Ranil Wickremesinghe, Prime Minister of Sri Lanka

VIEWS (1219)

"It's only when the private sector moves, that the growth will come."
Ranil Wickremesinghe, Prime Minister of Sri Lanka

Venerable members of the Clergy, Honourable Ministers, of course my good friend Nirj Deva and of course the organisers of the event, Mathi and wife - the couple that keeps everything moving, Honourable Deputy Speaker whom I just forgot, distinguished members of the private sector, winners of the awards, and friends.

Today the day is still unfolding for me. I started in the morning in a Presidential Commission. I've come here now, as I told Mathi, on my way to India. Hence, I don't think that my wife and I will have the opportunity of being here till the end. But you have expanded your awards and we see the TOP 30 and also the Passionate ones who speak of what they have done; how they have taken up an idea, pushed it and seen it develop into a global brand. To all of you I say, congratulations. We need you all to expand and many more would be passionate. Thusitha was talking about a development bank. The Budget has made provisions for a development bank and we will be allocating money, we thought we will start with the initial capital from the Sri Lankan Government side of ten billion rupees but that's not all. Much more will come. And as the money is taken up, there will be more capital that will be pumped in with the support of the Government. We want all of you to succeed, to access to capital and for God's sake create the jobs soon. That's what we require. There are a lot of young people who are leaving school and who want employment.

To accelerate growth, we have to look at you in the private sector and those who are not in this room, but are outside; the medium and the small. It is only when the private sector moves, that the growth will come. That is what we did in 1977.

Today, in the afternoon, I received the S&P ratings. We had gone from negative to stable. That being said we have to keep that reform momentum, because we are keeping the reform momentum and tackling the debt redemption spike. A very, very difficult task. Therefore, to have B+, B sovereign credit ratings is not bad. But where are we? This is not an occasion to have a party. It just says that our stabilisation programme is working. A lot of people want to know what are you doing. I need not to tell you the mess we inherited. As I said today morning in the Commission, we didn't know what our obligations were because only a part of the projects were in the Budget and the others were hidden. It was like looking for the dead bodies and we still haven't found all the dead bodies. Last week, I got a bill from a Singaporean Company, for having done part of the Northern Highway. There will be many more like this that will happen. But from a country whose revenue was insufficient, even for debt servicing, we have made some progress. That the last two year's programmes of economic stabilisation, of controlling the debt, of ensuring the interest and exchange rates, both determined according to the needs of the market, a new foreign exchange act, the plans for liberalisation - all have helped us. But this is not enough, I will be the first to say. As Standard & Poor's says, "we revise the outlook to stable, based on our assessment that the national strengthening of Sri Lanka's institution and governance practice is on a more sustainable footing". On the start, we are alright. This assessment is predicated on not only the adoption of further reforms over the next 12 to 18 months, this includes the passage of the liability management act, which would allow the Government to proactively address rising sovereign debt maturities in 2019. These positive developments are balanced by ongoing rating constraints, which include high external and net general Government indebtedness. I think we come third. According to them after Lebanon and Egypt, what an achievement. With a GDP per capita, estimated to reach approximately 4,000 US dollars by the end of 2017, Sri Lanka's economic assessment also represents a rating weakness. This rating constraints weighs against Sri Lanka's sound growth potential. Now this is the challenge we have. We have stabilised the economy. How do we go forward? And I thought I'd say a few words on that.

We have a growth potential. We have to maximise this. We have to accelerate growth and ensure the debt reduction is done in a shorter time. A shorter time is not five years, not ten years, or not wait for 25 years - ensure it is done in 15 years. That is possible if we earn a few more billion dollars and we earn more revenue. To accelerate growth, we have to look at you in the private sector and those who are not in this room, but are outside; the medium and the small. It is only when the private sector moves, that the growth will come. That is what we did in 1977. We have placed too much of reliance on Government spending. Every rupee spent to create growth, to create GDP growth, does not result in economic growth. In the last ten years, I would say from about 2005, our GDP had increased nearly four to five fold. But our exports have increased only in two fold. We have growth, with a lot of wasted investments. You can put money into roads, you can put money into infrastructure, but in the long term, it will not create the jobs that we want: the good jobs and the permanent jobs. That growth will come from private investments; whether it be local or foreign. For us, in Sri Lanka, first we want to encourage our local private sector to expand. And at the same time, encourage foreign investments. We cannot do this by ourselves. We haven't got sufficient capital if we are looking at accelerated growth. We need the foreign capital, we need the foreign technology and we need the markets. All of you remember how in 1979-80, the foreign apparel industry came in and everyone thought this is going to be foreign dominated. Today, the best of them, are from Sri Lanka. We learn from them, and then we overtake them. Our policy, the giving of new incentives, is to encourage the maximum investment in the coming years. This is what the Budget, which the Finance Minister presented, seeks to achieve. How do we then encourage you all? How do we encourage you to expand, to invest more money?

