June 28, 2005 Firms in the North and East of the country affected by the conflict have developed coping strategies, such as reducing their inventory, producing from a residential location, and increasing outlays on security. Urban businesses, located mostly in the Western province, enjoy better access to roads and other forms of transport, but are affected by the high cost and unreliable supply of electricity. This situation leads nearly 75 percent of urban manufacturing firms in Sri Lanka to purchase a generator, a significantly higher proportion than competitor countries like China (where only 27 percent do). As it can cost 3 to 4 times as much to generate electricity with a generator, urban firms are only half as productive as they could be with more reliable power. Â Executive Summary
English | Sinhala | Tamil Chapter One - Investment Climate Matters
There is growing recognition around the world of the importance of a sound investment climate for
generating economic growth and poverty reduction. Few now accept the simplistic view that greater
investment alone will lead to higher growth. Instead, the prevailing view emphasizes building a
productive environment in which private businesses can flourish. Although the term investment climate is used broadly, here it is taken to mean the policy, regulatory, institutional, and governance
environment that supports (or fails to support) entrepreneurship and efficient markets.
>>>download chapter one Chapter Two - The Different Profiles of Rural and Urban Enterprises
The urban and rural enterprises surveyed in Sri Lanka have sharply different profiles, and the
differences are accentuated by the coverage of the urban manufacturing survey, limited to formal
firms.1 Urban enterprises tend to be older and much larger than their rural counterparts. Large-scale
manufacturing is concentrated around Colombo-though geographic distribution differs markedly
across sectors-and is oriented toward exporting. Rural enterprises are likely to be a sole
proprietorship headed by a male, based outside the home, and established using household savings.
Their managers have education levels suggesting great potential for improving productivity and
introducing new technologies in Sri Lanka’s rural areas. Rural enterprises in North Eastern
Province have very different characteristics than those elsewhere in the country, largely because of
the conflict.
>>>download chapter two Chapter Three - The Investment Climate and Its Impact on Performance
Entrepreneurs make business decisions depending on how they perceive the climate for investment.
Examining firms' perceptions of the major business obstacles they face thus provides a solid basis
for understanding the investment climate in Sri Lanka. To aid in this exercise, urban and rural
enterprises were asked to rate the extent to which a range of factors in the investment climate affect
their performance. Complementing the information on firms' perceptions are data on a wide range
of objective measures making it possible to assess the burden that the perceived constraints impose
on firms' performance.
>>>download chapter three
Chapter Four - International Competitiveness: Challenges and Opportunities
Sri Lanka has opened its economy over the past 25 years, transforming its export base from mostly
primary commodities to mainly manufactured goods and spurring economic growth. As survey
results confirm, international integration also has benefited Sri Lankan firms. Yet the country's
export base, heavily concentrated in garments, is vulnerable to the changing external economic
environment. Moreover, export growth has decelerated since the mid-1990s. Sustaining rapid export
growth and unlocking the potential of foreign direct investment-both critical to the country's economic
prospects-depend most importantly on achieving political stability.
>>>download chapter four Chapter Five - Conclusions and Policy Recommendations
A good governance framework and a skilled labor force distinguish Sri Lanka among developing
countries. In sharp contrast with neighboring countries, Sri Lanka has created a business
environment that is relatively free from red tape and corruption. The economy is open, and trade
reforms and other liberalization measures have helped transform the export and industrial base. The
government has invested heavily in the health and education of the labor force. Yet despite these
achievements, survey results show that the country fares poorly on many investment climate
indicators. A low-intensity civil war, lasting from 1983 to 2001, discouraged international investors.
It also restricted regional commerce and diverted scarce resources from productive economic uses.
Moreover, there was little investment in infrastructure during the conflict period, undermining firms'
productivity and the country's growth potential.
>>>download chapter five Appendices and References
>>>download appendices and references |
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