Regulatory policies seen as key to SL’s global competitiveness

By Ifham Nizam

As Sri Lanka tackles its economic recovery and development, regulatory policies across key sectors—trade, energy and agriculture—are set to play a pivotal role in determining the nation’s global competitiveness, Institute of Policy Studies, Research Fellow, Dr. Manoj Thibbotuwawa said.

Speaking on the topic `How Regulatory Policies Could Shape Global Competitiveness’ at a discussion held at the IPS recently in Colombo, he said, whether carefully crafted or poorly implemented, these policies could either accelerate Sri Lanka’s progress or leave it vulnerable to crises, as evidenced by the recent missteps in agricultural policy.

He also said that the fertilizer ban, implemented without proper preparation, caused havoc in the agricultural sector, resulting in two consecutive failed seasons.

Thibbotuwawa added that despite traditionally being self-sufficient in rice production, Sri Lanka was forced to import large quantities of rice, underlining the catastrophic consequences of poorly planned regulations. This experience highlights the importance of sound policymaking across sectors critical to the nation’s global economic standing.

Trade liberalization can be both an engine for growth and a source of economic strain. IPS, Research Fellow, Dr. Asanka Wijesinghe, who is an expert in economic integration, stressed that the complex implications of joining regional trade agreements, such as, the Regional Comprehensive Economic Partnership (RCEP).

He added that while liberalizing trade could stimulate Sri Lanka’s GDP growth and create jobs, it comes with significant challenges, such as, an increase in trade deficits with manufacturing giants like China and East Asian countries.

‘Sri Lanka faces the challenge of reorienting its economic focus toward export-led growth, he noted adding that domestic industries remain heavily protected, which inhibits the development of an export-oriented economy.

“To harness the full potential of trade agreements, policymakers must prioritize sectors where Sri Lanka holds a comparative advantage. However, this shift requires a delicate balance to manage short-term disruptions, including potential impacts on the labor market, he added.

High energy costs remain a stumbling block for Sri Lanka’s export competitiveness, said IPS, Research Fellow, Dr. Erandhatie Pathiraja, adding that energy pricing reform is vital for making Sri Lankan industries globally competitive. Sectors such as apparel and tea—key contributors to national export earnings—are particularly sensitive to energy costs, which erode profit margins and make it difficult to compete with lower-cost producers in the region.

She stressed that renewable energy presents a promising solution to this problem, with Sri Lanka already having committed to ambitious climate goals under its Nationally Determined Contributions (NDCs).

However, she said institutional bottlenecks and political roadblocks have delayed the adoption of renewable energy technologies. `For Sri Lanka to reduce its reliance on expensive fossil fuels and improve its global competitiveness, overcoming these barriers will be critical.’

Agriculture remains a cornerstone of Sri Lanka’s economy, contributing 8% of GDP and nearly 20% of export earnings, said IPS Research Economist Dilhani Hirimuthugodage.

Despite its importance, she said that the sector is burdened by structural issues such as land fragmentation, low mechanization, and outdated technology.

She stressed that as Dr.Thibbotuwawa highlighted, the recent fertilizer ban further exacerbated these challenges, resulting in significant losses for farmers and reduced yields.

However, she added that Sri Lanka’s agriculture sector holds untapped potential, particularly in export agriculture. Spices, for example, represent a key area where Sri Lanka has a strong competitive advantage on the global stage.

“To capitalize on this potential, the government must invest in modernizing agricultural practices, improving supply chains, and accessing new markets. By doing so, Sri Lanka can diversify its export portfolio and boost overall economic growth, she stressed.

In closing remarks, Dr. Thibbotuwawa said the road ahead for Sri Lanka involves not just reforming individual sectors but adopting a holistic, integrated approach to economic development. Policymakers must recognize the interconnectedness of trade, energy, and agriculture and create regulatory frameworks that enable each sector to thrive in the global marketplace.