ECONOMYNEXT – New insurance products could replace unsustainable subsidies in Sri Lanka which have failed to adequately support recipients, ranging from farmers to exporters, Deputy Minister of Public Enterprise Development Eran Wickramaratne said.
Sri Lanka’s insurance market badly needs new products to protect farmers against crop failures and workers against unemployment, he told the opening of the International Cooperative & Mutual Insurance Federation’s three-day symposium in Colombo today.
Wickramaratne said it was unrealistic to expect the government to intervene every time businesses got into trouble.
“I must stress that while the government is here to serve the people, it realistically can’t rescue a firm or industry at every turn. In fact, government rescue is a weak form of insurance.”
Taking the agricultural sector as an example, he asked “by throwing subsidies at farmers and then taking it back by increasing prices and taxes, are the farmers any stronger than they were before?”
The practice, resorted to by successive governments which fuelled inflation and kept farmers in perpetual poverty was “a substandard form of providing insurance”, Wickramaratne said.
But he noted that if proper insurance schemes are technically well devised and implemented, they could provide the same functions as government subsidies but in a much more powerful form that creates more confidence.
Wickramaratne said the county’s export finance sector needed attention since it lacked sufficient insurance.
The government’s 2016 budget, unveiled last month, proposed setting up an Export Import Bank t support exporters.
But Wickramaratne noted that the establishment of such a corporate institution was not solely sufficient to promote the country’s exports.
Insurance can play a vital role as an instrument which supports exports, he said.
A longstanding problem in the insurance sector has been insuring against risks that affect rural communities, Wickramaratne said.
“Agricultural crop insurance is difficult. Insuring farmers against fluctuations in weather or bad harvests is a serious issue,” he said. “Yet there is very little of it in Sri Lanka.”
Another example was that, despite discussing labor market flexibility, the island still does not have insurance for government unemployment.
“These are some of the risks that people face, which ought to be insured against,” Wickramaratne said. (Colombo/December 07 2015)