July 2007 marks the 30th anniversary of the free market in Sri Lanka.“The United National Party led by Junius Richard Jayewardene (‘JR’) swept to victory over Sirimavo Bandaranaike's Sri Lanka Freedom Party. With JR’s swearing in as Prime Minister on July 23rd 2007 came liberalisation of the economy. The shackles of a closed, state-controlled economy - which witnessed bread queues and foreign exchange shortages - were broken. JR opened the economy to market forces, to which many credit the subsequent growth - but also greater social divisions. The move also destroyed local industry to some extent.”
- Feizal Samath, Business Editor, The ST Financial Times (STFT)
STFT: Has the open economy brought gains to this country?
AM: Yes… The foreign exchange crisis of the 1970s brought home the message that we are living in an interlinked world. We realised, even before other countries did, the need to set our sails according to the new economic winds that had begun to blow across the globe.
STFT: Would we have done any better under a free market if not for the conflict that broke out in the early 1980s?
AM: Yes… The conflict represents a diversion of productive resources for destructive purposes. These could have been better deployed on infrastructure and social development.
STFT: Assuming there had been no conflict, would Sri Lanka have developed to become a successful state like other thriving Asian economies?
AM: Yes… It is estimated that the conflict has trimmed 2 percentage points off our GDP each year. The compounded effect is that our per capita income would have been at least 60% higher than it currently is. Besides, the 'brain drain' phenomenon wouldn't have been as rapid.
STFT: Has local industry been affected by the free market?
AM: Yes… Economic forces have caused some domestic industries to perform and others to perish. With uncompetitive firms having fallen by the wayside, there have been social costs.
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