Annual Report 2007 - Institute of Policy Studies of Sri Lanka

Our Mission 

The Institute’s mission is to contribute to the economic development of a democratic Sri Lanka and enhance the 

quality of life of its people by informing policy makers and contributing to the public debate through timely, 

independent, and high quality research-based analysis of medium and long-term national policy issues. 

Contents 

Chairman’s Message …………………………………………………………………...2 

Executive Director’s Report…………………………………………………………...3 

Funding and New IPS Headquarters……………………………………………….....5 

IPS Research …………………………………………………………………………...6 

Research Programme 

IPS Research Themes 

Macroeconomic Policy …………………………………………………………............7 

International Economic Policy…………………………………………………......... 11 

Labour, Employment and Human Resources Development………………......…….15 

Industry, Public Enterprise Reform and Regulatory Policy ………………......……18 

Poverty and Social Welfare…………………………………………………......…….21 

Agricultural Economic Policy……………………………………………….......……24 

Environmental Economic Policy …………………………………………......………26 

Health Economic Policy …………………………………………………............…… 28 

Links ..................................................................................................................................... 30 

IPS Support Services………………………………………………………………… 31 

Administration and Finance Unit……………………… ..............................................31 

Library………………………………………………… .................................................31 

Publications and Communications Unit………………................................................. 33 

Information Systems Unit ………………………………...............................................34 

Human Resources Training and Development ……………………………………. 36 

IPS Events……………………………………………………….. ………………… 39 

Conferences, Workshops and Book Launches……......................................................... 39 

Monthly In-House Seminars………………………….................................................. .42 

Monthly In-House Book Reviews……………………….............................................. 43 

IPS Publications ……………………………………………………………………. 44 

Publications of 2007………………………………....................................................…44 

Forthcoming Publications………………………............................................................ 46 

IPS Staff……………………………………………………………………………… 47 

Research Staff.......................................................................................................................47 

Administrative and Support Staff......................................................................................48 

Financial...............................................................................................................................50 

IPS Annual Report 2007 1

Chairman’s Message 

It gives me immense pleasure to make some comments on the activities of the IPS in 

2007, the year under review being the first full year of my tenure as Chairman. My 

message in the Annual Report 2006 harboured a wish that the transition from university 

academia to the environment of the IPS should prove to be intellectually rewarding. 

This has indeed proved to be so. 

As the Annual Report 2007 details, the IPS has further focused the orientation of its 

research programme to build on its mandate and strengths. It has worked closely 

with the Government of Sri Lanka, not only in addressing the research and 

development issues identified in the country’s long-term development plans but 

also through direct participation in key sectoral initiatives, particularly by providing 

technical inputs to ongoing bilateral trade negotiations. The Institute has also 

strengthened its partnerships with other organizations to promote capacity 

development at the provincial level, for instance, through a series of workshops in collaboration with the World Bank 

Institute. IPS research activities in 2007 have further contributed to strengthening the Institute’s reputation. New 

networks have been developed and existing ones supported through collaborative research with both local and international 

agencies, participation in international conferences, training programmes, etc. The publications brought out by the Institute 

and its research staff in 2007 stand testament to such activity. 

The Institute is looking forward to moving to its own premises in 2009. It has responded to the many challenges of not 

only securing the land and funding for the building, but also of overcoming bureaucratic hurdles in getting the project 

under way. With the enhanced facilities that the new complex will offer, the IPS will look forward to contributing further 

to the debate and discussion on strategies of economic and social development in Sri Lanka. 

Buddhadasa Hewavitharana 

Chairman 

June 2008 

2 IPS Annual Report 2007

Executive Director’s Report 

The IPS had its first year under its new Chairman and the new Board in 2007. The 

Institute did not embark on major changes and continued with the status quo as it had 

to make preparatory work to shift to the new premises in 2009. The focus during the 

year was mainly on the new building project, upgrading the IT system, expanding 

the dissemination of IPS activities through the web, in addition to the usual research 

activities. 

As stated in my report last year, the building project was put on an accelerated 

schedule in 2007 with the laying of the foundation in March, preparation of the bid 

document in August, and closing the bids in October. A Technical Evaluation 

Committee and a Procurement Committee were formed with the concurrence of the 

Presidential Secretariat and the bid evaluation process was completed by November 

and the contract was awarded to the successful bidder in mid-December. The building 

project is now 50 per cent completed. It will be fitted with the most up-to-date equipment/facilities to be in line with the 

best social science research institutions in the world and we hope to move into the premises in early 2009. 

The IPS completed 20 projects and attracted 14 new projects during the year. Several projects were done for the government 

of Sri Lanka and the following are noteworthy: (1) bringing out a publication highlighting the policy options under 

Mahinda Chintana (Presidential Secretariat); (2) presenting guidelines for creating a new institutional structure for debt 

management (National Economic Council); (3) finalizing the text and preparing the schedules for liberalization of trade 

in services under the India-Sri Lanka Comprehensive Partnership Agreement (Department of Commerce); (4) preparing 

the Sri Lankan study on Liberalization of Trade in Services in South Asia ( Ministry of Foreign Affairs, for the SAARC 

Secretariat); (5) Arranging 4 sensitization workshops for Provincial Councillors and relevant personnel on Effective 

Service Delivery (Finance Commission and Ministry of Public Administration and Home Affairs); (6) serving in the trade 

and tariff cluster of the National Council for Economic Development (Ministry of Finance); (7) recommend policies to 

improve the effectiveness and coverage of the Catch-up Education (CUE) programmes (Ministry of Education); and (8) 

compilation of Sri Lanka National Health Accounts (Ministry of Health). 

For the private sector, several studies/support work were undertaken during the course of the year. Among others, the 

following may be highlighted: (1) Industrial Policy Guidelines for the Industry Association of Sri Lanka; (2) presentation 

to the Industrial Forum (Federation of Chambers of Commerce and Industry), Sri Lanka Economic Summit (Ceylon 

Chamber of Commerce), and Tea Symposium (Ceylon Tea Traders Association); (3) serving the panel of judges for the 

Exporters Award (National Chamber of Exporters of Sri Lanka) and Best Corporate Citizen Award (Ceylon Chamber of 

Commerce). 

The collaboration with overseas donor organization and research institutions continued as in previous years. These are 

documented elsewhere in this report. I may highlight the following: (1) for the third successive year, IPS collaborated with 

the FES and organized a regional symposium on Trade in Services; (2) for the first time, a seminar was organized on 

BIMSTEC with the collaboration of the Centre for Studies in International Relations and Development (CSIRD), Delhi 

and Sasakawa Foundation, Japan. Collaborative studies were completed or initiated with the OECD, ADB, World Bank, 

ARTNeT, CUTS, RIS, NSI, SANDEE and many other research organizations. The Institute also engaged in activities with 

local institutions such as the BCIS, Lakshman Kadirgamar Institute of International Relations, Department of Economics, 

University of Colombo, PIM, Marga Institute, Sri Lanka Economic Association, and others. 

IPS brought out 09 publications, including two issues of the South Asia Economic Journal. Our flagship publication, State 

of the Economy report, received two excellent reviews in the media. A book on South Asia in the WTO was launched in the 


presence of the Minister of International Trade. Seven essays on contemporary economic issues were published in the 

Financial Times of the Daily Mirror with the collaboration of HSBC. 

Seminars and Book Reviews took place at the in-house level as during the previous years and are documented in this 

report. The IPS encourages new researchers to actively participate in these discussions so that they could get the necessary 

training to participate in public debates and equip them for post-graduate research if required. The IPS also invested on 

training of its staff as during the previous years. This is an integral part of efforts to create a culture where the staff are 

encouraged and motivated to work with us. 

Chairman and the Executive Director of the IPS are members of the National Economic 

Council (NEC) under the leadership of His Excellency the President. They participated 

and made contributions at the NCE meetings during 2007. 

On the financial side, the Institute 

made a profit of Rs. 38 million 

compared to the 2007 budget. This was 

an achievement that we could be proud 

of when operating with our own funds. 

A Board Survey was put into operation. 

Despite several submissions to the 

Auditor General that the IPS does not 

come under the Administration and 

Financial Regulations (ARs & FRs) of 

the government of Sri Lanka, it is 

disappointing to see the IPS accounts 

being audited under such a framework. 

The Manual of Operations that the IPS 

painstakingly prepared over the years 

with the concurrence of the Governing 

Board (where the Secretary to the 

Treasury sits as an ex-officio member) 

clearly states that the IPS operates 

outside the ambit of the ARs and FRs of the government. We earnestly hope that due cognizance of this fact is taken into 

account in the future. 

The research staff is now fully geared to attract more projects and make their Research Units financially self-sustaining. 

Meanwhile, the support services of the Institute have grown in 2007 and the support staff is gearing themselves to face 

the challenges of the new building in 2009. These are positive signs for the growth and sustenance of the Institute. I look 

forward to more financial support from the Sri Lankan private sector in the coming years, so that the Institute can assert 

more vocally independent views on policy matters. 

The support I have been receiving from the Chairman and the Board of Governors is very encouraging. The IPS staff is 

fully geared to meet the new challenges. We will continue to move forward, overcoming all obstacles to ensure that the IPS 

lives up to the promise of being the “apex body of economic policy research in Sri Lanka”. 

Saman Kelegama 

Executive DirectorThe Chairman and the Executive Director of the IPS are members of the National Economic Council (NEC) under the 

leadership of His Excellency the President. They participated and made contributions at the NCE meetings during 2007. 

June 2008 


Funding and New IPS Headquarters 

The IPS has been supported through a collaborated project between the Royal Netherlands Government and the 

Government of Sri Lanka up to end 2005. 

Financial autonomy has always been considered essential for the long-term sustainability of the IPS. High priority was 

therefore given to the establishment of an Endowment Fund, to finance its ongoing activities. A first contribution was 

made to the Fund by the Government of Canada. The IPS Endowment Fund has gradually increased in size due to the 

prudent investment strategies adopted. The capabilities and resources that the Institute has developed have equipped the 

IPS for the challenges it now faces in operating in a new financial environment. 

The current operational funding of the Institute is primarily from the income derived from research projects, the IPS 

reserves invested in government securities, and the contribution made by the Government of Sri Lanka to meet the rent 

and maintenance of the Institute. In addition to the above, income generated by the sale of IPS publications and 

miscellaneous income, make up the total funding of the Institute. 

Recognizing the importance and contribution of the IPS to economic policy research in the country, the Government of 

Sri Lanka (GOSL) vested a prime half-acre plot of land in the city of Colombo to the IPS in order to construct the IPS 

Headquarters. The Netherlands funding for the construction of the IPS Headquarters was finalized with the signing of 

the agreement in May 2006, which is considered the ultimate gift and, a flagship project that symbolizes the generous 

support and contribution of the government of The Netherlands to the IPS, and the GOSL at large. 

Hon. Dinesh Gunawardena, Minister of Urban Development and Sacred Area Development 

(left), and Reynout Van Dijk, Ambassador of the Netherlands (right), laid the foundation 

stone for the proposed IPS Headquarters in the scientific and cultural zone in Colombo on 

12 March. 

Proposed IPS Headquarters in Colombo 07. 


IPS Research 

Research Programme 

The core aim of IPS research programme is to contribute constructively to the discussions and debates on 

medium-term economic policy priorities for Sri Lanka. The Institute’s research output over time has addressed 

many of the development issues that are relevant to the country such as unemployment, regional disparities, and 

rural poverty. The aim of the current programme of research is to build on the substantive work that has already 

been carried out, identify gaps in the existing body of research, and formulate an integrated medium-term work 

programme. This programme addresses strategies to achieve more durable and equitable growth to meet the 

country’s development priorities. 

The IPS research programme is carried out by research units, each headed by a senior staff member. Each unit 

works within the medium-term research agenda developed to ensure coherence to the overall direction of the 

Institute’s work. Currently, the IPS research programme carries out key topics of study under thematically 

selected areas of research as follows: 

• Macroeconomic Policy 

• International Economic Policy 

• Labour, Employment and Human Resource Development Policy 

• Industry, Public Enterprise Reform and Regulatory Policy 

• Poverty and Social Welfare Policy 

• Agricultural Economic Policy 

• Environmental Economic Policy 

• Health Economic Policy 

In addition to the above research areas, other specialized areas of research such as governance, gender, political 

economy, etc., are mainstreamed into the overall work programme of the Institute. IPS research programme is 

financially supported by the Institute’s funds as well as externally funded collaborative projects with both 

domestic and international partners. 


Macroeconomic Policy 

Inteional Economic Policy 

The macroeconomic policy environment has an important 

impact on the development objectives of a country. 

Increasingly, the intersection of macroeconomic and poverty 

issues is generating both scholarly and policy debate. While 

it has come to be accepted that economic growth is a necessary 

condition to alleviate poverty, a stable macroeconomic 

environment is a pre-condition to achieve and sustain higher 

levels of growth. Fiscal and monetary policy management 

and coordination, sustainable debt policy management, 

ensuring efficient allocation of resources for equitable 

growth across sectors and regions, generating the correct 

incentives, etc., are critical functions of a medium to longterm 

macroeconomic framework. Keeping such policy 

concerns in mind, the macroeconomic policy research 

programme of the IPS is focused on addressing key areas relevant to generating and sustaining macroeconomic stability 

of the Sri Lankan economy with a view to contributing to topical policy discussions and debates. 

Highlights 

The IPS offers a continuous review and analysis of Sri 

Lanka’s efforts to generate a conducive macroeconomic 

environment through prudent fiscal and monetary policy 

management through its publications, participation of staff 

at seminars and, media events. A notable publication in 

this respect is the Institute’s flagship annual report Sri 

Lanka: State of the Economy. 

Sri Lanka: State of the Economy 2007 

The State of the Economy report provides a rigorous 

assessment of Sri Lanka’s economic performance in the 

light of policy developments in both the domestic and 

external environment. The report notes that the most 

promising feature of Sri Lanka’s economic performance 

in 2006-07 was maintaining a relatively healthy rate of 

GDP growth. Nonetheless, the predominant policy concern 

was the high rates of inflation which showed no signs of 

moderation. The report analyses the risks in the interim, 

particularly those risks arising from a tightly constrained 

and volatile macroeconomic environment that would limit 

policy options in the face of any domestic or external shock. 

The report emphasizes the need to restructure fiscal policy 

to allow priority expenditures on growth enhancing areas. 

The report also highlights emerging socio-economic issues 

in key areas of medium-term policy relevance for the 

country. The central theme of the 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 report shows that the 

supply-side constraints in infrastructure, skilled labour, and 

public services in Sri Lanka are 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. 

Reform of the International Development 

Architecture 

The IPS collaborated with the North-South Institute (NSI), 

Canada on a cross-country research programme on “Reform 

of the International Development Architecture” to examine 

the challenges related to the donor-recipient aid nexus, in 

which IPS undertook the Sri Lankan case study. 


Dushni Weerakoon made a presentation on “Outlook and 

Prospects for the Sri Lankan Economy” at the“CFA Day” organized 

by the Chartered Financial Analysts, Colombo, Sri Lanka, 

11 June. 

In Sri Lanka, the government is pressing for increased policy 

space from donor imposed conditions in the backdrop of 

the country’s present circumstances as a conflict-affected 

country with substantial aid reliance given the urgent 

requirement for investment in public infrastructure. These 

conflicting needs of increased funding and greater policy 

space have pushed the government to explore alternative 

sources of finance, moving beyond the concessional lending 

of international financial institutions, towards commercial 

borrowing and emerging bilateral donors. The study 

explores thematic issues on the relationship between Sri 

Lanka and the international aid architecture in the context 

of the opportunities and challenges posed by Sri Lanka’s 

recent relationship with international donors including the 

roles played by the Bretton Woods institutions, the UN 

system, bilateral donors, and NGOs. 

Sri Lanka: Post Tsunami Rehabilitation and 

Reconstruction 

The Institute continued to work closely with donors in 

exploring the wider economic implications of the posttsunami 

reconstruction efforts. A collaborative research 

project on “Post Tsunami Rehabilitation and Reconstruction” 

which included an assessment of the macroeconomic 

implications of tsunami related aid inflows was carried out 

with donor funding from the Asian Development Bank 

Institute (ADBI), Japan. 

Sri Lanka has progressed to the more difficult and 

challenging phase of reconstruction and recovery following 

the devastating impact of the December 2004 Asian 

tsunami. The challenges of reconstruction and 

rehabilitation were new to Sri Lanka, and perhaps more 

complex than providing immediate relief. Information on 

the processes involved in delivering aid to the tsunami 

affected and the perceptions of individuals on the aid 

received and the aid delivery mechanisms remain limited. 

Building on the work carried out by the IPS on post-tsunami 

economic recovery in Sri Lanka, a survey of 600 households 

in 14 Grama Niladhari Divisions (GNDs) in six affected 

districts across the Southern and Eastern Provinces was 

carried out in July 2006 in an attempt to obtain views on a 

broad range of issues including housing, livelihoods 

recovery, aid distribution, community cohesiveness, and 

disaster management. The survey findings were 

supplemented by an overall assessment of the 

macroeconomic challenges facing the government in 

meeting the reconstruction costs, including issues of cost 

escalation, aid absorption, and its implications. 

Nisha Arunatilake, Research Fellow, IPS presented the 

findings of the report on “Economic Challenges of Post- 

Tsunami Reconstruction in Sri Lanka” at a video conference 

on “Asian Tsunami - Lessons learned” organized by the 

Economics Department, Australian National University, 

Colombo venue - GDLN centre, Colombo on 6 September. 

