THE INSTITUTIONAL POLICY FRAMEWORK FOR REGULATION AND COMPETITION IN SRI LANKA.pdf

Centre on Regulation and Competition WORKING PAPER SERIES Paper No. 40 THE INSTITUTIONAL POLICY FRAMEWORK FOR REGULATION AND COMPETITION IN SRI LANKA Malathy Knight-John Institute of Policy Studies (Sri Lanka) December 2002 ISBN: 1-904056-39-3 Further details: Published by: Fiona Wilson, Centre Secretary Centre on Regulation and Competition, Institute for Development Policy and Management, University of Manchester, Crawford House, Precinct Centre, Oxford Road, Manchester M13 9GH, UK Tel: +44-161 275 2798 Fax: +44-161 275 0808 Email: crc@man.ac.uk Web: http://idpm.man.ac.uk/crc/ 1 THE INSTITUTIONAL AND POLICY FRAMEWORK FOR REGULATION AND COMPETITION IN SRI LANKA Abstract The liberalization of the Sri Lankan economy in 1977 and the privatization of state enterprises in the ensuing years, created a need for competition policy and rules-based regulatory systems to address distributional concerns. However, the integration of these newer external regulatory processes into the policy framework was slow due to an ongoing civil war, pressures to finance the burgeoning fiscal deficit and the related move to opt for rapid privatization. In addition, the policy and governance milieu, institutional structures, and legal framework within which these reforms were finally formulated and implemented did not allow for an effective competition and regulatory regime. This paper describes and analyzes the policy, institutional and legal framework for competition and regulation in Sri Lanka, placing them in the context of pervasive bad governance practices. It is argued that rampant political capture is the principal obstacle to the creation of effective competition and regulatory agencies. The paper also poses the following questions - how to build effective competition and regulatory institutions and systems and to create the conditions for good regu