The Government’s decision to relax restrictions on imports of multiple items, which had been imposed in stages from 2020 onwards, must be welcomed by all who are familiar with the destructive and knock-on effects of excessive trade restrictions. Setting aside the fact that the levies imposed on these imports are to be sharply increased – which will lead to hiked prices – there is still much to appreciate in this decision.
The import restrictions that have been imposed in Sri Lanka over the past two years were not a scientific policy decision, but a knee-jerk reaction to the shrinking of foreign reserves due to the reduction of tourism revenue, foreign remittances, and export earnings brought about by the Covid-19 pandemic. If it was a well-thought out policy decision, it would not have been carried out overnight, but in phases and according to clear timelines, and most importantly, in consultation with independent economists who have seen the economic effects of closing a country’s trade borders.
The “we can make it all in Sri Lanka” camp, which cheered louder and louder with each new import restriction imposed, must now evaluate how many of these restricted items have a Sri Lankan substitute of comparable quality, two years later. Overly protectionist policies fail to push local brands to enhance their quality or effectiveness, instead encouraging them to stagnate in a pool of complacency, content that the local market demands their products in the absence of any viable alternatives.
Furthermore, this camp of cheerleaders failed to understand that some of the imported items were in fact intermediary goods for the country’s exports and that in this interconnected world market filled with global value chains, Sri Lanka was watching other countries pass it by due to the import restrictions.
Sri Lanka has long envied Singapore and has voted in presidents and governments to take Sri Lanka to that level, including the incumbent President, who according to one of his chief propagandists at the time, Wimal Weerawansa, was a locally manufactured Lee Kuan Yew, the legendary Prime Minister of Singapore. However, it is sometimes conveniently forgotten that, devoid of natural resources, Singapore developed through trade by building its economy around its port, and did not pursue a destructive policy of protectionism believing it would help develop local industries.
Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe revealed last week at a Committee on Public Enterprises (COPE) meeting that the International Monetary Fund (IMF) had assessed that Sri Lanka’s debt is not sustainable as far back as April 2020, at which stage the pandemic was in its infancy in Sri Lanka. However, the economic decision makers, led by President Gotabaya Rajapaksa, chose not to enter into an IMF programme, but to restrict imports that were considered non-essential, a term that has proven to be quite subjective in this scenario, as many have argued that the restricted items are in fact essential to the livelihoods of certain segments of society.
The short-sighted decision to restrict imports to save foreign exchange has led to the decline of many small- and medium-scale businesses, and resulted in a population deprived of accessing the highest quality products from iconic brand names. The deprivation of the world’s best products also has an impact on aspirational Sri Lankans, who have no goal to strive towards, no dream to chase, as the products they covet are unavailable in Sri Lanka.
Competition enhances quality, as has been seen over the years in many Western nations such as the US and Germany, and South East Asian nations such as South Korea and Japan, and Sri Lanka did not need to conduct an experiment of its own in protectionism to figure out what the results would be. While the President must be held accountable for the decision not to approach the IMF until it was two years too late, other economic bigwigs, such as then-Secretary to the President Dr. P. B. Jayasundera and then-State Minister of Finance Ajith Nivard Cabraal, who was subsequently appointed Central Bank Governor, must also be held accountable for the counter-productive import restrictions of the Government.
Now that the unnecessary experiment has been conducted and the economic harm caused by it is plain for all to see, we can only hope wisdom prevails to the extent that such foolhardy and ill-analysed decisions are not allowed to impact the economy negatively ever again.
Belated relaxation of import restrictions a promising sign
02 Jun 2022
Belated relaxation of import restrictions a promising sign
02 Jun 2022
The Government’s decision to relax restrictions on imports of multiple items, which had been imposed in stages from 2020 onwards, must be welcomed by all who are familiar with the destructive and knock-on effects of excessive trade restrictions. Setting aside the fact that the levies imposed on these imports are to be sharply increased – which will lead to hiked prices – there is still much to appreciate in this decision.
The import restrictions that have been imposed in Sri Lanka over the past two years were not a scientific policy decision, but a knee-jerk reaction to the shrinking of foreign reserves due to the reduction of tourism revenue, foreign remittances, and export earnings brought about by the Covid-19 pandemic. If it was a well-thought out policy decision, it would not have been carried out overnight, but in phases and according to clear timelines, and most importantly, in consultation with independent economists who have seen the economic effects of closing a country’s trade borders.
The “we can make it all in Sri Lanka” camp, which cheered louder and louder with each new import restriction imposed, must now evaluate how many of these restricted items have a Sri Lankan substitute of comparable quality, two years later. Overly protectionist policies fail to push local brands to enhance their quality or effectiveness, instead encouraging them to stagnate in a pool of complacency, content that the local market demands their products in the absence of any viable alternatives.
Furthermore, this camp of cheerleaders failed to understand that some of the imported items were in fact intermediary goods for the country’s exports and that in this interconnected world market filled with global value chains, Sri Lanka was watching other countries pass it by due to the import restrictions.
Sri Lanka has long envied Singapore and has voted in presidents and governments to take Sri Lanka to that level, including the incumbent President, who according to one of his chief propagandists at the time, Wimal Weerawansa, was a locally manufactured Lee Kuan Yew, the legendary Prime Minister of Singapore. However, it is sometimes conveniently forgotten that, devoid of natural resources, Singapore developed through trade by building its economy around its port, and did not pursue a destructive policy of protectionism believing it would help develop local industries.
Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe revealed last week at a Committee on Public Enterprises (COPE) meeting that the International Monetary Fund (IMF) had assessed that Sri Lanka’s debt is not sustainable as far back as April 2020, at which stage the pandemic was in its infancy in Sri Lanka. However, the economic decision makers, led by President Gotabaya Rajapaksa, chose not to enter into an IMF programme, but to restrict imports that were considered non-essential, a term that has proven to be quite subjective in this scenario, as many have argued that the restricted items are in fact essential to the livelihoods of certain segments of society.
The short-sighted decision to restrict imports to save foreign exchange has led to the decline of many small- and medium-scale businesses, and resulted in a population deprived of accessing the highest quality products from iconic brand names. The deprivation of the world’s best products also has an impact on aspirational Sri Lankans, who have no goal to strive towards, no dream to chase, as the products they covet are unavailable in Sri Lanka.
Competition enhances quality, as has been seen over the years in many Western nations such as the US and Germany, and South East Asian nations such as South Korea and Japan, and Sri Lanka did not need to conduct an experiment of its own in protectionism to figure out what the results would be. While the President must be held accountable for the decision not to approach the IMF until it was two years too late, other economic bigwigs, such as then-Secretary to the President Dr. P. B. Jayasundera and then-State Minister of Finance Ajith Nivard Cabraal, who was subsequently appointed Central Bank Governor, must also be held accountable for the counter-productive import restrictions of the Government.
Now that the unnecessary experiment has been conducted and the economic harm caused by it is plain for all to see, we can only hope wisdom prevails to the extent that such foolhardy and ill-analysed decisions are not allowed to impact the economy negatively ever again.
Kapruka
Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!
Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Automobile, Mother and Baby Products, Clothing, and Fashion. Additionally, Kapruka offers unique online services like Money Remittance, Astrology, Medicine Delivery, and access to over 700 Top Brands. Also If you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.Send love straight to their heart this Valentine's with our thoughtful gifts!