by Sarvananthan, M.
Produced by: Point Pedro Institute of Development (PPID), Sri Lanka, 2005
The economic effects of ethnic conflict in Sri Lanka are multifarious. A discussion of the economic effects of ethnic conflict could encompass the opportunity cost of the war, the economic impact of the military expenditures (on both combatants), financing mechanisms (both national and international) of the rebel movement, and the impact of economic sanctions on rebel territory.
This paper focuses on a few selected important aspects of the economic effects which are:
the relationship between economic growth and ethnic conflict
the competition between social expenditures and defense expenditures
the defense expenditures of Sri Lanka in comparison to other South Asian countries and some other internal conflict-ridden countries around the globe
the economic implications of the labour-intensive military strategy
This paper aims to identify the trade-offs between ethnic conflict and economic growth in Sri Lanka by comparing and contrasting the defense expenditure with the social expenditures of Sri Lanka. To gain a wider sense of perspective, this tradeoff is also compared and contrasted with other countries in South Asia and with other selected internal conflict-ridden countries in the developing world. The paper also discusses the cost-effectiveness of the labour-intensive military strategy pursued in Sri Lanka.
The author finds that one of the primary reasons for this predicament of the Sri Lankan economy is the pressing need to increase defense expenditure. The ever-expanding costs are attributed to a labour-intensive military strategy pursued by successive governments. The overall argument provided is that the high economic cost of the civil war in Sri Lanka is unsustainable in the long run, and therefore the peaceful resolution of the conflict is sine qua non for the economic prosperity of the country.
Other findings include:
the trade-off between ethnic conflict and economic growth in Sri Lanka may be higher than hitherto acknowledged by other researchers
defense expenditures have overtaken social expenditures consistently since 1995
Sri Lanka’s defense expenditures, as a proportion of the national income, is the highest in the region (bar Pakistan) and among selected internal conflict-ridden countries in the developing world
the labour-intensive military strategy pursued in Sri Lanka is economically costly
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