South Asia Economic and Policy Studies Series Editors Sachin Chaturvedi, Director General, RIS for Developing Countries, New Delhi, India Mustafizur Rahman, Executive Director, Centre for Policy Dialogue (CPD), Dhaka, Bangladesh Abid Suleri, Executive Director, Sustainable Development Policy Institute, Islamabad, Pakistan Dushni Weerakoon, Executive Director, Institute of Policy Studies of Sri Lanka, Colombo, Sri Lanka The Series aims to address evolving and new challenges and policy actions that may be needed in the South Asian Region in the 21st century. It ventures niche and makes critical assessment to evolve a coherent understanding of the nature of challenges and allow/facilitate dialogue among scholars and policymakers from the region working with the common purpose of exploring and strengthening new ways to implement regional cooperation. The series is multidisciplinary in its orientation and invites contributions from academicians, policy makers, practitioners, consul- tants working in the broad fields of regional cooperation; trade and investment; finance; economic growth and development; industry and technology; agriculture; services; environment, resources and climate change; demography and migration; disaster management, globalization and institutions among others. More information about this series at http://www.springer.com/series/15400 Dushni Weerakoon • Sisira Jayasuriya Editors Managing Domestic and International Challenges and Opportunities in Post-conflict Development Lessons from Sri Lanka 123 Editors Dushni Weerakoon Sisira Jayasuriya Institute of Policy Studies of Sri Lanka (IPS) Monash University Colombo, Sri Lanka Caulfield, VIC, Australia ISSN 2522-5502 ISSN 2522-5510 (electronic) South Asia Economic and Policy Studies ISBN 978-981-13-1863-4 ISBN 978-981-13-1864-1 (eBook) https://doi.org/10.1007/978-981-13-1864-1 © Springer Nature Singapore Pte Ltd. 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore Dr. Saman Kelegama (6 April 1959–23 June 2017) This volume is dedicated to the memory of Dr. Saman Kelegama, a distinguished Sri Lankan economist and one of the most eminent scholars of South Asia who passed away suddenly in June 2017. Preface This volume is dedicated to Dr. Saman Kelegama. Dr. Kelegama was a prolific and versatile scholar, publishing and editing many books and over 100 articles in ref- ereed journals on a wide range of development issues, covering national and regional trade policy, regional economic integration and free-trade agreements, macroeconomics, governance, industry policy and public enterprise reforms. But above all, he was an engaged and committed public intellectual whose research was motivated by the search for solutions to major economic policy issues, including the economic costs of conflicts and war, and the challenges of post-conflict recovery and reconstruction. He joined the newly established Institute of Policy Studies of Sri Lanka (IPS) in 1990 after completing his doctorate at Oxford University and became its Executive Director in 1995, a position he held right up to his passing away. With visionary leadership and total commitment, he built up the IPS to be globally recognized as the leading independent policy research institute of Sri Lanka. He served as the President of the Sri Lanka Economic Association, was a Director of academic and corporate entities such as Postgraduate Institute of Management in Colombo, and Chairman of Singer Sri Lanka, and provided non-partisan, independent policy advice to successive Sri Lankan governments. At the time of his untimely demise, he was serving as the lead negotiator on Sri Lanka’s free-trade agreements with India, China and Singapore. He was a patriot who understood that in an era of globalization, Sri Lanka’s path to development and prosperity was linked to developments in the regional and global economy. In particular, he was passionately committed to the cause of South Asian economic integration and built lasting collaborative partnerships and networks with scholars and institutions in South Asia. We hope that his legacy of intellectual integrity, commitment to rigorous and high-quality policy-relevant research, and dedication to the cause of social and economic development will serve as an inspiration to a new generation of Sri Lankan and South Asian economists. Colombo, Sri Lanka Dushni Weerakoon VIC, Australia Sisira Jayasuriya vii Contents Introduction: Challenges and Opportunities of Sri Lanka’s Post-conflict Economic Development Overview ................... 1 Sisira Jayasuriya and Dushni Weerakoon Part I Policies, Regulations, and Governance for Smart Growth Trade and Competition Policies: Implications for Productivity Growth in Sri Lanka .............................................. 15 Sarath Rajapatirana Regulatory Reforms in Post-conflict Sri Lanka: Breaking the Cycle? ............................................... 33 Malathy Knight Managing Macroeconomic Stability While Investing in Reconstruction in Post-conflict Sri Lanka ..................... 51 H. N. Thenuwara Ensuring Sustainable Development in Post-conflict Sri Lanka ........ 71 Athula Senaratne Part II Post-conflict Development in a Transforming Global Economy Debt Financing for Development: The Sri Lankan Experience ....... 95 Dushni Weerakoon and Sisira Jayasuriya Using RCEP as a Stepping Stone to East Asia: Case Studies of Sri Lanka and India ..................................... 113 Ganeshan Wignaraja Balancing Economic Partnership for Growth in the Post-conflict Sri Lanka ................................................ 133 Janaka Wijayasiri ix x Contents Export Expansion in a Changing Global Order: Challenging Times for Post-conflict Sri Lanka ................................... 151 Prema-chandra Athukorala Part III Smarter Development for Sustaining Peace Tourism in Post-conflict Development: Making Use of New Opportunities in Sri Lanka .................................. 173 Jayatilleke S. Bandara Economic Transformations for Better Lives Through Better Jobs ..... 195 Nisha Arunatilake Post-conflict Agricultural Modernization in Sri Lanka .............. 219 Manoj Thibbotuwawa Achieving Equity in Post-conflict Sri Lanka ...................... 239 Ganga Tilakaratna Transitioning to Middle Income and Beyond: The Urbanization Challenge in Post-conflict Sri Lanka ........................... 257 Bilesha Weeraratne Editors and Contributors About the Editors Dushni Weerakoon is the Executive Director of the Institute of Policy Studies of Sri Lanka (IPS). Her research and publications chiefly focus on regional trade integration, macroeconomic policy, and international economics. She has extensive experience in economic policy formulation, serving as a member of the Macro and Trade Policy Steering Committee of the Ministry of Policy Development and Implementation (2002–2004), an official delegate to the Committee of Experts to negotiate the South Asian Free Trade Agreement under the Ministry of Trade and Commerce (2004–2005) and member of the Trade and Tariff Committee of the National Council for Economic Development (NCED) of the Ministry of Finance (2004–2010), amongst others. She holds a B.Sc. in Economics from the Queen’s University of Belfast, UK, and an MA and Ph.D. in Economics from the University of Manchester, UK. Sisira Jayasuriya is a Professor of Economics at the Monash University, Australia. He is a development economist with a focus on economic policy issues in Asia. He has held previous appointments at the International Rice Research Institute (Philippines), the Australian National University, Melbourne University and La Trobe University, and has been a consultant to the Asian Development Bank, International Food Policy Research Institute, World Bank and several United Nations agencies such as ESCAP, FAO and ILO. He is also an Honorary Professor at the Arndt-Corden Department of Economics at the Australian National University, Canberra, and the Institute of Social and Economic Studies, Osaka University, Japan, as well as a Non-Resident Senior Fellow, National Council of Applied Economic Research, New Delhi. Prof. Jayasuriya holds a BA (Hons in Economics) from the University of Ceylon (Peradeniya), and a