Page 1
A People's Bank Publication
 
 

Page 2
YET ANOTHER DEVELOPMENT
DEVELOPMENT GAMES AND PARTY GAMES
“Development' is very much a chic word today, it is as fashionable in Sri Lanka (and other Third World countries) as are the outdated western fashions that are copied. Various 'development efforts are made in the cause of development. On this page and the inside back cover we document such an effort at degelopment by a "service organisation with roots in the deve琵 ities, Onithe inside back page we give a photographic wish to develop, a village on the \ミーリふ言ふ:。-ー ಥ್ರಿತ್ರ್ರಜ್ಞೆ s Oto coverage Of 6pment “eiroft", the party that was held to generate ܝ funds for development.
TA HAE ID ETV
Usually it is full of tou people from developed count
full of physically and financially develop They are engaged in development act
Money...... The norm cost of a meal at th developed hotel whe developed people frol developed countric usually eat is about R 5 of -.
Food is not the on end of development, is also drinks...... Th goal of development not only food, and she ter but also sufficie clothing. So no dev lopment is comple without display of clot CS . . . . . . SO, basic nee food, clothing, shelt ... and 'development
 
 
 
 
 
 

Where the development effort begins. At a big banjuet hall at a big 'developed" hotel.
ELOP EARS
rists physically developed ies. But today. . . . . . Today it is ed people from our underdeveloped country, ivities, which require the raising of money.

Page 3
Volume 2
Neuvion Go/ma fin
4.Shok Mzekerjee
Ranjii, M. V7,
NEXT ISSUE
The Ec Θες. Ο 11 Ο ίΥ
Nation, The W implicat SCa'C€e f*
COVER 4 RTIST
Tissa. He newspape
 
 

Number 10 January 1977
OONTENTS
FEATURES
ghe 21. The perpetuation of underdevelopment as a factor in the decline of fertility
27 Mass Sterilization in India
hana 28 Some Proposals for Effective Management of
Public Corporations
COVER STORY
3 THE EOONOMY OF SRI I ANKA
- a digest in historical perspective
COLUMNS
2 Diary of Events
16 The Economy
8 Trade
20 Commodities
sonomics of Marriage - a study of the rationality of people's lic decisions, through their social behaviour and values.
al Milk Supplies - the problems of our dairy industry.
"orld's Pharmaceutical industry - a significant study on its tions for the transfer of technology and how it strains the esources of the developing world.
wavitarine, whose special medium is water colours, has worked with 2rs and periodicals over several years and exhibited his work locally.

Page 4
DIARY O
December
I4.
I5
I6
Over seven million saplings and seedlings were planted throughout Sri Lanka to mark the beginning of one of the country's biggest tree planting campaigns.
The Government has decided not to extend the liberalised scheme of CRA imports beyond the end of December, official sources stated. This scheme was introduced in June 1976 permitting CRA holders to import a wide variety of luxury goods.
A new credit guarantee scheme for exporters, to facilitate credit to exporters and issue insurance cover on exports, will come into operation from January 1, 1977, the Minister of Foreign Trade told a press conference.
The 32nd Annual Sessions of the Sri Lanka Association for the Advancement of Science was ceremonially opened in Colombo by the Minister of Housing and Construction. The Minister also formally inaugurated the National Academy of Sciences.
India signed an agreement with Sri Lanka Railway authorities for the export of items worth Rs. II.5 million.
The IDA, the soft loan agency of the World Bank, approved a credit of Rs. 45 million for Sri Lanka's tank irrigation modernisation project, it was announced in Colombo.
Hungary was intending to end its rupee trade with India and change over to trading in convertible currencies, the Hungarian Deputy Prime Minister stated in New Delhi.
The 183rd and 184th branches of the People's Bank were opened in Ankumbura in the Kandy district and Galgamuwa in the Anuradhapura district respectively.
The Government began negotiations with a delegation of the Planters Association of Sri Lanka with a view to paying compensation to those members of its Rupee Companies that were nationalised.
The 1977 annual trade protocol for exchange of commodities between the People's Rupublic of China and Sri Lanka was signed in Colombo. China has agreed to purchase 49,2Oo metric tons of rubber while Sri Lanka in return agreed to purchase 2 oo,ooo metric tons of rice. The total turnover under the trade protocol which will be in the region of Rs. Ioo,ooo million over 1977 includes a large number of non-traditional goods to be exported from Sri Lanka.
Eleven of the 13 OPEC countries will raise the price of crude oil by Io per cent while Saudi Arabia, the largest producer, and the United Arab Emirates, will raise it by 5 per cent from 1977, stated the Venezuelan Oil Minister.
Sri Lanka's Centenary International Rubber Conference was declared open by the Prime Minister at the B.M.I.C.H. in Colombo to commemorate the completion of Ioo years of the introduction of the Rubber tree to Sri Lanka.
Sri Lanka's National Apprenticeship Board commemorated five years of its existence.
The 185th branch of the People's Bank was opened in Galigamuwa in the Kegalle district,

EVENTS
I6
I 7
真8
2. Ο
22
29
A decision of the U.N. General Assembly provided for the transfer of $20 million from the U.N. Special Fund, created to assist the most seriously affected developing countries overcome the effects of the economic crisis, to the UN Agricultural Development Fund has enabled this Fund attain its target of $ 1.5 million. There will be 24 developing recipient countries.
India is to receive a grant of $7.5 million from EEC as part of the first-ever community project assistance to non-associated developing countries, according to an agreement signed in Brussels.
The conference of OPEC countries in Qatar decided to adopt a plan to increase aid to Third World, following the decision by eleven members to increase their price by Io% from January 1, 1977 and a further 5% by July 1, 1977.
An Air Pact was signed in Manila between the Philippines and Sri Lanka to pave the way for establishing air links between Manila and Colombo.
India will give a loan of Rs. Ioo million to Zambia under a memorandum of understanding signed between the two countries at Lusaka.
The Third Reading of the Budget was passed by a majority of 4o votes at the National State Assembly.
Sri Lanka which is one of the six developing countries selected to receive interest-free loans from the OPEC Special Fund will get $8.1 million, it was announced in Vienna.
The Ceylon Petroleum Corporation signed an agreement with two Japanese firms, Nissho Iwai Company and Unitika Limited for the establishment of a Rs. 275 million nylon plant near the oil refinery at Sapugaskande. The foreign exchange component is approximately Rs. 16o million.
The 186th branch of the People's Bank was opened in
Hatton in the Kandy district.
Kuwait crude oil will cost $12.37 a barrel from January I as against the present $II.2.3, it was announced in Kuwait.
The U.N. General Assembly decided to suspend its 31st session, which began on September 2I, and to resume it after appropriate consultations, It would be reconvened solely to consider the agenda item “Development and international co-operation: implementation of the decisions adopted by the General Assembly at its seventh special session'. The decision to suspend rather than to conclude the thirty-first session was taken following a request from the Group of 77 developing countries in a letter dated December 17.
A Government order was issued under the Business Acquisition Act taking over J.B. Textiles Ltd. and J.B. Fishing Company with a view to increasing the availability of synthetic textiles.
The 187th branch of the People's Bank was opened in Pallai in the Jaffna district.
EconoMIC REVIEW, JANUARY 1977

Page 5
£Million
THE EC
OF SRI
The good earth of Sri Lanka is well endowed with fertile soil and adequate rainfall. Even in what has been called the dry zone, the rain is adequate and the soil is the fertile reddish-brown earth. The early inhabitants of Sri Lanka in their struggles with nature transformed these natural resources of earth and rain into productive agriculture.
Through the centuries the isolated village economies were centralised through the extension of centralised political power, inter-connection of the small reservoirs into a vast irrigation network and the introduction of a cultural hegemony through Buddhism in the pre-Christian era. Centralised kingdoms which were established in about the 5th century B.C. grew to a certain maturity in the early pre-Christian era. The central features of this economy namely irrigated cultivation, increasing integration of the irrigation network, increased co-ordiination and centralisation of the revenue and political system and the continued consolidation in the cul
EconoMic Review, JANUARY 1977
tural sphere of Bu{ at least for the firs Christ, the major tre
By the late cent millenium, the irt had been extended landwide basis, hug built, long canals dammed. The mair vity of the economy tion of rice by peas plus generated frc supplied the needs o and the feudal class also helped release r construction of m channels and tanks religious monument
Archaeological ex that money was in about the 5th centur in internal trade w minimal. Sri Lanll crossroads of ocean very early, one of th of trade. Archaeolo and literary remains
 

MY KA
ldhism remained, t millenium after inds in the island.
Luries of the first tigation network almost on an ise reservoirs were
dug and rivers 1 productive actiwas the producants and the surom this activity f the royal courts es. This surplus manpower for the assive irrigation
as well as huge S.
fidence indicates existence from y B.C. but its use rould have been ka being at the
traffic became, e world’s centres gical, epigraphic of several cen
Source: Elaine Gunewardena, Ceylon
Economist, March 196o.
A graphie representation of the strue#ural change my bich overtoo/* Seri Lanka” 3 economy during the I5o years up to 1955. The chari (in semi-logarithmic scale) shows how trade increased steadily in value throughout the period, impor mobing closely together with each change in exports. The exploitation of the country's resources through the establishment of planfations was the most significant factor in fhe economic situation over this period; but external trade not merely began to maee #he major contribution to the Island's National Income, it also firmly bound the fortuner of the country to the International Trading System, over phich ve bad no confrol. Sri Lanea was now enmeshed in a colonial plantation economy, with bonds of inequal exchange, fied to the controlling and consuming centres within Europe.
turies indicate the extensive trade that was carried on from very early times with both the Western regions (that is Africa, Europe and Western Asia) the Eastern regions (the IndoChina, Malaysian and Indonesian region and East Asia) and also the North (India and its regions above). The products exchanged, as well as those brought into the country, were largely luxury consumer items for the ruling elites of the country. Thus imports included at times, silks and chinaware, beads, jade etc. Exports from Sri Lanka were likewise for the consuming classes in the recipient countries and included gems, elephants and spices.

Page 6
Trade which was only a peripheral activity in the country's economy and polity takes on a significant dimension from the 16th century onwards with the arrival of the Portuguese. The principal intermediaries of trade
with Sri Lanka and the West prior
to the Portuguese were the Arabs. Spices, mainly cinnamon, were a significant item of luxury consumption in the European centre, and the prime purpose of the Portuguese was the extraction and shipment of these commodities. However to consolidate their economic hold the Portuguese entered into significant interventions in Sri Lanka's political, social and cultural structures.
The Portuguese incursion was the beginning of the growth of a distorted economy in Sri Lanka, distorted to supply primarily the needs of a European centre. This process started by the Portuguese, which diverted the energies and directions of the country and people away from their own needs began to be intensified, sharpened and refined in the subsequent centuries by the powers that followed them, namely Dutch and the British.
The Dutch presence in Sri Lanka up to 1796 was, in comparison with the Portuguese, mild. They concentrated primarily on their economic activity and apart from cinnamon they also built up an export trade in elephants, chank shells, arecanuts etc. They also introduced cultivation of pepper and coffee.
In 1796 the British replaced the Dutch as the predominant foreign power in the country. And in 1815, the British were able to consolidate their power throughout the country by largely exploiting internal dissension and treachery within the Kandyan Kingdom. A. most significant impact of British rule on the island was the deepening of the alien inroads into the economy.
Here began the regime of freely available imports, a major characteristic of the open economy that the county was to experience for Over another 3o years. Importers were now able to bring from abroad whatever items were required by those who could pay for them with scarcely any restriction of regulationa regime which quickly pushed the country into its state of import
*
4
the
dependency final the foreign excha I 96os. (See pages
Plantation Econ
By promoting plantation econon onwards the dist nomy which star tuguese began to proportions. Sri enmeshed in a c economy, with bo change, tied to th Consuming centre Coffee growing, with the Dutch, w; plantation crop i British. The fund. the economy intro tations system hav date and its seri still echo strongly.
The plantation to the earlier subs was based on wag type operation of production for a f was based initially foreign capital and similar in most re. gory of extractiv sprang up all over in the I 9th centu European centre. growth of the ec initial doses of fo made possible thro plus generated in The surplus was provide handsome more than compens nal investment.
The supply of li: plantations was not regions. It was f indentured labout by large numbers were transported t Semi-slave conditio anew estates, as well transport from the feminiscent of the lation shifts under inant Western pos parts of the Thir transport of slave again of indenture of the other planta the Central Aimeri
The economy o therefore complet

culminating in nge crisis of the I o and II).
my
the growth of a y from the 1840s rtion of the ecoed with the Portake on serious Lanka was nowy blonial plantation lds of unequal exe controlling and within Europe. which had begun is the first classical troduced by the mental changes in luced by the plana survived to this ous repercussions
ystem as opposed istence agriculture e labour, factorylarge estates and oreign market. It on small doses of | the industry was spects to the catee industries that the Third World ry to supply the The subsequent onomy, after the reign capital, was ugh the large surthe country itself. sufficient also to dividends which ated for the inotmi
bout for the new from the Kandyan rom the so-called From India wheref Indian Workers o Sri Lanka. The ns Of WOrk in the as recruitment and ir homelands, was large-scale popuaken by the domi7ers in the other World, like the to America and di labour to Some tion economies in an regions.
the country was ly rebuilt around
the plantations. The foreign banks that were established initially had the sole function of financing this industry and their large-scale profits arose from this. Engineering firms and workshops grew up to service the
engineering needs of the plantation
factory; and for the maintenance of
railways and roads, government engi
neering establishments came into
cing.
Sri Lanka's plantation crop coffee, experienced a phenomenal expansion from 1834 to 1842 when the export volume increased five times. Again from 1842 to 1849 a further rise of three times the 1842 level was recorded. Having thus taken a hold on the economy, the area of coffee planted rapidly rose together with earnings. In 1846 coffee prices fell drastically because of the world depression at the time. But coffee continued to be the major export of the country till the great coffee blight destroyed the crop. The disease first appeared in 1869 and by the 1880s the acreage under coffee which had earlier stood at 3ooooo acres had dropped to about 1oo,ooo acres. By 1886 coffee had collapsed as the main colonial crop in Sri Lanka.
The transition from a rural subsistence economy to a modern export economy was begun with the establishment of the coffee plantations in the 183os in the time of British rule. There was a complete transformation in the economy of the county with the new plantations making deep inroads into the existing village coonomy. The economy of the village in
turn became less and less adapted for
supplying even the everyday needs of the community. This made the country dependent on foreign Sources
for even such basic necessities as food
and clothing.
But the coffee industry set a firm pattern in the economic structure of he country. The development of Sri Lanka into a classical plantation economy had now been cast in this mould although later tea, rubber, and coconut were to replace coffee. Most of the characteristics of the plantation system were to survive until very recently. These features included ownership by the British planters, financing by British banks, management by a system of what has been called 'agency houses, large-scale
EconoMIC Review, JANUARY 1977

Page 7
rationalized operations and use of factory type technology and procedures and large amounts of Indian labour. The system rested on control of the basic import-export trade by expatriate capital, on imported technology and on the reliance of a virtually single foreign market for the product. The influx of the large amount of Indian labour (by the I88o's the accumulated Indian labour and their families settled in Sri Lanka amounted to roughly 20oooo), meant also the need to import food for this new labout force. Because of this structure of dependence and dominance local independent capitalist development in the country was also retarded. Although coffee production on a small holding basis was encouraged among Sri Lankans, Banks and Agency Houses which were British-owned were extremely circumspect about extending credit to locals and when they did so it was only at high rates of interest.
By 1886 the acreage in tea exceeded that of coffee. The structure of the tea estate management Was SymptOmatic of the enclave position of the industry and the colonial economy as a whole, and was best exemplified by the position within the tea estate itself. This is amply described in the following quotation from a book written by a Britisher D. M. Forrest to mark a “Hundred Year of Ceylon Tea' in I967. He says:
“What the plantation pioneers evolved in the face of all tropical inducements to ease of, is a self-disciplined routine aimed at the production of as much and as good tea as possible from a given acreage of land. Everything speaks of it from the moment when you spy at the roadside a neatly lettered sign :
ESTATE TO FACTORY AND BUNGALOW
until the final phase of your visit when specimens of the various grades produced are laid out for you to taste. You are absorbed into an unchanging time-table, a world complete in itself, a social mechanism fifted exactly to its sole function'.
Due to the weak demand for tea in the early years of this century planters began to see in rubber a more profitable product and rubber was planted extensively although not to the same extent as tea. Coconut was the other main crop to be grown on a plantation basis; but as it was also originally a peasant crop and the industry was largely in local hands the enclave situation was not equally pronounced.
EconoMIC REview, JANUARY 1977
Thus, with the classical plantatic late 19th century nomy suffered a split. The enclav sector, had its m. the external wo interaction with nomy, within wh the population liv the 19th century employed about Sri Lanka labour tional sector 6o pe gross magnitude the country was b sector and the out goods and servic the traditional sec or for that matter
tional sector and
This was also appendages of t namely the new urban areas, like heavily on the e for their basic need than 6o per cent o lation, by 1930, traditional sector sustenance almost
BREAKDOWN OF WESTERN-STYLE
Iteam
Food, drink and tob:
Rice Sugar ... Fish ... Curry stuffs Other food Drink Tobacco
Raw Materials
Fertilizers Others
Manufactured goods
Cotton goods Motor vehicles Iron & steel & the Gasoline Machinery Kerosene
Others
Total Percent of total
Source: Depart,

introduction of the in economy in the the country's eco
classical dualistic 2, so-called modern in interaction. With ld and very little he traditional ecoich a large part of ed. By the end of the enclave sector 4o percent of the Force and the tradiir cent. In terms of he bulk of trade in etween the enclave side World and few es flowed betWeen tor and the enclave between the tradithe external world.
true of the other he enclave sector, Lirban centre. The the estates, rested kport-import trade ls. Although more Sri Lanka’s popudepended on the for its economic all of the country's
foreign trade was only with the enclave sector.
The table below shows the pattern of imports in 1929 for several categories of goods-investment goods, intermediate goods and consumption items. It is seen that western type consumption items amounted to nearly 70% of imports and this was to supply the European population which was less than 1% of the total population of the country. In addition there were roughly 2%-3% population of Sri Lanka which had tied itself to the colonial presence and which had consumption patterns similar to Europeans. They consisted of persons in leading positions in the government, the estate sector, land Owners and a growing band of professionals. Of the intermediate and investment goods which comprise roughly 3 o'96 of the import bill almost all went to enclave and associated sectors i.e. the plantation, government etc. In contrast almost all the raw materials, tools etc. used in the traditional sector were of local origin.
Just as the interaction with the outside world was exclusively with the enclave sector, the interaction of
RETAINED IMPORTS AMONG CONSUMPTION GOODS, AND TRADITIONAL, INTERMEDIATE GOODS,
AND INVESTMENT GOODS, I929
(Rs. Millions)
Consumption Goods Κριέργηtyle
ACCO 27.5
-
Ο
3
3.
6
5
5
ir products
4
8
들
6.
I6.8
Inter-, Imperyήηβαία έθ ፳፻Zéጸ፲፭ Traditional Goods Good" Tota
Ι47. I 3.8 Ι78.4
99.5 -- - 99.5 I5.8 — - I5.8 IO, 2 -- n
5.8 - - 5.8 I5.2 3.8 - 37.4 - -- — 4.6 o.6 4、2
- 30.2 - 3O -2. - I5.2 I5.2 - I5.o - I5.o 38.4 33.4 49-9 I55.4
25.7 - 25.7 - - 9.5 IS.O - -- I4.7 I4.7 - 8.3 - I3. I - - 7.8 7.8 7.6 ബ 7.6 5. I 25・I I7.9 7I.4 I85.5 67.4 49.9 364.o SIO I8.5 I3.7 IOOO
ment of Commer, Thirty Years Trade Statistics of Ceylon (1925-1954)
5

