Lanka won’t adopt reforms without int’l pressure – Japanese envoy

… corruption cited as one of the three issues faced by the country

Japanese Ambassador Hideaki Mizukoshi Thursday (21) urged Sri Lanka to turn the continuing economic, political and social crisis into an opportunity to achieve success.

The Ambassador said that the country should take advantage of the continuing external pressure to adopt reforms, build-up competitive industries and take tangible measures to overcome corruption. Among those present were President Ranil Wickremesinghe, Governor of the Central Bank Dr. Nandalal Weerasinghe and former Speaker Karu Jayasuriya.

Ambassador Mizukoshi dealt with post-war developments in Japan after the conclusion of the second world war, the late JRJ’s role in Japan’s reintegration into the international community and modern Japan and comprehensive reforms before he explained how Sri Lanka could draw from the Japanese experience to turn things right.

Addressing an event held at Granbell, Marine Drive, Colombo, by the Indian Ocean think tank Geopolitical Cartographer, Ambassador Mizukoshi highlighted the following issues (a) Taking advantage of External Pressure: Firstly, taking advantage of external pressure. Looking back at Japan’s history, most reforms in Japan that were achieved would not have been possible without pressure from the international community. The reformist leaders of Japan, whether during the Meiji restoration period or under occupation after WWII, had made wise decisions for the future of the country under foreign pressure.

Today, Sri Lanka is trying to reform the economic system under the agreement with the IMF. Reforms such as tax reform, electricity reform, or SOE reform may be challenging and not always popular with citizens. However, viewing the utilization of such external pressure for the betterment of the country should not be seen as a weakness but as a testament to the wisdom of leaders. India, which went into financial crisis in 1991, went through structured adjustment of the IMF and World Bank. The economic reforms achieved at the time transformed India into a fast-growing economy. From an international perspective, agreements with the IMF serve as backing for Sri Lanka’s commitment to pursuing rational and consistent economic policies. Japan would not have supported the debt restructuring negotiation of Sri Lanka without agreement with IMF, which assures the consistency of Sri Lankan economic policy.

(b) Building up Competitive Industries: 2nd lesson from Japan’s experience that I can think of is importance of building up a competitive industry for economic growth. Sri Lanka is now at a crossroads.

This economic crisis can be utilized as a golden opportunity to transform and grow. Japan’s experience of the economic miracle shows that it is important to formulate its industrial policy to foster a competitive export industry. What can be the strong and competitive industries for Sri Lanka?

Sri Lanka’s economy has stabilized under the IMF programme. The inflation was contained to single digit and the GDP growth turned positive from the 3rd quarter of the last year. I commend the immense efforts of the current government and the people of Sri Lanka to bring about this economic stability in a very short time. However, without a competitive export industry, once Sri Lanka lifts its import restriction, there is a possibility of foreign currency shortage happening again.

Therefore, after achieving the stabilization, it is essential to build up a competitive industry that can push sustainable development of the country. In building up industries, Sri Lanka may learn lessons from Japan’s industrial policies. It is important not to protect a loss making industry with government money out of favoritism but to ensure a smooth transition from uncompetitive industry to more competitive industry.

(c) Overcoming Corruption: Thirdly, I would like to touch upon corruption problems because it is a challenge both for Japan and Sri Lanka. Observing Sri Lankan politics since I came here, I would like to point out two aspects of problems of corruption in Sri Lanka.

First, corruption is a source of distrust of leaders of the country by the people, and it discourages people from being responsible citizens of the country when leaders are corrupt. It gives convenient excuses to tax payers for tax evasion.

Secondly, it is very harmful when Sri Lanka wants to attract foreign investment.

Foreign investors want a transparent and predictable business environment. Japanese companies are nowadays strictly observing the compliance obligation and therefore never offer bribes or kickbacks. If that kind of culture remains in Sri Lanka, there is no prospect of Japanese investment coming into Sri Lanka.

I am saying this because I would like to see more Japanese investment in Sri Lanka to support economic growth. I hope, in Sri Lanka, ongoing anti- corruption reforms draw lessons from various countries, including Japan, to develop effective anti-corruption mechanisms. We would like to strongly support on going Sri Lanka’s effort in this field and we are funding the UNDP project for the enhancement of the Commission to Investigate Allegations of Bribery or Corruption (CIABOC).

There are many other lessons that can be drawn from Japanese experiences and we are ready to provide opportunities for Sri Lankan people to learn from them through JICA and other means.