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Sunday September 19th, 2021

Sri Lanka monetary and fiscal policies for export industry, but businesses not ready: de Zilwa

ECONOMYNEXT – Sri Lanka now has fiscal and monetary policies directed towards industry and exports like never before but businesses are not ready and are not thinking big, Kenneth de Zilwa, Chairman of Lanka Clear said.

“To compete globally for once we have a very aligned macro-economic framework in place,” de Zilwa told an online forum co-hosted by EconomyNext and Friedrich Naumann Foundation.

“Why I say that it is aligned is if we want to compete, your cost structures need to be properly looked at.

“You can’t compete otherwise. And for that you have to have your fiscal policy in place and the monetary policy targeting towards the export and industrial policy and also our export policy and industrial policy.

“We have never had this before.”

Comparative Advantage

In Sri Lanka many people were taught the theory of comparative advantage, which was not correct, he said.

“The doctrine of comparative advantage which we have been taught in school and also in our marketing textbooks,” he said.

“Now that is an absolutely rubbish theory. If you go and see what the US has done you will see empirical evidence to say that it is rubbish.

“You can definitely look it up and do a comparative analysis. The sad thing is in Sri Lanka we do not do a lot of reading and look at what history has done.”

Business Cycle and Technology

De Zilwa, who is a business cycle analyst, said the world was now in a Kondratieff cycle.

The fourth such cycle ranged from the 1930 to 1970s involving automobiles and petrochemicals.

The fifth involved information technology and communications technology. Now economies were recovering from Covid-19.

With economies being shut due to Covid-19 Sri Lanka had an opportunity in the new cycle he said.

“Their economies were shut there was no big advantage where we are in the positioning structure.

“Therefore Sri Lanka has a good platform now with part of the bigger business cycle that is unfolding,” he said.

“And this bigger business cycle is unfolding with technology, green technology, energy efficiencies.

“We sit on a huge resource base of minerals. Sad to say we have done absolutely nothing about it.”

“If we look at bank asset allocation it is all consumer. And we keep talking about a production economy. “So it is a laughing stock.

Production Economy

No economy had developed without a production base; de Zilwa said naming several countries that had made gains in industry.

“If you look at empirically, empirical evidence is very clear,” he said. “No economy has developed without a production base. From US to Germany to Japan to Taiwan to Korea to Malaysia, even to Singapore and now China.

“So it is clearly evident. Somehow we have been distracted we keep fighting for the smaller pie, why we feel that economies of scale are only in Sri Lanka.

But Sri Lankan businesses were not ready and did not have a mindset he said despite Sri Lanka now having an aligned macro-economic framework in place and policies.

He said economies of scale were not in Sri Lanka and companies had to look at the region and world using the policy framework provided.

“But I do not think we are thinking big,” de Zilwa said. “I mean if you look at what we are doing its absolute garbage.

“Right now our corporate leaders are not ready, our businesses are not ready, business models are not ready. We cannot compete globally.”

“So it is absolutely essential for Sri Lanka to pull their minds out of wherever they are keeping it.” (Colombo/July18/2021)

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