Page 8
the government was likewise almost exclusively with this sector. Most of government revenue as well as expenditure was within this sector.
The estate sector produced enormous surpluses. Once the initial capital was injected, handsome dividends were available. The estate sector's growth provided high level dividends for foreign share-holders and a high level of consumption for both expatriates and allied local groups of person within the enclave. It did not significantly increase the production of local goods and services nor were surpluses invested outside the enclave. The ability of the so-called modern of enclave sector to initiate economic development for the country as a whole was therefore minimal.
The establishment of the enclave
economy and its continued mainte
nance was also helped by local socioeconomic structures that grew up with it. This included the new supporting classes tied to the plantation and colonial presence as well as remnants of the old feudal order which had soon allied itself with the British. The maintenance of the enclave economy was further helped by social and cultural factors.
As early as the 1840s there were Ceylonese tied to the colonial presence who had developed a strong Western, particularly British, taste and consumer orientation. An Englishman, J. W. Bennet, wrote in 1843, in “Ceylon and Its Capabilities’ that:
“The Sinhalese are partial to Manchester, Leeds, Sheffield and Birmingham manufactures, except certain agricultural implements, manufactured in the later place which they consider inferior to those of Holland. The higher ranés indulge in the best wines, particularly Madeira and Champagne, which are liberally dispensed at their parties to European guests, and no people in the world set a higher value upon British medicines, stationery and perfumery, or relish with a €eener Rest, English hams, cheese, butter, porter, pale ale, cider, sherry, herrings, salmon, anchovies, picéles and confectionery, all of which they prefer to similar imports from France and 4merica except in regard to price'.
The social system that grew around the plantations tended to perpetuate itself, and a process of cultural conditioning to accept the status quo was set in play by aspects of the educational and other cultural manifestations of the British.
Later demands for political and
economic independence were to be
6
heard from section the newly emerging within the estates well as from some entreprenurial grou
Reformist Change
An outcome of change was the g franchise and inte ment in I 93 I at a European countries Switzerland did no Suffrage. This re by the British had the economy from onwards. One impo these changes was now generated in economy away fri pattern and there industrialization.
In I 934 the Repo BANKING COMMISS. interest and recomn of a local bank. (B exercising de facž against some of the The Chairman of the mittee on Labour, Ir merce became a che trialization in 1936. public-private sectO1 of Ceylon, came in possible lender to lo the State Council we posed towards prot ther during this ti: scheme for populat in the dry zone are: hydraulic civilizatic All these proposed the economy refl. real needs of the partly, the class inte bers in the elected
were, however, mac
the Second World W that the impact c changes was minim
During World W. the ties of the Sri to the metropolitan were in many ways v was engaged in a W. and its economic he was now geared Consequently Sri ) specially tea, was so blow i the level fetched in a free Sri Lankans were si tea consumers heav

that represented proletariat both and outside as merging national DS
he demands for ant of universal inal self-governime when many like France and t have universal ormist measure some impact on the late I930s rtant outcome of that interest was diversifying the »m the er clave Vere attemptS at
rt of the CEYLON ON echoed this ended formation ritish banks were discrimination local capitalists). Executive Comdustry and Comumpion of indusIn 1938 a joint bank, the Bank to existence as a Cal capitalists and is favourably disectionism. Furme an extensive ion resettlements as of the classical in was initiated. changes within :cted partly the people and also rest of the memchamber. They Le On the eve Of War which meant f the proposed ised.
ir II, by necessity, Lanka economy centre in Britain reakened. Britain r for its survival ild on its colony o that survival. ankan produce, at prices much it would have market situation. bsidising British ly.
In return, imports to Sri Lanka were reduced drastically. The shortages of imports induced local production both within the government and priVate sectors and several new factories were opened. These included coir products, leather goods, glass, ceramics, paper, plywood, acetic acid in the government sector and textile, rubber, lacquered goods, paper products, matches etc. in the private sector. The quality of the goods produced were sometimes below the prevailing international standards but because of the protection induced by wartime scarcities these products found a ready market. The return to peace time conditions also witnessed an unprecedented flood of imported goods which swamped all Sri Larka’s early attempts at industrialization.
The post-World War period saw the granting of politicalindependence.
There was however a high degree of
continuity of perceptions from the colonial times of what constituted development. Yet because of the responsiveness to at least some popular demands resulting from the introduction of universal franchise in I 93 II, a momentum was generated towards re-structuring the economy away from the colonial patterns. This tendency, which had some of its roots in the discussions of the 1930s, was directed towards an activist role of the government in the economy, principally aimed at siphoning some of the surplus of the estates to the peasant sector and to industrialization. New land colonisation schemes were opened up and large sums were invested in a multi-purpose project, the Gal-Oya Scheme, in the Eastern Province. But basically, the colonial economy still persisted in its hold as the main economic determinant in Sri Lanka.
The election in 1956 by which representatives of classes deemed not directly tied to the colonial presence came to power saw an increased cry for industrialization and attempts at somewhat deeper structural changes. Although the election manifesto of the government had in its programme direct Sri Lankan control of the colonial economic enclave through nationalisation of the tea estates, this did not occur. But other sections of the economy like the bus transport
(Contal on p. 8)
EconoMIC REVIEW, JANUARY 1977.

Page 9
THE PATTERN OF INDUSTRIALIZA
When the country gained its political independence in 1948, manufacturing activities consisted mainly of the processing of three primary commodities, namely, tea, rubber and coconut for export. Other industrial activities constituted an insignificant component confined" to the production of simple consumer goods which required simple technology by units established during the war period. On the eve of Independence, the economy was characterized by classical dualism: an agrarian economy operating on a low level of technology co-existed with an alien controlled plantation sector. The export earnings from processed primary goods financed the imports of manufactured consumer goods. The economy was so dominated by foreign trade that even in 195o this accounted for about 7o per cent of the Gross National Product.
The economic policy pursued after Independence, until the end of the decade of the 1950s, was of the laissez-faire type. In such an environment, local initiative for industrial investment in the private sector obviously was less forthcoming because of foreign competition.
The inherent weakness of the * open door', outward-looking economic policy pursued, and the high degree of vulnerability of the export-dominated economic structure to the instability of the international market, exerted pressure increasingly on the deteriorating balance of payments in the mid195os and early 1960s. The economy plunged into a foreign exchange crisis owing to deteriorating terms of trade and increasing demand especially for imports of luxury consumer goods. In the 1960s, therefore, the country's economic policy, constrained by foreign exchange resources, moved from an open import economy to an inward-looking controlled one.
Import controls created conditions
conducive for a programme of import substitution. The Government declared its intention of sup
porting indus through attract a protected marl ly entered in a manufacturing production of which included lizer, etc. A r goods industrie the initiative of for manufactur saving foreign was a sizeable ment in industri the country sta wide range of c.
SRI
Agricultu Mining a Manufact Construct Electricity Transport Wholesale Banking,
Ownershi Io, Public ad II. Other Ser
9.
Source: Cen)
The gross dom the manufacturi stant prices (in I doubled during
relative share m per cent in I95 in 197o. (See T. cies created by th crisis in the I9 setting up of ma tions with foreig the part of those exported consu emerging patte zation during th of import-substi
Yet this patt sation did not su the desired reli rating balancetion. Nor did up a strong indi transformation The reasons for may be traced t port substituti
turing was conf
EconoMIC REVIEW, JANUARY I'977

TION
rial investment ve incentives and et, and also directmassive way into activities for the basic industries, teel, cement, fertinge of consumer was left open to the private sector : With a View to exchange. There rolume of investI in the 1960s and rted producing a onsumer products.
production, namely assembly of finished components or compounding or packaging of materials from bulk imports. In order to sustain manufacturing operations, the country had to increase its imports of intermediate and capital goods to a considerable level; the value of intermediate goods in 1959 prices increased from Rs. 370 million to Rs. 592 million in 1969 and that of capital goods from Rs. 292 million to Rs. 7oo million in 1969. Some of the industries, far from saving foreign exchange, in effect, drained Off more foreign exchange to support them.
LANKA-SECTORAL COMPOSITION OF GDP
re, forestry, hunting, fishing
ld quarrying uring - ion
and retail trade
insurance and real estate
p of dwellings ministration and defen vices
, gas, water and sanitary services storage and communications ...
CC
1965 1910 1971
%
39.I 35 ءO 32.4 O.5 O.7 2.2 II.6 I 3.8 13.6 4.8 6.2 4·列 O2 O2 O.3 9.2 9.4 9.9 I 3.6 I43 I3.5 O.9 2 I.7 3.4 3・I 3. I 5. I 4.7 5.8 I2.3 2.2 13.6
'ral Bané of Ceylon, 4nnual Reports.
(estic product by ng Sector at COn959 prices) almost the decade and its oved up from II.6 } to I 3.8 per cent ble). The exigeneforeign exchange 5os promoted the nufacturing Operain participation on Who hither to had mer goods. The in of industrialie decade was that :ution-led growth.
rn of industrialicceedin producing ef to the deterio»f-payments posit help in building Lstrial base for the of the economy. its limited impact D the type Of imn, for manufacned to final stage
In the I970s, an attempt was made to recast the structure and pattern of industrial growth within the constraints of foreign exchange availability. The growing concern with the foreign exchange situation was so dominant in policy-making and the implementation of policy that the inward-looking attitude was cast aside and a more outward-oriented approach was accepted to ensure an export-led industrialization pattern. A number of incentives were provided and foreign exchange allocations were made available more liberally to industrial enterprises manufacturing for export. Incentives for export by way of rebates, allocation of raw material imports, and the ConvertibleRupee Accountscheme (CRA), are only a few in the list. The emphasis, in the context of the prevailing adverse foreign exchange crises, was clearly to gear up industrial growth for export markets.

Page 10
system were nationalised together with the ports. New governmentsponsored industries were opened up in the public sector as well as in the private sector. A pattern of industrialisation that persisted to the late 196os was set in motion.
Industrialization Attempts
The industrialization attempts in the late 195os and the early 196os were largely on the basis of import substitution. And, as a major part of the imports fed the enclave sector, it were products that were consumed by this sector that were now manufactured. These items can be considered luxuries in comparison to the needs of the mass of the people. The items thus manufactured tended to be those like refrigerators, fans, chocolates and biscuits. The technology for this was almost exclusively imported, and as was in the majority of the cases, so were the raw materials. These products were manufactured largely in the private sector and gave very high profits, specially in view of government inducements like tax holidays. But as Sri Lanka's terms of trade began to drastically worsen in the later years, the allocations of foreign exchange available for raw materials and for capital goods declined and many such industries were by the early 70s running at low capacity utilization.
A special feature of industrial policy in recent years has been encouragement of industries in both public and private sectors to use more local raw materials as well as to design and fabricate locally industrial equipment to suit our requirements.
Production-wise Sri Lanka’s industrial structure comprises four very broad groupings.
Firstly, the traditional and unorganised sector made up of over Ioo,ooo small scale manually worked units, engaged in industries such as coir processing, handloom textiles, carpentry, mat weaving, pottery, brick making, cane ware, basket ware, saw milling, furniture making, blacksmithy work and jewellery making in addition to traditional handicrafts and cottage industries. This accounts for IO-I 5 per cent of the value of industrial output.
8
Secondly, the p scale units rangi
large in size. Nea
registered with the tries are today range of consumet products, beveral textile products, le paper and rubber and pharmaceutic implements, transp electrical goods í and foreign mark for nearly 45 per C industrial output.
Thirdly, the pub operated as corpor: ing nearly 3o in all manufacturing an porations for stee block rubber, paper, sugar, leath ing supplies, texti distilleries, milk, fi ing, oils and fats, petrol um, salt, chlorine, pharmac drugs, ceramics, gems and mineral in addition to the search and servicin industrial sector ru or Corporations.
accounts for nearl the value of indust
Fourthly, there is new sector of indu now developing in tions in the countr 5oo such units, lar oriented, engaged agro and wood-bas neering industries.
Recent Developn
There has been in industrial activi An index, calculate data, shows that ir 1975 had risen Ioo average for 1956-6( investment in the S porations alone h Rs. 2,5oo m. in Rs. 5 Oo m. in 1965
For over a dec. duction in Sri Lar by the manufact goods. In 1975,

vate sector factory g from small to ly gooo such units Ministry of Indusroducing a wide items such as food es and tobacco, ther goods, wood, roducts, chemicals ls, machinery and Drt equipment and or both domestic ts. They account 2nt of the value of
ic sector industries itions and numberAmong them are il processing corl, hardware, tyre, lywoods, timber Sr products, weavles, tobacco, state sheries, flour millcashew, fertilizer, caustic soda and uticals, ayurvedic cement, graphite, sands. There are se the several reg institutes in the in as State Boards The public sector y 4o per cent of rial output.
the comparatively strial co-operatives varinus rural locay. There are over gely employmentin mineral-based, ed and light engi
Lefnts
a marked increase ty in recent years. d on Central Bank dustrial output in per cent above the . The total capital ate Industrial Corld risen to nearly 1975, from about
de industrial proka was dominated ure of consumer owever, the inter
mediate goods category showed an increase in value over that of the conSumer goods category, largely due to the heavy increase in the value of petroleum products. Production of investment goods, however, has continued to remain at about only onetenth of all production due to the heavy dependence on imported materials and the limited size of the imarket for this category of goods.
Over the last five years the main thrust of development activity in industries has been in the following four broad areas: expansion of industrial activities in the public sector; the setting up of resource-based industries in the private sector; transforming the existing built-in capacities of the private sector industrial units which were created on the basis of import substitution to produce goods for the export market; and re-structuring of supporting service institutions within the purview of the Industries Ministry to achieve set development objectives.
On the basis of set government policy, the country has witnessed the emergence of the public sector as a major factor in the process of industrialisation, by the expansion of the public sector into new areas, and strengthening and enlargement of existing public sector industries.
Agriculture-Non-Plantation
Sector
The traditional agricultural sector, distinct from the plantation sector provided a livelihood for the majority of the people. In contrast to the plantation sector, which was modernised and based on capitalist enterprises, the peasant agricultural sector consisted of subsistence agriculture, employing traditional technology. The individual farmer had self-sufficiency as his goal and supplemented paddy cultivation with other crops. The main characteristics of this sector were: small holdings, fragmentation of land into still smaller uneconomic holdings, traditional technology, tenancy agreements which inhibited the cultivator from making an im provement to the land and increasing
output, and indebtedness which kept
the cultivator tied to the village landlord. This pattern remained more or
EconoMIC REVIEW, JANUARY 1977

Page 11
less unchanged upto the end of World War II when a significant transformation occurred and the stagnant peasant agricultural sector emerged as a dynamic sector in Sri Lanka's ecOnOny.
The output of paddy rose by 25o per cent during the period I 946 to 196o, the value of its contribution to the GDP increased by 75 per cent in the Sos and it accounted for about 3 o per cent of the total increase in employment for this period.
Adoption of improved cultivation practices, extension of irrigation facilities, and a governmental effort to increase production, together with a system of price incentives were some of the factors which brought about this transformation. Standard practices in other parts of the world such as transplanting and the use of weedicides, insecticides and fertilizer were adopted. The grant of a subsidy for fertilizer speeded up this adoption process. To lessen the dependence of the crop on rainfall, irrigation facilities have been extended and during the period 1949 to 196o the area under irrigation increased from 4o percent to 62 percent. The most important factor however was the introduction of a Guaranteed Price Scheme which provides for government purchases of paddy (and certain other crops). The existence of the GPS together with marketing arrangements assured the farmer of a suitable price for his produce and helped a subsistence crop to be converted to a cash crop. Towards the end of the 195o's three other measures, provision of credit, an attempt at partial land reform and crop insurance designed to make the price support scheme more effective were implemented.
There have been subsequent increases although not so dramatic, in the fifteen years since. During this period the discovery of new high yielding varieties, increased the output of paddy. More intensive efforts were made to apply new technologies and certain other institutional reforms were instituted. Efforts were made in 1958 to overcome the problems of land tenure and give security to the farmer which culminated with the Land Reforms Act of 1972. The establishment of the People’s Bank enabled an im
EсоNомпc REvпЕw, JANUARr 1977
proved system C to be implement made to reliever
One area the beginnings changes in the ec rienced in the c that of agricultu of the domestic was spurred on b. of payments diff red Onions and su were struck Off til import of chillies were permitted Consumers were supplementary pu produce in the ol costs were also halving of the r provided a stron; paddy production of domestic agri period also helpe basic transformat sition of Sri Lanll imports.
With the press and the potential becoming apparen were opened up these irrigation s. is the Mahaweli which will eventu mately 6ooooo under cultivation for the more inte another 3 Oo, ooo, ac In addition to pad sidiary food crop vated.
The I 948-55 pe lishment of the Oya Developmen accelerated imple nization schemes. major colonizatio) commensurate Wit package program development was mise production methods of cult
institutional arran
of marketing, cred ment, rehabilitate for better produc development whe would grow into a
In 1971, there w land policy from

agricultural credit 2d and efforts were ralindebtedness.
which witnessed of basic structural nomy to that expeolonial period, was e. The activisation agricultural sector " Sri Lanka’s balance culties. Eggs and bsequently potatoes Le import list; while and bombay onions pin a limited scale. obliged to make rchases of domestic pen market. Rising reduced with the ice ration and this g impetus for local The performance culture during this d to bring about a ion in the compota's subsidiary food
sure of population of the Dry Zone t, irrigation schemes or cultivation. Of chemes, the largest
Diversion Scheme tally bring approxicres of new land
and provide water insive cultivation of tres of existing land. dy, a variety of subps are to be culti
riod saw the estabmulti-purpose Gal t Scheme and the mentation of colo
As the returns on 1 projects were not h the investment, a me of integrated
adopted to maxithrough improved vation, strengthen gements in respect it and farm manage
irrigation facilities ion and encourage eby the community
self-sustained one.
is a major change in welfare to produc
tion-oriented schemes. A programme to set up Co-operative Farms(Samupakara Gammanas) was introduced throughout the country in order to harness manpower resources, notably the youth, for agricultural production. The settlers were to work on a collective basis in the development of the land.
The Ministry of Planning and Economic Affairs introduced another form of co-operative project during the same year-namely the District Development Council projects. These projects were formulated on a smaller scale of production than the Gammanas. The main objective of these schemes was to harness the manpower and raw material resources in the area for agricultural and industrial development.
Land Reform and the Plantation Sector
An important change took place in 1972 with the enactment of the Land Reform Law of 1972. This process continued in 1973 with the State Land (Special Provisions) Sales Law and in 1975 with the Land Reform (Amendment) Law.
The objective of these laws were to restrict ownership of private land to So acres of highland or 25 acres of paddy land so as to secure a more equitable distribution of land and wealth. To increase productivity, provide additional employment in the agricultural sector, to build a socialist society owning land on a cooperative basis and to vest all lands owned or possessed by companies in the Land Reform Commission were the other objectives of these land laws.
The Land Reform (Amendment) Law of 1975 marked the takeover of the plantations which were mainly owned by public companies. These lands were now vested in the Land Reform Commission. The total extent of land vested in the Commission under the 1975 amendment was 417,957 acres consisting of 395 estates. Of these 22 agency houses operated 375 estates whilst the balance 2O were managed by companies which owned them. The Land. Reform Law brought under the LRC 63 per cent of the total extent of tea cultivated, 32 per cent of rubber and I o per cent of coconut. New management agencies, as decided by the Land
9

