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Complementarity of Trade and FDI Liberalization in Industrial Growth: Lessons from Sri Lanka

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  • Prema-chandra Athukorala
  • Sisira Jayasuriya

Abstract

This paper examines industrialisation experience in Sri Lanka following the market-oriented policy reforms initiated in 1977, with emphasis on the complementarity of trade and foreign direct investment (FDI) policies in shaping the reform outcome. It is found that the reforms helped to transform a primary product exporting economy into one in which manufactures dominate exports. Improved performance of domestic manufacturing through greater export orientation saw improvement in output and total factor productivity growth, and employment generation. The Sri Lankan experience highlights the complementary role of investment liberalisation for exploiting the potential gains from trade liberalisation. This industrialisation outcome is particularly impressive given that it occurred during a period of persistent civil strife and macroeconomic instability.

Suggested Citation

  • Prema-chandra Athukorala & Sisira Jayasuriya, 2004. "Complementarity of Trade and FDI Liberalization in Industrial Growth: Lessons from Sri Lanka," ASARC Working Papers 2004-10, The Australian National University, Australia South Asia Research Centre.
    • Handle: RePEc:pas:asarcc:2004-10
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    File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2004/WP2004_10.pdf
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    References listed on IDEAS

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    1. Prema-Chandra Athukorala & Sisira Jayasuriya, 2005. "Liberalisation and Industrial Growth: Lessons from Sri Lanka," Palgrave Macmillan Books, in: Raghbendra Jha (ed.), Economic Growth, Economic Performance and Welfare in South Asia, chapter 6, pages 102-118, Palgrave Macmillan.
    2. Premachandra Athukorala, 1995. "Foreign Direct Investment and Manufacturing for Export in a New Exporting Country: The Case of Sri Lanka," The World Economy, Wiley Blackwell, vol. 18(4), pages 543-564, July.
    3. Harberger, Arnold C., 1996. "Reflections on economic growth in Asia and the Pacific," Journal of Asian Economics, Elsevier, vol. 7(3), pages 365-392.
    4. Nayyar, Deepak, 1978. "Transnational Corporations and Manufactured Exports from Poor Countries," Economic Journal, Royal Economic Society, vol. 88(349), pages 59-84, March.
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    Cited by:

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    2. Salah A. Nusair, 2008. "Purchasing Power Parity under Regime Shifts: An Application to Asian Countries," Asian Economic Journal, East Asian Economic Association, vol. 22(3), pages 241-266, September.
    3. Jayasinghe, Maneka & Chai, Andreas & Ratnasiri, Shyama & Smith, Christine, 2017. "The power of the vegetable patch: How home-grown food helps large rural households achieve economies of scale & escape poverty," Food Policy, Elsevier, vol. 73(C), pages 62-74.
    4. AM.Priyangani Adikari & Haiyun Liu & MMSA. Marasinghe, 2021. "Inward Foreign Direct Investment-Induced Technological Innovation in Sri Lanka? Empirical Evidence Using ARDL Approach," Sustainability, MDPI, vol. 13(13), pages 1-16, June.
    5. Zulfadhli, 2018. "Determination of Industrial Competitiveness on Manufacturing Industry Growth in Palembang City," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 238-254, July.
    6. Priyanga Dunusinghe, 2009. "On Export Composition and Growth," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(2), pages 275-304, July.
    7. Kaminski, Bartlomiej & Ng, Francis, 2013. "Increase in protectionism and its impact on Sri Lanka's performance in global markets," Policy Research Working Paper Series 6512, The World Bank.

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