The Economic Reform Bill (ETB) was introduced in the Sri Lankan Parliament by President Ranil Wickremesinghe as Minister of Finance, Economic Stability and National Policy on May 22. The government hopes that the new bill will be debated and passed in Parliament as soon as possible.
The purpose of the bill is to facilitate greater access for international capital, in line with the stringent austerity measures required by the International Monetary Fund (IMF) and the $3 billion bailout loan.
The policies outlined in the bill will be maintained by all future Sri Lankan governments, which will be required to present specific annual targets every March 31. Section 6 states that “all policies, programs, regulations, circulars and directives of the government shall be consistent with the National Policy on Economic Reform.”
Article 11 of the bill proposes the creation of an Economic Commission (EC), which will have broad powers to assist large businesses, including formulating and reviewing investment policies and regulations, and guiding the implementation of reforms necessary to improve the investment climate.
The EC will replace the existing Commission on Investment, which was established in 1978 to promote foreign and domestic investment in and outside the free trade zone. Six of its 10 members are appointed by the president.
The Bill creates several legal entities, such as the Sri Lanka Investment Zone, the Department of International Trade, the National Productivity Commission and the Sri Lanka Institute of Economics and International Trade, which will be run by EC members and other agencies appointed by President Wickremesinghe.
Taken as a whole, the ETB further concentrates economic policy power in the hands of Sri Lanka's president and represents a further step towards an authoritarian form of governance.
Article 13 of the bill lists some of the EC's powers, including the right to approve investment or business agreements with anyone and to declare investment zones virtually anywhere in the country. The bill abolishes “negative lists” — areas where foreign investment is prohibited due to public safety, environmental protection and other concerns. The ETB would allow the Cabinet to approve any investment registered by the EC.
According to Article 46, government agencies must inform the EC within 15 days of any enquiry or request regarding an investment project proposal. If a government agency rejects such a proposal, it must communicate its decision to the EC within 21 days. However, the Commission has the power to make its own recommendations to the Cabinet, through the Minister, on all such investment proposals.
These set timeframes and powers mean the EC can give the go-ahead to any investment project, ignoring the opinion of any other government body, including on labour and environmental protection issues.
According to sections 3 and 4 of the bill, the following measures will be legalized to meet the IMF's conditions for obtaining revenues for external debt repayment:
“By 2032 and beyond, keep the central government's total annual financing needs as a percentage of gross domestic product (GDP) below 13 percent.”
The proposed cuts compare with last year's rate of 27 percent and represent steep cuts to government spending on health, education, farm subsidies and social welfare funds.
* “From 2027 onwards, government revenues will reach at least 15% of total GDP…”
The revenue increase, up from 11 percent last year, is expected to be achieved through further tax hikes on workers and rural residents who are already suffering from high inflation.
The measures are on top of an 18% value-added tax (VAT) already levied on almost all goods and services, as well as higher import and special duties. Last year, the government increased income tax for employees earning more than 100,000 rupees a month.
* “The public debt-to-GDP ratio should be below 95 percent by 2032, and thereafter…”
This ratio, which exceeded 105% last year, can only be reduced by paying down the accumulated debt and limiting new debt through government spending, which will have further impacts on remaining social welfare programs, public education, and public health.
The Economic Reform Bill comes as the government expands the list of state-owned enterprises (SOEs) targeted for privatisation, including Hotel Developers Lanka, Kanwill Holdings, Lanka Hospitals Corporation, Sri Lanka Telecom, Sri Lanka Insurance Company, Lithro Gas Lanka, Lithro Gas Terminals Ltd and SriLankan Airlines. The government has advertised the companies for sale globally and tenders are being invited.
Hundreds of other state-owned enterprises are at risk of privatization, commercialization, or outright closure if deemed unprofitable. These attacks will affect around 500,000 workers employed by these institutions.
International creditors and Sri Lanka's ruling elite are growing worried about growing working-class opposition to IMF austerity measures.
The Ceylon Chamber of Commerce and Industry, Sri Lanka's leading business lobby, recently issued a statement warning that “it is important for all political parties to focus on Sri Lanka's long-term sustainability and avoid exploiting the reform process for short-term electoral gains.”
The main opposition party in Parliament, the Samagi Jana Balawegaya (SJB), has not made any statement on the ETB but one of its leaders, Dr Harsha de Silva, told media that it would be acceptable with some amendments.
The National People's Force (NPP) led by Janata Vimukthi Peramuna has announced that it will move the Supreme Court to challenge the bill, a political diversionary tactic. The ETB will be passed by Parliament with or without the amendments suggested by the Supreme Court.
by Daily FTSunil Handunnetti, a member of the NPP Economic Council, criticized the bill, saying there had been no call from chambers of commerce, industry associations or private sector representatives for the new law. He called on the government to “explain its decision to introduce the bill.” In other words, the JVP/NPP's concerns about the ETB center on how it will affect Sri Lanka's large corporations.
Both the SJB and the JJB continue to insist that all those opposed to the Wickremesinghe government should vote for them in the upcoming presidential and national elections. To deceive the public, they sensationalize by claiming that a government under their control will “renegotiate” the IMF program.
This is a complete lie. Both parties have fully endorsed the IMF's social attacks, including holding closed-door meetings with the IMF's envoy to Sri Lanka and agreeing to implement austerity measures.
Contrary to the stance of these political parties and trade unions, mass protests and appeals against the Wickremesinghe government and its successors will not protect workers' jobs, wages and social conditions.
The bitter experience of the working class during the past two years has not only demonstrated the futility of such action, but has also given the Government time to pursue its cruel social policies.
The Socialist Equality Party (SEP) calls on the working class to rally the rural masses and launch a political struggle for a workers' and peasants' government based on an international socialist perspective, including the cancellation of all foreign debt and the nationalization of banks and large corporations.