Sri Lanka’s Foreign Investment Regime 

The IPS collaborated with the Asia-Pacific Research and 

Training Network on Trade (ARTNeT) to conduct a study 

on “Trade and Investment Linkages and Need for Policy 

Coordination in LDCs: A Case Study of Sri Lanka” and 

initiated a collaborative project with the Asian Development 

Bank (ADB), Manila, to examine “Sri Lanka’s Foreign 

Investment Regime” as part of a wider study examining 

ways and means of strengthening trade and investment 

links across the South Asian region. 

A key component of Sri Lanka’s efforts to encourage an exportoriented 

growth strategy was to create a climate conducive to 

attracting foreign direct investment (FDI). Institutional reforms 

in this regard have included the establishment of the Board 

of Investment of Sri Lanka (BOI) to administer an attractive 

incentive package for foreign investors, including access to 

Export Processing Zones (EPZs). FDI was seen as a key element 

in promoting export growth, supplementing scarce domestic 

capital, technology, and managerial skills, as well as a means 

of penetrating foreign export markets. Given increasing 

evidence of intra-industry and services investment linkages 

between Sri Lanka and its South Asian economic partners - 

most obviously that of India - this thematic area of study aims 

to analyse issues related to the investment climate for FDI. 


The areas of study include examining the linkages between 

trade and investment at the national level as well as 

assessing the potential for increasing intra-South Asian 

trade and investment flows, focusing in particular on 

important sectors such as textile and clothing (T and C) and 

automobile industries. 

As part of this initiative, IPS responded to the GDN-IPPR 

(Global Development Network and the Institute for Public 

Policy Research) call for proposals to participate in a global 

research project on “Development on the Move: Measuring 

and Optimizing the Economic and Social Impacts of 

Migration”. The IPS proposal was one of the twelve shortlisted 

research teams for the initiative, among nearly 250 

proposals submitted from all regions in the developing and 

transition world. More information on the GDN-IPPR 

research project is available at www.gdnet.org/ 

middle.phpoid=1214 

Other Activities 

As an integral part of influencing the policy discussions on 

macroeconomic related issues, the IPS has worked closely with 

the government, private sector, and donors, including the 

following during the year. 

Deshal de Mel presented the Sri Lanka country study on “Trade and 

Investment Policy Coordination in LDCs” at the ARTNeT 

Consultative Meeting on “Trade and Investment Policy Coordination” 

in Bangkok, Thailand during 16-17 July. 

Migration, Development, and Economic Welfare 

Sri Lanka has experienced varying forms and intensity of 

migration in post-independence decades. The number of 

people leaving the country, both for political and economic 

reasons, increased significantly in the 1980s. At present, 

over one million Sri Lankan citizens are estimated to have 

migrated for foreign employment. The estimated outflow 

of migrants exceeds the number entering the labour force 

annually. Migrant remittance flows into Sri Lanka are 

significant and rising. Remittance inflows have come to 

account for nearly 8.5 per cent of Sri Lanka’s GDP in 2006 

(US$ 2.3 billion), second only to export earnings from goods 

(US$ 6.8 billion) and far above that of average FDI inflows 

of 1.0-1.5 per cent of GDP. Lack of adequate livelihood 

and employment opportunities at home is the prime driver 

for most such out-migration. Skilled migrants – estimated 

to make up about 20 per cent – on the other hand mostly 

seek better employment/financial opportunities abroad. Sri 

Lanka continues to produce relatively large numbers of 

asylum seekers and currently ranked at 15 th place in terms 

of top asylum sending countries by the UNCHR. In this 

backdrop, it is important to better understand the 

development issues associated with migration and maximize 

the benefits of migration. 

The IPS was requested by the Government of Sri 

Lanka to review the long-term development framework 

plan Mahinda Chinthana: Ten Year Horizon Development 

Framework, 2006-16 with the objective of shedding some 

light on the policy options available. Even though the 

overall policy framework to achieve the broad based 

development goals for the country – of sustainable 

growth, equity and poverty alleviation – has not varied 

substantially in the last two decades, successive 

governments have been less than successful in 

effectively articulating and implementing a consistent 

policy paradigm. For instance, there have been three 

separate development frameworks in the last four years 

alone i.e., Regaining Sri Lanka, Rata Perata and Mahinda 

Chinthanaya. 

The Ten Year Horizon Development Framework 2006-16 

has signalled that the approach to achieving Sri Lanka’s 

fundamental development objectives would differ in 

tone and focus with a stronger emphasis on the rural 

economy, agriculture, and small and medium 

enterprises (SMEs) as vehicles for generating a vision 

of ‘growth with equity’. The IPS in its review of the 

document offers a detailed examination of some 

relevant sectors with the objective of examining some 

of the policy gaps and implementation challenges, 

while suggesting possible policy alternatives where 

necessary. The assessment was published as a Working 

Paper by the IPS. 


The IPS research staff participated at the following key 

forums in 2007, as part of the Institute’s effort to strengthen 

links and engage with the private sector and donor 

community. 

Dushni Weerakoon made a presentation on “Outlook 

and Prospects for the Sri Lankan Economy” at the CFA 

Day organized by the Chartered Financial Analysts, 

Cinnamon Grand Hotel, Colombo, 11 June. 

Executive Director made a presentation on the Sri 

Lankan Economy at the launch of the UN-ESCAP 

“Economic and Social Survey of Asia and the Pacific 

2007” report to the media, UN office, Colombo, 19 April. 

(for more information visit: www.ips.lk/staff/ed/ 

index.html) 

Publications 

• IPS (2007), State of the Economy Report 2007. 

• IPS (2007), “Mahinda Chinthana: A Commentary on 

Policy Options”, IPS Working Paper Series No. 11. 

• Weerakoon, D., S. Jayasuriya, P. Steele and N. 

Arunatilake (2007), “Economic Challenges of Post 

Tsunami Reconstruction in Sri Lanka”, Discussion 

Paper No. 75, Asian Development Bank Institute 

(ADBI), Japan. www.adbi.org/discussion-paper/2007/ 

08/31/2354.sri.lanka.post.tsunami.reconstruction/ 

• Kelegama,S. (2007), “Why is the Rupee Depreciating 

so Rapidly” MONTAGE, Vol. 1, No.10. 

• Kelegama, S. (2007), Sri Lankan Export Performance 

in 2006: A Closer Look”, Sri Lankan Exporter, Vol. 

58, July-September. 

• Kelegama, S. (2007), “Global Integration and 

National Interests: Managing Change in Sri Lanka”, 

OPA Journal, Vol. 22, May. 

Research Personnel 

Executive Director at the launch of UN-ESCAP Report on 

“Economic and Social Survey of Asia and Pacific 2007”, 

Colombo, 19 April. 

Dushni Weerakoon, Jayanthi Thennakoon, and 

Tilani Jayawardhana. 

Executive Director and Deshal De Mel presented the “Sri Lankan Country Study” prepared by the IPS at a conference on 

“Southern Perspectives on Reform of the International Aid Architecture” organized by the North South Institute, Canada, 

Wilton Park, West Sussex, U.K. during 19-22 May. 


International Economic Policy 

In an increasingly globalized world, Sri Lanka as a 

small and vulnerable economy highly dependent on 

trade faces considerable challenges. In order to better 

address them Sri Lanka has strived to secure its interests 

through regional agreements whilst being committed 

to the multilateral process. With the slow progress seen 

under the Doha Round, there has been a further 

intensification of regionalism across the world. In this 

context, it is important that Sri Lanka undertakes 

measures to further strengthen the existing trade 

arrangements to ensure greater market access abroad. 

There is also the need to not only strengthen but also 

deepen these regional trade arrangements to include 

trade in services and investment. While these regional 

initiatives would help diversify Sri Lanka’s markets 

and export baskets away from developed countries and the garment industry in the long run, it is imperative that in the 

short-medium term Sri Lanka continues to concentrate on these markets and export sector. During the year, the International 

Economic Policy Unit continued to undertake research on these issues relating to Sri Lanka’s participation in the 

multilateral negotiations, bilateral and regional trade arrangements, and the garment industry which continues to 

occupy a significant place in the economy. 

Highlights 

Domestic Preparedness of Sri Lanka to 

Services Trade Liberalization 

Sri Lanka has not been active in services negotiations under 

the Doha Round of trade talks given that it does not have 

offensive interests in the exports of services at least at the 

multilateral level. Nevertheless, it has engaged in 

negotiations on a bilateral basis largely on account of 

interests of other countries which are seeking market access 

to Sri Lanka’s services sector. While there has not been any 

overt pressure to open up the domestic service sector in the 

country, it is important that Sri Lanka is prepared to 

undertake new commitments under GATS as a part of a 

larger negotiation process to secure Sri Lanka’s interests in 

agriculture and Non-Agricultural Market Access (NAMA) 

under the current Round. Moreover, making commitments 

unilaterally in the services sector independent of requests 

received could bode well for the sector in question and the 

overall economy. In this context, this study examines the 

extent to which the country is prepared to undertake further 

commitments under GATS. Given that there have been a 

number of requests received by Sri Lanka to further open 

up this sector, the study focuses on the telecom sector and 

examines the current state of regulatory framework and 

readiness of the sector to undertake further commitments 

at the multilateral level. This study was carried out as part 

of the ongoing collaborative project ‘WTO Doha Round 

and South Asia: Linking Civil Society with Trade 

Negotiations’ of CUTS Centre for International Trade, 

Economics and Environment, India. The overall objective 

of this project is to generate negotiation inputs for trade 

negotiators and policy makers in the South Asian region 

whilst taking into account the positions of civil society on 

these issues. The Sri Lankan paper was presented at the 

10th Sustainable Development Conference, organized by 

Sustainable Development Policy Initiative (SDPI), 

Islamabad, Pakistan during 10-12 December. 


India-Sri Lanka FTA: Lessons for SAFTA 

Much before SAFTA came into existence in 2006, the India- 

Inteional Sri Lanka Free Trade Agreement Economic (ISLFTA) was already in Policy 

operation by 2000. One salient feature of this bilateral 

arrangement is that Sri Lanka, being a smaller developing 

country, has been offered less than full reciprocal preferences 

to India. While many consider the FTA a success, others 

argue that the most important items of export interest to 

both countries are placed under the negative list, the 

resultant impact on trade and welfare being minimal. While 

the agreement has generated benefits, particularly by way 

of a significant expansion in Sri Lanka’s exports to India, 

the lessons of the ISLFTA appear not to have been fully 

taken on board in the South Asia Free Trade Agreement 

(SAFTA) negotiations. In order to assess the lessons of the 

bilateral FTA for the regional process, the study 

commissioned by CUTS, India, aims to assess the depth of 

preferences granted and the resultant trends in trade and 

investment between the two countries before and after the 

formation of the ISLFTA. The study also aims to draw broad 

policy implications relevant to the implementation of 

SAFTA and its likely impact on generating increased trade 

across South Asia. 

Executive Director made a presentation on “Potential for Trade and 

Investment through FTAs” at the “Sri Lanka Economic Summit 2007” 

jointly organized by the Ceylon Chamber of Commerce and the Board 

of Investment of Sri Lanka, Cinnamon Grand, Colombo, 6-8 June. 

During the year, presentations on prospects and challenges 

facing SAFTA in the light of other regional trade 

agreements were made by IPS researchers at various forums 

held in the capitals of the region. IPS researchers also 

continued to actively contribute articles on the subject to 

several notable magazines and economic journals. 

Potential for Trade in Services under SAFTA 

Agreement 

The services sector has grown in importance in South Asian 

economies over the last decade. However other than India, 

most South Asian countries have not made much progress 

in tapping the growing market for trade in services. 

Recognizing this opportunity, during the 13 th SAARC 

Summit in November 2005, the Heads of State of SAARC 

nations called for a study to examine the potential for 

including the liberalization of trade in services in the 

SAFTA framework. Accordingly, the SAARC Secretariat 

commissioned the study which was to incorporate 

perspectives from national studies of all eight SAARC 

countries into a final study to be prepared by RIS, New 

Delhi. The IPS compiled the Sri Lanka study and 

participated in the two workshops to discuss and finalize 

the study. The final study is at present undergoing its final 

revisions and will be presented to the Council of Ministers 

of the SAARC prior to the July 2008 Summit in Colombo. 

Economic Cooperation between East Asia and 

South Asia 

Against a background of intensifying efforts at regional 

economic cooperation and integration between East and 

South Asian economies in recent years, the Asian 

Development Bank (ADB), embarked on a major policy 

research project on the subject in 2007. The project seeks 

to identify gains from closer economic cooperation 

between East and South Asian economies and inform 

public and private sector stakeholders of the policy steps 

required for effective economic cooperation and 

integration between the two sub-regions. The project 

would thus help developing member countries devise 

strategies for effective regional economic cooperation and 

integration. The Sri Lanka country study aims to provide 

details on three sectoral areas of cooperation – in the areas 

of merchandise trade and investment, trade in services, 

and infrastructure and trade facilitation – and identify 

possible constraints to further cooperation and policy 

remedies. 

Trade and Innovation in the Textile and Clothing 

Industry in Sri Lanka 

The abolition of the quota system which governed much 

of the international trade in apparel till 2005 was the 


iggest challenge confronting the industry. Despite stiff 

competition from low cost producers from other countries, 

Sri Lanka has managed to survive due to a number of 

innovative initiatives undertaken by the industry with 

support from the Sri Lankan government. Whilst the 

industry led by some of the large scale manufacturers have 

established themselves as credible suppliers to some of 

the big brand names in the apparel trade, they are 

constantly striving to remain competitive by offering 

innovative solutions to their customers. This study looks 

at how trade has affected innovation in the textile and 

clothing sector in Sri Lanka. More specifically, it looks at 

how intensified competition in light of the Multi-Fibre 

Arrangement (MFA) phase-out has led to a number of 

innovative measures being undertaken in the textile and 

clothing industry in Sri Lanka to face the challenges of a 

quota free environment. This study was commissioned by 

the Trade and Agriculture Directorate of the OECD as 

one of a number of case studies. In this regard, a 

presentation on “The Ending of the Multi-Fibre 

Arrangement and Innovation in the Textile and Clothing 

Industry in Sri Lanka” was made at the “OECD Global 

Forum on Trade 2007” which was held at the OECD 

Secretariat, Paris in 15-16 October. 


IPS research staff continued to assist the Government and 

its various Ministries and Departments on trade policy 

formulation and served in various capacities, by: 

participating in the preparatory meetings at the 

Department of Commerce and leading the technical 

level negotiations on Trade in Services under the Indo- 

Lanka Comprehensive Economic Partnership 

Agreement (CEPA) 

The Institute has also worked closely with the private sector, 

donor community and research partners by: 

heading the Panel of Judges at the 15 th NCE Export 

Awards 

addressing various gatherings of private sector bodies 

such as the Ceylon Chambers of Commerce (CCC), 

National Chambers of Exporters (NCE), the Ceylon Tea 

Traders Association, etc. 

Publications 

• IPS (2007), “Market Access through Regional Trade 

Arrangements”, Daily Mirror, 13 July. 

www.dailymirror.lk/2007/07/13/ft/03.asp 

• Kelegama, S., and R. Adhikari (2007), “Repositioning 

SAFTA in the Regionalism Debate”, in A. Siddiqui 

(ed.), India and South Asia – Economic Development in the 

Age of Globalization, M.E. Sharp Publication, New York. 

• Kelegama, S. and I.N. Mukherji (2007), “India- Sri 

Lanka Bilateral Free Trade Agreement: Six Years 

Performance and Beyond”, RIS Discussion Paper, No. 119, 

RIS, New Delhi. 

• Kelegama, S. (2007), “Working Towards a Common 

Position for South Asia in the WTO”, Sri Lanka Exporter, 

Vol. 55. 

• Kelegama, S. (2007), “Sri Lanka” in South Asian 

Perspectives 2006: Regionalism and Trade, ISAS, National 

University of Singapore. 

attending meetings of the Trade and Tariff Cluster 

of the National Council of Economic Development 

(NCED) of the Ministry of Finance 

delivering lectures on “Sri Lanka and SAARC: 

Responsibility under SAFTA” and the “India-Sri 

Lanka Bilateral FTA” to new recruits of the Sri Lanka 

Ministry of Foreign Affairs conducted at the Lakshman 

Kadirgamar Institute of International Relations 

(LKIIRSS) 

Janaka Wijayasiri, Research Economist, IPS participated at the 3rd 

International Conference on “Building a New BIMSTEC: Towards 

BIMSTEC – Japan Cooperation” at the Nippon Foundation, Tokyo, 

Japan, 3 December. 


• Kelegama, S. (2007), “The Bilateral Trade: The Case of 

India-Sri Lanka Free Trade Agreement”, South Asia 

Survey, Vol.13, No.2. 

• De Mel, D. and J. Wijayasiri, “Domestic Preparedness 

of Sri Lanka with respect to Services Trade 

Liberalization: Case Study of the Telecom Sector”. 

• Kelegama, S. (2007), “Towards Greater Economic 

Connectivity in South Asia”, Economic and Political Weekly, 

29 September. 

• Kelegama, S. (2007), “South Asia in the WTO”, Sage 

Publications, New Delhi. 

• Thennakoon, J. and A. Rajapakse (2007), “Sri Lanka in 

the WTO” in S. Kelegama (ed.), “South Asia in the 

WTO”, Sage, New Delhi. 

• Weerakoon, D., and J. Thennakoon (2007), “Trade 

Facilitation: Priorities for South Asia” in South Asia 

Yearbook of Trade and Development 2007: Harnessing Gains 

from Trade-The Domestic Reform Agenda, Centre for Trade 

and Development (CENTAD), India. 

Deshal de Mel made a presentation on “Trends in Sri Lanka’s 

Trade Flows with South Asia” at the “3rd CENTAD Annual 

Sessions” held in New Delhi, India, 19 December. 

• Weerakoon, D. (2007), “Economic Cooperation in South 

Asia: Challenges and Constraints” in A.S. Raju (ed.), 

Reconstructing South Asia: An Agenda, Gyan Publishing 

House, New Delhi. 

