All sectors should help economic revival efforts | Daily News

All sectors should help economic revival efforts

Prime Minister Dinesh Gunawardena meeting Asian Development Bank economists headed by Vice President Shixen Chen at the Prime Minister’s Office on December 5, 2022.
Prime Minister Dinesh Gunawardena meeting Asian Development Bank economists headed by Vice President Shixen Chen at the Prime Minister’s Office on December 5, 2022.

Sri Lanka’s efforts to put the economy back on track has received accolades by many, including international monetary institutions, foreign envoys representing the most affluent nations and top economists. Earlier this week, a top team of Asian Development Bank economists headed by Vice President Shixen Chen congratulated Prime Minister Dinesh Gunawardena for the successful efforts taken by the Government to face the challenges of the global economic crisis. He praised the strength of the Sri Lankan leadership and its commitment to achieving a speedy revival through economic reforms.

The Government keeps the international community informed of the developments and the President and Prime Minister holds meetings with foreign leaders and ambassadors almost weekly. Prime Minister Gunawardena, despite the busy schedule on Poya Day (December 7) held a detailed discussion with European ambassadors at the Temple Trees. Those who attended included European Union Ambassador, Denis Chibi, Ambassador of Germany, Holger Seubert, Ambassador of the Netherlands, Bonnie Horbach, Ambassador of France, Jean-Francois Pactet and Charge d’Affaires of Embassy of Romania, Victor Tiudjia.

While the country is making slow but steady progress on the economic front, there are severe challenges in obtaining foreign exchange for essential imports and funds for infusing economic activities. There were reports that top exporters park their foreign income abroad causing further difficulties in obtaining foreign exchange for imports, including raw material for the manufacturing sector.

Economists have often highlighted these difficulties and stressed the imperative need for helping the national efforts in every sector, business, export, banking and others at this difficult juncture. Addressing the Sri Lanka Economic Summit on Monday, President Ranil Wickremesinghe asked private sector business community if they are ready to think outside the box and make sacrifices to achieve growth. “We want to build a new economy. An economy that is ready for 2050. Is the private sector ready for it? That’s the only question I have to ask you? Are we going to take up the challenge? Can we take the pain that comes with it, or are we going to hide? Sri Lanka must earn more foreign exchange,” he posed several pertinent questions before the business leaders.

In recent meetings with Prime Minister Gunawardena, top representatives of the World Bank, International Monetary Fund, Asian Development Bank as well as envoys of the most affluent countries assured support for the country’s development and its efforts to overcome economic and fiscal challenges.

The commitment of the Government to carry out reforms in fiscal sectors as well as to restructure the energy, electricity and petroleum sectors have come up for much praise.

Although tax hikes were required, they also were sensitive to the need for safeguarding vulnerable sections of the population.

The ADB Vice President stressed the need for controlling inflation and protecting the vulnerable, underprivileged sections of society. The Prime Minister explained to them the programmes aimed at protecting the vulnerable groups of society and rural agricultural development plans to increase production and increase the export of surplus.

President Wickremesinghe brought out a few home truths to the top professionals who attended the Economic Summit. “You have to compete with the world. We have to be highly competitive. Are you ready to take that challenge? We have to build a highly competitive social market economy. It must benefit all, not only a few. If you are ready there are many opportunities,” the President said.

Speaking at the Summit, World Bank Vice President South Asia Region Martin Raiser said tariff increases are not pleasant, but are necessary to bring revenues that are currently lacking. In the short-term there is a need for a strong financial sector safety net, and stress on prioritisation of processes and transparency in communication.

“We have strongly emphasised the importance of increased competition. Sri Lanka is one of five most protected import markets in the world. That’s not a good recipe for being a good exporter. This is what value chains are all about. That level of protection will have to be gradually reduced and a first step is to simplify para-tariffs,” he said.

Economists also pointed out the need for building a skilled human resource base. Dr. Dushni Weerakoon, Executive Director at the Institute of Policy Studies called for reforms amid other things needed to strengthen Sri Lanka’s factor endowment or the amount of resources such as labour, land, money and entrepreneurship available for a country to be utilised in manufacturing.

As many experts pointed out, it is absolutely critical for Sri Lanka to continue to ensure that its labour force is skilled and reskilled sufficient enough to keep pace with the technological, digital and scientific advances that are happening so fast around the world to stay relevant and competitive.

Acknowledging the long overdue labour reforms, President Ranil Wickremesinghe, in his capacity as the Finance Minister, in November proposed to enact a new, updated and a unified labour law in a manner to benefit both the employers and employees.

As local and foreign economists acknowledged, despite the crisis and its challenges, Sri Lanka has managed to stabilise the economy with its own efforts with help from friendly nations and multilaterals.

The Government started a long due restructuring of the power sector and loss-making Government owned enterprises. Early next year the restructuring of the Ceylon Electricity Board will take place, saving billions of rupees needed to bail out CEB by the Treasury. “If we are to go ahead there is only one thing we can do, as there are no options and I presume I will get chastised again for that,” President Wickremesinghe said.

He also spoke on the need to protect local banks and the Small and Medium Enterprise sector, and stressed that small industries cannot be allowed to collapse and must be saved. He acknowledged that both large and small businesses are looking for relief in terms of interest rates to continue business, and said there must be a meeting of minds including the Central Bank on how to handle the economy and see what relief could be granted to the private sector.

As Ceylon Chamber of Commerce Chairman Vish Govindasamy said at a recent seminar, Sri Lanka is at a crucial point in its economic development trajectory. There are difficult decisions to be made, where the steps taken now by the Government and private sector will determine how we emerge from our current challenges. We need to complement the tax reforms with other structural reforms related to trade, investment, cost-recovery pricing and the ease of doing business.

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