Reforms failed due to dysfunctional State - Economist | Sunday Observer

Reforms failed due to dysfunctional State - Economist

Dr. Razeen Sally
Dr. Razeen Sally

‘Mahinda Chinthana’ reversed the liberal economic policies of the country by advocating illiberal policies, a chauvinistic ethnic agenda, crony capitalism and a foreign policy tilting towards China rather than the West, renowned economist Dr. Razeen Sally told guests at the 69th anniversary Oration of the Central Bank on Wednesday.

Dr. Sally, a visiting associate professor of the Lee Kuan Yew School of Public Policy of the National University of Singapore and an advisor to the Government said liberalisation until about 2005 took place in fits and starts and thereafter the country under the ‘Mahinda Chintana’ from 2005 up to 2015 entered a period of ill-liberalisation marked with chauvinism, crony capitalism and a foreign policy strongly tilted towards China.

“The change of government in 2015 should not be seen as a change that brought about an economic crisis in a classic sense but nevertheless economic liberalisation by far probably was the best since 1977.

However, in the political front there was modest success which I suspect will not be reversed in the near future. I have worries about it.

He said that during his three years experience as a failed advisor to government he had two main sets of observations. One is that this government came into power wholly devoid of talent. The LTTE and the JVP in combination did a spectacular job in destroying the political elite in Sri Lanka. The new government came without an economic plan. It it came with a Christmas tree wish list of things to happen in 2025 and rhetorical nonsense that Sri Lanka could be the next Singapore which is similar to George Orwell’s duckspeak,’ Dr. Sally said.

“The second major observation I have to make was observing the dire state of the Sri Lanka State which in academic jargon is lack of capacity that even simple reforms were difficult to push through because of a dysfunctional State.

The utter shambles of high level meetings in government ministries that start late and end late, five or six different people talking at the same time in five or six directions, everyone taking and no one takes notes and going in all directions supports my point. I am sure Mahesh Amalean and Hanif Yuzoof did not participate in those meetings

From Independence to 1977 there was big expansion of the State with more restrictions on markets between 1950 to 1970 following Nehru’s high mercantilism and many things became politicised particularly in the 1970s.

The old currency board Ceylon inherited from the British morphed into discretionary Central Banking.

The new Monetary Law Act should be passed before election preferably to have more rule based discretionary policy.

Dwelling into the global political scene, he said that he as classical liberal believed in a strong government, rule of law and free markets rather than a weak government.

“The Great Depression was really bigger than a political crisis and that crisis in the West and elsewhere was a pendulous swing from markets to state with much greater intervention with financial regulations, welfare states expanding, protectionism and financial control leading to backward growth,” Dr. Sally said.

Paying tribute to Central Bank Governor Dr. Indrajit Coomaraswamy, Dr. Sally said he along with many others in the room were pleased when Dr. Coomaraswamy was appointed the Governor.

“I thought that he was and remains by far the best person for the job with a reputation of good temperance, ramrod, expertise and dedication to public service,.

He is the only Sri Lankan to be known for not having a bad word by any one in public and not a bad word for another either,” Dr. Sally said, adding that when Dr. Coomaraswamy took the governorship he faced great challenges.

One was to make the Central Bank play a positive role to restore macroeconomic stability, restore the good name of Central Bank and thirdly perhaps in the medium term to restore integrity and professionals of the bank from unprecedented politisation.

These challenges remain unfinished business in Sri Lanka’s noxious political climate.

“I wish Dr. Coomaraswamy and his colleges the best in achieving those objectives.” Dr. Sally said.

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