Local Economy Opens out to Market Forces

A premier’s policies end an epoch of rationing

In terms of political developments, this was the year that set the stage for the introduction of a presidential system, which would hold terrorism, the interest and attention of republicans, and democracy itself hostage over the next 45 years or so – and perhaps more to come…

Under the provisions of an amendment he made to the 1972 constitution, Prime Minister Junius Richard (‘JR’) Jayewardene was sworn in as Sri Lanka’s first executive president.

Its aegis gave JR sweeping powers, and he was not slow to act – stripping political rivals of their civic rights, shifting the capital from Colombo to Sri Jayewardenepura Kotte (what’s in a name, eh? No connection to the politico, in reality!) and having a loaded parliament ratify a new constitution in September 1978 that consolidated his executive hold.

There was also instituted a 180 degree turn in terms of economic and developmental policies under the new republican administration.

The economy, which had been highly state-controlled and heavily subject to stagnation, was opened out to market forces and inter­nationalism. Opening the economy through liberalising of attendant policies prompted an unprecedented private sector led spurt of growth.

That policies were streamlined to promote local and foreign investment saw export led growth take over the reins from the previous approach of import substitution in an era of scarcity, which had witnessed citizens islandwide undergo depredations at the hands of scarcity and rationing of commodities including essentials.

JR initially curtailed the rationing of staples such as rice, introduced a food stamp system to alleviate the hardships faced by the poor and eventually eliminated the era of rations dominated scarcity. In addition, the floor price and fertiliser subsidy schemes were terminated.

To facilitate export oriented enterprises and administer the relevant processing zones, the Greater Colombo Economic Commission (GCEC) – the forerunner of the Board of Investment (BOI) – was set up.

Over and above these initiatives, the introit of the age of an open economy also saw the advent of large-scale infrastructure projects enabled by the entry into the island of internationally reputed businesses that partnered the government in its developmental projects – notably, the Accelerated Mahaweli Development Programme.

That policies were streamlined to promote local and foreign investment saw export led growth take over the reins from the previous approach of import substitution in an era of scarcity