Reforms Sri Lanka needs to boost its economy

Many Sri Lankans understand the potential benefits of lowering trade costs and making their country more competitive in the global economy. The majority, however, fear increased competition, the unfair advantage of the private sector from abroad and limited skills and innovation to compete.

Yet, Sri Lanka’s aspirations cannot be realised in the current status quo.  

While changes in trade policies and regulations will undeniably improve the lives of most citizens, I’m mindful that some are likely to lose. However, many potential gainers of the reforms who are currently opposed to them are unaware of their benefits.

Implementing smart reforms means that government funds will be used more effectively for the people, improve access to better healthcare, education, basic infrastructure and provide Sri Lankans with opportunities to get more and better jobs. Let me focus on a few reforms that I believe are critical for the country.  First, Sri Lanka needs to seek growth opportunities and foreign investment beyond its borders.    

First, Sri Lanka needs to seek growth opportunities and foreign investment beyond its borders.Experience shows that no country in the world today has been able to create opportunities for its population entirely within its own geographic boundaries. To succeed in this open environment, Sri Lanka will need to improve its skills base, better understand supply and demand chains as well as produce higher quality goods and services

Experience shows that no country in the world today has been able to create opportunities for its population entirely within its own geographic boundaries. To succeed in this open environment, Sri Lanka will need to improve its skills base, better understand supply and demand chains as well as produce higher quality goods and services.

Sri Lanka attracts less foreign investment than other comparable economies - and only a small proportion of these investments generate diversified exports or jobs. Enhancing the Board of Investment’s capacity to attract and retain foreign investment, creating a one-stop shop that streamlines all foreign investment-related approvals in Sri Lanka, will be key to attracting more businesses. Second, Sri Lanka needs to improve its trade regime.  

Trade as a proportion of GDP has decreased from 88% in 2000 to 50% in 2016, while the composition of exports has remained stable with a high concentration on garments and raw materials. 

The country needs a solid trade policy – a reason why the Government recently approved the National Trade Policy - to provide guidance on how to create the capacity for Sri Lanka to attract foreign investment, access international markets, adopt new technologies, build capacity and enhance trade within and outside the region. 

A significant part of this effort will also include improving trade competitiveness by reducing the time and cost required to fulfill regulatory processes to import and export. For this purpose, two key initiatives are the development of a trade information portal and an electronic single window for trade that will bring all aspects of trade onto one easily accessible platform for stakeholders.

 It is noteworthy that the trade-related efforts led by Sri Lanka Customs are conducted in consultation with both the Government and the private sector. In fact, many of the Government’s trade and investment-related reforms are being developed in consultation with key stakeholders from the public and private sectors. 

The Investment Climate Reforms, launched by the Prime Minister in July 2017, are a great example; the eightfold action plan was developed following in-depth key stakeholder consultations to understand the obstacles business owners and investors face in Sri Lanka. 

This engaging and transparent approach is key to the success of the reforms and will contribute to raising Sri Lanka’s Ease of Doing Business ranking from 110 in 2017 to 70 by 2020. Ease of doing business means more and better jobs, higher quality goods and services at lower prices. 

I have skimmed through some of the critical reforms but I haven’t touched on how positive outcomes can be achieved.  

Follow-up articles over the next few weeks will offer some insights on how reforms have helped other countries and how Sri Lanka can take advantage of a more competitive economy to create opportunities for its people. So please engage and stay tuned!

(The writer is the World Bank’s Country Director for Sri Lanka and the Maldives. You can engage with her on Twitter through @Idah_WB. For more information on the World Bank’s programs in Sri Lanka visit www.worldbank.lk or www.facebook.com/WorldBankSriLanka).