ri
Lanka is credited with being the pioneer of economic liberalization in
South Asia. It has the distinction of achieving a high physical quality
of life in a relatively short period by maintaining social welfare
programmes inclusive of a universal food subsidy. In spite of these
feathers in its proverbial cap, Sri Lanka still remains a developing
country with a per capita income level of USD 1025 (2004) with an
average growth rate of about 5 per cent and close to 23 per cent pf the
population living below the poverty line. Why, then, is economic
progress painfully slow with the outcome being far below the country’s
potential? Development Under Stress: Sri Lankan Economy in Transition
attempts to answer this and other related questions that impact Sri
Lanka, South Asia, and ultimately, most of the developing as well as
underdeveloped nations.
Sri Lanka’s development over
the years took place under a stressful environment. As a result, it
could not match the achievements of countries like South Korea and
Malaysia - countries that had similar per capita levels to that of Sri
Lanka in the late 1950s. At the time of its independence, Sri Lanka had
the highest per capita income outside Japan, in Asia. Even by 1960, its
per capita income was at par with South Korea and higher than that of
Thailand and Malaysia. However, by 1977, South Korea’s per capita income
was 14 times higher than Sri Lanka.
This book studies the various
impediments faced in the process of development and implementation of
reforms, particularly after the economic liberalization in 1977. Saman
Kelegama has highlighted certain key features of the Sri Lankan
socio-political economic system that came in the way of economic growth.
There are 14 articles by the author written over the past decade -
sometimes in collaboration with others - and published in the form of
papers in various books as also journals.
This book has been divided into
five parts. The first part examines the 50 years of economic development
and the challenges ahead, the second part studies the economic
liberalization debate, the third part delves into macro-economic
management during times of stress, the fourth part analyses sectoral
issues with reference to industry and agriculture, and the final part
scrutinizes employment and poverty. All of these chapters are
contemporary and relevant against the current scenario in Sri Lanka as
also countries facing similar hurdles.
Saman Kelagama critically looks
at the causes behind the failure of such a promising beginning. The
burning issues here are Sri Lanka’s political economy, policy errors and
missed opportunities. The Sri Lankan development experience during the
first 50 years of independence clearly shows the limitations of the
state-led direct method of enhancing social welfare and the ability of a
liberal trade and investment regime to generate reasonably high growth
rates even during a chaotic war situation in a developing economy. The
liberalization policy was pursued without proper stabilization, during
the first decade of economic reforms in 1977, which overheated the
economy and applied pressure on the incentive structure to be in favour
of non-tradables. Adjustment proved to be dear in the short run and the
bulk of the price was paid by the poor. To add the price of
stabilization in the short run to this adjustment cost was politically
difficult. Thus, the adjustment reforms became ad hoc and were mostly
governed by political imperatives.
This is just the tip of the
iceberg. The author more than scratches the surface. The issue of
development merits the detailed study of the situation and the facts
that speak for themselves, and ably so. Alternatives and other options
have been studied with critical impartiality. That the author is very
well read is obvious. The inputs are precise, with careful analyses
providing back up wherever necessary.