In 1960, Sri Lanka’s income per person was almost the same as South Korea’s. The average Sri Lankan earned around US$142 a year, compared with US$158 in South Korea. Six decades later, however, the gap between the two countries had widened dramatically.
According to the World Bank, Sri Lanka’s GDP per capita stood at around US$4,516 in 2024. Singapore’s, by comparison, reached approximately US$90,700. This means Singapore’s GDP per capita was nearly 20 times higher than Sri Lanka’s.
The contrast is striking, especially when looking back at Lee Kuan Yew’s account of Sri Lanka. In 1956, Singapore’s founding prime minister was impressed by the country, then known as Ceylon. He considered Colombo’s public buildings and infrastructure better than those in Singapore.
When Colombo Impressed Lee Kuan Yew
Lee first visited Ceylon in April 1956 while travelling to London. As he explored Colombo, he noticed its grand public buildings. Some stone structures had even survived the destruction of World War II.
In his memoir, From Third World to First, Lee described Ceylon as a model Commonwealth country. He believed it had more natural resources and better infrastructure than Singapore.
Ceylon’s position during World War II partly explained this advantage. From 1944, the city of Kandy served as the headquarters of the Southeast Asia Command led by Lord Mountbatten. Singapore, meanwhile, had just endured three and a half years of Japanese occupation.
However, the conditions that impressed Lee did not last. That same year, Ceylon began experiencing political changes that heightened tensions between its Sinhala and Tamil communities.
A Language Policy Fuels Tensions
After winning the 1956 election, Prime Minister S.W.R.D. Bandaranaike passed a law making Sinhala the country's sole official language. The policy replaced English and rejected Tamil communities' demands for their language to receive official recognition as well.
The decision triggered protests among Tamil communities and violence between ethnic groups. The government initially tried to ease tensions through an agreement between Bandaranaike and Tamil leader S.J.V. Chelvanayakam in 1957.
However, Bandaranaike cancelled the agreement a year later following pressure from Sinhala nationalist groups. Violence erupted again in May 1958, forcing the government to declare a state of emergency.
Efforts to reach a political settlement continued, including an agreement between Prime Minister Dudley Senanayake and Chelvanayakam in 1965.
Despite these attempts, ethnic tensions persisted and eventually escalated into a civil war in 1983. The conflict lasted until 2009.
A Second Visit, A Different Scene
Lee returned to Sri Lanka in October 1966. This time, the country looked very different from the one he had visited a decade earlier.
While playing golf with Prime Minister Dudley Senanayake at the Royal Colombo Golf Course, Lee noticed huts standing around the course. Cows and goats were also grazing on the grounds.
According to Lee's account, Senanayake apologised for the sight. He explained that such conditions were difficult to avoid under a democratic system where governments had to face elections.
Lee later travelled by train to Nuwara Eliya, a town in Sri Lanka's central highlands. There, he saw a former British governor's residence that had fallen into disrepair, despite once being carefully maintained.
The visit gave Lee a different impression of Sri Lanka after independence. A country that had once impressed him was now struggling with the challenges of managing its development and improving people's lives.
Two Countries, Two Economic Paths
The different trajectories of Sri Lanka and other Asian economies also reflected the choices their governments made.
South Korea, for example, began pushing its companies to sell goods abroad on a much larger scale in the 1960s. The government provided cheap loans and protection to local businesses to help them grow.
But this support came with conditions. Companies had to meet export targets, and those that failed could lose their access to government benefits.
Sri Lanka, on the other hand, took a different approach. From the late 1950s until 1977, the government sought to reduce dependence on imported goods by encouraging domestic production.
As a result, imports were restricted, while the government tightly controlled the use of foreign currency to pay for goods from abroad. State-owned companies also played a major role in several sectors of the economy.
The 26-year civil war placed an additional burden on the economy. A study published in the journal World Development estimated that the cost of the conflict since 1983 was at least twice the value of Sri Lanka's entire economic output in 1996.
Although the economy still grew by an average of 4.6% annually between 1983 and 1998, the war hit communities in the north and east hardest.
Trade also became a growing concern. The World Bank recorded a steady decline in Sri Lanka's exports relative to the size of its economy. In 2000, exports accounted for 39% of GDP. By 2021, that figure had fallen to 17.7%.
In 2000, Sri Lanka's GDP per capita was just US$870. South Korea's had already reached US$11,947.
A Debt Crisis and a Growing Gap with Singapore
Sri Lanka's economic troubles reached a peak in 2022. On April 12, the government announced a temporary suspension of foreign debt payments as the country's foreign currency reserves continued to run low.
Sri Lanka subsequently failed to pay US$78 million in bond interest due on April 18. By the end of that month, its foreign reserves, which are used to pay for imports and other international obligations, had fallen to around US$1.6 billion. That was not even enough to cover one month of imports.
In March 2023, the International Monetary Fund (IMF) approved a loan package worth around US$3 billion to support Sri Lanka's economic recovery. It was part of a series of IMF programmes the country had received since 1965.
The Central Bank of Sri Lanka noted that many of the economic reforms promised under previous programmes had either remained incomplete or been abandoned after the funds were disbursed.
Sri Lanka's story also offers an interesting contrast with Singapore. Lee once wrote that Singapore was flattered when Sri Lanka looked to it as a model for development.
Six decades after Lee was impressed by Colombo, the situation has been reversed. Sri Lanka is now struggling with an economic crisis, while its GDP per capita is nearly 20 times lower than Singapore's.
