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Don’t fool people with hand-outs, Sri Lanka’s new govt told

ECONOMYNEXT – Sri Lanka’s new government should drop past policies of deceiving people through hand-outs and adopt a more professional approach, moving away from short-term political expediency to deliver real improvements to living standards, a think-tank has recommended.

“Sri Lankans are now aspirational and impatient. Governments will be judged by their capacity to deliver improving living standards,” the Pathfinder Foundation said in a policy paper that called for urgent action.

“The old stop-go policies of deceiving people with hand-outs and then imposing burdens on them are unlikely to be politically and socially tenable in the future.

“The country needs a new paradigm of economic policy-making which breaks away from the short-term political expedience of the past,” it said.

The Pathfinder Foundation recommended a series of reforms including ones that could be done fast and without political cost such as improving the ease of doing business on the island.

“The overall thrust should be shift to from a culture of entitlements to one which unleashes the capabilities of Sri Lankan’s, especially the young, through their empowerment based on increased opportunities for human resource development on the one hand and productive employment on the other.”

It called on the government to maintain “sound macroeconomic fundamentals”, especially fiscal consolidation and noted that boosting revenue should receive the “highest priority”. 

The policy paper called for reforming land and labour laws saying they keep farmers in perpetual poverty and do not serve the interests of workers or businesses.

“Agricultural productivity should be increased through reform of policies which currently trap a large share of the population in low productivity/low income activities. This is a major causal factor explaining why 25 percent of the population lives below 2.50 US dollars (338 rupees) per day.”

It called for a “coherent and well-coordinated SME development program” that gives high priority to link small enterprises to domestic and external supply chains.

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It suggested reforming public enterprises with the options to include privatisation, strategic investment, listing of minority stakes on the stock market and privatising management.

“Improving public service delivery is essential to meet the requirements of a modernizing and more complex economy and increase the rate of return on the financial and human resources deployed,” the Pathfinder Foundation said.

It also suggested the government develop a well-designed and targeted social protection scheme based on income transfers rather than on distortionary and wasteful subsidies.

“Analysis has shown that a disproportionate share of subsidies benefit the better – off. Consideration should also be given to extending social protection to workers who are adversely affected by the structural changes associated with a modernizing economy.”  (Colombo/September 3 2015)
 

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