The CRC Series on Competition, Regulation and Development
Edited by Paul Cook, Colin Kirkpatrick, Martin Minogue and David Parker
Chapter 14: Competition, regulation and regulatory governance in Sri Lanka
Malathy Knight-John INTRODUCTION The policy shift in the developing world over the last two decades, towards market mechanisms as instruments of economic growth and poverty reduction, has been paralleled by the emergence of a new role for the state from provider to facilitator/regulator. Liberalization and privatization have been accompanied by competition policy and rules-based regulatory systems in an effort to address distributional concerns. The integration of the regulatory process into the policy framework and its effectiveness in addressing its stated objectives, however, has depended to a large extent on the political economy priorities and governance standards of the state. Sri Lanka has not been an exception in this regard, as the ensuing discussion in this chapter illustrates. Although Sri Lanka moved from an import substituting and heavily state-interventionist economy to a more liberalized one in 1977, competition legislation was enacted only a decade later, with legislation for regulating telecommunications, passenger bus transport, and the financial sector also being introduced later. The civil strife that has engulfed the nation for over two decades, pressures to finance the burgeoning fiscal deficit and the related move to opt for rapid privatization contributed to placing competition and regulatory concerns on the backburner. Moreover, while the formal institutional and legal structures for competition and regulation do exist, distortionary intervention and bureaucratic micromanagement by the state are not uncommon. Regulatory practices have tended to stifle rather than enhance or promote competition. This raises important questions such as, are competition and regulation weak because the institutional and...
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