• Wijayasiri, J. and S. Samad (2007), “Preference Erosion 

and Aid for Trade” in CUTS-CITEE (ed.), South Asian 

Positions in the WTO Doha Round: In Search of A Trade 

Development Agenda, Vol 2, Jaipur Printers, Jaipur. 

• Wijayasiri, J. and S. Samad (2007), Preference Erosion and 

Aid for Trade: A South Asian Perspective, Briefing Paper, 

www.cuts-citee.org/pdf/BP07-WTO-10.pdf 

• Wijayasiri, J. (2007), “Utilization of Preferential Trade 

Arrangements: Sri Lanka’s Experience with the EU and 

US GSP Schemes”, International Economic Series No. 8, 

IPS, Colombo. 

• Wijayasiri, J. (2007), “The Maldives and the WTO” in 

S. Kelegama (ed.), “South Asia in the WTO”, Sage, New 

Delhi. 

Executive Director delivered the Keynote Address at the Economic 

Forum on “Exploring Potential for Economic and Trade 

Cooperation for Mutual Benefit” at the conference on “China 

Sri Lanka Relations” to mark the 50 th Anniversary of Diplomatic 

Relations, Bandaranaike Centre for International Studies (BCIS), 

Colombo, 21-22 October. 


Saman Kelegama, Dushni Weerakoon, Janaka Wijayasiri, 

Tilani Jayawardhana, Jayanthi Thennakoon, Deshal De 

Mel, and Jagath Dissanayake. 

Forthcoming Publications 

• De Mel, D., “SAFTA: Towards a Viable FTA”, Trade 

Insight. 

• Weerakoon, D., and J. Thennakoon, “SAFTA: Which Way 

Forward”, Journal of South Asian Development, Vol. 3, 

No. 1. 


Labour, Employment and Human Resources 

Inteional Development Economic Policy 

In 2006, IPS research in the Labour Employment and 

Human Resources Development area focused on labour 

market issues faced by different marginalized groups - 

such as the elderly, the youth and workers in the informal 

sector-in Sri Lanka. While continuing on this research 

agenda, in recognition of the need for basic education 

and health care in childhood for a more productive adult 

life, a new focus was added to the research programme to 

exclusively examine the effectiveness of the delivery 

of health and education services to the poor. Education 

services in Sri Lanka have increasingly been challenged 

by disparities across schools and problems of low 

achievement rates. Enrolment and achievement rates, 

especially for post primary grades, are worse for children 

from poorer households and less developed provinces. At the same time, high unemployment rates among the more 

educated youth, among other reasons, point to the problems with relevance to education. The “New Educational Reforms” 

proposed in 1997 and implemented since 1998, planned several amendments to the education policy in the country to 

improve access to better quality education for all, to improve relevance of education, teacher training and management of 

education and resource provision. These reforms are currently being implemented through various donor-funded projects. 

Are these policies successful in reaching the poor and delivering better quality education to the poor The answer to this 

question was explored by several IPS research as highlighted below. 

Highlights 

Elderly and the Labour Market 

This study, part of a greater World Bank study on ageing 

in Sri Lanka, aims to describe how and why individuals 

reach full-time retirement from full-time work in Sri Lanka. 

The study identifies both the incentives available for the 

elderly to work, in terms of retirement incomes, family 

support and assets as well as constraints faced by the elderly 

– such as poor health and lack of suitable employment 

opportunities. The study finds that the majority of elderly 

workers are engaged in the informal sector, work long hours 

and are paid less than younger workers, and that the formal/ 

informal sector duality in the labour market are carried 

over to old age. Previous employment is a key factor 

influencing retirement decisions. Formal sector workers 

retire around age 60 mainly due to mandatory retirement 

regulations, while informal sector workers work until very 

old age due to economic reasons and lack of social security. 

Part-time work is not widely prevalent. The few who engage 

in part-time work are mainly workers who held regular jobs 

in their prime-age employment. The study hopes to guide 

policies aiming to influence work activity of the elderly. 

One outcome of this study was a paper on “Labour Market 

and Ageing - the Case of Sri Lanka” (by Milan Vodopivec, 

World Bank and Nisha Arunatilake), which was presented 

(by Milan Vodopivec) at the World Bank Economists’ Forum 

at the World Bank headquarters in Washington DC, USA. 

on 19 th April. An article based on this study on the 

“Economic implications of demographic changes in Sri 

Lanka” was published in the Daily Mirror on 26 th July, 2007. 

The study has also contributed to a forthcoming World Bank 

report on the subject. 


Improving Education Services to the Poor 

IPS conducts ongoing research on issues concerning 

delivering effective education services to the poor. One 

study on the theme was to examine the current status of the 

Catch-up Education (CUE) programmes in the country and 

recommend policies to improve their effectiveness and 

coverage. The study was conducted for the Ministry of 

Education and UNICEF (with funding from UNICEF). 

Catch-Up Education (CUE) is a mechanism for providing 

additional support and/or accelerated learning for children 

who have lost out on education for a period of time, and for 

children whose attendance has been poor, due to the 

prevailing political and security situation in the country in 

recent years. About 17 per cent of children do not complete 

the compulsory education cycle in Sri Lanka. Low school 

participation is particularly an issue in the conflict affected 

Northern and Eastern provinces, where violence and related 

displacements are disrupting education. Some other areas 

of the country also experience high drop-out rates, 

particularly due to poverty, lack of infrastructure and 

facilities among other reasons. The study intends to examine 

whether the CUE programmes in the country address the 

goal of providing education for all by effectively catering 

to those who have dropped out of the regular school system 

or are finding it difficult to keep up with the regular school 

work due to various reasons. Another study under the same 

theme was on how health affects education. This study was 

conducted in collaboration with a research team from the 

Kelaniya University Medical School. The study was a 

follow-up to the “Inter Sectoral Study on Education and 

Health” that was completed by the National Education 

Commission (NEC) in September 2005. IPS closely worked 

with the Ministry of Education and UNICEF and 

participated in workshops related to the above studies. 

Will School Level Decision Making Improve Access 

to Better Education for the Poor in Sri Lanka 

Formula based funding and decentralized management of 

schools as a means of improving school quality and 

performance has received renewed interest in the late 1990s, 

especially amongst developed countries. International 

experience suggests that needs-based resource allocation 

through formula funding and decentralized management 

of these funds has great potential for improving resource 

availability and management of schools. However, the 

success of these schemes depend on the level and depth of 

decentralization, availability of information for 

An archived photo of the project on “Improving Education 

Services to the Poor”. 

implementation and monitoring these schemes, availability 

of basic resources, strength of school-support systems, and 

the ability of the central government to motivate local level 

players to achieve identified education goals. IPS using 

school census and other primary and secondary data 

examined the success of the Educational Quality Inputs 

(EQI) Scheme in Sri Lanka that envisage improving school 

performance through formula based funding and 

decentralized management of schools. The findings of the 

study show that the EQI fund distribution is largely propoor, 

with the exception of expenditure at the collegiate 

level. The study concludes that allocating more funds to 

more disadvantaged schools alone is insufficient to reduce 

disparities as the inability of schools to fully utilize the 

funds hold back progress. The findings of the study support 

the hypothesis that qualified principals, adequate levels of 

human and physical resources and state level monitoring 

and support is needed for the success of education 

management at the school level. The study highlights the 

need to better use information collected from the schools on 

the EQI scheme to simplify and improve the implementation 

of the scheme and improve its effectiveness. 

Nisha Arunatilake participated and presented the findings 

of this study at the 6 th Poverty and Economic Policy Network 

(PEP) General Meeting, Sheraton Hotel, Lima, Peru, 11- 

16 June. She was also a visiting scholar at the UNESCO 

International Institute for Educational Planning (IIEP) 

from 2 February to 2 March, where she worked on the study, 

funded by the PEP Network. 


Publications 

• Arunatilake, Nisha and Roshani de Silva (2007) “Issues 

Relating to Prevention of Child Labour in Sri Lanka” 

in Gamini Herath and Kishor Sharma (eds.), Child 

Labour in Sri Lanka, Ashgate Publishing Limited, 

Hampshire, England. 


IPS research staff served in the following advisory capacities 

in the government sector, during the year. 

Nisha Arunatilake is a member of the National Advisory 

Committee on Manpower Planning, Ministry of Labour 

Relations and Manpower (from April 2007). 

Executive Director delivered the keynote address at the First 

Meeting of the General Body of the Industrial Relations Forum 

of the Federation of Chambers of Commerce and Industry of 

Sri Lanka (FCCISL), JAIC Hilton, Colombo, 23 February. 

Nisha Arunatilake participated at the 6 th Poverty and Economic Policy Network (PEP) General Meeting, Sheraton Hotel, 

Lima, Peru, 11-16 June. 


Nisha Arunatilake and Priyanka Jayawardena. 


Industry, Public Enterprise Reform and 

Inteional Regulatory Economic Policy Policy 

Following from the three-year research programme 

identified in the IPS Annual Report of 2006, policy analysis 

in the areas of industry, public enterprise reform, and 

regulation continued to focus largely on the role of the state 

and of the market in generating sustainable and equitable 

growth. Whilst issues relating to the interdependence and 

to the dichotomy of state and market institutions have been 

the subject of much debate in academic and policy literature 

for decades, the topic is of particular significance for Sri 

Lanka at the current juncture given the decisive stance 

assumed by the incumbent government to facilitate private 

participation without resorting to privatization per se. 

As such, research activities in the current year centred on 

key topical issues such as strengthening public-private linkages for industrial development; options for financing 

infrastructure development; and, regulatory governance and the institutional framework for economic reform. 

Highlights 

Impact of Corruption on Investment in Sri Lanka 

This study was carried out for the USAID-ARD as part of 

a larger project on the linkages between governance and 

economic performance. The specific objective of the research 

was to get to a perceptions-based understanding of the 

impact of corruption on investment in Sri Lanka. Given 

the qualitative nature of the study, the research 

methodology consisted of a Corruption Environment 

Assessment questionnaire distributed amongst key 

stakeholders at the national and local government levels, 

face to face interviews, and focus group discussions. Findings 

of the research were also presented at an informal workshop 

organized by the IPS and USAID-ARD in an effort to further 

verify our conclusions. Research findings indicated that 

corruption has less of an impact on investment than 

inadequate infrastructure facilities and inconsistent 

government policies. 

Understanding the Conditions for Change in State 

Owned Enterprises 

The over-arching objectives of this research study are to 

look at a menu of options to facilitate better performance in 

18 IPS Annual Report 2007 

key public enterprises and to stimulate a dialogue amongst 

the public, based on informed analysis, on the costs and 

benefits of reforms. The methodology consists of a 

comprehensive literature survey, in-depth one-on-one 

interviews with major stakeholders, focus groups discussions 

and expert consultations. The study explores 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 study are; 

what are the drivers for change in State Owned Enterprises 

(SOEs); is there sufficient at stake for change (will change 

make a difference); will identified policy options be 

politically beneficial – or at least, politically benign; what 

strategies are required to manage the transition from the 

status quo (for instance, compensating the “losers”). 

The study focuses on four selected SOEs 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 have been selected as representative case 

studies of the SOE sector given the crucial role they play in 

the country’s economic activities.

Draft National Policy on Enterprise Development 

and Investment Promotion 

The IPS, in collaboration with the Ministry of Enterprise 

Development and Investment Promotion (MEDIP), Marga 

Institute, and the Ceylon Chamber of Commerce, under the 

coordination of Asia Foundation, initiated a study on 

drafting a national policy on enterprise development and 

investment promotion. Initial draft tendered for a wide 

consultation organized in the provinces with the participation 

of entrepreneurs spanning a wide range of competences 

and capacities. The national policy was drafted with the 

objective of bringing together support infrastructure for 

enterprise development within a cohesive and comprehensive 

framework. Moreover, the policy recommendations 

set out in the 

report focused 

on effective 

networking 

between the 

public and 

private sectors 

to improve 

quality and to 

facilitate the 

growth and 

distribution 

of enterprises 

in the services 

sector. 

Participants at the workshop on “Participatory 

Concept Paper for the Design of an Effective 

Industrial Policy Framework for Sri Lanka”, 

Hotel Taj Samudra, Colombo, 9 February. 

Alternative Methods of Financing for 

Infrastructure Development in Sri Lanka 

The budget of the Sri Lankan Government is over-stretched 

by competing needs on limited resources with major 

implications for the infrastructure and service delivery 

sectors in terms of cost and quality. In this context, the aim 

of the IPS study is to highlight the importance of attracting 

private investment for the development of domestic 

infrastructure. A paper on “Alternative Methods of 

Financing for Infrastructure Development” was submitted 

to the National Economic Council on 5 June. Subsequently, 

a presentation was also delivered on the same topic at the 

National Economic Council chaired by His Excellency the 

President on 3 July. 

Formulating Guidelines for a Consensus on a 

National Industrial Policy Framework for Sri 

Lanka 

The aim of the study is to formulate guidelines reaching 

consensus on issues relating to a national industrial policy, 

which will create consistent and appropriate policies to 

ensure the industrial development of the country. A 

workshop in this regard was organized by the IPS jointly 

with the Industrial Association of Sri Lanka (IASL) at the 

Hotel Taj Samudra, Colombo on 9 February. The main 

objective of the workshop was to elicit the views of key 

stakeholders on industrial policy based on a document 

prepared by the IPS for the IASL, titled, “A Participatory 

Concept Paper for the Design of an Effective Industrial 

Policy Framework for Sri Lanka”. 

The outcome of the research study as a policy brief was 

submitted to the National Economic Council by the IASL. 

Malathy Knight-John made a presentation at the workshop on 

“A Participatory Concept Paper for the Design of an Effective 

Industrial Policy Framework for Sri Lanka”, Hotel Taj Samudra, 

Colombo, 9 February. 

Publications 

• Indraratna, A.D.V. de S. and Hirimuthugodage, Dilani 

(eds.), (2007), Inequity, Poverty and Development, 

Sri Lanka Economic Association, Colombo. 


IPS research staff participated at the following key forums 

during the year, as a part of strengthening links with the 

Institute’s various stakeholders. 

Malathy Knight-John, Research Fellow, made a 

presentation on “Improving Telecom Performance in 

Sri Lanka: Policy Actions” and was discussant at the 

session on “Regulating in an Imperfect World” at the 


“CPRsouth 2007: Research for Improving ICT 

Governance in the Asia-Pacific Conference” organized 

by LIRNEasia and the National College of Public 

Administration and Governance, University of the 

Philippines, Diliman, 19-21 January. She also made a 

presentation on “Telecoms Service Delivery and Pro- 

Poor Growth in Sri Lanka: Opportunities and 

Challenges” and chaired the session on “The Role of 

the Private Sector in Service Delivery at the Provincial 

Level” at the workshop on “Service Delivery for Pro- 

Poor Growth in Sri Lanka” organized by IPS and 

theWorld Bank, Hotel Chaaya Village, Habarana on 

11-13 January. 

In addition, she was a lead discussant at an open forum 

on a study “Assessing the Impacts of Privatization on 

Workers” organized by the Centre for Policy Analysis 

(CEPA), CEPA, 28 June; discussant at a workshop on 

the “Economic Impacts of Corruption” organized by 

the Sri Lanka Economic Association, OPA Auditorium, 

4 June, and moderated a live televised session organized 

by Lanka Business Online (LBO), and Lanka Business 

Report (LBR) on “Women in Enterprise” at the Trans 

Asia Hotel on 12 March. 

Dilani Hirimuthugodage presenting a copy of the book edited 

with Prof. A.D.V. de S. Indraratne on “Inequity, Poverty and 

Development” to Robert Blake, US Ambassador in Sri Lanka, 

OPA Auditorium, Colombo, 18 December. 


Malathy Knight-John, Shantha Jayasinghe, Dilani 

Hirimuthugodage, Yatila Wijemanne, and Praveeni 

Munasinghe. 

Executive Director participated as a panelist at a seminar on 

“How Competitive is Sri Lanka for Business” organized by the 

Ceylon Chamber of Commerce (CCC) on 1 November. 

Malathy Knight-John participatd as a discussant at the workshop 

on “Service Delivery for Pro-Poor Growth in Sri Lanka”, Hotel 

Chayaa Village, Habarana, 11-13 January. 


Poverty and Social Welfare 

Inteional 

Economic Policy 

The IPS work in the areas of Poverty and Social Welfare 

seeks to improve knowledge on poverty dynamics of 

vulnerable groups in order to emphasize the need to balance 

economic and social issues in policy making and 

implementation, which would eventually lead to improved 

status of the poor. Despite continued efforts by the 

government to reduce poverty through a dual approach of 

growth generating policy reforms and continued assistance 

to the deprived via social welfare programmes and poverty 

alleviating initiatives, poverty level in Sri Lanka has 

continued to remain high over the past decades. While 

around 23 per cent of the population falls below the poverty 

line, considerable disparities exist across regions. Given 

the continued dominance of the macro-adjustment based 

development strategy in Sri Lanka, there is a strong need 

to understand the mechanisms and processes that translate macroeconomic policy reform to increased welfare, and also the 

reasons why certain population segments remain deprived. The IPS recognizes the need to furnish policy makers with upto-date 

evaluations on poverty alleviation efforts and provide medium-term analysis of the relevant issues. The research 

in the area of poverty and social welfare at IPS, focuses on understanding the causes and dynamics of poverty and 

evaluating the effectiveness of various poverty alleviation initiatives by the government, co-operatives and the nongovernmental 

organizations. 

