Sri Lanka should be a trading country; no balancing acts: Harsha

Harsha de Silva

Oct 06, 2015 (LBO) – Sri Lanka should be a trading country and there is no need of a balance between manufacturing and trading, Deputy Foreign Minister Harsha de Silva said.

“Some say there must be a balance between manufacturing and trading. I don’t believe in this balancing. We have to go down to the basic principle of economics,” Silva said.

Speaking at an exporter’s forum Deputy Minister explained the theory of comparative advantage.

“Why is the doctor a doctor and not a carpenter at the same time? A doctor may be able to fix his own furniture but he makes more money through operations than fixing furniture.”

David Ricardo developed the theory in 1817 to explain why countries engage in international trade even when one country’s workers are more efficient at producing every single good than workers in other countries.

“We are better at something and somebody else is better at something else. It may be because where we are located or our climate or anything else.”

In an economic model, one has a comparative advantage over another in producing a particular good if he can produce that good at a lower relative opportunity cost.

“If we have to become a manufacturing nation; do we have the comparative advantage, if not; are we going to become a hub where we can service the region,” de Silva said.

“The answer to that is fairly clear; it is almost impossible for us to compete with China, with the global factory flow,” he said.

“If you look at Sri Lanka’s diplomatic relations with our neighbors in this region, it’s quite practical to come up with a plan for Sri Lanka to be a hub in the coming years.”

In fact in ‘Mahinda Chintana’ the previous regime talked about transforming the country into an aviation, maritime, commercial, energy and knowledge hub.

“The idea is not a bad one. But the question is how we get there,” Silva said.

“Suppose you are talking of a maritime hub and you put money in the wrong infrastructure; then you are again at cross purposes,” the deputy minister said.

“So I think Sri Lanka’s future lies in how well Sri Lanka becomes the hub for this part of the world using logistics, adding value and other things.”

He emphasized that this discussion must be re-started and the outcome must be based on evidence.

“We can’t everyday avoid this issue. Once and for all, we must agree, are we going to do it or not. Evidence based policy making is what we required.” Minister further stated.

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Tilak
Tilak
6 years ago

Just after independence SL was a much richer & advanced country than Singapore with what we had.May have to look backward rather than forward to understand our decent(economical) & identify what we were good & bad at.

Mohandas V Thangarajah
Mohandas V Thangarajah
6 years ago

We cannot be a hub if we do not permit the free flow of goods and capital within the country. So we have to start by liberalising trade as Singapore has done and the build on the maritime location and links.

Nirmala Samarawickrama
Nirmala Samarawickrama
6 years ago

When Dr. Harsha de Silva tells in Colombo that we should only concentrate on doing things we are good at (leveraging comparative advantage), mr President tells in Kilinochchi that we should produce every possible thing inland(irrespective of the commercial viability). We are confused sir…..

expat
expat
6 years ago

LOL when ur advocaating classical comparative advantage theory, u need to know what comparative advantage we have. look at the garment buyers who are now moving into other countries like vietnam cambodia bangladesh. look at all the leading brands in anything that have a base in china. what advantage can sri lanka give to a private enterprise that has profit motive ???
talk is cheap doctor, u need to walk the talk and soon becoz time is the onlything u cannot recycle.

BKVWHK
BKVWHK
6 years ago

There are things that everyone will agree on. Developing a knowledge economy is one of them – while keeping the rest of the trade and services economy running of course. Manufacturing and Agriculture – fine, what precious little is there, let’s keep and help grow however modestly. They both require lots of land to make it viable, which we do not have.

We have the base to do it, with the right investment. One of the fundamentals of this is reforming the education system so that there is no massive brain drain to Australia, USA, UK universities in Malaysia, the UK itself and even Russia. Once our young people go, since they cannot recover their parent’s money that they have spent in Sri Lanka in their lifetime, they opt to settle out of the country. That’s why we have a bunch of traders with few skills. The war was another excuse, but that’s gone now. Lots of work to do, speed and execution is the major problem.

