Jan 20, 2017

SL will play constructive role in S.Asia - Fonseka

Sri Lanka, the Gateway to South Asia, which is also fast becoming the hub of the Indian Ocean and who maintains excellent relations with all relevant stakeholders, too will play a constructive role in promoting dialogue and cooperation for peaceful development in the region, says minister Sarath Fonseka.

He was speaking at the international conference on New Normal: Multipolarity and Multilateralism in New Delhi.

Text of his speech:

Good Afternoon,

Your excellences, Distinguished Invitees, Ladies and Gentlemen.

It is gives me great pleasure to participate and to make a key note address in this high-level event dedicated to an issue that is of paramount importance to both global and regional context. Since the collapse of the Soviet Union, the global political and economic architecture has been undergirded largely by one superpower, which set the stage for an unprecedented period of globalization managed through multilateral institutions and actors. Now that unipolar moment is giving way to an era of diffused powers, with countries like the US, China and Russia each bearing considerable disruptive capacities, and each struggling to stitch together new norms and rules for these rapidly changing times.

This phase, the beginning of which was marked by the Global Financial Crisis of 2008 and characterized by America’s two bruising wars in Iraq and Afghanistan, has seen a vacuum emerge. Many are seeking to fill it, most determinedly China, but with a push back from countries such as Japan and India. Separately, ISIS and radical energies in the Middle East also seek to grab new space. Russia has chosen this very moment to signal its ability to muddy the Eurasian fields and intervene in the Middle East. The fact is, there is not enough room to accommodate all of these ambitions.

In this context of macro-convergence and limited mciro-convergence a framework for regulating power in the Indian Ocean and beyond is required. Of course, such a framework must be flexible enough to respond to strategic changes, for example if unexpectedly fast Indian growth shifts the regional balance of power, but it must also effectively constrain, channel and process the exercise of power. Such a framework will need to maintain and uphold the rules-based international order and the principles that undergird them. It is this very order that has so successfully prevented a global conflict since the Second World War, provided a sense of security for millions of people living in small states such as Sri Lanka and perhaps most importantly providing the bedrock for our unprecedented collective economic prosperity.

Sri Lanka is at a defining moment in its history, a new government taken over the power in early 20115 to run the state with new vision and shared political ideology of two main political parties, United National Party and Sri Lanka Freedom Party. The end of Sri Lanka’s 27-year conflict has opened the possibility of a new period of sustained peace and prosperity. Despite the conflict, the 2004 tsunami and the impact of the global recession, the country has achieved middle-income status. With a land area of 65,610 square kilometers and a population of 20.3 million, Sri Lanka achieved a score of 0.757 in 2014 from 0.679 in 2000 on the 2015 Human Development Index, ranking 73rd out of 187 countries, the highest in South Asia. The world average in 2014 is 0.711 and South Asia averaged at 0.607. Noting the positive relationship between work and human development, the HDR said most Sri Lankan workers in the formal sector retire in their 60s, and a relatively small fraction are employed part or full-time. But casual workers and self-employed workers tend to keep their full-time jobs for many more years.

Sri Lanka has integrated human resources and employment strategies in its National Human Resources and Employment Strategy, which began in 2014, to reduce unemployment and create more work opportunities. In Sri Lanka annual job growth is 12 percent. Sri Lanka's neighbor, India is ranked at 130th in the 'medium development' countries along with Bhutan at 132, Maldives at 104, Bangladesh ranked at 142. Under 'lower development' countries Nepal is ranked at 145 and Afghanistan at 174. Pakistan at 147 Sri Lanka is well positioned to achieve the Millennium Development Goals (MDGs) by 2015.

Sri Lanka has a recorded history of over 2,500 years with diplomatic ties and trade with other countries in the world. For the most part, ancient Sri Lanka was ruled by kings with a self-sufficient village based economic system. The country boasts of irrigation works that compare with the most modern in terms of scientific construction and hospitals that pre-date the birth of western medicine. Sri Lanka was later colonized by the British, and remained so until gaining independence in 1948. Economically, agriculture – in particular, paddy and chena cultivation – has been a dominant sector, and continues to be the main source of income for many. The plantation sector gained prominence towards the latter part of the 19th century, with Sri Lanka known for its production and export of tea, rubber and cinnamon.

