Contents:

• Taking Forward the Climate Change Discussion in Sri Lanka
  By AthulaSenaratne, Research Fellow and Head of Environmental Economic Policy Unit - IPS
• Impacts of Global Climate Change on Inclusive Growth in Sri Lanka
  By KanchanaWickramasinghe, Research Officer - IPS
• Our Water and Climate Change
  By DrHerathMainthtrithilake Head, Sri Lanka Development Initiative of the IWMI
• Impact of Climate Change on Agriculture in Sri Lanka
  By C Shanthi de Silva , Prof. in Agriculture Engineering Faculty of Engineering Technology, the open University
• Impact of Climate Change on Agriculture in Sri Lanka and Possible Response Strategies
  By Dr. B V R Punyawardena, Head, Climatology Division, Natural Resources Management Centre, Dept. of Agriculture
• Traditional Rice Farming in Sri Lanka: Still Viable with Climate Change
  P B Dharmasena, former Deputy Director of Field Crops Research and Development Institute Mahailluppallama
• Combating Adverse Impacts of Climate Change on Tea Production in Sri Lanka with “No-Regrets Strategies”
  By M. A. Wijeratne, Senior Research Officer and the Officer in-charge of the Tea Research Institute, Low Country Station
• Potential Impacts of Climate Change on Coconut Crops in Sri Lanka
  SanathanieRansinghe, Head, Plant Physiology Division, Coconut Research Institute, Lunuwila
• Assessing the Risk of Sea Level Rise: The Way Forward for Sri Lanka
  Prof. S.S.L. Hettiarachchi and Prof. S.P. Samarawickrama, University of Moratuwa
• Climate Change and Coral Reefs in Sri Lanka
  By SandeepJayawardena, Project Intern - IPS
• Post-Copenhagen and Sri Lanka -
  By KanchanaWickramasinghe
• Rio+20: Towards a ‘Green Growth’ Path -
  By KanchanaWickramasinghe
• National Climate Change Policy and the Role of Citizens in the Post-Durban Era
  By L. PadminiBatuwitage, Former Addl. Secretary (Environment & Policy), Ministry of Environment
• The Rio+20 Conference on Sustainable Development
  By W.L. Sumathipala, Prof. of Physics at the Open University of Sri Lanka, Senior Technical Advisor, Ministry of Environment.
• Human Development Report 2011 A Review
  By DrSamanKelegama , Executive Director - IPS
• Human Development Review 2007-2008 A Review
  By AthulaSenaratne, Research Fellow and Head of Environmental Economic Policy Unit - IPS
• IPS Research Studies on Climate Change
  
• IPS /Contribution to Policy Making
  
• IPS Climate News
  

With technological transformations continuing at a rapid pace, and the emergence of a globalised market-place, all countries are under pressure to become more innovative. Sri Lanka too needs to focus heavily on innovation in this new post-war era and in that context, this publication looks at the imperative of innovation for Sri Lanka’s growth and competitiveness. It explores the status of R&D investment, availability of a skilled talent pool, need for industry-research collaboration, importance of commercialization and innovative financing, attracting diaspora scientists, among other issues. The paper calls for innovation policy to be considered in a holistic manner, and calls for a powerful National Innovation Council to be set up to drive the agenda at a national, strategic level.

Executive Summary English , Sinhala , Tamil

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This report wchih is the fourth in the series provides the National Health Accounts estimates for the period 2005-2009.

National Health Accounts describe the financing flows to the national health system, the direction of spending and for what purpose, by function. The boundaries of the health accounting framework are embedded in the health system concept. Health goods and services provided and consumed are seen in relation to health outcomes for the population and the influencing characteristics of the health status. In essence, this means that the health accounting framework is part of a larger model, in which the determinants of health play a crucial role.

The Sri Lanka population is served by a dual health system comprising of both public and private health sectors. In recent years, rapid economic growth has led to a significant growth in the private health sector with an increase in the number of private hospital facilities in the country. Sri Lanka has a well-known universal health care system with government financed public sector services which cover the entire population. The public health sector has a free, open-door policy in regard to general out-patient services and hospital admissions. Private health services are financed through fee-for-service arrangement mainly by out-of -pocket payments, and for those covered by voluntary private health insurance funding is through insurance companies. National Health Accounts identify these sources of funds and expenditure pattern by different providers and their expenditure by functions.

