Big picture of telecom reforms

Posted on November 7, 2004 / 7 Comments

Yesterday, I spoke to a large and restive crowd (made so by lack of air conditioning and a delayed start) in Matara (main city in the South of Sri Lanka) at the launch of the Pathfinder Foundation’s first book, a Sinhala translation of Janos Kornai’s Toward a free economy. I was asked to talk about globalization and the relevance of Kornai’s ideas for facing the challenges posed by globalization. In this talk that I pieced together thanks to time zone differences that caused me to wake up at 3 in the morning while in the US, I illustrated the issues referring to Business Process Outsourcing (BPO), a broad area of service exports for which efficient, flexible and low-cost telecom is a pre-condition.

I think the talk provides the "big picture" of the necessity of telecom reforms of the type that we at LIRNEasia are involved in. If we are to go beyond simply giving people phones, to giving them "money in the pocket and hope in the heart" this big picture is essential.

_note_: For those reluctant to read Word Documents online (ie me) I’ve added the talk as HTML on the following page.

7 Comments

Divakar
November 7, 2004, 11:47 pm
Rohan,

in the concluding paragraphs of your talk you seem to imply that farmers in Sri Lanka should get out of farming because there is no future in farming and also because SL’s comparative advantage lies elsewhere. This may make economic sense but is politically suicidal. If a political party in SL incorporated this advice in their manifesto I doubt they would get elected. When you shut the subsidy tap you will have more farmers drinking insecticide! To move from an agrarian mode of production to an information economy will take a generation or more. I think the challenge is to lay down a credible plan that shows how the transition can take place. Shutting subsidy tap is wishful thinking. May be one can redesign the subsidies so that they are better targetted–giving subsidy directly to the farmer to buy fertiliser rather than giving it to the fertiliser firm to produce more.

Forget Sri Lanka, India and our part of the world (where a significant proportion of our manpower is involved in agriculture), look at the USA and the EU and the billions of dollars of price distorting subsidies that are pumped into their agricultural sector. Is it politically feasible for countries in that region of world to shut the subsidy tap?
rohan
November 8, 2004, 3:29 am
Thank you for that insightful comment. But I want to emphasize that I was not suggesting that the subsidy tap be turned off. I was making reference to one of what I described as Kornai’s most radical suggestions and I was showing how radical it would be in our context. I also made clear that the S Indian prices are also distorted. I was a member of the Study Group on the India Sri Lanka Comprehensive Economic Partnership Agreement (FTA II) where I did my best to preserve the protections for the Sri Lankan agricultural sector, so even in action, I have been less radical than Kornai. The key point I was making, which you have picked up on, is the need to apply our minds to managing the long transition to non-distorted prices, rather than keep piling on the subsidies. Milinda Moragoda was very clear in his response during the question period: agriculture, especially paddy cultivation, which is central to our culture has to be preserved.
Luxman Siriwardena
November 10, 2004, 1:04 am
Rohan’s comments on farming: I think the principle involved is simple comparative advatage and benifits from the international trade. To make the debate and policy actions more complicated let us add the dynamic nature of the comparative advantage. One can argue that our farmers are not competitive because rest of the economy is not deregulated, liberalised and high level of state intervention. Some told me that per Sri Lanka farmer there are a 4 dozens of govt offcials to HELP him. In efficiencies in all other sectors arising out of Govt interventions as well as protection driven urban private sector too contribute to high cost of farming.
It is easy to blame farmers and tell how to reform them instead of addressing the broader issues first.
IN SRI LANKA EVERYBODY WANTS REFORM AND LIBERALISE EVERY THING OTHER THAN THEIR OWN AREAS.
Chanuka
November 10, 2004, 8:30 pm
I am not a politician (Heaven forbid!) and thus unlike Mr. Milinda Moragoda, I do not have to make meaningless statements like Agriculture, especially paddy cultivation, which is central to our culture has to be preserved. (I do not think even Mr. Moragoda meant what he said, but as we all know, unlike us, politicians have to say things to make others happy, whether they mean it or not.)

I do not care for this so-called culture which is signified by two distinct factors, poverty and backwardness. I also do not mind eating rice imported from Vietnam, as long as they are within the same price ranges. We in Sri Lanka often hear paddy cultivation being linked with our ancient culture and patriotism and I am not someone ready to swallow that pill! As Rohan correctly points out, living in a globalised society is not anymore an option. I prefer an imported Toyota to a locally manufactured Mico. Similarly I might prefer rice imported from Vietnam to rice cultivated here. I do not think I can be branded unpatriotic because of that.

I strongly believe, if agriculture in Sri Lanka (or South Asia for that matter) is to be preserved it should be only if that is economically sound. We just cannot afford to preserve agriculture (by offering so many subsidies) just because it is central to our culture. Lets leave the responsibility of preserving culture to the Cultural ministry. The job of the Ministries of Agriculture and Finance is NOT to preserve paddy cultivation for its cultural value per se, but to make agriculture more advanced and economically viable. Both Singapore and Hong Kong do not cultivate paddy and they are doing so much better than we do.

In Sri Lanka, we have more than one third of our work force directly involved in agriculture. (not considering the ones in the plantation sector) We can hardly export any agricultural good they produce, so this is only for the extremely LIMTED local market. Therefore, our farmers always remain poor. We do not need one third of our work force to produce our daily meal. With the contemporary technological advances and proper planning, only one twentieth of our work force can easily do that (and get better paid for their effort!). What is required is to find more constructive jobs for the rest (One third minus one twentieth) in the industry and services sectors. As Rohan emphasizes, that is exactly why we should focus more and more on solutions such as BPO.
rohan
November 10, 2004, 11:23 pm
Chanuka,

Thank you for the comments. But, is this the best place for a debate on agricultural pricing? I know you have given this issue serious thought and have actually written (perhaps not published) in this area. If there is a good location, I’m happy to participate in a debate from the side of the services economy; I am not an expert on agricultural economy; all I was talking about was the way it looks from the services side. It seems to me that this issue should be debated by those with direct expertise in agriculture.
Chanuka
November 10, 2004, 11:45 pm
Well, extremely sorry if my previous comment looks irrelevant here. Anyway, I was not exactly talking about agriculture pricing. All I wanted to say was agriculture sector is already overloaded, and what we need is a mechanism to employ the excess population in more constructive areas in the services sector like BPO. I think this is the same you wanted to say in different words in your speech.
indi
November 10, 2004, 11:47 pm
I think it lets me put images in here, this is an image from a World Bank document on post-industrialization (PDF).