Economic Costs of Conflict in Sri Lanka
SRI LANKA'S long civil war has exacted an enormous economic cost in terms of lost productivity, lost investment, and misallocated resources, resulting in a lower standard of living than would have been possible in a peacetime setting. Although ethnic conflict had taken place for several years, it became a burden on the economy only after 1983, when the Liberation Tigers of Tamil Eelam (LTTE) commenced a guerrilla war against the state. For convenience of reference it is called the Eelam War (I, II, and III). Eelam War I started in 1983 and continued until 1987 when the Indian Peace Keeping Force established itself in commanding positions in the north and the east. With the collapse of peace talks initiated in early 1990, Eelam War II started in June 1990 and continued until December 1994. Eelam War III, which commenced in mid-April 1995, continues to date. This chapter analyzes the economic aspects of the war, with special reference to Eelam wars I and II.
At the time of independence in 1948, Sri Lanka had very promising initial economic conditions, so much so that Oliver Goonetilleke, the first governor-general of Sri Lanka, stated that, of all post-colonial nations, Ceylon ( Sri Lanka) would prove the "best bet in Asia." Even by 1960, Sri Lanka's economy was on a fairly sound footing, with per capita income at U.S. $141--comparable to that of South