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Benefitting from the Korean Miracle and Diversifying our Economic Relations

The Republic of Korea (ROK)’s development record is arguably the most impressive since the end of the Second World War. The country experienced harsh Japanese rule and subsequently the Korean War (1950-53) which resulted in the partition of the peninsula. ROK has, therefore, had to come through periods of conflict involving each of its two larger neighbours: Japan and China during the last 100-years. Despite this, thriving economic relations with its two neighbours have been a major part of ROK’s success over the last five decades; as has been the US defence umbrella and economic support.

Last Updated on Wednesday, 09 September 2015 12:07

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Why are we so afraid of India?


Time to grasp the opportunity?
In recent days, important voices have been raised about the dangers of completing the Comprehensive Economic Partnership Agreement (CEPA) with India and constructing a land bridge between the two countries. It is noteworthy that the focus has not been on exploring whether the CEPA and the land bridge can be favourable for Sri Lanka. Instead, there has been a clamour to throw the baby out with the bathwater. This article seeks to make the case that both the CEPA and the land bridge are opportunities rather than threats. However, it is important that the CEPA is negotiated in a manner that furthers Sri Lanka’s interests. The article also makes the case that the land bridge should be seen in the context of a pan-Asian and sub-regional push towards greater connectivity.

Last Updated on Tuesday, 18 August 2015 11:43

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Central Bank of Sri Lanka (CBSL) - Reserve Bank of India (RBI) SWAP Arrangement Indian support in time of need

The RBI has stepped in to provide timely support to Sri Lanka when its external finances were deteriorating and the currency was under pressure. The $400 million, drawn upon by the CBSL under the SWAP arrangement with the RBI, was one of the outcomes of Prime Minister Modi’s visit to Sri Lanka. There is a further $1.1 billion which can be utilized. These arrangements are providing much-needed insurance against depleting external reserves and a boost to the creditworthiness of the country. However, it is important to realise that the support provided by the SWAP arrangement with the RBI only serves to buy time. It does not address the underlying causes of the elevated risks associated with the country’s external position.

Last Updated on Wednesday, 27 May 2015 14:28

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The impossible trinity: an immutable law of economics

With the end of the 100 days, moves are currently afoot to complete the constitutional amendments and electoral reform. Elections are also on the horizon. The Pathfinder Foundation is of the view that once these important measures are completed, high priority should be attached to the imperatives for urgent economic reforms. Recent developments have made this even more important.

Last Updated on Tuesday, 28 April 2015 11:00

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Colombo Port City Project, Monster or Trans-formative Opportunity?

Since the beginning of the recent Presidential election campaign, development projects initiated or implemented by the Rajapaksa administration have come under severe criticism by the opposition, mainly on the grounds of corruption or wasteful expenditure. Although the allegations are still being made and are yet to be substantiated in a court of law it is reasonable to assume that a perception has been created among the public against corruption and malpractices. However, long term socio-economic benefits of most of these projects have not been questioned by even the anti-corruption critiques. The writer can vividly remember a similar uproar against the Accelerated Mahaweli Development Project and its numerous components during the early 1980s. In both these situations, criticisms were not necessarily on the outcomes of the project implementation but on the transparency of the processes. Among the projects initiated by the previous administration which came under severe scrutiny, the largest, most diversified and integrated development project is The Colombo Port City Project (CPCP). The purpose of this article is to highlight the salient features of this landmark project and analyse the impact of implementing a project of this nature on the Island of Sri Lanka, strategically located in the Indian Ocean.

Last Updated on Wednesday, 27 May 2015 15:25

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The Choices for Voters: Forthcoming Parliamentary Elections Getting out of or continue to be in the vicious circle?

