Stronger interaction between institutions, processes, & outcomes

Stronger interaction between institutions, processes, & outcomes a must for policy reforms: IPS
2015-10-21
Calls for coherence and prioritisation in design of reforms
Reform ambitions may have to be tempered by political economy realities: Dr. K elegama
Rise in infrastructure investment to spur growth only temporarily
Sustained higher growth to come via a competitive export sector


By Shabiya Ali Ahlam
As Sri Lanka paves its way towards greater economic progress, agenda setting for reforms must begin with attempts to strengthen interactions between institutions, policy processes, and policy outcomes, revealed a top report launched by the Institute of Policy Studies (IPS) yesterday.

Acknowledging that the environment in which many of these transitions take place is strongly influenced by broader factors such as the quality of institutions and governance, the State of the Economy Report 2015, that explores the theme ‘Economic Reforms in Sri Lanka: Political Economy and Institutional Challenges’, calls for coherence and prioritisation in the design of reforms on several fronts, so they add up to a plausible overall economic strategy that will assist in economic development.
“Reforms generate distributional impacts that create ‘losers’ and ‘winners’, entailing short-term adjustment costs and the potential for long- term benefits. Therefore, while reforms need to be ambitious in scope, it is typically the case that ambition may have to be tempered by political economy realities, “said IPS Executive Director Dr. Saman Kelegama while presenting an overview of the report at the launch event that featured Deputy Minister of State Enterprise Development Eran Wickramaratne as Chief Guest.
Noting that overhauling the nation’s tax system, tackling loss making state- owned-enterprises (SOEs), improving labour market efficiency, filling skill gaps in the work force, improving productivity of agriculture, delivering a better safety net to the poor and vulnerable, are just few key area that require attention, Kelegama professed such reforms are politically difficult to deliver through the legislative phase, and are often even more difficult to implement. The wide-ranging report suggests that a rise in infrastructure investment will spur growth only temporarily and emphasises that sustaining higher growth in the long run must come through a competitive export sector through improvements in productivity, notably due to innovation and to investments in human capital.
The statement was arrived at after having taken into account Sri Lanka’s fiscal constraints, the demographics of a contracting labour force, and skill deficiencies.
In an attempt to provide a comprehensive view of the economy, the 2015 report also takes into account the many promising development achievements, opportunities, and challenges ahead. It argues that rising socio-economic prosperity in Sri Lanka, if fostered skilfully and inclusively with progressive reforms, can spur economic dynamism and social progress, and place the country on firmer ground, as it makes a decisive transition into a middle-income economy and beyond.