Globalisation and Sri Lanka: the economic impact

Abstract

Globalisation is the global integration of product and factor markets. International experience shows that countries that yielded to the process of globalisation well in advance have reaped large benefits, mainly by allowing access to the global consumer base. It benefits smaller countries more, as those countries can gain from economies of scale in production facilitated by access to large markets. It allows countries to identify inefficient economic activities, and replace them with productive activities. However, to reap full benefits of globalisation and to avoid harmful effects, a country should implement a wide range of regulatory and supervisory measures. Those are, financial sector regulation and supervision, anti-trust legislation and other internationally recognised measures such as action against money laundering. At the same time, excessive resistance to the process of globalisation may marginalise countries, yielding more serious repercussions. Countries should be mindful of the fact that there are other more important factors affecting economic growth such as technological development, human capital accumulation, enhancing law and order, enhancing democracy and mechanisms to counter negative externalities arising from individual selfish actions.