Red Herring

by V. Gunaratnam; published May 26, 2004

It is too early to be speculating on where the peace process is heading, but we cannot forever be engaged in political invective, and not go further afield to look at other plausible causes which have forced Sri Lanka to come down from its high-horse in search of a just and equitable power-sharing arrangement with the minority Tamils.

Can we say “It’s the economy, stupid” that’s the real driving force behind the peace process? For as long as one can remember, the Sri Lanka economy has never been able to get off its haunches and go forward. The war with the Tamils was already costing more than two years of GDP by 2000, rising and fast becoming unsustainable. Not surprisingly, that’s when governments started giving it their attention.

In the beginning the economy virtually managed itself when tea, rubber, spices and coconut found a ready market in Europe and elsewhere. But all that changed when international competition started making inroads into Sri Lanka’s traditional markets. Tourism, and the export of textiles and garments later started making significant new contributions, but not nearly enough to support the demands of the war, and development. In fact, for the first time in its history the economy recorded negative growth in 2001.

People began to suffer severe hardships when the economy took a further hit following two JVP-led Marxist insurrections and the war with the Tamils. But successive governments, while paying lip service to the cause of peace, showed a marked inability or unwillingness to end the war and help economic recovery. Instead, they continued to play on people’s fears of the LTTE, the red herring they employed to enlist people’s passion to fight the war, and keep themselves in power.

But, as the Tamil question continued to defy resolution, the war intensified and the armed forces suffered huge reversals, frustration with the war and the economy kept rising. The government was in a quandary, because, after condemning the Tamils as dangerous separatists, and vowing to crush them, how could they end the war? Peace was secondary for them, because there was always a lifeline, foreign aid.

Sri Lanka’s troubles were largely self-inflicted, because the government could have brought the war to an end at any time by entering into peace talks in good faith. There was always the lust for power, whether it was the UNP or SLFP/PA. The economy and people mattered less to these parties, and international aid was forthcoming without question to cushion the economy at every turn.

No government was bold enough to take the plunge toward peace until 2001. By then the Sinhalese people had had enough of the fighting, and there was a palpable yearning for peace, especially with a severely anemic economy in dire need of large infusions of international aid to revive it.

International donors also had woken up to the politics of duplicity by this time, as they began to see aid going down a black hole, with no end to the war, and no returns. Now donors are looking for positive movement in the peace process before providing aid and this has given peace much needed momentum that it lacked before. But to gauge its impact, we must have an appreciation of Sri Lanka’s economic performance.

Economic survival is the name of the game. A quick look at Sri Lanka’s economic performance sheds a lot of light on the enormous dimensions of its economic woes. There is a powerful message for Sri Lanka’s rulers in the comparisons drawn here. But let the numbers tell their own story.

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Source: World Bank 2002 statistics (rounded in some places). Ppln. is population in millions.

* Based on Atlas method, which accounts for exchange rates and inflation for cross-country comparisons.

** Poverty below national poverty level set by country in question.

Sri Lanka’s performance is almost laughable when we see tiny Maldives, which became free in 1965, outperforming it. In fact Sri Lanka has the very dubious distinction of being at the bottom of this group of countries, by a lopsided margin. Its world ranking is 142 in per capita income terms. That puts it in the company of the likes of Guyana (141) and Armenia (144).

In the 1960s Sri Lanka had the same per capita income as South Korea, Malaysia and Singapore, but today, thirty years later, it is galling to know they have made such spectacular progress with incomes several times more, while Sri Lanka continues to languish in relative poverty. Sri Lanka’s $840 per capita income is in sharp contrast to Malaysia $3,540, South Korea $9,930, and Singapore $20,690.

Amazingly, while Sri Lanka managed to squander away more than five valuable decades in political squabbling and civil strife, South Korea, which became free about the same time, has become a veritable industrial powerhouse. South Korea’s population is just 21/2 times that of Sri Lanka, but its GNP of $473 billion dwarfs Sri Lanka’s $16 billion by a factor of 30.