When we talk of liberalising, we have to remember what Asia will be... No country has developed utilising only its domestic market.

The only way we could see was one - to provide you funding, two - to provide you incentives and three - to liberalise further. When we talk of liberalising, we have to remember what Asia will be in the next ten, 15 and 20 years. Because there are those who feel that we can develop only through our domestic market. No country has developed utilising only its domestic market. China, with nearly a billion people, and India with nearly a billion people at that time, could not develop only relying on the domestic markets. Every country developed when they integrated with global trade, when they started exporting and allowed the imports to come. Whether it be Japan after the war, whether it be South Korea, whether it be Singapore, whether it be China, Thailand, Malaysia, they all opened out into the world. Just as much as people came and invested, just as much as they exported, they also allowed trade to come in. And this is the way that Asia is going. Not only have they opened out, now there is talk of Indo-Pacific. There are two big trading initiatives going on in Asia Pacific, which will certainly lay the foundation for a liberalised trading area, relying on the markets to determine each one's economic growth. If you go to manipulate your exchange rates, if you manipulate your interest rates, no one else will come. The first of these is the ASEAN-led initiative - the Regional Comprehensive Economic Partnership. The ASEAN countries; Japan, China, India, New Zealand and Australia have all got together to form one comprehensive trading area. There will be one set of common rules, within which each one can then proceed. The next one, is the TPP or the Trans-Pacific Partnership, which includes East Asian countries, Canada, Mexico and Chile. It was initiated by the United States - they dropped out. And then, Japan decided they'd carry it forward. Even without the USA, it still is a formidable trade grouping. There are two trade groupings - the Comprehensive Regional Economic Partnership and the Trans-Pacific Partnership, without the United States. The discussions that were held last week during the visit of President Trump in Vietnam, in Da Nang and in Manila, Philippines, both showed the intention of these groups to move forward. They are talking of 2018 as the year. I do not know whether they will make it all by 2018 but I'm sure by 2020 the trading partnerships will be in place.

The Government wants to help you. What are the other measures we can take? Given this period, this five-year period, you plan out and you have another five years to grow. That is sufficient. We would like you to join us.

Then what do we do in Sri Lanka? Do we join this? Do we join this or do we stay out saying we can't get in there? That we can work with our 23 million of our population. It will never go beyond 25 million. Here are two great opportunities which we should grasp. With this in mind, we have already obtained the GSP+ from the European Union, we are talking with Singapore, India and China on free trade agreements. Now some say, with free trade agreements, we are finished. No, we are not finished. We are not looking at opening our borders for all foreign goods. No. We will want to phase out the implementation of these agreements, over a period of eight to ten years. Eight to ten years for our businesses to grow, to become more competitive, to go out into the world, to be brave. That's the time that we will provide the trade adjustment packages to strengthen you to go out and find the markets. I have confidence in Sri Lanka's business. I've seen many of them, the stories they said here of how they started and you can go ahead.

Once these trade agreements in place, in addition to the GSP+, what do we do next? Well, if we get into the Comprehensive Regional Economic Partnership, you get the whole of ASEAN, you have China and India with you, and Singapore, and you get Japan, South Korea, and Australia. That's a big market. We have to enter that. And then you look at the Trans-Pacific Partnership without USA, which sets a higher standard. When that agreement comes in, get your observer status and work towards it. Then all the way from India, to Canada, to Mexico, and to Chile, you have access to markets. But it also means they have access to your markets. It works both ways. But that is where we have to be. If we stay outside that, then we are outside this big market, nearly with three billion people. If we don't enter this, that's the end of Sri Lanka's industry. In the long term, the end of Sri Lanka's economy. We have to make plans. In addition to these markets, we also have the GSP+. We have to get into these trading agreements and that's what we are preparing the country. It means that we have to compete and survive in a global trading system. The Government wants to help you. What are the other measures we can take? Given this period, this five-year period, you plan out and you have another five years to grow. That is sufficient. We would like you to join us. Or we would like to join you and make the journey. Then as Dharshan says, we would be more efficient than the Ministry of Crab. I don't know, but what I say maybe bitter for some and sweet for others, but let's make the transformation. Where were we in 1948? We were one of the best countries in Asia. Where were we in 1977? Still one of the leading countries in Asia. Where do you want us to be by the 2030? Behind Bangladesh? Behind Afghanistan? Behind Laos? and Behind Myanmar? Are we going to have achievement - having being at the top end, we have come to the bottom. Or are we going to crawl our way back to the top? For me, there's only one path, that is to crawl our way back to the top. And as we crawl our way back to the top, we'll be creating more jobs, we'll be creating more income.

The Budget then is designed to have the private sector investing in growth, in jobs and creating the income. And the Government Budget to carry on to redeem the debt and to spend on housing, on education, on health and other needed infrastructures. This is the plan we have. And I hope like the Passionate here, the rest of you will join us, and make this journey to ensure that we achieve what we have started out to be and what we were in history - the hub of the Indian ocean. Thank you.