The key players of health financing are the central government, the nine provincial governments, local authorities, and statutory authorities such as the President's Fund and Employees' Provident Fund in the public sector, and private individuals, households, insurers, private sector companies and non-government agencies in the non- government sector. The National Health Accounts provide an analytical view of the financial burden of the key players.

The Sri Lanka National Health Accounts framework was adapted from the OECD System of Health Accounts (OECD SHA, 2000) classification with minor modifications to suit the local needs. This report presents the health expenditure estimates by source of funding, by function, and by provider for the period 2005-2009.

Foreign Aid in South Asia examines the individual South Asian country experience in dealing with foreign aid. The chapters in this book show that the effectiveness of foreign aid as a developmental tool over the last few decades has been mixed, and that the Paris Declaration of 2005 has brought about some improvement in aid ownership, harmonization, mainstreaming, utilization, etc. The book examines how emerging as well as less developed South Asian economies are adapting to these developments in the context of security issues, post-conflict rehabilitation/reconstruction, and so on.

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Out-migration of small farmers or members of their families can have both a positive and negative effect on the rural agricultural production as well as consumption. This study examines the impact on rural agricultural production and the food security situation in farm families resulting from the out-migration of the members of the rural agricultural sector of Sri Lanka.

Analysis of data gathered through a survey of existing literature, key informant interviews, Focus Group Discussions representing the commercial agricultural, semi-subsistence agricultural and fisheries sectors, as well as analysis of secondary data through the Household Income and Expenditure Survey (2006/7) showed that remittances account for a larger portion of the incomes of poorer segments of society, with the contribution reaching up to 81 per cent for the poorest 10 per cent of the population. Subsequently the study explores the degrees of change for instance, in food security and quality for the respective societies studied.


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While the provision of financial services (credit and savings) to the poor through microfinance is an established concept, the provision of insurance to the poor through microinsurance is relatively new. As a result, most microinsurance providers are affiliated to microfinance institutes while specialized providers are fewer in number. This study fills the gap in literature currently available on microinsurance, by providing a critical insight through the examination of the behavior and needs of segments of the microinsurance market in Sri Lanka. This, establishes the basis for the design and development of demand driven, risk managing financial products. This study looks at the differences of the products, delivery methods and the extent to which they reflect the needs and preferences of the poor households. It used both qualitative and quantitative research methods through desk reviews, key informant interviews, and a household survey of 330 households in 2008.


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These two volumes cover a broad spectrum of Sri Lanka’s economic and social development and critically explores the market economy. The volume of essays offer comprehensive accounts of the actually existing market economy of Sri Lanka, complete with disaggregated analyses of key economic and social problems faced by the country during recent decades.

The report begins by assessing the emerging risks to growth and stability for the Sri Lankan economy in the light of developments in both the external and domestic economic environment. While Sri Lanka has made a rapid recovery, with GDP growth continuing at 8 per cent into the first half of 2011, threats to sustained growth remain in view of a weakening global economic environment. In the circumstances, retaining necessary fiscal, monetary and exchange rate policy flexibility to respond appropriately to changing economic conditions is vital for macroeconomic stability.


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The link between trade liberalization and poverty has arguably been one of the most debated topics in development policy debate. Existing studies on the subject have primarily used multi-country cross-sectional data, and there is a growing concern about the limitations of this approach in providing a sound empirical basis for informing the policy debate. These limitations point to the need for undertaking in-depth analyses within individual countries over time.

In order to examine the connection between trade liberalization and poverty, this book provides case studies of trade policy reforms and poverty reduction outcomes of seven countries in South Asia - Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The South Asia region allows for an excellent comparative study given the widespread emphasis on liberalization reforms in the region over the past two decades, as well as highlighting significant inter-country differences in terms of the timing and comprehensiveness of reforms, and the heavy concentration of world poverty in the region. This book is a useful contribution to studies on South Asia, as well as International Trade and Development Economics.

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Migration, Remittances and Development in South Asia explores the impact of migration on development in South Asian countries, compiling extensive information on the migration flows and trends, migrant remittances and migration policies. It discusses a number of proposals for effective cooperation on protection of migrant rights and promotion of migration and development linkages.

Through a nuanced look at the role of remittances in bringing about development, it takes cognizance of the fact that remittances alone are unlikely to lift people out of poverty; rather, it is their interplay with other economic, social and cultural factors which determines the scale and type of impact that remittances can have on poverty reduction.

The book also examines how migration should be brought into the mainstream of development planning where development must be understood as a dynamic process implying growth, advancement, empowerment and progress, with the goal of enlarging the scope of human choices and creating an environment where citizens can live with dignity and equality.

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Even though the wetlands provide a wide spectrum of use and non-use values, burgeoning demand for land and inadequacy of resources to manage urban wetlands effectively as a public good has led to the conversion of the wetlands to different uses over the past years. The ad hoc conversion of wetlands into other uses has been subjected to much debate during the recent past. However, no attempt has been made on evaluating the economic aspects of any of the services provided by Sri Lankan wetlands until date. In this initial attempt, this study attempts to evaluate the social welfare that visitors derive by enjoying the recreational benefits, and thereby to provide an economic justification to the long standing conservation conversion debate, taking Diyawanna Oya wetlands as a case study.

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The “Sri Lanka MDG Country Report 2008/09” is the second Millennium Development Goals (MDG) Progress Report for Sri Lanka, which reviews the progress on MDGs in Sri Lanka, since 1990, at national level, as well as at sector and regional levels. The first Millennium Development Goals (MDG) Progress Report for Sri Lanka, which was released in 2005, played a very important role in creating awareness on MDGs and promoted a dialog among policy makers, planners and other stakeholders.

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The study focuses on two types of aid transfers: boats and houses, which were distributed as part of an effort to rehabilitate tsunami-affected fishery household in six district of Sri Lanka. The study attempts to investigate the distributional impacts of these transfers on the affected households. The study also attempts to quantify the factors underlying the allocation of such asset transfers and examines the degree of which the government and donors targeted the right households. The study uses the Census of Tsunami, conducted by the Department of Census and Statistics in 2005, as the baseline survey for pre-Tsunami data. The study bases its findings on a follow-up survey carried out in 2008 for a sample of fishery households selected from the baseline survey. The results of the study show that there was better targeting of households for the allocation of houses compared to the targeting and allocation of boats. The findings also show that housing transfers have resulted in improved asset equality among the fishery households compared to what existed in the pre-Tsunami period.

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Promoting Economic Cooperation in South Asia: Beyond SAFTA examines the distinct development dichotomy that exists in South Asia and tries to find a workable solution to bridge this gap. In spite of rapid economic growth since 1980, there is extensive poverty and inequality in South Asia. This dichotomy has two faces: one is highly urbanized and well-linked to global markets, and the other is rural, isolated from the global economy, and growing very slowly. The large bulk of South Asia’s poor live in the latter environment.

The book brings together perspectives from academics, the private sector, civil society and policy makers. Using solid empirical evidence and sound analysis, it stresses that in addition to policy and institutional reforms aimed at removing domestic constraints to growth and job creation, market integration and regional cooperation ought to be key elements of a strategy for removing the dichotomy and eliminating poverty in the longer term. Delving into major political economic issues of the SAARC region, the book analyzes SAFTA, bilateral FTAs, transportation, regional integration, regulatory mechanisms, food prices, labor and employment, and tourism. It also provides an analysis of why past cooperation efforts have not worked and how better cooperation can be achieved in specific areas. It looks at the many policy and institutional constraints that contribute to the present state and have made South Asia one of the least integrated regions of the world.

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Scientific evidence from numerous sources indicates that global climate change is actually taking place. This implies that the present generation and many to come will have to face impacts of climate change. Scientists are unanimous that pending changes in climate patterns would be global in scope and scale. It is widely agreed that developing countries would face greater hardships and within them also, poorer communities are more vulnerable. Various studies have underscored the importance of effective mitigation measures ‘to avoid the unmanageable’ and the necessity of appropriate adaptation ‘to manage the unavoidable’.

Sri Lanka, being a tropical island of significant poor population located in a disaster prone region, is highly vulnerable to climate change in terms of physical as well as socio-economic impacts. The country needs to develop a strong national agenda to confront the challenge on which the nation’s entire future hopes for sustainable development depend on. In spite of that, the present readiness of the country to face the climate change impacts can hardly be considered adequate. In the backdrop, this study undertakes a policy analysis that could guide developing a national agenda for mainstreaming the activities on climate change in the overall national development context of the country.

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Forest-based ecotourism is considered as a non-consumptive, market-based approach to forest utilization. Ecotourism can be viewed as an important tool for forest management, wherever potential exists. Sri Lanka possesses an enormous potential and prospects for the development of forest-based ecotourism. However, ecotourism in Sri Lanka is still at its infancy. The study aims to identify the main problems and issues that demand policy attention in developing forest-based ecotourism in Sri Lanka, to identify the existing management approaches of forest-based ecotourism, followed by an evaluation of their strengths and weaknesses, to review policies and legislations relevant to development of forest-based ecotourism and to recognize existing policy gaps in addressing the identified issues. Finally, it presents key policy implications and recommendations for promoting ecotourism as a sustainable tool for forest conservation in Sri Lanka. The study makes use of data and information gathered through focus group discussions, key informant interviews and secondary information sources.

Having recognized the importance of international migration for Sri Lanka, this report was initiated with the objective of preparing a comprehensive analysis of the current trends, patterns and changes in migration related sectors such as labour migration, permanent migration, student migration, irregular migration, and tourism for the recent years. The report attempts to provide Sri Lanka’s international migration dynamics using the available data. The report acknowledges that there are many gaps in the collection of migration data in Sri Lanka despite recent efforts by the Government for a coordinated approach to data collection. The report by no means provides a total migration picture in Sri Lanka. However, it is a progressive step in the direction for collection and dissemination of migration data for the benefit of policy development and subsequent programme intervention for managing migration for the benefit of Sri Lanka.

The 2008 edition of the International Migration Outlook in Sri Lanka shed more light on the challenges and opportunities ahead of Sri Lanka towards enhancing migration management approaches that uphold the principle “human and orderly migration benefits migrants and society”.

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The “Sri Lanka: State of the Economy 2009” is an annual publication of the Institute of Policy Studies of Sri Lanka (IPS) devoted to a rigorous analysis of Sri Lanka’s economic outlook and emerging key areas of policy concern. The 2009 report focuses on the “Global Economic Crisis: Issues, Impacts and Outlook”. It examines the path of the current global economic crisis, the impacts that have been visible in Sri Lanka, and discusses policy concerns that need to be addressed to mitigate downside effects.

In 2009, world output is estimated to contract for the fist time in 60 years, with growth in global export volumes forecast to plummet by 10 per cent after 30 years of uninterrupted growth. Sri Lanka too has not been immune to the unfolding crisis. A sharp drop in earnings of key export sectors has been the most obvious downside effect. On the other hand, a marked reduction in international oil prices, and reduced demand for imports in general, helped the county to avert a looming foreign exchange crisis in the latter part of 2008 and into the first quarter of 2009.

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The use of Information Technology (IT) in trade facilitation has received considerable attention in policy circles given its potential to reduce costs involved in trading goods across borders. Sri Lanka too has automated its import/export processes, albeit partially. With special focus on automation of the customs clearance process, the study examines the extent to which automation of trade facilitation has taken place in Sri Lanka and the impact it has had on SME exporters of the country. The study includes the results of a small survey that was carried out to capture a number of issues including the extent to which traders/agents use the electronic (EDI) system in Sri Lanka, the adjustments they had to make in adapting to it, and the costs and benefits stemming due to the electronic system. The survey showed that although the SME traders and agents surveyed were aware about the EDI system, very few use it due to reasons such as the partial implementation of the system as well as the additional cost involved in using it, which has discouraged many traders and agents especially the SME players from lodging the trade related documents electronically. In addition, lack of information on the EDI system and how to access it has hindered its use by the SME sector. The study, which also sheds light on the trading process of Sri Lanka, makes policy recommendations for the relevant stakeholders involved.

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Based on a study done by the IPS for the National Intellectual Property Office, financed by the World Intellectual Property Organization this publication gives a comprehensive study on Sri Lanka’s tea, sapphire and cinnamon industry. A legal-economic analysis of Geographical Indications (GI) in relation to the tea, blue sapphires, and cinnamon sectors in Sri Lanka suggest that GI strategy would be beneficial for all three sectors. Further, the importance of niche marketing in the global context and the variety and variations in national systems of GI protection suggest the need to base the international protection of each GI on separate legal-economic cost-benefit analyses carried out for each individual key overseas market.

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This book explores the opportunities and risks of the liberalization of trade in services in South Asia. It offers an overview of the entire region on market access and regulatory issues as defined by the GATS framework of the WTO and exposes areas for regional and bilateral liberalization. It provides policymakers and other stakeholders in the region with better comprehension of the problems pertaining to these, and consequently, shows them a clearer vision of how to overcome them.