Page 12
Reform Commission are now manag- decline of living si ing the best maintained and most pro- was little opport ductive tea and rubber estates. menting program designed to achieve For a time it provi vent a rapid detet standards by ru country's exchange built up upto the t
The plantation sector which had been a key determinant in the Sri Lanka economy was therefore now in State hands. The output of the plantation sector had also over the years since Independence shown a marked increase but with falling real 篮 蠶 t prices, the effect of the increased ble y S 羲 ©s tnts ད་ production was minimised. Under bro ht rict 臀 the section in trade the behaviour of : 1:n tO el tim - ess essential consul1 prices relating to these are discussed. so that the country ings would be ava Foreign Exchange requirements for
From the 1960s Sri Lanka's foreign goods (eg. Foodstu exchange problem has come, in one By the mid-I 96os ir Way or another, to be a dominant prices which cont factor in the economic situation. The it had become regime of freely available imports Lanka's foreign e that chara the open economy would not even be which the country had experienced with the basic nee from early times came to an end by population. the 1960s. The monetary system of the colonial period—the Ioo per cent exchange standard managed by a Currency Board-ensured that foreign exchange was always available to match whatever rupees were surrendered in payment for imports. This Consumer, Goods
of which: food & system was terminated with the diate Goods establishment of the Central Bank in investic Gois 195o and theintroduction of a managed Unclassified currency. By the sixties however, the acute stringency
inning of the
in foreign exchange was resulting in Source: Ceylon Curt an extensive regime of import restrictions and controls. The table above
import controls op 196o brought impo: high level reache Altogether, durin. period 1961-1964 im lly Rs. 97o millio would have been if tinued at the annual
Earlier much of the surplus generated by the export sector had flowed abroad. After Independence in 1948 however, part of it was taken through taxation for the use by the rest of the economy. But initially much of this surplus was transformed into imports of consumer goods. Policies and practices of governments after Independence did not help positively to raise the level of domestic savings for new programmes which would help to improve the productivity of the End of Year
rest of the economy. Gross Assets
Short-term liabilities
G.
This problem was aggravated by the fact that from the mid-19so's Net Assets onward the surplus generated by the
ld consequence of falling world prices debt amounting to for our exports. Thus, during the had been incurred last part of the 195o's the Sri Lanka mum debt serviceauthorities were largely preoccupied years of about Rs. 4 with trying to prevent too rapid a equivalent to abo
' సాలూ,
 
 
 
 
 

indards, and there inity for implehes and policies economic growth. d possible to preoration of living ning down the reserves that had me of the Korean the late fifties and s no longer possiit controls were nate most of the her goods imports 's exchange earnlable to meet the basic consumer fs, textiles, drugs). the face of export nued to decline, bvious that Sri Kchange earnings.
icient to cope ds Of a grO Wing
export earnings. In the period 196o1964, official grants and loans provided a net capital inflow of Rs. 9o million a year on the average. These were not large amounts, though the trend was rising since 1963 as a result of increased aid from Canada and in particular Eustern bloc countries whose assistance which was insignificant previously, jumped to an annual level of Rs. 5o million. The dependence of the economy on foreign a was now being firmly established. It was not 蠶 that the 1963-1964 level of aidaround Rs. I2O million-could be sustained beyond 1965 unless new aid agreements were concluded. The fact that foreign aid covered only part of the current account deficit, meant that Sri Lanka had drawn on its exchange reserves to cover the remainder. It was for this reason that between the end of 1959 and the end of 1964, net exchange assets were re
LASSIFICATION OF IMPORTS
(Rs. Million)
I954-56 Average 1959 I96o I96I I962 Ι963 I964
2. I2O3 II95 972 979 9I9 II 72 rink Í).2 8oo 752 672 657 767 9I7 a. 396 397 383 409 372 4 ΙO fa. 389 355 339 337 324 305 Îl.2. I7 I3 9 8 I3 IO
I,495 2,oo5 1,96o 1,703 I,733 I,628 I,897
on Returns
shows that the erating since late rts down from the di in I959-I 96o. g the four-year ports were roughn less than they imports had conlevelof I959-196o.
duced by Rs. 575 million and thereby fill to a level where even a few days excess payments over receipts entailed the threat of a liquidity crisis, as the table below, from a publication of the Ministry of Planning and Economic Affairs in 1966, illustrates.
ROSS AND NET EXTERNAL, ASSETS
(Rs. Million)
I959 I961 1962 I963 I964 735 532 504. 462 35 I II 2 r. 202 244 293 3O4. 623 33O 26o Ι69 47
I957
Ι,ο62
IO9
95 3.
3 a public external Rs. 424 million
requiring maxi
over the next few 5 million which is
ut 2.5 percent of
With the drastic fall in the terms of trade and a rapidly deteriorating foreign exchange situation the Government was left with no alternative but
to resort to foreign borrowings, and if long
rm borrowing was insuffiജഭജ
Economic Review, JANUARY 1977
წა ČS \

Page 13
cient, to borrow from any source, it could whether it was short-term or high cost, in order to sustain the level
of imports. X -
Sri Lanka's export earnings, both in total and per capita terms, declined steadily during the sixties with the exception of a single year 1965. The comparative average annual growth rates of exports during the fifties and the sixties were as follows:
AVERAGE ANNUAL GROWTH OF
EXPORTS (%)
Total Per Capita Year Exports Exports I95O - 59 ... -- 6. I 十3.6 1960 - 69 ... 一I。2 ー3.7 1965 - 69 . 2.4 -4.8
During the period 1965-69, export earnings took a step downwards in each succeeding year. By 1969, Sri Lanka's exports had fallen to $321 million, an amount below that attained in any year after I953. The cumulative loss in export earnings between 1965 and 1969 was $252 million.
Prior to 1965 imports were sustained for as long as possible by drawing down external reserves but in the period from 1965-7o when reserves were no longer available imports were supported by foreign aid and other external credits. With the depletion of external reserves it was argued that imb orts could not be sustained, in a background of falling exports, unless foreign aid was to increase or external resources were to be obtained by borrowing on commercial terms. Various strategies were adopted at import substitution through encouragement at increasing production of food and industrial manufactures, though both met with limited success. Together with this strategy of infusing large doses of external resources into the economy was also adopted the underlying policy of reform of the exchange system and a liberalisation and relaxation of the external trade and payments system. The rupee was devalued in 1967 and this was followed by a partial devaluation through the introduction of a FEECs scheme which brought into bring a dual exchange structure. These measures were supported by incentives for industrial and other activities through generous tax concessions and relief.
The massive external resource mobilisation enabled the country to live beyond its means-gross domestic expenditure exceeded the gross national product by 3.6% in 1968 and 7.4% in 1969. It increased the
EconoMIC REVIEW, JANUARY 1977
import depende and caused a hi. the external debt debt outstandin average rate of I955 to 1965 an to an average
from 1965 to 19 In the meantime continued to fall level and by I9 exchange balanc Bank were at . Rs. 2 o million. standing short-te liabilities alone times bigger th Serves of the ecc. with the foreig inherited from t worsening of the rienced in the ea ment was com term to resort t measures which in the volume O. was possibly det growth as it cou postponing ther lying causes ofth but this was inev of payments po early 7os placed external finances more secure foot helped to pro immediate relief. crease in the cur: an improvemen (invisibles) acc attempts tO m Ov “unsatisfactory”
steps to arrest the term debt and bri able limits, and ment in the exte
In the intern tOO, steps Were ti to arrest the tren crease in budget increased revenu food subsidy bi penditure, an savings and a re finance gap an impact of fiscal
Public Debt
Despite the p the Government the external and the country there way out of the

ncy of the economy
gh rate of growth in .
. The official foreign g rose at an annual I 2% in the decade id from there shot up annual rate of 22% 68 and 3o 9% in 1969. the exterral reserves to an alarmingly low 59 the liquid foreign es held by the Central a bare minimum of At this stage the outrm foreign exchange
were nearly three an the external resnomy. In grappling exchange situation he 6os and the rapid : terms of trade expe(rly 7os, the Governbelled in the shortto certain immediate amounted to a cut f imports. This step timental to economic
ld have the effect of
emoval of the undere external imbalance, ritable. This balance licy pursued in the the management of to an extent Oil a ing than before and vide much needed It resulted in a derent accounts deficit, it in the services punt, and also in e away from earlier sources of finance, : growth of the shortng it within managea general improve:rnal assets position.
all finances situation aken in the early 7os d towards a steep indeficits, to bring in e, containing of the 1 and recurrent exincrease in private striction of the bank id the expansionary
operations.
rudence applied by
in management of internal finances of seemednoimmediate
“Dibt Trap. Sri
3) ܡܓܠܓ ܢ .
Public DE3T (GROSS)
MELLIONS or gS: 2oᏅco
6000
4000
2OOO
se
&gé驾 °曼季 as ed
1ᏅᏫᏅᏅ s
- Fo£3& Gr>4
8Ooo pe
ලීලCල
ᎪᏟᎧᏅᏅ
2OOO
Ο
;9r6 %78 ޑީޗް47ނ ۈj*
1967 o8 g oro si o72
Source: Central Bané of Ceylon
Lanka’s Public Debt continued to increase in the 7os at an even higher rate than before. A notable feature has been the steady increase in the Foreign Debt component of the Public Debt from 17% in 1968 to 24% in I973 and 28% by the end of 1976. What has been considered a disquieting feature is that the trend of short-term foreign liabilities incurred for meeting balance of payment defi
cits, which was begun in the late 6os, has been continued into the 7os to
maintain essential imports of foodstuffs and fuel. Another trend in the Public Debt during the 7os has been a manifestation of the major role played by external assistance in financing government budgets and more fundamentally that of balance of payment deficits.
A significant trend in the growth of the Domestic Debt in the recent years has been the growth in the funded component of the Public Debt. This indicates the ability of the Government to raise progressively increasing amounts through the issue of rupee securities, while simultaneously decreasing its reliance on Treasury Bills. The enlargement of the “captive sector' for government securities, which came about in recent years with the centralisation of government savings institutions in the form of the National Savings Bank and the extension of the coverage of the E.P.F. scheme, have largely accounted for the increased flow of funds to the government loan programmes.
11 ܢ ܓܢ.
-పై
蓋

Page 14
The Gror Public Debt of Sri Lanka at the end of 1976 stood at Rs. 17,659 million representing an increase of Rs. 3,095 million or 21% from the level at the end of 1975. During the five year period 1972-76, the public debt has risen by some 92%.
Of the total public debt about 28%, representing Rs. 4,968 million comprises the External Debt. The external public debt rose by some Rs. 1,263 million or 34% during 1976. During the five year period I972-76, it rose by about 1.55%. The major component in the external debt is
COMPOSITION OF FOREIGN DE8T
Multons of Rs:
THE PUBLIC DEBT IN 1976
that of commodity loar to Rs. 3,381 million o in I 976. Project lo Rs. I, 524 million ac balance 31% of the
source of commodity. Consortium Aid Grou under the sponsorsh Bank. The Consor some II countries) o of the external public
The Groff Domerfit million accounted for public debt in 1976. I million or 17% during five-year period 1972 debt rose by 75%. A
6000 domestic debt in 197 Ꮛ5oᏬ such captive sources
Provident Fund, Natic 9000 and the Insurance Corp 4500 25% was owned by
jကြီးငါ” Treasury Bills ol 4000 end of I976 amoun million accounting for 3500 gross domestic debt.
O 300 Grorr 2500 End of Public * :: :|::;:|:::|:: : :| Year „Dგbf 2OOO
500 8ဦဂျီCo^4:40င့;?: LoffAoi:: : (Rs
ከOÖO . . . . . . 1971 9,049 500 pROJEct loANS I972 Io,318 I973 II, 38o O I974 12,38ට 1967 68 7o 7 72 '73 75 76 Ι975 I 4564 و п976 Ι 7,659 Source: Central Bane of Ceylon
Trade
Sri Lanka's trade, in common with other colonial countries, was carried on primarily with the colonial power and constituted mainly our primary products; over 9o per cent of exports belonging to these items. After Independence attempts were made to diversify sources of imports as well as the countries to which Sri Lanka exports. One of the major attempts at a shift in this direction at diversifying dependence was the 1954 Rubber-Rice Agreement with the People's Republic of China. By this an assured market for one of Sri Lanka's primary products on a stable basis was guaranteed whilst simultaneously granting an assured source of her staple food.
Sources of imports and exports have been dramatically diversified over the last Io years. Sri Lanka's trade has shown significant shifts, specially closer ties with Third World countries. The tables on page I 3 indicate this dramatic shift between 1966
12
and 1975. China em buyer of Sri Lanka chasing II.5 per cen in I975. U.K. whi cipal source for Sri in I 966, then takir cent of our produc third place by 1975, 7.7 per cent of Sri Pakistan has come Larkas leading tra the last few years an largest source for C chasing 8.6 per ce exports in 1975.
Considering the of Sri Larka’s pro that in 1966 only f countries took mer of all our exports. B. of exports taken countries among th doubled. In the 2 World countries w 4o.7 per cent of all
 

s which amounted 69% of the total ns amounting to counted for the total. The main oans has been the p formed in 1967 p of the World ium (comprising wned about 7o% lebt in 1976.
Debt at Rs. 12,691. 72% of the total rose by Rs. 1,832 I976. During the 76, the domestic ibout 6o% of the 6 was owned by as the Employees bnal Savings Bank oration, and about the Central Bank. utstanding at the ted to Rs. 2,7oo about 20% of the
Gross Groff Domestic External
Deba Dehë
. Millions)
7, I 26 1,923 7,926 2,393 8,585 2,795 9,4ο6 2,974 Ιο,859 3,7ο 5 I2,69 I 4,968
erged the leading
's produce, purt of total exports ch was the prinLarka’s exports g nearly 25 per ts, had fallen to purchasing only Lanka's exports. lp as one of Sri de partners over d was the second ur exports, pur
nt of our total
2O major buyers ducts it appears
ve. Third World
ly 2 I. 5 per cent 1975 the volume y Third World e major 20, had were Io Third ich were taking ur exports.
There was also a remarkable increase in the number of countries to which Sri Lanka’s exports were going by 1975. In 1966 there were 9o countries purchasing Ceylon products as against I 25 in 1975. Most of the additional 35 countries were from the African, South and Central American and Middle East Third World nations.
By way of imports too Sri Lanka's trade relations with the Third World countries has grown rapidly in recent years. Among the 15 main countries from whom we obtained our imports in 1966 the Third World countries supplied orly 34 per cent of Our imports. By 1975 the value of imports from Third World countries among the first I 5 had risen to 47 per cent of all imports. In 1966 Sri Lanka obtained her imports from 8 I countries as against 97 in 1975; once again the new sources of supply being accounted for by the Third World
countries.
By 1975 the pattern of imports had also changed considerably and the 3 major food items of rice, flour and sugar together with petroleum and fertilizer accounted for the bulk of our imports.
Terms of Trade
Although Sri Larka has diversified her trade dependence, it had not helped very much in her terms of trade. Price of imports have constantly kept rising while exports have relatively declined. Between 1960-1970, the price index of all imports declined by 33 per cent whilst that of all imports rose by 68.7 per cent. The resulting deterioration in terms of trade for that decade was 43.2 per cent indicating the extent to which Sri Larka's purchasing power abroad declined in that decade. This continued, in the 197o's; between 197o and 1975, the All Exports price index rose by 8o.5 per cent whilst the All Import price index increased dramatically by 31 per cent. Thus from a base year of I96o, the purchasing power of exports had fallen by 6 I per cent by 1975. We have a vivid example in the case of tea, our major export item. Tea accounts for more than 5o per cent of Sri Lanka's export earnings. While we increased our production of tea and systematically improved its quality over the years, in
EconoMIC REVIEw, JANUARY 1977

