Dr Franziska Ohnsorge on Advocata Conversations | Ep.11| Murtaza Jafferjee | Dr Franziska Ohnsorge

We are back with our 11th episode of Advocata Conversations!

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact.

Our 11th episode is between Dr Franziska Ohnsorge ,Chief Economist at South Asia World Bank. She has been responsible for leading research programs on key economic issues in South Asia along with informing policy debates and World Bank lending. Prior to joining the World Bank, Franziska Ohnsorge worked in the Office of the Chief Economist of the European Bank for Reconstruction and Development and at the International Monetary Fund.

This conversation converses between Dr .Franziska and the Chair of Advocata, Murtaza Jafferjee.

The conversation focuses on the Title -South Asia Development Update 2024

Dr Franziska Ohnsorge in this conversation discusses about launching the South Asia development semi annual report that the World Bank produces on the growth Outlook of the region, further focusing on occupying policy makers. She pertains to describe this year’s report mainly involves on two things ; climate adaptation and creating more jobs in the market.

A Deep Dive into the Market Competitiveness of Ceylon Tea

Advocata Institute hosted an event titled ‘A Deep Dive into the Market Competitiveness of Ceylon Tea’ to launch the report on "Market Competitiveness of the Tea Industry of Sri Lanka" authored by Sudaraka Ariyaratne (Research Consultant, Advocata Institute) The conference consisted of a panel discussion on Land & Labour Reforms : Efficiency Through Liberalisation and Quality Control & Premiumisation : Unlocking the True Potential of Ceylon Tea

Session on 'Land & Labour Reforms : Efficiency Through Liberalisation

The session commenced with a presentation by Sudaraka Ariyaratne, followed by a panel discussion with Hon. Jeevan Thondaman (Cabinet Minister, Water Supply & Estate Infrastructure Development), Dr Roshan Rajadurai (Managing Director, Hayleys Plantation Sector), Dr Romesh Bandaranaike (Former Director, Plantation Management Monitoring Division), moderated by Murtaza Jafferjee (Chair, Advocata Institute)

Session on 'Quality Control & Premiumisation : Unlocking the True Potential of Ceylon Tea’

The session continued on with another presentation by Sudaraka Ariyaratne, followed by a panel discussion with Niraj de Mel (Chairperson, Sri Lanka Tea Board), Dilhan C. Fernando (Chief Executive Officer, Ceylon Tea Services PLC), Dasarath Dassanayake (Former Head, Manufacture High Grown, John Keells PLC Consultant) moderated by Rehana Thowfeek (Research Consultant, Advocata Institute)

The presentation on Land and Labour Reforms: Efficiency Through Liberalisation by Sudaraka Ariyaratne can be accessed here

The presentation on Quality Control and Premiumisation: Unlocking the True Potential of Ceylon Tea by Sudaraka Ariyaratne can be accessed here

Both discussions will be available on our YouTube channel shortly.

Sir Roger Owen Douglas on Advocata Conversations | Ep.10 | Murtaza Jafferjee | Sir Roger Douglas

We are back with our tenth episode of 'Advocata Conversations!'

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact. This episode is between Sir Roger Owen Douglas, Former Minister of Finance, New Zealand and the Chair of Advocata, Murtaza Jafferjee. In this conversation Sir Roger speaks about his political leadership, policy-making, and legacy. He also discusses the political and economic reforms in New Zealand and addresses tax reforms and the importance of transparency.

Check out our previous episode with Prof Chin-Huat Wong, Deputy Head (Strategy) UN Sustainable Development Solutions Network (SDSN) Asia Headquarters, Sunway University

South Asia Economic Outlook: World Bank | Infrastructure Challenges & Economic Growth | Murtaza Jafferjee | Maurizio Bussolo

In this episode of Advocata Studio, Advocata Chair, Murtaza Jafferjee is joined by Maurizio Bussolo, (Lead Economist, Chief Economist Office for South Asia, The World Bank). In this video he discusses with Murtaza Jafferjee on trade, gender inequality, and economic growth in South Asia, and its impact on productivity. He also addresses the South Asia's economic growth and infrastructure challenges.