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Sri Lanka has made significant progress in terms of its basic education indicators compared to many other developing countries in the world, and is "on track" to achieve the MDG targets of universal primary education and gender parity in education. Such achievements are largely a result of investment in human capital development and various pro-poor education policies pursued by successive governments since the 1940s. Despite such polices and remarkable achievements at the national level, evidence shows considerable disparities in terms of education facilities at more a disaggregated level. In this context, this publication attempts to analyze the availability of resources (both human and physical) of schools to assess the extent of disparity across and within districts

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This Working Paper looks at how intensified competition in light of the abolition of the Multi-Fibre Arrangement (MFA) has led to a number of innovative measures being undertaken by the textile and clothing industry in Sri Lanka to face the challenges of a quota free era.

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National Health Accounts has become a key source in describing the financing of the national heath system and its direction of spending. This is the third report of Sri Lanka National Health Accounts (SLNHA) prepared by the IPS.

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The IPS examined the “Mahinda Chintana: Vision for a New Sri Lanka” taking into account the current overall policy framework and attempted to shed some light on possible policy options where necessary.

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The State of the Economy report is an annual publication of the Institute of Policy Studies of Sri Lanka (IPS) providing a rigorous assessment of Sri Lanka’s economic performance in the context of policy developments in both the domestic and external environment. The report also highlights emerging socio-economic issues in key areas of medium-term policy relevance for the country.

The central theme of the State of the Economy 2007 report is that better infrastructure and improved public services are needed not only to increase growth, but also to ensure that the benefits of that growth are spread more widely. The report highlights related issues of enhancing access to land and microfinance, improving access to better quality education and health, the need to ensure sustainable and equitable utilization of the natural environment, etc. The supply-side constraints in infrastructure, skilled labour, and public services in Sri Lanka can seem formidable. However, what needs to be done comes back to the core issue: improve the capacity of the public sector to deliver basic services. All these require a commitment to major policy reforms.

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• livelihood recovery for micro-entrepreneurs, particularly women
• perceptions of tsunami affected households of strengths and weaknesses of livelihood recovery in north, east and south
• challenges and opportunities to upgrade post tsunami fishing industry
• views and structures for improving livelihoods among the fishing communi

Microfinance, one of the widely accepted instruments for poverty alleviation throughout the world, has been used in Sri Lanka spanning for over several decades. Despite the long history and the large number of institutions providing microfinance services particularly to the poor, there is limited knowledge on the impact of microfinance on poverty alleviation in Sri Lanka. This study fills this gap by studying some important issues related to the microfinance sector: outreach of microfinance, role of informal sources of finance and the impact on poverty and welfare of households.

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“The Case of EU GSP Concessions to Sri Lanka ” is a Working Paper published by the Institute of Policy Studies analyzing implications of deeper tariff concessions extended to Sri Lanka under the Labour Arrangement of the European Union's (EU) Generalized System of Preferences (GSP). The publication traces the labour-trade linkage, and underscores the implications and issues of the GSP scheme in the context of the textile and apparel industry in Sri Lanka . The analysis of Sri Lanka 's textile and apparel trade performance in EU sets the local industry in the context of its competitors and evaluates implications of the tariff concessions for this industry under two broad themes, namely- market access and image/branding. Some prominent issues addressed are EU GSP scheme's rules of origin requirements, Sri Lanka 's low utilization of concession and underlying reasons.

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It is argued that economic growth is a necessary condition for poverty alleviation while a liberal trade regime is a prerequisite for sustainable economic growth. However, trade liberalization affects consumers and producers differently. While tariff reduction on imports may bring welfare gains to consumers, there would be many producers who are adversely affected by such trade policy reforms. Hence, this paper attempts to look at the impact of trade liberalization on poverty and welfare of households, with a special focus on the rice and potato sectors of Sri Lanka. Both a descriptive approach (for rice and potato sectors) and an analytical model (for the rice sector) are used in this regard. The paper also analyses various trade policy reforms undertaken during the last decade, and the extent and nature of poverty in Sri Lanka.

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This paper is organized as follows. Section 2 highlights the trends in the aviation industry over the last decade, in terms of scheduled passenger services, cargo and non-scheduled services. Section 3 provides an overview of the development of regulation in the industry and steps taken by individual countries (US, Australia, New Zealand) and groups of countries (EU, APEC and ASEAN) to free air services from regulation hold. Section 4 discusses Sri Lanka’s aviation policy, identifies the main aspects of the present policy and looks at the country’s bilateral air service agreements, their main provisions and restrictions. Section 5 examines Sri Lanka’s airline industry in terms of both passenger and cargo transport. Section 6 considers policy options for liberalization and recommends plausible paths that could be taken while Section 7 looks at the airport and ancillary facilities at present in Sri Lanka and the planned expansion and improvements in the pipeline. Section 8 concludes.