Sentiment Alone Cannot Make Economic Progress

Dr P. B. Jayasundera, Sri Lanka’s Treasury Secretary granted an exclusive interview with The Sunday Leader’s Faraz Shauketaly and spoke frankly and openly on a variety of subjects. Dr Jayasundera admitted to not being the most popular Secretary around but said he was happy with the progress Sri Lanka has made, describing it as ‘credible’.

Excerpts of the interview:

Q: BOI and SLTDA officials specialise in promotional activities but as Treasury Secretary you don’t allow them to travel is an oft heard allegation. On the other hand you have travelled with some selected officials from these institutes for country promotions. This year alone you went to China, Korea, Phillipines etc. Is this ‘micro managing’ these institutes?
A: Treasury has no role in allowing official travels for BOI and SLTDA, as relevant line ministry approvals are sought from the Ministry of Economic Development.
The instruction from the Minister is to authorize official travel in promotional activities, only for those who have really proved themselves in such activities.
No travel requests have been rejected, unless those are nominations of same officials who repeatedly travel abroad. The Ministry has repeatedly requested to recommend officials with special skills relevant to the purpose, destinations and contributions.
I have not traveled to China, Korea and Philippines in my capacity as Secretary, Economic Development. All those visits are delegations led by me consisting of relevant Treasury senior officials for bilateral discussions on external resource matters with Asian Development Bank, Korean and Chinese Governments. As there was a request from Chinese authorities to explain the workings of export processing zones in Sri Lanka, I invited one Zone Director to join our delegations for that purpose. I do not get involved in the management of these institutions at all.
The management is entirely a responsibility of the Chairmen and the Board of Directors, subject to the formal approvals on travel abroad, in terms of the government policies applicable to the relevant line ministry. Further, I get involved when cabinet papers are submitted on behalf of these institutions and conducting regular progress review meetings.
Occasionally, when complaints against these agencies are made the Ministry pay attention. My involvement with these two agencies as far as the Ministry of Economic Development is concerned and all other government agencies as far as treasury is concerned is on policy matters and particularly during Budget discussions.

Q: In 2010 December you cancelled a tender where 6 investors had been selected for Kalpitiya islands by a ministry approved evaluation committee: Thereafter for the last 1 ½ years we do not see a single foreign or local investor for Kalpitiya. Is Kalpitiya Integrated development project a failure and is it your responsibility?
A: When the Ministry of Economic Development was formed in 2010, absorbing thethen Tourism Ministry and several others, the policy framework towards promoting tourism zones such as Kalpitiya, Passikudah, Kuchchaveli etc, was on a case by case approach and it was not clear as to how land alienation is done, basic infrastructure is provided and the type of investment expected etc.
On the direction of Hon. Minister of Economic Development, a clear strategy was formulated and decision was taken to alienate land on a 99 year basis upon the payment of the valuation done by the Government Chief Valuer on an upfront basis. To the maximum possible extent, infrastructure facilities, such as solid waste management etc, was considered to be developed through private sector.
A clear strategy to position each tourism zone was recognized. On this basis Kuchchaveli was promoted first. While concentrating the completion of Passikudah projects which was also in various stages of approval. Substantial progress has been made on these 2 resorts. Attention has also to be paid to upgrade existing tourism zones in Negombo, Hikkaduwa etc. and new destinations such as Yala have been identified. In case of Kalpitiya, the problems pertaining to land acquisition of the entire zone has been resolved. Availability of key infrastructure facilities been attended and site has been opened for visits by several large international investors.
I wish to state that since the Ministry of Economic Development has been established, the two year performance with regard to tourism development has been satisfactory. The integrated project at Kalpitiya, is not a failure considering the significant investor interest that have been shown so far. However, structuring of such concession agreement including land alienation need to be done professionally and the ministry is optimistic that it can be done to promote the destination with its own identity conserving bio diversity.

