Budget 2002 Debate
(Parliament, 23rd March 2002)

Mr Speaker, in 1946 Jawaharlal Nehru said "India was in my blood. And yet I approached her as an alien critic, full of dislike for the present as well as for many of the relics of the past that I saw. To some extent I came to her via the West and looked at her as a friendly westerner might have done. I was eager and anxious to change her outlook and appearance and give her the garb of modernity. And yet doubts rose within me".

Very often I feel this way when I look at the economic and social landscape of Sri Lanka. I understand Nehru's frustrations, and yet I am incapable of walking away from what we have to do.

Government intentions have consistently been left unexplained in past budgets. In some cases, budgets have been presented just for the sake of being presented. However, the budget should be a form of road map for the year ahead. It is therefore with a great relief that I see that my honourable friend the Minister for Finance has adopted a new style. He is explaining to the world at large what this new UNF government intends to do.

He is faced with no mean task. The economic situation is not a happy one. The repayment alone on the interest for the money we borrow accounts for 31 cents in every rupee we spend. This interest accounts for the largest part of our budgeted expenditure and exceeds all other expenditures including welfare and even defence. To be so open and honest is not so much a reflection of a new government taking over the fiscal reins and blaming its predecessor. It is setting a standard for the future where the Finance Minister is saying "I am laying out the facts and I accept responsibility for my actions". I applaud the Minister's openness and his speech which was so devoid of jargon. He has set a new standard for all of us in the transparency of government.

Ultimately, budgets should not be about figures bandied here and there, they are about the household finances of a nation. They operate on similar principles to the everyday household budget. They reflect expected income into the nation's purse and an indication of how the money will be spent.

Perhaps the one difference is that one can reasonably accurately forecast the amount of money coming into one's own household. Whereas the nation's budget is subject to the vagaries of a wider variety of outside influences.

This is particularly so in the context of a global market where the economies of so many nations are linked by performance. Where speed, efficiency and high performance mark out the winners from the 'also rans'. That is why this budget is so significant. For the first time we are saying to the global market, Sri Lanka wants to participate in this arena and is prepared to change in order to do so.

Another big difference is that the average householder does not expect to spend more than the money coming into the household purse. In our case past budgets have taken no real account of the money coming in and the outflow of money from the public purse. No wonder then that we find ourselves in such a mess and with such a large budget deficit.

In my budget speech last year, I pointed to the over optimistic nature of budgeting in Sri Lanka. I showed how in 1995 the projected Budget deficit was given as 7.4 per cent, while the actual figure was 10.1 per cent. Similar variations proved true for the years 1996 through to 2000. And in 2001 this was no different.

But hard figures are only one aspect of the budget. Budgeting is more about declaring the overall state of the health of the nation.

I would like to remind the House of the Development Forum held in Paris in 2000. The international community was interested in four questions only.

Does the Government have a credible, viable and unified strategy to bring about a lasting peace in Sri Lanka?

Does the Government have a credible, viable and unified strategy to restructure the economy?

Does the Government have a credible, viable and unified strategy to improve governance and to strengthen democracy in Sri Lanka?

And finally does the Government have the political will, the management competence and the popular mandate to achieve these options?

At that time the international community gave a resounding No to all four questions. Today it is with some hope that they can now say yes to all four questions.

Whilst we are still in the early days in the peace process, there is a viable and unified strategy which is showing itself both to the international community and to the people of Sri Lanka. The local government election results demonstrate this and they show that we have the support of the vast majority of the people. Through the leadership, honesty and sincerity of our Prime Minister I believe we can keep the peace momentum going.

Equally, the Government has shown in this first budget of a new UNF government that we have started the road to restructuring the economy.

Despite local frustrations, there is a visible willingness on the part of this government to depoliticise a range of institutions and to strengthen the democratic process. Whilst the local elections this week were but a small move forward, nevertheless the drop in the amount of election related violence is a welcome move in the right direction. However there was still too much violence and much work still has to be done to make our elections truly democratic. This might include a change in the electoral system and the removal of the preferential vote.

The last question is the most difficult to answer. For that is where the crux of our problems lies. I believe we do have the management competence and certainly the popular mandate was there in December.

But do we have the political will to carry out the reforms so badly needed?

Perhaps the wider question the international community should have asked is whether the country as a whole has the will to carry out the reforms that are needed.

It was Lee Kuan Yew who is said to have remarked that he could create the most successful economy in the world if he did not have to consult the people about it.

The truth is very clear. We are a country that has been living in a dream world for too long. We are a country overburdened with outdated and outmoded regulations. There is no compelling reason to work hard. We survive on doing the minimum whilst expecting others to owe us a living. Our people have a low level of contentment and our social cohesion has broken down.

We are also a society that is dysfunctional. The people have no respect for the politicians. And the politicians show little respect towards the people. The people despise the business community whilst the business community has little time to care for the views of the people. The politicians use the business community and the business community pander to the egos of the politicians.

Not even a symbiotic relationship, more one of mutual distrust and ignorance.

I have likened us to sleeping on a mat. Where if we fall the ground is not very far - nor is the sleep a very comfortable one. If we as a country have any hope of changing our ways and pulling ourselves up from the mat then we all have to change. Politicians, businesspeople and the country at large.

Essentially there are three things we have to change. First we have to change our culture. As a Member of Parliament one of my first duties was to receive a long list of requests from people far and wide who wanted me to do something for them. For some it was a job, for others a house and yet more wanted me to see to the education of their children.

If someone had worked for me in my campaign then they felt they had a right to ask for something in return. In other countries victory for their Party in the polls and the consequent economic and peace benefits would be enough. But in Sri Lanka our system has broken down to such an extent that people want and need much more. This approach encourages some who hadn't worked for me to say that they had. If everyone who said they had worked for me had done so then my vote would have been twice as large.

But the reason for telling this story - and everyone in this chamber knows the feeling - is that there is a dependency culture in our country that we have to change. The sort of culture that says I don't need to do it for myself if I can get someone else to do it for me.

Take a long hard look at any Ministry. Walk around the precincts and count the number of people working there. I should correct myself. First look at the number of people working there and then count the number of people on the payroll. Now look a little deeper and find out how many of those people taking a salary were political appointees. Or rather people given jobs by politicians because they felt they had to find them a job.

We are a country that employs 850,000 public servants including the armed forces. One of the highest government servant to population ratios in this region. Add to that the dependants and nearly one in five of the people in this country owe their living directly to government service in one form or another.

That is simply unsustainable.

We have to change to an ethos where people are more self reliant. Where the work that they do is productive and useful. And where they gain their rewards through hard work and a desire to better themselves and their families. This is not a western value imposed on a country entering a global economy, rather the true values of an Asian nation seeking to return to its roots. Second we have to change our attitude. Our attitude is one of doing the minimum required whilst expecting the maximum benefit. Our attitude is one of self interest rather than looking to the betterment of the whole community.

In the months ahead we are going to face a very difficult time. As the Minister for Economic Reform I know how difficult it will be. In striving to change our attitude we will have to accept that going to work is not enough. When we are at work we shall need to be productive and efficient. If we are not then our jobs will disappear. We cannot afford the luxury of supporting those industries that do not meet this criterion. State enterprises will have to change or disappear.

We shall have to face up to the reality of privatisation or make changes that ensure that our state enterprises can compete with the best in the world. We cannot afford to subsidise our state enterprises any more. There is no money to do so.

But before I look more closely at privatisation let me touch on the state of our Labour regulations. At the moment they impede competition, stifle entrepreneurial skills and destroy any chances we have of competing in the world markets.

Take an American housewife. She sees a selection of three products on her store shelf. At first glance they all look similar.

The first was made in a country that has a hard working and efficient workforce. This product has a low price and high quality.

The second was made in another country where the cost is lower because of artificial subsidies and where there has been no investment. The machinery is antiquated and the workforce is inefficient. The second product is lower in price than the first but the quality is not so good.

The third product is made in a country where subsidies have been removed and the workforce has not accepted a need to change. This product is both higher in price and poorer in quality than the first two products.

It is not a difficult choice for our American housewife. She will choose the first product with low price and high quality. As a country Sri Lanka currently represents the second case. But very soon we shall become like either the first or the third country as subsidies are removed. If we improve our attitude and create competitively priced high quality goods then we can compete with the rest of the world.

But if we refuse to change, then our industries will become uncompetitive. Our products will remain on supermarket shelves until eventually they are no longer offered as an option. In short no one will buy our products and our industry will quickly die.