Watch the full discussion here:

Maurizio Bussolo, (Lead Economist, Chief Economist Office for South Asia, The World Bank) also presents a report on South Asia's economic outlook, highlighting slowing growth and challenges such as weak private investment and fiscal position.

The presentation by Maurizio on South Asia Development Update: Toward faster, Cleaner Growth can be accessed here

ආර්ථික නිදහස් සමුළුව 2024 : ධනවත් රටක් හදන ආර්ථික නිදහස

ආර්ථික නිදහස් සමුළුව 2024 : ධනවත් රටක් හදන ආර්ථික නිදහස

ප්‍රධාන දේශනය - ආචාර්ය හර්ෂ ද සිල්වා (පාර්ලිමෙන්තු මන්ත්‍රී, සභාපති රජයේ මුදල් පිළිබඳ කාරක සභාව) අදහස් ඉදිරිපත් කිරීම - තාරක බාලසූරිය (රාජ්‍ය අමාත්‍ය,විදේශ කටයුතු) අදහස් ඉදිරිපත් කිරීම- මහාචාර්ය සිරිමල් අබේරත්න ( උපදේශක, Advocata Institute ) ආර්ථික නිදහස පිළිබද ඉදිරිපත් කිරීම - ධනනාත් ප්‍රනාන්දු (ප්‍රධාන විධායක නිළධාරී, Advocata Institute) මෙහෙයවීම- හසලක තුෂාර (Content Creator)

The Advocata Institute hosted an event on ' ධනවත් රටක් හදන ආර්ථික නිදහස) on Monday 29th, at Jasmine Hall, BMICH. The keynote speech was given by Dr. Harsha de Silva (Member of Parliament & Chairman, Committee on Public Finance). The panel for the discussion included Dr Harsha de Silva, Tharaka Balasuriya (State Minister, Foreign Affairs), Prof. Sirimal Abeyratne (Advisor, Advocata Institute), and the moderator was Hasalaka Thushara (Content Creator)

A presentation was 'Economic Freedom' - Dhananath Fernando (Chief Executive Officer)

Access the presentation by Dhananath Fernando here

The full video can be accessed here

Advocata Economic Freedom Summit 24: Economic freedom & its pathway to prosperity

The Advocata Economic Freedom Summit 2024 brings together leading thinkers and doers to deliberate on the state of economic freedom in Sri Lanka. In two separate events, in two different locations they discussed, debated and contemplated on ideas on how to improve levels of economic freedom in Sri Lanka and to provide audit of Sri Lanka's ratings on the acclaimed Economic Freedom of the World Index.

The Advocata Institute's Economic Freedom Summit 2024, commenced on January 29th at Marriott Courtyard, with a breakfast forum on 'Economic Freedom & its Pathway to Prosperity'

The keynote speaker for this session was Thilan Wijesinghe (Chairman & CEO, TWCorp (Pvt) Ltd)

The speakers for the session included Fred McMahon (Resident Fellow, Fraser Institute), Dr. Tom G. Palmer (Executive Vice President, International Programs, Atlas Network), Dr.Harsha de Silva (Member of Parliament & Chairman, Committee on Public Finance), Daniel Alphonsus (Director, Advocata Institute) and Thilan Wijesinghe.

The session was moderated by Prof. Rohan Samarajiva (Board of Advisor, Advocata Institute)
The full video can be accessed here

The presentation by Key note speaker Thilan Wijesinghe can be accessed here.

Access the presentation by Fred McMahon here

Following the Morning session, a discussion on 'ධනවත් රටක් හදන ආර්ථික නිදහස' took place at BMICH. Watch the full panel discussion here and access the presentations from this session here

IMF in Sri Lanka: Supporting Governance Reforms | Murtaza Jafferjee | Peter Breuer | Joel Turkewitz

In this episode of Advocata Studio, Advocata Chair, Murtaza Jafferjee is joined by representatives from the International Monetary Fund, Peter Breuer (Senior Mission Chief for Sri Lanka, International Monetary Fund) & Joel Turkewitz (Deputy Division Chief in the Legal Department, International Monetary Fund)

The Sri Lanka Technical Assistance Report - Governance Diagnostic Assessment can be accessed here.

