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Project
Asia
New Pathways to Inclusive Growth in Sri Lanka
Multi-phase research project in collaboration with the Government of Sri Lanka aimed on putting growth on a sustainable and inclusive footing. -
Reports
Can Industrial Zones Address the Binding Constraints to Sri Lanka’s Growth?
This note collects evidence related to possible constraints to economic growth, and their relation with GoSL’s industrial zone development agenda. We find that new zones are especially well-suited to help […]
This note collects evidence related to possible constraints to economic growth, and their relation with GoSL’s industrial zone development agenda. We find that new zones are especially well-suited to help address Sri Lanka’s lack of industrial land and high policy uncertainty, both of which may be holding back growth. Less clear, however, are zones’ impact on Sri Lanka’s limited transport links beyond the Western Province. Finally, partnering with well-connected zone management companies may also help create opportunities to connect with firms in new, non-traditional sectors.
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Reports
Constraints to Sustained and Inclusive Growth in Sri Lanka
In late 2015, CID was requested to conduct an initial analysis of constraints to sustained and inclusive economic growth in Sri Lanka. The findings of this analysis were presented at […]In late 2015, CID was requested to conduct an initial analysis of constraints to sustained and inclusive economic growth in Sri Lanka. The findings of this analysis were presented at the Sri Lanka Economic Forum in Colombo in January 2016. This presentation outlined the initial findings and offered a series of questions that were then discussed at length with policymakers and academics during the two-day forum. The initial analysis found that recent growth and the sustainability of growth moving forward are constrained by weakness in Sri Lanka’s balance of payments, where a trade imbalance combined with low levels of foreign direct investment effectively puts a speed limit on economic growth. While monetary and exchange rate policy could be used to soften this constraint, solving the underlying problem requires structural transformation, which has proven difficult in Sri Lanka. At the same time, the analysis identified the government’s inability to raise revenues as a major risk that threatens to be more binding moving forward. Finally, the analysis identified the primary dimensions of inequality in the country as between regions and between cities and rural areas. -
Publication
Engaging Overseas Sri Lankans to Facilitate Export Diversification
Master in Public Administration in International Development, John F. Kennedy School of Government, Harvard University
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 […]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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Working Papers
Exit and Foreign Ownership: Evidence from Export-Oriented Firms in Sri Lanka
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 […]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. -
Reports
Immigration Policy Research in Asia
Immigration and Economic Transformation: A Concept Note Ljubica Nedelkoska, Tim O’Brien, Ermal Frasheri, Daniel Stock In May 2017, CID prepared a concept note that described the connection between immigration and […]Immigration and Economic Transformation: A Concept Note
Ljubica Nedelkoska, Tim O’Brien, Ermal Frasheri, Daniel Stock
In May 2017, CID prepared a concept note that described the connection between immigration and knowhow transfer internationally and profiled the current state of low immigration levels and immigration policy issues in Sri Lanka. The note identifies immigration policy reform as an important area of opportunity for unleashing higher levels of entrepreneurship and the introduction of new knowhow for economic diversification in Sri Lanka, but stops short of providing specific recommendations. Instead, the note lays out broad ideas for making immigration policy more flexible and encourages the Government of Sri Lanka to activate a cross-government policy team that is capable of developing reforms that meet Sri Lanka’s particular needs.
A Comparative View on of Immigration Frameworks in Asia: Enhancing the Flow of Knowledge through Migration
Ermal Frasheri, Ljubica Nedelkoska, Sehar Noor, Tim O’Brien
Later in 2017, at the request of a policy team of the Government of Sri Lanka, CID conducted research to compare immigration policy frameworks in other countries in Asia to understand promising policy options for Sri Lanka. Our resulting research note focuses on Indonesia, Vietnam, Thailand, Malaysia, Hong Kong, and Singapore. We find that the immigration policies of the six countries vary across numerous dimensions as each country prioritizes attracting the talents, skills and resources it needs from abroad in different ways. These variations provide a range of examples that may be relevant to decision-makers in Sri Lanka. Additionally, we find an emerging pattern among the six countries where more developed economies tend to have more elaborate immigration systems and target a more diverse set of people. By looking at available data, we also confirm that more elaborate immigration systems are closely associated with more actual immigration, higher presence of foreign firms, and higher levels of foreign direct investment (FDI) among this group of countries. Based on the comparative analysis, together with the issues identified by the Department of Immigration and Emigration’s Gap Analysis, it is possible to identify a number of principles around which future immigration reform in Sri Lanka should be organized. -
Reports
Increasing Your Chances of Success while Leaving Your Comfort Zone: Adapting Sri Lanka’s Growth Model
View Ricardo Hausmann’s presentation to the Ministry of Development Strategies and International Trade.View Ricardo Hausmann’s presentation to the Ministry of Development Strategies and International Trade. -
Working Papers
Learning to Engage New Investors for Economic Diversification: PDIA in Action in Sri Lanka
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 […]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. -
Working Papers
Learning to Improve the Investment Climate for Economic Diversification: PDIA in Action in Sri Lanka
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 preparing the investment climate in the […]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 preparing the investment climate in the country. Many governments tackle this issue by trying to improve their scores on ‘Doing Business Indicators’ which measure performance on general factors affecting business globally (like how long it takes to open a business or pay taxes). Beyond these common indicators, however, investors face context specific challenges when working in countries like Sri Lanka that are not addressed in global indicators. Governments often lack the capabilities to identify and resolve such issues. This paper narrates a recent initiative to establish these capabilities 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). The paper will be of interest to those thinking about the challenges associated with creating a climate that is investor or business friendly and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation. -
Working Papers
Learning to Improve the Investment Climate for Economic Diversification: PDIA in Action in Sri Lanka
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 preparing the investment climate in the […]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 preparing the investment climate in the country. Many governments tackle this issue by trying to improve their scores on ‘Doing Business Indicators’ which measure performance on general factors affecting business globally (like how long it takes to open a business or pay taxes). Beyond these common indicators, however, investors face context specific challenges when working in countries like Sri Lanka that are not addressed in global indicators. Governments often lack the capabilities to identify and resolve such issues. This paper narrates a recent initiative to establish these capabilities 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). The paper will be of interest to those thinking about the challenges associated with creating a climate that is investor or business friendly and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation.