Although there is much debate among various stakeholders about the best model of governance for the country, everyone seems to agree that Sri Lanka needs effective, accountable, and inclusive institutions to promote sustainable and equitable development.

The importance of building effective institutions has also been highlighted by the Open Working Group (OWG) on Sustainable Development Goals (SDGs) in goal 16; promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

The need to create inclusive institutions in Sri Lanka, improve existing institutional infrastructure, and formulate and implement a progressive reform regime, have been emphasized at many fora, including at the 2017 Sri Lanka Economic Summit

However, despite this commonly shared view, Sri Lanka has been slow to introduce essential institutional reforms. Rohan Samarajiva, founding Chair of LIRNEasia, an ICT policy and regulation think tank active across emerging Asia and the Pacific cited lack of political will as the main reason for this.

"When the government had the will to carry out necessary reforms, it worked well," he said citing the impact of institutional reform of the telecommunication sector in Sri Lanka which has made Sri Lanka one of the leaders in South Asia’s telecommunication sector.

State Minister of Finance, Eran Wickramaratne concurred saying that a large number of investors were hesitant to invest in Sri Lanka due to the lack of institutional reforms which could possibly make investments vulnerable.

"Breakdown in the rule of law is another reason for the lack of strong institutions. This is why we amended the constitution, and with the amendment, we will take fundamental steps in building robust institutions," he said.  

Wickramaratne added that the coalition government affords an excellent opportunity for Sri Lanka to carry out difficult institutional reforms. The minister added that legislations that ensure strong tax administrations and sound public financial management have already been passed, and that these legislations would help maximize the domestic sources of income that are necessary for the government to function, to sustain social safety nets, to maintain long-term fiscal sustainability, and to free up fiscal space for pursuing socio-economic objectives.

"The United Nations considers that 20% of GDP mobilized as tax is the minimum level necessary to achieve the Millennium Development Goals. Yet Sri Lanka's tax revenue is less than the low-income African countries that mobilized only around 16.8% of their GDP in tax revenues on average. But I think we have made significant progress in the last three years and things will improve further with the introduction of performance based budgeting. That is our vision for 2025,” Wickramaratne added.

The Ceylon Chamber of Commerce

Economic Intelligence Unit

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