The Asia Pacific region has produced several success stories for economic transformation and those are worth reading to analyse and apply insights for Sri Lanka’s transformation.
(A)Success stories from the Asia Pacific for economic transformation:
(1)Singapore – Singapore is a city-State with an area of just 734 km and has become the financial hub in Southeast Asia. Between 1965 and 2023, its economic transformation increased the GDP per capita of 428 USD in 1960 to 11,861 USD in 1990 and 84,734 USD in 2023. (https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=SG). Three principles backed Singapore’s vision for development. Namely, English for all, attracting world-class talent and compensating public servants generously.
Some of the critical steps taken by Singapore for Transformation:(1) Setting up of the Asian Dollar Market (ADM) in 1968 using the time gap between the opening and closing of American markets and European markets. (2) Directing the Finance industry as a growth industry. (3) Initial intervention of the State in creating institutions for financial sector institutional growth and development (4) Creating Financial Sector Development Fund and Financial Sector Talent Development scheme (5) Merger of smaller local banks (6) Since 1980-focus on Asset Management as a key growth sector. (7) long-standing policy of not encouraging the internationalisation of the SGD until relaxation in 2020. (8) A strong emphasis on education, ensured a steady talent supply for sectors like finance, technology, and management. (09)A liberal immigration policy to recruit international talent easily. (10) Digitalisation and Connectivity of the public sector (11) Innovation and thriving Fintech Sector, Commitment to Sustainability, Environmental, Social, and Governance. (12) Building a world-class Changi airport and world-class Singapore Airlines. (13) Maintaining Zero tolerance for corruption.
(2) China: Over the past forty years, China has transformed from a predominately Agri-based economy to the world’s largest factory and exporter. China’s exports of 19.41 billion USD in 1980 was increased to 1,5 trillion USD in 2010 and 4,454 products were exported to 212 countries and currently account for 28% of global manufacturing output, more than 10 percentage points ahead of the United States. (wits.worldbank.org).
Some of the critical steps taken by China for transformation:
Stage (1) from the late 1970s to the middle of 1980s: (1) Lifting Price control in the Agri sector, distributing lands to peasants, and allowing them to sell part of crops to the government. (2) Invite foreign investments under the open-door policy and grant permission for private entrepreneurship. (3) after enacting a law on Chinese Foreign Equity Joint Ventures technology and capital were attracted from advanced countries. (4) Allowing State-owned industries to sell excess production at market prices to avoid product shortages. (5) China’s first experimental Special Economic Zone (SEZ) in Shenzhen (Silicon Valley of China ) was set up at a remarkable speed and it became an instant success. This phenomenon was dramatised and applied under the famous slogan “Time is Money, Efficiency is Life” in other parts of China ”. (6) Individuals or groups were allowed to manage state-owned enterprises by contract.
Stage (2) from late 1980s to late 1990s.(1) Lifting of price regulations and keeping state ownership in the sectors of petroleum and banking (2)By 1990 two stock exchanges were in operation in Shanghai and Shenzhen. (3) In 1993, China adopted the landmark Corporation Law confining the state’s role as an investor and controller of stock and assets in state-owned enterprises. Thereafter all state enterprises, except a few large monopolies, were liquidated and their assets sold to private investors. (4) In 2001 China formally accepted the market economy and Joined WTO. (5)China no more depends on cheap labor as its competitive advantage but its unique Industry supply chain, (all parts within 100 km), Industrial Technology, constant innovation, and ability to offer low-quality to high-quality products became competitive advantages. The bottom-up approach of the reforms and experimental models to correct mistakes and then apply the concepts nationally were the key success factors in the Chinese transformation.
(3) Viet Nam: Exactly a year after the reunification (1975) Vietnam was considered as one of the world’s poorest countries with a GDP per capita of 94 US $. The transformation to a manufacturing powerhouse between 2002 and 2022 helped the country’s GDP per capita increase by 3.6 times to USD 4179. (World Bank) Its exports are worth approximately 90 percent of its GDP. In 2023 Viet Nam exported USD355Bn which corresponds to 20.1% of the total exports of ASEAN, Viet Nam is strategically located within the Asia Pacific region, allowing investors to exploit advantages within supply chains in China, ASEAN, and India and access to export markets.
