Global economic crisis and Lanka

While almost every country and region of the world are bracing against an impending global economic crisis, Sri Lanka — going by state media and some ministers — is quite optimistic about happy and prosperous times ahead. Only yesterday we had banner headlines about Sri Lanka being the 'Gateway to South Asia'. Indeed, Lanka had been the gate-way to South Asia and beyond from anicent times, and that was the reason why a British Prime Minister of the 18th Century said that the foreign power who holds Trincomalee, controls the gateway to Asia.

The world is certainly threatened by a global economic crisis. The latest issue of The Economist says that there could be a global economic meltdown .The former Economic Tigers of Asia are reeling under economic recessions. According to The Economist.,the economic growth (GDP) of Indonesia is expected to fall by as much as 15 percent and South Korea and Thailand by 7 to 8 percent respectively. Malaysia reintroduced exchange controls recently. Russia has defaulted on its debt. The global economic malaise is spreading far and wide: Eastern Europe, South Africa, and Latin America. The Russian economy is in such bad shape that analysts have said that the country is facing a greater crisis than in 1917, the year of the Russian Revolution.

The region least affected by this global crisis is South Asia. But South Asians have that remarkable ability to bring the roof down on their heads and they did it in May this year when India exploded five nuclear bombs and declared itself a nuclear power, and some days later Pakistan followed suit. These explosions were conducted with the clear knowledge that the United States and some countries would impose military and economic sanctions, and sure enough the US and Japan did impose them in a matter of days. Infact, some sanctions are already biting hard, particularly in Pakistan. According to economists the greater impact was the scaring away of foreign capital from South Asia as well, Asia as a whole being looked as unfavourable to Western investments. Economic pundits may disagree, but the dismal performance of the Colombo Stock Exchange too is partly attributed to these nuclear explosions followed by missile tests.

Sri Lanka is already feeling the effects of the collapse of the East Asian Tigers.The South East Asian crisis affected Russia and other former republics of the Soviet Union, who were the best buyers of Sri Lankan tea. And now the Sri Lanka tea market which was booming a few months ago too is down in the dumps. With Japan, the biggest aid donor to Sri Lanka also in the midst of severe economic crisis, the picture is by no.means rosy. President Kumaratunga is well aware of this and her call for a revamping of the IMF and the World Bank on the grounds that 'these institutions are less and less effective in responding satisfactorily to modern economic challenges' indicates her concern.

To the propagandists' however, everything will be rosy in this Garden of Eden as long as the PA stays in power. Sri Lanka has been saved from this global recession because of the government's sound economic management, they say, pointing out to the 5.8 percent economic growth. This 'sound economic management', we have pointed out before, is in consequence to the government very wisely swallowing the bitter prescriptions of the IMF. But if the garment industry collapses — US and Europe too catching this economic chill, then Sri Lanka will be severely affected.

On the other hand, a big question mark hangs over this ' sound economic management'. One of the main reasons for the collapse of the Asian Tigers is attributed to crony capitalism. Yesterday in pur centre page a reputed economist, Dr.J.B. Kelegama pointed out to some of the main reasons why the Russian economy has not come out of the crisis it was under socialism. In the early phase of capitalism, former Communist Party officials and farm managers embezzled millions of state funds which President Yeltsin had described as 'bandit capitalism'. Later there came other forms of capitalism such as "Klepto Capitalism and 'Mafia Capitalism". Dr. Kelegama says that in the last three years the Russian economy had passed into the hands of a small group of corrupt businessmen and banks, known as the 'Oligarchs', seven of whom control nearly 50 per cent of the economy with strong presence in minerals, energy and the media.

In this context, we refer to an article titled 'Has economic reform failed' published in The Island's  last Sunday edition under the pseudonym 'Analyst'. He points out to several instances where we too appear to be cultivating our own forms of capitalism He refers to the annual reports of the Chairman of Singer, where it is pointed out how honest business enterprises suffer through dishonest practices of competitors. Corruption in Customs is referred to. The case of a well known businessman caught falsifying invoices on his imports, appears to be dropped the Analyst says. He points out to Customs detection of a manufacturer of refrigerators abusing duty free concessions and a poultry food manufacturer doing the same. Many other instances of corruption in state enterprises in the award of international tenders, and allegations of defence purchases without tenders being called for are referred to.We may not have reached the levels of 'Mafia Capitalism' of Russia or the Crony Capitalism of the East Asians, but a new breed of corrupt Sri Lanka capitalism appears to be fast in the making.

The instance the Russian 'Oligarchs' moving into the media is indeed relevant to this country where some sections of the media appear to be oblivious to all this development of Crony Capitalism' whose Sri Lankan equivalent would be ' Machang Capitalism.'