Page 15
Exports-rg66
Country R.. zz. % I. U.K. - - - 4IS 24.8 2. China, People's Rep. I77 Ιο. 6 3. U.S.A. ... I 35 8,直 4. Iraq - - - - - - IO 5 6. I 5. U.S.S.R. ... - 82 4.9 6. South Africa s 8. 4.8 7. Australia ... - 74 4.4 8. Canada ... - - - 47 2.8 9. Germany, Fed. Rep. 47 2.8 Io. Japan es 42 2.5 II. Pakistan ... - 42 2.5 I2. New Zealand -- 多4 直;& I 3. Netherlands 33 I.7 I4. Italy - - 3O I.4. I5. Poland ... - 25. I.6 I6. India is os- 2Ο I.4 I7. Germany, Dem. Rep. I9 2 I 8. Rumania - a 五8 直。之 I 9. France ... -- 4. I. Ο 2O. Mexico ... - - - I3 O
Sub Total ... I 86.4 453 و Total (all countries) I,7OO IOO.O
Exports-I975
Country R.r. zzy. % I. China, People's Rep. 46ం II. 5 2. Pakistan to 345 8.6 3. U.K. - - - ... - 3 II 7.7 4. U.S.A. ... -- 2 I9 5.5 5. Iraq I90 4.7 6. Japan o se o т78 4.4 7. U.A.R. ... е в е 2. 3. I 8. South Africa 2. 3. I 9. Germany, Fed. Rep. 直直8 3.o Io. Libya - - II 7 2.9 I I. Iran d o ΙΙ 6 2.9 I2. Australia ... IO 2.8 I 3. U.S.S.R. ... o-s, IO3 2.6 I4. Canada ... о с о 95 2.4 I5. Saudi Arabia - - - 94 2.4 I6. Netherlands 69 I.8 17. Italy - - o el 68 I.7 I8. Syria ܘ ܘ ܘ ss. 65 I.6 I9. Kuwait ... --- 59 I.5 2O. Hong Kong - - - 59 I.5
Sub Total ... 3,OI8 75.7
Total (all countries) 3,933 I OO. O
the I4 years since 1962, we have had to watch its real price, in terms of the prices we pay for imports, plummet
by more than 7o per cent. This repre
sents a loss for Sri Lanka today of S5oo million per annum which expressed in Our national currency amounts to roughly Rs. 6 billion or almost the entire budget of our country for One whole year.
Sri Lanka’s trade position by the end of 1975 showed the following situation. The changes in 1976 are recorded in Our Trade column on pages I8 and I 9.
EconoMIC REVIEW, JANUARY 1977
Imports
A major part belonged to the I975 the three rice and cereals, the country R foreign exchang 46 per cent of import bill. TI cotton, fertilize. up 23 per Cent I975.
A compariso picture 111. I974 changes occurre among these six account for nea1 total import bill the three major took up about 4c try’s import bil leum, fertilizer 3 o per cent of th
Impc Country
Ο Κ. - - - China, People Burma India
Japan U.S.S.R. ... Australia ... Pakistan Thailand U.S.A. II. Germany
2. Netherlands
I 3. Italy I4. France I5. Poland
Sub Total Total (all cou
Impo Соитfry I. China, People 2. Saudi Arabia 3. Japan - 4. Australia ... 5. France 6. Thailand 7. U.S.A. ... 8. Germany, Fed 9. U.K. - - Io. Pakistan II. Iran. 12. India I 3. Burma I4. U.S.S.R. I5. Singapore
Sub Total Total (all cour
the food bill ac
cent of our entii other 3 items to
 
 
 

f Sri Lanka’s imports Food Group. During main food items of flour and sugar cost s. 2,455 million in e or approximately the country's entire hree other products and petroleum made of the import bilT in
in with the import hows that significant d over the year 1975
major items, which
ly 7o per cent of the For instance, while imported food items per cent of the coun
in 1974 and petro
and cotton took up e import bill; in 1975
rts-I966
R3. 77. %
I 6.7 I.77
34O 2I7 Ι76 I35 I26 ΙΙ 6 99 85 8O 8O 74. 55 38 37 34
s Rep.
8
7
I,692 2,028
8
I 嵩
intries)
rts-I975
Rs. m.
662 637 447 429 429 356 337 252 223 22. Ο 28 ISO 夏2兀
II 2 IO4.
's Rep.
O
Rep.
-
4,697 5,25I IO
8
9.
intries)
counted for 46 per ze imports while the ook up only 23 per
cent. See table below on major items of import I974 and I975.
Major Items of Import I974 and Ig75
(Rs. Million)
BTNV No. Ife.72 I974 I975 Io Cereals 845 I, I98 II Flour etc. 86o тоо6 I7 Sugar I9 I 2 5 o 27 Petroleum 9IO 879 29 Fertilizer ... 22 2O8 55 Cotton 2 Ο Ο IO7
3,227 3,648 Total imports 斗。554 5,318
Exports
It was the exports of tea that took the country's export earnings to its highest level on record. Tea, spices and coffee brought in Rs. 2,oo8 m. or 55 per cent of the country’s foreign exchange earnings in 1975. In 1974 these same items brought in Rs. 1448 m, and accounted for only 4o per cent of the country's export earnings. Earnings of coconut products at Rs. 408 m. were slightly less than that of 1974 and accounted for only 12 per cent of all export earnings. There was a slightly bigger drop in earnings from Rubber-exports in 1975 being Rs. 654 m. as against Rs. 741 m. in I974. Rubber exports accounted for approximately I 8 per cent of the total export earnings. Gems and Jewellery once again emerged as a major export item, following a drop in 1974, and accounted for nearly 5 per cent of the country's export earnings. Exports in 1975 were Rs. 182 m. as against Rs. IIo m. in 1974. Together these 4 groups of products brought in nearly 85 per cent of the country's export earnings. The balance 15 per cent comprised mainly petroleum products and other industrial exports in the minerals, textiles and food groups. See table below on major items of export
1974 and I975.
Major Items of Export 1974 and I975 (Rs. Million)
BTN IVo. Itezza I974 I975 9 Tea, spices, coffee II, 448 2,රට8 8 Coconuts - - 255 2O5 I5 Coconut oil and fats I 56 2O3 4o Rubber - - - 74I 654 7 I Gems and jewellery II O I 82 2,7Io 3,252
Total Exports 3,472 3,933
13

Page 16
Technology
Just as much as attempts were made to diversify dependence in the trade field, there have been attempts at diversification of technological dependence over the last decade or so.
The modern technological spectrum has begun to change rapidly after Independence and with numerous development plans. Accompanying the new development thrust was a diversification of technological sourees away from the British to the American, French, German, Japanese, Soviet, Chinese, Yugoslav, Czechoslovak, Rumanian and Indian sources. This was facilitated by the new credit lines made available by these countries. Many of the industries, established in the last few decades were therefore from non-British suppliers. To take the state sector alone, such non-British technology is now evident in the Tyre, Steel,Cement, Flour Mill, Ceramics, Petroleum, Plywood, Paper and Textile factories which account for a good part of the major state industries. The breaking of colonial ties also resulted in the training of engineers both at the post-graduate and under-graduate level, in nonBritish traditions. Engineering graduates from countries such as U.S.S.R. Poland, France, USA, Japan, East and West Germany, China, Yugo
slavia, India, Pakis
many positions in
sector. In additic personnel with University backgr practical training, countries as well.
Although techi have been divers effects have not be imported technolog enclaves with muc inputs still comi abroad. However, of trained technica built up. In recei ponse to the neec ployment, an attem to develop so-ca forms of technolog logical base of loca. blacksmiths and c like have been orga products with the technical inputs if a arises.
Social Developm Income Distribut
Two of the mai Sri Lanka are in the education, Levels in these fields whi with levels reached higher productive
GROSS NATIONAL PRODUCT AT CONS
(Rupees M
I959 (966 I967 1968 Sector
I. Agriculture, Forestry
Hunting and Fishing 2,3 ο 2.4 2,82.Ι. 2 3,οβο,6 3,239.7 2. Mining and Quarrying 3耳・3 37. I 37. Ο 37.3 3. Manufacturing - e. 682. I II, oo8. I I, o 52. I I, I 54. o 4. Construction 282.9 293.2 35ος 8 4万7.8 5. Electricity, Gas, Water
and Sanitary Services 9.5 I 4s 3 - س - I 497 I5.O 6. Transport, Storage
and Communications 540.9 791.8 772.9 848.5 7. Wholesale and Retail
Trade 8,OO,8 I, I44.I I, I93.8 I,245.O Banking, Insurance and Real Estate 50.9 83:O 99.6 II.O.4 9. Ownership of
Dwellings 2Oo.6 272.8 263. I 291.8 to. Public Administration
and Defence 3OI.O 396.5 388.9 432。4 II. Other Ser ices 727.6 992. 3 I, OI 2.4 r., I O4.8 I2. Gross Domestic
Product 5,93o.o. 7,854.4 8,254.9 8,936.7 I 3. Net Factor Income w
from Abroad .. ཡ36.7 — 36. 一44·列 ー35.7 14. Gross National Product 5,893.3 7,818.3 8,2Oo.o. 8,901.o
14
Estimate for 1972 to 1975 are provisional

an, Israel etc. man today's industrial n, many technical ritish or Ceylon ounds have had n many of these
tological sources ified, the spread in much felt. The y exists in virtual h of their physical ng from sources
a good reservoir 1 skills have been ht years, as a resto generate empt has been made 11ed intermediate y from the technocraftsmen. Thus, arpenters and the nised to make new provision of new ind when the need
ent and
ion
in achievements of
fields of health and
have been reached
ch are comparable in countries with capacities. (See
V
growth in Other Services, (sector II) in the table below.
Free education has actually existed in Sri Lanka, for one generation now since 1945. The number of enrolled pupils has consequently risen dramatically from a figure which stood at one million in 1946 to nearly three million in the 197os. Pupils at secondary levels of education have increased four-fold during the period and the number of university students tenfold during this period. Government expenditure has also increased dramatically from Rs. Io 5.7 million in Ι9 5 Ο to Rs. 5 I 2 million in I969 - The number of teachers Over the same period 1950 - 1970 increased from 39,ooo to about IOO,OOO.
The education system had however been very much a colonial transplant with courses largely not geared to local requirements. Within the last few years a fundamental reorientation has been attempted in the education field with courses and methods of teaching geared to the local environmeflt.
Sri Lanka is one of the oft-quoted success stories in the field of health, with widespread attempts after the second World War to eradicate malaria and install an islandwide health serVice.
STANT (I95a) FACTOR COST PRICES
Aillion)
Ι969 I 97o I97I I972 I973 I974 I975
3,28ο.5 3,4Ο6.6 3,3 ΙΙ.2 3,478.4 3,387.6 3,558.3 3,6οΙ.8 55.O 65.2 66.6 67.5 266.2 I90.9 248.2 I, 26o. 5 I, 33 II.8 II, 378.9 - I,4oo. 5 I,4 I 7.2 I, 359.4 I, 46 I.5 SO4.4 577.2 549.5 SO5.O 5 Ι6.2 552.8 SO3.4
Ι7.6 2I.3 28.6 3 I.O. 3I.3 3 II. 5 33.3
9oo.6 9I 3.2 92.O.3 987.6 II, o I 8.7 I, o 53.7 I, Ioo. I
I, 36 I. I I, 393.2 1,315.7 I,327.2 I, 383.2 1449.8 1,5014
II 3.7 II8.o I 28.5 п 35.6 I4I.9 Ι64,9 I83.6
29O.9 3OI.5 3O7.4 312.6 318. I 344.4 35 O.O.
4454 458.8 488. I 522.2 566.6 609. I 645.6 I, I 38.9 I, I83.7 I,297.o 1,334.O I,379.4 I,440,6 I,512.8
9,368.6 9,77.o. 5, 9,79I.8 Io, Io I.6 Io,426.4 Io,755.4 T I, I4I.7 -67.5 -84. I -66.9 一7享。9 一43.9 -24.9 -26.9 9,5oI. I 9,686.4 9,724.9 IO, O29.7 Io, 382.5 Io, 73o. 5 Io, II 4.8
Source: Central Bank of Ceylon
EconoMIC REVIEW, JANUARY 1977

Page 17
PERCENTAGE OF TOTAL INCOME RECEIVED BY
OF IN COME RECEIVERS AND SPENDING U.
(ALL ISLAND) I953-75
By Each Tenth of Income B
Receivers
I953 I963 I973 Ι9.
Deciler Highest Io 42.49 39.24 29.98 4O.( Second I4. I6 I6.o. I5.9 I3.3 Third IO. 39 II.46 I 2.65 IO. Fourth 7.94 8.98 Ιο. 56 8.: Fifth 6. 3 Ι 6.82 8.75 6. Sixth 5.7 I 5.55 7. IO 6. Seventh - - 4.37 4·5马 5.7o 5.4 Eighth - - - - - 3.56 3.56 4.38 4.) Ninth - - - 3.56 2.7o 3. I7 3. Lo West I.5. I I. I7 I.8o I. Source : Reports of the Survey of Ceylon's Consumer Finances 195
General indications of this dramatic increase of the health of the population is given by the following:
Crude death rate declined from I 3.2 per thousand of population in 1948 to 7.9 per thousand in I968; infant mortality has dropped from 9I. I per thousand live births in 1948 to 5o per thousand in I968 and life expectancy had increased from 44 for males and 42 for females in 1934 to 65 and 67 respectively in 1968. A further demonstration of the impact of health services is seen in the geographical distribution of the most healthiest and unhealthiest areas in the country. Judging from child death rates, the then malaria-infected regions of the dry zone which 4o years ago had death rates of 20o - 3oo per thousand have today the lowest rates of 20 - 39 deaths per thousand.
Both measures in health and education are largely attributable to a growth, specially since the 1930s, of policies increasingly responsive towards some mass needs. With increase of education the articulation of these needs has grown. One of the effects of this responsiveness has been also an effective redistribution of the country’s income in favour of the rural areas and towards lower income
groups.
In the non-socialist developing world Sri Lanka's performance in these spheres is almost unique.
The table above indicates some of the broad trends in this direction as far as total income received by each tenth of income receivers go and
EconoMIC REVIEw, JANUARY 1977
spending units on A definite trend te incomes is seen. A redistributing inci sector has also occ
Unemployment
With a worsenir trade the post-wa Lanka of investin, from the primary other fields has hac Consequently, targ jects and hence of fallen back so drast the limits of solut ployment problem socio-economic fra
The Ten-Year II mated, (on somewh that unemploymer per cent of the la
time. The next Fi
76 estimated to be about 55,6oc total labour force O is a rate of over I 2 wide sample survi Bank of Ceylon in
that the total unem meantime risen to I 9.8 per cent of the (The sample used
small, being only
and the interpretati have to be temper ledge).
The recent plans ILO Mission on I97 I have had appa on the unemploym
 

ACH TENTHI NITS
Each Tenth of Spending Units
3. I963 I973
O 36.77 28.ට3 Ο I5.54 I4.92 Ο II, 22 II.65 Ο 9. OO 9.9 I Ο 7.54 8.75 Ο 6.27 7.45 Ο 5.2I 6.52 Ο 4. OO 5.6o Ο 2.95 4.38 Ο I.5 O 2.79
3, 1963 and 1973.
an all-island basis.
wards levelling of similar process of Dme to the rural turred.
ng of the terms of ir strategy of Sri g export earnings r commodities in a severe set-back. gets of new proemployment have cally as to indicate ion of the unemwithin the present mework.
lan of 1959 estiat inadequate data) It was about 3.5 bour ܐܸܬ݂ܝܼ؟ at the e-Year Plan 1972ployment in 1971. persons out of a 4.5 million which er cent. A nationsy of the Central 1975 has estimated ployed had in the 84,Ooo, a startling total labour force. in this survey is 5,ooo households, on of these results ed by this know
as well as a special unemployment in cently little impact ent problem. The
Government has attempted encouraging various labour-intensive development strategies specially through the Divisional Development Councils. But this and other programmes have not yet had much impact on the magnitude of the problem.
Conclusion
Thus, seen globally the performance of the Sri Lankan economy, since Independence has been a struggle to get away from the structured limitations of the colonial plantation economy. Attempts were made to tap some of the surplus of the plantation sector and channel it to the traditional sector and break through the enclave situation. Attempts were also made to industrialise, to diversify the economy and resurrect the non-plantation agricultural sector. These attempts were made largely within the existing socio-economic structures, both locally and internationally.
The initial industrialization programme was largely through import substitution of products demanded by the higher income groups in the country. This led not to diversification and independence of the economy but to increased dependence on imported technology and raw materials, and to an emphasis on services and goods for demand-oriented individual luxuries rather than for need-based mass consumption. In agriculture, both in food crops and plantations, gains in output have been impressive in pure physical terms. But again in the plantation crops the drop in real purchasing power has offset these physical gains. With continued degeneration of the terms of trade manoeuvrability for development within the present strategy has become extremely limited. Recourse to short-term foreign borrowing for current consumption and not development, has grown in significance in recent times.
Sri Lanka has shown impressive gains in education and health services and some success in redistribution of income. But unemployment remains a strong structural feature needing attention, with the prospect of it worsening in the years to come. Sri Lanka still seems trapped within the socio-economic framework set during colonial times.
15