Prof Chin-Huat Wong on Advocata Conversations | Ep.09 | Murtaza Jafferjee | Prof Chin-Huat Wong

We are back with our ninth episode of 'Advocata Conversations!'

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact. Our ninth episode is between Prof Chin-Huat Wong, Deputy Head (Strategy) UN Sustainable Development Solutions Network (SDSN) Asia Headquarters, Sunway University and the Chair of Advocata, Murtaza Jafferjee. He has been a keen observer of Malaysian politics for more than 25 years, and was active in the civil society-based Coalition for Free and Fair Elections (Bersih) for 17 years after his recent retired.

Check out our previous episode with Iain Rennie, Managing Director of Iain Rennie Consulting and the Former State Services Commissioner of New Zealand

Market Competitiveness of the Tea Industry of Sri Lanka

Advocata Institute launches its latest report titled “Market Competitiveness of the Tea Industry of Sri Lanka” The report is written by Sudaraka Ariyaratne, Research Consultant at Advocata Institute.

The report begins with an introductory chapter that details the historical evolution of the island’s tea industry. The report finds that the present standing of the industry in the context of the international market is not too grim, but argues that issues related to the labour market, capital investment, value addition, and quality control limit the industry’s competitiveness in the global stage. The rest of the report takes the form of four discussion papers, each on the four areas of concern listed above, that present an economic theory-based lens to approach these issues, and discuss potential solutions.

You can access the report on ‘Market Competitiveness of the Tea Industry of Sri Lanka’ here

Housing For All: The Role of Competition Policy In Construction

The Advocata Institute hosted a conference on December 13th at the Lavender Hall, BMICH on the topic Housing For All: The Role of Competition Policy In Construction. The conference facilitated two separate discussion sessions on Trade and Competition Policy: Impact on Affordable Housing in Sri Lanka and Regional Housing Crisis: The Role of Competition in Construction Markets, with panelists who are experts in the relative conversations. This event was in partnership with the Templeton World Charity Foundation.

The agenda for the sessions can be found here

Access the presentation by Dr Roshan Perera here

Policy Briefs:

Access the policy brief on Unshackling Markets: The Case Against Import Controls and Price Controls in Sri Lanka by Advocata Institute

Access the policy brief on Impact of Anti- Competitive Practices in the Construction Industry on Housing for the Urban Poor in India

Access the policy brief on Impact of Anti-competitive Practices in the Construction Industry on Housing for the Urban Poor in Pakistan

Access the policy brief Impact of Anti-competitive Practices in the Construction Industry on Housing for the Urban Poor in Bangladesh

Iain Rennie on Advocata Conversations | Ep.08 | Murtaza Jafferjee | Iain RennieI

We are back with our eight episode of 'Advocata Conversations!'

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact. Our eight episode is between Iain Rennie, Managing Director of Iain Rennie Consulting and the Former State Services Commissioner of New Zealand and the Chair of Advocata, Murtaza Jafferjee.

Check out our previous episode with Dr Irvin Studin, founder, editor-in-chief, publisher of Global Brief magazine, & the president of The Institute for 21st Century Questions, a leading Canadian think tank

Dr Irvin Studin on Advocata Conversations | Ep.07 | Murtaza Jafferjee | Dr Irvin Studin

We are back with our seventh episode of 'Advocata Conversations!'

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact. Our seventh episode is between Dr Irvin Studin, founder, editor-in-chief, publisher of Global Brief magazine, & the president of The Institute for 21st Century Questions, a leading Canadian think tank and the Chair of Advocata, Murtaza Jafferjee.

Note that this is the audio of the conversation between Murtaza & Dr Studin.

