The case for policy consistency

Asia has been projected as the world’s engine of growth in the decade ahead. It has been forecasted that China and India will lead the way followed by the likes of Vietnam, Cambodia, and the established economic powerhouses of Singapore, Malaysia, etc. It is unfortunate that although Sri Lanka has had a head start over all these countries in the race for economic prosperity in this part of the world, it has not been able to attract the kind of investment needed to supercharge growth and propel it to the big league.

Today, India is well on its way to economic nirvana, along with the other countries mentioned above, thanks to a stable political environment and investment-friendly economic policies that have been a magnet for multinational corporations who have been generous with the big bucks, so long as the return is greater. It’s a win-win situation for both, as the country benefits through investment, job creation, infusion of technology, infrastructure development, industrialisation, etc.

Which brings us to the fundamental question: What has defined economic progress of Asian countries like India, Singapore, and Malaysia as opposed to Sri Lanka? Why is it that we as a nation have consistently underperformed while the rest around us thrive? The answer in a nutshell is that they have all had political stability woven around the concept of a supreme constitution which Parliament or politicians cannot override.

In contrast, Sri Lanka has had or attempted to have a new constitution every few years to suit the whims and fancies of the party in power, not only scaring away big businesses but also driving away others because the biggest put off for multinational investors – wherever that may be on the planet – is policy inconsistency. For all they care, governments and politicians can come and go, but state policy should remain the same. That really is the magnet, not some magic mantra. When the constitution is changed every now and then, the status quo changes and the fundamental requirement of stability remains unfulfilled.

Constitutional change has been a tried and tested method for election success in this country, and politicians of all hues have resorted to that tactic over the years, little realising the damage they cause in the process, especially on the economic front. Just to put things in perspective, India is to date governed by its founding Constitution introduced in 1949. Singapore is running on its Constitution introduced in 1963 with the declaration of Independence, which is also the case with Malaysia that enacted its Constitution in 1955. Although amendments have taken place at regular intervals in keeping with the evolving times, the superstructure has remained untouched, which in turn has acted as the rock on which the economies of these countries have been built.

Here in Sri Lanka, our first post-Independence constitutional change occurred in 1972 when the Sirimavo Bandaranaike Government proclaimed Sri Lanka a republic and severed all constitutional ties with its former colonial master, Britain. Just six years later, the J.R. Jayewardene-led administration introduced a completely new constitution with an executive president at the helm and a market economy to boot. A decade later, owing to the growing scourge of an ethnic war, the game-changing 13th Amendment was introduced to the Constitution under India’s compulsion, giving birth to the provincial councils and a new electoral system based on proportional representation, opening up a whole new ball game in the governance structure. These changes led to an uprising in the South in addition to a full-blown war in the North and East – the combined effect of which set the country back years, if not decades.

Then roughly a decade later, in 2000, the Chandrika Bandaranaike Kumaratunga Government valiantly attempted to introduce a new constitution abolishing the executive presidency, but it ended up in smoke as MPs decided to burn copies of it in the well of the House. Ever since, every successive government has promised to introduce a new constitution, and with the change of government in 2015, the Maithripala Sirisena-led administration introduced the 19th Amendment, curtailing the powers of the executive presidency while also introducing independent commissions, Right to Information (RTI), etc.

All this, though necessary, tends to send the wrong signals due to the manner in which it is done, which inevitably our competitors in the region capitalise on. The proof is there for all to see. A classic case is the 19th Amendment which was heralded with much fanfare by President Sirisena, who for the next two years at least took singular credit for it. Now, just three years later, the same Sirisena is championing its repeal. In the meantime, foreign funds are pulling out of the local capital markets while politicians have little comprehension of the connection between their actions and the consequences for the country.

We are not talking about the pros and cons of new legislation; for all intents and purposes, it is necessary, but there should be a method as to how it’s done in order to minimise its economic impact. To put it bluntly, constitutional overhauls every time a government changes is bad for business. Some folks may be driven by domestic political compulsions to enact party-friendly legislation, but the truth of the matter is that it scares away the big-timers whose guiding principle is to play it safe wherever they go. This is basically why Sri Lanka has been unable to get out of the bind ever since the initial euphoria of the open economy in 1978, which in reality was the only time the country was able to at least briefly command the attention of big multinationals.

Today, we are back at square one with another attempt at constitution-making in the works. What we are not quite certain about is whether it is a wholesale change of constitution or piecemeal where the 19th Amendment is to be replaced with the 20th. If a brand new constitution is to be introduced, then the 20th Amendment becomes redundant, as it can be incorporated in the new legislation. Going by what President Gotabaya Rajapaksa stated in his inaugural address to the ninth Parliament last week, the 20th Amendment could be an interim measure until the new constitution is ready for implementation.

The cliché “out-of-the-box thinking” has been part of the business lexicon for many years. It gained currency during the global recession that took place in 2008/09. It had its period of usefulness and like everything else was fading into oblivion when the Covid-19 global pandemic gave it a new lease of life. No doubt, the President is well aware that these are extraordinary times where the winners take it all and the losers lose it all. It’s a dog-eat-dog world and those who can get their act together faster than the competition will win the day. This is probably what prompted President Rajapaksa to specifically exhort members of the new Parliament to think out of the box during his policy statement.

Therefore, if we continue on the premise that the world will change to fit into our way of doing things, we are in for a rude shock. It is not too late to fall in line and adapt to the world order, for otherwise, we will continue to be left behind. In that regard, policy consistency is an absolute prerequisite, and inconsistency, especially between a sitting government and the next, could have far greater implications than what meets the eye, especially on the economic front, even though there may be no discernable connection between the two.