Liberalisation

The experience of economic liberalisation in Sri Lanka has coincided with the nearly 20-year long civil strife in the nation's north and east. An attempt is made here to trace the economic reform programme since the war began. For the economy to be brought back on track the cumbersome task of balancing the needs of long-term economic management with the immediate demands of the current ceasefire and peace initiatives has to be undertaken.

Privatisation is an evocative subject even in the developed economies. In a developing economy like India, with its tradition of successful and pervasive public intervention, it generates unique mind-blocks. Its implementation therefore requires persistent, persuasive zeal. However, the compulsions of ensuring higher levels of investment at progressively higher levels of efficiency and productivity require a complete restructuring of the economic environment. Low levels of public savings, inadequate competition and low export orientation are barriers which need to be transcended. Privatisation and liberalisation of the licensing regime for Foreign Direct Investment are two initiatives which can meet the objectives of efficiency enhancement, domestic and foreign resource mobilisation and incremental capital outlays. The pace of privatisation has quickened since 2000. The adoption of a strategy of block sale of government stock in identified PSEs to a strategic partner, along with transfer of management control, as opposed to market sale of shares in small lots, has enhanced the value received by the government through disinvestment. It also ensures that these assets are put to productive use in the most optimum time frame and with the maximum benefit. While it is too early to quantify such benefits, there is sufficient anecdotal evidence of significant welfare gains for employees, institutional investors and the economy, along with the quantifiable gains for government, from the additional resources freed by the sale of PSEs.

Using the Indian cement industry as an example, this paper argues that there is a limit to leveraging liberalisation. Developing-country companies cannot match the clout of MNCs in controlling the global market. The Indian cement industry, which witnessed rapid production and capacity growth during the past two decades, has suffered a decline in exports in recent years as MNCs setting up shop in other developing countries retained their hold on international markets.

This paper focuses on the ongoing changes in the business environment and the analysis of their implications for small-scale units. Specifically, it looks at possible ways of improving the competitive strength and commercial viability of small-scale units in the changing context. For this, substantial improvements will be needed in technology, such as mechanisation, organisation and information and the revamping of policy measures to encourage the growth of small units through collective efforts, ending their isolated mode of operation.