Abdul Hameed
Abdul Hameed
6 years ago

This is what I was telling in the first place. In order to be a trading country you need to reduce vat to 5% and remove duty. Do not charge vat for goods taken abroad. Look at Dubai, they started as a trading nation then they started manufacturing. Singapore and Hong Kong is another example. Trading country should be able to take money in out of the country as they wish. Our population is just 21million so we cannot be a manufacturing country like India, China or US. Trading nation is better off then a manufacturing one in terms of wealth creation and wealthy population.

expat
expat
6 years ago
Reply to  Abdul Hameed

just to know, what does Dubai manufacture?

Casper
Casper
6 years ago
Reply to  expat

You need to visit Dubai first my friend – almost all the major manufacturing brands are in Dubai. They are taking advantage of the low cost migrant population for this purpose.

expat
expat
6 years ago
Reply to  Casper

names?

“You need to visit Dubai first my friend ”
shud i walk or drive ? ROFL

Saman
Saman
6 years ago
Reply to  expat

Tea, Confectionary, Biscuits and other wheat products, electronics assembly

rookie
rookie
6 years ago

Again all talk – no plan shared. We are an island nation located strategically – Does the govt have done a research to identify which global companies would be in a better position to start business in Sri Lanka and aggressively target them? we might be not big as china/india in competing in the larger manufacturing models, but we have a skilled work force and using this why not have advance technologies in place? We cannot develop within ourselves – so we need external funding/investments to flow and we also need to create employment to retain and attract highly qualified sri lankan youth to return back? how many MNCs do we have that our youth would like to work as opposed to overseas? yes there is lot of talk – time we get to action – the civil war ended 2009 – now 2015 – what has changed since then to now?

i feel- we dont have enough people in society to challenge these few individuals at the top for their positions, therefore we end up with the same bunch of losers! there is no threat in the political circles- thats why we see the same thinking coming out and we end up being the frogs in the well, not looking beyond!

sacre blieu
sacre blieu
6 years ago

There are very talented people who are very capable of creative work in most spheres, and it would be of immense help to them to create a special department with carefully selected persons capable of guiding them through all the AR’s and FR’ without delay , some of which is used by certain officials to either seek favours or block them. I have read in a daily some time back about a violin maker here who receives orders from abroad and who was looking for further assistance,to expand his production. Like him there are also others. Seek them out and put them on the correct path they deserve.

andrew
andrew
6 years ago

Dont ever compare Dubai with Sri Lanka our country is much more developed due to the vision and mission of his highness. What was a desert has been turned to gold in other words Sri Lanka with natural resources are unable to derive from their own treasure this is due to political and silly administration. Dubai is a place to reckon I have lived here for 24 years security, health, and employment are the main factors. If the leaders of Sri Lanka wont to copy Dubai I think they need to await another 20 years . It may not be digested well in most Sri Lankan locals but this is the fact. So whatever your views of Dubai simply get lost we are proud of our country

Shee Lankan
Shee Lankan
6 years ago
Reply to  andrew

Dubai is using an expat population 5 times its own population for its GDP. This expat population is basically use and lose one. Dubai is using the fruit of poor asian nation, 80% of their earning ploughed back into Dubai. When useful life is over send them back for the poor asian nations to take care of them during old age, like these nations took care of them from birth to young adults, providing health, education, for Dubai to use them without investing in them. Clever !

expat
expat
6 years ago
Reply to  andrew

LOL 🙂
DUBAI is not a country.
The country is United Aarb Emirates.
UAE is a federation of 7 emirates and Dubai happens to be one of them.
others are Abu Dhabi, Ajman, Fujairah, Ras al-Khaimah, Sharjah, Umm al-Quwain.
Dubai is not even the capital of UAE; Abu Dhabi is !!!.
Sometimes little knowledge can make u look silly ROFL.

