Sri Lanka Exports

Press Release: Advocata Institute Applauds Economic Transformation Bill, Calls for Careful Implementation and Transparency

Originally appeared on Daily FT, Ada Derana

The Advocata Institute welcomes the government’s stated intention to move from an inward-oriented economy to a more open economy to boost international trade, foreign investment and productivity.

The Sri Lankan government has gazetted the Economic Transformation Bill to overhaul the country's economic landscape. This ambitious Bill aims to create a more competitive, export-oriented, and digitally-driven economy while achieving net-zero emissions by 2050- however, enshrining economic targets in law may prove to be problematic.

Some of the key reforms include the establishment of new institutions that are intended to address some important issues. The Bill proposes establishing an Economic Commission to streamline economic activity and trade, and splitting the role of the Board of Investments (BOI) between Zones SL, Invest Sri Lanka, and the Economic Commission. Additionally, the bill also sets up specialized bodies to focus on promoting foreign investment (Invest Sri Lanka), developing industrial zones (Zones SL) and international trade (Office for International Trade), boosting productivity (National Productivity Commission), and providing economic expertise (Sri Lanka Institute of Economics and International Trade).

The policy will address crucial areas like debt management, agricultural modernisation, import-export regulations, and economic governance.

The Economic Transformation Bill sets ambitious debt reduction targets, aiming to bring the public debt-to-GDP ratio below 95% by 2032 and significantly reduce annual government borrowing needs. This strategy is complemented by a Public Financial Management Bill, which will be introduced alongside the Economic Transformation Act, to ensure responsible management of public finances and prevent future economic crises.

The Bill requires the Cabinet of Ministers to submit a report to Parliament every five years, outlining the policy framework and strategies to achieve the National Economic Transformation goals (Section 5). This may be revised from time to time and presented to Parliament. The first report is to be presented in 2025.

All policies, programmes, regulations, circulars, and directives of the Government shall conform to such National Policy on Economic Transformation. The government will also present a report each year on March 31st detailing progress made towards each target, and any corrective actions taken as and when needed (Section 7).

Limits for levels of debt and public expenditure are within the control of the government and are widely used in other countries. Targets such as Exports/GDP, FDI/GDP while clearly signaling the government's intent, belong more to the realm of policy than law. The bill makes provisions that where these targets have not been met, the Government shall inform Parliament of the measures being taken to remedy the situation and indicate when they will be met. While the remedial measures reflect a commitment to meeting these targets, the practicality of it may be questionable as many factors influencing these targets often extend beyond direct government control.

Key Aspects of Concern

  • The composition of the Board of the Economic Commission, which proposes a ten member board with four ex officio members of the relevant line ministries while there will be six members appointed by the President. The chairperson of the Economic Commission Board will also be a Presidential appointment, while the Director General of the Economic Commission is a Ministerial appointment. The wide powers exercised by the President over these appointments leave room for questions of credibility and politicization of appointments which needs to be carefully considered. Independent appointments of these key officials is mandatory for effective national policy formulation.

  • Advocata is concerned that certain provisions of the Bill do not apply to the Colombo Port City Special Economic Zone, established under section 2 of the Colombo Port City Economic Commission Act, No. 11 of 2021. This exclusion could lead to unfair competition.

  • Another important point of concern is the incentives and exemptions offered to investors under this bill, which leaves room for ad-hoc short-term measures that can be changed from time to time under the prescription of the Minister.

  • Setting targets on debt and primary balance is commonly found in laws, while targets for GDP growth, exports, and unemployment are often addressed as policy targets. By codifying these targets into law, they gain a degree of enforceability that is not typical for policy goals. This raises questions about the mechanisms for enforcement and the consequences for failing to meet these targets. The decision to legislate specific economic targets in Sri Lanka’s Economic Transformation Act is unusual but comes with potential challenges in terms of enforcement and practicality.

