For air transport this is good news in that the State will not be the only actor in the international system, which hopefully mean that International Organizations may be more empowered and that government networks may exist within international Organizations, promoting interest groups within such Organizations to push liberalization of air transport.
l Dr. Ruwantissa Abeyratne
(15 July, 2012, Montreal, Sri Lanka Guardian) Last week, while vacationing in Colombo, I went downstairs in my hotel and strayed into a shopping arcade. One level down was a bookstore which inevitably drew my attention. It was stacked with books of all sorts, more like a library than a regular bookstore. My attention was drawn to one book – Sri Lanka in the Modern Age – a History of Contested Identities, by Nira Wickramasinghe, Professor in the Department of History and International Relations in the University of Colombo. I promptly bought the book for the main reason that I had not had contact with Sri Lanka for 23 years and I was sure that the book would fill me in on lost years.
The book proved to be fascinating reading and I read it cover to cover that evening. A wonderfully readable work, well documented and presented with erudition and analysis but without pretension. I was somewhat disappointed (and this is not the author’s fault) that there was not much economic analysis which I had expected. The author clearly states in the Preface that she has written a political history of the country of the twentieth century, which she mentions has been remarkably static compared to the evolution of world history during that period.
My own observations of the country, which by no means reflect a true and comprehensive picture of Sri Lanka as they were developed over a short stay, was that the population both in Colombo and cities such as Kandy, Kegalle and Galle seemed to have grown exponentially. This brings to bear the recent findings of Geoffrey West, a physicist at the Santa Fe Institute who has researched the math of cities. West states: “ there is an urban constant that holds good the world over: every doubling in the size of a city brings a 15%-20% increase in wages, patent output, the employment of super creative people, the efficiency of transport systems and many other good things associated with cities (The Economist, June 30 –July 6 2012, Special Report on London at 4) . Of course I have no way of verifying this in the context of the cities in Sri Lanka and I could only say that the three cities I mentioned certainly seemed to have “doubled” in terms of population.
Someone once said that the true nature and status of a country can be gauged by its transportation system. The two trips I took to Kandy and Galle over the weekend where the regular traffic gridlocks of the week were not expected gave me the impression that those cities were indeed clogged and the transport infrastructure on the Colombo- Kandy Road was in absolute chaos. I dated not wonder what these roads would have been during weekdays. There were no road markings and drivers seemed to exist on their wits and driving skills rather than applicable road rules.
This brings me to my thesis – which is that the progress, wellbeing and health of a State (the country) depends on its economic development and the quality of life it offers the nation (the people). In this regard, I noticed a somewhat disturbing trend in that some major projects already underway in Sri Lanka such as the second international airport in Mattala, the new Port and Convention Centre in Hambantota and Mihin Lanka seemed to be driven by government sponsorship and control. Nobel laureate Paul Krugman has mentioned that “depression economics “has returned and is with us. Krugman says:” …for the first time in two generations, failures, on the demand side of the economy – insufficient private spending to make use of the available productive capacity – have become the clear and present limitation on prosperity for a large part of the world (Paul Krugman, The Return of Depression Economics and the Crisis of 2008, Norton: New York, 2009 at 182). UNP MP Dr. Harsha de Silva, an economist himself has said in a recent interview that industries such as tourism should not be government controlled.
If the Sri Lankan economy is to surge ahead and the people were to benefit from it, there are two approaches that the Government must adopt – planning and innovation. Nobel Laureate Michael Spence has said: “ Innovation, which is sometimes called technological progress, increases the production potential of an economy over time. That means that with the same amounts of capital, labor, raw material and energy, you can produce more – or more valuable - output. You can also think of it as reducing the cost of producing a given amount of output (Michael Spence, The Next Convergence, Farrar, Straus and Giroux: New York, 2011 at 36).