 

Introduction

Every election in Sri Lanka has been contested by all parties on populist policies. Every government formed after the elections implemented unviable promises during their first few months. They hoped that they could find revenue and cut expenditure by eliminating waste and corruption. Invariably, they later faced hard realities within the domestic as well as the global setting and were compelled to reverse actions taken to fulfill election promises. This democratic process has ended up with fiscal deficits annually and has resulted in high levels of both domestic and foreign debt. This, in turn, demands high debt servicing from the annual budget. The government deficit increases aggregate demand in the economy. This pushes up demand for both imports and domestic goods and services which, in turn, creates inflation as well as exchange rate depreciation. The government borrowings also reduce available credit to private individuals and businesses and hence push interest rates up. These domestic macroeconomic trends are becoming increasingly played out in a context where countries are integrated to global trade, tourism, and labour markets as well as capital movements and financial transactions. This means that national economic sovereignty is becoming increasingly diluted in the modern global economy. This increases the importance of disciplined economic management as countries become more exposed to international markets.

Last Updated on Wednesday, 25 March 2015 09:46

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Relief Delivered: Fiscal Sustainability in Question.

 

The Pathfinder Foundation (PF) has been consistent in its call for prudent fiscal management and market oriented policies. In Economic Alert no: 67 titled ‘The Election Manifestos: An Auction of Non-existent Resources and Beyond’, it highlighted the populist nature of the manifestos of the two main candidates and the need for fiscal discipline. The subsequent Economic Flash 57 titled ‘Economics of the 100 day program: Word of Caution on Populist Measures’ developed upon the same theme. This piece seeks to assess the Interim Budget presented by the new government last week, from both a short and medium-term macroeconomic perspective.

Last Updated on Friday, 06 February 2015 15:22

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Sri Lanka’s Propitious Future: The Role of the Indo-Lanka Economic Partnership.

Sri Lanka’s Transformative Opportunities

 

The Foreign Minister’s visit to India offers an opportunity to reflect on the role of the Indo-Lanka economic partnership in charting the future prosperity of the country. The Pathfinder Foundation (PF) has previously advocated a ‘resetting’ of the Indo-Lanka relationship and it has emphasized that it should be one of ‘irreversible excellence’(article titled ‘ Resetting Indo – Lanka Relations – Irreversible Excellence is the Goal 200414’).

Last Updated on Wednesday, 21 January 2015 19:59

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Welcome to His Holiness Pope Francis: Inspiring Institutional and Policy Reforms

This article is being written on the eve of the elections. By the time it is published the

outcome would be known and the country will be looking forward to the Papal visit. His

Holiness Pope Francis has proved to be a remarkable Pontiff. As an Argentinian, he is the

first person from a developing country to grace this eminent position. His refreshing approach

has undoubtedly been influenced by his Ministry in his homeland which would have given

him first hand exposure to the challenges of living in the developing world.

Last Updated on Monday, 12 January 2015 14:25

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Voices of Asian Dragons, Elephants, Lions & Tigers

Boao Forum for Asia: Sri Lanka’s Opportunity

 

Sri Lanka’s current efforts to promote maritime and commercial hubs as integral components of its development strategy will receive a major boost through the ‘Maritime Silk Road’ (MSR) that is being promoted by the Boao Forum for Asia (BFA).

Last Updated on Monday, 24 November 2014 14:53

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Getting the FTAs right: Benefiting from both China and India.

A Winning Combination.

 

The combination of Sri Lanka’s geographical proximity and multifaceted ties with India which stretch back millennia not least through Buddhism; and the close all weather friendship with the People’s Republic of China which spans over six decades, creates an unprecedented development opportunity. Maximizing commercial opportunities with both countries are not mutually exclusive objectives. Sino-Indian economic ties were given a major boost during President Xi’s recent visit to India. This will inevitably generate new opportunities for Sri Lanka as well (see previous Pathfinder Alert 64 at www.pathfinderfoundation.org). This poses the question as to what would be the most conducive framework for maximizing the benefits from the proximity to India and the closeness to China. Getting the FTAs with the two countries right would act as a major engine for growth and development. It is noteworthy that Mexico has benefited greatly from the North American Free Trade Agreement (NAFTA) which links it both to the US and Canada.

Last Updated on Wednesday, 01 October 2014 14:34

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Economic Alerts Introduction

 

As of October 2010, the PF has been issuing monthly Economic Alerts which have sought to highlight emerging economic challenges & opportunities. These Economic Alerts have gained wide publicity in print and electronic media.

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