Check out our previous episode with Dr Swarnim Waglé, an Elected Member of Federal Parliament of Nepal and former Chief Economic Advisor at the UNDP Regional Bureau for Asia and the Pacific (RBAP) in New York

Dr Swarnim Waglé on Advocata Conversations | Ep.06 | Murtaza Jafferjee | Dr Swarnim Waglé

We are back with our sixth episode of 'Advocata Conversations!'

This is a series of discussions, where we converse with esteemed industry leaders on policy and economy! With Advocata Conversations we aim to capture insights from experienced policymakers on policy reforms and their impact.

Our sixth episode is between Dr Swarnim Waglé, an Elected Member of Federal Parliament of Nepal and former Chief Economic Advisor at the UNDP Regional Bureau for Asia and the Pacific (RBAP) in New York and the Chair of Advocata, Murtaza Jafferjee. Dr Swarnim Waglé discusses his journey from joining the The World Bank and the UNDP in Asia and the Pacific in New York to becoming an elected Member of Federal Parliament in Nepal. He also further explores on the economic developments of countries in South Asia like Vietnam, Pakistan and Nepal.

Check out our previous episode with Dr Reza Baqir, the Former Governor, State Bank of Pakistan and the Chair of Advocata, Murtaza Jafferjee.

PUCSL Electricity Tariff Revision is Discriminatory

Originally appeared in the Daily FT

Electricity tariff design must meet two main objectives: firstly, raising the money needed to pay for the costs of provision, and secondly, sending the right economic signals to each customer to favour the optimal socio-economic use of electricity. 

To achieve the above objectives the principles that must be followed when designing tariffs are; 

1. Economic sustainability or revenue sufficiency, 

2. Equity or non-discrimination among users, 

3. Economic efficiency in resource allocation, and

4. Transparency, simplicity, and stability of the methodology.

A well-defined and appropriate tariff structure must balance the financial sustainability of the sector on the one hand and the well-being of various segments of society on the other. The CEB’s tariff revisions seem to be mainly focused on the aspect of revenue sufficiency, ignoring the other aspects.  As electricity is a commodity, there should be no difference in the prices charged to different users, except when reflecting any differences in the cost of providing services to different classes of users.

A differential tariff implies that some categories are subsidised leading to the question of who pays these subsidies. The current structure is such that households consuming an excess of 60 Kwh, and general purpose bulk supply users subsidise the industrial, hotel and charitable sectors.

Households that consume over 90 Kwh and general purpose bulk customers are charged a tariff that is double that of industries and hotels. With regards to hotels, in effect, domestic consumers subsidise foreign tourists. However, the differential tariff between general bulk supply and industrial/hotel users is meaningless. For example, a hall that hosts weddings and celebrations would be treated as a general bulk customer and be charged double the tariff that a hotel would be charged, even though both host similar events. A restaurant in a shopping mall would be charged as a general customer, but the same restaurant located within a hotel would enjoy a tariff half of that which a hotel incurs. While this differential existed under the previous tariff, it is made worse under the new structure; hotels faced a 10% increase in tariff while general users faced a 20% increase.

If the idea behind a lower tariff for hotels is to make the sector more competitive, then the solution is to address the causes of uncompetitiveness directly. One area is construction costs which raises the level of investment and the cost of maintenance.  Protectionism for the domestic construction materials industry raises the costs of steel bars and rods, sanitary ware, aluminium extrusions, granite, electrical fittings, and carpets resulting in high overall construction cost. The effective protection granted on these items can exceed 200%; the savings in finance cost from a lower capital outlay would probably exceed the savings from a lower electricity tariff.

Economic value creation can take place in many different ways in an economy and the service sector is no less important than other sectors. The cross subsidisation between customers violates the equity or non-discrimination principle of a good tariff and discourages use by the overcharged and promotes overconsumption by the subsidised. 

