WB advocates more liberal trade and labour policies to boost competitiveness

By Chandeepa Wettasinghe
The World Bank yesterday called on the Sri Lankan government to implement more liberal trade, investment and labour policies to become a competitive global economy, during the launch of its latest report on South Asia’s competitiveness.

“Generally speaking, and in Sri Lanka, there are particular examples of low starting points in competitiveness,” World Bank Innovation and Entrepreneurship Lead Economist Denis Medvedev said.
He noted that most of the constraints are in the areas of low productivity, investment climate and trade facilitation.
World Bank South Asia Lead Economist Vincent Palmade said that even though Sri Lanka has impressive cases to be made in the areas of competitiveness in tea and apparel, there are restrictive market regulations and subsidies being offered, especially in the agriculture area.
“These policies are from a period when there were food security issues, encouraging farmers to produce the same crops as back then in the same labour intensive way,” he said.
Palmade further added that Sri Lanka has to reduce import taxes greatly and remove export tariffs completely to boost exports, especially during an era of international economic integration through global value chains.

“You can’t be in the game unless you can import or export hundreds of components freely,” he said. The World Bank earlier this year, at the launch of a separate report, told Prime Minister Ranil Wickremesinghe that Sri Lanka is one of the most protected countries in the World.
Development Strategies and International Trade Minister Malik Samarawickrama, a close confidante of the premier, at yesterday’s event said that the government is aware of the issues presented in the report and that it is taking steps to address them.

National Chamber of Exporters Chairman Sarada de Silva speaking at the event said that he is against the implementation of protectionist policies over lengthy periods of time.

Many industries in Sri Lanka enjoy protection, including tea, ceramics, food and agricultural products. The government also charges cess on key foreign exchange earners, including tourism, tea, rubber, etc.
Though the initial legislation called for the cess to be returned to the industry for promotional purposes, these funds have now been taken over by the Treasury.
“Anyway cesses don’t come back to the industries,” De Silva said.
While Verite Research (Pvt.) Ltd Economic Research Head Subhashini Abeysinghe noted that reducing protectionist tariffs would foster greater competition, Institute of Policy Studies Executive Director Dr. Saman Kelegama noted that due to sensitive matters, the government couldn’t cut certain subsidies.

Ceylon Tea Services PLC Director Dilhan Fernando said that instead of the current model of blanket benefits, the government could provide support for those who deserve it, such as high value-added exporters.
Medvedev noted that not enacting reforms soon would only benefit traditional businesses at the cost of entrepreneurs who can make a difference at the world stage with new types of products and services.
“Over the past 25 years, older firms in Sri Lanka have only doubled in size compared to companies that started five years ago, showing that they haven’t grown much and are keeping resources away from more efficient companies,” he said.

With the 2017 budget around the corner, traditional businesses are lobbying the government heavily to maintain their ways of doing business, since they are coming under the threat of disruptive business models created by millennials.
While the previous budget had called for the support of and directed government agencies to help create such disruptive start-ups, it was recently revealed that these efforts have not developed into a tangible programme over the past year.