Sri Lanka’s Economic Independence: A Distant Dream?

Political independence in 1948 economically meant little to Ceylon. It was more a declined economic opportunity – to be a part of a trade empire on which the sun never set could have been far advantageous. Still independence was no excuse for failure. Not every post WWII-independent Asian nation took the wrong turn. Then most were behind us. Now they have surpassed us not just in GDP terms, but even in human development – what we used to boast about. Memoirs of Lee Kuan Yew, who once dreamt emulating the Ceylonese economic model, describe why and how we failed, in style.


The true independence, if anyone cares to celebrate, gained not in 1948, but in 1170 AD – give or take few decades. That was when Parakramabahu the great –the greatest to ever rule us – not only liberated the isle from the mighty Chola Empire but converted it to an economic powerhouse. Contrary to popular belief, agrarian self-sufficiency was not Parakramabahu’s goal. His futuristic strategy was to be the trade hub of South Asia. Indian, Roman, Arab, Javanese and Chinese traders were frequent visitors to Serendib. The twelfth century ‘granary’ of Asia, probably was the equivalent of modern Singapore.

The dark ages that followed the fall of Polonnaruwa kingdom saw less political stability, more power centers, more civil wars and less trade. Arya Chakravarties of Nallur, arguably the most powerful in the interim period were said to have a large naval force, but still no records that business was their forte. Meanwhile in the South it was more a battle among each other.

Like it or not, it was the Portuguese followed by Dutch, who brought the lost glory. Spices suddenly became hot products; cutting a cinnamon plant was punished by death. British, after capturing Kandyan kingdom in 1815, introduced coffee, tea and rubber – the new economic crops. This gave birth to two classes of entrepreneurs – first British but towards the end of nineteenth century, domestic. The transition from feudal to modern economy materialized many dreams – highways and railways, commercial sea ports, administrative system, fixed income jobs, developed corporate sector, postal service, communication system followed by even quality education and proper healthcare. By the middle of the last century Ceylon successfully eradicated a predicament as serious as foreign invasions to ancient rulers: Malaria

Thus strictly speaking, it was not the Europeans who robbed our independence. Rather it was them who brought it back directing us to a new age. Otherwise Seylan could have easily ended up another Burma, Cambodia or Nepal.

Post independence economic reveries were short lived. The Colombo Plan, which aimed to ‘uplift’ neighbours to our own level, is long forgotten. First Central Bank chief John Exter’s objections to subsidies in the middle of rubber-crisis were met with a Hartal to be followed up with the first populist government in 1956. The rest is history.

To cut short, Singapore had Dr Goh Keng Swee and we had Dr. Nanayakkarage Martin Perera. Both were products of London School of Economics – students of legendary Harold Laski and no doubt, brilliant economists. Strangely they acted in ways diametrically opposite. Their footprints were long seen in the respective economies. By mid 1970s Singapore had a first-rate airline and one of the busiest airports. We had kerosene smelling t-shirts, transparent sarongs (aptly named ‘Ganta mark’) and maniocs – to be eaten twice weekly.


J.R. Jayawardena, sadly the typical scapegoat for every woe, was the one who took us out of that mess. 1978 economic reforms were the beginning of a new era. It made possible almost every economic benefit we enjoy today; banking facilities, garment industry, tourism and information and communication technologies. Post-1978 Economic liberalisation brought more employment opportunities than ever imagined. The impact was so strong that even the SLFP, a political party that traditionally vowed closed statist economic policies, had to embrace open economy in 1994. JVP- the extreme statists hitherto, settled for a hybrid.

Unfortunately, J.R. Jayawardena could not complete the revolution he began – in the backdrop of ethnic tensions and the second JVP insurrection. Reforms in education, power, railway and even agriculture sectors hardly happened. (Interestingly, Dr. Sarath Amunugama, a former finance minister later called four of such sectors as ‘paraassayaas’ or demons, that suck the blood from the national economy) Decision making power, in spite of the 13th amendment, has sacredly maintained at the centre. Enthusiasm in infrastructure building was lost on the way. A sizable fraction of state income has continuously been spent in education and healthcare subsidies. Government grew till it provided job opportunities for every one in sixteen of the population – again, a large section is political henchman. Money printing, at the cost of thumping inflation rates became the norm of the day.

The only break in this vicious system was the two brief years from 2002-3. At least the first year saw a systematic approach in building the economy. We saw Sri Lanka starts shining after a long period of suppression. Then the masses rejected the system – it did not meet their short term goals; government jobs and fertiliser subsidies.

This brings us to the days of ‘national economy’ – whatever it means. Patriotism has many facets. We are back to 1970-77 times, sans queues and barriers. Government takes pride in the number of jobs newly created within, and has absolutely no shame in imposing high taxes (tax on petrol is 189%) and printing money to support war efforts. We believe in isolated economic models that can be ‘plugged out’ from international trade. Protectionism is more a religion. Be Lankan; buy Lankan is the theme of the day. Just like in any sub Saharan African state the opportunities for new ventures are traded under the table. Private sector is looked with suspicion. Bribery remains the best strategy, and centralised now, the process perhaps is less cumbersome. (Just bribe one big man, not five on the way!) The masses are insensitive, as long as they receive their fair share. Money is not the only commodity that makes a mass exodus; brains too do so.

We still cheer for independence and a government that failed to carry out a single economic reform since the day it took office in November 2005.

Is our economic independence a distant dream? You tell me.