For example, the higher domestic tariff may serve as a disincentive for remote work. Remote or flexible work arrangements can reduce transport costs, congestion, energy use and for some, enable a better work/life balance. The government should be facilitating flexible work but the higher rates applicable to some domestic consumers may be a disincentive.

Economic activity is increasingly complex and a value chain can involve many different sectors. For example, the tea industry involves agriculture, processing in factories, transport, warehousing, blending, financing, marketing and exports. Moreover, products are now more knowledge intensive, so a greater part of the value addition arises in non-production-oriented components of the value chain. With differential tariffs, parts of the same value chain may pay different prices for use of the same commodity.

Further, a lower tariff to “industry” penalises new economy enterprises while promoting highly energy intensive users. This distorts resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries where the country may not have a clear comparative advantage. A subsidised tariff also blunts the incentive to economise.

The cost of supplying electricity fluctuates throughout the day, depending on the power generation mix, cost of fuels used, transmission costs and energy losses but as electricity storage is not economically viable, it has to be consumed whenever it is produced. Households with rooftop solar thus enjoy a subsidy. Domestic solar generation takes place in day time where the cost of generation is low but the import of electricity to the house takes place at night when the cost of generation is high. Offsetting units generated against units imported results in a subsidy because of the difference in costs between the two. Time of use metres should be mandated for all domestic users on net metering with the import/export being accounted for on the respective time of use tariff. Indeed all users who consume above 60 Kwh should move to the time of use tariff. 

Should the government decide to subsidise the capital or operating costs to serve certain customer classes, it should do so directly from the budget and while a lifeline tariff for the poor is justified the high domestic users pay a tariff 7.4x that of the lowest. Not all households are the same size and an extended family living in a single house may face a much higher tariff although their income level may not differ greatly from the average.

The PUCSL should review tariffs to prevent the distortions highlighted above. Instead of cross-subsidies, the regulator should be working to reduce overall cost of the provision of electricity through better procurement and greater efficiency. 

Treating all costs as a pass-through in computing the tariff is a mistake. The PUCSL needs to set efficiency targets in order to set fair and reasonable tariffs. The CEB should be incentivised to control its costs by specifying and enforcing performance requirements. Benchmarking CEB performance against regional and international peers to assess relative efficiency is necessary, as is consulting stakeholders on achievable efficiency targets.

Women's Policy Action Network : Gender Discriminatory Land Inheritance Policy Brief

The Womens Policy Action Network launched their policy brief on 'Gender Discriminatory Land Inheritance' at a roundtable discussion. The discussions resulted in the identification of laws that are discriminatory directly and in its applications. Further laws that had the potential to be discriminatory were also identified.

You can access the policy brief on Gender Discriminatory Land Inheritance here

Land, freedom, & Life | Land rights of Sri Lanka's Farmers

About 82% of Sri Lanka’s land is owned by the government. This has resulted in many socio-economic catastrophes such as placing strict limits on the rights of farmers, inability to enhance agricultural productivity, inability to attract investors and many more. In order to rectify this and to come up with reform recommendations, the Advocata Institute has conducted research along with an island wide field survey covering 400 farmers.

In the aim of highlighting the above the Advocata Institute has produced a documentary on ‘Land, Freedom & Life’

The Advocata Institute hosted a live discussion on Land rights of Sri Lanka's Farmers followed by the premiere of the documentary.

The panel consisted of Dr. Asanga Gunawansa, (Lead Legal Counsel Attorney-At-Law), Thilini Bandara (Research Analyst Advocata Institute) & Dhananath Fernando (Chief Executive Officer Advocata Institute)

This video documentary captures the voices of farmers, shedding light on the myriad of  socio-economic challenges arising from the state ownership of the country's agricultural land.

The report will be published soon.

Check out the full panel discussion on Land rights of Sri Lanka's Farmers

Media Coverage on IMF & The Urgency of State-Owned Enterprise Reforms

Sri Lanka SOE accumulated losses equal 18 times PAYE taxes: Advocata

Sri Lanka’s state owned enterprises ratcheted up losses amounting to 18 times the annual pay as you earn taxes collected from wage earners, since privatisation was halted, a think tank has said.

