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Outlook for Sri Lanka in the “Unlocking Year” 2022

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January 22, 2022
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Outlook for Sri Lanka in the “Unlocking Year” 2022

Sri Lankan Consul General Valsan Vethody (Right) at the Indian Merchants Chamber in Mumbai

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By Valsan Vethody

Mumbai, January 22 (newsin.asia): 2022 would be the “Unlocking Year”. If so, there will be no more fear and anxiety; the masks would disappear; cosmetics and business suits would once again be out on display; work-from-home-battalions would go back to the usual hustle and bustle and to the intimidating presence of their bosses in offices; webinars and zoom meetings sans live presence would cease; more and more pompous grumblings about jet-lag would resonate in clubs and board-rooms; MBA brains would get overstressed; ‘ambitious-graphs’ for  operational targets of corporates would peak; bank accounts in tax havens will swell; computers at the income tax and enforcement departments will overwork; and the Central bank officials will break their heads to deal with the complexities of an overheated economy showing high consumer demand, supply chain disruptions, excessive money supply, asset bubbles, inflationary pressure, low interest rate, reduced purchasing power that affects savings and investment, foreign exchange volatility, widening income inequality, malnutrition and a surge in the BPL numbers.

This sort of an economic concoction, in which all sorts of positive as well as negative socio-political-economic elements would certainly be a challenge for policymakers to get the macroeconomic fundamentals aligned with democratic realities of the polity, especially, in the context of high expectations from citizens and businesses, who hope their leaders can pilot them out of the Covid-19 induced socio-politico-economic muddle.

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These challenges and expectations would be an enticing topic of debate for the so-called ‘aandolan-jeevis’, trade union leaders and political and economic pundits, in the media and on the political platforms that might even impact the future electoral outcomes. This also would have its own international ramifications as the world continues to remain economically multipolar, with its own complexities of competitive economic whims and fancies. These ramifications would be even more intense in the middle-income economies with high economic aspirations, especially if the macro-economic fundamentals of their domestic economies are not strong enough and if they are dependent on external resources to fulfil the economic aspirations of their citizens. Moreover, it becomes progressively worse along with the periodical auctioning of the non-existent resources by politicians in the name of an egalitarian democracy.

These economies are typically those that become easily vulnerable to the geo-strategic susceptibilities that are increasingly becoming polarised into a bipolarity between the USA and China. This bipolarity is the  outcome of a decade-long lingering dispute between these two nations over the traditional global economic governance structure, which has been by and large under the dictation of the Western-led, neo-liberal multilateral institutions based on Western values such as strict governance conditionalities, fundamental rights and religious freedoms. This, according to many Third World nations, is designed to interfere in the internal affairs of a nation and therefore imperialistic. China challenged this with its monetary fund – the Global Stability Mechanism – modelled after their governance model based on tech-authoritarianism combined with state-led capitalism and most importantly without any governance conditionalities. China’s political stability, unilateral quick-decision-making mechanism and stronger economic power not only further complemented this model but also harmonised the consolidation of their dominance over the global financial system with their long-term foreign policy interest, while the US has been stumbling with its arbitrary and heedless military-power based foreign policy.

However, the positive development of this geostrategic dimension is the launch of the ‘Global Gateway’ strategy by the EU with an ambitious 300 billion Euros of investments between 2021 and 2027 in various socio-economic sectors across the world with the intention of countering the Chinese global investments and attaining ‘strategic autonomy’ for EU.

When it comes to South Asia, the region which is a vital intersection of maritime trade, connecting the Indian Ocean to the Pacific in the East and the Mediterranean in the West, the geo-strategic bi-polarity becomes a chaotic-tri-polarity. The third polar being dominated by India, the regional superpower, which wields regional superiority over the other two powers due to its geographic and economic dimension, technological capacity, geo-strategic location, cultural identity and most importantly its military power.

Nevertheless, China’s ‘pervasive economic investments’ in the key strategic sectors in South Asia, such as infrastructure, high-tech, information technology, data management, green economy and artificial intelligence, and their assertive border disputes have created a sense of ‘neo-security-threat-perception’ in India, which has not only led to Indo-China face-to-face military stand-off and arms race both in conventional and cyberspace, but also to both India’s as well as China’s discrete meddling in the internal decision-making processes of some of the South Asian nations. In this context, it should be noted that the cornerstone of India’s foreign policy in the South Asian region has always been this so-called ‘security-threat-perception’.

Sri Lanka, with its unique geo-strategic position in the centre of the Indian Ocean, is the worst affected in this regard, as the global geostrategic stakeholders today view Sri Lanka primarily through the prism of Indo-Sino-American geo-strategic competition. Therefore, going forward, Sri Lanka will need to navigate cold-blooded power competition between Beijing, Washington, and New Delhi as much as it did during the Cold War as well as during the thirty years of civil turbulence.

Sri Lanka has the experience as well as plenty of institutional memory with the dynamics of great power competition. Moreover, Sri Lanka has a proud history of safeguarding its sovereignty and integrity even during the most difficult period of its political history.

Therefore, Sri Lanka’s most difficult task lies not at the geo-strategic level, but at the national level, where it must adapt to highly professional governance skills to manage a mix of economic, health, foreign exchange, environmental, and internal socio-political stability challenges. Most importantly, to get the macro-economic fundamentals at the internationally accepted levels.

However, the Sri Lankan diplomatic dispensation has to be mindful that any sort of outreach to China to address Covid-19 economic distress would perpetuate the inaccurate perception that Sri Lanka is prone to advancing Beijing’s geostrategic ambitions.

These post-pandemic challenges are nothing unique to Sri Lanka alone, but also applicable to most other (Covid-19) pandemic hit countries.

(Valsan Vethody is the Consul General of Sri Lanka in Mumbai, India)

Tags: DomesticEconomic challengesInternationalOutlook for 2022Sri Lanka

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