Sri Lanka is a miniscule economy by any standard, with little life of its own, one that’s being constantly resuscitated by foreign borrowings and aid. The hopeless war against the Tamils, along with rampant graft and corruption are bleeding the public offers empty, with little left for investment to grow the economy.

South Africa is mentioned here, because they were able to reconcile with their former white masters, and overcome the scourge of apartheid, thanks to the vision of Nelson Mandela. Within a decade of gaining freedom, they appear to have laid a firm foundation for economic prosperity, and stand out as an example worthy of emulation by Sri Lanka on how to attain ethnic harmony with dignity.

In relative terms, Sri Lanka with agriculture accounting for 20% of GDP, and industrial activity confined mainly to processing food, beverages, tea, rubber coconut and spice, has a long way to go before it can join the surging economic engines of Malaysia, Singapore, and South Korea, with burgeoning industrial and services sectors, producing for world markets.

For years Sri Lanka prided itself with its ‘quality of life’ claims, saying it trumped raw statistics that did not tell the whole story, but no longer. Any talk now about this would only provoke derision, because there is no force behind their numbers to sustain such a claim.

Sri Lanka’s claim to social progress and the amelioration of the condition of the poor, is a hollow one. Nothing tells the story more plainly than to know that 25% of its population lives below the national poverty line, a level set by the government.

If this was not enough, the cruel persecution of the minority Tamils, and the near-abandoned state of the educational, health, transport and electricity systems in the north, severely dents any such claims. Another aspect of the deterioration is the difficult social problems thrown up by the rapidly growing ranks of the unemployed, creating a fertile breeding ground for Marxist demagogy and, social and political unrest.

Take a look at other numbers in the table above, to see how they support the general understanding reached about where the Sri Lanka economy stands in relative terms.

In Sri Lanka, with just 44 telephones to a thousand people, it can be a real runaround to find a nearby phone even in an emergency. In today’s world, it is such an indispensable device used in everyday life to facilitate personal and business communication, and so common in many countries similar to Sri Lanka.

It just goes to show how much Sri Lanka’s infrastructure development is lagging behind the others. If this is one measure of the quality of life, Malaysia with 196 telephones, Singapore 471, South Korea 486, and even Maldives with twice as many at 99, are all so much better off.

Sri Lanka is also at the bottom in TV ownership. This is understandable, because with such a low per capita income, it would take a big chunk of it to buy an ordinary colour TV. The Sri Lanka statistic is also deceptive, because it is inflated by the large number of TVs gifted by expatriates living abroad or the sets brought home every year by the 800,000 Sri Lankans working in the Middle East.

Perhaps the most telling indicator of Sri Lanka’s backwardness is personal computer ownership. With only 9 computers for every 1,000 of population, it’s a crippling handicap for the educated youth of the country, and for the economy, in today’s very competitive technology-driven world. The numbers for other countries are mind-boggling: Malaysia 126, Korea 257, and Singapore an amazing 508 per 1,000.

The question then is, did the Sinhalese, their leaders and governments get it all wrong from the beginning? What did they achieve with the Tamils forced out of their way for the last four decades? Ethnic strife. A cruel war in which tens of thousands of Tamils and Sinhalese perished. Hundreds of thousands of refugees and displaced people. Colossal destruction of property. One quarter of the population trapped in poverty. A pathetic economic performance.

It can be persuasively argued that, in the final analysis, many of people’s problems stem from their own economic condition brought about by the country’s economic performance. It’s poverty or economic deprivation that inhibits people from reaching their potential as human beings, not the ethnicity, culture or religion of others. If the Tamils got somewhere in life, was it not by dint of hard work and perseverance?

The only way out of the poverty trap and economic decline is to stop the war and grow the economy. This would be the preferred solution, as the premise developed here suggests, but the question is how do we stop the war when the Sinhalese people’s fears and passions have been driven up so high? That’s what the peace process is about, and what international intervention can do for the process.

Sri Lanka must move decisively to make peace with the Tamils, repair the social fabric, return to the humanitarian ways of its noble heritage, if it is to recapture missed economic opportunities, and reach its true potential. If the heart is there, good things are bound to happen.

Sri Lanka could easily become the next Malaysia or Singapore!