Page 18
THE ECONOMY
The Economic Consequences of
in our Coconut Crop
Domestic Consumption
The most conspicuous effect of the rise in the price of coconut prices has been the impact on the cost of living, given the fact that coconut occupies a central place in the family budget. According to the SocioEconomic Survey of 1969/70, the average per capita consumption of coconuts (as food nuts) is 7.5 nuts per month or 9o nuts per year. In addition, there is an average per Capita consumption of o. 5 bottles of coconut oil (equivalent to nearly 3 coconuts) per month or 6 bottles per year (equivalent to nearly 34 coconuts) for household uses mainly as a cooking oil. Hence the average per capita consumption of coconuts and coconut oil amounts to about Io. 5 coconuts per month or nearly I 25 nuts per year. These figures broadly tally with the findings of earlier surveys such as the Consumer Finance Survey of the Central Bank. An average household (with five members) consumes about 37 COCOnuts and 2.5 bottles of coconut oil per month. These statistics readily demonstrate the effects of the escalation of coconut prices on the cost of living. The consumer demand for coconuts can be assumed to be highly inelastic with respect to modest price changes. But the price increases of the magnitude witnessed in recent months would have undoubtedly led to a decline in the conventional consumption levels. The retail price of
coconuts which is generally below 5 o
cents, has shown a continuous increase from about October and by the end of January the price had risen Over Re. I.oo per nut representing a price increase of over Ioo/6. The price of coconut oil which was generally below Rs. 2.5o per bottle had shot up to nearly Rs. 3.5o - 4.oo by the end of January.
The decline in the coconut crop and the consequent escalation in the coconut prices in the domestic market has served to focus public attention on the cuirent state of the coco
16
rial. result of fixing the
nut industry in S need for urgent m the industry.
Animal Husband
An important sec adversely affected of coconuts is the industry. Poonac the coconut oil m traditionally been t feed stuff in the col poonac which ha below, Rs. 5oo per 8oo in August last nuous price increa ded since then air January this yea reached almost R. This price increas effect on the pou dustry; the prices sharply and the cos milk toO Would hav In this context, the ded to import p a breakdown of the industry.
Soap Manufactur
Another importan affected by the high that of soap manuf. nut oil is used as t
Here the p1
price of Soap unde the context of a sha oil price. At the ti were fixed under
price of coconut oi tonne. However, last year the pric Rs. 3,ooo; and by D Rs. 4,Ooo and by Ja price had reached per tonne. In this
the fixed price for facturers of soap h losses. The gov did not agree to an in the price of soa soap manufacturer instructed to maint

the Drop
iri Lanka and the easures to develop
try Industry
stor of the economy by the high price animal husbandry , a by-product of lling industry, has he principal animal Intry. The price of is generally been ton, stood at Rs. I year and a contiSe has been recorld by the end of r the price had S. 2,OOo per tOn. e had a crippling try and cattle inof eggs moved up it of production of te gone up sharply. ; government deciDOnac to prevent animal husbandry
tindustry adversely l, COCO nut pr:1Ces 1s cture, where cocohe main raw mateoblem arose as a maximum selling ir price controll in ply risi ag coconut |113 ညှိနှိုးမျိုး prices price control the Was Rs. 2,5oo per from about July 2S rose to nearly ecember it reached nuary this year the almost Rs. 5,ooo zontext, and given
soap, the manuad to suffer heavy ernment however y upward revision p and the leading
were specifically ain adequate pro
duction levels to meet the consumer demand. In order to provide some relief the government has decided to permit import of tallow to be used as a substitute for coconut oil.
Exports Decline
The decline in the crop has led to a corresponding drop in the exportable surplus of the principal coconut products. In both 1975 and 1976 export earnings from coconut products (including by-products amounted to around Rs. 5oo million) per year and this is the third important source of foreign exchange earnings for the country. Consequent upon the decline in the crop, the export of coconut oil, copra and fresh coconuts have come to a complete halt and the export volume of desiccated coconut has declined by about 4o to 5 o'/6. Since desiccated coconut is a Ioo/6 export industry, a certain minimum level of exports had to be maintained in order to protect employment in this sector and to prevent a loss of foreign markets to competitive suppliers. The exportable surplus in 1977 is expected to decline by about 5 o'96 in relation to 1976 levels resulting in a foreign exchange loss of at least Rs. 2 oo million.
The coconut production during I97o - 76 has varied from a high of nearly 2,8oo million nuts to a low of 1,950 million nuts and the exportable surplus (in nut equivalents) has varied from 1,23o million nuts to 35o million nuts. The bulk of the decline or increase in the coconut crop in a given year is reflected in the level of the exports since exports are the residual after local consumption or demand, which is relatively inelastic, is met. With the growth in the population and the consequent increase in the domestic consumption of coconuts, the exportable surplus of coconuts is bound to decline over the years unless production levels are raised. The policies so far followed,
e.g. replantation, rehabilitation and
fertilizer subsidy schemes, have failed to make a substantial impact on coconut production in Sri Lanka. The response of the small holder in particular to such policies has not been very encouraging. The current coconut crisis calls for new approaches and new thinking on the development of the coconut industry.
EconoMIC REview, JANUARY 1977

Page 19
The recent drop in coconut production is primarily a result of the adverse weather conditions that prevailed in the country from about late 1975 to the middle of last year. (It takes approximately One year for the weather to affect the coconut crop). The decline in the crop which began around SeptemberOctober last year is expected to continue until about May this year when home recovery is expected. This is the highest production shortfall recorded in recent history and coconut prices have never before risen to
such high levels.
State of the Industry
Although coconut is generally grouped along with tea and rubber as a plantation crop, there are Certain characteristics which sharply distinguish coconut from other plantation crops. The estimated acreage under coconut (I.2 million acres) is only second to the acreage under paddy (I.4 million acres) and is twice that of the acreage under tea or rubber (around 6oo,ooo acres). Unlike other plantation crops, coconut is primarily a smallholder's crop with around two-thirds of the acreage below 25-acre hollings and with 35% of the acreage below five-acre hollings. Only Io9% of the coconut lands came under the Land Reform compared with 63%, in tea. Only O.6% of the coconut lands were owned by companies compared with 40% in tea. Foreign capital and ownership and the use of Indian labour were never an important feature in the coconut plantations. Coconuts were planted and developed by the villagers as home gardens and small holdings and by the indigenous (lind-based) capitalist class as estates. Despite the large acreage, employment creation in coconut cultivation is quite low. According to the Socio-Economic Survey of 19697o, the number of persons employed in coconut cultivation was only 84,Ooo compared with over 6oo,Ooo in tea cultivation. The employment per acre is less than o. I persons compared with over I.O in tea. However, unlike tea or rubber, coconut has been the base for the development of a substantial industrial sector in the rural areas. There are around 5o coconut oil mills, 75 desiccated coconut mills, over 6oo coconut fibre
EconoMIC REVIEw, JANUARY 1977
MONEY SUP
Sri Lanka’s mo as the sum of cu deposits held b from Rs. 3,088 m I975 to Rs. 4,166 Of I 976. This rei of Rs. 1,078 mill I976. This is the the money supply years. The inct supply in 1975 w; in 1974 it was 69
Fad
AMone
I972 I973 I974 I975 I976
An important í this increase in this the increase in the of the banking sy and Commercial eXternal assets Oft Rs. 1,4O2 million representing an i million or 68% du increase was large export earnings a import payments utilisation of imp contrast, both in
mills, and thousar dustry units engag of coir yarn, rop manufacturers and of coconut shell c the soap industry as its principal 1 animal husbandry i nut poonac as it and the local dis almost wholly d coconut palm. In nut industry has b lop linkages with th and to integrate economy in contras nature of the tea tations. Anothet characteristic of the is that on the av thirds of the produ consumed locally represent the Surp quirements of the met. Both in tea uses account for the production.
 

PLY RISES BY 35 PER CENT
ney supply (defined rrency and demand 7 the public) rose illion at the end of million at the end presents an increase On or 35% during
highest increase in recorded in recent ease in the money is less than 5% and
/ O
0fYear % change over у Уиpply previous *s. 77. Jear ! 248. I I5.4 2778 I2.O 2.946 6.o გO88 4.8 4. I66 35.o
actor which led to 2 money supply was 2 net external assets stem (Central Bank Banks). The gross
the country stood at
at the end of 1976 increase of Rs. 568 Iring the year. This ly a result of higher nd aid flows, lower
and also underOrt allocations, In
I974 and 1975 the
lds of cottage inged in the making e and other coir in the production sharcoal. Besides, u Ses coconut Oil aw material, the industry uses cocos main feed stuff tillery industry is ependent on the this way the cocobeen abla to devehe village economy with the village t with the 'enclave
and rubber plandistinguishing : coconut industry erage about twoction in an year is and the exports lus once the relocal market are and rubber local sess than Io9% of
external assets of the banking system recorded a decline thereby exerting a contractionary influence on the money supply. The other major contributory factor to the expansion of money supply in 1976 was the increase in
MiONEY SA PO Y Million.9 C 21222S jų 400
ಜ್ಯ000
35600
T○TAL 〉/sし4PPLy
3200
2800
2:00
pe MAND pÉ2O61s 2000
600
1200
8OO
○U4RQETN○×
oQکہل
1972 1973 197 1975 1976
Source: Central Bank of Ceylon
the bank credit expansion to the (a) private sector and (b) to the Government, on a scale much larger than in previous years. The higher credit expansion to the private sector could have been partly a result of the higher credit requirements of the export trade following the rise in export prices. There was also an increased recourse to Central Bank and Commercial Bank credit during the year to finance government operations. On the other hand, there was a sizable increase in the time and savings deposits of the private sector which exerted a contractionary influence on the money supply. The principal factors which changed the money supply during January-December 1976 are summarised below :
Expansionary Factors RJ. z. (a) Increase in the external banking
assets (net) - 470. I
(b) Increase in the commercial banks'
credit to the private sector 539.5 (c) Increase in banks' credit to the
Government 729,9 (d) Other factors Ι67.3 Contractionary Factors (a) Increase in time and saving de
posits of the private sector ... 5 o8. I (b) Other factors - ... 32 І.4 Changes in money supply + хо74
17

Page 20
T R A DE
SRI LANKAoS TETRADE BALANCE IMPROVES
Sri Lanka's merchandise trade showed a favourable balance in 1976 for the first time since 1965, according to our Customs data. Throughout the period 1966 to 1975 the country had been running a persistent deficit in the merchandise trade account and in I975 this deficit reached a record figure of Rs. 1,318 million. The favourable balance registered in 1976 amounts to Rs. I2O million which is a result of higher export earnings and a decline in our import bill. Customs data shows that in 1976 export earnings totalled Rs. 4,815 million, registering an increase of Rs. 88.2 million or 2.2%. Over the previous year's earnings of Rs. 3,933 million. Meanwhile, the value of imports which reached a peak of Rs. 5, 31.8 million in 1975 registered a drop of Rs. 63o million or I2 per cent from the I 975 figure to reach Rs. 4,688 million in 1976. The food import bill particularly was far less than in 1976 though the increased value of petroleum imports nullified much of this reduction.
Sri Lanka's foreign trade position over the last 13 years is seen in the table below.
FOREIGN TRADE 1964 - 1976 (Rs. Million)
Exports Imports Balance of
Year (fo.θ.) (α.i.j.) Trade Ι964 Ι876 - 1975 - 99 I965 I948 I 474 - 474 I966 I7oo 2028 - 328 I967 I96o I 738 - 48 1968 2O35 2I73 - I 38 Ι969 I9I6 2543 ー 627 Ι97Ο 2O35 23I3 - 28o Ι97 Ι. I947 I986 - 39 I972 2OO9 2ο64 - 55 2 I973 26I7 2715 - 98 I974 3472 4554 -Io82 I975 3933 53 I 8 -I 318 п976 4815 4688 -- I 27
*Including re-exports.
Source: Central Bané Annual Reports
and Ceylon Customs Returns.
A significant feature in Sri Lanka’s pattern of trade has been the consistent rise in the trade deficit since 1971 when it reached a peak of Rs. 1,318 million in 1975 and then showed a dramatic reversal with a surplus in
Ι976.
18
It may be noted t regarding a favour is based on the Cu that these statisti reflect the actual tra the delay in record and imports. Hov this data is all adju drawbacks, there that the balance of in 1976 should sh improvement relati year.
Imports
Food imports hav a major part of St bill. In 1976, how time petroleum larger slice of out rice and cereals. P which upto 1973 below Io9% of the have shown a contii over the last three y million petroleum the total import bill major food items ( sugar took up abou fall in prices of rice in the international import value of t was only RS. II, 54C pared with Rs. 2,45 and Rs. 1,767 milli
The other majo were fertilisers arms million; and textil fibres and cotton y Rs. 94 million in ) significant items o were machinery an motor Vehicles. S6 major items of it and I976.
MA.
(tezag Petroleum Rice and Cereals
Flouf - - - Textiles, Synthetic Fib) Fertilizers Sugar o Sub Total Total Imports

露
hat the conclusion able trade balance stoms records and cs often do not de flows owing to ing actual exports wever, even whensted to correct the can be no doubt merchandise trade ow a considerable ve to the previous
re always taken up i Lanka’s import ever, for the first products took a import bill than 'etroleum imports nave always been total import bill nuous rising trend ears. At Rs. 1,196 took up 26% of in 1976 while the pf rice, flour and ut 33%. With the 2, flour and sugar market, the total nese commodities million as com5 million in 1975 on in 1974.
: items of import unting to Rs. 76 les and Synthetic arn amounting to 976. Two other f import in 1976 d appliances; and e table below on import in 1975
Exports
The exports of Sri Lanka reached Rs. 4,815 million in 1976, the highest on record for any single year up to date. Mainly responsible were the earnings from the leading primary commodities: rubber, coconut, tea, spices and coffee. These three groups of exports amounted for as much as 75 per cent of the total export earnings in 1976. Tea, spices and Coffee brought in Rs. 2,713 million or 44. per cent of the country's export earnings in 1976. In 1975 these same items accounted for 55 per cent of all export earnings. Earnings from rubber, however, showed the highest
increase in value terms for any pro
duct. The additional earnings from rubber amounted to Rs. 238 million in 1975. The 1976 increase in earnings from coconut were negligible amounting to an extra Rs. 3 million Only. Among the non-traditional items where significant increases were reached were gems and precious stones Rs. 82 million or 45 per cent increase; textiles and textile articles Rs. 62 million or 57 per cent increase; mineral fuels Rs. 81 million or I 38 per cent increase; and fish and crustaceans Rs. 53 million Or I 45 per cent increase, the largest for any product group. See table on next page for major items of export.
Countrywise too there were significant changes in Sri Lanka's trading pattern according to data recorded by the Sri Lanka Customs; the most important being the drop of the People's Republic of China as a supplier of imports from number one in 1975 to number 19 in 1976.
OR ITEMS OF IMPORT 1975 AND 1976
(Rs. Million)
res & Cotton ...
I975 1976
Value of % of total Value of % of total imports 207ff ήηρογές import
894 I7 II 96 26 . II 98 22 787 I8 ΙοΟ6 I9 686 I4 Ι 67 3 26. 6 2O8 4 78 3. 25 Ο 5 66 芝 3723 7o 3O74 69
53.8 OO 4688 ποο
EconoMIC REVIEW, JANUARY 1977

Page 21
MAJOR ITEMS OF EXPORT IN 1975
(Rs. Million)
Ifew
Tea, Coffee and Spices Rubber ... - - - Coconut and its products Gems and Precious Stones Textiles and Textile articles Fish and Crustaceans Mineral Fuels
Sub Total
Total Exports ...
Sources of Supply
A notable feature in our import pattern during 1976 was the increasing value of imports from the Middle Eastern countries. This trend was strengthened over the last three years and in 1975 as much as 17 per cent of our imports were from the Middle Eastern countries. In 1976 the value of imports from these ce intries amounted to nearly 25 per rint of all Sri Lanka’s imports. The main reason being that petroleum has been figuring larger in our import bill. -
The value of supplies from Third World countries had also increased and the significance of this shift is observed when comparing the difference over a ten-year period. In 1966 only 24.5 per cent of our foreign purchases were from the Third World countries, by 1976 it had increased to 48.5 per cent. The two largest suppliers to Sri Lanka were Saudi Arabia and Iran from where nearly all our crude petroleum was imported.
U.S.A. and Japan continued to be important sources of imports for Sri Lanka in 1976. U.S.A.'s share of our imports moved up from 6.4 per cent in 1975 to 8. I per cent in 1976, while U.K.’s share moved up from 4.3 per Cent tO 5.9 per Cent.
China which was our leading foreign supplier over the last several years and was the chief supplier of imports in 1975 providing Rs. 662 million or I 2.6 of our total imports in that year recorded a heavy drop in I976. According to the Customs Returns, Sri Lanka imported goods from China to the value of only Rs. 56 million or I.2 per cent of total imports in 1976. In terms of this data China had dropped to number
EconoMIC REVIEW, JANUARY 1977
I975 Ι976 ീdle Malzge Ris. m2. Rs. 772.
2,237 2,оо8 892 655 5 o8 5 O5 264. I 82 Ι73 I I I 75 22 I4O 59
4,29O 3,542
4,815 3,933
I9 as a source Lanka. The in
situation, howe part of China’s Came to Sri Lank According to Sources as much
IMPORTS :
Sri Lanka’s 25 mai pr
Οομη έry ARr. , Saudi Arabia 637 Iran - 28 置 S.A. 337
apain Pakistan 懿 France 429 U.K. - - - 223 Australia ... 429 Burima 真2直 Germany,
Fed. Rep. 252 India -- I5 O Thailand ... 356 Canada 62 Singapore IO4 U.S.S.R. ... 直直之 Netherlands 46 Sweden 36 Belgium п7 China, People's
Rep. ... 662 Italy - - - 38 Korea, South 直8 German,
Dem. Rep. 24 Sudan ... I 3 Hong Kong 8 Yemen Nil
Sub Total 4,959 Other
Countries 292
Total (all countries) 5,251
from Burma and
from Thailand W. the Chinese Trade Also, about 24,oc 1976 supplies we
 

NID 1976
Increase in 1976
Rif. 77. %
229 22 238 37 3 - 82. 45 62 57 53 I45 8 Ι I 38
748
I82
of imports for Sri 1ain reason for this rer, is that a large annual rice supplies a from other sources. Food Department
as Ioo tons of rice
(975 AND 1976
in suppliers of foreign oducts
975 1976
z. % Ri. m. %
r 2. I 595 直2.8 4、2 499 Ιο,6 6.4 379 8. I 8.5 37 8. I 4. 2, 3 Ι 7 6.7 8.2 2.94 6.2 4·3 275 5.9 8.2 273 5.8 2.3 23. 4、9
4.8 Ι83 3.9 2.9 I8I 3.9 6.8 I7I 3.6 I.2 Ιο6 2.2 2.O. 79 I.8 2。互 72 I-5 o.8 7o I.5 O.7 59 I.3 O. 3 56 2
I 2.6 56 2
O.7 52 O. 3 37 Ο
o. 5 3 και ο.7 O.3 28 o.6
O2 25 O.5 I9 \ o.4
94.7 4,468 95.3
5. 22.Ο 4.7
I9o,o 4,688 IOO.o LSLSLSLSLS 4o,ooo tons of rice re supplied under protocol for 1976. o tons of China's e received at the
end of the previous year and were
recorded under 1975 imports.
Pakistan movedinto position number 5 from number Io in 1975. Her importance as a trading partner of Sri Lanka ever since the birth of
Bangladesh has come to be estab
lished; in 1976 she took up position number five as a supplier to Sri Lanka and position number three as a buyer of Sri Lanka’s products.
Foreign Markets
China continued to occupy top position as a buyer of Sri Lanka's produce purchasing Io9% of our total exports. U.K. and Pakistan shared position number two and three respectively, while, USA held the same position as in 1975 of number four. By way of markets for our produce the proportion of developed countries in the West increased slightly in 1976. The share of purchases by the developing world which reached 33. I per cent in 1975 dropped to 28.7 per cent last year. Most significant were the Middle Eastern markets which took 20.5 per cent of our exports in 1975 and only I 5.5 per cent in I976. See details in table below.
EXPORTS I975 AND I976 The 25 main buyers of Sri Lanka's
Products
1975 1976 Country —
Rs. m. , Rs. 27. /
China, People's
Rep. ... 46o II.7 48I IO.O U.K. - - - 3 II 7.9 465 9.7 Pakistan ... 345 8.8 365 7.6 U.S.A. ... 2I9 5.6 335 7. Ο Japan - - - Ι78 4·列 2I3 4.4 Germany,
Fed. Rep. II 8 3.O I 63 3.4 U.S.S.R. ... IO3 2.6 I53 多·名 Iraq - I90 4.8 耳44 3.O Singapore 5 O I.3 I43 3.O South Africa. I2I 3. I I4I 2.9 Italy - - - 68 I.8 I3 I 2.7 Australia ... IIO 2.8 I 29 2.7 Saudi Arabia 94 2.4 I22 2.5 Hong Kong 59 I.5 I 2 Ι 2.5 Canada ... 95 2.4 II 7 2.4 Netherlands 69 1.8 ΙΙ 6 2.4 Kuwait ... 59 I. 5 IO4 之。夏 U.A.R. ... 12 3. I Ι ΟΙ 2. Iran II 7 3. O IOO 翠。】 Syria - - - 65 I.7 79 I.7 Mexico ... 27 o. 7 57 2 France ... 44 56 1.2 Tunisia ... 4O II, O 54 Libya - I I 8 3.o 44 O.9 New Zealan 34 O.9 42 O.9
Sub Total 3,215 82.0 3,852 82.7.
Other
Countries 708 I8.o 949 17.
Total (all
countries) 3,023 Icc.o 4,8or loo.o