Suresh
Suresh
6 years ago

Being a Expat and having Lived in Sri Lanka for over 30 Years my understanding is the people of Sri Lanka prefer jobs like in Banking, BPO, Hospitality etc , the Farming, Agriculture Heavy Industries are of the past. Sri Lanka should be a Finance Hub for Asia like Dubai is for Middle East, Singapore is for Far East, Hong Kong for China and Mauritius for African Countries.
Also Any Political Party who maintains High Taxes and Duties is Inviting Corruption ( Restriction Means Corruption ) Hence Low Duties and Taxes with a proper monitoring system would have a better yield for any Government instead of high Taxes/Duties.
I endorses Dr Harsha Trading Ideas.

Shee Lankan
Shee Lankan
6 years ago

Most of Sri Lankan people do not like risk. One needs to take calculated risk to be a trader and entrepreneur. We like to have a secure job, specially in the public sector where you have no risk even if you do not perform. Most of us envy the entrepreneur. We need to change our peoples attitude to risk, to become a successful trading economy like Singapore. The Chinese like taking risks. Risk takers are rewarded. Others just complain.

rookie
rookie
6 years ago
Reply to  Shee Lankan

Fully agree – we have been a nation with risk averse to the utmost- unfortunately all the genes from our heroic ancestors are no more! pity! To long we have been talking the same topic- but unlike wine, the economy hasnt grown to be interesting enough levels. we need to have few people at the top to drive an agenda – over time for sure the people will adjust – as in any where, the leaders influence following! problem is we dont have the right kind of leaders! many wont agree with me – we need politicians with blend of pure businessman thinking with parts in the body able to take tactical and strategic decisions on short to long term goals! where can we find these people?

Shee Lankan
Shee Lankan
6 years ago

We need to manufacture some for our own consumption and security. We need to choose what they are strategically and strengthen that industry. be careful about opening our markets to every product from abroad. When state is reliant on imports for our govt revenue like duty, cess etc Sri Lanka needs to supply a combined offshore market atleast 5 times ours to make your strategy viable Dr. Harsha. Can we supply 1% of Indian populations needs ? Can we be competitive ? And most importantly will India allow us to do it ? Currently the balance of trade is very heavily in India`s favour.

rich list
rich list
6 years ago

I completely agree with Rookie below. This is all talk without a concrete plan. We have chosen the absolute worst people in our society to be our politicians/leaders and we are expecting them to do things which benefit the nation??? What we need are specifics. Start with law and order, then education, transport, health and so on. Give us goals, objectives and timelines.

Dias
Dias
6 years ago

Sri Lankan leaders are great at buzz-word talk. This is a bunch of horse-raddish by the young Minister. Here’s a 2025 vision: Sri Lanka must strive to preserve its greatest asset, its very delicate eco-environment (its degradation = death to the island), and simultaneouly engage in industries that catapults the per-capita-income to US$60,000 (in today’s $’s) in 2025. Can she do it? Absolutely yes, provided it embraces those industries that have made many a billionaires, non-polluting, and where Sri-Lankan DNA lends them to get there very fast: software development. Now, I know that not everyone can be a sw engineer, but most Sri Lankan youth with the proper training can do it. 2 things need to take place: (1) Vastly expand and expedite sw capacity building (2) Attract particularly US sw FDI. Both involve fine planning that these bureacrats have no idea on how to advance. [The blogger is a 40+ years sw veteran corporate entrrprenuer based in the Silicon Valley.]

Nirmalan Dhas
Nirmalan Dhas
6 years ago

…”the question is how we get there”…since you ask… “structure and market the Colombo Stock Exchange as the entrepot through which investments flow into the regions of the IOR-ARC, SAARC, BIMSTEC and the ANTARCTIC, and then many other interesting elements and dynamics will fall into place”.

I cannot understand why this government is unable to perceive this and move rapidly towards its realization BUT I suspect that it is a strategy of working only within narrow circles of limited perceptual capacity and strategic competence and a strong bias against local expertise and favor of foreign development consultants that has caused this unacceptable delay.