Plug the leaks

Thursday, 19 April 2012 00:39 - - {{hitsCtrl.values.hits}}

Consistent policies and more investment by the private sector are key to continuing post-war economic growth says a new report on Sri Lanka released by the Asian Development Bank.

In its Asian Development Outlook (ADO) for 2012 released on Tuesday, the ADB said that despite the improved political and economic environment, growth in private investment – domestic and foreign – is falling below planned levels.

It opined that one reason is the Government has taken only a few steps to reduce red tape and improve the business climate needed to create the conditions for ramping up private investment; issues that have been voiced by both investors and opposition politicians several times in the past but have received little attention from the Government.

Although Sri Lanka’s position in the World Bank’s Doing Business index has improved in 2012 to 89 (out of 183 countries) from 98 in 2011, some challenges still deter private investment, especially paying taxes.

It adds that investor confidence is a key factor in attracting investment and this requires a predictable policy environment as articulated and reinforced through the legal, regulatory, and institutional framework. Thus the lack of such an environment for the private sector is a major obstacle to private sector development.

It went on to say that the need for higher private sector investments was in line with Government policy to double per capita income to $2,400 by 2016. The Government, as seen in the framework, would like to see a greater role for the private sector through increased investment by both domestic and foreign investors, as investment is key for increasing supply capacity and bolstering growth.

The framework also seeks private investor participation (beyond the traditional areas of industry and commerce) in infrastructure. The framework projects private investment to rise from around 21% of GDP in 2011 to about 26–28% in the next few years.

This growth cannot happen unless the Government puts in place a framework that does not rely on the President to take action on important points but rather, the institutions that have been established to regularise the macro economy of this country along with law and order. More and more frequently, important decisions are made by an individual rather than through stakeholder consultation and consideration for the long term effects of those decisions.

Wednesday’s newspapers reported yet another custody death in Wadduwa of a 42-year-old fisherman and father of two for possessing marijuana. The interesting scenario of this death was that the deceased was also a petitioner of a fundamental rights case against the Police OIC. Investigations are continuing but there is every danger that the offenders would only be transferred rather than punished for their wrongdoing.

Incidents of this nature, which happen almost monthly, are just one indication of many that law and order has all but broken down in Sri Lanka. Blatant politicisation of institutions is one of the main reasons why Sri Lanka needs to focus on strengthening its ability to implement law and order. The private sector needs to know that corruption is being stamped out, policies are steady and trust in the Government absolute before they can increase investment, particularly if they are foreign.