Increase in Protectionism and Its Impact on Sri Lanka's Performance in Global Markets
Sri Lanka's external performance defies global trends on two counts. First, the level of openness as measured by the ratio of trade in goods and services, after a strong increase in 1987-95 and stagnation in 1996-2004, sharply fell in 2005-10...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17933848/increase-protectionism-impact-sri-lankas-performance-global-markets http://hdl.handle.net/10986/15870 |
| Summary: | Sri Lanka's external performance
defies global trends on two counts. First, the level of
openness as measured by the ratio of trade in goods and
services, after a strong increase in 1987-95 and stagnation
in 1996-2004, sharply fell in 2005-10 to the levels
experienced during the era of import substitution. Second,
the share of clothing in manufactured exports has remained
largely unchanged over the past 25 years. Had there been no
economic growth, this would not have been puzzling. The
paper argues that these unique features can be traced to (a)
the duality of Sri Lanka's economic regime -- the
legacy of unfinished structural reforms of a socialist
economic regime -- and (b) high and growing protectionism in
the 2000s. Sri Lanka's experience shows that the lack
of stability in trade policy combined with recently
expanding protectionism and the state's micromanagement
of investment does not create an institutional/policy
setting conducive to rapidly evolving composition of exports
and their fast growth. The practice of dealing with
weaknesses in trade policies and the business environment
through granting exemptions to various activities deemed
desirable by the authorities only exacerbates distortions
and creates more fertile ground for rent seeking. Without a
radical overhaul of the current policy framework shaping
interaction of Sri Lankan businesses with global markets,
economic growth may be reduced, if not reversed. |
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