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Making Sense of Economic Policies


A.D.V. de S. Indraratna

CONTEMPORARY ECONOMIC ISSUES: SRI LANKA IN THE GLOBAL CONTEXT
By Saman Kelegama
Sri Lanka Economic Association, 2006, pp. 233, SL Rs. 500.00

VOLUME XXXI NUMBER 10 October 2007

This book is based on weekly commentaries on economic issues published in a Sunday newspaper for about 10 months from the last week of May 2005 to March 2006. Most of these commentaries were written under the pen-name Economist by the author of this volume. The book covers an important period where a number of domestic and global events influenced the economy of Sri Lanka at regular intervals—a crisis in the electric power sector, the international oil price hike, GSP-Plus scheme coming into operation, operationalization of the Pakistan-Sri Lanka Bilateral Free Trade Agreement, steps to operationalize SAFTA, WTO debates before the Hong Kong Summit and the aftermath, growth of the Business Process Outsourc-ing industry, etc. The period under consideration also saw increasing inflow of aid, economic policy discussions and debates before the Presidential Election.   The 40 essays in this volume cover these issues and many more. They have been organized into six sections: Economic Debates, Macroeconomy, Industrialization, Infrastructure, Regionalism and the Global Scenario. Each one of these essays stands on its own, and thus some repetitions are inevitable in the compendium. Most essays should be read in the context of the events at the time of writing, the date of which is given at the bottom of the first page of each essay.   Although Sri Lanka has experienced twenty-eight years of reforms, there are still rigid pockets in the economy where reforms are required for better functioning of market forces. However, as the author correctly points out there are always winners and losers when implementing reforms. Given the fact that the reforms are more complex in these prevailing pockets, there has to be a strategy in place before implementing reform to mobilize the potential winners and neutralize protest by potential losers by open dialogue. Otherwise reforms can backfire. One of the key messages coming out from the first part of the book is that in recent years Sri Lanka has not been successful in managing change, i.e., coping with short term costs of economic reform. The Ceylon Electricity Board is a good example in this regard. Marketing the virtues of reform, coalition building and neutralizing protest by open dialogue were conspicuous by their absence in all reform programmes hitherto pursued. Consequently, reforms were abandoned just after initiating them.   The author argues that there is no point in highlighting the well-known static efficiency gains of a neo-liberal reform process in the absence of ...


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