Highlights 

Poverty Alleviation through Microfinance 

Programmes 

The important role played by microfinance in combating 

poverty and creating employment among the poor has 

increasingly been recognized. Especially in Sri Lanka, 

there have been a wide range of financial institutions 

(varying from banks to community based organizations) 

involved in the provision of various financial services to 

lower income households. Moreover, in the aftermath of 

the tsunami, the microfinance sector in Sri Lanka 

experienced an influx of donor funds leading to a number 

of developments in this sector. Nevertheless, limited 

research has been carried out in this area to explore the 

outreach and the effectiveness of these programs in 

alleviating poverty in Sri Lanka. In this context, IPS 

continued its focus on microfinance and was involved in a 

number of research projects in this area. 

a) Outreach of Financial Services in Sri Lanka: A 

Look at the Demand side from a Microfinance 

Perspective 

IPS completed a study on the outreach of financial services 

in Sri Lanka with special reference to the microfinance sector 

of the country. This study was carried out under the 

Promotion of Micro Finance Sector (ProMis) programme 

implemented by the Ministry of Finance in collaboration 

with the German Technical Cooperation (GTZ). The findings 

are based on an island-wide survey of almost 3,000 

households. The study analyses the extent to which 

households have utilized financial services, specifically loans, 

savings and insurance and explores disparities across sectors, 

geographical regions, and income groups. In addition, the 

study explores the volume of loans and savings at household 

level, expectations from, and preferences among, financial 

institutions, barriers to access and the extent to which 

households use informal sources of finance. The final report 

will be published by GTZ -ProMis in early 2008. 


) Post Tsunami Microfinance in Sri Lanka 

In the aftermath of the 2004 tsunami, the microfinance 

sector in Sri Lanka experienced an influx of donor funds - 

in the form of grants, soft loans and subsidies. This 

encouraged many microfinance institutions (MFIs) to 

expand their outreach to areas/households affected by the 

tsunami. Many MFIs implemented special credit schemes 

aimed at rebuilding the lives of the tsunami affected 

households particularly to assist them to revive various 

income generation activities. The Central Bank of Sri Lanka 

and the National Development Trust Fund (NDTF) also 

implemented special credit schemes to serve those affected 

by the tsunami. Moreover, a number of NGOs that have 

traditionally been involved in other welfare and 

development activities entered into microfinance. In 

addition, in the aftermath of the tsunami, many MFIs 

started lending at zero or subsidized rates of interest and 

mixed loans and grants which led to various adverse 

implications in the microfinance sector in Sri Lanka. 

In this background, IPS engaged in a study to explore the 

“Post Tsunami Microfinance in Sri Lanka” funded by the 

German Technical Cooperation (GTZ) and the Ministry of 

Finance (under the Promotion of the Microfinance Sector- 

ProMis Project). A survey covering 18 key MFIs in four 

districts in the South and East of Sri Lanka was carried out 

to assess the effectiveness of post tsunami microfinance 

programmes on clients, MFIs and the microfinance sector 

as a whole. The study expects to identify lessons learnt on 

post tsunami funding for microfinance and to provide 

recommendations to donors to improve their policies and 

practices for development of the sector. The final report is 

expected to be completed early 2008. 

c) Other Activities Related to Microfinance 

IPS Researchers have also worked closely with the 

government, donors and various international and local 

networks and have provided policy advice and technical 

support in a number of occasions. Ganga Tilakaratna, 

Research Economist, has been serving as a Social 

Intermediation Specialist to the National Development 

Trust Fund (NDTF) under the Rural Financial Sector 

Development Programme (RFSDP), implemented by the 

Ministry of Finance and Planning and funded by the Asian 

Development Bank. She also made a presentation on 

“Microfinance Programmes in Sri Lanka” at a seminar 

organized by the Sri Lanka Economic Association (SLEA) 

on “Poverty in Sri Lanka: Evaluation of Programmes and 

Improving their Effectiveness” in March 2007. 

Micro-Insurance for the Poor 

Micro-insurance has been recognized as an important 

mechanism to help the poor to cope with various risks and 

vulnerabilities they are faced with. In recent years, many 

MFIs in Sri Lanka have expanded their services to provide 

micro-insurance along with other credit and savings 

facilities. Moreover, there are a number of government and 

private organizations involved in the provision of microinsurance 

facilities to the poor. Nevertheless, the type of 

services/insurance facilities provided by these players 

varies to a great extent. Moreover, the extent to which these 

services match the needs of the poor and help them to 

mitigate their risks is not clear. The study initiated by IPS 

attempts to evaluate the current status of the microinsurance 

sector particularly looking at the supply of and 

demand for these services to identify the gaps/constraints 

in the sector. The study is expected to bring out important 

policy implications for the micro-insurance sector as a whole 

particularly in identifying demand-driven insurance 

products to serve the needs of the low-income groups. 

Development Strategies, Welfare Regime and 

Poverty Reduction in Sri Lanka 

IPS completed a country study on Development Strategies, 

Welfare Regime and Poverty Reduction in Sri Lanka for 

the United Nations Research Institute for Social 

Development (UNRISD). The study explores development 

experience, social policy regime and poverty reduction 

strategy of Sri Lanka. It discusses the development strategy 

that has produced limited structural transformation in the 

economy, a moderate level of per capita income, and good 

social outcomes, structured under two policy regimes: the 

state-led period of structural change; and the regime of 

neo-liberal reforms. The study discusses the configuration 

of institutions and policies in different spheres of the 

political economy that has resulted in such outcomes, the 

political forces that drive the development and social policy 

regime, and how the country has coped with pressures for 

economic and social policy reforms. 

SAARC Regional Poverty Profile 

Although there is a growing body of literature on the role 

of infrastructure on poverty alleviation, such information 

available for the SAARC member states is limited. The 


Ministerial Meeting on Poverty Alleviation held in 

Colombo in August, 2006 decided to explore the nexus 

between rural infrastructure, including socio-economic 

infrastructure, and poverty in the next SAARC Regional 

Poverty Profile (RPP). IPS in collaboration with the 

Samurdhi Division of the Ministry of Nation Building 

and Estate Infrastructure Development and the 

Department of Census and Statistics of Sri Lanka (DCS) 

has been involved in the preparation of the Sri Lanka 

country report which will be used as input to the RPP. The 

country report is expected to be completed by early 2008 

and launched along with the RPP. 


Roshini Jayaweera on a field visit on the study on “Combating 

Multiple and Overlapping Vulnerabilities: Microinsurance for the 

Poor”, Gampaha, Batuwatta during 3-4 May. 

Poverty and Social Welfare Unit provided technical 

input in organizing the workshop on “Taking SAARC 

Development Goals (SDGs) Forward” in collaboration 

with the Samurdhi Division of the Ministry of Nation 

Building and Estate Infrastructure Development held 

at the Sri Lanka Foundation Institute on 17 December. 

The workshop was a starting point to create awareness 

of the SDGs and to ensure that tasks and 

responsibilities are effectively undertaken by the 

relevant institutions. 

Ganga Tilakaratna and Ramali Perera contributed 

towards preparing a report on “Outreach of Financial 

Services in Sri Lanka: A Look at the Demand-side 

from a Microfinance Perspective” for the Promotion 

of the Microfinance Sector (ProMis) and GTZ. 

Ganga Tilakaratne was a member of the Committee 

to “Prepare Work Plan of Action in Implementing, 

Monitoring and Evaluating the National Action Plan 

for Poverty Alleviation for Sri Lanka under the 

SAARC Social Charter”, for Samurdhi Division, 

Ministry of Nation Building and Estate Infrastructure 

Development. 

Publications 

• Book Review: Perera R. (2007) , “We Are Poor but So 

Many: The Story of Self-Employed Women in India” 

(by Ela Bhatt), South Asia Economic Journal, Vol.8, 

No. 1, January-June. 

IPS staff participated at the workshop on “Taking SAARC 

Development Goals (SDGs) Forward” in collaboration with the 

Samurdhi Division of the Ministry of Nation Building and Estate 

Infrastructure Development held at the Sri Lanka Foundation 

Institute on 17 December. 


Ganga Tilakaratna, Ayodya Galappattige, Ramali Perera, 

and Roshini Jayaweera. 


Agricultural Economic Policy 

Inteional 

Economic Policy 

In 2007, Sri Lanka’s agriculture continued to advance for 

another year on the rough terrain of increasing food prices, 

increasing costs of production, and multiple institutional 

constraints. Under this setting, the challenges to the 

agricultural economic profession are, obviously, numerous 

in this year. The programme of the Agricultural Economic 

Policy Unit of the IPS for 2007, therefore, had to be drawn 

up with care to address as many of them as possible. The 

impact of the ongoing armed conflict and the long standing 

poor governance in the state services on the small holder 

sector was therefore considered a timely subject for 

investigation in Sri Lanka and the fisheries sector was 

chosen as the case for the study. Further, value chain 

analysis, a new analytical tool currently gaining popularity 

was employed in this study so that its applicability to conflict studies could also be ascertained. The other persistent 

problem in the agricultural sector involving productivity and efficiency under changing policy scenarios was also focused 

on during this year and an analysis on the food crop sector, based on the Policy Analysis Matrix, was initiated. In addition 

to these, a study of the recreational value of Diyawanna Oya wetland was included in this year’s research programme as 

the environmental impact of rapid urbanization is a growing concern in Sri Lanka. 

Highlights 

Value Chain Development in Conflict-Affected 

Environments: Analysis of the Fisheries Sector 

in Sri Lanka 

Sri Lanka has been facing an armed conflict for nearly 

three decades. Further, it is saddled with a state sector that 

is pervaded with chronic inefficiency and pilferage which 

can also be treated as a conflict in the sense that it has the 

potential to cause extreme unrest and violence. These two 

forces are considered to be largely responsible for the 

country’s prevailing underdevelopment and evaluating 

their impact on the performance of a productive sector 

remains a timely exercise and value chain analysis (VCA) 

offers a potential methodology to address these problems. 

Out of the set of conflicts that are affecting various 

components of the fish value chain creating a host of 

constraints to its effective functioning and thereby its 

competitiveness, the ongoing armed conflict and failure in 

governance affecting the value chain within the sector were 

selected in this study to be analysed for their impacts on 

the fisheries value chain. 

Impact of Post Doha Agricultural Liberalization 

on Efficiency and Comparative Advantage of Rice 

and Potato Sectors in Sri Lanka: A Policy Analysis 

Matrix (PAM) Approach 

Specific policies on agriculture in Sri Lanka include provision 

of input subsidies, guaranteed product prices and state owned 

marketing services. With the implementation of open 

economic policies which started from 1977, Sri Lanka 

liberalized some of the activities relating to agriculture and 

on a “second wave of liberalization” in 1990, the trade policy 

was further relaxed. However, some of these inward looking 

policies extend even into the post-liberalization period and 

imports of major sensitive agricultural commodities 

including rice, potato, chilli and onions are still controlled 

through tariffs, non-tariff measures and quantitative 

restrictions. Thus, the present policy is neither liberal nor 

protective. To complicate matters further, Doha Development 

Agenda demands a substantial improvement in market access, 

reduction and ultimate phasing out of export subsidies and 

domestic support. Consequently, a lack of clarity exists about 

the real effects of present day policy and the ways to continue 


with further policy reforms and the fragmented research 

conducted so far does not shed enough light on the impacts 

of the existing agricultural policies. On this backdrop, this 

study employs PAM approach that offers a repeatedly usable 

model which is capable of producing coherent sets of 

multiple efficiency indicators. 

An Estimation of the Recreational Use Value of 

Diyawanna Oya Wet Land Eco-System: An 

Application of Travel Cost Method 

In spite of the wide spectrum of eco-system services 

generated, the urban wet lands in Sri Lanka have been 

decreasing rapidly in acerage and quality over the past few 

decades. Importance of these valuable eco-systems was not 

adequately identified until recently and ad-hoc conversion 

of the wetlands for development purposes has become a 

serious problem. Diyawanna Oya wet land is one of few 

remaining wet lands in the Western Province, which has 

already proven to be an important recreational site in the 

greater Colombo area and nearby suburbs. This study 

attempts to estimate the economic value of this natural 

resource based on the perceptions of the regular visitors of 

the site on the recreational value and their preference to 

conserve this endangered and under-appreciated resource 

using the Travel Cost Method (TCM). In particular, the 

study estimates the change in annual recreational value 

and the distributional impacts due to the implementation 

of new development projects in the area. It also assesses 

the welfare loss due to the acreage loss from the natural site 

for development and the benefits of preserving it as a 

natural site. The findings may give directions for policy 

formulation on allocation and sustainable utilization of this 

natural ecological system. 

Parakrama Samaratunga served as a discussant at the Policy Forum 

on “Agricultural and Rural Development for Reducing Poverty 

and Hunger in Asia” organized by the International Food Policy 

Research Institute of Washington DC., U.S.A. at the Asian 

Development Bank in Manila, Philippines, 9-10 August. 

Publications 

• Samaratunga, P. A. (2007), “Sri Lanka: Innovative 

Practice in Integrating Small Farmers into Dynamic 

Supply Chains: A Case Study of Ma’s Tropical Food 

Company”, Regoverning Markets Innovative Practice 

Series, IIED, London. 

• Samaratunga, P. A., K. Karunagoda, and M. 

Thibbotuwawa (2007), “Mapping and Analysis of the 

South Asian Agricultural Trade Liberalization Efforts” 

in ESCAP (eds.), Agricultural Trade: Planting the Seeds of 

Regional Liberalization in Asia, ARTNeT Studies in Trade 

and Investment 60, (pp. 33-74), UNESCAP, Bangkok, 

Thailand. 

Executive Director made a presentation on “Contribution of the 

Tea Sector to the National Economy” at the Tea Convention 

Workshop organized by the Ceylon Tea Traders’ Association, 

BMICH during 6-8 September. 

Asha Gunawardena, Dilhani Marawila, and Manoj Thibbotuwawa 

at a focus group discussion conducted for the ‘’Fishery Value Chain 

Study”, Tangalle, 27-28 September. 


Parakrama Samaratunga, Dilhani Marawila, and Manoj 

Thibbotuwawa. 


Environmental Economic Policy 


Natural environment plays a crucial role in sustainable 

development of the economy. Sri Lanka is endowed with 

a rich base of environmental and natural resources, which 

has an immense potential to contribute to the nation’s longterm 

development aspirations. However, unplanned 

utilization of natural resources and growing population 

have resulted in numerous environmental problems. In 

addition, the island nation is vulnerable to various impacts 

of global climate change with uncertain outcomes. The 

Environmental Economic Policy Unit of IPS undertakes 

research studies on environmental and natural resource 

management issues of the country, which need special policy 

attention. It aims at providing policy suggestions to 

improve the overall environmental management, thereby 

contributing to achieve the goals of sustainable 

development of the country. 

Highlights 

Post Tsunami Coastal Fishery Issues in Sri 

Lanka 

The Coastal fishery was one of the most adversely affected 

sectors by the 2004 Indian Ocean tsunami, resulting in a 

greater attention from donors in the rehabilitation effort. 

However, delivery of post-tsunami livelihood related 

benefits to the affected fishers did not take place in a 

planned and systematic manner and ended up with poortargeting 

and various distributional issues. Absence of 

accurate, reliable pre-tsunami data on the composition of 

the fishing fleet and genuine fishers, especially the small 

scale fishers, was a main problem. This study funded by 

the South Asian Network for Development and 

Environmental Economics (SANDEE), aims at identifying 

the issues relating to the targeting of beneficiaries for 

delivery of post-tsunami livelihood interventions in the 

fishery sector and to evaluate the distributional impact of 

post-tsunami livelihood interventions. The study would 

help to understand the current problems of fishers with 

special reference to income, profitability, accessibility to 

fishing, input availability, and input and output prices in 

the post-tsunami context. The objective is to recommend 

relevant policy options to address important fishery 

management issues. 

Economy and Environment Profile in Sri Lanka: 

An Overview of Physical Resource Situation, 

Policy, and Institutions 

The objective of this study is to assess the two-way links 

between environment and the economy of Sri Lanka at the 

macro level. The ‘overview’ would cover the broad linkages 

and overall relationships from a holistic perspective, followed 

by relatively in-depth presentations of specific resource 

sectors such as land, forestry, water, fisheries, etc. The 

outcome of the study would provide a useful guide to 

formulate sustainable development policies at the macro 

level. 

There is no systematic macro-level data gathering system 

for environment and natural resources in Sri Lanka and most 

of the available data are by-products of sources such as 

administrative reports, sector performance reports, project 

feasibility studies, etc. Therefore, any attempt at macro level 

analysis of environment/natural resource issues has to 

undergo the painstaking process of gathering secondary data 

from various scattered sources. Considering these difficulties, 

the study attempts to build on the basis of district level data 

compiled from various secondary sources. Data will be 

presented on different natural resource types and 


environmental problems, that would indicate the stocks, 

flows degradation and pollution aspects of environmental 

management of the country. An important by-product of 

the study would be a comprehensive dataset on 

environment/natural resources of Sri Lanka. It is expected 

that the database would serve as a useful baseline in 

analyzing ‘environment and economy’ issues of the country. 

Integrating Sustainable Agriculture and 

Renewable Energy: Gliricidia for Stabilization of 

Farming Systems and Production of Biomass 

Energy 

This study examined the potential for integrating systems 

of dendro energy and sustainable agriculture systems using 

Gliricidia. It was based on a desk study of information 

gathered from various secondary sources on renewable 

energy and sustainable agriculture. The study identifies 

that there is a potential for generating dendro thermal power 

using Gliricidia that would provide alternative solution for 

the existing energy problems, at least in the scale of smallto-medium 

enterprises. At the same time, integrating this 

approach to agricultural systems has a potential to create 

stable agricultural production systems that can positively 

contribute to increase the food security of the country. 

