{"id":110686,"date":"2021-01-14T17:01:53","date_gmt":"2021-01-15T00:01:53","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=110686"},"modified":"2021-01-14T17:01:53","modified_gmt":"2021-01-15T00:01:53","slug":"economic-liberalization-policies-in-sri-lanka-boon-or-bane","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/01\/14\/economic-liberalization-policies-in-sri-lanka-boon-or-bane\/","title":{"rendered":"ECONOMIC LIBERALIZATION POLICIES IN SRI LANKA: BOON OR BANE?"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

The\nSunday Observer (10\/01\/2021) reported that the Central Bank of Sri Lanka is\ngoing to review economic liberalization policies, it is a good and overdue\ntask. Economic liberalization policies initiated by President J. R. Jayewardene\nand it would have done when Mr.J.R.Jayawardane ended the presidency, and he was\nthe right person to explain why Sri Lanka implemented economic liberalization\npolicies, and why didn\u2019t his cabinet ignore to correct indiscipline at the\noperational level? Mr.J.R.Jayawardane commenced good economic policies in the\ncountry and the tourism initiatives and related business were the best policies\nhe introduced in 1965 as the Minister of State. Tourism has become a major area\nfor foreign exchange earnings and the provision of employment. Why did the\nCentral Bank of Sri Lanka ignore to get an opinion from Mr. Jayewardene is a\nquestion to be answered by the Central Bank, and the Minister of Finance in\n1978 is alive and can get an opinion from him? \n <\/p>\n\n\n\n

Economic\nliberalization policies came to effect with the budget of 1978, this doesn\u2019t\nmean that Sri Lanka hasn\u2019t had economic liberalization policies before 1978. It\nwas a necessary evil to the economy.  Under the financial controls of the Currency\nBoard System, Sri Lanka had economic liberalization policies, and the central\nbanking that began in 1951 also allowed to work liberal economic policies until\nthe ending of the Korean War in the early 1950s, and the influence of socialism\nin economic policymaking and the shortage of foreign reserves influenced to get\naway from liberal economic policies in 1956.<\/p>\n\n\n\n

The\neconomic policies of Sir John Kotelawala attractively reflected liberal\neconomic policies, and the Six-Year Development Program introduced in 1954\nshowed how to use liberal economic policies promoting indirect import\nsubstitution and practical liberal economic policies covering regional Sri\nLanka. Many economic policymakers assumed to not read and understood the\nSix-Year Development Program, 10 Years Plan, and Five-Year plan in 1972. The\npolitical changes in 1956 forced Sri Lanka to get away from liberal economic\npolicies and consumers and producers suffered from inward-looking strategies,\nand the economic policy of 1978 directed to adopt outward-looking policies\nhoping to change the economy to generate positive benefits to the country.<\/p>\n\n\n\n

The\nSunday Observer (10\/01\/2021) reported that we will test the performance of the\nopen economic policies and its economic agents could follow a focused approach\nto becoming an industrial economy.\u201d stated the governor of the central bank. To\nbecome an industrial country, the contribution from the Industrial sector to\nGDP must be over 50% and it is not an achievable target when considering the\ncurrent contribution from the industrial sector to GDP. Sri Lanka is an\nagricultural economy, and an input-output analysis could show that the highest\ncontribution to GDP is made by agriculture. The governor may have a correct\nopinion, but the reporter of the Sunday Observer may not understand the jargon\nexpressed, and I have a question about the organization of the report, as it\nseems the nature of the writer lacking knowledge of the economy.<\/p>\n\n\n\n

What\nis the new macroeconomic policy framework? The macroeconomic policy framework\nis a broader area and international economists in the past explained that it is\nlike a jungle which comprises many varieties of plant. After the Cold war, the\nworld bank advised making policy correction and microeconomic reforms were\nneeded to successfully work macroeconomic variables.  The best example was after the cold war\ndeveloped countries did microeconomic reforms and such reforms worked well to\nimprove macroeconomic variables and the productivity enhancement and\nimprovement of competitiveness should have essential ingredients in liberal\neconomic policies. <\/p>\n\n\n\n

There\nis nothing wrong with the economic liberalization policy and the problem has\nbeen the policy implemented without disciplines. The central bank did not\nadvise the government what were the disciplines and how they should have\nimplemented them in the country. As I found as a village person, the positive\naspect of the liberal economic policy was getting the right price for products\nand services of rural areas. The opportunity to take part in economic\nactivities was received by all, and this positive aspect was ignored by many\ncritiques. The negative aspect of the liberal economic policies was the rapid\ndecline of the Sri Lanka rupee and it lost the financial gains of rural people.\nThe depreciation of currency value has been a common nature in all countries\ndespite this situation the government policy process has not addressed the\nissue to satisfy rural people. \nTherefore, people looked for foreign jobs rather than engage in\nproductivity and competitiveness improvement. The government did not educate\nthe public on the role of liberal economic policies and how it should be\nprotected and how it should use to take part to achieve economic objectives of\nthem. <\/p>\n\n\n\n

In\nthe liberal economic system, the central bank is the regulatory authority in\nthe financial system which comprises the trading bank market, non-bank\nfinancial intermediaries, stock market, merchant banks, superannuation market,\nand many other markets providing clear policy guidance to protect the market\nand eliminate crooks from markets.  The\nmarket of non-bank finance intermediaries has been entirely swollen by crooks,\nand the central bank has not worked with coachmanship and acumen ship to\nprevent this situation.  In Sri Lanka\nregulator (Central Bank) works as a market operator and this is wrong. For\nexample, the superannuation market comprises EPF, pension funds that are\nmanaged by banks and other institutions. If the government takes policy action\nto combine all super institutions to establish a mega super organization it\ncould provide employment opportunities to over 10000 unemployed graduates and\npractical finance education could broaden in the country. Many people in the\nrural area are illiterate in practical finance and they have caught crooks and\nlost hard earn money. The central bank handles this situation, and the bank has\nnot developed policies to protect the financial system.<\/p>\n\n\n\n

In\ndeveloped countries, the management of superannuation organizations is not a\nrole of the central bank, and many independent companies play the role.  If Sri Lanka can manage the central bank as\nthe regulatory authority in the finance system, it would help to strengthen the\neconomic performance of the country.  Why\nit is impossible to manage a superannuation organization that integrated all\nsuper funds in one organization is a question, and my feeling is policymakers\nare either lack knowledge or they are playing politics with funds. As the regulatory\nauthority, the central bank can supervise and regulate such an independent\norganization.<\/p>\n\n\n\n

The\nprivatization of public assets is supported by liberal economic policies, and\nmany people in the country have no clear understanding of the policy. The privatization\nof public assets aims for various purposes and in Sri Lanka it should be\nfocused on attracting private capital, sharing the economic burden, reducing\ngovernment spending and retiring public debt, etc. The central bank should\neducate people about privatization. <\/p>\n\n\n\n

Economic\nliberalization should use as a boon to the country, and it is not the bane. The\nproblem in Sri Lanka is people were not educated about the policy, therefore, a\nmisconception is traveling around.            <\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS The Sunday Observer (10\/01\/2021) reported that the Central Bank of Sri Lanka is going to review economic liberalization policies, it is a good and overdue task. Economic liberalization policies initiated by President J. R. Jayewardene and it would have done when Mr.J.R.Jayawardane ended the presidency, and he was the right person to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-110686","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/110686","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=110686"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/110686\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=110686"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=110686"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=110686"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}