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Labour Absorption in Industries: Some Observations from the Sri Lankan Experience
(1992) Kelegama, Saman; Wignaraja, Ganeshan
Eleven years have passed since liberalization began in Sri Lanka, and yet the level of unemployment remains at about the same level as in mid-1977. Even if the export industries take time to respond to policy reforms, the fact that unemployment increased to pre-1977 levels by 1985 clearly shows that export-oriented industrialization has not been able to generate employment on a large scale. Why has this been the case? This paper attempts to answer this question by examining the labour-absorptive capacity of manufacturing and how it has changed after liberalization.
External Shocks and Domestic Policy Adjustment: The Case of Sri Lanka
(The Indian Institute of the Economics, 1994) White, Howard; Kelegama, Saman
A major methodological problem in the analysis of adjustment policies is the separation of the effects of the policies themselves from those changing external conditions. But such a separation can be clearly made by decomposing the sources of change in the current account. In this paper authors apply methodology, with a number of important modifications to the experience of Sri Lanka for the period 1971 to 1991. By extending the decomposition analysis to cover the capital account authors are able to address a further important issue in the adjustment debate: namely distinguishing the impact of external finance given to support domestic policy adjustment efforts from that of the efforts themselves.
SAPTA and Its Future
(Sage, 1996) Kelegama, Saman
This paper is structured in a way that first section gives the background to SAPTA. Section 2 examines the impediments to the progress of SAPTA and the validity of the preferential trade assumption to South Asia. Section 3 examines the international experience with preferential trading arrangements. The next section looks at policy options for more effective economic cooperation among SAARC countries. Some concluding remarks are given in the last section.
Does Leadership Matter in the Economic Reform Process? Liberalization and Governance in Sri Lanka, 1989-1993
(Elsevier, 1997) Dunham, David; Kelegama, Saman
Governance assumptions of the East Asian miracle may not be a sufficient or a necessary condition for effective economic reform or for solid growth to emerge in other Asian economies. This paper argues that in Sri Lanka, where the state is not strong, where it is not well coordinated, and is neither cohesive nor disciplined in organizational terms, strong political leadership proved critical in the second wave of reform from 1989-93 - even if it was essentially illiberal in the process of implementation. Technical and political imperatives are seen to be interrelated and parts of a single reform package.
Stabilization and Adjustment: A Second Look at the Sri Lankan Experience, 1977–93
(John Wiley, 1997) Dunham, David; Kelegama, Saman
Mainstream thinking on economic policy assumes a logical progression from stabilization to liberalization and adjustment that is rarely attainable in practice. Most developing countries have been forced to undertake them simultaneously with a resulting tension between them, and with conflicting demands being made on economic policy. This paper reexamines Sri Lankan economic performance in the 1980s from this perspective. It argues that the pristine application of theory is not an appropriate yardstick and that “economic mismanagement” is at best an incomplete explanation of what was happening. It contends that incompatible demands were at the time being made on economic policy, and stresses the importance of external shocks and the political sustainability of the reform process.
Privatization and the Public Exchequer: Some Observations from the Sri Lankan Experience
(United Nations ESCAP, 1997) White, Howard; Kelegama, Saman
This paper examines the Sri Lankan experience with privatization from 1989 to 1996 and argues that its short-run fiscal benefits have not been significant even when the direct and indirect costs of privatization are ignored. Fiscal gains from privatization should be considered long-term benefits and greater importance should be given to designing a transparent privatization programme to promote competition and to stimulate the capital market. Such a strategy can address the problem of the fiscal burden of subsidizing State-owned enterprises more effectively than a privatization programme that is designed for speedy execution in a non-transparent manner or one whose objective is to achieve revenue targets according to short-term budgetary needs.
Risks to the Sri Lankan Garment Industry from Trade Diversion Effects of NAFTA
(1997) Kelegama, Saman
The analysis of trade diversion in the various studies has been carried out using different methodologies such as the partial equilibrium model, the international trade linkages system, indices of trade similarities between different pairs of countries, gravity models, etc. The results vary from study to study and are not comparable. Trade diversion can also be analysed by examining the price competitiveness of the main export of a non-member country to the regional bloc, using a comparative static framework. Such analysis can always be combined with an analysis of additional factors to assess the medium-term impact of the regional bloc on the non-member country. This approach will be used in the present study to examine the impact of NAFTA on the Sri Lankan economy, examining in particular the trade and investment diversion impact on the garment sector — Sri Lanka’s largest foreign-exchange earner and its main exporter to the NAFTA region. It concludes that all in all, NAFTA does not appear to pose a serious threat to Sri Lankan garment exporters. Moreover, there are indications that the US may not restrict its trade liberalisation with its regular trading partners in the medium term because of NAFTA. This allows at least four years for Sri Lankan garment exporters to adjust to the changing situation and rectify the existing shortcomings in the sector.