Page 22
TEA Tea Prospects Bright
The prospects for tea appear bright
for at least another year. One of the
major factors in the current tea price boom was the drastic drop in production of coffee and stocks during 1976. London's Tropical Products Institute has forecast that the outlook for coffee during 1977-1978 still indicates a considerable shortfall in supplies, which are likely to remain tight until the turn of the decade’. Exportable production of coffee has been estimated at some 44 million bags, around Io million bags below roasters likely requirements during 1977. Reflecting the forthcoming global shortage of supplies the demand by roasters has continued to remain very firm.
The local tea brokers summed up the position at the end of 1976 on a jubilant note. Among the factors they attributed to causing the affluence that pervaded the tea industry in 1976
Production and Disposal
The increases recorded in production and disposal of tea in 1975 was halted last year with the 17 million kilogrammes fall in our corp in 1976.
Were that ʻʻthe tigi forced Packers a adopt a “wait and regard to stocks.
when crop from t centres suffered acu land alienation,
fertiliser and incr sumption in Ind This pressure bui. enveloped all buy gressed. It was global consumpt
(I) Highest H. (2) M
(3) وو L) (4) , (5) , H. (6) , , Μ (7) , I.( (8) T. (9) , R.
S
(Io) R (II) ,, RI (I2). Highest-ev
(a) Rs. 1.) (b) Rs. IC (c) Ris. I ( (d) Ris. I 1
SLSLSLSLSLSL0SLLL
Production an Lanka crop as C three previous se 1ows:
Annual Crop - - -
Offered in Colombo Auctions (excluding
reprinted teas, sampling allowance and
withdrawals) Shipped to London Auctions Total Shipments from Sri Lanka
I973 Ι974
(in Milli
2.2 2O4.O
I86.o I7.8ך
2 Ι . Ο 23.2
25 I. I I75.2
Prices increase
The increase in the average price of tea last year, over that of 1975, amounted to Rs. 1.67 per kilogramme. The increase in 1975 over that of 1974 was only cents 28.
Net average prices per kilo for teas sold in Colombo Auctions during the last four years were as follows:
NET SALE AVERAGES
I973 I974. I975 I976 (in Rupees per Kilo)
High Grown 4. 6I 6. III 6.2 5 8.o6 Medium Grown... 3.88 5.5I 5.78 7.45 Low Grown ... 3.97 5.88 6.35 7.82 Total Offerings ... 4. I7 5.84 6. I2 7.79
20
U.K. Tea Impor
A significant fez of tea into U.K. W took Sri Lanka as in 1976. Another that U.K. turned pliers for increase among whom we Argentina and M proximately 225,O ported into U.K. was re-exported, going to Japan f and the continent Sweden, West Ger lands, Denmark ai
 

nt liquidity position nd Wholesalers to see attitude with This boomeranged he major producing tely due to drought, non-application of eased internal conia and Indonesia. it up and gradually ars as the year proalso evident that ion increased by
around 4%, whilst production rose by only around 3%. Other factors that made an impact on tea prices were the increased consumption of tea in the oil- rich nations and the boycott of coffee by US consumers, owing to its prohibitive price'.
Tea prices zoomed to unprecedented heights and a new price level was established. Twelve records were notched as against nine the previous year.
The catalogue of Sri Lanka’s new records for the year 1976 reads as follows:
gh Grown Gross Average edium Grown Gross Average ow Grown Gross Average pital Offerings Gross Average
igh Grown Turnover edium Grown Turnover
w Grown Turnover pital Offerings Turnover
ecord price of Rs. 46o/- per
»ecial.
. 9.63 per kilo 8.72 per kilo . 9.27 per kilo . 9.2 I per kilo . 636 million 5 33 million 504 million
Rs. 1,673 million kilo for a FBOPF Super Silvery Tips
ecord price for a Dimbula BOP of Rs. 18.5o per kg.
acord price for a Dust I er Weekly Averages of:
of Rs. 2 I per kilo.
.81 per kilo for High Growns on 5-Io-76. ). 97 per kilo for Medium Growns on 31-8-76. D. 8 I per kilo for Low Growns on 23-I I-76. ..o.8 per kilo for Total Offerings on 21-12-76.
di disposal of Sri compared with the asons were as fol
Ι975 1976 on Kilos)
2I 3.6 I96.6
I93.o I3I.7 I 7.3 真4·3 21 2.5 I99.9
YSYYSLSLSYYYSLSLSLSLSLSLSLSYYYSSL
ts
ture in the imports as that Kenya overa supplier to U.K. striking feature was to several new sup2d supplies in 1976 re China, U.S.S.R., alawi. Of the apoo metric tons inabout Io to I2% the largest amount ollowed by Canada all countries France,
many, Italy, Netherhd Norway.
Particulars with regard to the quantities of tea imported into the United Kingdom during the period January to December 1976, together with the comparative figures for the same period of 1975, according to a leading broker's report are shown,
below :
JANUARY/DECEMBER (in Metric Tons)
Imports from- I976 I975
India ao s 72,343 8I, I59 Bangladesh ... Ιο,9O5 6,878 Sri Lanka 28, 5O7 27,463 Indonesia 8, 182 8,419 Kenya 29,592 26,467 Uganda 6,235 6,744 Tanzania 7。349 8,275 Malawi ... I6,418 I 3,284 Mauritius ... . ... 348 277 Mozambique 9,735 8,677 Zaire I 983و I,720 Other Africa 3,393 3699و China 7,969 5648 و Taiwan 974. 637 Argentine 9,584 6,753 Brazil - 6 Netherlands 蠶 U.S.S.R. a 5,OO 5 4,856 Papua, New Guinea 1,761 п,776 “ Other countries 3, 27 3,427
Total imports . 224,6 Ι2 2I 8,36 Ι
EconoMIC REVIEW, JANUARY 1977

Page 23
F E ATURES
The Perpetuation of Underdev as a Factor in the decline of
-A Study of a Kandyan Villag
Newton Gunasinghe
The problems associated with development and population have aroused vide interest in many parts of the Third World. The conventional view has been that development cauref a drop in population growth, as occurred historically with in the developed countries in the West. In this Case Study the author from the Institute of Development Studies, Sussex,
the young adı parents, whic dependencyra at marriage at the most fertil child bearing to a general fe
(2) (a) The gene.
fertility th social clas last instan
shows how the revere has occurred in Sri Lanéa namely, underdevelopment has led to a drop in fertility.
the econon
The Demographic Theory has number of generally associated the declining (b) The differ rates of fertility with the processes 蠶 unleashed by economic development, related, on i.e. a shift of a substantial proportion dition of
of the labour force from agriculture to industry, a rise in the real income of the people, urbanisation, spreading of education and health facilities, disintegration of traditional family organisation and the increasing participation of women in industrial and service sectors. Historically, the gradual decline of fertility in Western Europe and North America and the sharp decline in Japan, resulted precisely due to these processes. More recently the islands of Taiwan, Singapore and Hong Kong have also been added to this group of societies, which experienced a decline in fertility due to economic development.
During the past one and a half decades, Sri Lanka has also experienced a substantial decline in fertility. The crude birth rate, which was 37.o in 1959 came down to 29.4 in 197o and the downward trend seems to be a continuing one. The objective of this essay is to argue that this decline in Sri Lanka is not related to economic development but on the contrary, to a process that runs in the opposite direction, namely the perpetuation of underdevelopment. 1 The hypotheses advanced can be summarised as follows:
(i) The underdeveloped economy of
I will attempt hypotheses prim data obtained f
The village Delu
Udunuwara Dis
Division, Kandy
miles away fron
district capital. But whenever ne data will be prese them.
The social hist as Delumgoda as with the structur in the country as duction of the pl tant expansion o them and the acc of towns as comr cised a dominativ Kandyan village nineteenth centur
The forces u: structural chang which reacted or further reinforced were taking plac
I. The word “unde: of Baran (I957), in the 'Third WC and perpetuated metropolitan cer
Sri Lanka is incapable of creating sufficient employment opportunities for they young adults who are currently in the marriageable age groups. High rates of unemployment compel
EconoMIc REvIEw, JANUARY 1977
accumulation in the resource trar I port, communica not be taken as source transfer a
 

lopment Fertility:
lts to depend on their gives rise to a high tio. This raises the age d effectively reduces period of a woman's age, thus contributing rtility decline.
al decline in marital at pertains to all the ses is caused, in the te, by the incapacity of ly to absorb a growing
labour units.
antial decline of marital hich indicates a lesser ine among the poor is the whole, to the conunderdevelopment.
to substantiate these arily, in relation to rom Delumgoda'.
Imgoda is located in the trict Revenue Officer's District. It is about II in Kandy, which is the
:cessary, nationwide inted to supplement
ory of villages such te invariably linked ul changes going on a whole. The introantations, the resulthe roads to serve Yompanying growth mercial centres exera influence over the s from the mid
y. leashed by these
es are manifold,
the structure and | the changes that e. For instance,
Land: Part was claimed by the colonial state and was sold to the British companies to be turned into large-scale plantations. The ancestral lands held by the peasant families were converted into commodities sold in the market, thus always tending to alienate the poorest groups of peasants from the land that ancestrally belonged to them.
Commodity Production: In agriculture, the surplus product became a commodity that could be sold in the market. This led to the increasing commercialisation of agriculture and the worsening of the condition of the rural poor who could not rely on the village grain surplus any more.
Monetisation: As a result of the expansion of commodity production, the exchange relations became mainly monetised. Whenever money penetrates a traditional economy, where barter used to be the predominant traditional form, it has a tendency to reify the exchange relations and set them against those social relations on which the traditional social order was based.
Integration: Commodity produc
tion and the monetisation of exchange, logically implies that the village economy gets increasingly absorbed into the national structure and through it inevitably into the world economy. In consumption, as well as in production inputs, the village becomes an organic but a dependent part of the national and the global econOmy.
Wage Labour: Working for a
wage, where the actual producer is alienated from the means of production, emerges in the countryside as an important production relation. This new form of employment as against the old forms, such as labour rent (Rafaéariya),
development' is used here in the sense that it is employed in the works Frank (1969) et al. Underdevelopment is not a condition that existed rld countries prior to the colonial domination. It is a condition created by the colonial powers on the basis of the transfer of resources to the tres. Underdevelopment is mainly a process of uneven development, the metropolis and stagnation in the hinterlands. In order to facilitate sfer to the metropolitan centres, the service sector consisting of transtion, etc. has expanded to a certain degree in the hinterlands, which must conomic development. On the contrary, the societies subjected to ree not developing countries but underdeveloping countries.
21

Page 24
exchange labour (attam) and sharecropping (ande) reduces the content of the social relationship between the employer and the employee (or the partners) into a mere cash nexus and disrupts the traditional social fabric.
All these processes, with their attendant disruption of the traditional social relations can be seen at work in Delumgoda. 9o acres of land border
ing the adjoining village of Hiddaula .
was claimed by the colonial state and was converted into a tea plantation in the late 19th century. This reduced the land area the village could have possibly extended to. But it also provided employment for some of the village poor. Buying and selling of land started in the mid-nineteenth century, alienating the poor from the land and tending to further concentrate the land in the hands of the affluent. The land records are full of instances of mortgage, lease and outright sale.
A single non-resident family group owns 19 acres of paddy land and over so acres of highland. 55.7% of the heals of households in the village do not own any paddy land. Nearly half of them however, possess cultivation rights as they work as sharecroppers for various landlords. 69% of the heads of households do not own any highland (defined as non-irrigated land excluding house and garden). The ownership of houses is
more widespread, with only 19% of
the heads of households having no legal title to their houses.
Agriculture, especially in the past decade, has become definitely marketoriented. The old division between the commercial crops and the subsistence crops no longer holds. Rice, the subsistence staple par excellence, has also become a major commercial crop. Even the poorest sharecroppers, who do not produce enough rice for their own subsistence sell their grain in the market. The bulk of the product going to the market however, comes from the affluent landlords.
In exchange relations, with the exception of the share-cropper-landlord relation, money dominates. The villagers have become consumers inextricably linked with the national market. Barter has disappeared,
22
except in those c. Sents a monetary
In production as tion, Delumgoda grated in the glob. cultivators in Delu high-yielding va which require exp as fertilizer and i. tent of mechanisat Inspite of this, pa become increasing inputs coming fro: sumption too, the dependent on the
ing from outside
sugar, clothes, r. ducts, etc.
The employme indicates the incr with the national the heads of hous of school teachers urban workers) at regular basis in t
and earn monthly
Population
Population ... Paddy land in acres ,
Paddv land Population
Soufc.
of
In the period 19 lation of Delumg threefold. In the i I946-1953, the rat I 2.7%; the growth I953-1963 is 22.4% growth rate is f. period 1963-1974, The very high gr I963-1974 period to the maintenanc rates, but primar into the village. less families fro village of Rabbega the village and o owned by the govt vant period. The trend emerges hov pyramid. The a the largest with 8: by the age group 8I persons. The O-4 age giOup W 64 individuals.

es where it reprelation in content. ell as in consumphas become inteeconomy. All the hgoda use modern eties of paddy, nsive inputs such secticide. The exon is very limited. ly agriculture has dependent on the i Outside. In cOnillagers are heavily commodities com
rice, flour, oil, anufactured pro
it structure also asing integration conomy. 21% of pholds (consisting supervisors and e employed on a he modern sector salaries.
The paddy cultivated area has remained nearly static since 1891. It is possible that the slight increase indicated in Table T is due to better recording methods, rather than to any actual increase in the paddy acreage. The shift from single cropping to double cropping, which occurred nearly twenty years ago and the application of labour-intensive methods, such as transplanting adopted more recently, would have definitely
made the village economy capable of
absorbing more labour units than it earlier did. But the labour absorp
tion capacity of agriculture, in paddy
cultivation or in the cultivation of
other crops is necessarily limited.
Delumgoda would have passed the
capacity of providing employment for all the members of the village labour force, in agriculture and re
lated occupations, at least two decades ago. -
The primarily agrarian economy of Delumgoda, becomes incapable of
TABLE
Growth and Area of Paddy Cultivated in Delumgoda
I88 II I 89 I I 9OI
228 I86 223 37.5 38.5
I6 .2d --
Ι9ΙΙ 192I 1931 Ι946 Ι953 Ι963 1974 255 254 335 37o 417 5 І 3 683
- - - - - - 43. 43.
AMSASASA ASAAAS SAASASSLLL SLLeL0
as: Census Reports, unpublished records of the Department Census and Statistics and Laurie (1896: 358).
I-I974, the popuoda has increased nter-census period e of increase was rate for the decade ; and the highest r the eleven-year which is 33.0%. Dwth rate for the s not entirely due e of high fertility ly to migration
number of landin the adjoining muwa, moved into cupied some land rnment in the reledeclining fertility ever, from the age e group Io-I4 is persons, followed
5-9 consisting of top is sharp in the ich includes only
supporting the growing population, which is a result of the historically maintained high fertility rates, supplemented by the declining mortality rates. If the members of the labour force are to be employed, it becomes imperative to create employment opportunities in the non-agrarian sector, either within or outside the village.
Such a programme would require a high degree of capital accumulation which in the last analysis rests on the amount of the surplus extracted and the ways in which it is disposed of. Baran has demonstrated the availability of two varieties of surplus in the underdeveloped countries (i) the actual surplus and (ii) the potential surplus. (Baran: I957).
A part of the actual surplus is directly exported to the international metropolitan centres and the rest is conspicuously consumed by the upper
EconoMIC REVIEW, JANUARY IQ77

Page 25
classes. The potential surplus however, is never realised due to the irrational nature of the social organisation of production.2 The perpetuation of underdevelopment thus makes it impossible for a country to create sufficient employment for its labour force, which could only be created in the non-agrarian sector.
A step in the right direction however, was made when a powerloom factory, administered by the Department of Small Industries was established in Delumgoda. The factory primarily depends on female labour and employs I2O women. But the factory recruits labour from the entire Udunuwara Revenue Division which had a population of 66,368 in 1971. As a result, there was great competition to get employment in the factory and only twelve women from Delumgoda succeeded in doing so.
Though Delumgoda is located only II miles away from Kandy, the unemployed young adults of the village find it extremely dificult to find employment in the city. Kandy, like so many cities in the Third World is not a manufacturing centre, but a centre of circulation. As an administrative and commercial nucleus, the amount of employment opportunities it could create are limited.
The insufficientemployment opportunities in the non-agrarian sector, thus emerge as the basic factor related to the prevalence of high rates of unemployment among the young adults. The gravity of the problem is heaviest among the educated youth (lefined as those who have completed their G.C.E. 'O' Level). This does not however, imply that the lesseducated youth have sufficient employment opportunities. Some of them in Delumgoda have become seasonally migrant agricultural workers, travelling 7o miles or more to the North Central Province where the wages are high during the peak periods of the agricultural cycle. In the village context they can only hope for casual employment, which
Ag
I5 - I9 2O - 24 25一29 3 O - 34. 35一39 40 - 44 ... 45 - 49 on
*Includer person.
means being id days per month. especially in the classes, often coi dent on his pare late twenties.
peasants, the yo his parents in W if he is educated he would not tak job'. Among th the rural work dependence of y parents is lessert but it is by no m.
As seen in Ta Women in the a unmarried, Eve 20-24, the marital ge significantly the women are u Women continue the age group in in the age group
Proportio
I5 - I9 2O - 24 25 - 29 3 O - 34 35 - 39 4O - 44 45 - 49 *The relevant one and Kurunegala (Source for statist
2. A share-cropper who obtains his inputs (seed paddy, insecticide the landlord can be cited as a case in point. Since he is compell produce and the cost of the inputs to the landlord after the harv does not show much interest in applying all the inputs. It may be his point of view, to sell them to some other cultivator on the black across several disputes between landlords and share-croppers whi sales of inputs. If every cultivator owned the plot that he cultivate to pay rents, this is unlikely to occur, and the harvest would also be of potential surplus refers to such unrealised wealth, which does r cisely due to the irrational organisation of production.
EconoMIG. REVIEW, JANUARY 1977
 

