A valuable and timely contribution to SL contemporary economic policy debate

Book review

‘Export Competitiveness and Poverty Alleviation in South Asia with Special Reference to Sri Lanka’ by Lloyd F Yapa, Colombo

S Godage & Brothers, ISBN 978-955-30-8062-2, hard back, pp xvii + 360.

By Premachandra Athukorala

Engagingly written and compelling, this book is a valuable and timely contribution to the contemporary economic policy debate in Sri Lanka. 

The economic liberalisation reforms initiated in 1977 and sustained over the ensuing three decades dramatically transformed the economic landscape of Sri Lanka. The export structure of the economy underwent a remarkable shift from land-intensive plantation exports to labour-intensive manufacturing, ending the historic dependence of the economy on three primary commodities (tea, rubber and coconut products). 

Export-oriented manufacturing emerged as the major generator of employment opportunities in the economy, accounting for over half of total employment growth in the ensuing three decades. Employment generation significantly contributed to poverty alleviation as the overwhelming majority of those who found employment in export-oriented industries (in particular the garment industry) were unskilled workers coming from low-income households. 

Notwithstanding these notable economic achievements, there was a back-sliding from liberalisation reforms from about 2005, in particular following the ending of the ethnic conflict in May 2009. The policy backsliding, coupled with real exchange rate appreciation underpinned by the emphasis on debt-financed infrastructure development, resulted in a massive contraction in exports as a share of GDP. 

Reflecting largely the sluggish export performance, the current account deficit has widened, total outstanding external debt reached alarming levels, and labour absorption in domestic manufacturing has slowed. In this context, restoring export competitiveness is a key policy priority of the country. The purpose of this book is to contribute to the policy debate on export development by examining the Sri Lankan experience with export performance from a comparative perspective encompassing selected Asian countries.  

The author of the book, Lloyd Yapa, was the Director of Policy and Planning of the Sri Lanka Export Development Board during 1981-1998. After retirement, he has been actively engaged in the policy debate in the country, in particular as a member of the Sri Lanka Economic Association and later as one of its Vice-Presidents for a few years. At various times, he has also served as consultant to both private and government organisations during this period.

The book is a compilation of 10 self-contained chapters each dealing with selected themes of determinants of export performance, export-development nexus, and policy options for export promotion and improving the productivity of export-oriented manufacturing. 

The first two chapters provide the context for the ensuing chapters by presenting a succulent discussion on the concepts and easement of poverty and inequality. The ensuing chapters deal with the formulation of development strategies with a focus on export-employment-poverty nexus. 

These chapters in turn deal with the role of foreign direct investment (FDI) in export expansion and policy options for creating an enabling environment for attracting FDI (Chapter 3); patterns and determinants of exports (Chapter 4), export competitiveness (Chapter 5), the role of productivity and innovation in export expansion and the diversification of export composition (Chapter 6), social and physical capital needed for export expansion (Chapter 7), strategies for improving total factor productivity, with emphasis on how the productivity especially of land, could supplement the poverty alleviation role of the export strategy, in addition to supporting competitiveness (Chapter 8), the role of effective leadership as a sine qua non for export development with a focus on employment generation and poverty alleviation (Chapter 9); and the development strategies of the high-performing East Asian economies and Dubai (Chapter 10), with a view to reinforcing the key policy inferences made in the previous chapters. The concluding chapter brings together the key inferences and policy recommendations. 

All in all, the hallmark of the book is that it goes beyond the narrow confines of the conventional balance-of-payments focus of the standard economic analysis to encompass the role of export performance in employment generation and poverty alleviation. 

This informative book, with its extensive data coverage and comparative analysis, shows how one can use practical experience and country knowledge accumulated over many years to analyse economic issues and make sensible policy recommendations. The style of the book is relaxed and clear. The exposition is refreshing and insightful. Notwithstanding the title, the country coverage of the comparative analysis of the book is not limited only to the countries in South Asia.

The quality and policy relevance of the book could have been improved by including an opening chapter on policy reforms and performance of the Sri Lankan economy, with emphasis on the role of export expansion. A conspicuous omission of a book of this length (360 pages!) is a subject index that would have greatly enhanced it ‘user friendliness’. 

(Premachandra Athukorala, FASSA, is Professor of Economics, Australian National University.)