EXPORT RESPONSE TO LIBERALIZATION - THE SRI-LANKAN EXPERIENCE

The driving forces behind export expansion in the context of liberalis ation reforms in developing countries remain a matter of debate. This article aims to contribute to this debate through a case study of the Sri Lankan experience following the policy reforms initiated in 1977. The results point to the importance of sound macroeconomic policy, pol icies to promote export oriented foreign direct investment and revampi ng the overall policy setting in favour of private sector activities f or achieving export success. Direct export subsidies are a poor substi tute for genuine trade, investment and macroeconomic policy reforms. T here is little support for the hypothesis that an import-substitution phase is a prerequisite for the successful transition of domestic manu facturing to export orientation.