Beyond the crisis: Sectoral paths to durable growth

The Institute of Policy Studies of Sri Lanka (IPS) emphasizes the need for regional infrastructure improvements beyond the Western Province to address market-access gaps and enhance efficiency. While the Western Province accounts for 42% of Sri Lanka's GDP, IPS estimates that nearly 61% of the population is effectively urban, using population density and infrastructure access data from the 2024 census.

The lack of strong secondary cities and industrial clusters in other regions limits the potential benefits of agglomeration and discourages firms from locating or decentralizing operations elsewhere.

Fiscal incentives can promote decentralization by offering tax rebates, lower property taxes, and land access in secondary cities such as Kalutara and Gampaha. The existing connectivity of Southern and Colombo-Katunayake Expressways can be leveraged to develop the Southern Province. Key infrastructure projects, including the Hambantota seaport and airport, Koggala, and Mirijjawela Export Processing Zones, can further bolster the Southern Province's growth through geography-based tax concessions.

To alleviate congestion in Colombo city, immediate measures like pricing vehicle entry can be implemented. This congestion pricing can be achieved using low-cost, technology-anchored methods, such as Automated Number Plate Recognition (ANPR), installed at key arterial entry points. E-Tags electronic toll collection on expressways, integrated with digital payment gateways like GovPay and LankaQR, can enable dynamic, time-of-day variable pricing. This approach ensures operational efficiency without disrupting traffic speed.