Some of the critical steps taken by VietNam for Transformation:
Stage (1)1986-1999: ‘Doi Moi’ reforms; Developing small-scale producers, expanding agricultural production areas, increasing crops, and utilizing low-cost labor and agrochemicals were prominent during this period. A Monoculture-based agricultural system was developed by encouraging the adoption of newly developed rice varieties and investing heavily in irrigation systems. In 1986 the country created its first Law on Foreign Investment to reduce administrative bureaucracy and better facilitate investments.
Stage (2) 2000-2009: Self-sufficiency in the export-oriented economy: Viet Nam shifted toward an export-oriented economy, focusing on agricultural products, textiles, and raw materials. The signing of the Vietnam- US Bilateral Trade Agreement in the year 2000 and joining the World Trade Organization in 2007 not only ushered a new era in VietNam’s international trade but also helped promote trade reforms, market diversification, strengthening the trade policy, economic partnerships, etc.
Stage (3)2010-present (Accelerating growth): Implementation of Trade reforms, focusing education and skills development through public investments, creating a capable workforce for advanced industries, improving the business climate by reducing bureaucracy and taxes, investing in infrastructure, particularly power and transport, leveraging a low-cost labour force while moving up the value chain ensured sustainable development. Viet Nam also made large public investments in primary education. (https://vietnam.opendevelopmentmekong.net/topics/economy-and-commerce/World Bank reports state that Vietnam made progress on everything from enforcing contracts, increasing access to credit and electricity, paying taxes, and trading across borders. Viet Nam has been successful in upgrading its export basket into high-valued items such as electronics, computers, mobile phones, machinery, vehicles, spare parts, iron, and steel, etc.https://oec.world/en/profile/international_organization/association-of-southeast-asian-nations).
(B) Commonalities of success stories
(a)According to my opinion these countries became globally competitive in a chosen sector by adopting a single-Minded Business Proposition-(SMBP)-(A unique Business Dream)
Even though each country was exceptional in terms of political ideology, governance model, geography, culture, demography, natural resources, spiritual leadership, time taken for transformation, etc., one notable feature of these success stories is the transformation was driven by a consistent single-minded business proposition (SMBP)for decades. E.g. Singapore – to be the financial hub in the East Asian region. Japan -To be the Leader in value-added and high-valued exports, China- To be the world factory, and Viet Nam- to be the next manufacturing powerhouse in Esat Asia”. Dubai – To be the regional hub for logistics and Trade. Finally, It’s the Single-Minded Business Proposition-SMBP supported by a supportive business ecosystem that made these nations globally more competitive than their competitors in the chosen sectors. These countries while pursuing their SMBP have moderately developed other sectors of the economy as well.
(b)Building a business ecosystem: No success story was ever built in a vacuum and it was always backed by strong political leadership, clearly defined and supportive foreign policy, consistent, predictable, and transparent policies, investments in tradable stocks, open trade, and investment regimes, informed decisions based on data, sustainable infrastructure development plans, modernisation of the public sector, zero or less tolerance for corruption, public confidence in government institutions, discipline at the highest level of the government, accountability of the state, focus on skill development, research, and innovations, the contribution of intellectuals etc.
(c) Managing poverty reduction and Expansion of Middle-income earners: Countries with success stories managed to reduce poverty substantially or eradicate extreme poverty. Every success story had a mechanism to develop small entrepreneurs to contribute to national income and uplift low-income earners to the middle and upper-middle class. Throughout the 1970s and 1980s, Japan was described as a “100 million middle-class society,” and its strong buying patterns supported economic growth. As of 2023, the purchasing power of 600 million middle-income earners in China, the middle class consisting of 70% of Singapore, and 50 % of Viet Nam substantially increased the demand for housing, vehicles, new clothes, electrical and electronic items, and use of services such as health, Insurance, out-of-home entertainment, air travel, and savings etc. Further, the expansion of the middle class has implications for social structure and global relations.
