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Friday May 14th, 2021
Political News

Sri Lanka opposition to expand some economic freedoms, curb others

EconomyNext: Sri Lanka’s opposition has advocated curbs on people’s freedom of exchange to artificially boost profits of producer lobbies in an election manifesto though some economic freedoms have been proposed.

"Import expenses that devalue the exchange value of the rupee will be curtailed while steps will be taken to produce to the maximum what could be manufactured in the country," a manifesto of common opposition candidate Maithripla Sirisena said.

"Security of supply will be afforded to drugs, flour, milk-powder and foodstuffs such as sugar. Nobody will be allowed to use these essential goods as a trade weapon."

Since the creation of a money printing central bank in 1951 which led to currency depreciation and inflation, peoples’ trade freedoms have been robbed by elected rulers who printed money to give subsidies and then blamed imports for currency troubles.

Analysts say the opposition is also now benefitting from the economic hardships imposed on the people by high priced rice, sugar and milk powder due supporting a producer lobby, which has kept food prices artificially high.

Currency depreciation in 2012 credit funded energy subsidies ultimately accommodated by the Central Bank has also made life difficult for the people.

Sri Lanka already has higher-than-world-prices for milk powder, sugar, rice and wheat flour due to German style Ernährungsautarkie policies which promote high food prices and an inefficient ‘import substitution’ producer lobby that is not efficient enough to export.

"In order to encourage entrepreneurs manufacturing import substitutes a joint banking system, a centralized marketing plan, a joint technological plant and a common enterprise upliftment plan will be worked out combining state and private sectors," the manifesto said.

Of late the state has got involved in producing sugar, by expropriating private firms, with import duties kept high to prevent prices dropping. Meanwhile more tax payer money has been pumped into the firms.

In Sri Lanka brown sugar – which contain more molasses and has a lower calorific value but some believe to be healthier – is more expensive than white sugar. Domestic production of tinned fish has also imposed economic hardships on the poor.

Several tinned fish companies have come up set up under cover of prices kept artificially high with import duties.

It is not clear what state interventions are proposed for drugs, but if price controls disrupt supplies,  or if the  ability  of  people to buy branded drugs from developed markets – where efficacy is tested unlike generics – is curbed some analysts fear that the sick will also suffer like consumers of sugar, rice, tinned fish and dairy products suffer now.

But Sirisena’s manifesto separately said excessively high import tariffs on several goods and fuel taxes will be reduced, improving trade freedoms, though the items were not mentioned.

"Custom duties will be relaxed on 10 essential food items to give relief to the people
burdened with high cost of living," the manifesto said.

"The prices of essential food items will come down instantly as a result."

The manifesto also said taxes on boats and fishing equipment will be reduced, improving the freedoms of fishermen, which have been curbed by boat making businessmen.

High taxes on fuel will also be cut, the manifesto said.

The proposal to cut fuel prices comes as global food, energy and metal prices are falling with the US Federal Reserve ending its deadly money printing operations, leading to a real appreciation of the dollar.

The opposition manifesto is also promising guaranteed prices for export commodities like tea and rubber, which are also expected to fall further with continued improvements to US monetary policy.

A floor price of 350 rupees a kilogram for rubber and 80 to 90 rupees a kilogram for green leaf tea has been offered.

Building of new government departments to regulate or support various sectors has also been proposed.

By curbing imports and trade freedoms of ordinary people, the state allows producers and businessmen to exploit consumers and gain unjust profits which are called rents by economists.

Without competition, consumers become price takers and producers and big industrialists have little interest to improve on quality and deliver value for money.

By raising domestic costs, including living costs, import restrictions ultimately hurt export competitiveness.

Sri Lanka Economics Association has also warned that import restrictions will ultimately hurt the ability of the country to export.

The manifesto meanwhile said special tax concessions and priority would be given to industries with substantial contributions from local investors in the fields of technology exchange, local value addition and local end-product manufacturing.

Export manufacturers who wish to re-enter the international market will get tax and energy concessions.

"I will diversify our exports and improve new fields of export such as information and communication technology," the manifesto said.

 Fifty five percent of our export market comprises Europe and North America. The prime attention of the country will be focused on extending it to Asia, South America and Africa."

Though Sirisena plans to extend restrictions on economic freedoms of the people and favour producers over ordinary wage earners, he has also promised to re-establish rule of law with an independent judiciary and a public service, setting the institutional mechanisms for justice and freedom.

Sirisena’s manifesto also promised to abolish a powerful executive presidential system which has arbitrary powers and also change the electoral system of the country.

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