Right government policies, tax reforms and successful implementation of the Right to Information Act can position Sri Lanka to attract more foreign direct investment and grab a larger share of the global market, the World Bank says.
World Bank Vice President of Equitable Growth, Finance, and Institutions, Jan Walliser says Sri Lanka is well positioned to grab a larger share of the global market with the right supportive policies by the government and the government needs to prepare the economy and promote greater competitiveness.
Walliser visited Sri Lanka in early May and met with senior government officials, key private sector representatives, and members of the Right to Information (RTI) Commission.
The meetings provided an opportunity to discuss the status of comprehensive fiscal, economic, and governance reforms aimed at boosting the economy and promoting equitable development, the World bank said.
The government’s development agenda intends to stimulate exports and attract more foreign direct investment, while creating more private sector jobs and enhancing value-added manufacturing capabilities.
To that end, Walliser said the government needs to prepare the economy and promote greater competitiveness.
According to the World Bank official, Sri Lanka can attract more foreign investment by improving its business climate, focusing on investment promotion activities, and leveraging its burgeoning sustainable tourism sector.
By improving the investment climate and strengthening its performance on international rankings like Doing Business, Sri Lanka can become more attractive to potential investors, the official says.
Ideally, the skills and strengths of the Sri Lankan population can be leveraged to help the island nation become part of global value chains, which can lead to increased job opportunities.
Trade agreements can help reach that goal, Walliser pointed out, as can improvements to Sri Lanka’s business environment, such as providing better access to finance for the private sector.
Walliser noted that a focused effort on investment promotion activities would also draw the kind of interest Sri Lanka seeks. Likewise, a dedicated tourism strategy mapping out infrastructure investment requirements and constraints could help build up Sri Lanka’s burgeoning sustainable tourism industry.
The official said with a tax to GDP ratio of only 10%, Sri Lanka has to consider tax reform thoroughly.
Research has found that countries that collect less than around 15% of GDP are at a disadvantage, not only in providing services, but in economic growth.
“The need to widen the revenue base, while increasing revenue collections is important. However, it is not only how the revenue is raised but also where and how it is spent that will determine the success of reform initiatives,” the World Bank official says.
Walliser explained that poverty alleviation could be addressed in such reform policies through either targeted spending designed to bring relief to the poorest and most vulnerable, or through prioritized investments that create jobs and reduce unemployment for those at the lowest end of the income spectrum.
He said the Right to Information act (RTI) will bring the accountability and transparency Sri Lankans want and when successfully implemented, the newly enacted Act can help create an environment more conducive to reforms. Successful implementation of the RTI will help build broad support for ambitious reforms.
“When citizens feel that they are being asked to contribute and at the same time the government opens up and shares information at the request of the citizens, it enhances cohesiveness and support,” said Walliser.
“Openness is not only important to these types of reform processes but for the government and for the environment in which the government operates.”