Advocata calls for removal of import bans and MRPs

• Points out small businesses worst-hit by such policies 

The import ban covering 300 items, which was gazetted last week, and the ad-hoc maximum retail prices (MRPs) introduced on certain goods will add additional burden to businesses that are struggling to stay afloat, and the hit will be most painful to the micro, small, and medium enterprises dependent on imported inputs for their production process.  

Colombo-based economic think tank, Advocata Institute asserted that it is the livelihoods of street vendors, businesses dependent on selling raw materials, and the construction and apparel industries that will be worst affected as they will face severe hardship as a result of the import ban.  

Also affected is Sri Lanka’s tech industry as a result of the ban on the importation of electronic and IT equipment. “Net economic losses in the wider economy will increase as this restricts competition. These economic inefficiencies will have to be borne by consumers through higher prices, fewer jobs, and reduced economic activity. 

This will add to the country’s economic woes and lead to new black markets and corruption. This will also negatively affect exports as some important items needed to produce exports have to be imported,” said Advocata Institute in a statement to the media yesterday.
Stressing the policy is counterintuitive, the think-tank cautioned that the move will push investments away from exports to import substitutes and non-tradable goods sectors.
Moving towards an export-oriented economy is the only plausible answer to the country’s severe woes. Import restrictions and similar bans will hamper such a transformation, it said.

The institute also slammed the Consumer Affairs Authority (CAA) for imposing price controls (on eggs by colour). Experience is that such market interventions have failed numerous times over the last two years.  “... the imposition of price controls to address equity concerns instead of undertaking the hard reforms needed to create competitive markets is counterintuitive,” it said, pointing out that such decisions create distortions such as shortages, rationing, and the creation of a black market as well as substitution towards low-quality alternatives.  Advocata Institute called for the immediate reversal of both policy decisions. 

 Stating that the government has taken some steps to address the macroeconomic imbalances and highlighted a commitment to economic reforms, Advocata Institute said efforts need to continue and be supported by a consensus for economic reforms.  “Market interventions in the form of price controls and import bans will dilute the impact of economic reforms and delay macroeconomic stabilisation,” it reiterated.