Rent-seeking key obstacle for serious entrepreneurship: Dr. Ekanayake

Many businessmen in Sri Lanka are rent-seekers or started out that way, which has left the country’s youth with a dearth of role models to look up to when becoming entrepreneurs, according to a former Ceylon Chamber of Commerce chairman.

“The big, big problem in Sri Lanka to me is entrenched rent-seeking behaviour and corruption. That kills entrepreneurship because when there are easy ways of making money by going after politicians or a bureaucrat, why bother about any other type of business?” Dr. Anura Ekanayake said.

Speaking at the ‘Panel Discussion on Vision 2025’ organised by the Association of Sri Lankan Sociologists and the Sri Lanka Foundation, Dr. Ekanayake, who is an economist, said that the public discourse centred around entrepreneurship is focusing on education and training but this rent-seeking behaviour is ignored.

The government has also identified easy access to finance as a key requirement for entrepreneurship. 

“But if you don’t address this particular one (rent-seeking), there’s not going to be any serious entrepreneurship. And we don’t have many role models because even in the business sector there are people who started that way and to the youth, what’s the part of the role models?” he questioned.
Dr. Ekanayake noted that the image these role models convey to the youth is to become either a politician or a thug working for a politician, both of whom have the same qualities or start a business and go after politicians.

The government’s Vision 2025 document stresses on the importance of entrepreneurship and private sector participation in making Sri Lanka a prosperous country by 2025, fuelled by export-oriented enterprises.

The Ceylon Chamber of Commerce, of which Dr. Ekanayake was the head in the past, is the largest lobby group of businessmen in the country.

Many businesses benefit from continuous tax holidays, loan subsidies, preferences on government tenders, import protection and protection of monopolies, which are some common rent seeking activities. 

It could be observed that some top companies choose their chairmen or CEOs for their ability to go after politicians effectively to seek rent. 

Rent seeking by powerful businesses weakens competition in the market, especially for small and medium enterprises, according to free market advocates. 

Meanwhile, Dr. Ekanayake said that rent-seeking is common due to unpredictable macroeconomic variables.

“When there is crowding out in the capital market, interest rates are high, all the macroeconomic variables are unpredictable; don’t know what time they will change, don’t know what time interest rates will change, what will happen to inflation, then rent seeking is the most secure way of making money,” he said. (CW)