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Government in Petroleum Trade Is it Really Necessary?

Since nationalization of the petroleum import and distribution trade in 1961 successive Sri Lankan Governments have continued to carry the burden of operating this business. During the past four decades, the political and economic burden became evident with the drastic increase of prices, partly due to the cartel exercised by OPEC. This has meant that price increases as well as product and service quality have been key issues for Opposition political parties in leveling criticism against any government that was in power.  In the recent past too, we have seen the Government being criticized on petroleum trade related issues.

Last Updated on Tuesday, 06 March 2012 21:44

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Dead or Buried Capital or a Factor of Production?

The issue of state-owned land being offered to foreign and local investors on freehold or  long-term leases , for establishing commercial projects, has been the subject of much debate both in Parliament and the media. The public debate is focused mostly on prime land in Colombo city. However, the arguments for and against the sale of state land also apply to transactions in other parts of the country. One extreme argument is that none of the government owned-land should be divested to any local or foreign investors but allowed to remain with the state, whether productively used, under-utilised or completely unused. The opposite of this argument is that the state should not own any land other than for security, environmental or other such reasons, while allowing any enterprise to utilize other land for producing goods and services thereby generating employment and increasing  incomes.

Last Updated on Tuesday, 06 March 2012 22:15

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Free and Free to Choose Tertiary Education

Changing the Education Landscape in Sri Lanka: A Call for Pragmatism

The debate regarding private participation in the provision of tertiary education, in Sri Lanka, has been around for a long time. Attempts to establish private universities have met with fierce resistance in the past. For instance, the North Colombo Private Medical College was taken over by the government due to strong pressure from various vested interests.

Last Updated on Tuesday, 06 March 2012 21:43

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The Global Economic Landscape: Some Reflections


Growth has stalled in the global economy. Stock markets have plummeted. Risk appetite has declined and there has been a flow of resources to safe havens. The IMF has stated that the world economy has entered its most dangerous phase since the financial crisis of 2008. The ammunition available to policy-makers is much reduced with interest rates at extremely low levels and the scope for expansionary fiscal policy circumscribed by the large stimulus packages already introduced.

Last Updated on Tuesday, 06 March 2012 22:16

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Time to Act is Now: Good to Learn from Others Mistakes.

•    The cost to the people of policy mistakes increases as a country moves from low to middle-income level.
•    Trade deficit is increasing sharply.
•    The proportion of the trade deficit unfinanced by remittances is increasing.
•    Non-borrowed reserves are declining.

Last Updated on Tuesday, 06 March 2012 22:03

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Are we serious about private investment? Confidence: the Most Critical Element of the Business Climate

Need of the Hour

Investment needs to increase from 28% (2010) to 34% of GDP to attain the government’s growth target of 8%, as Sri Lanka’s incremental capital output ratio is 4.2. Public investment has been capped at 6% - 7% of GDP. This means that private investment, both domestic and foreign, needs to increase from the current 21% of GDP to 27-28%. It is, therefore, important to create a conducive business climate that encourages private investors to fill this gap. Failure to do so will mean that the government’s growth target will not be met on a sustained basis. Attempts to circumvent the lack of private investment by raising the level of public investment are likely to undermine the government’s own fiscal consolidation targets and thereby have an adverse impact on the country’s macroeconomic fundamentals. As a lower-middle-income country with an increasing exposure to capital markets, Sri Lanka cannot afford to allow this to happen.

Last Updated on Tuesday, 06 March 2012 20:46

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Impending Food Crisis and Enhancing Food Security: What is to be done?

i)    Introduction:

The recent floods affecting several districts of Sri Lanka and other weather related events in several parts of the world have brought to the fore a number of public  policy issues.  Major challenges are looming up on the horizon, both within Sri Lanka and globally.  A holistic package of reforms would be needed to address both the short-term food crisis and increasing concerns related to longer-term food security.  The upward pressures on food prices are also being amplified by rising oil prices which impact on the former through a number of channels.

Last Updated on Tuesday, 06 March 2012 21:45

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Increasing Investor Confidence, Attracting Investment:

A Golden Opportunity for the Government

The previous Economic Alert sought to highlight some of the threats to the investment climate generated by the Revival of Under-Performing Enterprises and Under -Utilized Assets Legislation.

Last Updated on Tuesday, 06 March 2012 21:51

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Jump - Starting Growth: What Can We Learn from Vietnam and Malaysia?

I.    Our Targets

The President Mahinda Rajapakse as the Minister of Finance has once again reiterated in the Budget of 2012, the Government’s commitment to a sustainable growth target of 8% - 10%. A key objective of achieving this growth is to double per capita GDP to over $4,000 by 2016. The recent experiences of Vietnam and Malaysia provide important insights for developing a road map for achieving these goals.

Last Updated on Tuesday, 06 March 2012 21:57

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Depreciation of Rupee: Is it a Powerful Tool to Drive Growth and Employment?

The Pathfinder Foundation strongly supports the depreciation of the Rupee by three percent announced in the Budget Speech. The Economic Alert – 15 called for early remedial action to address the deteriorating trade balance; the buildup of foreign commercial debt/increased debt servicing; and the decline in non-borrowed reserves and running down of extremely large amounts of the country’s foreign reserves defending the Rupee.

Last Updated on Sunday, 04 March 2012 16:16

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India’s Expanding Economic Cooperation Arrangements in Asia.

India has reduced its sensitive list of products for the Least Developed Countries (LDC’s) under the agreement on the South Asia Free Trade Area (SAFTA) from 480 to 25 tariff lines. This means that Afghanistan, Bhutan, Nepal and most importantly Bangladesh will enjoy a significant competitive advantage over Sri Lankan businesses in accessing the rapidly growing Indian market. (Sri Lanka is ineligible for such preferences as it is a lower middle income country.) Local entrepreneurs have already invested in Bangladesh to take advantage of lower costs and the trade preferences enjoyed by that country as a LDC. Bangladesh’s increased preferential access to the Indian market is likely to increase the momentum of such investment and accelerate the loss of growth, employment and incomes experienced by Sri Lanka.

Last Updated on Sunday, 04 March 2012 16:28

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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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