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" "There is arguably a more politicized environment for foreign investments, particularly when it come to big projects,” he said. The nominal average for Sri Lanka’s tariffs is about 10 percent which does not look bad when compared with South Asian countries, but it compares badly with East Asian countries, he said. The East Asian average is roughly five percent. Sally says the next government should have a programme to bring them down as close as possible to zero on industrial goods. According to neoclassical economic theorists, tariffs are viewed as distortions to the free market. Typical analyses find that tariffs tend to benefit domestic producers and government at the expense of consumers, and that the net welfare effects of a tariff on the importing country are negative. Normative judgements often follow from these findings, namely that it may be disadvantageous for a country to artificially shield an industry from world markets and that it might be better to allow a collapse to take place. “So that where protection of imports exists, it exists by means of the ad valorem tariff,” Sally said. He added that Sri Lanka should also bring down import protection in terms of ad valorem tariffs, and have one single uniform tariff of average five percent by 2020. “The target I would propose is not several bands.
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Make it as simple as possible,” Sally said.
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