Spotlight: Econ Op-eds in Summary (Week ended 16th December '20)
1. Why Sri Lanka cannot be a Singapore: Chief Festus Budget
· Sri Lanka aspired to be a Singapore after liberalizing trade and ending a closed economy of the 1970s, however, the current situation in the country indicates that this may not be possible. One of the major problems Sri Lanka faces is its continuous reliance on import substitution.
· Looking into the lessons from Singapore, it is clear that this is not a policy favoured by investors and businesses. Another threat to Sri Lanka comes from nationalism which over the years had resulted in conflicts that had pulled back the country’s economy and made the economy unattractive for investments. This had been amplified by regime uncertainty.
· Another threat that looms ahead for Sri Lanka comes in the form of money printing for debt servicing, which is the result of the powers rested on the Central bank by deciding to eliminate the currency board in 1951. Almost all Prebisch-Triffin central banks in Latin America that tried import substitution ended up with sovereign default or complete meltdowns. It is now time for Sri Lanka to learn a lesson, from these countries if it is to make the dream of becoming a Singapore come true.
2. Protecting jobs & enterprises during crises: How can Sri Lanka respond better?
By: Ashani Abayasekara
· The Budget 2021 proposes a COVID-19 Insurance Fund, stirring controversy among different stakeholders in the country, as the government has limited fiscal space to extend further relief to the public. Employees are currently covered by the EPF and ETF, where there is limited provision for a withdrawal of funds in the case of economic shocks.
· These funds are managed by the Central Bank and represent the largest source of investments for government domestic borrowing, so the fund itself is heavily affected when the government is cash-crunched. Currently, contributions to the fund remain low due to evasion and manipulation of contribution requirements, among other factors.
· In the wake of COVID-19, other countries have made amendments to their EPF regulations to bolster employee protection. In line with this, Sri Lanka should take this opportunity to reform EPF regulations to come to a fairer agreement between employers and employees. A possible option in this context is to allow withdrawals from the EPF to provide assistance during crisis periods.
(Compiled by: Promodhya Abeysekara & Malitha Goonaratne)
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