Launching the South Asia Economic Update 2010, the World Bank Country Director for Sri Lanka and the Maldives Naoko Ishii said, "Sri Lanka needs to understand the expectations of the people in the North and East and implement policies to create employment in those areas to enjoy peace dividends".

She said that the mindset of those people have changed now and their problems should be addressed on the ground and upgrade their standard of living.

"Agricultural projects and tourism policies will materialize peace dividends", she said.

South Asia rebounds strongly following global financial crisis and can sustain faster and more inclusive growth according to South Asia Economics Update 2010. It is poised to grow by 7 percent in 2010 and nearly 8 percent in 2011, making it the second-fastest growing region after East Asia and Pacific. The drop in growth during the crisis was the smallest in the regions. The region will benefit from new engines of growth and adapting to a “new normal” as emerging markets and Asia drive global growth.

Trade with East Asia and China could potentially triple to reach USD 450 billion per year.

Sector Director for Economic Policy for the South Asia Region Ernesto May said developing countries are starting to save more and spend less, are burdened with large fiscal and financial adjustment and are likely to grow at a much slower pace, especially in Europe and North America, whereas Asia and emerging markets will become much bigger drivers of global growth.

The report focuses on trade and investment integration opportunities and recommends three principal directions for countries in the region. First, intensify their “Look East” strategies to integrate faster with East Asia, secondly integrate more closely with each other within the South Asia Region and finally preserve links to high income markets in Europe and North America and others as this will continue to be important for labour intensive exports, sources of capital and knowhow.

Elaborating on challenges and opportunities ahead the report said peace dividends can be large but are not automatic.

Policy settings need to be supportive-potentially rising growth by 2-3 percentage points annually in the countries and more in the sub regions severely affected.

The region also has unique opportunities. One of the key prospects for the region could be the rise of a globally competitive manufacturing sector that will also benefit from a Look East trade intensification strategy to help integration with global production networks and reduce large behind the border costs such as logistics.

South Asia Economic Update 2010