Embassy of the United States

Letters and Speeches

Ambassador’s Remarks at the Sri Lanka Economic Association’s (SLEA) Annual Book Launch

December 18, 2007, OPA Auditorium, Colombo

Professor Indraratna, Members of SLEA, Authors, Ladies and Gentleman

It is an honor for me to join you today for your annual book launch, and to congratulate both the authors and the Association for their work in bringing greater focus to these important subjects.  I am certain that both of these books are well worth a detailed read, and that they maintain the high standards that we have come to expect from SLEA publications. 

I’m also particularly happy to see them issued in hard copy.  Despite living in a digital age, publishing books in printed form is, and will continue to be, an important way to share facts, opinions, and ideas. By that I mean that there are still a few vital topics that cannot be handled by text message or Blackberry!

Speaking of Blackberries, I was perusing the internet last night for something erudite to say about economists.  The best I saw was a remark that economics is the only profession where two people can win Nobel prizes for saying exactly the opposite things.  I think that gives me sufficient cover to proceed with my speech.    

Since I am no economist and any attempt to comment on price theory would quickly expose my deep ignorance, I’d like to focus my remarks on the book Inequity, Poverty, and Development, which grew out of SLEA’s August 2007 conference of the same name at the BMICH.  I know that the editors, Professor Indraratna and Dilani Hirimuthugodage, the SLEA staff, and all the contributors worked very hard to produce this book as both a record of that event and as a continuation of the discussion that occurred at the conference.  This is a timely book containing many fine essays.

The book provides a detailed look at how inequity and poverty affect development, and how the links between the three are clear and obvious.  As Governor Cabraal highlights in his chapter, the distribution of global gains is extraordinarily unequal.  Although there has been some improvement throughout the past century in the conditions in which mankind lives, inequalities continue. 

These inequalities affect people living in the developing world far more seriously than they affect residents of developed countries.  They exist at a macro-economic level, but are felt and best understood on a micro scale.  For example, it is unfortunately the poorest of the poor within Sri Lankan society who continue to suffer the most from poverty, inequity, and inequality.  Development will continue to be hindered until greater efforts are made to combat these issues. 

In Sri Lanka, perhaps more so than in some other countries within Asia, the links between poverty, inequity, and development – whether stemming from the consequences of history or the ethnic conflict – are readily apparent.

For example, residents of the Western Province have experienced a decline in poverty and a dramatic increase in growth and development – at a rate double that of other provinces – within the past 10 years.  That progress was not matched in other regions, where development was comparatively low and poverty remained high.

In her essay, World Bank Country Director Naoko Ishii highlights the phenomenon of “inequality traps.”  This phenomenon, if I may quote from Ms. Ishii’s paper, occurs when “an unequal distribution of wealth and power in a society…leads to the creation of institutions that systematically favor the interest of those with more influence,” thereby perpetuating inequalities.  She goes on to highlight three ways in which Sri Lanka can combat inequality traps:  by investing in human capacities, expanding access to infrastructure, and by focusing on institutions that support a higher growth trajectory.  

Her comments, combined with the detailed research of Swarna Jayaweera & Chandra Gunawardena, Raja Korale, and others in this book not only help explain the relationships between inequity, poverty, and development, but also give a partial roadmap for improving the current situation.   

I’d also like to note a related hindrance to development which several of the contributors touched upon: corruption.  The cost of corruption is difficult to quantify, but there is little doubt that it has dramatically negative economic as well as political consequences. 

Corruption damages economic development and reform, impedes the ability of countries to attract foreign investment, hinders the growth of democratic institutions, undermines rule of law, concentrates power in the hands of a few, and erodes public confidence in its leaders.  Many polls have shown that the Sri Lankan public feels that corruption is one of the highest priorities the Government should address.

Of course, corruption is not a uniquely Sri Lankan or American phenomenon.  It is a worldwide phenomenon that affects all of us.  The United States experiences its share of corruption, just like others do.  But my country also has strong, independent institutions that work to improve legal, administrative, and societal mechanisms needed to prevent and prosecute corruption.  I invite all of you to look at the website of the famous FBI.  It does not just focus on terrorism, drug smuggling, and violent crime, as you might expect.  It also lists anti-corruption as a major priority, and cites many investigations and busts that prove the FBI is serious about this mission.

Sri Lanka has taken several important steps in the struggle against corruption.  Your country enacted a bribery and corruption law.  You have established a Commission to Investigate Allegations of Bribery or Corruption.  You have also enacted an Assets and Liabilities Declaration Law, put in place a law to control money laundering, and signed the U.N. Convention Against Corruption.  Following the example of India and others, Sri Lanka also would benefit from the passage of a Right to Information Law to give its citizens the right to know how their taxes are being spent by government agencies.    

Properly implemented, and with the true will of the government and parliament, these initiatives can make a difference in the rate of corruption, and ultimately in the development of Sri Lanka and the alleviation of poverty. 

The last month in Sri Lanka has seen a period of political drama.  With the budget now passed, the government has an important opportunity to focus its attention on addressing poverty and inequity.  One of the best ways it can do so would be to complete the APRC process and thereby lay the basis for a negotiated solution to Sri Lanka’s conflict.  The All Parties process offers a significant chance not only to effect meaningful power-sharing with the regions as an essential component of constitutional reform, but also to build peace through development and by reducing regional poverty inequities.  Genuine devolution of power from the national level to the provinces, districts, and localities will give all of Sri Lanka’s communities a greater say in how resources they are allocated should be spent and the issues they want their elected representatives to give greater focus to. 

One region that must be an early priority is the East.  Sri Lanka has a significant opportunity to stabilize and develop the East in a manner that would demonstrate to all Sri Lankans, but particularly Tamils and Muslims, that they have a bright future within a united Sri Lanka and that the Government is serious about ensuring their rights and providing opportunities equitably within a pluralistic state.  In short, a successful transition in the East can be an important confidence builder and a building block for a future negotiation process. 

Conversely, the government faces significant risks if it fails to seize its opportunity in the East.  Specifically, a failure to effect an orderly transition from military to civilian control, a failure to consult elected representatives of the Tamil, Muslim and Sinhalese communities on the development and other programs now being devised for the East, and a failure to rein in paramilitaries are all likely to destabilize the East and harden minority attitudes and even spark violence. 

The government wisely has pledged to promote development in the East as one of its priorities in the budget that just passed.  The United States is already helping in this respect, and is ready to do more. 

The U.S. Agency for International Development (USAID) will implement two major new projects over the next five years:  the Sri Lanka Conflict Response Program and the Connecting Regional Economies program.

The Sri Lanka Conflict Response Program will implement governance and communication programs that support a resumption of the peace process to resolve Sri Lanka’s long standing conflict.  The Connecting Regional Economies program will address the disparity in economic development between the North and East and the rest of Sri Lanka.  This disparity is a major driver of Sri Lanka’s ongoing ethnic conflict. The program also offers a major opportunity for us to engage the private sector as a partner in our efforts through establishing public private partnerships.

In conclusion, there is no doubt that a peaceful solution to the conflict will enhance and encourage development for all Sri Lankans – be they Sinhalese, Tamil, Muslims, or others – living in this wonderful country. 

This book positively focuses attention on the current roadblocks to greater equitable development.  I personally look forward to reading it in-depth, and recommend it to policy makers here in Sri Lanka.

I congratulate you once again on this momentous occasion, and I wish you all a healthy, prosperous, and safe 2008.