However, the wide uncoordinated gap in demand and 

supply of Glicidia wood, stands out as the major bottleneck 

for promoting this integrated approach. The 

recommendations made by the study includes promotion 

of cultivation of Gliricidia in large scale plantations with 

connected dendro-power generation facilities, combining 

sustainable agriculture projects with rural energy 

programmes, promotion of bio-mass energy for thermal/ 

electrical applications in rural industries, promotion of green 

manure as a nitrogen substitute, facilitation of market for 

fuelwood and enhancement of logistics and infrastructure, 

incentives for attracting foreign exchange for bio-mass 

cultivation and energy projects, strengthening the Clean 

Development Mechanism (CDM) capacity in Sri Lanka, and 

enhancing research and dissemination on Short Rotation 

Coppice (SRC), farming systems and bio-mass energy. 

Conjunctive Management of Small Tank Systems 

and Groundwater Resources in Dry Zone 

Physical water scarcity has been a major obstacle in 

expanding dry zone agriculture in Sri Lanka. Among others, 

institutional issues related to utilization of groundwater as 

a common pool natural resource has important implications 

over sustainable management of the resource. This issue 

has been receiving an increased attention with the rapid 

growth of agro-wells to tap the limited groundwater 

potential in village tank areas in the dry zone. Pending 

threat of global climate change is another matter for 

concern. Therefore, conjunctive use of surface and 

groundwater resources has become an important policy 

issue. 

The study plans to gather information from several rainfed 

village irrigation tank areas in the dry zone through 

participatory rural appraisal methods. The study would 

provide policy guidelines to strengthen the conjunctive 

management of surface and groundwater resources and to 

discourage the over-use of groundwater for private benefit 

at the expense of community welfare. This study is 

supported by the Economy and Environment Programme 

for Southeast Asia (EEPSEA). 

Publications 

• Steele P., Malathy Knight-John, Amrit Rajapakse, and 

Kanchana Wickremasinghe (2007), “Disaster 

Management Policy and Practice in Sri Lanka: Lessons 

for Government, Civil Society and the Private Sector”, 

IPS, Environmental Economic Policy Series, No. 7 

(published in collaboration with Oxfam, America). 

• Also, published as a web publication by Oxfam 

America, September 2007. Online at: 

www.oxfamamerica.org/newsandpublications/publications/ 

research_reports/disaster-management-policy-and -practicelessons-for-government-civil-society-and-the-private-sectorin-sri-lanka 

• Book Review: Wickramasinghe, K. (2007), Mohan 

Munasinghe and Peter Meier (eds.), “Sustainable 

Energy in Developing Countries: Policy Analysis and 

Case Studies”, South Asia Economic Journal 8.1, 

139 - 163. 

• Wickramasinghe, K., P. Steele, and A. Senaratne 

(2007), “Impact of Forest Conservation on Household 

Economy and Poverty: Case of Knuckles National 

Wilderness Heritage of Sri Lanka”, electronically 

published in, (http://recoftc.org/site/fileadmin/docs/ 

Events/RRI_Conference/Session_3/) 


Athula Senaratne, Asha Gunawardena, and Kanchana 

Wickramasinghe. 


Health Economic Policy 


Sri Lanka’s Health performance has reached an exceptional 

level in the developing world, with low mortality and 

fertility, compared to the countries in the region. This is 

an achievement considering the fact that Sri Lanka spends 

less on the health sector as a percentage of the GDP. Besides 

the many factors that have directly and indirectly 

influenced this achievement, social development 

programmes including free health care services 

implemented by successive governments of Sri Lanka 

during the last six decades are seen as the main reason for 

this achievement. Main features of Sri Lanka’s health 

system are access to free health services in public hospitals 

under the Central Ministry of Healthcare and Nutrition, 

and the Provincial Ministries of Health, and the growing 

fee levying hospital care fully funded by the private sector. 

The research agenda of the Health Economic Policy Unit at IPS focuses on organization and performance of public sector 

health care delivery, private health care provision, health care financing, economic and health sector implications of 

demographic ageing, and other social issues related to health. During the year, the research programme concentrated on 

national level health financing, provincial health financing, private health care delivery, future option for financing Sri 

Lanka health services, and health related social issues such as marketing of alcoholic beverages. 

Sri Lanka National Health Accounts 2003-2004 

The IPS Health Economic Policy Unit is continuing its 

programme to assess the national health expenditure 

through the preparation of National Health Accounts. The 

third series of National Health Accounts covers the period 

from 2003-2004. The first official estimate for the period 

1990-1999 was released in 2002, and the second series for 

the period 2000-2002 was released in 2005. 

National Health Accounts describes the financing of the 

national health system and its direction of spending. 

National health expenditure covers a spectrum of total 

health expenditure, and expenditure of different providers 

while identifying sources of spending and also by function. 

The report indicates that Total Expenditure on Health 

(TEH) reached Rs. 83.2 billion in 2004 from Rs. 59.5 billion 

in 2002. This is 4.1 per cent of GDP in 2004 rising from 

3.8 per cent of GDP in 2002. 

Provincial Public Health Expenditure 

Public expenditure plays a major role in the health system 

in Sri Lanka. Financial resources for provincial councils are 

provided by the central government by way of grants as the 

provincial councils are not generating adequate revenues to 

meet such expenditures. 

The Provincial Council health System which is administered 

by the Provincial Director of Health Services provides 

details of recurrent and capital expenditure incurred under 

several programmes such as health administration, patient 

care, and community health services. 

During the period between 2000 to 2004, provincial health 

expenditure was increased by 63 per cent from Rs. 7,006 

million to Rs. 11,432 million in 2004. Provincial health 

expenditure was 17 per cent of the TEH in 2000 which 

declined to 15 per cent in 2004. In 2000, provincial 

expenditure on health stood at 5 per cent of total public 

expenditure on health and increased to 31 per cent in 2004. 


Census of Private, Co-operative, and Estate 

Hospitals 2006 

For the third consecutive year, IPS carried out the Census 

of Private, Co-operative and Estate Hospitals for 2003- 

2004 as a supplement to Sri Lanka National Health 

Accounts. The survey finds that the number of private 

hospital admissions have almost doubled over the last 

decades, whilst simultaneously recording a six fold increase 

in the provision of outpatient care. 

As part of the effort to develop a national alcohol policy for 

Sri Lanka, the IPS study attempts to equip decision-makers 

to make informed policy choices in the light of the current 

situation on alcohol production, sales, and consumption in 

the country. 


G. D. Dayaratne, and Sunimalee Madurawala. 

The study also reveals that the Western Province and 

Colombo district have been the largest recipient of private 

investment in health-related infrastructure, thus 

highlighting the preference of the private sector to operate 

in urban locales. Demand side pressures for private hospital 

in-patient services offers opportunities for the future 

expansion of private hospital services in certain areas. 

The study assumed that the scale of the estate hospital 

sector had remained unchanged from 2001-2004. In the 

case of co-operative hospitals, no statistically significant 

difference was observed between the 2004 survey results 

and those obtained in previous years. 

A Framework for Formulating a National 

Alcohol Policy 

Alcohol policies are those regulations, laws, and rules that 

govern the manufacture, promotion, distribution, sale, and 

use of alcohol. Alcohol legislations applied and effected in 

the country in the past could be viewed from the 

perspective of prohibition and denial. However, a greater 

part of policy formation world over during the past century 

has been incremental, deliberate, and accepting of adults 

drinking in moderation. 

Alcohol policy need to be formulated taking into account 

the social, religious, cultural, economic, political, and public 

health dimensions of alcohol use and abuse. A more holistic 

approach, based on objective and long-term prospective 

would be ideal, rather than ad hoc policy making. Like 

many Asian countries, Sri Lanka is seen approaching alcohol 

use and abuse from a narrow and short term perspective, 

without adequate consultation from different disciplines. 

On the other hand, the government continues to show a 

strong interest in alcohol tax revenues, while its ambivalent 

position regarding alcohol creates a disjointed national 

approach to alcohol policies. 


Links 

The IPS has placed considerable value in developing research linkages both locally and internationally. In this respect, 

the Institute has established formal links with a number of research organizations from around the world and developed 

working relationships with researchers, and research organizations through its collaborative work. 

• Asia-Pacific School of Management, Charles Sturt University in Wagga, NSW, Australia (www.csu.edu.au) 

• Asia-Pacific Research and Training Network on Trade (www.artnetontrade.org) 

• Asian Development Bank Institute (www.adbi.org) 

• Brazilian Institute of Studies on Competition, Consumer Relations and International Trade – IBRAC 

(www.ibrac.org.br) 

• Centre on Regulation and Competition (CRC) based at the University of Manchester, 

U.K. (www.competition-regulation.org.uk) 

• Centre for Policy Dialogue (CPD), Dhaka, Bangladesh (www. cpd-bangladesh.org) 

• Centre for Trade and Development, India (www.centad.org) 

• Coalition for Action on South Asian Cooperation (CASAC) 

• Consumer Unity and Trust Society (CUTS), Jaipur, India (www.cuts-india.org) 

• Equity in Asia-Pacific Health Systems (Equitap) (www.equitap.org) 

• Global Development Network (GDN) (www.gdnet.org) 

• Indian Council for Research in International Economic Relations (ICRIER), New Delhi, 

India (www.icrier.com) 

• Indian Council for South Asian Cooperation (ICSAC), New Delhi, India 

• Indian Ocean Rim Association for Regional Cooperation, IOR-ARC and IORAG (www.iornet.com) 

• International Development Research Centre (IDRC), Ottawa, Canada (www.idrc.ca) 

• International Labour Organization (ILO) (www.ilo.org) 

• International Network of Civil Society Organization on Competition – INCSOC (www.incsoc.net) 

• Institute of Social Studies, The Hague, Netherlands (www.iss.nl) 

• La Trobe University, Edith Cowan University, and the Australian South Asian Research Centre 

of the Australian National University in Canberra. 

• North South Institute, Ottawa, Canada (www.nsi-ins.ca) 

• Research and Information System for Developing Countries (RIS), 

New Delhi, India (www.ris.org.in) 

• South Asia Centre for Policy Studies (SACEPS), Kathmandu, Nepal (www.saceps.org) 

• South Asia Watch on Trade, Economics, and Environment (SAWTEE), Kathmandu, 

Nepal (www.sawtee.org) 

• South Asian Network on Economic Modeling, Bangladesh (www.sanemnet.org) 

• South Asian Network for Development and Environmental Economics (www.sandeeonline.org) 

• Sustainable Development Policy Institute, Pakistan (www.sdpi.org) 

• UN-ESCAP, Bangkok, Thailand (www.unescap.org) 

• World Bank (www.worldbank.org), and many more 

• Youth Employment Network (YEN) (www.ilo.org/yen) 


IPS Support Services 


Administration and Finance Unit 

Library 

The Department of Administration and Finance comprises 

of five units, Administration, Financial Operations, Human 

Resources, Maintenance Operations, and Procurement 

Services. These provide essential internal services to each 

of the Research Units in IPS. 

The primary goals of the units within the Department of 

Administration and Finance are to: 

• Provide professional expertise in all business areas 

• Provide management services to ensure compliance 

by all Units within IPS 

• Create appropriate policies and procedures to ensure 

"best practices" 

• Act as the central point for contact with the donors, 

public, private sector, and the community at large. 

The year has been very challenging for IPS, with the 

Government of Netherlands funding coming to an end in 

2005. The Institute performed well to achieve an income 

over expenditure which exceeded the budget. On staff 

development side, an Employee Performance Development 

Review (PDR) process was introduced to certain levels of 

the support staff, which enabled the employees to meet 

their objectives and contributed to the efficiency of their 

respective Units and the institute as a whole. 

The Library's mission is to identify, investigate, define, 

and meet information needs of the Institute's research staff 

in support of the research and administrative functions of 

the Institute and efficiently provide access to quality 

information resources, irrespective of format and location, 

and facilitate information transfer using the best of 

traditional and innovative technologies. 

Collection Development 

The IPS Library continued to increase its acquisitions and 

a considerable number of items were added to the library's 

collection. Currently, the collection consists of about 10,500 

volumes of books, 5,000 pamphlets, 77 titles of Sri Lankan 

and international print journals which are relevant to the 

institute's research programmes. A substantial amount of 

publications and documents were also added to the 

repository, which the library maintains on Sri Lankan 

economic and sectoral policy. Apart from direct purchasing, 

the library obtained publications through exchange 

programmes and gifts from various local, regional and 

international organizations. 

There is a slight decline in the total acquisitions due to deselection 

process carried out in 2006. However, the annual 

acquisitions remain the same as in the previous years. 

Staff 

Iloka Wickremasinghe, G.L.B. Pooliyadda, Dhanuja David, 

K. A.R.T. Wijekoon, Malini Fernando, Nirmala Meegama, 

and Urmila Jayasekera. 


Library Collection up to 2007 

Books 10500 

Journals-Local (printed) 22 

Journals-International (printed) 59 

Pamphlets 5083 

CD-ROMS 84 

On-line full text databases 3 

Electronic Databases 

Library continued to provide access to (EBSCO) and 

Blackwell-Synergy Databases with the generous support 

of International Network for the Availability of Scientific 

Publications (INASP) and Programme for the Enhancement 

of Research Information (PERI), a programme funded by 

(SAREC). In addition, the library continued its subscription 

to JSTOR database. 

Enhancing Services 

With the advice of the library committee, library carefully 

reviewed its existing circulation policy, in order to provide 

an effective and efficient circulation service. A revised 

circulation policy was introduced in July 2007. The Library 

Intranet is functioning smoothly with continuous updates. 

A Library guide book was prepared during the year and 

will be released by early 2008. 

The demand from outsiders to use the library is increasing 

annually. During the year, more than 100 researchers and 

university students personally visited the library. Besides, 

the library handled a great number of document delivery 

and inter-library loan services and responded to an 

enormous number of queries via telephone, fax, and e- 

mail. 

to channel requests for acquisition of new material, informs 

the Librarian of the priority needs of the researchers, and 

sets the direction for the IPS library within the context of 

the Institute's overall goals. 

Achievements 

Premila Gamage, IPS Librarian, was elected as the 

Chairperson to the Regional Standing Committee of Asia 

and Oceania (RSCAO) and to the Division VIII of Regional 

Activities (which covers Africa, Asia and Oceania, Latin 

America, and the Caribbean) and also was elected to the 

Governing Board at the 73rd Word Library and 

Information Congress and International Federation of 

Library Associations and Institutions (IFLA), General 

Council, held in Durban, South Africa during 19-23 August. 

This is the first time a Sri Lankan Librarian has been elected 

to serve in such bodies. 

The Librarian was also awarded a scholarship by the Leeds 

Metropolitan University, UK to follow a PhD programme. 

Priorities for the Coming Year 

Priorities would include planning the library at the IPS 

headquarters. 

Personnel 

Premila Gamage, Dilrukshi Ariyaratna, Chamari Yapa, and 

Gayani Bentotage. 

Library Committee 

The Library Committee which plays an advisory role assists 

the Librarian in setting overall library policy and in 

defining broad guidelines for further development of the 

IPS library. The Committee provides an efficient avenue 


Publications and Communications Unit 

The IPS Publications and Communications Unit (PCU) 

coordinates and provides opportunities to manage and share 

information and knowledge of IPS research for the 

Institute's key audiences. This is primarily carried out by 

the Unit through IPS research publications, IPS public web, 

networking and organizing of local and international 

conferences, seminars and workshops. 

IPS Publications 

This is one of the main methods through which IPS research 

is disseminated to its target audience. In 2007, the PCU 

brought out the following publications: 

• four IPS publications under its research series 

• Sri Lanka: State of the Economy Report, the Institute's 

flagship publication 

• South Asia in the WTO, a book published by Sage 

publication, India 

• South Asia Economic Journal, the bi-annual journal 

managed by the IPS and RIS, India and published by 

Sage, India. (For more details on the above publications 

refer "IPS Publications of 2007") 

In the effort to increase the access and circulation of IPS 

research, the Unit in 2005, started translating the main 

findings of IPS publications into the two official languages, 

Sinhala and Tamil. Given the positive response of this 

undertaking, IPS will continue translating executive 

summaries of all IPS publications into both Sinhala and 

Tamil languages for the benefit of the non-English 

speaking audience. 

Conferences, Workshops and Book Launches 

The PCU organized two international conferences, three 

local workshops and a book launch during the year 2007 

as highlighted in the section on 'Conferences, Workshops 

and Book Launches' in collaboration with the Institute's 

local and international partners. 

Future 

Networking will become a priority of the Unit in 2008, 

and it will seek to strengthen inter-action with resource 

centres, and partner networks both locally and 

internationally, towards creating greater awareness of 

IPS research, while effectively marketing IPS 

publications through its existing channels. Priority has 

also been placed by PCU to increase the number of sales 

and display points for IPS publications and in this regard, 

the Unit has drawn up a new marketing strategy which 

will be implemented in 2008 and beyond. 

Staff 

Manu Tissera Gunasekara, K. Sothinathan, Asuntha Paul, 

Sharmini De Silva, Ayoni Rangala, and Amesh 

Thennakoon. 

Web 

The importance of the web as an effective tool for 

disseminating IPS research was recognized early on and 

the PCU has made a selection of the Institute's publications, 

and reports freely downloadable over the IPS website. This 

initiative was launched in 2007 in conjunction with the 

revamping of the Institute's website and more research 

work would be disseminated over the web in the future. 

IPS Publications Website 


Information Systems Unit 

The Information Systems Unit (ISU) concentrates its 

activities on the core areas of: a) Software, hardware, 

networking, and IT infrastructure management; b) Web 

Development, maintenance, and information dissemination, 

and; c) Database development, maintenance, and 

management. 

Computing Facilities and Resources 

All the IPS staff members are provided with personal 

computers operating on a Windows environment along with 

relevant software. The two buildings occupied by the IPS 

are networked and interlinked via an underground optic 

fibre cable. 