Privatisation provides us with an even greater challenge. Few people believe we achieve this and most feel that it is a bad thing. However, no-one has come up with a better solution to privatisation. It may be an imperfect solution but it is recognised as the lesser of all evils.

I recognise that mistakes have happened in the past. This has made people understandably nervous and some would wish to exploit that nervousness for political reasons. But on this we need to act responsibly for it affects people's livelihoods. We should put aside our political differences, come together and take a look at the conceptual issues to see how we can best help our people through this difficult time.

There are lessons to learn from privatisation. One such lesson was the deregulation of telecommunications. Through this action we saw the expansion of telephones and mobile phones and a wider choice for all. Unfortunately we did not go all the way towards combining deregulation and privatisation and there are still areas where SLT acts as a monopoly, stifling competition and keeping prices high.

We shall have to do something about that. To do so will free up competition, bring down prices and create more choice. In this era of the information technology revolution providing cheap and reliable nationwide access to the Internet and telecommunications could be the single most important contribution we can make towards employment generation and social equity.

We shall need to look closely at power, the financial sector and petroleum distribution to see how we can provide a better, cheaper and more efficient service for the consumer.

This is not a matter for government alone, nor for the businessman. It is a matter for all of us. We shall have to find it within ourselves to recognise that out there somewhere there are workers in other countries who also have families to feed and lives to lead. Workers who are prepared to make the change and are the survivors because of that.

Some will say that we should do nothing. That is no longer an option. Like a card gambler we have used all of our aces and removed all the cards from up our sleeves. We are now forced to play with the hand that we have been dealt.

As the Economic Reform Minister that will not make me the most popular man in Sri Lanka. I will regret the lack of popularity but I am determined that we do the right thing to create a better life for our people in the long term. For as Lee Kuan Yew once said "I would rather be respected by my people than popular".

The hard fact is that we cannot fight globalisation. It is happening and it has us in its sights. It is heartless, ruthless and demands that there can only be winners and losers.

Third we have to change our approach to the outside world. For many years our country has resembled a North Korean state more than a Hong Kong or a Singapore. Our policies and our regulations have been protectionist.

We have wanted the world to trade with us but only on our terms. Fewer and fewer international companies or governments are prepared to work with us on those terms. They don't want to invest in a country that is not prepared to change. People only invest in something if they think they are going to get something in return. At the moment we offer very little.

But we could. We have an intelligent people. We have the makings of a hard working workforce. We have adaptability and flexibility. Just look at Sri Lankans working in other parts of the world if you don't believe me. They are the business leaders, the top bankers and the hardest workers. Even our villages have made a success of working in the Middle East.

Go back into our history and look at irrigation systems which our ancestors built. These hydraulic systems, tanks and waterways are considered to be one of the marvels of the world. If we could achieve such feats then why can't we do so now? Today, we seem incapable of building modern roads, of running a modern railway or digging a simple drain.

What we lack at the moment is the courage, the drive and the commitment. We had better find them soon or we shall no longer have the luxury of that mat to sleep on.

We have to change our culture, our attitude and our approach to the world at large. This budget shows that this government is prepared to make the change. But we cannot do this on our own. We shall need the people to understand that times will get tougher before they get better. We shall need our workers to work harder and more efficiently. We shall need our business leaders to lead from the front and take some of the hard hits themselves.

Most of all, we shall have to change from a country of individuals who think only of themselves. To a country where we look at the person next to us and realise that we have an obligation to them as well.

Mr Speaker, the peace process has given us a chance that few others have. We have the opportunity to make something of a peace dividend - if we can secure peace. We can enhance the international goodwill that has come from our first moves towards peace. But we shall have to sequence things carefully.

Our politicians can never afford to forget that the people will only follow them if they have trust in them. If they show that they, too, are sharing in the hardships and that their plan of action is credible. If we don't then our people will lose all hope and confidence in the system. And they will defy us. Our Prime Minister has taken a huge step in showing us the way forward. His leadership should inspire all of us.

For any society has to have an agenda. Otherwise that society becomes the victim of another's. History shows that we have become such victims of others and it is now time that we have our own agenda.

Mr Speaker some often disclaim that we are a small country and so what can we do by ourselves. I would simply leave you with the words of Fidel Castro the Cuban Leader when he said "It does not matter how small you are if you have faith and a plan of action"

The Finance Minister has given us a plan of action. Now we have must have the faith to carry it out.

Thank you.