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Immigration key catalyst for development

May 17, 2018

Daily FT

Reforming immigration law to allow free movement of people through progressive laws could tackle Sri Lanka’s chronic economic challenges of narrow exports, low Foreign Direct Investment (FDI) and limited innovation, a top expert said yesterday, outlining many examples of countries that have experienced growth spurts by opening up their labour markets.  

Prof. Ricardo Hausmann is Director of Harvard’s Center for International Development and Professor of the Practice of Economic Development at the Kennedy School of Government. Delivering a...

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My Summer Internship with the Central Bank of Sri Lanka

Author: Haiyang Zhang, HKS MPA/ID student

In a poetic reference, Sri Lanka is often described as “a teardrop of the Indian Ocean.” The island country is endowed with some of the world’s most scenic landscapes, a diverse culture, and a documented history that spans across three millennia. For a country that recently emerged from a 26-year-long civil war, Sri Lanka faces the challenge for transforming its short-lived “peace dividend" into sustainable growth. 

Following the end of the civil war in 2009 and the presidential election in 2015, Sri Lanka...

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Harvard economist calls for tariff reforms to increase exports

February 9, 2018

Robert Lawrence/Sri Lanka project - Daily FT

Making a compelling case against tariff regimes, renowned Harvard economist Dr. Robert Lawrence yesterday called for a simpler system with significantly lower tariffs in order to increase Sri Lanka’s exports.

Delivering a lecture on protectionism organised by the Advocata Institute in Colombo, Prof. Lawrence, who is the Faculty Chair of the Practice of Trade Policy program at Harvard University’s Kennedy School, said that imposing tariffs is the wrong way to raise revenue, highlighting the need for tax reforms with...

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What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States
Chauvin, J.P., et al., 2017. What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States. Journal of Urban Economics , 98 (March 2017) , pp. 17-49. Publisher's VersionAbstract
Are the well-known facts about urbanization in the United States also true for the developing world? We compare American metropolitan areas with analogous geographic units in Brazil, China and India. Both Gibrat’s Law and Zipf’s Law seem to hold as well in Brazil as in the U.S., but China and India look quite different. In Brazil and China, the implications of the spatial equilibrium hypothesis, the central organizing idea of urban economics, are not rejected. The India data, however, repeatedly rejects tests inspired by the spatial equilibrium assumption. One hypothesis is that spatial equilibrium only emerges with economic development, as markets replace social relationships and as human capital spreads more widely. In all four countries there is strong evidence of agglomeration economies and human capital externalities. The correlation between density and earnings is stronger in both China and India than in the U.S., strongest in China. In India the gap between urban and rural wages is huge, but the correlation between city size and earnings is more modest. The cross-sectional relationship between area-level skills and both earnings and area-level growth are also stronger in the developing world than in the U.S. The forces that drive urban success seem similar in the rich and poor world, even if limited migration and difficult housing markets make it harder for a spatial equilibrium to develop.
Andrews, M., et al., 2017. Learning to Target for Economic Diversification: PDIA in Sri Lanka.Abstract
learning_to_target_wp332.pdf

Many countries, like Sri Lanka, are trying to diversify their economies but often lack the capabilities to lead diversification programs. One of these capabilities relates to targeting new sectors to promote and pursue through a diversification policy: countries know they are ‘doomed to choose’ sectors to target,1 but lack effective capabilities to do the targeting. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities. The paper tells the story of this process, providing documented evidence of the progress over time and describing the thinking behind the PDIA process. It shows how a reliable targeting mechanism can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about targeting for diversification and to those interested in processes (like PDIA) which are focused on building state capability and fostering policy implementation in public contexts.

1 The term here comes from Hausmann, R. and Rodrik, D. 2006. Doomed to Choose: Industrial Policy as Predicament. Draft.

Andrews, M., et al., 2017. Learning to Engage New Investors for Economic Diversification: PDIA in Action in Sri Lanka.Abstract
diversification_investors_cidwp_336_updated_v2.pdf
Many countries, like Sri Lanka, are trying to diversify their economies but often lack thecapabilities to lead diversification programs. One of these capabilities relates to engaging new investors—in new sectors—to bring their FDI and know-how to a new country and kick-start new sources of activity. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). It shows how an investment engagement approach can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about investor engagement challenges and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation in public contexts.

Charting a path towards Lanka’s durable success

March 13, 2017

Ricardo Hausmann for Daily News

It is not just because I am from Venezuela that I see Sri Lanka with admiration and envy. The island has made more progress in human development than any other in South Asia. It has reduced poverty in a pretty dramatic way. It has many reasons to be proud of its achievements. But anything that is worth doing, is worth doing better. The Center for International Development at Harvard University is collaborating with the Government of Sri Lanka to work on a strategy to make progress faster, more sustainable and more inclusive.

