• Stilt fishing in Sri Lanka

    Growth & Transformation

    CID's Growth Lab is doing in-depth, tailored analysis of Sri Lanka's economy – to diagnose growth constraints

  • Colombo Harbor Sri Lanka

    Trade Development

    Conducting research into reforming and improving Sri Lanka’s trade policy and implementation of trade commitments

About

In 2015, Sri Lanka elected a new government with a vision of promoting sustainable development and reconciliation. The Center for International Development at Harvard University is collaborating with the Government of Sri Lanka through a grant by the Open Society Foundations (OSF) to provide research support to help the country move toward this future. Read more >>

 

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New Research

Exit and Foreign Ownership: Evidence from Export-Oriented Firms in Sri Lanka

Daniel Stock. 3/11/2019. “Exit and Foreign Ownership: Evidence from Export-Oriented Firms in Sri Lanka”.Abstract
While foreign direct investment may play a transformative role in the development of economies, foreign-owned firms are also said to be more “footloose” than comparable local firms. This paper uses a semi-parametric approach to examine the link between firm ownership and exit rates, tracking a set of export-oriented firms operating in Sri Lanka in years between 1978 and 2017. We find that foreign firms are in fact 42-56% more likely to exit than local firms, but only for their first years of existence. In their later years, foreign firms are actually less likely to exit than local firms, though this late advantage is not statistically significant when conditioned on the firms’ initial characteristics (such as employment size). This pattern supports the theory that foreign firms face a steeper early learning curve in adapting to local conditions.
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Engaging Overseas Sri Lankans to Facilitate Export Diversification

Jack Sennett. 6/17/2018. “Engaging Overseas Sri Lankans to Facilitate Export Diversification.” Master in Public Administration in International Development, John F. Kennedy School of Government, Harvard University.Abstract

Insufficient export diversification is a binding constraint to economic growth in Sri Lanka

  • The Harvard CID growth diagnostic found that with wages in traditional export sectors now below average Sri Lankan wages, new higher-wage export industries are required

Overseas Sri Lankans (OSL) have the potential to create new export industries in Sri Lanka

  • Diasporas were involved in the export-led development of India, Taiwan, and China by bringing industry knowhow and market connections to their home countries
  • There are large, well-educated OSL communities living in the US, UK, Canada, and Australia that have the industry knowhow to assist in export-led growth in Sri Lanka

OSL can have the biggest impact on diversifying exports if they return to start firms in new export industries rather than working with firms while based overseas

  • OSL can play a useful role connecting the existent Sri Lankan IT export sector to overseas markets, but they cannot start firms in new export industries from abroad
  • If OSL return to start firms they can “seed” a new export industry that grows organically through the diffusion of knowhow
  • The pharmaceutical sector is an example of an industry with high potential to be “seeded” by returning OSL entrepreneurs

Preliminary policy recommendations focus on removing barriers and catalyzing latent motivations to facilitate OSL return entrepreneurship:

  • The Department for Immigration and Emigration should continue to ease border processes for OSL through dual citizenship and the OSL lifetime resident visa
  • The Board of Investment should orient part of its “one-stop-shop” to dealing specifically with OSL issues
  • The Ministry of Foreign Affairs should utilize its diplomatic network to engage potential OSL entrepreneurs to catalyze latent motivations to return

*This is an edited version of a Policy Analysis written in fulfilment of the requirements for the degree of Master in Public Administration in International Development, John F. Kennedy School of Government, Harvard University

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Path to Prosperity: Protectionism or Free Trade?

Robert Lawrence. 2/8/2018. “Path to Prosperity: Protectionism or Free Trade?”.Abstract

While the late 1970s were characterized by trade liberalization, Sri Lanka has since increased trade protection, using trade policy as a tool to promote import substitution and local industry. Today, the effective rate of protection is at a similar level as it was in the 1980s, and includes a complex and unpredictable web of paratariffs.

Is protecting local businesses from foreign competition the way forward for Sri Lanka? Or should the country embrace globalization and free trade? In this lecture Professor Robert Lawrence from Harvard University's Kennedy School of Government explores the topic.

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