Spotlight: Econ Op-eds in Summary (Week ended 19th May '21)
1. Port City Economic Commission Bill is far from objective of developing as regional financial centre
By: Lasantha Somaratne
The Port City Economic Commission bill will ensure that the area acts as a ‘free zone’, having differing laws from the rest of the county. The first free zone in the country was established in Katunayake, in 1978, and was successful in bolstering apparel exports. One of the most successful free zones in the world is the Dubai International Financial Centre (DIFC).
The development of such zones are able to attract skilled workers, financial capital and trade flows. Leadership is a key component for the success of Port City, with the bill having diluted this, as it is not chaired by the President nor Prime Minster. Efficiency within the zone is also affected, as regulators may not be well equipped to deal with a global financial centre.
Given that there is no difference in the legal system applicable between the country and the zone, the Bill may not provide sufficient incentives to bring in major competitive advantages for the country. Regardless, the Bill will be a major step in bringing Sri Lanka closer to being a regional player, and it should focus on being the financial centre for South Asia.
2. COVID-19 resurgence a severe threat for economic revival
By Nimal Sanderatne
Expected economic revival in 2021 might be quite challenging in Sri Lanka due to the resurgence of Covid cases in many regions. Further disruptions in agricultural production, manufacturing and services may further lead to reduced employment, increased poverty and food insecurity. Exacerbating the impacts are the policy challenges relating to the agricultural and manufacturing sectors which could lead to higher imports and lower exports.
Even though the considerable level of mobility during the New Year season is often identified as the cardinal error leading to the increase in Covid cases, more factors such as relaxation of restrictions for some tourists could have contributed to the introduction of new mutations. Whatever the actual reason is, it is clear that it is related to the impatience to get the economy moving by relaxing restrictions.
According to the annual report of Central Bank, Sri Lanka expects to rebound strongly in 2021 and sustain high growth. This was however under the assumption of a recovery in the global economy and its direct effect on increasing exports. At present this is quite unrealistic due to the fact that cases are building up in Sri Lanka as well as the severe situation in India. Thus, for a sustainable economic recovery, successful Covid containment is a mandatory requirement.
(Compiled by: Promodhya Abeysekara, Malitha Goonerathne & Mariyan Perera)
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