Rise and fall of rankings

Friday, 7 September 2012 00:01 - - {{hitsCtrl.values.hits}}

SRI Lanka’s slide of 16 places in the Global Competitiveness Index will not come as a surprise to many, though it will act as a guide to pointing out the challenges still facing the economy. Last year when 10 places were gained, everyone was jubilant, with the Government and private sector voicing hopes that the island could hit the top 30 by 2015.

Even though media reports a year ago indicated that a special committee would be appointed to meet this lofty target, there will be few mentions of the latest statistics. A comparison between the previous report and the 2012 edition shows a significant number of similarities. The differences are mostly dominated by a more positive global outlook in 2011 and more buoyant spirits at home with the end-of-war-sprit shining hope.

Last year the compilers said Sri Lanka’s economy was characterised by poor governance, ongoing political instability that undermines credible reform progress, and heavy reliance on foreign assistance. Overall, weak reform efforts have failed to stimulate broad-based economic growth. The heavy presence of the State in the economy continues to hamper private-sector development.

They also said challenges to economic freedom in Sri Lanka are considerable. The average applied tariff rate has dropped significantly, but the persistence of non-tariff barriers still adds to the costs of trade. A lack of transparency and a burdensome approval process continue to impede the much-needed growth in private investment. Property rights are undermined by an inefficient judicial system, which is also subject to substantial corruption and political influence.

In 2012 under macroeconomic environment issues factored in are government budget balance, gross national savings, inflation, interest rate spread, government debt and country credit rating. Under labour market efficiency factors considered are cooperation in labour-employee relations, flexibility of wage determination, rigidity of employment index, hiring and firing practices, redundancy costs, pay and productivity, reliance on professional management, brain drain and women in labour force.

The deterioration of the macroeconomic environment pushed Sri Lanka from 116 to 127, with labour issues pushing the country from 117 to 129. These big slides show that much of what was highlighted in 2011 failed to be addressed by policymakers and subsequent economic challenges, locally and globally, pushed it down the ladder.

It is time to face the fact that the post-war euphoria has evaporated and that Sri Lanka has to look at sustained policies based on rule of law, good governance and transparency devoid of nepotism. As other developing countries become more competitive in a tough environment, Sri Lanka also has to look beyond loan-based development.

The challenges are many and varied, yet there is urgent need to address these issues before the 2013 index puts reality before everyone. Ironically even infrastructure, on which the Government is spending billions, is a pillar on which Sri Lanka has slipped two rankings. This alone should take some study.

The Government task force needs to be revived and a step-by-step analysis of what needs to be done in terms of priority must be outlined. At present Sri Lanka is struggling to recapture its 2011 glow, much less reach the heights envisioned among the top 30.