All centralized IT services are facilitated through an array 

of servers located in a dedicated server room. These servers 

run all centralized applications and services such as the 

IPS e-mail system, file sharing and Microsoft Active 

Directory Services, IPS databases, finNGO; the IPS 

accounting system, IPS corporate web, the back end facilities 

for the IPS public web: www.ips.lk and a host of other 

applications, and are available round the clock. Data Backup 

facilities are made available to the IPS. 

IPS Public Web 

IPS public web (www.ips.lk) now consisting about 550 web 

pages and many other downloadable files, is the focal point 

for the latest details of IPS research and findings, its latest 

(and archived) publications as well as IPS news and other 

related information. The web site is designed, developed, 

and maintained by the IPS ISU. 

IPS web site has seen a significant improvement in its access 

rate since its inception in 2003, where the IPS commenced 

developing its web site in-house. During 2007 the IPS web 

attracted around 123,000 hits per month and also 

disseminates around 2.5 Gigabytes of data/information 

every month. 

The ISU commenced development of a new version of the 

home page of the IPS web site in order to highlight the 

latest outcomes and developments regarding the research 

activities carried out by the Institute. Development of an 

entire new section for the IPS publications on the web site 

was also commenced during this period, in order to provide 

a comprehensive collection of IPS publications in a user 

friendly manner. These are planned to be deployed during 

the first half of 2008. 

The ISU also possess the ability to provide web 

development/information dissemination services and 

solutions customized to the requirements of various 

research projects undertaken and other related activities. 

IPS Corporate Web 

The IPS corporate web, accessible only within the IPS 

LAN, is the Institute's key knowledge management 

platform, integrating existing online facilities such as the 

Library Catalog and the newly developed Economic 

Research Data and Databases section and providing a 

platform to host research information, etc., online and 

updated. 

There were a number of developments undertaken on the 

corporate web during the year. An event scheduler was 

introduced, where all IPS events could be tracked and 

scheduled. Other sections which can contain information 

such as Administration, Information Systems, Publications 

and Maintenance were also introduced during the year. A 

data mining solution was introduced in order for users to 

search and locate data and information accumulated and 

stored on the corporate web in an efficient manner. 

The Data section of this corporate web which has a vast 

collection of economic research data and databases 

accessible to staff members round the clock in a 

comprehensive, user friendly and a secure manner 

introduced in 2006, made significant improvements and 

additions during the year. 

Data and Databases 

The vast range of economic research data bases and data 

sets maintained by the ISU (such as Macroeconomic data, 

Trade data, and Agriculture data, obtained from various 

Government Departments, NGO's, and other relevant 

Organizations as well as primary data collected by the 

IPS) that are necessary for the Institute's research activities, 

is continuously updated. 

During 2007, the IPS Macroeconomic database was 

updated and the Telecom indicators database has been 

developed. The database division also was involved in 


preparing databases for the Global Competitiveness Report 

2007-2008 and supported projects on Micro Finance study 

and the Telecom study on data and data related services. 

Data base analysis and development, data entry and 

processing as well as questionnaire/survey designing based 

on the needs of research projects are also handled by the 

ISU. 

ISU plays an active role in hosting and facilitating 

maintenance of databases and functionality of the finNGO 

accounting package and supporting the Library in 

maintenance of the library online catalogs hosted on the 

intranet and the Internet (IPS Public Web). 

Software 

A range of econometric, statistical, mathematical, and 

related software packages are made available to the 

researchers along with installation, usage, and maintenance 

support by the ISU. Several training sessions were 

conducted by the ISU to various staff members in this 

regard. A collection of operating systems, desktop 

publication applications as well as financial accounting 

packages are also a part of the IPS software collection. 

The newly developed IPS corporate website and 

the centralized event scheduler. 

Conferencing Facilities 

ISU maintains audio visual equipment including 

multimedia projectors, teleconferencing facilities, and other 

related equipment to provide facilities in organizing 

workshops, conferences, seminars, and similar events. 

Way Forward 

ISU prepared a new set of proposals under the guidance 

of the Executive Director regarding the IT strategy of the 

IPS for the coming years ahead, in view of providing its 

research staff the necessary facilities and technologies to 

support the core activities and for the Institute to remain 

competitive as a regional centre of excellence. 

ISU team members at work 

in the IPS server room. 

Staff 

Haren Kodagoda, Nandaka Pothuwewa, Indika 

Siriwardena, Lasitha Fernando, and Nuwan Kahandawala 

Arachchi. 


Human Resources Training and Development 


The Institute encourages rigorous on-the-job training of 

its research staff to develop their research and analytical 

skills, as well as presentation and communication skills. 

With these objectives in mind, the IPS initiated several inhouse 

training programmes for its research staff in 2007. 

Research Staff 

IPS Small Grants Competition 

Course on Survey Methodology 

In order to improve survey related skills of the research 

staff, a Master's level course on "Survey Methodology" was 

initiated at the IPS and was conducted by Wimal 

Nannayakkara, Consultant/ Visiting Fellow, IPS. The 

course, conducted over a period of five months from 

September 2006 to January 2007, included training related 

to estimation procedures as well as sampling theory. 

The IPS introduced a Small Grants Competition intended 

to sharpen the research capabilities of junior researchers 

by providing them with an opportunity to conduct 

independent research. Junior research staff was invited to 

submit proposals to conduct a short-term research study on 

a key policy research issue of interest. The 14 proposals 

received were evaluated by the Research Committee and 

four short listed candidates were invited to present their 

proposals at an IPS in-house seminar. The evaluation 

criteria were based on the importance of the research 

question and its policy relevance, the appropriateness of 

the proposed methodology, and feasibility of conducting 

the study within the given time frame. The short listed 

candidates were Asha Gunawardena, Manoj 

Thibbotuwawa, Priyanka Jayawardena and Kanchana 

Wickremasinghe. 

Training on Effective Presentation 

Recognizing the importance of effective communication 

of research output to diverse audiences, the Institute invited 

Dr. Uditha Liyanage, Director, Post Graduate Institute of 

Management (PIM) to conduct an interactive workshop for 

IPS research staff on "Effective Presentation Skills", 

30 October. 

Training on Value Chain Analysis 

This training programme was organized by International 

Alert and USAID and was held at the IPS during 11-12 

September. 

The Institute at the same time encourages research staff to 

participation at important external training programmes 

and seminars to strengthen their knowledge and skills. 

Research staff attended the following programmes in 2007. 

• “Global and Regional Developments in the Banking 

and Financial Services Industry and Challenges and 

Opportunities" by Dr. K. Ramakrishnan, organized by 

the Central Bank of Sri Lanka, Centre for Banking 

Studies, 04 October. 

The four short listed candidates from left, Priyanka Jayawardena, 

Kanchana Wickremasinghe, Asha Gunawardena and Manoj 

Thibbotuwawa. 

Kanchana Wickremasinghe's proposal on "Ecotourism for 

Sustainable Forest Management in Sri Lanka: Policy 

Analysis" was judged the winner. 

• “ITC Market Tools" conducted by International Trade 

Centre (ITC), Geneva and organized by Ceylon 

Chamber of Commerce and German Technical 

Cooperation, SLIDA, 8-11 October. 

• “12th Annual Tax Oration", organized by the Faculty 

of Taxation, the Institute of Chartered Accountants 

of Sri Lanka, Institute of Chartered Accountants of 

Sri Lanka, 26 October. 


• National Workshop on Capacity Building for 

Development of Bond Market in Sri Lanka", conducted 

by the Public Debt Department of the Central Bank 

of Sri Lanka jointly with the United Nations Economic 

and Social Commission for Asia and the Pacific 

(UNESCAP), Galadari Hotel, 22-23 November. 

• Attended the 14th Biannual Research and Training 

Workshop organized by the South Asian Network for 

Development and Environmental Economics 

(SANDEE), Nepal, 8 -12 July. 

In addition, the following staff members participated at 

various academic programmes at both local and 

international institutions. 

Manoj Thibbotuwawa 

• Attended the “Third ARTNeT Capacity Building 

Workshop on Trade Research” organized by 

UNESCAP and WTO, Bangkok, Thailand, 26-30 

March. 

• Participated in the Post Graduate Diploma programme 

on “Modelling and Accounting for Sustainable 

Development” at the Institute of Social Studies (ISS), 

The Netherlands, 16 April-30 June. 

Asha Gunawardena and Dilhani Marawila attended a training course 

on “Advanced Econometrics: Dummy Dependent Variables, Survey 

Design and Evaluation Methods”, Kathmandu, Nepal 3 -7 July. 

Athula Senaratne 

• Participated at the workshop on "Regional Voices: 

Transnational Challenges" organized by the Henry L. 

Stimson Center, Singapore, 9-11 July. 

• Attended a training workshop on "Resource 

Mobilization for Environmental Economics Research" 

organized by the Economy and Environment 

Programme for Southeast Asia (EEPSEA) of IDRC, 

Bangkok, Thailnad, 2-5 October . 

Manoj Thibbotuwawa participated in the Post Graduate Diploma 

on “Modelling and Accounting for Sustainable Development” at 

the Institute of Social Studies (ISS), The Hague, The Netherlands, 

16 April-30 June. 

Dilhani Marawila 

• Attended an introductory training course on 

"Environmental and Natural Resource Economics for 

Economists", Bangkok, Thailand, 30 April -17 May. 

• Attended the advanced course on "Econometrics: 

Dummy Dependent Variables, Survey Design and 

Evaluation Methods", Organized by South Asian 

Network for Development and Environmental 

Economics (SANDEE), Kathmandu, Nepal, 3 -7 July 

(with Asha Gunawardena). 

• Attended a workshop on "IPCC Working Group III's 

Dissemination of Fourth Assessment Report" 

organized by the Jadhavpur University, Kolkata, India, 

11-12 October. 

• Participated at the training workshop on "Water and 

Sanitation Planning in Developing Countries" 

organized by the Economy and Environment Program 

for Southeast Asia (EEPSEA) of IDRC, Kuala Lumpur, 

Malaysia, 16-19 November. 

• Participated in the training Course on "Assessment of 

the Doha Outcome: A Development Perspective on the 

Global Agricultural Trade Regime in Sri Lanka" 

organized by the International Food Policy Research 

Institute in collaboration with the Agribusiness Center, 

Faculty of Agriculture and the Board of Study in 

Agricultural Economics, Postgraduate Institute of 

Agriculture (PGIA), University of Peradeniya, 3- 14 

November, and 10- 20 December. 


Kanchana Wickramasinghe 

• Completed a Post Graduate Diploma in 

"Universalizing Socio-Economic Security for the Poor", 

conducted by the ISS , The Hague, Netherlands, in 

collaboration with Self Employed Women's' 

Association (SEWA), Ahmedabad, and Center for 

Development Studies (CDS), Trivendrum, India, 

10 January - 23 March. 

• Completed Master in Economics, Department of 

Economics, University of Colombo. 

Support Staff 

Manoj Thibbotuwawa attended the “Third ARTNeT Capacity 

Building Workshop on Trade Research” organized by UNESCAP 

and WTO, Bangkok, Thailand, 26-30 March. 

• Chamari Yapa passed the BA Degree and commenced 

MA in Library and Information Science programme at 

the University of Kelaniya. 

• Gayani Bentotage commenced a Diploma in Library 

and Information Science Final examination at the Sri 

Lanka Library Association (SLLA). 

Dilhani Marawila at the “14 th Biannual Research and Training 

Workshop” organized by the South Asian Network for Development 

and Environmental Economics (SANDEE), Nepal, 8 -12 July. 

Kanchana Wickramasinghe completed a Post Graduate Diploma 

in "Universalizing Socio-economic Security for the Poor". The 

ISS, The Hague, The Netherlands, 10 January - 23 March. 

• Dilrukshi Ariyaratne participated at the conference on 

"Information Management in the Digital Environment 

(NACLIS 2007)", Sri Lanka Library 

Association (SLLA), Colombo, 8-9 March, and at a 

workshop on Research Methodology, SLLA, Colombo, 

10 March. 

• Chamari Yapa participated at the 47th Annual General 

Meeting, Sri Lanka Library Association, Colombo, 

29 June. 


IPS Events 


Conferences, Workshops and Book Launches 

The IPS in collaboration with the World Bank Institute (WBI) organized four residential workshops in 2007. 

Workshops on "Service Delivery for Pro-Poor Growth in Sri Lanka" 

Hotel Chaaya Village, Habarana, 11-13 January, and Light House Hotel, Galle, 16-18 January 

The first of the two workshops on "Service Delivery for 

Pro-Poor Growth in Sri Lanka" was held Hotel Chaaya 

Village, Habarana during 11-13 January and the second 

at Light House Hotel, Galle during 16-18 January. 

Nimal Bandara, Director-General, Sri Lanka Institute 

of Local Government, and Prof. Buddhadasa 

Hewavitharana, Chairman, IPS inaugurated the two 

workshops. 

Chairman IPS addressing the workshop on “Service Delivery for 

Pro-Poor Growth in Sri Lanka”, Hotel Chaaya Village, Habarana, 

11 January. 

Workshops on "Service Delivery and Provincial Budgeting for Promoting Pro-Poor Growth and Development in 

Sri Lanka" 

Hotel Amaya Lake, Dambulla, 16-18 November, and The Blue Water, Wadduwa, 23-25 November 

The next two workshops on 

“Service Delivery and Provincial 

Budgeting for Promoting Pro-Poor 

Growth and Development in Sri 

Lanka” were held during 

November. The first workshop was 

at Hotel Amaya Lake, Dambulla 

during 16-18 November and the 

second at The Blue Water, 

Wadduwa during 23-25 

November. Prasanna Gunawardena, former Mayor of 

Colombo inaugurated the first workshop in Dambulla 

while H.P.C. Herath, Secretary, Ministry of Provincial 

Councils and Local Government inaugurated the 

second workshop in Wadduwa. 

Participants of the workshop on "Service Delivery and Provincial 

Budgeting for Promoting Pro-Poor Growth and Development in Sri 

Lanka", Hotel Amaya Lake, Dambulla, 16-18 November. 


Workshop on "A Participatory Concept Paper for the Design of an Effective Industrial Policy Framework for 

Sri Lanka" 

Taj Samudra Hotel, Colombo, 9 February 

The IPS jointly with the Industrial Association of Sri 

Lanka (IASL) organized an interactive workshop on 

"Participatory Concept Paper for the Design of an 

Effective Industrial Policy Framework for Sri Lanka" 

at the Taj Samudra Hotel in Colombo on 9 February. 

The objective of this workshop was to elicit the views 

of key stakeholders on industrial policy based on a 

document prepared by the IPS for the IASL, titled, "A 

Participatory Concept Paper for the Design of an 

Effective Industrial Policy Framework for Sri Lanka". 

Technocrats and government officials, private sector 

industrialists and experts from the academic institutions 

were among the participants. The extensive debate and 

discussion that emerged during the sessions provided 

valuable inputs for the final policy brief being drafted 

by the IPS to be included in the Government's 

Industrialization Strategy. 

Inaugural session of the workshop on “A Participatory Concept 

Paper for the Design of an Effective Industrial Policy Framework 

for Sri Lanka”, Taj Samudra Hotel, Colombo, 9 February. 

International Conference on "Trade in Services in South Asia: Opportunities and Risks in Liberalization" 

Cinnamon Grand Hotel, Colombo, 4-5 April 

The IPS and the Friedrich-Ebert-Stiftung (FES) Colombo, 

jointly organized an international conference on "Trade in 

Services in South Asia: Opportunities and Risks in 

Liberalization" at the Hotel Cinnamon Grand Hotel, 

Colombo during 4-5 April. The conference was inaugurated 

by Hon. G. L. Peiris, Minister of Export Development and 

International Trade. 

Ms. Astrid Becker, Resident Director, FES, Colombo made 

the welcome address, while Dr. Saman Kelegama, Executive 

Director, IPS made the introduction to the conference. The 

keynote address was made by the Chief Guest. 

Janaka Wijayasiri making the introduction to the IPS publication 

“Utilization of Preferential Trade Arrangements: Sri Lanka’s 

Experience with the EU and US GSP Schemes” at the international 

conference on “Trade in Services in South Asia: Opportunities and 

Risks in Liberalization”, Cinnamon Grand Hotel, Colombo, 4-5 April. 

The conference analyzed service sector liberalization 

undertaken up to date in the region and highlighted the 

opportunities and risks present from further liberalization. 

The potential areas of cooperation in the services sector in 

the SAFTA framework was also one of the areas discussed 

during the conference. 


International Conference on "Towards BIMSTEC-Japan Comprehensive Economic Cooperation: Sri Lankan Perspective" 

Taj Samudra Hotel, Colombo, 17 August 

The IPS organized an international conference on 

"Towards BIMSTEC-Japan Comprehensive Economic 

Cooperation: Sri Lankan Perspective" at the Taj 

Samudra Hotel, Colombo on 17 August. The event was 

jointly organized with the Centre for Studies in 

International Relations and Development (CSIRD), 

India, and sponsored by the Sasakawa Peace Foundation 

(SPF) of Japan. 

Hon. Milinda Moragoda, Minister of Tourism making the inaugural 

speech at the international conference on “Towards BIMSTEC-Japan 

Comprehensive Economic Cooperation: Sri Lankan Perspective”, 

Taj Samudra Hotel, Colombo, 17 August. 

The conference was inaugurated by Hon. Milinda 

Moragoda, Minister of Tourism, while His Excellency 

Kiyoshi Araki, Ambassador of Japan in Sri Lanka, 

attended as the Guest of Honour, and Dr. Akinori Seki, 

President, Sasakawa Peace Foundation, as the Special 

Guest. 

