Business

Missing the boat again

  • The many wasted opportunities to capitalise on Port City

 

This is just a funny story I have heard before; not a true one. Once upon a time, a man was caught amidst a flood, and his life was in danger. This man was extremely religious and believed that his God would rescue him from any threat to his life. A boat came to rescue the man, but he refused, saying that his God was going to help him. Then an emergency rescue team arrived, and he rejected them as well, saying: “I don’t need you. My God is coming to rescue me soon.” Flood became very serious and a helicopter arrived, but the man said he didn’t want anyone’s assistance and the same answer was provided. 

Unfortunately, the man died in the flood and he met his god after death. At the very first meeting with his God, the man said: “I am very disappointed with you my God. You didn’t rescue me from floods”. God said: “I first sent a boat to rescue you, and then another emergency rescue team, and finally I sent a helicopter as the floods became severe, but you didn’t consider any of my attempts!” 

When it comes to our economy, isn’t that the same case for Sri Lankans? Sri Lankans leave the country, claiming we do not have economic opportunities. Some Sri Lankans even risk their lives by attempting to go to Australia and Italy by boat. When Sri Lanka attempts to implement policies where we could navigate towards the same development as some of the countries they aspire to run away to illegally, the same Sri Lankans oppose and protest.

Think about the recent discussions on the Singapore Free Trade Agreement (FTA), the Millenium Challenge Compact (MCC) agreement, East Container Terminal discussion, and now, the Port City public debate.

Instead, many believe working with a foreign nation is a part of a whole conspiracy. We are overwhelmed with the belief that we can become self-sufficient in everything under the sun. We have forgotten that the global context has changed. Global supply chains have changed over the last few decades. We as Sri Lankans have forgotten the power of mankind when we share ideas with each other. Connecting with each other and sharing ideas is sharing and creating wealth. 

It is true that working with other countries is not a one-way street; it has to have mutual benefits. The way forward is not to isolate ourselves and attempt to do things on our own, but to connect with the world. That is how small countries like Sri Lanka can succeed.

As of now, Sri Lanka is at the critical juncture of getting the fundamentals right with the Port City Bill, which is now being challenged at the Supreme Court. Of course, constitutionality and the legal aspects have to be considered and cleared before we move forward. What is missing in the discussion is the concept of the “Special Economic Zones (SEZs), and the ability to understand that Port City has to be a special economic zone instead of a real estate project, where we just sell land to investors without creating a business- and market-friendly environment.

“Special Economic Zones” are a concept where a separate and an easy regulatory mechanism is set up in a region to create a business-conducive environment. Businesses can be done easily and people can live conveniently only when markets operate right. We have to establish special economic zones because the rules and regulations in the mainland or other parts are so laid back that doing business or convenient living is difficult. 

Take current Sri Lankan regulation as an example: 80% of our land is owned by the Government, where the citizens haven’t been provided property rights. Which investor would invest in a business when the ownership of the property is not secured? According to Minister of Justice Ali Sabry, contract enforcement takes 1,318 days on average, where it is just 164 days in Singapore. The average time to resolve a criminal case is about 10 years, while our business registration takes months. Small and Micro enterprises have tiers of regulatory barriers. Granting a permit for construction takes more than three months or so for accessing electricity. Those are the fundamental reasons why people leave Sri Lanka – because the rules we have set for ourselves are not supporting our aspirations.

What we need to do ideally is to make the rules of the entire country easy for business, and for people to live. Since we haven’t had the political will nor the knowledge to do it, we have to go with second-best solutions. One of the second-best solutions is “Special Economic Zones” such as Port City.

What ultimately decides whether a country and its people are going to prosper or not are the rules that it sets, because our opportunities for investments, doing business, employment, real wages, and quality of life will depend on what we set as rules to govern ourselves. Those rules cannot be excessive, but have to support markets.

While the concept of a “Special Economic Zone” is in the right direction, we should not think that Port City is going to solve all our problems. We can attract investments only if we set an example by allowing market forces to operate. Our immediate term debt repayment challenges, and our regulatory barriers in the mainland, remain as they are, and we have to take a holistic approach on serious economic reforms connecting with the world.

The tax concessions suggested have to be reconsidered, as these would not only further distort our markets by giving just a few politically connected businesses tax benefits, but also a serious burden on our balance sheet when the Government expects to develop infrastructure near Port City, such as the connecting roads to the airport highway and the tunnel connecting Port City and Marine Drive.

We have to be sensitive about the geopolitics coming into play with Port City, and we should not lose our friends internationally. It’s a long-term project, and things change very fast in this era of time.

Like the man who said no to his god’s rescue attempts, we too have missed so many opportunities that could have complemented the Port City project further. If we had implemented the projects with the MCC (after clearing all constitutional matters), it could have been a better attraction to investors. On the MCC project that was developed by local experts, the project on facilitating the proving of land rights could have attracted more investors to Sri Lanka to set up manufacturing plants, and the Port City could have served as the financial service center.

The traffic plan and the infrastructure projects could have added significant value to the entire project. At the same time we could have managed our geopolitics better. 

The same goes for the Singapore FTA. We could have provided a strong signal that we are a nation open for business by creating rules that support industry and strengthening trade relations with countries like Singapore. Investors expected to come to the Port City could have tapped into global talent, taking Sri Lanka one step closer towards becoming a global hub for business.   

Again with the East Container Terminal, where more Indian investors could have attracted and created a Port City, a truly multicultural, multinational special economic zone. What history teaches us is that we have been provided with so many opportunities, like the man who was provided the chance to save his life from the flood. How we managed and what we did with it is something we have to rethink.