...

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Sri Lanka to boost economic diplomacy with Harvard University

March 7, 2017

EconomyNext

Sri Lanka's government is boosting its economic diplomacy capacity with Harvard University which will help boost investments and exports, Deputy Finance Minister Harsha de Silva said.

"Traditional diplomacy was to bring peace," Deputy Foreign Minister Harsha de Silva said. "Economic diplomacy is to bring prosperity."

Sri Lanka had a presence in over 60 countries spending about 9 billion rupees a year, de Silva said.

"Sri Lanka is running a race, where we are behind Thailand, Vietnam and Myanmar," he said. "We have some good runners, we need a strategy. We have got the best coaches in the world to coach our runners."... Read more about Sri Lanka to boost economic diplomacy with Harvard University

Harvard University to conduct online Economic Diplomacy course for officials of Sri Lanka Foreign Ministry and Commerce Department

March 7, 2017

ColomboPage, Sri Lanka Internet Newspaper

 As part of its economic diplomacy role, the Ministry of Foreign Affairs has undertaken a unique initiative to design and implement an online Economic Diplomacy Course catering to Sri Lanka's specific economic needs and challenges.

This Course is a result of the Foreign Ministry's collaboration with the Department of Commerce and Harvard University, one of the most prestigious Universities in the world.

The ceremonial launching of the Course was held today, 7th March 2017 at the Ministry of Foreign Affairs presided over by the Acting Minister of Foreign Affairs Harsha de Silva. Also participating at the event were Mrs. Sonali Wijeratne, Director General, Department of Commerce; Professor Matt Andrews, Senior Lecturer, Harvard University Center for International Development (HCID), invited guests and officials selected to take part in the Course.

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Sri Lanka needs economic knowhow

January 11, 2017

Ricardo Hausmann, Growth Lab research - Daily News

Professor Ricardo Hausmann of the Harvard Kennedy School of Government delivered a lecture entitled “Increasing your chances of success while leaving your comfort zone: adapting Sri Lanka’s growth model to new constraints,” yesterday at BMICH.

Hausmann, who runs the Kennedy School’s Center for International Development, and his team have been studying Sri Lanka’s economy for the past year. His lecture spanned over two hours and covered the country’s current economic shortcomings and its paths to increased...

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Frankel, J., 2012. What Small Countries Can Teach the World.Abstract
cid_working_paper_232.pdf

The large economies have each, in sequence, offered "models" that once seemed attractive to others but that eventually gave way to disillusionment. Small countries may have some answers. They are often better able to experiment with innovative policies and institutions and some of the results are worthy of emulation. This article gives an array of examples. Some of them come from small advanced countries: New Zealand’s Inflation Targeting, Estonia’s flat tax, Switzerland’s debt brake, Ireland’s FDI policy, Canada’s banking structure, Sweden’s Nordic model, and the Netherlands’ labor market reforms. Some examples come from countries that were considered "developing" 40 years ago, but have since industrialized. Korea stands for education; among Singapore’s innovative polices were forced saving and traffic congestion pricing; Costa Rica and Mauritius outperformed their respective regions by, among other policies, foreswearing standing armies; and Mexico experimented successfully with the original Conditional Cash Transfers. A final set of examples come from countries that export mineral and agricultural commodities -- historically vulnerable to the "resource curse" -- but that have learned how to avoid the pitfalls: Chile’s structural budget rules, Mexico’s oil option hedging, and Botswana’s "Pula Fund."

Frankel, J., 2012. The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions.Abstract
cid_working_paper_233.pdf

Countries with oil, mineral or other natural resource wealth, on average, have failed to show better economic performance than those without, often because of undesirable side effects. This is the phenomenon known as the Natural Resource Curse. This paper reviews the literature, classified according to six channels of causation that have been proposed. The possible channels are: (i) long-term trends in world prices, (ii) price volatility, (iii) permanent crowding out of manufacturing, (iv) autocratic/oligarchic institutions, (v) anarchic institutions, and (vi) cyclical Dutch Disease. With the exception of the first channel – the long-term trend in commodity prices does not appear to be downward – each of the other channels is an important part of the phenomenon. Skeptics have questioned the Natural Resource Curse, pointing to examples of commodity-exporting countries that have done well and arguing that resource exports and booms are not exogenous. The relevant policy question for a country with natural resources is how to make the best of them.

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