This research was done for an international project titled “How Economies Participate in the WTO: Case Studies in Developing Countries” jointly commissioned by the WTO and by AusAid and carried out under the leadership of Dr. Peter Gallagher of Inquit Communications Pvt. Ltd., Australia.

The objective of this international project was two-fold. First, to document through case studies, the strategies employed by developing countries to use the WTO mechanism to address their development needs and priorities; and second, to assess the effectiveness of these strategies in terms of their impact on the domestic policy and development process. The conceptual framework was set out so as to address this second objective from the perspective of key domestic players involved in the particular development issue being taken up in the case study.

The context for the Sri Lankan case study is that adherence to the regulatory principles set out in the GATS Telecommunications Reference Paper has tended to be weak in practice, rendering a gap between global and domestic regulatory governance. The methodology employed in the study included interviews with key players in the telecommunications industry, and in the telecommunications policy and regulatory space, and was supplemented by an extensive literature review of telecommunications reform and regulation in Sri Lanka .

The principal findings that emerged from this research are as follows:

• Sri Lanka 's WTO commitments in relation to telecommunications are of little substantive significance.

• The reasons for the absence of a WTO compliant interconnection regime range from the technical to the political.

• Technically, the failure to implement a fair interconnection regime is due to a gap between the Telecom Reference Paper and domestic legislation. (On paper at least, this gap between domestic and global regulatory governance has been addressed with the promulgation of the Interconnection Rules of 2003).

• The bigger challenge however, is that the interconnection problem is a symptom of a larger political economy nexus linking rent-seeking behaviour, privatisation and anti-competitive regulatory practice.

The broader policy lessons that emerge from this case study are best expressed as follows:

• What incentives can be put in place to encourage policy decisions conducive to good regulatory governance in an environment where bad governance is widespread and pervasive and where civil society pressures are relatively mild.

• As reflected in this study, WTO commitments were insufficient to bring domestic regulatory governance in line with international best practice. Does this imply that international best practice and WTO commitments are merely an academic exercise in countries with weak domestic governance and that such countries should look for alternative governance benchmarks ?