Dec 20, 2013 (LBO) – Sri Lanka will have to reverse a recent trend of de-liberalization to spur growth to high levels and work towards greater macro-stability, which has been a chronic problem, a top international economist said.
Protection for domestic business drives capital and factors of production towards inefficient tax arbitraging rent seeking businesses at the expense of free enterprise in other sectors including exports.
Analysts say for example it is more profitable to tear up rubber trees, where the output faces an export tax and plant oil palm instead, which can be sold at a much higher price than in Malaysia or Indonesia.
Self-sufficiency particularly in food was a failed policy propagated by the so-called historical economics school of Germany which did not use deductive reasoning but used an inductive process and nationalism to support their views.
Analysts say it is never too late to change policy and give back economic freedoms to the citizens by reducing state interventions and curbs so that they can engage in economic activities more freely.
Sri Lanka also has problems with governance and deteriorating rule of law, the one thing a modern government is expected to deliver to the people, w