Sri Lanka squandered chance to reform and grow: Razeen Sally

ECONOMYNEXT – Sri Lanka has thrown away a once in a lifetime opportunity to reform the economy and grow that opened up in 2015, and is continuing with China dependent controlled economy, where modest political reforms achieved may also be reversed, a top economist has said.

Ranil Wickremesinghe in 2015 had probably the best opportunity since 1977 for liberal and economic reforms to ratchet up growth, Razeen Sally, a visiting professor at the National University of Singapore said.

“On the political front we have seen modest successes, and I suspect those reforms are not major enough not to be reversed in the near future,” Sally said delivering a lecture on 69 year anniversary of Sri Lanka’s central bank.

“On the economic front it failed comprehensively.”

He said some modest success had been achieved in correcting of the past and current administration had been corrected.

Sally said the administration came to power without an economic team of the likes of which that was put into place in July 1977.

“The new government came into power without an economic plan and they did not develop one,” Sally said.

The new administration had continued the same plan as adopted by the Rajapaksa administration with China as ‘first friend’.

He said the administration came up with a rhetorical wish list where a Singapore style take-off was supposed to happen.

The machinery of the state to implement reforms had been lost, he said.

“In academic jargon there is a serious lack of state capacity,” Sally said. “Even quite simple reforms were difficult to push through because of the dysfunction of the Sri Lanka state.”

It was not a Sri Lankan exception and echoes were seen in other parts of the world as well. Sally said he had served as a ‘failed advisor; to the government for three years.

Sri Lanka public service has been systematically broken through first in the republican constitution and the 1979 one, critics say.

In 1977 however there were enough remaining senior officials from the permanent secretary era to carry out reforms, analysts say. Now ministry secretaries lose power as soon as a cabinet is dissolved leaving dangerous discontinuity and vacuum, as well progressive deterioration of capacity.

Meanwhile Sally said high level ministry meetings which he had taken part in were a ‘shambles’.

“There is hardly a coherent agenda, there are five or six different people speaking at the same time veering off in five or six different directions, everybody taking and nobody listening, and nobody talking notes.There is no conclusion and the process starts all over again.”

From 2005 to 2015 Sri Lanka had been de-liberalized by the Rajapaska regime, with a swing towards state intervention away from markets.

Sri Lanka had swung away from the West and India towards China and become more nationalist.

Read More

What went wrong; Sri Lanka’s illiberal economics and unsound money

Hayek’s warning: lost generation economics kill Sri Lanka’s social market economy attempt

He said Sri Lanka was now heading into a world where a rule based order set up after the second World War and strengthened in the 1980s which helped East Asia and later India to grow with free and peaceful global order was breaking down. (Colombo/Sept12/2019)