The Hindu Business Line : Where the tsunami came as a blessing...

IT is with a little hesitation and embarrassment that social scientists and economists in Sri Lanka admit that the tsunami waves that ravaged the tiny country on December 26, 2004, "came as a bit of a mixed blessing" and helped the Sri Lankan Government to keep the wolf at the door vis-à-vis the economy ravaged by years of ethnic conflict.

But, Executive Director of the Centre for Policy Alternatives in Colombo, Paikiasothy Saravanamuttu, does not mince words when he says, "I don't think I'm being overtly cynical when I say that the tsunami sort of saved the government's bacon on the economy! It brought in so much money and that was a huge relief because we were stuck." He says around $3 billion have been pledged for tsunami over the next few years.

Underlining the need for economic reforms in oil and power, he says, "There is no escaping from the fact that routine reforms will have to be made in the two key areas of power and energy" and subsidies in both the sectors deserved a hard look and tightening of the public sector.

"This government, in terms of election promises, had said it would give 2,000 graduates employment in the public sector. The public sector is far too huge and overstaffed, and there is need to streamline and make it more efficient. This requires political legitimacy and support; taking people along and telling them: Look, for the economy to take off in any meaningful way, there are certain sacrifices that will have to be made at certain costs."

But, adds Saravanamuttu, while this is the need of the day, "The tendency of the UPFA (United People's Freedom Alliance) Government has been to go back to the populist policies of the 70s and talk of the State taking care of everyone. But the State is just bloated at the present moment."

Expressing concern on the economy and inflation, Dushni Weerakoon, Deputy Director of the Institute of Policy Studies in Colombo, says that the present inflation rate of 13 per cent was a major cause of worry, and unless the Government monetary policies were tightened, things would get out of hand.

She, too, thinks the tsunami relief came as a breather for the Sri Lankan Government. The total donor package was $2.2 billion for tsunami reconstruction and is expected to come over three years. "Normally, we get about $800 million a year; with the additional inflow of tsunami assistance, this amount is expected to increase to $1.2 billion in 2005."

The Supreme Court has suspended the PTOMS (Post Tsunami Operational Management Structure) agreement signed between the Sri Lankan Government and the LTTE, which has further slowed down reconstruction work. "That leaves us with extra money, so if you look at the balance of payment for the first quarter, things have improved quite a bit."

Jehan Perera, Media Director of the Colombo-based National Peace Council, agrees, and says the tsunami was a sort of "mixed blessing" for other reasons too. "We believe it retarded the progress towards return to war. Prior to the tsunami, the LTTE had threatened a return to war saying the peace process is stuck, and so we have no other option except go back to war. After the tsunami, they stopped saying that; now they're saying it again, but, meanwhile, we got seven months thanks to the tsunami. But we don't seem to have made much use of it. The second positive is the unprecedented amount of economic aid. Although the tsunami destroyed houses and many victims are yet to get back houses, it has put a lot of money into their hands."

Weerakoon adds that the Government's hesitation in tightening monetary policy and continuing to subsidise the petroleum corporation as global oil prices were rising was a major concern. She thinks with the additional foreign capital coming in and the reconstruction process getting under way, there will be pressure on resources. "That means the cost of construction, labour, and the rest will add to the inflationary pressure, notwithstanding the high oil prices which are not coming down. So there is a concern that we have to be very careful on the inflation front... that it does not get out of control."

On the monitoring of the tsunami aid, Saravanamuttu says, "There are concerns that the bureaucratic procedures need to be expedited and a lot of streamlining needs to be done. The government points out that MoUs with NGOs have been signed but they are dragging their feet and not acting fast enough, so on both sides there are problems."

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Govt approves guidelines for timeshare resorts

Telephoto in pact with UTV Soft

Ultra Movie forays into film distribution

GV Films signs pact with 1-Net Singapore

Shanghai street food fest is here

Where the tsunami came as a blessing...

Cartoon