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Harvard CID to do growth diagnostics, complexity research in Sri Lanka

ECONOMYNEXT – US based Harvard University’s Center for International Development said it will conduct its trade mark growth diagnostic and complexity research in Sri Lanka.

"We’ll be doing growth diagnostic and complexity research in Sri Lanka led by @ricardo_hausman," the centre said in a twitter.com message, following an earlier EconomyNext story, which quoted Prime Minister Ranil Wickramasinghe.

Ricardo Hausmann, a former minister from Venezuela, heads Harvard CID.

Growth Diagnostics

Growth Diagnostics is a methodology developed by Hausmann, Dani Rodrik and Andrés Velasco to determine the obstacles to a country’s capacity to grow, according to the centre’s website.

"The main idea is that each country may be bumping against different potential constraints but each constellation of constraints must be giving off a different collection of symptoms or signals," Harvard CID says.

"By using Growth Diagnostics, policymakers can develop a clearer theory of change by designing policies that can take the country out of (or work around) its current syndrome and relax its most binding constraints."

Sri Lanka has no recent history of evidence based policy making and interventions are made overnight by politicians succumbing to pressure from special interest groups or their own whims and fancies.

Interventions and Planning

Sri Lanka has a long history of failed industrial and agricultural policy on ‘thrust sectors’ including ceramics, steel, maize, rice, and potatoes which are now heavily protected and overpricing has led to constrains to the shelter of all but the rich and the mal-nutrition of poor children.





But a few unplanned gems which have been beyond imaginations of bureaucrats to plan and incentivise have emerged in recent years.

Among them figure a solid tyre industry which grew so fast that it led to the import of raw rubber and an infotech sector which emerged despite a state monopoly on degree awarding and is crowned by a firm that makes the fastest securities trading software in the world.

People await annual budgets with trepidation to see what new controls, interventions and taxes are foisted upon them. Taxes do not even last a year and are jacked up mid-year as spending accelerates to give more subsidies or privileges to state workers and farmers.

The budget for 2016 highlights included Zwangwirtshaft (economic compulsion) style directed lending slammed on banks and controls on credit products they offer as well as price controls on sprats, a type of dried herring mainly imported from East Asia.

Sadly the economic controls came from an administration that promised not Zwangwirtshaft but Soziale Marktwirtschaft (social market economy).

But the ending of several restrictions on people was also announced in the budget.

It proposed ending controls on tea imports, which could see a repeat of the rubber sector and allow a population that got independence from Britain in 1948 the freedom to consume any tea in the world without producers robbing their food freedom.

But a push-back from nationalist and control oriented special interest groups is expected.

Economic Complexity

"Economic Complexity is a measure of the amount of capabilities and know-how that goes into the production of any given product," Harvard CID says.

"Products are vehicles for knowledge. To make a shirt, one needs to design it, make the fabric, cut it, sew it, pack it, brand it, market it and distribute it.

"As a consequence, countries tend to move from the products they know how to make to others that are not too far away in terms of know-how.

The centre has developed a concept called ‘Product Space’ to define the distance and capabilities required to make two products.

The Atlas of Economic Complexity visualizes many of the findings. (Colombo/Dec03/2015)

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