(d) Authoritarian rule – One downside of these success stories is the restrictions imposed by respective governments in terms of democratic rights. However, it should be noted that the definition of democracy may be different from society to society. When the West defines democracy as the people’s right to elect representatives by people’s vote some East Asian economies define democracy as the inclusive participation of people through party elections. “Westerners value the freedoms and liberties of the individual. As an Asian of a Chinese cultural background, my values are for a government that is honest, effective, and efficient “Lee Kuan Yew)
(C) Sri Lanka’s case: Is Sri Lanka on the right path? Since independence, all successive governments have considered burning issues such as Housing, Health, Education, Transport, Nutrition, Energy, Unemployment, poverty, etc as the major problems to solve. However, this approach has failed to solve any of these problems to date, and it only ended up seeking assistance from the IMF a record 17 times.
(a)Identification of the real problem
From my point of view, none of the abovementioned issues are real problems. Those are only symptoms of a bigger unsolved problem Sri Lanka inherited from independence. Sri Lanka’s real problem is how to be competitive globally as a nation or how to offer more value for money than its competitors. For that, Sri Lanka must find an answer! A satisfactory answer would bring about the much-talked-about economic transformation while eradicating symptoms.
At the recently concluded elections, the people of Sri Lanka endorsed the economic transformation policies of the National Peoples Power (NPP). Its manifesto focuses on so many initiatives such as making a corruption-free country, a Data-driven economy, making Sri Lanka an industrialized nation, making Sri Lanka a trade and logistic hub, achieving High productivity and Food Security, and entrepreneurship development, making Sri Lanka an attractive tourist destination, converting Sri Lanka’s energy source to renewable energy, etc. (from page no 98 to 187). These initiatives are great and bound to increase sectoral contribution to GDP and improve the quality of life of Sri Lankans to some extent. However, the manifesto lacks a business dream/Single-Minded Business Proposition which is an essential factor for an economic transformation and solving Sri Lanka’s long-standing question of how to be globally competitive than competitors! Critically evaluating Sri Lanka needs a paradigm shift in its approach and Asia Pacific success stories give a clear direction in this regard.
(D)What could be the most realistic business dream / SMBP for Sri Lanka?
Sri Lankan tourism is the third largest foreign exchange earner and its direct contribution to GDP is around 2.5%. Unlike other economic transformative ideas widely discussed in Sri Lanka, this sector has a lot of prospects and strengths to make Sri Lanka a globally competitive nation if supported by a single-minded business proposition
(a) Advantages of tourism
(1) Sri Lanka’s image and favorable ranking as a tourist destination for scenic beauty (2) the friendly attitude of Sri Lankans towards foreigners, (3) Political stability (4) state initiative for digitalisation (5) air, and naval connectivity with the world. (6) Highly motorable road network. (7) Globally, one of the fastest-growing industries. (8) less influence of geo-political factors.
(b) Single-minded business proposition
Firstly, to develop the country to be the tourist destination with the most number of repeat visits in South Asia. Secondly, to be the most attractive destination for high-end tourists in the region converting the tourism industry into the mainstay of the economy. The process needs to identify factors, directly and indirectly, affecting this transformation while bridging the resource gaps such as investments, infrastructure development, knowledge, supportive systems, competencies, skilled manpower, expertise, management, research, and planning. Providing incentives to the industry and learning best practices from other countries will help Sri Lanka immensely.
(e) Finally, A point to mention is countries such as Japan, China, Malaysia, Vietnam while maintaining the competitive advantage achieved in the manufacturing sector concurrently developed the service sector which has the potential to contribute to GDP significantly. Conversely, Sri Lanka while realising the dream of becoming a globally competitive nation through tourism can continue to drive merchandised export growth by increasing the export contribution of SMEs and gradually introducing high-valued exports to Sri Lanka’s export basket.
“Transformation begins when you embrace your uniqueness”. A quote.
Author: Ajith D Perera is the Chair and Executive Secretary of the Asia Pacific Trade Agreement Chamber of Commerce and Industry (APTA CCI) and the former Secretary General and CEO of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) from 2014 to 2022.
Reference Link:- https://ceylontoday.lk/2025/02/22/sri-lankas-economic-transformation-lessons-from-the-asia-pacific/