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March / April 2006
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Give Your Preference Vote for a Woman Candidate

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In this editorial we make a special appeal to all Kandy voters to mark at least one preference for a female candidate in this month's KMC election. But before we give the reasons for this appeal some general remarks about the election.

There is really nothing new about the KMC elections that will be held at the end of this month. The UNP that has ruled the city for the last 58 years hopes to retain control. The UPFA hopes that the Mahinda Chinthana would work its magic and give them the reigns of power for the first time in Kandy municipal history.

In a way local government in Sri Lanka is an utterly boring and pathetic subject. Misnamed as local “authorities” they have anything but authority. They do have some authority over garbage, sewerage and drains. But they have to get the permission of the central government even to recruit a sanitary labourer. In fact Mayor Kesera Senanayaka has constantly lamented over the last four years that the government has blocked his attempt to recruit some additional labourers to the KMC.

Mayors do not have any power to secure police assistance to enforce municipal laws. In Sri Lanka not even a mere police constable is required to “worship” His or Her Worship. Mayors have to worship the police to help enforce even simple regulations such as keeping the pavement clear of unauthorized vendors.

Local authorities are severely circumscribed by law when it comes to taxation. They have to virtually beg for money from provincial and central government. Last year the Kumarataunga administration cut the annual fund allocation to the KMC by 15%. The only reason one could think of was that the KMC was under her arch rival UNP.

Ideally local elections must focus on local issues. But the main parties try to make local elections a poll to test the national mood. Holding all local elections on one day has encouraged this practice. Before about 1970 this was not the case. Local elections were staggered. That allowed local issues to get more focus.

Local government is a nursery for aspirants to higher public office. This is healthy for democracy. The rule that 40% of the nominees should be youth -18 to 35 age group who are 42% of the current population probably serves a useful purpose.

The law to have the 40% youth quota was enacted after a segment of this very same youth led by the JVP massacred thousands of people and threatened to eliminate everybody who was over the age of 50 or 60! May be our women should also resort to such violence to get their due in Sri Lankan politics. We find that women who are 50.5% of the population get no such special privileges when it comes to nominations even to the lowly local authorities. The UNP and UPFA have nominated only one female candidate each for the KMC. The JVP has three females candidates and JHU five. The three Independent Lists have 24 making up a total of 34 (14%) female candidates.

Rajapaksa and Wickremasinghe talk big in their Mahinda Chinthanas and National Agendas about women's rights. But in practice they do almost nothing to give them their due place in politics. In fact it as far as these two parties are concerned even “youth” means male youth.

The further irony of this is that the motherdaughter duo Sirima Bandaranaike and Chandrika Kumaratunga who collectively ruled this country for 23 years miserably failed to take any meaningful steps to pave the way for women to come into politics. Contrast this with, say, Michelle Bachelet who was sworn in earlier this moth as the first woman president of Chile. She promised in her campaign to have sexual equity in all government posts. In keeping with that promise her cabinet of 20 has ten women and ten men. She has promised to implement the same principle in other government appointments as well.

May be all Sri Lankan women should boycott elections until they get their fair share of political office. But we have a more practical proposal for Kandy municipal voters. We appeal to both women and men voters to mark at least one of their preferences for a female candidate on the list of the party that they vote for. That will be a good start to break the male domination of local authorities. To help you identify a candidate we have published the female list on page IV of the Election Supplement.

India on the March with US Support

By S W R de A Samarasinghe

“Growth will be our mount, equity will be our companion and social justice will be our destination.” P. Chidamabaram, Finance Minster of India (Financial Times, March 01,2006,p.03)

A few weeks ago the American president George W. Bush visited Sri Lanka's great neighbor India. These are two countries that will have a profound influence on small Sri Lanka. Thus it is good to reflect on what this visit signified in broader terms, especially from a political economy perspective.

There are three major factors that have led to the increasingly close relationship between the US and India. One is the end of the Cold War. USSR which was India's old ally in global super-power politics simply collapsed compelling India to reassess its options. The second is India's decision to abandon Nehruvian Socialism for a more liberal market-friendly economic strategy that will make India a strong presence in the global economy. The third is the mutual interest of US and India to counter-balance China's emergence as a global power.

First the economics. The inward looking model that Nehru and his successors chose for India at Independence (1947) sustained the country for quite a while. The Green Revolution that helped India attain self-sufficiency in grain was one of the outstanding achievements of this period. Another was the production of a vast army of relatively well educated young people who today have formed the backbone of the Indian IT boom. A third is the growth of an indigenous entrepreneurial class that when allowed to operate unencumbered by India's notorious “Permit Raj” bureaucracy is able to compete with the best in the world.

However, the “Hindu” growth rate of 3.5% that India's economy produced until the 1990s did not meet the rising expectations of the growing Indian population or pull India out of poverty. In 1985 more than half of the country's population of about 765 million were poor. India's population in that year accounted for about 17% of the world population. But the country had 38% of the world's poor.

In the 1980s India took a few tentative steps to liberalize the economy. But it still retained the fundamentals of a closed economy. The country did relatively well in the 1980s compared to the previous three decades. Economic growth averaged a respectable 5.5% and the poverty level declined from about 51% in the late 1970s to 39% by the late 1980s.

However, in a rapidly changing global economy India was uncompetitive and was being left behind by newly emerging countries in East Asia and elsewhere. For example, in 1990 India's exports were only about one quarter of that of South Korea whose population was less than 5% of that of India. It was in 1991 that the present Indian Prime Minister Manmohan Singh a Cambridge trained Economist - who was at that time Finance Minster made India confront global economic realities. The country was facing a major economic crisis with foreign reserves down and living virtually beyond its means. Singh initiated major economic reforms centered on liberalization, privatization and globalization that are still being followed.