TABLE III e-Specific Marital Statistics in Delumgoda, r974
Married Not Married
Total Male Female Male Female Male Female
7Vo. Ava. - Va. % % % % 86 38 48 Ο Ο 2.O OO, O 98.o 7o 37 33 5.4 8. I 94.6 8I.9 65 34 3 I 39.4 58.o 6o.6 42.O. 42 2I 2 47.6 7I4. 52.4 28.6 42 2. 2. 7 I .4 90.4. 28.6 9.6 28 I5 I3 86.6 92.3 I3.4 7.7 25 7 18 - 85.7 Ioo.o I4.3 O.O.
divorced and widowed.
e for ten to fifteen change significantly with only 28.6%
The young adult, being un married.
The data in Table III pertains to
rural lower middle ntinues to be depennts well into his/her
Among the midling adult may help orking the land, but (which he often is) e to cultivation as a e poor peasants and ers the degree of oung adults on the han in other classes, bans absent.
ble II 98.o % of the ge 9 fOup I 5-I9 afe n in the age group rate does not chainand about 82% of nmarried. 42% of to be un married in 25-29 as well. Only 30-34, does the rate
the
island and the relevant zone in
dicates a number of important trends.
()
(ii)
The overwhelming majority of women in the age group I5-19, remained un married; a substantial proportion of them get married in the age group 20-24, but still more than half of them continue to be un married. In the age group 25-29, nearly 80% of them are married and the proportion ofunmarried women significantly declines thereafter.
The comparison of figures that
pertains to I 963 and I 97o indi
cates an increase in the proportion Of unmarried women in all the three relevant age groups in between 15-29. In the relevant zone there had been a sharp increase in the proportion of unmarried women in the age group
TABLE III
ins of women not married by age group for Sri Lanka,
the Relevant Zone and Delumgoda
Delungoda
5γή Ιαηβα 2ome is 1963 I97o 1963 I97o 1974
85.o 9 I-3 85. I 92.8 98.o 4I-3 56. I 36.3 58.3 8I.9 I7. I 22.9 I2.8 I9.2 42.O 8.3 9.O 5.8 5.3 28.6 4.8 S.O 3.4 3.0 9.6 4・3 2.8 3.2 2.2 7.7 39 2.3 2.6 2. Ο, Ο
consists of Kandy, Matale, Diafričtír.
Numvara Eliya, Badulla, Ratnapura, Kegale
is on Sri Lanka and the Zone; Fernando I974)
fertilizer etc)... from d to pay 5 o'4 of the est, the share-cropper: more profitable from market. I have come th resulted from such i and was not obliged greater. The concept ot actualise itself pre
20-24. The proportion went up from 36.3% in 1963 to 58.3% in І97О. -
The village data indicates more or
less
the same tendency, i.e. a very
high proportion of unmarried women in the age group 15-29. They vary however from the national and zonal
23

Page 26
figures, as the tendency is particularly pronounced in Delumgoda. Further, a comparatively higher proportion of women seem to remain unmarried, even in the age group 4o-44. It is likely that this is due to a number of factors :
(i) The figures that pertain to the Zone include the population living on the plantations. The socio-economic structure and the
cultural values among the plan
tation workers are quite distinct from those of the Kandyan villagers. In general, the plantation workers tend to marry early and it is possible that the data pertaining to them has raised the general proportion of married women.
It is obvious from the zonal figures that the rate of increase of the proportion of unmarried women in the age group 20-24 between 1963 and 197o is 22%. If one assumes a linear trend, by I974 the proportion would have increased to 70.9%, which is closer to the proportion of wOmen un married in Delumgoda.
The Kandyanareas are hinterland communities, in relation to the coastal areas in the Western Province. The process of underdevelopment is most pronounced here. Since the employment opportunities in the non-agrarian sector are at least available in the Kandyan villages, the proportions of women un married also may be high.
(ii)
(iii)
The nationwide decline in the proportions of women un married has also been explained in relation to purely demographic factors. Fernando (II 975) for instance, has attributed it to an imbalance in the sex ratio of the corresponding age groups. Thus in 1971, there were only 8I.I. males per Ioo females (relevant age group being 15-29 for females and 20-34 for males). The figures for Delumgoda are comparable; for Ioo females in the age group 15-29, there are 82. I males in the 20-34 age group. No doubt, this imbalance has contributed to the problem, but nevertheless it does not casually explain its existence. If the problem is entirely due to the imbalance one would expect a higher proportion of males in the relevant age group to be
24
married. In Delun group 2 O-34, 23.9 O by comparison, in I 9-29, 22.3% of w. The difference is
warrant an explana imbalance of the se
TABL)
Average number of
per currently mai age group and in Delumg
I5-24
Class I ... Ο Class II ... Ο Class III ... I.O. Class IV ... Ο
Class V Ι . Ο
Class I consists C visory workers ar. white-collar employ land owners. In th marriage is high. T whose parents hold tions, are forced b get married to m. employment and a The bridegrooms o pect a dowry, espec is unemployed. T lems particularly i with a number of marital fertility rat is also comparati parents expect their plete at least thei: cation. They also better schools loc village, which im muting by bus. children of this st cultural work. T only in the mid-tw fits coming from system are more t heavy expenditure members of this motivated by an i mobility. Seen ideology, a large f. is capable of main not make much ser
3. The state is the maj much-sought-after basis of merit. Hic a highly important Assembly, is thoug people with suffic dations.

goda, in the age men are married the age group men are married. too marginal to tion based on an
ratio.
| IV
children ever born ried women by
social class
oda, I974
ゆー34 35-44 45-54
I.6 5.o 6.o 2.2 4.O 6.2 3.6 7.2 8. I I.3 5.5 7.O
3.9 5.7 IO.O
if teachers, superd other salaried ees who often are s class, the age at he young women,
the above posi
y social values to ales with regular monthly salary. f this stratum exially if the woman his creates probin those families
daughters. The e in this stratum vely low. The
children to comr secondary eduend to attend the ated outside the plies daily comMoreover, the atum do no agrihey start earning enties. The benethe state welfare han offset by the involved. The class are strongly deology of social in terms of this imily, though one taining one, does |SC;
Case A: MGJ, a schoolteacher is 35 years of age. He was born to a family of land holding cultivators and attended a government school 6 miles away from the village. He joined the Education Department as a teacher, after completing his secondary education and entered a teacher's training college later. He married MA, also a school teacher, whom he met at the teachers' training college. It is a cross-caste union. Their joint income in the form of salaries received, is in excess of Rs. 75 of- per month. MGJ has not yet inherited the land due to him from his father as the latter is still alive. Last year he purchased an acre of paddy land, which is given out for share cropping. He obtains around 4o bushels of paddy per annum, as his share.
MGJ married 5 years ago, when he was 3o years of age; his wife was then 27 years old. They have two children, a boy aged 4 and a girl aged 2. He would like to have another child, but not as yet. He is also thinking of moving closer to Kandy when his children grOW lup.
MGJ is aware of family planning techniques, but has relied mainly on natural methods. No child of this family has died in infancy.
Class III consists of owner-cultivators who are not compelled to sell their labour. They own plots of paddy land and highland which provide them with a sufficient income to maintain their way of life. In this social class too, the age at marriage is comparatively high. The younger members of this class are also education-oriented, but their chances of getting employment are not as high as those of the former class. Their parents do not possess the same influence as those of Class I, in rural society, to find them employment. When they get employed in the modern sector they tend to get less prestigious jobs in spite of their educational accomplishments. In seeking partners, the young women of this class are not entirely motivated to find one with regular employment and a monthly salary. But they are unlikely to get married to a rural worker with no land. The marital fertility in this class is lower than that of Class I, but is higher than the rate that pertains to the ponr peasants and the rural workers. The children of this class are not as alienated from
or employer in Sri Lanka's modern sector. The recruitment into these positions in the state and the semi-state sector, de jure occurs on the wever, in the de facto recruitment procedure, political influence plays role. A recommendation from the local representative to the State ht to be necessary to obtain many jobs in the state sector. Only the ent influence in rural society are capable of getting these recommen
EconoMic Review, JANUARY 1977

Page 27
agriculture as those of the former class. They help their parents in agriculture. But the economic benefit gained from this, loses its significance due to the money that has to be spent on their education.
CaseB: DMD (aged 4o) is an owner culti
vator, who owns a home garden one acre in extent, an acre of paddy land and two acres
of highland. In addition, he has leased on
money rent, half an acre of paddy land. He also owns a small building, where a shop used to be located, but now he derives no income from this, as there is no tenant. His monthly income from land exceeds Rs. 4oc/- per month.
He was 27 years old when he married DMS who was then 23 years old. They have five children, two boys and three girls. Their age distribution is as follows: I2, Io, 8, 4 and 8 months. The three elder children attend the school located in the village. The spacing of children, especially in the case of the younger three indicates that DMD is conscious of the problem of having too many children.
DMD thinks that it is better to have sons than daughters. In fact, he had been expecting a son this time, when the baby girl was born. Though he is aware of family planning methods, he believes that the force of Karma operates in deciding the number and the sex of children.4
The two boys aged 12 and Io help their father in agriculture, performing less demanding tasks. But DMD would prefer them to have jobs in the modern sector when they grOW սp. -
DMS (the wife) has obtained family planning advice from the midwife. No child in this family has died in its infancy.
Class III consists of poor peasants defined as those who either own small plots of land or who are sharecroppers. All the poor peasants obtain an income from land, but are compelled to sell their labour to supplement it. The age at marriage is slightly lower than in the case of the former two classes. The young members of this class are not as education-oriented as those in I and II. They attend the village schools but often drop out without complet
ing their secondary education. When
someone from this stratum conpletes his secondary education, he is less likely to find a job in the modern sector. Thus the possibility of marrying early among the young, who primarily consist of secondary school drop-outs, depends on the labour requirements that the agrarian sector can generate. The sons of this stratum
are unlikely to i from their pat Owner-cultivatic cess of fragme population grov members of th: skilled irregula marital fertility i as the investmen is less. In th children help th vation. They
money if the d Il ob our would h D lumgoda does opportunities in
The State soci
emerges as an
influencing the this class. The be manipulated of a family livin tence level. In do not pay ince well as adults) per week free o two pounds at price. The rati these people to commodities, si sugar, clothes e level, food hab change and rice Some of the free the co-operative money is used to The ration card 3/4 lb. sugar per of sugar in the between Rs. 8. It is possible to s for Rs. 6.oo to spends only 72 If one had seven have nine ration sugar alone on 54.oo, which is in of the head of th days.
But even in th fertility is slowl must be related to employment opp of infantile mort class and the life paratively low.
4. Buddhism teaches that every volitional action has its result which it in this life or in the later lives. Karma is the force that is attribute one has committed in the past births or in the past of the present actions are capable of giving good results i.e. birth in an exalted p. while bad actions cause birth in an inferior position and much fortune and misfortune can be explained in terms of the Karma t
EconoMIC REVIEw, JANUARY 1977

herit sufficient land :nts to depend on 1. The double protation of land and th drives the young s class towards unemployment. The comparatively high, the children require is stratum also the eir parents in cultiwoul. I have earned emand for unskilled lve been high. But not provide enough that direction.
l welfare system also
important variable fertility patterns of welfare system could to suit the necessities g at the bare subsisSri Lanka, all who me tax (children as receive I lb. of rice charge and another a special subsidised on card also entitles obtain various other uch as dried fish, to. At the poorest its of the villagers
becomes a luxury. rice obtained from store is sold and the buy bread and yams. entitles everyone to month. The price
blackmarket varies oo and Rs. IO.OO. ell a pound of sugar a peddler and one cents in buying it. children, one would cards and by selling e would earn Ris. hore than the wages e household for ten
uis class the marital y declining, which the general lack of rtunities. The rate ality is high in this expectancy is com
may come to one either d to these actions that birth. Good volitional osition and well being, suffering. Thus both leOfy.
Case C. HGS (aged 45) is a share-cropper who cultivates a plot of paddy land half an acre in extent. In addition, he also cultivates a half acre plot owned by the temple of Lankatilaka and pays labour rent in the form of carrying the insignia of the deity in the annual temple procession. The landlord charges the cost of the inputs which he advances, plus 50% of the produce. From paddy cultivation and wage labour, HGS earns around Rs. 20of- a month. His eldest son contributes another Rs. 6o/- to Rs. 8o/- to the family coffers.
He married VGHM (now aged 40), in I952. It is a Binna (uxorilocal) union and the woman is his cross-cousin. VGHM gave birth to eight children but one of them died in infancy. The age distribution of the surviving children is as follows; 21, 19, 17, I 5, 13, Io and 6. None of the children are married. The three elder children are secondary school drop outs. The younger children, except the one aged 6 are currently attending the village school. The elder children help the parents in agriculture activities
HGS has not invested very much in his children. In fact, they have become economic assets to a certain degree, as they help him in agriculture, earn some money and also valuable assets in manipulating the state social welfare system. But the children would have been of greater benefit if (i) HGS held more land and/or (ii) if employment opportunities in the agrarian sector were readily available. Since this is not the case even in the poor peasant stratum, the rationality that was once attached to having a large family is gradually being eroded.
Class IV consists of urban workers who are resident in the village. They generally come from the ownercultivator families and are employed in the urban areas as watchers, peons, drivers, etc. The majority of the urban workers own land in the village which accounts for their continued residence there. Generally, they enjoy living standards superior to the poor peasants and the agrarian workers.
As far as value-orientations are concerned, they are closer to Class I than to any other agrarian stratum. An ideology of social mobility pervades this stratum; they who are blue-collar workers are interested in pushing their children to the whitecollar stratum. Hence, education becomes an important field of investment. The majority of them however, cannot afford to send their children to the prestigious urban schools. The children of this class attend either the village schools or the government secondary schools located near to the village.
The girls of this class are interested in getting married to a man with a monthly salary and regular
25

Page 28
employment, even if he is a blue-collar worker. This raises the age at marriage and the proportion of young women unmarried in this category is high.
Marital fertility in this class is closer to that of Class I. Since the urban workers are less agriculture-oriented than the other agrarian strata, children are not important to them as labour units in agriculture.
Case D: DGW (aged 38) is a Police Constable, attached to the Kandy Police Station. He commutes for work daily. He owns half an acre of paddy land, a house and a garden. The paddy plot is cultivated by means of wage labour and he obtains approximately
so bushels of paddy per annum. His salary is Rs. 4oof
He married LGB (now aged 36) from Kandy, seven years ago. They have three children, two boys and a girl, respectively aged 6, 4, and I.None of the children are yet old enough to attend school. DGW is conscious of the burden of having a large family. When his children grow up he will have to invest in their education. Moreover, since the land owned is cultivated by wage labour, the children are not important as
labour units.
DGW is practising modern family planning methods; he obtained advice from a doctor attached to a rural maternity hospital six miles away. No child in this family has died in infancy.
Class V consists of rural labourers who possess no rights over productive land and who entirely depend on income from wages for their sustenance. This excludes the share-croppers and temple tenants who possess some form of right overland. The members of this class are rural labourers, who work in the paddy fields and the high land. They are also engaged in various unskilled tasks such as carrying weights and assisting skilled workers of certain categories. Their employment is of an irregular nature and they are fully employed only at the peaks of the agricultural cycle. The paucity of demand for their labour in the village has driven them to become migrant workers and some of them travel to the North Central Province in the planting and harvesting seasons.
In their value-orientations they are not very different from the poor peasants. Their children attend only the primary school and many of them drop out. Though the Government schools do not charge fees, the cost involved in buying books and dressing the children properly is exorbitant in comparison to the income. The investment on children is low.
26
On the contrary, ju of the poor peasant ing the social we children become
Hence, the marital high.
The age at marriag ly low in this class expect to marry 2. employment or a la Vator. Do Wries are given. As soon as capable of getting ment, if he has no 1 to his parents and a position to get quently does so.
Case E: KMA (aged 4 He owns no land; the hl stands on a plot of land cratic land-owning fami any monetary rent, bu work on his landlord’. seasons, without paym any irregular employm way, both agricultural cultural. When he w fields, he receives Rs. 5 and snacks. He is not works on the highlanc gaged in non-agricultl Mostly piece-rates pret negotiated. His wife, works for wages when which generally happen of the paddy cultivati Rs. 3.oo to Rs. 4.oo pe employment.
KMA married TGM were respectively aged from Delumgoda itself cross-cousin of KMA. nine children but one age distribution of t children is as follows: 4 and I. The two eld attend school. The si primary school but dr. pleting only grade 2.
The grown-up girl money, but spends he her younger siblings. number and the sex of ded by Karma. But h with the sex of the ch number. If his first E now he would be in a father’s burden. His s a son but he died du KMA is aware of fan but is not convinced of methods could bring h
Conclusion
The decline offe is directly associat tors: (i) very high married women group, and (ii) a the marital fertility system, where p highly disapproved these un married v

st as in the case y, in manipulatfare system the valuable assets.
fertility rate is
je is comparativeA girl cannot han with regular nd-owning cultinot expected nor a young man is regular employmajor obligations siblings he is in married and fre
I) is a rural labourer. ut which he occupies owned by the aristo
ly. He does not pay
t he is expected to s fields in the peak ent. He undertakes lent that comes his as well as non-agriorks on the paddy .OO per day plus tea given food when he or when he is enural unskilled work. Vail and the wage is TGB (aged 38), also I she can find work, is in the peak periods on cycle. She earns r day when she finds
in 1955 when they 22 and 19. She came and is a callificatory
TGB gave birth to lied in infancy. The he remaining eight
I8, I2, Io, 8, 6, 5, er daughters did not on aged Io attended opped out after com
does not earn any r time looking after KMA thinks that the | the children is decie is more concerned ldren than with their orn had been a son, position to lessen his econd born had been e to KMA’s Karza.
ily planning methods, the benefits that these lf.
ctility in Sri Lanka ed with two facproportions of unn the I5-29 age general decline in rate. In a social e-matital sex is
of, the fertility of 7omen is near to
zero, which contributes to fertility decline of the general population in a most significant way. I demonstrated the causal relationship between these high proportions of unmarried women and the underdeveloped economy, which is incapable of generating sufficient employment opportunities. The decline in the marital fertility trend has two observable features: (a) The rate has declined in relation to all the classes, which partly results from the declining rates of infantile mortality and partly from the low capacity of the economy to absorb labour, which reduces the importance of the children as abour units. (b) The differential rate of decline in relation to various classes results from the operation of secondary variables such as the high investment in children the affluent engage in and the manipulation of the welfare system on which the poor rely.
The declining rate of fertility in Sri Lanka, cannot be explained in terms of the standard demographic transition theory, which assumes sustained economic development as its base. The service sector in Sri Lanka, the transport system, the communication network, the education and the health services have definitely made some advances. But this expansion is heavily, service-oriented, which implies that the bulk of the population is still engaged in the agrarian sector and their real income has remained static or is even decreasing. The expansion of the service sector is not a sign of economic development but a structural incongruity of the economy which in itself is a facet of underdevelopment. Sri Lanka’s case demonstrates that even the perpetuation of underdevelopment, given a certain degree of expansion of the service sector, can generate the necessary conditions for a decline in fertility. References Baran, Paul A., The Political Economy of
Growth, New York, Monthly Review Press, 1957. Fernando, D. F. S., “Differential Fertility in Sri Lanea, Demography, Vol. II, No. 3, August 1974. Fernando, D. F. S., “Changing Nuptiality Patterns in Sri Lanea, 1901 - 1971, Population Studies, Vol. 29, No. 2, July 1975. Frank, Andre Gunder, Capitalism and Underdevelopment in Latin 4merica, New York, Monthly Review Press, 1969. Lawrie, A. D., 4 Gazetteer of the Central Province of Ceylon, Colombo, Government Printers, 1896.
EconoMIC REVIEW, JANUARY 1977

