The facade of nationalism
My TV watching has reduced quite dramatically since returning to SL. Watching the World cup on Eye has made me spend more time watching tele and as a result i’ve noticed an interesting trend amongst some of the advertising. Several ads, three of which come to mind immediately, are based on a nationalist theme. The ads i’m referring to are the Lanka Bell ads, the Cargills advert with the salesman claiming to buy stuff directly from farmers and thereby supporting the farmers and finally the mihin air ads, the sky is ours. Of these the Lanka Bell ad is quite disturbing, they refer to the company being noble bc money doesn’t leave the country, it is a pretty obvious stab at dialog. The cargills advert is pretty harmless and the mihin air one is again a stab at SLkan airlines and its partial foreign ownership, I think.
The Lanka Bell advert is symbolic of the ideas of a lot of ppl i’ve interacted with in Sri Lanka. The idea is that foreign investment is all good but the profits leave the country, so we must stop that. People forget that profits make up just one part of economic activity. Employment generation, knowledge transfer, and services provided are several fold more important to the country than the profits that are repatriated. The telecom sector is easily the standout success story in terms of privatisation and liberalisation, it has its faults, but you can’t argue with the tremendous improvements in service provision in this sector and the benefits enjoyed by the consumer. The idea that ownership of the company needs to be Sri Lankan is an unfortunate misunderstanding of the macro impacts of investment. I personally care more that i receive quality telecom services than whether the company is owned by a Malaysian or a Sri Lankan. Even if profits “remain in the country” into whose pockets does it go? certainly not to the rural poor, so really the average Sri Lankan should not care whether profits go to Malaysia or to a few people in Colombo. Sure there is bad foreign investment, with little knowledge transfer and local employment creation only in low skill categories, but this is something that the BoI needs to look after. Taking a xenophobic view with regard to foreign investment is counter-productive, specially in a country where capital remains scarce.
The whole “deshiya” stuff is I think a gimic. I don’t think cargills will buy stuff from local farmers if they can import the same good for cheaper, nobody would unless they’re altruistic and not profit oriented. This nationalist image is pretty similar to the stance being taken by the govt at the moment. We hear the president, the ST and other key officials running around saying we don’t need donors, we can manage on our own, we have aid from India, China and Iran (wtp) and we don’t need help from the WB, IMF, ADB and what not. This whole image of being a self sufficient, sovreign nation is being portrayed everywhere. In fact I heard the head of the national resources department in a radio interview say that SL didn’t need foreign assistance to build the Parakrama Samudraya, so why do we need help now. But all this is just noise. The borrowing from the international financial institutions (bar IMF) have not changed. But there is increased borrowing from countries like China, and also projects funded through commercial borrowing, which are of dubious quality and have limited transparency. (WB, ADB borrowing require competitive bidding, these criteria are no longer required when the govt. funds a project using commercially borrowed (or printed) money, and from donors like China).
It can be argued that the emphasis on being an independent, sovreign state thing is, at least partly, an excuse to spend money in an irresponsible manner. Mihin air. Would any donor in their right minds fund such a project? I think not. The noise makes projects like this easier to achieve. And this kind of nationalistic mindset lulls ppl into believing that we can and we do need to develop on our own and will support the govt in such ventures. But clearly some of these projects have very limited benefits for the majority of the population. The funding for Mihin air was drawn from “emergency” credit through the treasury, i really don’t see the emergency requirement for a budget airline wholly owned by the state (surely a first), specially for a country with public debt around 100% of GDP.
I am firmly of the belief that the state has a role to play in economic development in developing nations like ours where market imperfections (specially information) are completely different to those which are prevalent in developed nations, and those which neo-classical economic theory is modelled upon. So there certainly is a role for the state, but there is again a huge difference between good state intervention and bad state intervention. I’m afraid at present in SL the former is being championed but the latter is the reality. I think the one exception is in the long overdue infrastructure projects, the Southern highway and the power plants. But that again is interspersed by poor infrastructure investments such as the airport in the South. The geographic concentration of the infrastrucure development (Hambantota port, highway, airport) is also a bit too much of a coincidence.
It’s important that people do not buy the gimics about nationalism and domestic ownership. We are a small island nation in a global economy, we don’t have the domestic markets which would allow us to be self sufficient and happily closed to the rest of the world. The sooner we understand this reality and learn how to deal with whatever pitfalls open economics brings, the sooner we’ll make any real progress.
Nice write up! I agree with you on certain points, but SOME sort of nationalism is essential I think and to be nurtured. We do not need to sell of everything to foreigners and let foreigners into everything. Heck, we even import toothpaste! Where are the SRI LANKAN businesses, the SRI LANKAN entrepreneurs? They have been shortchanged for foreigners and their products.
Comment by Asan — April 11, 2007 @ 7:43 am
good analysis…wish I had time to say more…btw you forgot the F1 racecourse Mahinda mamme wants to build down south…or is that just a rumour?
Comment by N — April 11, 2007 @ 8:06 am
Asan - thing is, Sri Lankan entrepreneurs do well under the right conditions. we have this culture of spoon feeding, waiting for the govt. to hand things out, and in this kind of system no wonder there is no incentive for local business to thrive. But when there is competition, they step up. Look at the garment industry, one of the world’s most competitive markets but we have SLkan companies doing bloody well in global markets. I think the worst thing we can do is to protect these buggers ad nauseum, specially big business.
n - i haven’t heard that rumour yet! i do know there’s an international cricket stadium coming up in, surprise surprise hambantota, but no word of a F1 stadium..that would be a hoot heh.