When state enterprises ran losses they were covered by loans taken from domestic banks as well as from capital markets.

“From 2005 to 2021, roughtly over 15 years, state enterprises have accumulated losses of 1.8 trillion rupees,” said Dhananath Fernando, Chief Executive of Advocata Institute told reporters in Colombo.
Read the full article here

ITN News Live IMF & The Urgency for State-Owned Enterprise Reforms

The video can be found here from the ITN Live News segment (2023-10-10| 06.30 PM)

Sri Lanka should speed up SOE sales before momentum dies: think tank

Sri Lanka should speed up the divestment of state enterprises to reduce the burden on the people, before the momentum for reform out, Advocata Institute, a Colombo-based think tank said.

Key reforms have to be done in the first year of government, Rohan Samarajiva, an Advisor to Advocata Institute told reporters.

“2024 by all estimates will be an election year,” Samarajiva, who had been involved in government reforms earlier said.

“I would generally argue that is not the opportune time for this kind of reforms.”

Read the full article here

Failed SOEs account to Rs. 1.5 Tn accumulated losses

Debt owed by public corporations up to 2021 amounts to Rs 1.8 Tn:

The failures of State Owned Enterprises (SOE) are creating a huge financial burden to the country; their losses have resulted in a staggering Rs. 1.5 trillion accumulated losses from 2006 to 2021.

In addition debt owed by public corporations up to 2021 was Rs 1.8 trillion which is a 9.4% of public debt, said Research Analyst Advocata Institute Rehana Thohwfeek at a special event yesterday on SOE’s. She explained that the country expected to generate around Rs. 100 billion from PAYE Tax and if one compares the losses of SOE’s and their debt it paints a very sad story.

She also said by providing subsidies by State institutions like Petroleum Corporations for Kerosene due to political and union pressures the CPA lost rupees billions.

Though SOE’s are marketed as national assets they are actually a vehicle for corruption,” accused Chief Executive Officer of Advocata, Dhananath Fernando.

Read the full article here

SOE restructuring delays seen as discouraging prospective investors

The restructuring of State Owned of Enterprises (SOE) is being delayed day- by –day, resulting in an uncertain situation where prospective investors will also tend to think twice before investing in Sri Lanka, Advisor, Advocata Institute Prof Rohan Samarajiva said.

“Although certain trade unions say that Sri Lankan Airlines, CPC, CEB, Water Supply and Drainage Board and other state owned enterprises are making profits, there are various issues in their accounting system. They are actually incurring losses because some of their debts and the relevant interests are borne by the Treasury, Prof. Samarajiva said at a forum organized by Advocate Institute on the topic, ‘IMF and the Urgency for State – Owned Enterprises Reforms’. The event was held at BMICH on Tuesday.

Read the full article here

The Urgency for Restructuring State-Owned Enterprises in Sri Lanka

The restructuring of State-Owned Enterprises (SOEs) in Sri Lanka has been facing significant delays, leading to an uncertain environment that may deter potential investors. According to Prof Rohan Samarajiva, Advisor at the Advocata Institute, although some trade unions argue that certain SOEs are profitable, there are issues with their accounting system. Many of these enterprises are actually incurring losses because their debts and interests are being bornethe Treasury.

The interim budget in August 2022 had specifically mentioned the restructuring of various SOEs, including Sri Lankan Airlines, Ceylon Petroleum Corporation (CPC), Ceylon Electricity Board (CEB), and Hilton Hotel, among others. However, despite 14 months passing, no progress has been made in restructuring these entities.

Read the full article here

IMF & The Urgency of State-Owned Enterprise Reforms

In the wake of Sri Lanka's economic challenges, it is undeniable that State Owned Enterprises (SOEs) have had a substantial impact on the country's fiscal health. They squander resources, land, labour, and add to the debt burden. They monopolize markets limiting competitiveness and contribute to the inefficiency in the economy. At this economic juncture, the necessity for SOE reforms is not just a matter of economic prudence; it is a matter of national importance. Without swift and comprehensive SOE reforms, we risk prolonging our current economic downturn.