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

Online forum on COVID-19 with Tourism Industry Leaders by Advocata Institute

Published in the Daily News, Lanka Business Online, Business News, Economy Next, the Morning and Travel Voice

Advocata Institute is hosting a panel discussion with tourism industry leaders, Kimarli Fernando (Chairperson, Sri Lanka Tourism), Vipula Gunatilleka (CEO, SriLankan Airlines), Sanath Ukwatte (Chairman, Sri Lanka Hotel Association), Mahen Kariyawasam (President, Sri Lanka Inbound Travel Operators); moderated by Murtaza Jafferjee (Chair, Advocata Institute) on the impact of COVID-19 on Sri Lanka's Tourism Industry. The tourism sector has been hit hard by COVID-19, with international travel into the country slowing down in January and February, even before our airports closed for international arrivals. The World Bank estimates that Sri Lanka’s tourism sector contributes a little over 12% of GDP, and is a major source of local employment. As the tourism sector is also the country’s third-largest source of foreign exchange, the impact of this downturn will be felt throughout the economy. The discussion will cover the current challenges faced by the tourism industry and route to recovery.

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The online panel discussion will be hosted on Zoom and live-streamed via Advocata Institute's Facebook Page and other partner channels this Tuesday, 21st of April from 10.30 AM.

Register now: www.advocata.org/events (Limited slots available to join the zoom call)

Send us your questions via slido.com. Event Code: #COVIDLK

Online forum on COVID-19 with Export Industry Leaders by Advocata Institute

Published in the Daily FT and Economy Next

Advocata Institute is hosting a panel discussion with eminent business leaders, Ashroff Omar (CEO, Brandix), Dilhan Fernando (CEO, Dilmah Tea), Romesh David (CEO, South Asia Gateway Terminals) and   Prabhash Subasinghe (Chairman, Sri Lanka Export Development Board (EDB); moderated by Murtaza Jafferjee (CEO, JB Securities). The discussion will explore the current challenges faced by Sri Lankan businesses and the road to recovery, with a special focus on merchandise exports.

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The online panel discussion will be hosted on Zoom and live-streamed via Advocata Institute's Facebook Page and other partner channels on the 16th of April from 10.40 AM.

Register now: www.advocata.org/events (Limited slots available to join the zoom call)

Send us your questions via slido.com. Event Code: #COVIDLK

Advocata hosts Facebook Live event with Dr Narayan

Dr Narayan, a former economic Adviser to the Indian Prime Minister says there’s ample opportunity to further India - Sri Lanka Trade.

Dr. Narayan, former secretary to the Indian Ministry of finance and former economic adviser to the Indian Prime minister, made such statements by pinpointing to several sectors where opportunity for growth is visible. One such area for Sri Lanka to exploit is the market for consumer goods, he said, given the nature of India’s vast internal market. He alluded to the current success of the export of Sri Lankan sausages as a case study for his claim. Sri Lankan sausages,  is preferred over local sausages , especially in Southern India, due to its higher quality, which results in gains in income for Sri Lankan sausage producers and exporters. At the same time, India benefits from higher quality when its local producers aim to perfect their production process to match the quality of Sri Lanka exports, which leads to mutual gains for both countries.

Dr. Narayan also pointed to the IT sector as an area filled with opportunities for Sri Lankan firms.  Despite India being an IT giant, and attracting a lot of IT related investment into key cities like Hyderabad and Bangalore, where you would expect Indian firms to dominate, there is so much scope for Sri Lankan IT firms to exploit. He claimed that since recently, many large Indian IT firms like Oracle have been preoccupied with government work alone, that they are missing out on other potential customers. This is what creates the market for Sri Lankan IT firms to target, and prosper in the process.

Such sentiments were expressed in a Facebook Live event organized by the Advocata Institute, held at the MAS innovation centre on the 21st of November. Dr. S. Narayan was joined by Professor Razeen Sally, associate professor of the National University of Singapore and the chairman of the Institute of Policy studies. The discussion progressed into a session of active engagement between the audience present at the venue and the audience connected through Facebook. Common questions asked were along the lines of whether India is a threat to Sri Lanka, bringing to light the transfer of professionals and skilled labour from India to Sri Lanka. The Facebook audience seemed concerned about the NT trade barrier removal and the degree of commitment India is showing to facilitate trade. Professor Sally went onto to ending the discussion on a light note, stating that we as Sri Lankans should be much more optimistic about Indo-Lanka relations and the opportunities that may arise from such a relationship.