J. R. Jayewardene was the king of Free Trade Zones (FTZs). This article does not seek to vilify the late President, but it aims to take a dispassionate look at his economic policy, in contrast to the Rajapaksa vision of today, and some of the policy initiatives of other regimes of various leaders before and since JRJ.
J.R. Jayewardene heralded the creation of Free Trade Zones as if they were a fantastic achievement, the best since man invented the wheel. After the long period of abject economic atrophy under the leadership of Sirimavo Bandaranaike, he was able to pull this off. The image, that is, not the reality. In contrast to the total stagnation of the economy in the 1970–1977 era, JRJ had “brought the robber barons in.”
It is quaint that he in fact articulated that in so many words! He said, “Let the robber barons come in,” as if he was Santa Claus letting in the reindeer for the sheer joy of the ride on Christmas Eve. Who on Earth in their right minds would say, “Let the robber barons come in?”
But JRJ did, because he had the naïve colonial mindset that led people of his era to believe that an exploitative colonizer or ex-colonizer was a benefactor. He appointed the dashing young tycoon Upali Wijewardene the Head of the GCEC (Greater Colombo Economic Commission), the first Free Trade Zone, and celebrated the latter’s successes in inviting chip companies such as Motorola in setting up shop here.
FTZs
Why did he put his best man on the job to be the boss of the GCEC, the first FTZ in Sri Lanka? For the simple reason that he thought the FTZ was economic salvation, that it was God’s gift to the Sri Lankan nation.
There is no gainsaying that the GCEC brought some glamour and some jobs and a certain illusion of movement in the economy in those heady days, when we had opened up after years of an insular system that was not rooted in reality. But JRJ’s quaint belief that the FTZ was the answer to our story of economic setback is on the whole, a sad story. It is not to say that the Free Trade Zones established by him and since then have been failures. At best, they have created many jobs, with or without workers’ rights, and that has been a good thing in a country that quickly needed employment opportunities after the stagnant Bandaranaike era.
But to place the FTZ concept at the pinnacle of economic policy and hope that these zones will deliver like some magic lantern, was hallucinatory. It goes to show why Sri Lanka could never capitalize from the early entry into the so-called liberalized-economy territory.
The rulers of the country had no clue. They genuinely thought that the robber barons would come and let us rob them instead of the other way around. The Free Trade Zones never encouraged the development of industry and production. They encouraged near slave labour, where the intruding capitalist takes all.
No visionary leadership
There are high costs of setting up such zones, but that would have been excused if the FTZs were able to bring substantial gains to the economy. But despite all the chutzpah of the dashing late Upali Wijewardene, etc., all we succeeded in doing was to tag ourselves to the neo-liberal trend of exploiting cheap labour, and then siphoning off all the profits abroad.
Did the FTZ concept or the GCEC as it was called and the other zones create wealth for the country? The answer is an emphatic no. The zones created wealth for other countries, and a host of multinational companies, or MNCs as they are called.
This writer does not grudge the presence of the zones if they are recognized for the very limited role they can have in improving the economy by providing some jobs for unemployed youth, and putting a little money in their pockets — which would in turn shore up the fortunes of the country in a very limited manner.
But that is not production, and it is not industrialization that can be put in the same class as the massive production economies that transformed countries such as Japan and South Korea, to take two examples. Even if it is conceded that we are no Japan, we could have experimented with a production economy at an early stage, when instead JRJ simply invited the robber barons, with his limited Royal College grasp of economic fundamentals.
Paradoxically, Sirimavo Bandaranaike had before him, fantasized of a production economy of sorts, but it was within a doomed socialist framework. But at least she had the Eastern bloc countries such as Yugoslavia led by the charismatic Marshal Tito, supporting us to establish paper factories, etc., that at minimum kept us self-sufficient in some ways, without having to import everything from the motorcar down to the pencil, as with the post JRJ years. Leaders such as South Korea’s Park Chung Hee would not have been caught dead celebrating Free Trade Zones as the main pivot of their economic efforts.
Their approach was to empower the ‘chaebols’ or the big companies to produce and innovate with the help of government agencies that were created to help with Research and Development (R&D), export development and the setting up of the necessary industrial infrastructure. Now, that is vision — by way of contrast to inviting the robber barons to come in, and putting your flamboyant jet-setting cousin to lead that initiative.
Even the most humble of strides we are making now, with local dairy farming or domestic saffron production or what have you, is superior to the reliance on the FTZ concept, which is an invitation to suck out all the profits using the cheap and efficient labour that we are able to provide. Imagine the gains we could make for own economy if we were able to harness our abundant human talent for Sri Lankan owned industry, as opposed to foreign enterprise?
We certainly lacked visionary leadership at an early stage and JRJ was supposed to be one of our better leaders strictly by way of comparison, but with him we got a romantic notion instead of a vision. He was in troth to the West, and to capitalism, that is all. He was not able to harness the power of capitalism for the greater good of the people, and that is what it boils down to — a lack of vision. To his credit he had some economic policy, in contrast to leaders such as Ranil Wickremesinghe who had none whatsoever, except to mouth inanities about balanced budgets etc., with disastrous consequences — but that is another story.
A lack of leadership
JRJ had an idea in contrast to Ranil Wickremesinghe’s baby-talk, but his ‘vision’ was misguided, shortsighted and deeply flawed, and in that sense was not a vision at all, but a mere fond wish that the robber barons would come in and create some kind of industrial orgy here that would magically at the end of it all, develop this nation and uplift its people. Sad.
It was as absurdly romanticized as his love affair with airlines and his grand idea of a national airline just because Singapore had an iconic national carrier. That was copycat economics at its worst. We needed a solid base for our economy before we needed a fancy airline, but in JRJ’s imagination we had already leapt before we could take the leap. The fact that he was invited to the White House by President Ronald Reagan and was considered a great chum by British PM Margaret Thatcher, etc., also went into his head probably, even though his invitation merely recognized the fact that he was an early advocate of economic liberalization. It was not an acknowledgment of anything he had achieved.
Certainly, nobody would deny that he had an enormous capacity for work and did some substantial transformations, getting the Mahaweli scheme into overdrive, etc., and building a good quality of reservoirs to boot. It was definitely better than the vacuous going-through-the-motions leadership style that Chandrika Kumaratunga and Wickremesinghe offered. Ranasinghe Premadasa had his garment factories, but these were also glorified adjuncts of the FTZ concept and not indigenous industry of the visionary type that we sorely needed. What a lack of leadership this country has been plagued with over the years.
