacent as she shows no immediate danger of demise. She talks, listens to others, understands them, makes requests, takes her medicine, eats and sleeps.
Still, she is a sick woman, who cannot stand on her own feet. Like many patients, she too shows signs of recovery from time to time. Then we get so excited and we hope she would soon be dismissed from hospital. Sadly, these ‘good times’ last too short.
The Easter incidents in April have further deteriorated the situation. The tourism sector, which normally brings an annual revenue of US $ 4 billion, has already bled. After the bombings in Kuta, Bali, 17 years ago, the recovery in tourism took a year. After the attacks in Paris in November 2015 that killed 129 people, it took a similar amount of time, although the decrease in tourists was less severe. This could further lower Sri Lanka’s next year’s predicted growth of 3.5 percent. It could be possible that we reach near zero levels, a situation the country has not faced since 2001.
Weren’t we doing well at all? Yes. During the last few decades, the best time came in the aftermath of conflict. Despite the universal negative impact of the so-called ‘Great Recession’ of 2007-8 (Most Asian economies suffered a delayed impact about a year later), Sri Lanka’s economy has been doing great around 2010-12. The GDP growth rates for these three years varied between 8.0 percent and 9.1 percent – no small achievement, given its past performance since independence. (Growth of 9.1 percent in 2012 was so far the best)
The post-conflict economic recovery was so grand that one question at the presentation of the Central Bank annual report of 2012 was whether the Sri Lankan economy overheating. (An economy is said to be overheated when inflation increases due to a prolonged good growth rate and the producers produce in excess, thereby creating excess production capacity. The main reason behind overheating is insufficient supply allocation because of excess spending by the people due to the increase in consumer wealth.) This euphoria was short lived.
The growth rate fell during 2013-4. Since then, despite the successive leadership changes, it remained at low levels. If the current rates continue, even by 2030, we will record a per capita GDP of US $ 6,000. We need a continuous minimum 8 percent growth to reach US $ 10,000 within 10 years.
Can a powerful central plan reverse trend, double per capita GDP?
Dhammika Perera’s strategic master plan has been the outcome of his research for over nearly 15 years. It covers 30 ministries. I have personally been able to go through, with his assistance for two hours, only some components. You don’t have to eat a whole egg to say it is good or not.
The plan is good and to the point. The proposals are as comprehensive and as practical as what one expects from a single team. If they were to be implemented, certainly the plans have to undergo a more rigorous scrutiny. Still this per se does not undervalue the significance of the task.
One immediately observes two key characteristics: Some proposed approaches are not new. Firstly, they are similar to the projects in the pipeline some ministries struggle to launch for a year. Then all examples follow successful implementation elsewhere.
A closer look reveals some more features. The ministerial plans are interlinked. When one plan requires funds, say Rs.10 billion, either the same or a plan for a different ministry finds that. Not all funds come from increased tax. In fact, the large idea is to reduce tax rates over five to 10 years.
Mostly funds come from the money saved by improving productivity. This approach leaves no room for ministry secretaries to question for funds at the implementation stage, unlike in case of national budget utilisation. Such thinking, as if you have not noticed, would not have come from a politician or a bureaucrat. It needs a sharp business mind to figure the linkages.
As one expects, his new-found interest in Artificial Intelligence (AI) is seen across all plans. This is again taking matters to a new level. Most ‘digital roadmaps’ propose implementation of information systems that drive on the natural intelligence displayed by humans. Tesler’s Theorem says, “AI is whatever hasn’t been done yet.”
Having moved from the backseat it has taken since ’50, AI is now driving international business. AI models developed by Microsoft and Alibaba each succeed in beating humans in a reading and comprehension test at the Stanford University. No surprise, AI is in the middle of all this.
Then, the plans are not just to overcome economic hurdles. Sometimes achieving social outcomes takes precedence. A good example is the suggested prison reforms. It aims to reduce the number of unnecessarily held detainees. Prisoners get reduced sentences for skills they develop. Every prisoner leaves a more educated individual.
What about raising the per capita GDP to US $ 8,000? Well, that has to come from the ministerial plan for the Treasury. Dhammika Perera does not focus on just one sector. (A point I disagree with him) His plan is to double the output of all three sectors: industry, services and agriculture.
The former Board of Investment chairman, we assume, must know all about attracting international investors. Then it is a game of creating the right environment. Easier said than done. Still, at international level, special economic zones have made real differences. You do not have to go so far. This is exactly what happens across the Palk Strait in Tamil Nadu. Why not a replication with modifications?
Finally, the bigger picture: The question is whether or not Dhammika Perera becomes the president. The question is whether or not who wins. The question: Where do we want to be in 2025? I guess among all presidential aspirants so far, Dhammika Perera at least has an idea. The ‘middle-income trap’ is not a concept many others may even understand. In that environment, he surely makes his mark.