The Advocata Institute hosted a press briefing on IMF & The Urgency of State-Owned Enterprises Reforms, to create further awareness and public debate on the urgency of implementing reforms to State Owned Enterprises (SOE’s). This Press Brief was held at BMICH, Tulip Hall on October 10.

The Event commenced with a 15 minute presentation by Rehana Thowfeek, Research Associate at the Advocata Institute analysing the issues surrounding SOE’s and their link to broader macroeconomic issues. Following this, there will be introductory remarks by the main speakers for the evening:

• Professor Rohan Samarajiva - Advisor, Advocata Institute.

• Mr. Dhananath Fernando - Chief Executive Officer, Advocata Institute.

• Mr. Ravi Rathnasabapathy - Independent Consultant

The Presentation by Rehana Thowfeek can be found here

The Full video of the briefing can be found here

Sri Lanka Slips in Economic Freedom

Originally appeared in the The Island, Daily Mirror, Economy Next, Lanka Business online, NewsWire

Sri Lanka ranks 116 out of 165 jurisdictions included in the Economic Freedom of the World: 2023 Annual Report, released by Advocata Institute in conjunction with Canada’s Fraser Institute. The current ranking represents a decline in the economic freedom of the country which ranked 104th during 2020.

The report measures the economic freedom of individuals—their ability to make their own economic decisions—by analyzing the policies and institutions of 165 jurisdictions. The policies examined include regulation, freedom to trade internationally, size of government, legal system and property rights, and sound monetary policy. The 2023 report is based on data from 2021, the last year with available comparable statistics across jurisdictions.

Sri Lanka’s decline in score was driven by 4 out of the 5 sub indicators of economic freedom registering declines in their respective individual scores. These indicators are the size of government, access to sound money, freedom to trade internationally, and the regulation of credit, labour, and business. The only indicators that registered an improvement in its score is the indicator of legal system and property rights.

“The report captured a stark warning: Sri Lanka's economic freedom declined prior to the economic crisis of 2022, a testament to the vulnerability of nations with limited economic freedom in the face of economic turmoil. If the country is to recover, Sri Lanka must prioritize economic growth within the framework of maximising economic freedom for its citizens to trade, work, and transact freely in a stable monetary and fiscal environment” said Dhananath Fernando, Chief Executive Officer at the Advocata Institute.

The number one spot is now occupied by Singapore, followed by Hong Kong, Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom, and Canada. Other notable countries include Japan (20th), Germany (23th), France (47th) and Russia (104th).

Venezuela once again ranks last. Some countries such as North Korea and Cuba can’t be ranked due to lack of data.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories. It’s the world’s premier measure of economic freedom.

The report was prepared by Professor James Gwartney of Florida State University and Professors Robert A. Lawson and Ryan Murphy of Southern Methodist University.

According to research in top peer-reviewed academic journals, people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.

For example, countries in the top quartile of economic freedom had an average per-capita GDP of US$48,569, compared to US$6,324 for bottom quartile countries. Poverty rates are lower. In the top quartile, less than one per cent of the population experienced extreme poverty (US$1.90 a day) compared to 32 per cent in the lowest quartile. Finally, life expectancy is 81.1 years in the top quartile of countries compared to 65 years in the bottom quartile.

“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom with the Fraser Institute said.

See the full report at www.fraserinstitute.org/economic-freedom.

About the Economic Freedom Index

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories.

Economic Freedom of the World measures how policies and institutions of countries support economic freedom. This year’s publication ranks 165 countries and territories. The report also updates data in earlier reports where data has been revised.

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The Government Should Rethink the Minimum Room Rates Policy

Originally appeared in the Daily FT, Daily Mirror, Daily News, Lanka News Web

The Advocata Institute expresses concern over the recent proposal by the Sri Lankan Authorities to impose minimum room rates on hotels in the city of Colombo.  