Can Open Regionalism Work in the Indian Ocean Rim Association for Regional Co-operation?
(1998) Kelegama, Saman
Whether a regional economic co-operation under an "open regionalism" framework brings about expected economic gains cannot be judged from statistics alone. Attractive statistics for intra-regional trade and other trade-related indices such as intra-industry trade can be very deceptive. For the Indian Ocean Rim Association for Regional Co-operation (IOR ARC), the basic fundamentals that are essential for the functioning of open regionalism are not in place. Regional economic co-operation, after all is a dynamic process that requires a firm commitment from member countries. For IOR-ARC, it is argued that this component is also lacking and the sharing of the Indian Ocean waters alone is not adequate to provide a blueprint for effective regional economic co-operation.
The Political Economy of Agricultural Trade Policy: Sri Lanka in the Uruguay Round
(1998) Athukorala, Prema‐chandra; Kelegama, Saman
The Uruguay Round Agreement on Agriculture (URAA) laid a firm foundation for establishing a rule‐based world trading system, encompassing both developed and developing countries, for agricultural products. This paper aims to broaden our understanding about the constraints faced by developing countries in their attempts to comply with new URAA rules through a comparative case study of Sri Lanka in the South Asian context. We find Sri Lanka's policy initiatives so far under the URAA to be unique among the South Asian countries. In a notable departure from the hesitant policy responses of the other countries, Sri Lanka has made use of the window of opportunity provided by the URAA to significantly liberalise agricultural trade as well as to lock in the ongoing trade reform process at low duty levels. This move has laid the foundation for further trade liberalisation with the aim of restructuring the agricultural sector in accordance with Sri Lanka's comparative advantage.
SAARC — From Association to Community: a Small Country Economic Perspective
(1999) Kelegama, Saman
This essay has given a small country perspective of SAFTA and a more advanced level of economic cooperation in the region. The essay identified four broad areas as major areas of concern for a small member country: (a) political commitment; (b) market access; (c) safeguarding domestic producers; and (c~ trade and investment supporting policies. The concerns in these areas have to be effectively addressed in order to reap the benefits of a PTA or FTA. At present, the domestic policy support for SAFTA remains lukewarm. As long as this is the case, initiatives by the political establishment for regional cooperation will continue to be ambiguous, sporadic, and fragmented, leading to a ’stop and go’ pattern of regional cooperation in SAARC. In such patterns of cooperation, SAARC growth in terms of regional institutional development and programme implementation will remain uncertain, and the organisation’s life cycle will oscillate between short-lived euphoria and agonisingly protracted stalemates.
Indo-Sri Lanka Trade and the Bilateral Free Trade Agreement: A Sri Lankan Perspective
(1999) Kelegama, Saman
India-Sri Lanka trade has been growing in recent years. In the mid-1990s, India became the main import supplier of Sri Lanka. Although Sri Lankan exports to India remain small, they have been growing faster than Indian imports to Sri Lanka in recent years. The Indo-Sri Lanka Bilateral Free Trade Agreement is a further step, by removing existing trade barriers, to stimulate trade between the two nations. While trade brings benefits to both there is an import competing sector in both countries that is still not in a position to face external competition from free trade. The Agreement allows for a “negative list” to accommodate this sector but preparation of the negative list has proved to be a time-consuming and intricate exercise. Once the Agreement comes into force, the Sri Lankan export sector is faced with a challenge to produce goods that are in demand in the Indian market. The challenge may be a “warm up” exercise to face future free trade under the South Asia Free Trade Agreement (SAFTA).
Impediments to Promoting Backward Linkages from the Garment Industry in Sri Lanka
(1999) Kelegama, Saman; Foly, Fritz
The slow growth of backward linkages from the garment industries (exportoriented) in developing countries and the policy merits of promoting these linkages have considerable contemporary relevance. Backward linkages are useful particularly for a garment industry to reduce the lead time and remain competitive in the international market. Local suppliers to the garment industry cannot function however unless conditions exist which allow them to be competitive. Furthermore, in a world where multinational garment-buying ®rms are dominant, a large import dependence in the garment industry does not necessarily imply that there are many opportunities to create local supplies and thereby create backward linkages. These factors are shown from the Sri Lankan attempts to promote backward linkages from the garment industry. It is argued that formation of backward linkages in the garment industry that operate in an open economy such as Sri Lanka is a natural outcome of industrial deepening and therefore will be time dependent. It is noted that even with less backward linkages, the garment industry in Sri Lanka has contributed signi®cantly to foreign exchange earnings and employment creation in the country. Ó 1999 Elsevier Science Ltd. All rights reserved.
