The kind of ‘liberals’ we are

Originally appeared on Daily FT

In an Op-ed published in the Daily FT recently, a group called ‘Avocado Collective’ provided a critique of a lecture by Prof. Razeen Sally organised by The Advocata Institute. Whilst much of it is a critique on the lecture, it casts aspersions on the motives of Advocata. We thought this was a good time to explain what the organisation is about and why we exist.

The Advocata Institute was set up in 2016 as an independent public policy think tank focusing on economic freedom. Sri Lanka’s public debate on economic policy has been dominated by those who believe that state intervention is the answer to all our problems. Advocata has sought to present an alternative view. 

Poor policy and governance are at the root of our problems. 

Take for example State-Owned Enterprises (SOEs), a major area of research for Advocata. The 55 largest State enterprises collectively lost Rs. 87 b in 2017, almost double the Rs. 43 b allocated to Samurdhi, the largest social welfare programme in the country. The losses of SriLankan Airlines alone were Rs. 28 b. 

The Auditor General has exposed billions of rupees in procurement corruption and mismanagement in the State and State enterprises. These losses are paid by taxpayers and, taxes are paid by everyone not just the rich. 

Last year alone, the Government raised Rs. 71 b by taxing food. This is partly responsible for the high cost of living in Sri Lanka. Is funding losses the best use of our tax money?

The country has some 200+ State enterprises but no comprehensive list is readily available. Procedurally, State enterprises must be incorporated by an Act of Parliament and be held accountable to Parliament. In Sri Lanka, all manner of entities are incorporated under the Companies Act with no debate in Parliament and minimal accountability.

Audited accounts of the 55 enterprises where more data is available are chronically late. When they are published, they frequently carry audit qualifications. Some – such as LakSathosa – have not submitted accounts from 2010. Poor accountability results in fraud. For example, the Auditor General reported a fraud of Rs. 15 b in rice procurement at LakSathosa. There are many others. 

We need to ask the question whether the running of a supermarket is the proper role of the Government. Or whether there are better ways of achieving the stated policy objectives of running LakSathosa. Similar questions can be asked about many other institutions, including the State Timber Corporation, which had its last two chairmen arrested under corruption charges. 

The State is engaged in economic activities that range from the strategic to the absurd. From hotels catering to tourists to firms claiming to convert polythene into diesel. What public interest do these enterprises serve?

Posing these questions is hardly a neoliberal conspiracy. It is only reasonable to assume a state that tries to do a limited, well defined set of things has a greater chance of success than a one that tries to do everything and failing at great cost to the people

This is particularly relevant since over several decades Sri Lanka’s once-effective public service has been broken. Some have even questioned the capacity of the State to deliver the most fundamental of public goods: the rule of law and a system of justice.

Is there a conspiracy in asking for sound money and low inflation? Is not keeping the cost of living low the most important safety net for the poor?

Protectionism is another problem. Sri Lankan consumers have to bear extraordinarily high prices due to high taxes. Protective tariffs are rampant in common consumer goods such as footwear, electronics and in vital industries like construction. These tariffs serve narrow political and business interests at the expense of all others. 

Tariff reform is naturally opposed by businesses who have a captive market. Their opposition to competition is at least understandable. What is more surprising is the opposition from groups such as the ‘Avocado Collective’ who perhaps inadvertently, find themselves siding with these groups, and indeed Donald Trump, on his views on trade. 

Sri Lanka faces multiple challenges including an unsustainable fiscal position characterised by persistent fiscal deficits and high levels of debt, particularly foreign commercial debt. Tightening global conditions could increase the cost of debt and make rolling over the Eurobonds maturing from 2019, more difficult. 

Uncertain property rights and trade restrictions deter investment, impairing job creation. The State has stepped in to fill the vacuum of jobs, it employs one in every 15 people, but the narrow tax base does not support the superstructure of the expenditure. Resorting to debt to fund recurrent expenditure is no longer sustainable.

The lack of opportunities and the cost of living cause many Sri Lankans to look overseas for advancement.

New challenges loom in health as the population ages while risks from climate change have increased. Is the education system geared to meet the needs of a knowledge economy? There are important questions to be raised on the priorities of public spending as well as the quality and effectiveness of spending. 

We believe that we need to rethink these issues and our objective is to bring alternative ideas for discussion since they are absent in the current discourse. We hold lectures and publish research and commentary, all of which, including videos of lectures are available online at advocata.org and our social media pages. Our public lectures have been open to all. 

We have always been open about our priorities. Our ideal Sri Lanka is one that is prosperous, open and free. A system that allows for maximum individual freedoms, particularly economic freedom. A country where anyone can succeed through hard work, personal responsibility and determination. 

Are these good things? How do we get there? There can be legitimate disagreement. Our role is to provide ideas, stimulate debate and offer practical solutions based on evidence, not to be the ultimate arbiter. 

Shooting down messengers is a spectator sport among Sri Lanka’s political elite. Constructing conspiracy theories is a fanciful, if entertaining, exercise practiced by those trying to de-legitimize real issues and will do little to move us forward.

By Fellows of the Advocata Institute in response to the article ‘What kind of liberals are these?’ published in the Daily FT, Friday 29 June. More information on Advocata is on www.advocata.org.