EVOLUTION OF ROLE OF THE STATE: HOW FAR HAS SRI LANKA COME UP TO NOW?

Market based economic policies are unanimously accepted by present economists all over the world as the best one in reaching higher welfare levels. However, market fails in some occasions. Thus, the role of the state is essentially required in economic development and it has been in process of amending since Adam Smith. After reviewing development experiences of many countries, many attempts have been made by economists to correctly identify the role of the state. The latest issues that have been identified as parts of that role, include decentralization of governance and invigoration of capacity of public institutions. However, some countries have not properly performed role of the state. Sri Lanka has no exception. Thus, in this paper an attempt is made ascertain important steps in dynamics of the role of the state and how far Sri Lanka is successful implying the role of the state properly. These can be accomplished reviewing literature and analyzing secondary data on the Sri Lanka economy. Findings show that World Bank's prescription on the role of the state has been advanced. However, documentary service (protection of documents), even if provided by all states, has not yet been identified as a public good. In Sri Lankan case, some failures or inefficiencies can be observed in performing the state role. These include establishment of legal framework and provision of education, eradication of poverty and ensuringine quality in income. Construction of roads shows a slow growth. Sub-national or lower layers of government suffer lack of competent public officials in public expenditure management and have not properly recognized the role of lower layers of government in development. Divestment of the some unnecessary items of the public sector has been stagnated due to intervention of politicians and trade unions. To exclude all these omissions and increase efficiency of the public sector, politicians, public officials and citizenry ought to be made aware with the role of the all layers of government and trained in public expenditure management. The conclusions of the paper are of great benefit to public officials, politicians and policy makers in the public sector. Keywords: Decentralization, Efficiency, Market Failure, Role of the State. For full Paper: fmscresearch@sjp.ac.l