What is the state of Sri Lanka's state enterprises?

Sri Lanka has a total of 527 State Owned Enterprises out of which regular information is only available for 55. These SOE's accumulate billions of losses annually due to sheer mismanagement. The precedence of corruption in the highly bureaucratic systems that govern SOEs are also a case for alarm. What is the state of our state owned enterprises?

At this year's Asia Liberty Forum, 2019, we are explored this topic in a discussion and public talk by Ravi Ratnasabapathy, Suresh Shah, Thilan Wijesinghe and Dr. Malathy Knight; moderated by Dr. Nishan de Mel.

Report out now: https://goo.gl/XogBvY

How can Asia embrace its urban future?

Many Asian countries vastly underestimate the levels of urbanization in their countries. Yet Cities are the engines of growth and prosperity. How can we embrace our urban future? What are the issues and challenges? 

A panel discussion by Pritika Hingorani, Hon. Dr. Harsha de Silva and Iromi Perera; moderated by Anushka Wijesinha at the Asia Liberty Forum, 2019.

What are the consequences of a depreciating currency?

The past few months have witnessed rapid currency depreciation across Asia, causing a significant amount of concern across economic sectors. What are the reasons behind these changes, what is their real impact on Asian economies and its people? A panel discussion by Dr. Ross McCleod, Dr. Cris Lingle and Dr. Ajay Shah; moderated by Murtaza Jafferjee at the Asia Liberty Forum, 2019.

Is Sri Lanka afraid of opening up to trade?

Sri Lanka was one of the first countries in South Asia to open up it’s economy in 1978. Four decades later however, it’s one of the least open economies in the region. At this year's Asia Liberty Forum, 2019, we are explored the question "Are we afraid of opening up?" in a public talk and panel discussion by Prof. Rohan Samarajiva, Lakshman Athukorala, Dr. Charitha Herath and Chandi Dharmaratne; moderated by Nisthar Cassim.

Prof. Robert Lawrence on Protectionism vs Free Trade: Video

Advocata Institute in partnership with Echelon Magazine, organized a public lecture by Ricardo Hausmann, from Harvard University's Centre for International Development. He spoke of Free Trade vs Protectionism 101 and its relation to Sri Lanka, and encouraged Sri Lanka to take on ambitious high skilled immigration reform to increase knowhow in the economy.

Prof. Razeen Sally on the state of Asian Capitalism and what it means for Sri Lanka: Video and Q&A

Prof. Razeen Sally, Associate Professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, spoke of the three facets of Asian capitalism and what it means for Sri Lanka at a public lecture organized by Advocata and the Echelon Magazine. 

Q&A Moderated by Eshini Ekanayake, an Economist at JB Securities focused on macroeconomic research and analysis on Sri Lanka.

A Public Lecture on Asian Capitalism and what it means for Sri Lanka

Advocata, along with Echelon Magazine with it's new event series Think! will host Prof Razeen Sally for a talk on the state of Asian Capitalism and what it means for Sri Lanka.

Prof Razeen Sally, Associate Professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also Chairman of the Institute of Policy Studies, Sri Lanka. 

Eshini Ekanayake, Economist at JB Securities will moderate the Q&A.

Capitalism has had an astoundingly successful run since the 1950s, especially in East Asia. With China now at its centre, and, to a lesser extent, in South Asia, what will be Asian capitalism’s challenges in the next half-century? And what will it mean for Sri Lanka?

Prof. Sally will look at the three facets of Asian capitalism: economic, political, and global.

First, its economic face. So far Asia has had successful “catch-up” growth based on mobilising labour and capital, and imitating what the West has already done. Poor Asia (low-income and lower middle-income Asia) still has much room for catch-up growth. But Middle and Rich Asia (upper middle-income and upper-income Asia) have either exhausted catch-up growth or come close to exhausting it. Their challenge is to innovate, to move to more productivity-based growth. They need the “creative destruction” of “Schumpeterian” capitalism. So what are their innovation challenges?

Second, Asian capitalism’s political face. What are the varieties of institutions that underpin Asian capitalism? Are they equipped to move to Schumpeterian capitalism? What are the obstacles? Is Schumpeterian capitalism possible in a Chinese-style autocracy? Or does it need Western-style liberal democracy and “open societies”?

And third, Asian capitalism’s global face. Asian capitalism has been successful in a global and regional environment of stability and openness – the post-1945 Pax Americana. US leadership has provided geopolitical security and the maintenance of a liberal world economy. But these conditions seem to be changing, and faster than expected, with the US in seeming decline and retreat, and China ascendant and more assertive. So what are the relevant global and regional scenarios for Asian capitalism?

Find out more about the lecture and register to attend.

Ricardo Hausmann on Accessing know-how for Development : Video Lecture and Q&A

Prof Ricardo Hausmann of Harvard University's Centre for International development spoke about   the importance of immigration reform for Sri Lanka at a public lecture organized by Advocata and Echelon Magazine.  Prof Hausmann argues that know-how which immigration brings is essential to diversify Sri Lanka's exports and help the country grow faster.

Q&A moderated by Murtaza Jafferjee 

Dr Ganeshan Wiganaraja delivers public lecture : Is the era of export-led growth over?

Sri Lankan-born economist Dr Ganeshan Wignaraja delivered a public lecture on the question of whether the era of export-led growth is over.   Dr Wignaraja is an advisor to the Asian Development Bank with decades of experience in various development organizations, focusing on Asia. 

