Coalition politics hurt Sri Lanka liberalization drive: Harsha

ECONOMYNEXT - Sri Lanka's liberalization drive has been hit by policy conflicts due to clashing ideologies of the two main coalition partners, a minister representing Prime Minister Ranil Wickremesinghe's United National Party said.

"Coalition politics is not easy. It’s difficult," National Policies and Economic Affairs State Minister Harsha de Silva told a forum at the Institute of Policy Studies, a Colombo-based think tank.

"We’re more liberal in our approach to economics. The UNP is and the UNP has always been more liberal," he said at an event held at the Institute of Policy Studies.

Sri Lanka Freedom Party (SLFP) of President Maithripala Sirisena had tended to protect businessmen, opposing the ending of monopolies and pushing up import taxes to push prices up for consumers.

"Our coalition partner has been inward looking, so there is certainly a policy conflict and we need to overcome that," de Silva said.

"Our coalition has not been positive towards liberalization."

The United National Party opened the economy in 1978, after it was closed in 1971 as the Bretton Woods system and President Nixon stopped giving gold at the soft-pegged rate of 35 dollars an ounce after printing money to push up economic activity.

Sri Lanka's central bank was not reformed significantly and monetary troubles continued into 1980s with currency depreciation and inflation.

Lion Brewery Ceylon Plc Chief Executive Suresh Shah told the IPS forum that many politicians in government speak of the same issue with differing policy ideologies, hurting investor confidence.

He said it was publicly known that the ideologies of the two main parties were different.

"It was known upfront and managing that should have been one of the most crucial efforts of the coalition. As an outsider, from what I hear, that effort has not gone in."

Sri Lanka's 2015 budget also contained sweeping price controls and a number of new licenses including to import cars, going directly against UNP's 1978 strategy. There was no evidence to show that it was the making of the SLFP.

Under the new Finance Minister Managala Samaraweera however, a liberalization drive has been started, which has been questioned by some SLFP ministers.

Shah said that in business, there are joint ventures between companies with differing viewpoints, although what is heard in the end is the same voice.

"When there are partnerships between a Sri Lankan firm and a big global giant, there are problems in these partnerships, but we manage them," Shah said.

"The issues that we have don’t get spilled over. We speak with one voice."

Finance Minister Mangala Samaraweera had insisted last month that the coalition speaks with one voice after finalising a policy.

De Silva meanwhile said that indulging protectionist lobbies will hold the country back.

“If you leave it to the lobbies who say don’t open, then we are not going to make it. We better understand that,” he said.

“If vested interest is going is going to come up on top and not the national interest, we’re going to miss the bus once again.”

He said the UNP had done crucial free market reforms in 1977 but since then there has not been courage politically to continue the reform path.

Sri Lanka current liberalization plan has also been hit by the soft-peg troubles, with a number of trade controls being slapped by the UNP amid a run on the rupee. (Colombo/Oct16/2018)