Sri Lanka’s Experience of Economic Liberalization

During the 1950s Sri Lanka was in the third place in Asia after Japan and Malaysia in terms of per capita GDP. South Korea, Thailand and Indonesia were behind Sri Lanka. However, all these countries have surpassed Sri Lanka very long ago. Many reasons could be attributed for this economic failure. Frequent economic policy changes, extensive welfarism and sporadic insurrections had negative impact on the economy during the pre liberalization regime. However, after the introduction of economic liberalization in 1977 many positive changes occurred on the economy. Firstly, Sri Lanka started to achieve higher rate of economic growth. Secondly, the GDP composition has changed to some extent. Thirdly, unemployment situation has improved after the introduction of liberalization. Fourthly, the rate of investment increased significantly. Finally, the export structure changed significantly from plantation cum agricultural goods to industrial exports, dominantly garment and textiles. The eruption of civil war in 1983 had negative impact on the economy. If there was no war in Sri Lanka the impact of liberalization would have been a different scenario.