On 15 February 2022, at a time when many policymakers weren’t even considering the International Monetary Fund (IMF) as an option, we at Advocata and Advocata Plus made strong recommendations to look beyond the IMF and focus on much-needed reforms. We have been saying that we need a complete ‘reset’ of our economy and that the IMF is just a milestone. We need it for stability, but for growth we will need our own strategy. 

What the IMF can bring is credibility and access to many doors to enable a move from instability to stability. We need to realise that stability without growth is not pleasant, especially in a country like Sri lanka, where the per capita GDP is just a little over $ 4,000; we need growth. 

The growth predictions of the IMF and the Asian Development Bank for Sri Lanka are in a range between 1.3-1.5% for 2024. If we try to grow at that range after a 7.8% economic contraction in 2022 and an additional contraction of 3% in 2023, it will take us a few more years from 2024 to return to where we were in 2019.  

When the economy is not growing, it frustrates people because their income and living standards are not improving compared to people in other countries. Especially at a time when many have left our shores for better living standards and income, we have to catch up soon to retain our skills to get back in the game. 

Growth can only be achieved through trade and being competitive. In order to be competitive and capable of trade, we have to take a look at the economy from a holistic point of view. We have to think about the basics, starting from factors of production such as land, labour, capital, and entrepreneurship. 

Although this is simple in theory, we have quite a lot to change in order to increase the productivity of all main factors of production. Our growth potential in industries and investment is mainly obstructed by land. Around 82% of land is owned by the State and if you ask the Board of Investment (BOI), you will be told of how difficult it is for an investor to get land in Sri Lanka for any type of manufacturing. 

Most of the slots in key BOI zones are occupied. Investors go from pillar to post in order to obtain a slot of land and set up their business. We have locked away massive amounts of capital on our lands and most of the valuable lands are under State-Owned Enterprises (SOEs).

Sri Lanka Railways is one of the main land owners of the country. In contrast, Japan Railways, a private company, owns both the rail track and the land. As a result, many offices, residences, and commercial buildings are operated by the Japan Railways, increasing and facilitating economic activity. 

Anyone who has visited Japan will witness the punctuality, speed, and quality of the transportation system which is an outcome of many factors such as private ownership of land and government regulatory mechanisms. The IMF agreement does not cover such areas and it is Sri Lankan policymakers who should have the foresight to implement reforms related to land and unblock our growth potential. 

Labour regulations in Sri Lanka are some of the most archaic in the region and in the world. Our labour regulations are complicated, with many Wages Boards applying different regulations to different industries. It is too complicated for employers as well as employees. 

Our labour regulations should consider fundamental aspects such as flexibility in work hours and the ability to move across the labour market. At the same time, it should consider an insurance scheme for the unemployed and flexibility for employers. Our labour laws should provide flexibility, security, and convenience for both employer and employee, since otherwise the labour markets will not function to their maximum capacity. 

When it comes to capital and concepts such as money, we are miles behind accelerating growth. Without a system in which the value of the money earned by people is protected against high inflation, our space to attract investors and create new entrepreneurs is limited.  

We have a terribly complicated tariff structure which incentivises corruption and an equally complicated set of non-tariff barriers which only favours a few with political connections at the expense of the majority of poor people. Therefore, trade reforms require a detailed and comprehensive approach such as a low tariff regime with a simple tariff structure so that growth is incentivised. 

One of the major challenges for entrepreneurship is the unnecessary regulations and the licensing regime we have for almost everything. From permits for bus routes and filling stations, importing licences for eggs – you name it, it requires obtaining a licence. If everything requires a licence and if the business registration is time-consuming and too complicated, what incentive does a new entrepreneur have to make a fresh attempt regarding a problem?

If Sri Lanka is to move away from the crisis and take a leap into the developed world, economic growth is paramount. That can only be done by opting for reforms beyond the IMF programme, even while understanding that the IMF is required for debt restructuring.