Book Launch: "South Asia in the WTO” 

Trans Asia Hotel, Colombo, 7 December 

The book "South Asia in the WTO" edited by the Executive 

Director, and published by Sage Publications, India, was 

launched in the presence of Hon. G.L. Peiris, Minister of 

Export Development and International Trade at the Trans 

Asia Hotel on 7 December. 

The book was reviewed by Janak de Silva, Senior State 

Counsel, Attorney General's Department and Visiting 

Lecturer in International Trade Law, Sri Lanka Law 

College, and Dr. Biplov Choudhary, Trade Specialist, 

UNDP Regional Centre in Colombo. 

Executive Director handing over the first copy of the book “South 

Asia in the WTO” to Hon. G.L. Peiris, Minister of Export 

Development and International Trade at the book launch:”, Trans 

Asia Hotel, Colombo, 7 December. 


Monthly In-House Seminars 

Topic Presenter Date 

An Economic Estimation of the Dilhani Marawila and Manoj 06 February 

Recreational Value of Diyawanna 

Tibbotuwawa, Research Officers, IPS 

Oya Wet Land 

Solid Waste Management Asha Gunawardena, 05 March 

Research Officer, IPS 

International Aid Architecture Deshal de Mel, 08 March 


Conflict in Governance: Central Shelton Wanasinghe, 27 March 

Government vs Provincial 

Senior Visiting Fellow, IPS 

Governments 

Public Administration Reforms Yatila Wijemanne, 30 March 

Research Assistant, IPS 

Climatic Changes and its Athula Senaratne, 19 April 

Economic Aspects 

Research Fellow, IPS 

Poverty and Social Security Kanchana Wickramasinghe, 26 April 


Human Resources for Development Priyanka Jayawardena and Sunimalee 16 May 

Madurawala, Research Assistants, IPS 

Sri Lanka's Economic Performance Tilani Jayawardhana, 29 May 

in 2006 and Prospects 

Research Economist, IPS 

Microfinance Sector in Sri Lanka Ramali Perera, 21 June 


Globalization and Technological Lalith Munasinghe, 27 June 

Progress: What Track and Field 

Assistant Professor of Economics, 

Records Show 

University of Columbia 

Impact of Forest Conservation on Kanchana Wickramasinghe, 20 July 

Household Economy and Poverty: 


Case of Knuckles National Wilderness 

Heritage (NWH) of Sri Lanka 

Population and Ageing and the Nisha Arunatilake, Research Fellow, IPS 27 August 

Labour Market 

and Priyanka Jayawardena, 


The Private Health Care Sector of Sunimalee Madurawala and 12 September 

Sri Lanka: Is it a Case of Great 

Praveeni Munasinghe, 

Expectations 

Research Assistants, IPS 

Will Education Decentralization Nisha Arunatilake, Research Fellow 13 September 

Improve Access to Better Schooling and Priyanka Jayawardena, 



Monthly In-House Seminars 

Topic Presenter Date 

Corporate Finance Missaka Warusawitharana, Economist, 03 October 

Federal Reserves Board, USA 

Poverty in Sri Lanka: Issues Wimal Nanayakkara, 09 October 

and Options 

Visiting Fellow, IPS 

Budget 2008: Macroeconomic Jayanthi Thennakoon, Research 14 November 

Implications 

Officer, IPS and Jagath Dissanayake, 


The Proposed Railway Reforms T. L. Gunaruwan, General Manager 21 November 

of Railways, Department of Railways 

Sri Lanka's Domestic Preparedness Janaka Wijayasiri, Research Economist, 30 November 

with respect to Trade in Services in and Deshal de Mel, Research Officer, IPS 

GATS: A Case Study of the 

Telecommunications Sector 

Introduction to Social Accounting Manoj Thibbotuwawa, 19 December 

Matrix (SAM) and Applications 


Monthly Book Reviews 

Topic Author/Publisher Reviewed By Date 

How to Make Trade Work Joseph Stiglitz, Daniel Handel, 12 February 

MIT Press, Cambridge, Research Assistant, IPS 

MA, 2005 

and 

Growth and Empowerment: Nicholas Stern, Jean- 

Making Development 

Iacques Dethier, and 

Happen 

F. Halsey Rigers, 

MIT Press, Cambridge, 

MA, 2005 

Labour Market Regulation Caroline Brassard and Nisha Arunatilake, 27 April 

and Deregulation in Asia: Sarthi Acharya, Research Fellow, IPS 

Experiences in Recent 

Academic Foundation, 

Decades New Delhi, 2006 

DFCC Bank: One Among the Ranjit Fernando, Praveeni Munasinghe, 16 November 

Successful Few World Bank, 2007 Research Assistant, IPS, 

Fresh Perspectives: Exploring Azra Cader and Fiona Ayodya Galappattige, 18 December 

Alternative Dimensions of Remnant, CEPA, 2007 Research Officer, IPS 

Poverty in Sri Lanka 

Re Inventing Public Service Vikram K. Chand, Sage Ramali Perera, 18 December 

Delivery in India: Selected Publications, India, 2006 Research Officer, IPS 

Case Studies 


IPS Publications 

IPS Publications of 2007 

Utilization of Preferential Trade Agreements: Sri Lanka’s Experience with the EU 

and US GSP Schemes by Janaka Wijayasiri, International Economics Series 

No. 08, January. 

ISBN: 977-955-8708-48-4 

This publication using three indicators (coverage, utilization, and utility rates) assesses the 

usefulness of the EU and US GSP schemes for Sri Lanka and discusses Sri Lanka’s performance 

under both schemes while suggesting possible measures that can be taken to improve them. Sri 

Lanka has been a beneficiary of the GSP scheme since its inception in 1968. However, meeting 

the scheme’s objective of export expansion seems to have fallen short and Sri Lanka has not 

been able to export effectively under the EU and US GSP schemes, which are the most important 

non-reciprocal preference arrangements providing access to Sri Lanka’s main export markets. 

The analysis of Sri Lanka’s experience under both schemes highlights several reasons for their limited use. These include 

low product coverage (in the case of the US scheme), strict rules of origin criteria (in the case of the EU scheme), and weak 

supply capacity of the country. Lack of awareness of the schemes on the part of exporters and understanding the 

conditions attached to the schemes do not seem to have caused problems in their usage. 

Beyond Twenty Million: Projecting the Population of Sri Lanka 2001-2081 

by Indralal De Silva, Demographic Transition and Pension Series No .06, March. 

ISBN: 978-955-8708-49-1 

The publication updates the IPS previous population projections in 1995, and is based on the 

more recent population statistics available. The publication reveals that according to the standard 

projection, the population would reach 20.1 million by 2011, and could attain its peak by 2031 

with a size of 21.1 million. A near-zero population growth rate would be attained during 2021 

to 2036 where the total size of the population could be around 21 million. However, the 

publication concludes that beyond 2040s, primarily due to significantly low level of fertility, 

the total size of the Sri Lankan population would decline. 

Disaster Management Policy and Practice in Sri Lanka: Sharing Lessons among 

Government, Civil Society and Private Sector, Environmental Economic Policy Series 

No. 11, April. 

ISBN: 978-955-8708-50-7 

The publication was prepared by the IPS as an outcome of a study that the Institute undertook 

in collaboration with Oxfam America, providing recommendations to the government, NGOs 

and other stakeholders in formulating best practices and improving policy on disaster 

management in Sri Lanka. 

This publication contains a comprehensive analysis based on the recommendations presented 

by the Parliamentary Select Committee on Natural Disasters in April 2006 together with legal and policy documents, and 

interviews with all stakeholders. The publication highlights the need to take a multi-hazard approach with greater 

emphasis on mitigation and prevention. Further, it recommends the adoption of location specific approaches, focusing on 

coping strategies, vulnerable groups, and on effective implementation. 


Population Ageing, Policy Responses and Options to Extend Retirement 

Coverage: Case Study of Sri Lanka by Nirosha Gaminiratna, Demographic Transition 

and Pension Series No. 07, May. 

ISBN: 978-955-8708-57-4 

The publication examines the ageing patterns in Sri Lanka to have a better understanding 

of the status of the elderly and the adequacy and coverage of the present system of 

retirement benefits in the country, at a time when the country is experiencing rapid 

demographic changes with an ageing of its population. The publication reveals that old age 

dependency is increasing in Sri Lanka, despite the fact that economic dependency has remained 

stable, and also that only a quarter of Sri Lanka’s working age population is found to be 

covered by retirement benefits, indicating a need to redistribute income from workers to 

non-workers in order to achieve comprehensive retirement coverage. 

Sri Lanka: State of the Economy 2007, September 2007 

ISBN: 955-8708-46-1 

The State of the Economy report is an annual publication of the 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 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. 

Mahinda Chinthana: A Commentary on Policy Options, IPS Working Paper Series 

No.11, October. 

ISBN: 978-955-8708-538 

The IPS examined the ‘Mahinda Chintana: Vision for a New Sri Lanka’ (MCVSL) taking 

into account the current overall policy framework and attempted to shed some light on 

possible policy options where necessary. In this exercise, 10 chapters out of the 16 chapters 

of the MCVSL were selected for commentary, viz., Chapters 1& 2 on Agriculture and Irrigation, 

respectively; Chapter 3 on Industrial Development; Chapter 4 on Economic Infrastructure, 

Chapter 7 on Livelihood Development and Social Protection; Chapter 8 on Education; Chapter 

9 on Health, Chapter 11 on Flexibility and Globally Employable Workforce; Chapter 13 on 

Environment; and Chapter 16 on Macroeconomic Framework. 

South Asia in the WTO, edited by Saman Kelegama, Sage Publications, India, 

November. 

ISBN:978-0-7619-3614-5 

The book examines the position of each South Asian country in the multilateral trading 

system and highlights various concerns South Asian countries have on key WTO issues in 

agriculture, industry, services, and development dimensions. The possibility of South Asian 

countries formulating a common position in the WTO negotiations is also explored in detail. 


“South Asia Economic Journal”, Vol.8, No.1 and 2, January – June and 

July – December. 

ISSN: 1391-5614 

The South Asia Economic Journal is designed as a forum for informed debate on issues 

which are of vital importance to the people of South Asia who comprise more than onesixth 

of the world’s population. The journal is devoted to the economic analysis and 

policy options aimed at promoting cooperation amongst the countries comprising South 

Asia. It discusses South Asia’s position on global economic issues, its relations with other 

regional groupings and its response to global developments. A refereed journal, it carries 

articles by scholars, economic commentators, policy- makers and officials, from both the 

private and public sectors. 

Besides the regular publications, the IPS contributed monthly columns on contemporary economic issues to the Financial 

Times of the Daily Mirror. The topics covered were: 

• Driving Productivity at the Bottom of the Pyramid: How ICT can Help 

• Greening Your Business: Designing a Business Project in Environmentally Sustainable Manner 

• Economic Implications of Demographic Ageing in Sri Lanka 

• Market Access through Regional Trade Arrangements (RTAs) 

• Untapped Potential for Trade, Investment Regionally via FTAs 

These can be viewed in the IPS website. 

Forthcoming Publications 

• Sri Lanka National Health Accounts 2003-2004 

• Health Statistics: Census of Private, Co-operative and Estate Hospitals 2006 


IPS STAFF 

Research Staff 

Dushni Weerakoon, BSc (QUB), MA, PhD (Manchester) 

Deputy Director and Fellow/Head, Macroeconomic 

Policy Unit 

Nisha Arunatilake, BSc (Univ. of South USA), 

MA, PhD (Duke) 

Research Fellow/Head, Labour, Employment and Human 

Resources Development Unit 

Malathy Knight-John, BA (Swarthmore), MA (Colombo) 

PhD Candidate (Manchester) 

Research Fellow/Head, Industry, Public Enterprise 

Reform, and Regulatory Policy Unit 

Parakrama Samaratunga, BSc (Peradeniya), MSc (Univ. of 

Philippines), PhD (La Trobe) 

Research Fellow/Head, Agricultural Economic Policy 

Unit 

Athula Senaratne, BSc (Peradeniya), MPhil (Peradeniya) 

Research Fellow/ Head, Environmental Economic Policy 

Unit 

Janaka Wijayasiri, BA (Sussex), MA (The Hague) 

Research Economist/Head, International Economics 

Policy Unit 

Ganga Tilakaratna, BA (Manchester), MPhil (Cantab), 

PhD Candidate (Manchester) 

Research Economist/Head, Poverty and Social Welfare 

Unit 

G.D. Dayaratne, BA (Peradeniya) 

Manager, Health Policy Programme 

Tilani Jayawardhana, BA (Peradeniya), MA (Colombo), 

CIM (UK), PhD Candidate (Colombo) 

Research Economist 

Shantha Jayasinghe, BSc (Sri J’pura), MBA (Moratuwa) 

Research Officer 

Asha Gunawardena, BSc (Peradeniya), MBA (Moratuwa) 


Ruwan Jayathilaka, BA, MEcon (Colombo), MSc (NUS) 


Priyanka Jayawardena, BSc (Colombo) 


Deshal De Mel, BA (Oxon), MSc (LSE) 


Jayanthi Thennakoon, BA (Peradeniya), MSc (NUS) 


Ayodya Galappattige, BSc (Peradeniya), 

Msc (Peradeniya) 


Manoj Thibbotuwawa, BSc (Peradeniya) 


Ramali Perera, BSc (UCL) 


Jagath Dissanayake, BSc (Colombo) 

Research Assistant 

Kanchana Wickremasinghe, BSc (Peradeniya), 

MEcon (Colombo) 


Daniel Handel, MA (Sussex) 


Roshini Jayaweera, BA (Peradeniya), MSc (NUS) 


Yatila Wijemanne, LLB, LLM (Hull) 


Dilani Hirimuthugodage, BA (Colombo) 


Sunimalee Madurawela, BA (Colombo) 


Praveeni Munasinghe BEc (Syd) 


Indika Wijethunga, BA (Colombo) 

Project Assistant 

Dilhani Marawila, BSc (Peradeniya), Msc (Peradeniya) 



Visiting Research Staff 

Shelton Wanasinghe, BA (Cey.), Hon. D. Litt (J’pura) 

Senior Visiting Fellow 

Wimal Hettiarachchi, BA (Cey.), DPhil (Oxon) 


S.A. Karunaratne, BA (Cey.), MA (Boston), MA (Warwick) 


Wimal Nanayakkara, BA (Cey.), PG.Dip (Reading, UK) 

Visiting Fellow 

Project Interns 

Neethra Samarawickrama, T. Pothuhare, Sawati Rawat, Shezny Kabir, Mihiri Seneviratne, Maneka Jayasinghe, Nethmini 

Perera, and Ruwangi Welikala. 

Administrative and Support Staff 

Iloka Wickremasinghe, FCMA 

Director Finance and Administration 

Premila Gamage, BA (Peradeniya), MLS (Colombo), 

Dip. Lib. & Doc. Sci. (Kelaniya), Dip. Writership and 

Comm. (Sri J’pura), PhD Candidate (Leeds Metropolitan) 

Librarian 

Manu Tissera-Gunasekara, BA (Kelaniya), MA 

(Colombo) 

Head of Publications and Communications 

Haren H. Kodagoda, BSc (Colombo), MBA (Moratuwa) 

Head of Information Systems 

Dhanuja David, ACMA 

Accountant 

Indika Siriwardena, BSc (Colombo) 

Database Manager 

Nandaka Pothuwewa, BSc (Kelaniya), Dip. Comp. Sys. 

Design (NIBM), CCNA 

Manager Information Technology 

G.L.B. Pooliyadda 

Administrative Officer 

K.A.R.T. Wijekoon 

Maintenance Officer 

D.D.M. Waidyasekera, BA (Ceylon) 

Editor 

K. Sothinathan 

Documentation Officer 

Deepika Nawavickrama 

Administrative Assistant 

Gayani Bentotage 

Library Assistant 

Amesh Thennakoon 

Publication Officer 

Nirmala Meegama 

Secretary 

Asuntha Paul 

Secretary 

Sharmini De Silva 

Secretary 

Lasitha Fernando 

Web Developer 

Ayoni Rangala 

Secretary 

Urmila Jayasekera 

Receptionist 

Dumidu Karunaratne 

Web Developer/Network Assistant 

Nuwan Kahadawala Arachchi 

Web Developer/ Network Assistant 

Dilrukshi Ariyaratne, BA (Kelaniya) 

Assistant Librarian 

Chamari Yapa, BA (Kelaniya) 

Assistant Librarian 


Sunil Dharmadasa: An Appreciation 

It is with profound regret that the IPS records the demise of Sunil Dharmadasa, 

former Administrative Officer, who passed away on 2 nd March 2008 at his residence 

at Ratmalana. 

Sunil Dharmadasa, fondly called ‘Sunil’ by both friends and associates, was born 

on 29 th January 1930 and joined the Institute from the very inception in 1990 and 

retired as its Administrative Officer in March 2001. Sunil was a senior Public 

Servant who started his career as a draughtsman in the Survey Department in 

1951 and retired in 1985. He subsequently served in the National Planning 

Department and worked on the IPS project during 1985-1989. 

Sunil Dharmadasa was instrumental in establishing the new IPS Administration 

Office at DFCC building and later shifting to its present premises at St. Michael’s 

Road, Colombo 3. He assisted the Executive Director in preparing the Institute’s 

Code of Conduct: IPS Manual of Operations in 1995. He was not only a devoted officer in carrying out his functions 

effectively, but he did this in his usual affable style and was very popular both with the staff and with all those who 

associated with him. He also coordinated administrative and financial tasks with the Netherlands Embassy from the 

inception. He was largely responsible for bringing up the Institute in its administrative capacity to its present level. 

Sunil Dharmadasa is survived by his wife Sumana and two daughters. We wish to record our deepest sympathies to the 

family and our great appreciation of the services rendered by him to the Institute. 

