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Sri Lanka tourism minister on warpath against competitive economy

ECONOMYNEXT – Sri Lanka’s tourism minister is planning to limit hotels in the capital Colombo claiming an oversupply, a media report said, in the latest blow to the promise of a competitive ‘social market economy’ by the current administration.

"Now so many hotels are coming up in the city," Sri Lanka’s Daily Mirror Business newspaper quoted the tourism minister John Amaratunga as saying.

"In fact, we are now thinking that it’s time to say, ‘Enough is enough in the city, please go out of the city’."

Sri Lanka’s international trade has declined as a share of gross domestic product over the last decade amid rising protectionism and successful lobbying by rent seeking businesses during the ousted Rajapaksa regime.

The Rajapaksa regime, brought minimal room rate to Colombo’s five stars, after being egged on by rent seeking Colombo hoteliers.

However the regime mostly left the tourism sector alone, allowing a market driven transformation with investments flowing into lean, modern, modern-rustic, minimalistic, properties, driven by online booking engines which can compete with East Asia.

Branded hotels, operating in different niches, have also come to Colombo and elsewhere.

Tourism is an export is an export of services, which will lose customers if the state tries to limit competition.

The industry has already lost competitiveness due to higher building costs coming from import taxes on steel and other building materials, which have been imposed to give rents to oligarchs with political power.

Such hotels, especially in the capital, are not only competing against domestic hotels but popular capitals elsewhere in Asia, where much more entertainment and shopping, cheaper and more interesting food and drink options are on offer.





Top hotel groups, which are unused to such domestic competition have been calling on the state to bring regulations to control smaller establishments, which provide value for money.

Overturning of the established order shows the dynamism of a sector and is not something to be stifled but celebrated, economic analysts say.

On the other hand the use of the coercive power of the state to limit competition and stop new hotel investments in the capital, goes directly against the promise of a competitive social market economy with which the current administration came to power.

The promise of a social market economy is also contained in a Vision 2025 of the government.

The tourism minister’s effective declaration of war on a competitive economy with the threat to take away the freedom to build hotels in the capital comes shortly after the appointment of Finance Mangala Samaraweera State Minister Eran Wickremaratne which raised hopes that more economic freedoms will be granted to the people, releasing them from the grip of rent seeking oligarchs and other businessmen.

Minister Samaraweera has a track record of creating competition and liberalization of telecoms sector and batting on behalf of consumer sovereignty. Though tariffs initially went up, the sector was transformed.

Minister Seneviratne also wanted to strictly enforce floor rates in Colombo hotels, by starting audits of hotels, the Daily Mirror Business said.

"We have introduced a minimum rate because the hotelier want it," he was quoted as saying.

However the floor rate was being violated ‘behind the scenes’ Minister Amaratunga claimed.

The stricter enforcement of floor rates comes as the finance ministry has moved to remove some price controls, imposed in the first two years of the new administration.

Politcs are a large part of peoples lives in Sri Lanka as the elected ruling class and buraucrats try to use their coercive powers to rob freedoms and intervene in the lives of citizens, sometimes at the behest of special interest groups. (Colombo/Sept17/2017 – Corrected)

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