Investment, Lock-in, Path dependence; Reconciliation, Post-conflict, Sri Lanka

Using economic geography concepts, this paper compares four groups of investors to the conflict-affected region of Sri Lanka and critically analyses the key factors that are locking-in and locking-out investment, business development and employment creation. It argues that foreign/Diaspora investors were mostly being influenced by political and social factors, and thus far had not invested significantly in the region. Traders from the non-conflict-affected region of the country had benefitted the most due to opportunistic behaviour, their acceptance of the political realities and the short-term economic opportunities that had opened up. Large investors from outside the region, on the other hand, had either been disappointed with the economic situation or had invested due to a sense of social responsibility and long-term business prospects. Local SMEs within the conflict region were hit hard by the opening of the war-affected economy and have been unable to cope with the change. Political, economic, and social factors had all contributed to their unwillingness and inability to expand their businesses. The paper concludes that the climate for investment must be improved significantly by creating a strong path-creating environment and de-locking investment inhibiting factors. There must be better collaboration amongst different types of businesses and coordination amongst different stakeholders. If done well, enhanced investment and employment.