Impact of Trade Liberalization on Poverty in Sri Lanka

Sri Lanka is characterized by significant public sector involvement in economic activities through State-Owned Enterprises (SOEs), which are engaged in commercial activities in many sectors of the economy. They suffer from institutional duplication, lack of commercial practices, inflexible pricing policies, etc. Further, SOEs are widely perceived to be overstaffed, inefficient, and a source of political patronage, and corruption.

The research study focused on four selected enterprises, namely Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), Sri Lanka Railways (SLR), and Sri Lanka Central Transport Board (SLCTB) (public passenger bus transport). These entities were selected as representative case studies of the SOE sector given the crucial role they play in the country’s economic activities.

The over-arching objectives of this research study were to look at a menu of options to facilitate better performance in key public enterprises and to stimulate a dialogue amongst the public, based on informed analysis, on the costs and benefits of reforms. Our research methodology consisted of a comprehensive literature survey, in-depth one-on-one interviews with major stakeholders, focus groups discussions, and expert consultations.

This study explored both the economic and social costs of the status quo and the political forces at play determining the prospects for change. The primary research questions underpinning this research study were: a) what are the economic and social costs of the status quo?; b) what are the key policy changes that would help to reduce losses, improve efficiency, and ensure sustainability of the SOEs?; c) who are the key stakeholders (special interests or broad interests) in the change process?; d) how to buy-in “winners” and compensate “losers”?, and e) how can policy changes be implemented?

Funding: World Bank

Research team

Malathy Knight-John
Dilani Hirimuthugodage
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