This leads me to my questions on the Mattala Airport and the aspect of planning. Why does Sri Lanka need another airport? Is the airport at Katunayake already full and congested? It is a fundamental principle of airport building that new airports are built essentially to accommodate overflowing traffic or to provide “hubbing” capacity. Would there be enough traffic in Mattala? Would airlines opt to arrive at and depart from an airport which is so many miles away from the capital? Would Mattala provide them with hubbing potential? Has a market study been done to justify “hubbing” operations by new airlines and current operators coming into Colombo? Who are waiting to bring international traffic to a remote city? Is Mattala going to be an aerotropolis? How much revenue would airport operations generate? Why does the government not hand over airport operations to private enterprise as it is done in India? The same questions can be asked with regard to the new port and the potential movement of ships into and out of that port. I am sure the government, its wisdom and with its experts has thought of all this.
The woes of the air transport industry have always centered on the claim of most that aviation is effectively precluded from entering the free market due to government meddling. This seems to go contrary to the Keynesian view of the advantages of some degree of government control of the free market economy. Harsh restrictions on ownership and control of airlines and market access are stringent tools of government control. The argument for deregulation, as against government control, pervaded the economic crisis of 2008 where some argued that the bubble burst because the markets had not been free enough from government meddling and that the US Congress pushed lenders to have unfettered ability to lend to those who could not pay back their loans, leading to a housing bubble. Pankaj Ghemavat, referring to the 2008 bubble says: “ Media magnate Rupert Murdoch blamed the Government for the debacle, stating: “It’s very easy to blame the free market but how did we get to the housing bubble? We got it because of Congress pushing Fannie Mae and Freddie Mac into lending money to people who couldn’t afford it and blowing up the price of housing….” (Pankaj Ghemawat, World 3.0 – Global Prosperity and How to Achieve It, Harvard Business Review Press:2011 at 12).
In the air transport sector this principle is reversed in that governments meddle in fettering the freedom of air carriers by imposing political and economic restrictions. Anne-Marie Slaughter of Princeton University speaks of a new world order where the State will not be the only actor in the international system but will still be the most important actor; the State will not disappear but will disaggregate into its component institutions, which will increasingly interact principally with their foreign counterparts across borders; these institutions will represent distinct national or State interests, even as they also recognize common professional identities; and government networks will exist alongside and sometimes within more traditional international Organizations. For air transport this is good news in that the State will not be the only actor in the international system, which hopefully mean that International Organizations may be more empowered and that government networks may exist within international Organizations, promoting interest groups within such Organizations to push liberalization of air transport.
One of the key drivers in this equation is private investment. As Michael Spence, Nobel Laureate and Professor of Economics at New York University observes in the example of India: “ India’s earlier slow growth was partly attributable to a distrust of foreign investors and a relatively low level of foreign investment by multinational firms. If you look at the data for India and China for example, the differences are dramatic. Of course this is changing now with India’s growing options” .
Niall Ferguson, Professor of Business Administration at Harvard University draws the interesting parallel of Marco Polo’s visit to China in the 1270s when he was impressed by the volume of traffic in the Yangzi. Polo observed that the quantity of merchandize carried up and down made the Yangzi looked like a sea rather than a river. In comparison to this Ferguson argues that the Thames in the early fifteenth century was the backwater . Ferguson goes on to suggest that one of the reasons for the success of European States in the 16th Century onwards was its opening out to commerce and competition. It was Adam Smith who said: “a country which neglects or distrusts foreign commerce, and which admits the vessels of foreign nations into one or two of its ports only, cannot transact the same quality of business which it might do with different laws and institutions”.
.The underlying principle in Sri Lanka, when it comes to economic development and the welfare of the people, has been succinctly explained by Nira Wickramasinghe in her book: “ there still seems to be a problem of self-vision and national identity. While the leadership speaks of transforming Sri Lanka into Singapore or Hong Kong, most people see themselves as a nation of proud and self sufficient farmers, a vision that has stemmed from the Sri Lankan political and administrative elite’s tutelary, custodian and paternalistic attitude towards the peasantry”.
We might have to get rid of this mindset.
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