The free market economy was introduced in the country in 1977. Today, Sri Lanka’s major economic sectors include tourism, clothing and textiles, while the country’s economy has also seen significant contributions from other sectors such as industrial exports and telecommunication. Politically, Sri Lanka was the first country in South Asia to introduce adult suffrage in 1931. Sri Lanka has a multi-party system and is governed by a semi-presidential system, consisting of the Executive, Legislative and the Judiciary. The country is divided into nine provinces and 25 districts, with each district being administered under a District Secretariat. The districts are further subdivided into divisional secretariats and to Grama Niladhari divisions.

Sri Lanka is a lower middle-income country with a per capita income of USD 3,924 in 2015. Sri Lanka’s economy has grown at an average 6.4 percent between 2010-2015, reflecting a peace dividend and a determined policy thrust towards reconstruction and growth. Sri Lanka’s economy transitioned from a previously predominantly rural-based agriculture economy towards a more urbanized economy driven by services. In 2015, the service sector accounted for 62.4 percent of Gross Domestic Product (GDP), followed by manufacturing (28.9 percent), and agriculture (8.7 percent). The country ranked 73rd in Human Development Index in 2015 and has comfortably surpassed most of the MDG targets set for 2015.

Strong economic growth in the last decade has led to improved shared prosperity and an important decline in poverty. Extreme poverty remains low, as the $1.90 (PPP 2011) poverty rate fell half a percentage point, from 2.4 to 1.9 percent between 2009/10 and 2014/15. The real per capita consumption of the bottom 40 percent increased 2.2 percent annually between 2006/07 and 2014/15, and improved living standards are reflected in rising asset ownership, declining shares of food consumption, and a rise in reported household per capita income among the poor.

However, moderate poverty remains a challenge. In 2012/13, nearly 15 percent of the population lived on less than $3.10 per day. Pockets of poverty persist in the North, East, Estate Sector and Moneragala district where equality of opportunities in terms of access to services and linkages to the labor market are weaker.

As Sri Lanka aspires to become a higher middle-income country, it will need to adjust its development model. Growth in the last five years is in substantial part due to a “peace dividend”. Going forward, economic growth will likely require continued structural changes towards greater diversification and productivity increases and a reduction in the role of agricultural employment from its present share of a third of the population. Although Sri Lanka has excelled in overcoming human development challenges typical to a low-income country, its service delivery systems in education, health and other areas must now adjust to face new and changing demands typical of a middle income country.

To accommodate these increasing demands, the government needs to increase fiscal revenues in the medium term, which at present is low visà- vis its own historical standards as well as international standards. Imperatives to improve social safety nets will increase owing to an aging population that has passed its demographic peak. Finally, increasing affluence and information will lead to higher expectations for the state to perform in order to facilitate growth, provide a higher level of services, and demonstrate increasing responsiveness to a more demanding citizenry.

Taking awareness of the changing development priorities, the government policy statement presented in early January 2016 and early this year envisioned promoting a globally competitive, export-led economy with an emphasis on inclusion. It identified generating one million job opportunities, enhancing income levels, development of rural economies and creating a wide and strong middle class as key policy priorities. The policy statement proposed reducing the fiscal deficit to 3.5 percent of GDP by 2020. Also, it discussed far reaching reforms with a view to improve performance of the SOE sector and enhance trade and FDI. We in Sri Lanka have learnt our lessons the hard way. After years of violent conflict, which has created such a large, diverse and vibrant Sri Lankan diaspora community across the globe, we know that creating rules developed by legitimate, representative and inclusive institutions and imbued with universal values is essential for peace and stability. Today’s ‘multi-power’ reality is most visible in Asia and this can be attributed to the lack of a unifying political and security architecture for the Asian region (or regions). The question then arises: Will the Asian century be defined by contestation or cooperation? And how will Asian powers reconcile multipolarity and multilateralism, a process for which there are no handy 20th century templates? The trans -Atlantic political and economic regimes that were the ‘hub’ of the liberal international order has no parallel in Asia.