Retirement of K. Sothinathan 

K. Sothinathan who served as the IPS Documentation Officer since 1994 retired from 

service in September 2007. 

He was a colleague of late Sunil Dharmadasa at the Survey Department before joining 

the IPS. He established a wide network of sales outlets for IPS publications and made a 

valuable effort to disseminate the publications to a wider audience. The Institute records 

its deep appreciation to K. Sothinathan and wish him a happy and peaceful retirement. 


Financial 

Report of the Auditor General 






Management Response to: Comments on Financial Statements 

2.2.1 Non – Compliance with Laws, Rules and Regulations and Management Decisions 

The Institute of Policy Studies (IPS) was created as an autonomous research institute, by an Act of Parliament. The IPS was 

envisaged as a policy “think tank” that would have the operational freedom and resources to engage in socio-economic 

research requiring long-term commitment. Although closely linked to the policy making process, its financial and 

administrative independence enables it to be both constructive and critical. 

a) An Audit Committee will be established shortly. 

b) The bonuses paid to staff have been approved by the Governing Board of IPS. As stated above the 

IPS by its very nature is not required to conform to the Government of Sri Lanka Administrative 

Regulations (ARS) and Financial Regulations (FRS). 

c) Financial regulations 

i. Appointments and payments to staff do not require the approval of the Ministry as the Government does not fund the 

emoluments made to IPS staff. The staff payments are made using project funding and recruitments are as per the project 

requirements. The Institute of Policy Studies does not come under the Government of Sri Lanka Administrative 

Regulations and Financial Regulations. Section 20 of the Institute of Policy Studies of Sri Lanka Act No 53 of 1988 

clearly states that the appointment of officers and their salaries and emoluments is at Board discretion. 

ii. Most of the Bank Accounts have been opened due to donor requests and have been in operation for many years. 

iii. The staff strength of the Finance & Administration Unit is limited. The Department comprises of Director-Finance & 

Administration (DFA), Accountant, Administrative Officer and Administrative Assistant. Of these 4 members, only 

DFA and Accountant are qualified in finance and have knowledge to do bank reconciliations and other specialized 

accounting tasks. With the current resources, segregation of duties is not possible. 

iv. Consumable stocks are issued on an authorized document, by the Maintenance Officer. No formal warehouse is maintained 

due to lack of space. Further, non-consumable items are not stocked, therefore the need for a warehouse does not arise. 

v. Board of Survey was carried out as per the fixed Asset Register. Copy of Board of Survey Report 2007, was sent to the 

Auditor General’s Department. Copy was also given to the audit team during the audit. 

d) Establishment Code 

i. The loan scheme is as per the Manual of Operations (MOO). Employees of IPS are on a contract basis; 

therefore they are unable to obtain loans from commercial banks, financial institutions and are not on par with 

permanent employees of the government sector. The MOO has specified limits for each grade of staff, and the 

amounts are hardly sufficient to meet the cost of the reason for obtaining the loan (the wedding, funeral of a 

family member, purchase or renovation of a house, purchase of a vehicle etc.). However, taking into consideration 

that staff of IPS cannot obtain loans unlike employees of government institutions who can obtain loans from 

private banks and institutions, the Governing Board of the IPS approved the 2% interest charge. On a special 

needs basis, taking into consideration the difficulties faced, an employee maybe granted a loan even though he/she 

has not completed the stipulated 2 years at the Institute. This is as stated in the MOO strictly on the approval of 

the Executive Director. The loans are granted from savings made from Project Income and Institute’s Reserves. 

ii. The subsistence is as per the Manual of Operations (MOO). Subsistence payments are made to researchers 

who travel out of Colombo for research, survey and for data collection. The amounts are budgeted in the project 

budgets and approved by the donors. 


Income and Expenditure Account for the Year Ended 31st December 2007 

Notes 2007 2006 

Rs. Rs. 

Income 

Grant from Royal 

Netherlands Embassy - 5,651,440 

Contribution from the Ministry 

of Finance and Planning 10,930,000 11,000,000 

Income on Research Projects 50,276,193 41,313,866 

Investment Income (12) 31,115,975 19,095,551 

Sales of Publications 524,946 747,837 

Miscellaneous Income 465,118 235,809 

Net Profit on Disposal of Assets 34,800 15,000 

Net Gain on Fluctuation of Exchange Rates (13) 10,334,079 - 

103,681,111 78,059,502 

Less: Expenditure 

Local Staff Salaries (14) 36,379,719 31,700,550 

Research Costs (15) 9,062,977 15,769,024 

Operational Costs (16) 20,255,152 22,255,597 

65,697,848 69,725,170 

Income/(Loss) before Tax 37,983,263 8,334,333 

Taxation - - 

Income/(Loss) after Tax 37,983,263 8,334,333 

Surplus / (Deficit) Brought Forward 187,955,137 178,157,443 

Prior year adjustment - 1,463,361 

Surplus / (Deficit) Carried Out 225,938,400 187,955,137 


Balance Sheet as at 31st December 2007 

Represented By : 

Notes 31.12.2007 31.12.2006 

Rs. 

Rs. 

Non-Current Assets 

Fixed Assets (2) 32,441,092 28,209,262 

Fixed Deposits (3) 200,419,512 228,246,071 

Building Construction in Progress 49,256,526 621,080 

Current Assets 

Stock of Publications 2,254,864 2,026,731 

Staff Debtors 2,631,675 1,699,050 

Other Receivable (4) 11,759,621 6,506,262 

Deposits (5) 546,000 551,000 

Interest Receivable 417,735 494,204 

Pre-Payments (6) 4,540,336 4,305,734 

Cash/Bank (7) 79,438,494 15,048,984 

150,845,250 31,253,044 

Current Liabilities 

Accruals (8) 2,450,763 1,090,492 

Other Creditors (9) 4,227,126 1,251,445 

Deferred Income 

- IPS 9,021,275 17,583,477 

- IPS - HPP Unit - 4,044,180 

15,699,165 23,969,594 

Net Current Assets 135,146,086 7,283,450 

Long-term Liabilities 

Retirement Benefits 5,913,515 4,239,496 

Long-term Lease (Land) (10) 21,060,000 21,840,000 

Deferred Income - Building Fund (11) 112,950,634 47,560,010 

Financed By : 

228,082,542 190,099,279 

Assets Transferred 2,144,144 2,144,144 

Revenue Reserves 187,955,136 179,620,803 

Surplus / (Deficit) for the year 37,983,263 8,334,333 

228,082,543 190,099,280 

The notes to these accounts are annexed, 

signed for and on behalf of the Board 

22nd June 2008 

Executive Director 


Statment of Changes in Equity for the Year Ended 31st December 2007 

Assets Revenue Total 

Transferred Reserved 

Rs. Rs. Rs. 

Balance as at 31st December 2006 2,144,144 187,955,136 190,099,280 

Changes in Equity for 2007 

Income for the period - 37,983,263 37,983,263 

Balance as at 31st December 2007 2,144,144 225,938,399 228,082,543 


Cashflow Statment for the Year Ended 31st December 2007 

31.12.2007 31.12.2006 

Rs. Rs. 

Income /(Expenditure) before tax 37,983,263 8,334,333 

Adjustments for 

Depreciation 2,980,954 5,066,172 

Provision for Gratuity 1,674,020 923,483 

Profit on Disposal of Plant, Equipment & Motor Vehicles (40,300) (15,000) 

Operating Profit before Working Capital Charges 42,597,936 14,308,988 

Changes in Working Capital 

(Increase)/Decrease in Publication Stocks (228,133) (563,369) 

(Increase)/Decrease in Staff Receivables (932,625) (567,995) 

(Increase)/Decrease in Other Receivables (5,171,889) 5,034,984 

(Increase)/Decrease in Pre Payments (234,602) (389,748) 

Increase/(Decrease) in Other Payables (9,630,701) (1,786,352) 

Increase/(Decrease) in Accruals 1,360,272 (70,395) 

Cash Flow from Operations (14,837,679) 1,657,125 

Income Tax Paid - - 

Net Cash Flow after Operating Activities 27,760,257 15,966,113 

Long-term Land Lease Payable (780,000) 21,840,000 

Building Fund 65,390,624 47,560,010 

Purchase of Property, Plant & Equipment (7,212,784) (24,570,376) 

Building Construction in Progress (48,635,446) (621,080) 

Sales proceeds from Disposal of 

Property, Plant & Equipment 40,300 15,000 

Net Cash Flow from Investing Activities 9,582,694 22,383,553 

Net Increase/(Decrease) in Cash & Cash Equivalents (Note) 36,562,951 60,189,666 

Cash & Cash Equivalents at the beginning of the Period 243,295,055 183,105,391 

Cash & Cash Equivalents at the end of the Period 279,858,006 243,295,057 

(1) 

NOTE 31.12.2007 31.12.2006 Changes in 

the period 

Rs. Rs. Rs. 

Cash at Bank and in Hand 79,438,494 15,048,984 64,389,510 

Fixed Deposits 200,419,512 228,246,071 (27,826,559) 

279,858,007 243,295,055 36,562,951 


Notes to the Accounts as at 31st December 2007 

1. Accounting Policies 

1.1 The financial statements have been prepared in accordance with generally accepted accounting principles and no 

adjustments have been made for the inflationary factors affecting the accounts. 

1.2 Fixed Assets 

Fixed assets are stated at cost less accumulated depreciation. 

Assets are depreciated on the Straight-line method using the following rates per annum: 

They are not depreciated in the year of purchase. 

1.3 Debtors are stated at the amount estimated to be realised. 

Computer Equipment - 33% 

Web Page Design - 33% 

Motor Cycle - 20% 

Furniture - 20% 

Office Equipment/Generator - 20% 

Motor Vehicles - 20% 

Lease-hold Improvements - 50% 

Library Books - 25% 

1.4 Taxation 

The profits and the income of the Institute of Policy Studies are exempt from tax as per 

section 19 (4) of the Institute of policy Studies of Sri Lanka Act No.53 of 1988 and section 2 (3) 

(LIX) of the Inland Revenue (Amendment) Act No. 42 of 1990. 

1.5 Recognition of Revenue 

Income is recognised only when realised. Therefore revenue is recorded at the end of a particular phase and/or 

at the end of the project when research work is fully completed. 

2. Fixed Assets 

Land & Computer Motor Furniture Office Library Lease-hold Total 

Building Equipment Vehicles & Fittings Equipment Books Improvements 

60 IPS Annual Report 2007 

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. 

Cost 

Opening Balance as at 

01st January 2007 23,400,000 19,530,593 5,048,625 3,544,613 7,005,139 1,210,774 820,091 60,559,835 

Add: Additions - 612,784 6,600,000 - - - 7,212,784 

Less: Disposals (81,000) - - - - - (81,000) 

Closing Balance as at 

31st December 2007 23,400,000 20,062,378 11,648,625 3,544,613 7,005,139 1,210,774 820,091 67,691,620 

Accumulated Depreciation 

Opening Balance as at 

01st January 2007 18,169,559 3,999,626 2,995,025 6,038,714 382,253 765,396 32,350,573 

Add: Depreciation charge 

as at December 2007 922,800 744,998 324,597 696,483 237,370 54,706 2,980,954 

Less: Depreciation on 

Disposal (81,000) - - - - - (81,000) 

Closing Balance as at 

31st December 2007 19,011,359 4,744,624 3,319,622 6,735,197 619,623 820,102 35,250,527 

Written down value 

31st December 2007 23,400,000 1,051,019 6,904,001 224,991 269,941 591,152 (11) 32,441,092 

Written down value 

31st December 2006 23,400,000 1,361,034 1,048,999 549,588 966,424 828,522 54,695 28,209,262

3. Fixed Deposits 2007 2006 

Rs. 

Rs. 

Fixed deposits 300,000 39,780,417 

Treasury bond 11,210,295 14,605,463 

Treasury Bills - 

Gratuity Fund Investment 5,913,515 3,968,626 

Repurchase Agreements 182,995,702 169,891,565 

200,419,512 228,246,071 

Note: Decrease in fixed deposit is due to the advance payment made to the contractor for the IPS head office 

building construction. 

4. Other Debtors 2007 2006 

Rs. 

Rs. 

Debtors 3,842,179 6,065,103 

VAT Receivable 7,475,060 - 

Interest Suspense - 33,632 

Other Advances 31,500 2,500 

Other Receivables 410,881 405,028 

11,759,621 6,506,262 

5. Deposits 2007 2006 

Rs. 

Rs. 

Deposit on IPS Annex 200,000 200,000 

Deposit on IPS HO 200,000 200,000 

Deposit for Fuel 80,000 80,000 

Mobile phone - Roaming facility 60,000 60,000 

Deposit - American Premium Water 6,000 6,000 

SSC - refundable deposit for 

year end dinner - 5,000 

546,000 551,000 

6. Pre-Payments 2007 2006 

Rs. 

Rs. 

Rent 3,370,375 3,306,625 

Vehicle Insurance 101,641 37,666 

Medical Insurance 705,519 505,992 

IT maintenance & Insurance 288,551 354,350 

Other Pre-Payments 74,250 101,102 

4,540,336 4,305,734 

7. Cash/Bank 2007 2006 

Rs. 

Rs. 

HSBC 3,955,731 502,693 

Commercial Bank 107,379 101,704 

People’s Bank 555,005 27,182 

Citibank - 130,483 

Citibank Euro - 770,100 

Commercial Euro - 1,266,974 

People’s Bank USD - 471,067 

Citibank USD 1,116,110 433,313 

Citibank GBP 2,643,831 2,880,364 

Commercial Debit Tax 123,631 101,996 

Petty cash IPS 26,623 36,999 

HSBC Building Construction Account 70,910,184 8,326,108 

79,438,494 15,048,984 


8. Accruals 2007 2006 

Rs. 

Rs. 

Audit fees 310,000 225,000 

Electricity 189,369 240,206 

Fuel 92,240 55,894 

Foliage - 750 

Telephone/Internet Charges 560,939 270,284 

Training and Development 93,475 200,961 

PAYE Tax (Oct - Dec ’06) 52,256 45,272 

Postage/Courier 3,117 8,541 

Research project expenses 1,038,721 - 

Other Office Costs 110,646 43,584 

2,450,763 1,090,492 

9. Other Creditors 2007 2006 

Rs. 

Rs. 

Creditors 416,513 802,846 

EPF/ETF Payable 483,491 447,323 

Stamp Duty Payable - 1,275 

Withholding Tax Payable 3,327,121 - 

4,227,126 1,251,445 

10. Long-term Lease on Land 

An extent of land was given to the IPS by the Land Commissioner in year 2006, on a 30 year long-term lease agreement to costruct 

the IPS Head Office building. The Institute pays the Divisional Secretariat in Thimbirigasyaya, Rs. 780,000 per annum towards the 

lease payment. Three lease payments have been made amounting to Rs. 2,340,000 as at 31.12.2007. 

11. Commitments 

The Institute has commited to construct its own Head Office building valuing Rs. 268 M, over a period of 2 1/2 years. (June 2006 to 

December 2008). A substantial part of the funds, Rs. 226.8M (Euros 1.8M) required for this project is provided by the State of 

Netherlands. The balance Rs. 41 M (Euros 325,000) is to be met by IPS reserves. The first instalment of Rs. 47.5M (Eur. 360,000) 

was received in June 2006. The second payment of Rs. 65.4M (Eur. 416,000) was received in December 2007. 

In the event that this project is not carried out as per contract specifications between the State of Netherlands & the IPS, the IPS would 

be required to pay back the grant in full or part thereof. 

12. Investment Income 2007 2006 

Rs. 

Rs. 

Savings account interest 204,752 266,178 

Savings account interest - 

Dutch Building Fund 1,594,718 324,435 

Investment Income 29,316,505 18,504,939 

31,115,975 19,095,551 

13. Net Gain on Fluctuation of Exchange rates 

Net gain on fluctuation of exchange rates include Rs. 8,921,735 exchange gain from the Dutch building fund which is maintained 

in Euros. 

Therefore the Rupee value of Euro Dutch building fund of Euro 446,251 as at 31.12.07 is Rs. 70,864,182 at the exchange rate of 

Rs. 158.50. per Euro 

14. Local Staff Salaries 2007 2006 

Rs. 

Rs. 

Salary 33,919,305 30,016,761 

Medical 534,732 579,829 

Retirement Benefits 1,674,020 971,808 

Other 251,662 132,151 

36,379,719 31,700,550 


15. Research Costs 2007 2006 

Rs. 

Rs. 

Research Papers 2,440 38,000 

Printing & Publication Cost 472,096 926,337 

Consultancy fees 4,398,197 8,996,489 

Data Entry Operators 5,625 65,798 

Doc: data retr & Libr: 354,200 217,415 

Seminars/Workshops 495,640 312,110 

Networking 122,534 142,028 

Travelling, Field Visits & Accomm. - 

Foreign 152,300 392,728 

Travelling, Field Visits & Accomm. - 

Local 311,030 307,208 

Data and Survey Cost 1,576,100 1,874,043 

Internet Costs/Website costs 1,172,815 2,496,867 

9,062,977 15,769,024 

16. Operational Cost 2007 2006 

Rs. 

Rs. 

Depreciation 2,955,954 5,066,172 

IT expenses - Consumables & Other 417,834 1,190,836 

Office Costs 4,009,979 3,512,981 

Rent & Office Maintenance 12,871,385 12,485,608 

20,255,152 22,255,597 

Glossary of Financial Terms 

Accounting Policies 

Specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing 

and presenting Financial Statements. 

Deferred Income 

The income on incomplete projects deferred in the Balance Sheet to be recognized as income 

over the period of projects. 

Revenue Reserves 

Reserves considered as being available for distribution and investments.

Annual Report 2007 - Institute of Policy Studies of Sri Lanka

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