Q: The crisis in Europe has already prompted a flow of capital to Asia due to the lack of opportunities in Europe and the US and the other fundamentals that go with a recession. This is evident in the World Investment Report 2011. Should we have used this opportunity and got our house in order? Have we missed the bus with the emergence of Myanmar now coined the next Asian Tiger? How could we have used the euphoria and interest created immediately after the war, and taken advantage of it?
 A: I do not think Sri Lanka has missed the opportunity available after ending the conflict. However one should not underestimate the implications of the crisis in Europe and slowdown in US and the global recession on Sri Lanka during last 2 -3 years. Emergence of Myanmar and other Asian countries is of course a challenge but Sri Lanka itself has managed positioning its strategic advantage to attract foreign and domestic investments. The initial attraction for any investor depend on the availability of critical infrastructure.
Country has sufficiently exploited immediate benefit of peace with the surge in tourist arrivals. However, the economic capacity expansion takes time. The opening of Southern expressway, the accelerated completion of Colombo Port, the capacity generation to ensure uninterrupted power, transformation of cities into clean and safe places, are instrument to promote investments by private sector.
The conclusion of a large investment in the development of Colombo South Port, securing investment in the development of steel industry, dairy, agriculture to expand the domestic production capacity has taken place.
Investment in petrochemicals, cement, and sugar processing has taken place in the port city development in Hambantota. Expansion in telecommunication is on the way. Investment by international investors in hotel industry and urban property development is significant. Proposals are examined to expand the domestic capacity in the manufacturing of cement, sugar, fertilizer and pharmaceuticals, to replace imports.
Several apparel manufacturing factories companies are under construction in the North and East by international investors. Based on the success on the commissioning of a section of the Southern Express way, connecting Colombo and Galle and the ongoing construction to link to Katunayaka airport landscape has changed.
The feasibility studies are carried out to develop the next expressway from Colombo to connect Kandy, Kurunegala and Dambulla to provide access to North, East and hill country. Expression of interest for this massive projects which is to be done either through direct foreign investment or on a PPP basis will be announced in the next three months. So, in my view these large investments are taking on their own speed. These are very large investments involving complex issues.
The working on concession agreements on such investment projects is not as easy as approving garment factories or similar investments. I should state that the average investment in any of these projects is in the range of USD 200 – 300 million per project, in comparison to the experience in the past with smaller investment projects with less than USD 5 million each project.
The people must also appreciate that it is only 3 years since the country has fully consolidated peace. Fair amount of energy has been diverted to make Sri Lanka as a mine free and IDP free country. The progress is something that everybody can be proud and can be used for investment promotion.
The promotion of investment cannot be done only by restoring peace. Country needs good infrastructure, good macro policy environment, improved investment climate and committed organizations and above all a good team of committed officials.
Progress in all these has been satisfactory. It may not match the expectation in the short run. Although you have referred to Myanmar and several Asian countries, I must say experience in many of these places are also complex.
Sentiments alone cannot change economic progress.

Q: Should Sri Lanka promote, for both FDI and tourists? We see various countries advertising in both print and electronic media aggressively. Why not us? Can we not make a consolidated effort between Tourist Board, BOI and even Sri Lankan Airlines and hire a global PR agency?
 A: Yes. Sri Lanka should promote. Not just FDI and tourism but also take a concerted effort to promote exports and skilled based foreign employment and targeting ensuring markets.
Everybody should recognize that effective and aggressive promotion is costly and should not be an experiment. We know results of fast promotional institutions.
This is why His Excellency the President himself has directed that all promotional agencies must work together, pooling their resources to undertake a cost effective and a coherent country promotion program. Towards this, the BOI, Tourism, Export Development Board, Tea Board, Department of Commerce, SriLankan Airlines and the private sector which has established a fair reputation in local brands, popularizing international markets, program must also have a good home based story, like clean cities,  must work together to achieve the desired goals.
The promotional infrastructure, attractive tourism products and opportunities for investments.
Getting all these pieces are difficult but must happen. After all, every visiting tourist going with a positive message itself can make a difference. Coca-cola promotion got a product and it is done by that company and not by government funds. Tourism also needs to get its product right and get their stakeholders together. I am optimistic these agencies will work together to select a world class reputed PR agency adequately backed by information about tourism products and investment opportunities. Industry must commit for these rather than relying on state concessions.

