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Sri Lanka most open economy in South Asia in two years: PM
View(s):Sri Lanka is set to accelerate its economic development drive by sprucing up the domestic market, to become the most open economy in South Asia in the next two years. Prime Minister Ranil Wickremesinghe said on Friday that focus must also be on the short term with the aim of liberalising the economy and ensure competitiveness of the industries, in the next two years, to get things moving.
He made these observations in delivering the inaugural address of the Sri Lanka Economic Association (SLEA) Annual Sessions 2017 at the Centre for Banking Studies, Rajagiriya. “In a bid to create more jobs and increase income levels, more attention will be focused on promoting existing industries and making the domestic market competitive,” the Prime Minister said.
“But faced with the highest debt-ridden economy in the South Asian region, the Govt is not in the best position, as the economy kept sinking due to expansion of non-tradable activity and a drop in exports over the last decade,” he explained. Mr. Wickremesinghe believes, “National govts are not the easiest forms of govt, but it gives stability that the system will follow with no U-turn.” “Debt repayments were sucking up all resources of the Govt,” he complained.
Moreover, he pointed out that the Govt is currently tackling the problem of bureaucratic delays, but did not elaborate. Cutting red tape within the establishment has been a crucial factor in forging ahead with development projects. The Premier noted that, while the country would have to put up with some of the large State-owned enterprises for some more time, they should not hinder the private sector’s progress.
“We will be the most open economy in South Asia,” the Prime Minister said, noting there would be further liberalisation of imports in IT and industries.
Further, Mr Wickremesinghe said Sri Lanka’s northern port has the potential to establish itself as the best transshipment hub for India, in the future.
Overriding the competition that Sri Lanka feared it faced from the development of the Southern Indian ports and states, he noted that trade links could be established with them instead.
He also identified the potential for Trincomalee and Hambantota harbours to work in cooperation with southern Indian states, so that in 10 years, a US$ 1 trillion economy could be achieved. Opening up the economy would mean the county would have to focus on future markets opening up, like those said to come up in the next five years from South Africa to Indonesia, with another one billion people with high income levels.
Central Bank Governor Dr Indrajith Coomaraswamy also identified with the Govt’s position that the main challenge it faced was in resurrecting the collapse of Govt revenue. Some of the measures adopted to fix the economy would be, first, in tax administration and also in the strengthening of the Fiscal Responsibility Act.
“This piece of legislation is meant to ensure that any deviation from fiscal responsibility by the govt would be for only specified reasons like natural calamities,” the Governor said, adding that, it would hold well for this to be institutionalized. “A forward looking monetary policy could be achieved by adopting a flexible inflation targeting regime, by embedding this with the legal and accountability requirements.”
“Another requirement was for the Govt to allow for a flexible competitive exchange rate,” he said. He also proposed legislation to limit Govt borrowing to finance its debt payments. SLEA President Dr.U. Vidanapathirana said that Sri Lanka was unable to sustain a high growth rate in the last five-and-a-half decades, insisting that the country needed to achieve much higher GDP.
He blamed it on the inefficiency of the manufacturing and agriculture sectors that were inter-linked in being unable to deliver. Dr Vidanapathirana noted that the country was unable to attract the right FDIs crucial to developing the manufacturing sector.