Then next two or more years will be difficult with the government having to take tough but unpopular decisions to put the economy back on the rails, Milinda Moragoda, Minister for Economic Reform, Science and Technology warned last week.
The government needs the support of the private-sector to explain to the people the importance of economic reforms such as privatisation of state enterprises and to win their acceptance, he said.
'Life in the next few years will be tough for all of us,” he told the Annual General Meeting of the International Chamber of Commerce (Sri Lanka Chapter).
'But the potential rewards are huge. If we take the tough decisions now then we might hope to save some of our state-owned enterprises. They will change and you will not recognize them as they are today.”
The government needs private-sector support to share in the hardships and to lead from the front, Moragoda said.
'We also need you to help us explain to the public why privatisation is so necessary and what the rewards will be for everyone.”
Privatisation, he said, is 'the burning issue” that the private sector is pressing for but is viewed with suspicion by the public.
'It is what everyone doesn’t want to talk about. It is what people fear the most. It is seen as the businessman’s panacea and the ordinary man’s demise,” he said.
'For businessmen, it is seen as a get-rich-quick fix. For politicians it is seen as selling away our state assets. For the ordinary man it spells change and job losses. It is hard to dispel such fears when in the past privatisation in Sri Lanka has not always been a huge success.” Moragoda said.
Privatisation, he said, is a necessary evil that we have to face up to.
'But we also have to explain to the people the benefits of privatisation. We have to explain that it takes time to turn around an ailing enterprise and we have to explain that although everyone benefits at the end, some may suffer during the process.”
Workers in those industries that are privatised will have greater hope of a better future for them and their families, he said.
'Certainly their working conditions will be better and their chances of a better wage will be greatly enhanced,” he added.
There would be a greater willingness on the part of international investors to come in and invest in the island. He also said.
Workers who lose jobs will not be abandoned to their fate, he said.
'We shall implement voluntary retirement and other compensation schemes so that there is a safety net for those affected by downsizing.”
The international community has become 'fed up” of seeing Minister after Minister reaching out with the begging bowl for funds to support ailing state enterprises, he said.
Governments are the keepers of taxpayer’s money and the conduits of international aid, Moragoda said.
'They have a responsibility to spend that money wisely and efficiently,” he said. 'Yet past governments have spent with a carefree attitude and in a way that would never be acceptable elsewhere in the world.”
Placing businesses in the hands of government to administer is the worst of all available choices, he said.
'Businesses have to be lean and hungry to succeed in the market place. Businessmen understand the dynamics of the market place in a way that government never can. At the end of the day they are responsible to their share holders. The result is that if you put Government in charge of a business producing a consumable, ultimately this will fail. That is precisely what has happened in Sri Lanka,” Moragoda said.
With privatisation governments cannot go half way, he said referring to privatisation of Air Lanka which 'became an expensive charge on government funds” that was now under investigation.
'You cannot go half way; you have to go all the way or not at all,” he said.
This was where Government control has failed the people the most, he pointed out.
'For Government controlled industries use taxpayer’s money to keep the workers in non existent jobs. As taxpayers we should all be angry about this. For when our taxes are spent in this way our own jobs deteriorate and our standard of living falls,” he said.
'Likewise, the workers do not get a true wage for their work,” he added. 'Workers in such industries know that past governments can and have subsidised their industries. After all, governments have always seemed to have unlimited funds.
'So the workers are cheated too. They have to work with inferior equipment as governments pay wages but never invest in new machinery. They earn low wages because governments want to employ as many people as possible for as little money as possible. All round everyone is cheated,” Moragoda said.
In Sri Lanka, the problem was even more complicated because past privatisations have not been a huge success.
In the case of sugar 'there are parts of the sugar industry that few private companies would want to buy,” Moragoda said. 'For the workers in those industries there is little choice but unemployment and fallow fields.”
'The economy is in a 'dire mess” with no money in the coffers to subsidise such enterprises any more,” he said.
The international community will not give the money to subsidise such industries any more, he added.
'For them it is a case of bad money being thrown after more bad money.”
The reality, Moragoda said, was that 'we have to privatise just to pay back the money we borrowed to support state-owned enterprises in the past.” If this is not done then the debt will grow ever larger each year until the economy is declared bankrupt.
'On the other hand, if we start to reduce our debt in this way then we can hope to achieve two things, 'Moragoda said. 'First the revival of those industries albeit in a slimmer version. And second we can put our own finances in order which in turn allows us to invest in new sectors such as health and education and a better infrastructure to support new industry.”