The liberalization program was accelerated by the BJP government that was in power in the early 2000s. The current administration in Delhi is a coalition that includes Communists. The latter are reluctant junior partners of economic reform who are not too happy about liberalization and India cozying up to USA. But Indian communists are also pragmatists. They see no other option but to liberalize so that India could claim its due place in the global economy.

India's more traditional industries are still shackled by outdated labour laws and bureaucratic restrictions. In contrast, IT, which the Indian bureaucracy forgot to control because it sort of grew from nowhere, is booming in a more or less laissez faire business environment. The government aims for a GDP growth rate of over 8% this year. In the budget that was presented in parliament a few weeks ago the Finance Minster expressed the hope that soon India would match China's growth rate of 10%.

But this goal is not that easy to achieve. On the one hand companies such as Infosys represent the new India. But as reporters this week covering the Bush visit have repeatedly noted, around 80% of the Indians live in rural areas and many are desperately poor. In India's IT centres such as Bangalore the IT community works and lives in conditions that are increasingly comparable to those of the west. But a few streets away there is unspeakable poverty and squalor.

Fifteen years after Manmohan Singh launched the liberalization program the economic conditions in India have radically changed in many respects, mostly for the better. India has opened its economy to a significant degree. The hostility towards foreign direct investment (FDI), a hall mark of the Indira Gandhi governments of the 1970s is now only a faint memory. FDI that stood at a paltry $237 million in 1990 had climbed to $4.4 billion by 2003. But this was still a modest 7% of China's $59 billion.

The impact of India's economic liberalization on poverty is a very contentious issue in India. Official data suggest that poverty has declined by a remarkable 10% points from 36% to 26% between 1993 and 2000. Those who support liberalization cite this as vindication of the strategy that high growth reduces poverty. If they are right India's poverty level today must be still lower. Others believe that the official figures exaggerate the actual decline. The bottom line is even today about 30% of Indians live on under $1 a day and this is still unacceptably high.

India's switch to a more export led growth strategy is beginning to yield results. The country's exports nearly tripled between 1990 and 2003 from $18 billion to $56 billion. India's share of global exports is still only 0.74% compared to South Korea's 2.6% and China's 5.8%. These figures illustrate that there is still a long way to go before India can call itself a truly big player in the global economy. For that India has to make further economic reforms.

Rigid labour laws that tie the hands of business to layoff labour are considered a major disincentive to investment and job creation. India's banking system is in dire need of reform. There are some unsustainable subsidies such as cheap electricity to farmers that are hard to get rid of for political reasons. Indian infrastructure such as roads are improving but much remains to be done.

Finance Minister Chidambaram's goals high growth, equity and social justice - quoted above are commendable. But they are not easy to achieve. About two years ago the electorate kicked out the BJP government not because the voters objected to liberalization and high growth rates per se but because it failed to provide for the people who are poor and mainly rural.

Even a 10% growth rate won't touch the vast majority of the poor in a hurry. This is a dilemma that the democratically elected Indian politicians have to face and their Chinese counterparts who do not have to ask for votes need not worry about. Managing successful economic growth in a poor democracy is one of the most difficult political challenges. If you try to redistribute too much you lose growth momentum. But if you do not redistribute you face the ire of the multitude of poor voters. There is no theoretically correct one answer to this dilemma. This is probably why Chidambaram's recent budget had been described as the last chance for Congress to go for major reforms before the next election cycle. By next year that window of opportunity would be closed because a more populist budget may have to be presented to win votes at the next election.

Both India and US are benefiting from India's economic success. US exports to India have grown from $3.7 billion in 2000 to $8.0 billion in 2005. In the same period Indian exports to the US have grown from $10.7 billion to $ 18.9 billion. India is now the major supplier of IT services to US. Bush is keen to see India import more from US to bridge the trade gap.
The major gain for India from the Bush visit was the nuclear deal. Bush agreed to make available US nuclear technology for civilian use. Critics of the deal see this as a step that would undermine the nuclear non-proliferation efforts. For India it is an essential part of the solution to future energy needs. For US it is good economics and politics combined.

The growing relations between India and US now include military cooperation. Many see this as a counterweight to China that US wants to promote. This does not meet the approval of a section of Indian opinion that is suspicious of US motives.

Overall a prosperous and successful India would be a positive force for global prosperity and peace. I qualify the statement because the global economy and especially the US would have to make some difficult adjustments to cope with the growth of the two giants from Asia, India and China. We already see oil prices under pressure. The days when US motorists could buy a gallon of petrol for less than the price of a bottle of Coca Cola are probably over. The growing demand for oil from India and China would ensure that world price would remain around $40 or more per barrel.

As the middle class in India, China and elsewhere in the developing world such as Brazil grows US consumers will have to make another difficult adjustment. Up until now US households have been allowed to spend more than they earn because these countries were growing by exporting to the US. But the export growth model is not permanent. As domestic incomes expand the locals will increase consumption. That means countries like China won't lend as much as they do today to the US to finance credit-based consumption.

If India (and China) continue along the economic path that they are currently on, within the next generation the world would witness a dramatic change in prosperity. During the post World War II generation a minority of about 25% of the world were prosperous and the rest were poor. The next generation will witness for the first time in human history a majority of the world living in relative prosperity. This is not a bad outcome of globalization, even if that is the only one.