Sri Lanka bakers not doomed by palm oil ban Trade Minister says, license raj to the rescue
ECONOMYNEXT- Sri Lanka’s bakery industry is not doomed as claimed by some but a license raj on import controls will be extended to rescue bakers and biscuits makers, Trade Minister Bandula Gunewardene said.
“When President Gotabaya Rajapaksa banned the cultivation of Palm trees and the import of palm oil, an opinion is going around that the bakery and biscuit industry is doomed (vinasha vena-war kiyala),” Minister Gunewardene told parliament.
“It is not fair because we are giving the bakery and biscuit industry a license to import palm oil needed for their products without a shortage.”
Minister Gunewardene said anyone can appeal to the Secretary to the Ministry of Finance to import the necessary palm oil required for their industries.
Sri Lanka has already built an extensive licence raj to allow imports for various firms after the worst import controls since the 1970s were imposed on the people as money printing ratcheted up from the first quarter of 2020 creating severe forex shortages.
Instead of fixing monetary instability, Sri Lanka has blamed trade for forex shortage due to strong beliefs in Mercantilsm in the island and is pushing import substitution, a strategy which led to sovereign default in countries that followed similar strategies.
Minister Gunewardene said the intention of the government was to develop the local coconut and coconut oil industries, while reducing the dollars spent on importing palm oil and provide the required oil for industries.
Analysts had warned that the move would push up domestic prices of oil. It may also deprive coconut for high value added exports such as coconut milk and dessicated coconut.
In recent years a trendy product called virgin and extra virgin coconut oil is also being exported.
Sri Lanka lacks evidence based policy making and the midnight gazette as well as the Export Import Control Law contributes to regime uncertainty or the lack of a stable operating environment.
The order to uproot palm oil plants will also imposed costs and losses on growers. Attenuation of profits or outright expropriation is also regime uncertainty.
Analysts say the three major impediments or ‘tripple shackles’ to the progress of the country is monetary instability, regime uncertainty and nationalism.
Monetary instability also re-inforces regime uncertainty through measures such as import controls, foreign exchange controls and import substitution which raises prices of goods while channeling potential tax revenues to the firms that cooked up the tax arbitrage import substitution scheme.
The Import and Export Control Act was brought in 1969 amid excessive money printing which reduced foreign reserves to 40 million US dollars.
Sri Lanka has been suffering forex shortages from soon after a money printing central bank was set up in 1950 ending a currency board the kept stable exchange rate from 1885. (Colombo/Apr07/2021)