Comment by ddm — April 12, 2007 @ 8:58 am
hear hear for the most part. Nationalism being the last refuge of the scoundrel (yes, I know I quote incorrectly but I think it fits).
Err. but about Cargills. Surely import duties (call it a form of protectionism) play a part in deciding where corps buy their stuff? Being available outside cheaper doesn’t mean that it will be allowed legally into a country for that same low price. It works that way in SL for the local farmers with Bombay onions and dhal and even paddy… and it works that way the world over (US with sugar, EU with any number of crops). A government can force people to buy local, as previous governments have in SL.
On the foreign investment thing, I personally feel there needs to be a better balance. What happens now is that a privatization initiative essentially sells off a local monopoly to a corporation. Happened with SLT and it took how many years before DSL reached consumers? Remember how SLT raised local tariffs because their profit margins from IDD were being whittled away? SLT still control the last mile in copper and that means less meaningful competition (based on price) by other providers. Shell Gas for another example. By contrast, see how a field with many players (mobile telephony) has benefited the consumer and the industry as a whole in SL.
There is certainly any amount of politicking and bad reasons for doing things (yeah, a budget airline is silly and a F1 circuit more so) but the fact of the matter is that WB and the ADB do enforce their own agenda on governments that they have in a bind. I’m certainly not saying that going it alone will make things better but at least we have a clear line of accountability when things go wrong. It’s not going to be the demonic WB or some foreigner forcing us to do things that will land us in a soup
Perhaps that’s not a bad thing. It’s too easy to blame some parachuted foreign economic agency for problems now.
Comment by drac — April 13, 2007 @ 5:02 pm
drac - hmm not sure i get what you mean about cargills. my point is that cargills’ show of nationalism is also a facade bc they will, just like any other rational agent, source goods from the least cost source, rather than thinking about nationality. If tariffs force them to source from local producers then that’s hardly due to a love for the country or whatever, so that advert is just a show. heh but then i guess all ads are.
on investment, i agree that privatisation is pointless if there’s no competition alongside it. you rightly say that in mobile telephony competition has resulted in a better deal for consumers (when i referred to telecom i mainly meant mobile telephony, my bad). i don’t think we should be too fussed if competition comes from locals or foreigners, in telecom its both.
whatever agreements the WB and ADB have with SL, the SL govt has complete responsibility for these. though these donors have their own agendas, the final agreement is well, agreed upon by both sides. any decision taken against the interest of the country is the responsibility of the govt, if they spot something they just shouldnt agree to it, simple. we’re no longer talking about structural adjustment programs of the 80s, where the country is in desperate need of cash to fill in external sector gaps, and basically have to do whatever the donor tells them to do. modern aid is just project based lending, and there’s no macro conditionality involved, only project specific “covenants” that are agreed to by both parties (like environmental, resettlement safeguards etc.) anyway, do you really think increased accountability will make a difference with this govt? (make that any govt)
in the past govts have made excellent use of “donor conditions” to tie their arms and make tough decisions on economic policies that are not politically popular, so donor conditions aren’t all bad.
Comment by ddm — April 13, 2007 @ 11:08 pm
I guess my convoluted point about Cargills was that they may be able to source goods cheaper from outside but tariffs can make importing less viable. I’m not sure about the rational agent thing though… On a smaller scale, supermarkets do offer loss leaders - it’s not an unusual practice to take a dent in profits for increased sales.
Do you really think that a government is in a position to say no to terms and conditions put forward by banks? I’m pretty sure it’s not as simple as saying no. Benin is one example, Indonesia is another. A frequently recurring theme with both ADB and WB development aid and loans is the requirement for liberalization of markets. Some industries in SL are less ready to take this step than others
And no, increased accountability won’t make a jot of difference, perhaps especially with this government.
The problem with blaming donor conditions and making unpopular decisions is that the opposition usually takes the chance to promise an overturn and a return to the status quo. As superficial as it sounds, people do buy that line and vote accordingly. It happens to the UNP more than most
Speaking of specifics, the organizations have long been on the government’s case to reduce subsidies and welfare spending… I’m sure I’m uninformed but I remember that being a long running string attached to further aid.
It’s also political suicide for whichever party attempts it without a massive majority in parliament.
Which neatly comes back to nationalism or the facade, as you rightly refer to it. The government needs the money to do the infrastructure projects, they ask the ADB/WB for the cash, some conditions are reasonable, others perhaps not and the government is not in a position to say no…
Comment by drac — April 13, 2007 @ 11:50 pm
You’re being way too elitist. It’s been the same in every country I’ve lived in, even (and especially) Australia. Imagine how you’d get worked up if you had to live here.
Comment by jm — April 23, 2007 @ 5:30 am
JM - don’t see how being opposed to xenophobia is elitist. i agree that a lot of countries use nationalism as a political tool. My point is that it’s complete nonsense in SL bc we do rely a lot on the rest of the world and we can’t afford to be all nationalistic and xenophobic, it is counterproductive and irrational given the size of our markets and levels of development we have achieved thus far.
Comment by ddm — April 23, 2007 @ 11:23 am