This proposal, set to take effect from October 1st 2023, stipulates rates of USD 130 for 5-star hotels, USD 100 for 4-star hotels, and USD 80 for 3-star hotels. While the authorities argue that this measure aims to counter underpricing by higher-tier hotels, this policy threatens to undermine the growth and vitality of the tourism sector. It places an unnecessary burden on hoteliers already grappling with the challenges posed by the global pandemic and subsequent economic crisis. Further, it undermines the country’s competitiveness in the regional tourism market.  

Pricing acts as a reflection of the quality of services offered by hotels and serves as a differentiating factor. If prices fail to accurately represent the services provided, customer dissatisfaction can ensue, especially when compared to more competitively priced options in neighboring countries such as Thailand and Vietnam. This is supported by a comment made by the Sri Lanka Association of Inbound Tour Operators (SLAITO) which states that “before implementing such prescribed rates, it is crucial to generate demand and interest in Sri Lanka...Adopting these rates will render Sri Lanka uncompetitive and result in a loss of clients, even when compared to hotels in New Delhi, with which they are currently competitive”.

Sri Lanka has previously attempted to implement price controls between 2009 and 2019, following lobbying by a segment of  hoteliers aiming to compete more effectively against 5-star rated hotels. However, this policy failed due to numerous violations resulting from inadequate monitoring and enforcement by the authorities. Many hotels, including those that initially advocated for the government's proposed room rates, have not complied with the established rates, as alleged by the former Minister of Tourism, John Amaratunga. 

The imposition of minimum room rates restricts hotel owners' flexibility in setting prices in accordance with market demand and effectively stifles healthy competition among various establishments. The tourism industry experiences fluctuations in demand that correspond to seasonal and weekly trends. Such demand patterns necessitate the ability for hotels to tailor their pricing strategies to capitalize on peaks and optimize profitability.

Every hotel has its unique room pricing considerations depending on factors such as location, size of the hotel, market demographics, level of competition, and type of service offered to name a few. The uniform imposition of minimum rates disregards the diverse range of hotels and accommodations available in Sri Lanka, catering to various budgets and preferences. This one-size-fits-all approach disregards the crucial factor of consumer choice. Imposing minimum room rates on a certain type of accommodation whilst disregarding alternate forms of accommodation available within the city of Colombo such as guest houses and Airbnbs, undermines the effectiveness of this policy.  

Furthermore, hotels do not solely rely on revenue from room occupancy; rather, the occupancy of rooms paves the way for alternative sources of income such as from food and beverages, along with the provision of other hotel-related services. For example, a leading hotel in Colombo earned 77% of their revenue from food and beverages in contrast to the 19% earned from accommodation services in 2022. Therefore, when the government intervenes in one component of a hotel’s business model, it disrupts the interconnected methods of revenue generation.  

Further, the foundation for these minimum rates—star classifications—is itself flawed. This system primarily relies on quantitative factors, often overlooking qualitative aspects such as service quality and ambiance. The inability to quantify these vital attributes compromises the accuracy of the classification.

The tourism industry in Sri Lanka has historically played a crucial role in the country's economic development, providing employment opportunities, promoting cultural exchange, and contributing significantly to foreign exchange earnings. However, the recent decision to enforce minimum room rates could deter these potential visitors who are seeking affordable accommodation options, particularly given the publicity international vloggers have given Sri Lanka as a tourist destination. Further, this approach stifles innovation within the hospitality sector, and ultimately leads to reduced tourist arrivals and negatively impacts the entire value chain that relies on a thriving hospitality sector.

This policy undermines competition and oversteps in a serious way the role of government in a competitive market economy, the stated policy framework of the government. 

The Advocata Institute strongly urges Sri Lankan Authorities to reconsider this ill-advised proposal. 

By fostering an environment that embraces market competition, Sri Lanka can position itself as an attractive destination for travelers while allowing its hotels to thrive and cater to diverse consumer demands.