Ravi to liberate Sri Lanka's homeless from grip of protectionists
Nov 23, 2015 10:32 AM GMT+0530 | 1 Comment(s)
ECONOMYNEXT - Sri Lanka's Finance Minister Ravi Karunanayake has proposed to cut protectionist taxes on steel and sanitary wear which was making housebuilding expensive for struggling young families who were trying to put a roof over their heads.
"To address the short supply and high prices of building materials such as steel, tiles and sanitary ware, import related duties will be revised downwards" Karunanayake said in his budget speech.
It is not clear to what extent the import and excise duties on building materials would be revised down and prices would come down.
In Sri Lanka many houses do not have toilets and toilets fitting are much more expensive than East Asian nations such as Malaysia and the ASEAN region, where free trade has dramatically raised the living standards of people and forced business to compete.
Up to 67 percent of people in rural areas do not have access to toilets and about 30 percent in urban areas, according to some estimates.
Separately Karunanayake raised the import duty on most goods from 25 to 30 percent and ended a 7.5 percent band.
Sri Lanka's ceramic and steel producers had built near monopolies in collusion with the ousted Rajapaka regime which raised import duties of essential items that people cannot do without including houses and food.
The policy allowed powerful lobby groups such as the Sri Lanka Ceramics Council to exploit the homeless by lobbying for import taxes to be raised.
The ousted regime practised economic nationalism, pioneered in countries like Germany in the run up to and during Nazism, which sought to create an autarky or 'self-sufficiency.'
Protection or 'infant industry' is an argument that was first devised in the US and taken to Europe by Frederick List, a proponent of historical economics, which helped boost economic nationalism and later Nazism in Germany.
Though it was supposed to be temporary protection is usually given to industries until their 'geriatric', helping build monopolies while ordinary people suffer, because protected industries become powerful lobby groups with funding clout and government also fear job losses.
High taxes were forcing importers to bring in factory rejects to give reasonable priced goods to people. Domestic firms also sell factory rejects.
At the same time owners of protected businesses shed crocodile tears lamenting about 'low quality imports' though it is none of their business, if people choose to spend their money on whatever quality/price combination they choose.
In Western nations, when ordinary people wised up to the tricks of protectionists, business lobbies came up with 'anti-dumping' legislation to cut access of the poor to cheaper foreign goods.