Q: From the organizations under your purview (In the Economic Ministry) many if not all of which are important and vital for the economy. describe your relationship with the various Boards and officials who manage these institutions? their strategies at meetings? The complaint of Dr Jayasundara is that you are ‘dictatorial’ !! What is your view?
A: There are several agencies and projects under the Ministry of Economic Development. There are several agencies and projects working on rural development and poverty reduction. Four agencies are working on tourism and two further agencies are on recreational services and one on investment.
All these are agencies functioning under separate statutes and the effective functioning of each agency lies with the respective Head and the management of the agency. Line ministry Secretary‘s role is clearly defined in the constitution and I do nothing more than that with any of these organizations.
I am experienced enough to understand this and I maintain excellent relationship with best performing departments, organizations and officials. We work with all 25 District Secretaries and 300 Divisional Secretaries on rural development initiatives.
We have delegated such work. Hon. Minister himself spends time in districts where such work programs are taking place. Regarding the Department of Botanical Garden and Zoological Garden, we hardly confront any problems. They come up with their own plans, work programs and budgets and Ministry facilitate their performance.
In regular Heads of Department meetings, we have excellent dialogue and we learn a lot from them and help resolving any ministerial level problems. So, complaint that “I am dictatorial” must be coming from those officials who may not have the leadership qualities, ideas, commitment and above all spirit of work and appreciation of the role of the Secretary.
I have only 2 years experience in the Ministry of Economic Development and have attempted to build 2nd and 3rd tier leadership in these places as it is vital to consolidate the progress of this country in a post conflict middle income journey, which cannot be approached the same way we did during conflict and during premiddle income country framework.
In fact, considerable reforms are necessary to change the mind sets of people. In the Treasury, where I have a long term carrier experience, you can check how well the Treasury has come up as a team. I can take pride in claiming that every single officer and the organization maintain absolute integrity, commitment and professionalism. So, I am not sure the rational of the complaint.
But I do understand that I am not a popular public servant, among certain people not blessed with good PR character but I am proud that I am myself.

Q: Do you have more than 130 institutes and departments under the Ministry of Finance, The Treasury and The Ministry of Economic Development? Theoretically you cannot spend more than 2 days per year on any of these institutes. You are known to be a person who wants to micro manage and decide on all matters big or small. Does this not slow down the workings of all these institutes?
A: Finance Ministry is even smaller today than the one managed by my predecessors, because several agencies such as NDB, Janashakthi are no longer with us, because they have been privatized. BOI once functioned under the Finance Ministry. It is also no longer with us. In terms of our constitutions, various institutions are clustered and gazzetted under the respective ministries.
In case of Finance Ministry, all agencies coming under the Ministry of Finance, are well within the subject matter described under the Ministry of Finance and Planning. The regulatory agencies such as the Central Bank, Securities and Exchange Commission, Insurance Board and Public Utilities Commission are independent regulatory agencies functioning independently from us, other than the matters connected with the leave approval of Head of Institutions by the Hon. Minister and the policy matters. Revenue agencies such as Customs, Inland Revenue, Excise, and Lotteries Boards function directly under separate Head of Institutions in terms of separate statutes. We have no role other than getting involved in oversight responsibilities and policy matters.
State banks, Insurance and financial institutions perform independently in terms of respective statutes and under respective regulatory supervisions. The Chairman and the Board of Directors are appointed by the Hon. Minister. The Treasury, with various units involved in planning, budgeting, external resources, treasury operations, accounting and personal management etc, functions under respective Head of Departments.
They are being supervised by respective Deputy Secretaries to the Treasury solely. All the Heads of departments are appointed by the cabinet. So the question of my spending time with others arises only if it is a non performing one.
Once they are appointed to those positions in corporations or departments they become public servants who have to work according to certain norms. Each of us cannot work according to our own agenda or personal interest. I am surprised to hear that I get involved in big or small matters in these organizations. That is not the role of the Secretary to the Treasury.
I must say, I spend more time in interacting with private sector groups, industry associations ranging from small farmers to corporate world on different issues. Equally, on line ministry related work, development partner issues and broad policy matters. If what you say is true, that I am getting involved in big or small, I would not have leave office every day with a clean desk without a single file on my table. I rarely take office work home either. (Faraz’ note: his desk was bereft of any files!)

Q: You have been managing the treasury of this country for almost 18 years under different governments. But you still seem to be blaming everybody else for the lack of Economic Progress which came out clearly when you addressed the media on the occasion of releasing the Annual report of Treasury last week.
Being the person who has been in the driving seat of the economy since the end of the war, how responsible do you feel for what we have not achieved at least during last three years?
A: I do not blame anybody. I also do not admit this country lack economic progress. In the recent media briefing all what I explained is challenges we have to face and the progress we have to achieve. I emphasized the changes needed, particularly because our country is now in the mood of development. Free from conflict trap problems.
I emphasized the need to recognize the middle income challenges. They are different. We are still a young middle income country with less experience and competent in managing such a challenging journey. Despite conflict of 30 years, the country has made good progress in implementing exchange and interest rate reforms as early as early 2000, opening many opportunities to the private sector, maintaining a liberal trade and investment regime etc.
These achievements have been made overtime and the county has developed capacity and resilience to live with such environment. We need to address the 3rd generation reform to take the progress forward. If you think that somebody should take responsibility for what we have not achieved during last 3 years, I am not reluctant to admit for my share of responsibility.
However while I always enjoy when others take credit for what we have achieved, I must say Sri Lanka‘s progress during last 8 years under His Excellency the President is credible.
(faraz@thesundayleader.lk)