Perhaps the most significant policy question for the Asian century is ensuring the realisation of ‘human value’. How will demographic realities in Asia translate into economic, and by extension, political transformations? The region hosts the youngest as well as the most rapidly ageing populations in the world, suggesting that demography can both be a dividend and a disaster. Growth models of decades past are being rendered obsolete by technological advancements and digitisation. These cripple the notion of a demographic dividend. What are the livelihood avenues available to 21st century Asians? Will unemployment continue to fuel the high-octane nationalist and sub-nationalist movements that Asia is witnessing? Does this detract from the ability of Asian actors to ‘sacrifice’ and ‘compromise ’, something that multilateralism demands?

Asia needs to think through these pressing questions and so does the world. After all, the Asian century is not exclusive to Asia. It is as much about the rise of Asia, Asian actors and Asian institutions as it is about others who engage with the continent. Challenges and transformations in the region will define not just this continent’s century, but that of the planet. I do not think it would be naïve to say, that like in Sri Lanka, in a very fundamental sense, parties with an interest in the Indian Ocean have a greater convergence of interests than divergence. Interdependence between economies and peoples is at historically unprecedented highs, there is growing understanding that trade is imperative for development and there is little appetite for risking an optimistic future to conflict and instability. In addition, there are also very specific instances were interests converge, for example both India and China have a shared concern with keeping the Hormuz and Red Sea choke-points open to free maritime passage.

In my opinion there are three possibilities — distinct, but not mutually exclusive — emerge in relation to Multipolarity with multilateralism. At the commencement of the 21st century, Asia’s politics resembles the fraught, rudderless multipolarity of the
beginning of the 20th. It took 50 years and two wars for that reckless order to settle into a multilateral equilibrium. Asia has to do it better, faster and without the external stimulus of a Great War As the dowager power, the US can incubate new institutional arrangements in Asia, playing Greece to emergent Asia’s Rome, to borrow from Harold Macmillan’s description of the post-war relationship between Britain and the US.

The second possibility for an Asian order is that it resembles the 19th century Concert of Europe, an unstable but necessary political coalition of major powers on the continent. The ‘big eight’ in Asia (China, India Japan, Saudi Arabia, Iran, Australia, Russia and America) would all be locked in a marriage of convenience, bringing their disparate interests to heel for the greater cause of shared governance. Difficult as it would be to predict the contours of this system, it would likely be focused on preventing shocks to ‘core’ governance functions in Asia, such as the preservation of the financial system, territorial and political sovereignties and inter –dependent security arrangements. Given that each major player in this system would see this as an ad hoc mechanism, its chances of devolving into a debilitating bilateral or multi-front conflict for superiority would be high — very much like the Concert that gave way to the First World War.

A third possibility could see the emergence of an Asian political architecture that does not involve the US. This system — or more precisely, a universe of subsystems — would see the regional economic and security alliances take a prominent role in managing their areas of interest. As a consequence, institutions like SARC, ASEAN, the Shanghai Cooperation Organisation, the AIIB, the Gulf Cooperation Council and the South Asian Association of Regional Cooperation will become the ‘hubs’ of governance. The US would remain distantly engaged with these sub-systems, but would be neither invested in their continuity, nor affiliated to its membership. Rather than crystal gazing these three possibilities, our objective is to gauge the political underpinnings behind an emerging Asian architecture. Thus the quest for the Asian century is not for the Holy Grail of shared governance, but diagnosing the right means to reach a sustainable and inclusive platform.

Allow me to conclude by noting that building understanding and confidence is a tremendous task that will require great courage, political will and perseverance. But we have a useful example in the region in the form of ASEAN. Both South Asian and East Asian countries have a great deal to learn from this example as we navigate the transitions in the short, medium and long terms. And just as Singapore has over the years helped stakeholders come together and work towards their common interests in South-East Asia, Sri Lanka, the Gateway to South Asia, which is also fast becoming the hub of the Indian Ocean and who maintains excellent relations with all relevant stakeholders, too will play a constructive role in promoting dialogue and cooperation for peaceful development in the region.

Thank you very much!