Engage or stagnate (or perish): A final call to the private sector

Thursday, 25 August 2016 00:00 -     - {{hitsCtrl.values.hits}}

By Hourglass

Every literate citizen in the country should be aware by now that the Government has made it a policy priority to accelerate the liberalisation of the economy. Though cynics claim otherwise, the policy is presumably not based on a reckless attitude of “liberalisation for the mere sake of it” but instead, as a genuine attempt at restructuring the badly faltering economy. 

Successive governments have wished to peg the country’s growth prospects to its location - as a gateway to the sub-continent. However, experience has shown that location by itself means nothing. If the “hub” or “gateway” is to be made a reality, the country needs, among other tasks, to gain entry into regional markets by the elimination of tariff and non-tariff barriers and attract large investments, foreign and otherwise, to create enterprises that can compete globally. 

One strategy being adopted in pursuing these goals is through free trade agreements with countries considered to be potential markets or sources of investment. Gaining preferential access to large markets will not only open new opportunities for local entrepreneurs but also entice large investors to locate in Sri Lanka, provided of course, that a sound investment climate is simultaneously created. Increased access to markets not only means deepening access in areas in which our exporters have already made progress, but also expanding markets and facilitating product diversification. 

This is vital since realisation has now dawned that our traditional markets and product portfolio cannot sustain economic growth in the long term. Therefore, from the Governments perspective, liberalisation is not meant to benefit our trading partners, but instead, to create more opportunities and benefits for local stakeholders, whether they be entrepreneurs, service providers or consumers. 

Trade agreements are essentially grounded on the principle of reciprocity and liberalisation does not require governments to blindly remove all tariffs. It is a process of “trade-offs” – with each party being entitled to demand reciprocal benefits corresponding to the liberalisation or concessions they offer their partners. It is not unusual for even developed countries to seek to protect nascent or sensitive industries, usually to provide them with temporary breathing space to adapt to greater competition. 

Governments are also entitled to prescribe restrictions and qualifications in granting access to markets in services, not only in terms of sectors but also with respect to modes of delivery. Additionally, developing countries, and even countries that can be considered as having asymmetrical economies vis-à-vis their partners can legitimately seek differential treatment in agreeing to concessions. 

However, a government’s ability to incorporate legitimate interests in its trade policy and successfully negotiate benefits for their constituencies primarily depends on the level of engagement and participation by domestic stakeholders. This requires an open and sincere commitment to explore mutual interests. 

The private sector and other service providers therefore need to objectively and cogently express their concerns on how liberalisation of sectors of interest could affect their business and what measures are required to protect their legitimate interests. Perhaps even more importantly, they should assess their offensive interests in the form of strengths, potential or otherwise, to compete in the markets of trading partners with whom agreements are being entered into, and lobby the government to seek liberalisation in overseas markets.

Regrettably, the level of such interaction between the Government and stakeholders has not been very satisfactory. The fault undeniably lies with both, the Government, being unsure of how it should facilitate the consultative process, and the stakeholders, equally unsure of themselves, but also, in many cases, colored by political or personal agendas, cynicism and indifference. However, from the stakeholder’s perspective, hiding behind the “blame game” would be counter-productive, causing it to lose out on an opportunity to create a more open business environment, explore access to new markets and move out of the protective shell it has operated in for decades. 

Trade agreements are a source of disagreement and emotional outbursts the world over. They often result in short term disruption to which stakeholders need to adapt, in the pursuit of the greater public good. And disruption is inevitable, with or without trade agreements, in a changing global economy where geographic borders inexorably keep losing their relevance, especially in the services sector. Moreover, this struggle for relevance, or perhaps even survival, will increasingly be played out in cyberspace which will be beyond national regulation. This is a harsh reality that has to be acknowledged and faced by all stakeholders. In this context, trade agreements provide an opportunity to begin the process of adaptation within a more orderly set of rules. It is time that all stakeholders accepted this fact and decide to constructively engage with the Government. Engage, stagnate or (even perish) – the choice is clear.