As Asian trade slows down and with the increase of protectionist rhetoric from the west, the model of the East Asian countries, i.e. the export-led growth has been called into question.    Dr Wignaraja says that although the returns to such models have now become less, and it is now more difficult, he does not believe the era of export-led growth is over.

For Sri Lanka, he says basic reforms in trade liberalization in the areas of 'para tariffs' is needed, as well as improving delivery, and price quality of services and products.  Sri Lanka has failed to get into global value chains with the exception of garments. It hasn't happened in the BPO/ICT sector as expected, said the ADB economist. 

Dr Wignaraja says that as China now is moving up value chains,  rising wages and a upwardly mobile middle class is making China follow the model of Japan and subsequently South Korea in higher value added production and building innovation capability.  This opens up opportunities for Sri Lanka and other ASEAN countries argues Dr Wignaraja. Sri Lanka could attract export oriented Foreign investment from China to replace some of the labour intensive activities.  

In a new more difficult trading regime,  trading in services is likely to emerge as an important avenue of trade growth says Dr Wignaraja. Sri Lanka should focus on reforming internal barriers to trade in services by addressing skill gaps, trade barriers and infrastructure requirements in the area of basic power and digital infrastructure.  

With the expected death of the US-led Trans Pacific Partnership (TPP),  the China-focused Regional Comprehensive Economic Partnership (RCEP) is likely to come to fore as the major multi-lateral trade agreement in the region says Dr Wignaraja.  

Whilst Sri Lanka should pursue free trade agreements with India, China and other Asian countries, the correct sequence is to figure out the domestic reform agenda rather first and enter into trade agreements rather than the trade agreements dictate the reforms warns Dr Wignaraja.

Commenting on the use of Industrial policy and the government picking winners and sunshine industries in a country like Sri Lanka, Dr Wignaraja said that industrial policy requires a high-level of government capability, which at the moment Sri Lanka lacks,  and in such an environment, it's better to follow the market-led approach rather than try out sophisticated industrial policy measures according to the economist.

Dr Wignaraja also urged the policy makers to look into safety-nets and pay attention to the losers of trade liberalization, as addressing their concerns are vital to build support for trade liberalization.

Deshal de Mel delivers lecture on What's wrong with the Sri Lankan economy

Deshal de Mel delivering the lecture organized by Advocata Institute

Senior economist at Hayleys Group, Deshal de Mel gave the inaugural lecture on a public lecture series organized by Advocata Institute last month.

A crowd of more than 200 people attended the lecture which concluded with an engaging Q&A session moderated by  Shiran Fernando,  an economist attached to Frontier Research. 

Delivering the lecture, Deshal said that the biggest risk to the Sri Lankan economy is the ability to meet the external debt repayments. Until about 2005, Sri Lanka had very easy access to long term finance said Deshal, who went on to explain that with the elevation of the country to a middle income status country, Sri Lanka lost access to this low-interest rate loans that allowed the government to maintain a very large government in terms of employees, and activities in the economy as well as accumulate a huge amount of debt.

Continuous deficits that the government keep running and the accumulated debt is one of the key reasons for macroeconomic instability explained Deshal.  High government borrowing crowds out the private investment and vulnerable to episodes of monetary expansion leading to inflation the economist said.   

"Big Government" policies including the maintaining of loss-making state enterprises, large public sector and targeted subsidies and transfers have all resulted in the deficit that the government tries to bridge by borrowing and indirect taxation, which creates further distortions according to Deshal de Mel.

The large government is not just fiscally not affordable, but also is a consumer of scarce resources explained the economist.  "The state owns large quantum of land, and employs about 17% of the entire labour force" all consuming economic resources whilst the 245 odd State owned enterprises employs a further 220,000 people. 

Deshal believes that there is a role for the government in addressing wealth inequalities resulting from unequal opportunities and for state intervention when markets fail through smart unobtrusive regulation. However, he says that the big government policies have not helped in sectors where state intervention is generally accepted, for example in Education where outcomes indicate that only around 50% of students pass science related subjects.

Resources tied up in unproductive sectors such as Agriculture  represents another problem Deshal explained. The Agricultural sector accounts for a massive 30% of labour force, but only accounts for 9% of GDP.  The protectionist policies with the stated aim of 'protect' farmers has resulted in resources being tied up in lower value domestic agriculture instead of utilizing the full resource pool of agricultural land, farmers and other resources into global value chains and higher value agriculture.

Sri Lanka has also failed to attract export oriented Foreign Direct Investment (FDIs) making use of it's strategic location Deshal said and emphasized on a proactive approach to attracting FDIs such as targeting multinationals with operations in southern India to set up Shop in Sri Lanka.

In order to fix the Sri Lankan economy, Deshal recommends that the first thing to do is to rationalize government expenditure. Cutting back on size, and particularly state owned enterprises. Enhancing government revenue through simplification of taxes and relying on direct taxes.  He also emphasize the need to focus on education, ensuring an environment of more private participation in the supply of education and gradually decreasing trade and domestic protectionism as possible ways of remedying the problems in the Sri Lankan economy.

While acknowledging the political realities and difficulties in bringing about economic reform, Deshal said that a possible starting point is reforming State Owned Enterprises, where there is increasing awareness of it's ill-effects. 

Advocata's research report on SOEs are found on our research section.  Advocata Institute organizes monthly lectures focused on the broad theme of 'fixing the Sri Lankan economy'. 

full slide deck from the lecture is available below.   See more articles on the event .  Deshal was speaking in his private capacity as an economist. 

What is wrong with the sri lankan economy from Advocata Institute