Open Regionalism and APEC: Rhetoric and Reality
(Sameeksha, 2000) Kelegama, Saman
APEC has now functioned for more than one decade but its record is not very impressive. This article argues that the operational aspects of APEC have clearly highlighted the limitations of APEC's governing framework, i e, open regionalism. The paper shows that APEC's trade liberalisation strategy is a frail initiative and argues that APEC might be better-off focusing on deep economic integration issues.
Open Regionalism in the Indian Ocean: How Relevant is the APEC Model for IOR-ARC?
(2000) Kelegama, Saman
The Indian Ocean Rim Association of Regional Cooperation (IORARC) came into being in 1997. It is experimenting with open regionalism for strengthening economic integration in the region. The paper examines the concept of open regionalism as practiced in APEC and its validity for IORARC given the initial conditions in the region and the level of development of the member nations. The paper argues that the APEC model has little relevance for IOR-ARC, and open regionalism could be put into practice only partially in the region. It argues that IOR-ARC should stick to the WTO timetable of trade liberalization and focus more on non-controversial areas of open regionalism, viz., trade and investment facilitation, economic and technical cooperation, and maintaining a trade and investment dialogue. A stronger institutional framework to overlook the implementation of the agreed proposals in these areas of open regionalism will be necessar y if IORARC is to strengthen economic integration and achieve some results. In the modern-day world, in contrast to the era of sailing vessels, sharing of Indian Ocean waters may have less relevance for effective economic integration.
Development in Independent Sri Lanka: What Went Wrong?
(Sameeksha, 2000) Kelegama, Saman
Independent Sri Lanka's failure to live up to its initial promise in the area of economic development could be attributed inter alia to: (a) a foreign-exchange crisis which persisted till 1977 because the exigencies of electoral politics bound the country to welfare-oriented, inward-looking policies; and (b) the eruption of conflict between the two main communities as of 1983.
Bangkok Agreement and BIMSTEC: Crawling Regional Economic Groupings in Asia
(2001) Kelegama, Saman
Both the Bangkok Agreement (BA) and Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation (BIMSTEC) have offered opportunities for economic cooperation in the Asian region. Four countries that are (or were) associated with the former are members of the latter. The BA (formed in 1975) is a preferential trading arrangement (PTA) whereas BIMSTEC (formed in 1997) is a sectoral cooperation arrangement, but has announced its intention of moving to a PTA in the future. However, the results of both regional economic groupings have so far not been impressive. The BA did not produce the desired results due to inherent shortcomings in the Agreement and the ineffectiveness of the preferential system, inter alia: a) exclusion of nontariff barriers from the preferences; b) low product coverage by the preferential tariffs; and c) low preferential margins. Moreover, the PTA was not combined with direct measures for sectoral cooperation. Although the BIMSTEC emphasizes the latter, for these to be effective in the absence of a PTA, there has to be a high degree of commitment to the regional group by member countries, harmonization of standards, and an institutional framework. All these requirements are lacking in the BIMSTEC at present. BIMSTEC could have become a PTA if Thailand and Myanmar joined the BA but regional geo-politics and commitment to ASEAN have prevented this process. Surprisingly, BIMSTEC is considering a new PTA when a mechanism already exists under the BA. © 2001 Elsevier Science Inc. All rights reserved.
The Economic Cost of the War in Sri Lanka
(2001) Arunatilake, Nisha; Jayasuriya, Sisira; Kelegama, Saman
This paper discusses some of the conceptual and methodological problems associated with assessing the economic costs of civil wars and other violent social conflicts, and presents an evaluation of the costs of the (still ongoing) conflict in Sri Lanka. Our estimates suggest that the costs of conflict since 1983 may be at least equivalent to twice Sri Lanka's 1996 GDP.
Sri Lankan Economy in Turbulent Times: Budget 2001 and IMF Package
(Sameeksha, 2001) Kelegama, Saman
Political crises and economic mismanagement are to account for the grave state of Sri Lanka's finances. While reform programmes under the aegis of the IMF promise some succour, these are accompanied by strict conditionalities. The new Sri Lankan government has thus to take some vital political decisions - negotiating with the LTTE to end the long-drawn civil strife in the north-east and implement a harsh budget that will assist a revival of the economy in the long run.
Sri Lankan Economy of War and Peace
(Sameeksha, 2002) Kelegama, Saman
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.
A Need for a New Direction for SAARC: An Economic Perspective
(2002) Kelegama, Saman

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