Sept 17, Colombo: Democracy, Reconciliation, and Rule of Law are essential for the sustainable economic development of Sri Lanka, country's Finance Minister Mangala Samaraweera said delivering a speech at a premier economic event in Colombo today.
Addressing the Sri Lanka Economic Summit (SLES) organized by the Ceylon Chamber of Commerce under the theme "Recalibration of Sri Lanka's Economic Trajectory", Minister Samaraweera said to recalibrate the future it is essential that to learn from the mistakes of the past.
The Minister recalling the 1983 ethnic riots which compelled Motorola to suspend plans for a manufacturing plant in Katunayake Free Trade Zone, said Reconciliation is an absolute necessity for economic development.
"There is no way of harnessing our potential as a modern, stable, prosperous nation, except to celebrate the diversity of our country as a multi-ethnic, multi-religious and multi-lingual nation."
The Minister emphasized that there can never be sustainable economic development without democracy and the rule of law.
Samaraweera said the previous regime's "naked power-grab" disregarding the rule of law was a key reason for the failure of the promised post-war investment boom to materialize as foreign and domestic businesses decided that their factories and investments would be safer in other countries such as Ethiopia, Bangladesh or Vietnam.
Speaking of economic policies, the Minister pointed out that Sri Lanka prospered when it was opened to the world. Sri Lanka's economic openness, which had increased in the 1980s and1990s, took a turn for the worse after 2005 and the previous regime's isolationist and confrontational foreign policy did not help the economic development.
"By 2015, the country had lost its economic sovereignty. We were at the mercy of international financial markets," he added.
"Globalization means that we are inter-dependent and inter-linked. Confrontation, isolation and dependence on a single country will not bring sustainable economic development, peace or prosperity to our people our foreign policy must be based on openness and confident engagement," Minister Samaraweera emphasized.
He said the current government inherited an economy that was on the verge of collapse and stabilized it. Although there were some successes in the last four years, because of the vagaries of cohabitation and a focus on political rather than economic reform, the plans have not been fully implemented.
But the successes such as the new Inland Revenue Act, regaining EU's GSP+ concession and the lifting of the ban on fish exports, new management of Hambanthota Port and the Port City development are substantial, the Minister said. "Their fruits will hold Sri Lanka in good stead for many years to come," he added.
He noted that this year, Sri Lanka laid the foundation stone for its first Free Trade Zone in 17 years. In the last year, "Ease of Doing Business" rankings improved 11 places.
"Most importantly, we have moved away from a corrupt, discretionary economic system towards a transparent, rules-based level playing field," Samaraweera noted.
He said the government is in the process of expanding good governance to the economy focusing on critical bottlenecks to growth; namely macroeconomic stability, State Owned Enterprises (SOEs) and tariffs. He said the SOE management has become political rather than professional, resulting in waste and corruption.
According to the Finance Minister, two urgent reforms are necessary. First, the state needs to cease to have operational control over SOEs operating in competitive markets. It can list SOEs operating in competitive markets, and use the listing proceeds to settle Sri Lanka's debt or invest in funds that track the Colombo Stock Exchange.
Second, in the case of natural monopolies, like railways, the state needs to create a holding company with a de-politicized board, for example, by subjecting board appointments to Constitutional Council approval, the Minister explained.
Eliminating non-tariff barriers is needed as the export sector has been crippled by para-tariffs caused by businessmen influencing politicians, according to Minister Samaraweera. The measure will de-politicize the border tax-policy and bring huge benefits to exporters and consumers.
In conclusion, the Minister said "Prosperity requires us to move even more decisively in the direction of more democracy, more reconciliation, more rule-of- law, more depoliticization, more openness, more competition and more reform."