Page 29
Mass Sterilization in in
Ashok Mukerjee
Sterilization was growing into a controversial issue in India in 1976. This article from the New Asia Neur which was reproduced in the American journal Elements records first-hand observations of an Indian writer.
“The farmers tell us the reason we go hungry is that we have too many children.’
Fulcrum magazin were performed, men. But to
snatched up vis trucks, and ope men of reproduct too old to have
months married, already had opet You
you care?
The Scene: A village in the heart of
India. Thirty women, untouchable labourers, speak with bitterness of their poverty, helplessness and resentment against the government which has left them worse off than in the days of British rule when “we earned less but our stomachs were full’. They do field work at 15 cents a day and several hours of housework in addition; on the days when they can’t get work they try to sell grass in the market and “go to sleep starving. The large landowners in this era farm With hired labour but do not invest in the land. There is little irrigation and productivity is the lowest in India, while the people's labour power which could develop the land goes wasted. Still, “they tell us were poor because we have too many children’.
4 year later in the same village and similar ones throughout the region.
| Around January 1976, the government began to use its powers to enforce family planning, and this meant, in India, no playing around with “uncertain’ methods like pills, loops or condoms, but massive, precipitous, enforced sterilization operations.
In the states which went ahead with vigour to enforce this, quotas were assigned to districts and villages. Twenty operations by the end of the week, the headman is told. If there are no volunteers, police are sent. Poor peasants spend nights hiding in the fields, but the quotas are inexorable. “We call it “coercive persuasion ’, say government officials blandly.
“There have been hundreds of operations in my village', says one young factory worker. “There should be family planning, but not this way'.
In the small town of Barsi in Maharashtra a quota of I,ooo operations was set for the week ending February 3, 1976. According to a reporter for
EconoMIC REVIEW, JANUARY 1977
Patient undergoing S. -The aff
In several state misconduct fo ployees to have children. In De school teachers W. three Volunteers on their students. benefits. In many told to bring op before they could ment Worksites of welfare benefits. pitals, doctors u show “results’ ri ordinary operation signed approval fo
Compulsion ha by a widespread paign estimating t lion operations a y could be solved. as Punjab and
 

dia
of Bombay, 1,042 overwhelmingly on o this the police iting peasants on rated not only on ve age but on those children, on men 4 on men who had ations. “What do ll get 5 o rupees!”
'eriliation in Bombay ing edge !”
s it was declared a government em
mOre than tWO
lhi and elsewhere are told to bring in each-via pressure -or lose pay and areas the poor were eration certificates get jobs at governany government In municipal hosnder pressure to :fused to perform s unless the patient r a sterilizzation.
d been preceded propaganda camhat With two milear the “problem' Some states, such Maharashtra, pro
posed compulsory family planning bills, promising as many as one million a year. The first intensified drive was against men, and generally remained so, especially in the cities. But in the remoter villages, it seems the state was going after women also. According to official figures in 1975, 888, 9oo men and 945,ooo Women were sterilized, though the women’s operation is much more arduous.
The campaign was identified with Sanjay Gandhi, Indira’s pro-right and anti-communist son, and reflected also Western pressure. Sanjay began touring villages to say that the old slogan “Two or threeenough’ has now changed: Two is the number. All over Delhi billboards appeared: “You have two, that will do-Sanjay Gandhi’.
But it is the government's Emergency powers that turned this prissysounding moral injunction from a simple “campaign' into a massive
assault on the rural and urban poor.
Why the sudden emphasis on compulsory population control? In one sense it is a culmination of long trends. India was one of the first Third World countries to institute a program of “family planning, and at international conferences it has taken a “moderate-i.e. compromising stand between the militant Third World emphasis on development and the imperialist emphasis on population.
Family planning is crucial for countries like India, especially for women, many of whom are prevented mainly
by their husbands from limiting their
families. But in practice, India's program has not meant successfully giving the people access to techniques so that women could "control their own bodies’; rather it has increasingly meant the state's control of bodies.
It has also meant propagation and widespread acceptance of the official ideology of family planning. The idea that “population causes poverty in many ways fits the prejudices of the bureaucratic elite. Government officials, experts, professors and planners have spoken and written about India’s vast masses as if they were an inert, dull force to be cajoled, forced or manipulated into “progress'. To these elite, the people seem dark, mysterious and an unknown force,
and one may hear a long-time upper
27

Page 30
class social worker, after complaining that social movements never reach the villages (the “real India''), suddenly break in with, “But how they breed, baba’ A large section of the lower middle class has also been brought up to believe that the problem is too many children. Landlords, meanwhile, can freely use this cliche to disclaim responsibility for the misery of their labourers.
It is doubtful if India’s more sophisticated rulers really believe the ideology. There are too many Indian
agricultural experts saying that India could double its food production with relative ease; even the California Farm Bureau has estimated that if India had rice yields at the level of Japan it could easily feed all of South East Asia.
But real agricultural development would involve both investment and large scale mobilization of human labour power; it would have to be part of an integrated program that would both build an internal market and provide work for the masses. But this is not the development policy that the government of India has been following. Increasingly since the Emergency, in spite of rhetoric of self-reliance, the emphasis has been on production for export, and reliance on Western multinationals and production co-operation ventures with the Soviet Union to push industrial growth. According to K. N. Raj, a leading Indian economist, this is simply the “Brazilian model', which requires a relatively small but "disciplined’ (i.e., repressed) labour force.
There has been resistance, however, to compulsory family planning in India. Most of this has been spontaneous, for with threat of arrest under Emergency regulations no political party has been able to organize opposition, though the Muslim League has spoken out most strongly againstit. The greatest clash occurred in April 1976 in Delhi, when thousands of Muslim, Hindu and Sikh slum dwellers rioted, angered, both by compulsory sterilization and by the levelling of a long-established slum colony.
In the end the government drive,
which hit its peak in the first months of 1976, subsided. In spite of speculation about a national bill for compulsion, this was rejected and police are no longer being sent around.
28
Some Prop of Public C
Ranjith M. Witha.
Public Corporations an increasingly importa, economy and changes in form and internal ma with a view to improvin are desirable today. Wiihana, who is Gene Ceylon Zyre Corporat, Management Consulta, of Administérative Söz, βιοη οη έββίβ ήταθύ.
The important ro rations play in dev like Sri Lanka, wh: to a policy of direct control of the nati greater involvement and trading activiti dent today. The qui far the state should it facturing, trading Ot is now, in most deve only one of degre principle.
The present for Corporation in Sri On the British mode in U.K., by the Lab Of the I940s, as an is state’s intervention of some of the impo: ing and service in Lanka, Corporation the same lines, on dations of the Con vernment Commerc in 1953. This Com
the most desirable
the industries and during the second W e run. The req enterprise to be Treasury control personnel procedu: commercial organis. whilst being subje control and publi were ideally met b lished British Morr poration. The Stat porations Act No. the Outcome of t recommendations w the running of thes this type of Corpo Industrial Corporat of 1957 which w

sals for Effective Management orporations
2.
have come to play | role in the national heir organisational age:77zenž pracížce, I their performance, n this paper Mr. al Manager of the in and was earlier ή αν έβρ Αραaθηκy dies, focuses atten
le Public Corpoloping countries ch is committed intervention and inal economy by in manufacturing s, is clearly eviestion as to how tervene in manusimilar activities loping countries, rather than of
n of the Public Lanka is based
1 first established
our Government nstrument for the and management tant manufacturdustries. In Sri S Were set up On the recommenmission on Goial Undertakings mission examined manner in which services set u orld War should irement for the alieved of close on finance and es and have a tional framework tt to ministerial : accountability, the then estabsonian type CorSponsored CorI9 of 1955 was is Commission’s nich provided for industries under tion. The State ons Act No. 49 s enacted later,
provided for new Industrial Corporations to be set up as well as to manage those established under the I955 Act. Most of the present industrial Corporations such as Steel, Cement and Tyre are managed and operated under the Act No. 49 of I957.
There are also a number of Corporations set up under separate Acts including some industrial undertakings such as the Petroleum Corporation, the Milk Board, the Fisheries Corporation and Air Ceylon. These reflect only certain differences in capital structure, auditory provisions, procedure for pricing, borrowing powers, composition of Boards etc., compared to the provisions of the State Industrial Corporation Act. However, with the enactment of the Finance Act No. 38 of 1971, Part II Financial Control of Public Corporations, the provisions for financial control and allied matters are now uniform among all Corporations.
This paper makes certain proposals for effective management of these Corporations based on my present brief experience as a practising manager in an Industrial Corporation and my continuing interestinsuch organisations as a student of management. It is my intention to focus attention mostly on the Industrial Corporations because, firstly I have within a short period obtained some basic information and data on some management practices and approaches in these Corporations. Secondly since they comprise a group with a sizeable capital investment which is involved in manufacturing and activities using modern technology they present inte
resting demands on management; and
since the organisational form and statutory provisions for general control and operations are basically identical among all Corporations, a discussion centred around Industrial Corporations would, I feel, indicate the general applicability of such issues to all Corporations.
Before examining the proposals for effective management, I feel it is necessary to briefly indicate the significant role the Corporations play in the eco
EconoMIC REVIEw, JANUARY IS77

Page 31
inomic life of the country, by reference to some economic indicators and parameters. Such reference enable us to focus attention sharply on the need to efectively manage the Corporations. II. It has been estimated that the activities of Public Enterprises (i.e. of Corporations) accounted for nearly I 3% of the G.N.P. for 1974 with the value of goods and services produced by them being estimated at Rs. 236o million. 2. The Corporations capital formation of Rs. 425 million in 1974 accounted for nearly II.5 per cent of Gross Domestic Capital Formation; whilst all Public Corporations and Public Enterprises accounted for 17.o% of the Gross Domestic Capital formation. 3. The total capital invested in the Public Corporations upto 1975 was Rs. 5688 million. - Considering only the Industrial Corporations it has been estimated that they accounted for nearly 31 per cent of the manufacturing sectors contribution to G.N.P. in I 974. Capital invested in the Industrial Corporations being Rs. 2,964 million accounted for nearly 52 per cent of the capital invested by Corporations.
Another feature, specially of the industrial Corporations, is that during the first phase of industrialisation in the late 195os and early 1960s, most of the Corporations spearheaded the then industrial development programme of import substitution. Some of the items manufactured by these Corporations were sophisticated products such as tyres, steel, cement, textiles etc., which require a complex technology; and the technology used in these local industries was comparable with those of other developed couintries. In the present strategy, of the next phase of industrial development, namely to promote and expand industrial exports these Corporations will no doubt have to play the same leading role. They will therefore have to expand production, initiate new projects as well as develop products that could compete in export markets at least in items that have a distinct economic advantage in foreign markets. For example, it is an accepted fact that Sri Lanka would have an economic advantage in the rubberbased industries, cement industries, tea processing industry and other industries for which ray materials are
freely available locally.
In view of this it has to be accepted that even though some of the developing countries are looking towards
EconoMIC REVIEw, JANUARY 1977
intermediate tecl facturing proces
sophisticated and
sive, we cannot l that there has to sector with and a which could con exports in certain so as to provide base. This for o have to be from porations. The n management of therefore takes of sion and serious have to be given sary for their effec that they would b challenging situat
The subject of efficient managem porations both in developing count considerable inte: policy makers an in view of the abo role Public Corpo:
national economy.
This has been w R. H. Tawney, a demic and a respec in the British Lab the 193os and I 94os alisation then, is inc to an end, and whi ownership has bee tion of administr; solution’.
The specific inte Corporation stems organisational form to fulfil, according flicting objectives C business success air wider public intere is well expressed it architect of this ty: Herbert Morrison, of the British Lab 194o's thus: “we s of public ownershi ability and busines public ends’.
The studies on th management of Co academics and polic (i.e., mostly in U.K. countries and dev like India, Pakista focussed mainly . delicate and indete. between business ministerial control

Lology and manuis which are less more labour-intense sight of the fact e a manufacturing vanced technology jete and expandin lines and products he main industrial vious reasons will he industrial Cored to improve the nese Corporations
an added dimenconsideration will CO feaSulifeS fi ĉCĈSlve management so able to meet this
O 11.
performance and efnt of Public Cordeveloped and the ties has attracted est both among academics alike, ve outlined critical rations play in the
ell summed-up by distinguished acaited leading figure our movement of who said 'nationit end, but a means in the question of h settled the question remains for
rest in the Public from its unique which expects it to some, the conf commercial and d the national or it. This situation the words of the e of Corporation, the Deputy leader bur Party in the ek a combination , public accountmanagement for
performance and orations both by makers elsewhere
other European loping countries Malaysia) have the somewhat nihate boundary autonomy and
The position of
this boundary according to these studies has had its influence on many factors affecting performance namely, pricing, investment policies, overall business strategy etc. Unfortunately there have been very few studies here that have examined these issues so comprehensively. It is my contention that in countries like Sri Lanka for very good reasons, both from the point of view of the prevailing political ideology and government policy and the failure of Boards to display their capacity for effective management the dividing line has moved more in the direction of greater Ministerial and Central Governmental control.
It is unfortunate that the term 'commercial has often been interpreted here only in terms of profit, return on capital, accumulation of surplus and repayment to the Consolidated Fund. These criteria do not have the same significance for enterprises operating under monopolistic conditions with protected markets. Commercial consideration should also, equally, include certain other performance criteria such as cost reduction, consumer satisfaction and service, market coverage, growth and diversification, better material utilisation and labour productivity. Unfortunately in Sri Lanka, in the evaluation of the performance of Corporations and also in their management these aspects have not been given due consideration and importance.
With these remarks let me now outline some of the measures that should be taken to improve the management of Corporations, which is the main theme of this paper.
I wish to present these proposals under 4 main categories namely: I. Changes in the organisational form of
the Corporation. 2. Framework for governmental control.
3. Measures for effective management
within the organisation.
4. Personnel and related policies.
Though for purpose of analysis the proposals have been classified separately, as above it would be evident in the rest of the discussion that they are to some extent interconnected.
Changes in Organisational Form
Though Corporations have been created under separate Acts, the organisational form as mentioned earlier
29

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is generally the same. The capital is generally owned wholly by Government and the Board is nominated by the Minister. Though this form of organisation has worked satisfactorily possibly in the developed countries inspite of their operating in some cases under monopolistic conditions, because certain public opinion, effective consumer pressures have ensured that the interests of the consumers are met. The same cannot be said for Corporations in developing countries and though the interests of the 'wider public' which implies more the national interest and public accountability are met by closer Ministerial and Governmental control, it is clear from experience that the interests of the limited public, namely consumers
of the products and services have covered.
not been satisfactorily Therefore, my proposal is for the representation of these consumers in the management of the Corporation, by issue of not less than 25% of the capital in the form of preference shares, to the consumer group. By this automatically there would be provision for proportionate representation on the Board and for these Board members to be elected by the consumer shareholders. A specific requirement should bethat a Board representative before election should satisfy the Minister and the shareholders that he has no political affiliations. This of course has to be exercised more in spirit than in law and the main objective is to ensure that the interests of the consumer are represented in the management of the Board which I consider a very important measure for improved performance.
In fact the first enactment, namely, the State Sponsored Corporations Act No. 19 of 1955, has provision for issue of limited shares to outside shareholders.
The present form of the Board, apart from the above mentioned shortcoming, does not in my opinion function as a very effective planning group. I will be mentioning elsewhere the importance of planning and the need to have a corporate strategic plan for the Corporation for a period of 3 ears or more which would enable the Corporation to relate its growth and development on the basis of this corporate plan.
In view of this, it is important that the Board as the policy making body effectively exercise the planning
30
function for which far as possible two directors; one fo1 other Technical. careet Officers wł positions and coul relevant i departim I will mention til building a speci management g('Ou. able to move fro Corporation at thi be noted that in ot cially in U.K., the of a small propos members in addit members. India all porations were set selected and trained trators and manage ment of Corporatio would also enable t ensure a certain co policy in the light o in Boards with the ÍSÍt. -
Framework for Governmental Co.
The lack of de objectives for Co. than a general stater in the Corporation financial and econo Corporations some in U.K., until the White Papers on 'F nomic objectives of dustries” were pu clarified the objecti in U.K., specific pe in terms of financi and profits are exp These White Pap stating that reven operational cost a basis for meeting fi nerative but social vities. Some of the Finance Act No. duced here cover this was the first o clear statement on t çial performance w: it has not enabled with prior consulta porations to decide of profits or return of the products, Corporation accor is expected to prep get and forward it Ministry and the Tr tion from these b.

here should be as ull-time working Finance and the These could be hold executive be heads of the ints. Elsewhere, » importance of lised competent who would be Corporation to level. It should er countries, speBoard consists of ion of full-time on to part-time o, after the Corp, had a specially pool of adminiss for the managels. This proposal he Corporation to tinuity of Board possible changes
hange of govern
Introl
inite operational porations, other ment of objectives Acts, has left the mic obligations of what vague even
1961 and 1967 inancial and EcoNationalised Inblished. These res and since then rformance targets all rate of return essed every year. ers, apart from
ue should cover .
so explained the nancially unremuly beneficial actiprovisions of the 8 of 1971 introthese aspects and casion that some ne expected finans stated. Even so, the Government ion with the Coron specific targets on capital or cost Except that each ing to this Act, re an annual budo the supervising asury. Any deviadgeted costs and
profits have not been scrutinised by any of the overseeing authorities like the Ministry, the Treasury or the Planning Ministry and no action taken for such deviation. Therefore, one of my specific proposals is that annually an agreed target of profits, the return on capital and cost structure, be published on the basis of a critical evaluation of the budget. This would enable the performance to be reviewed in relation to this definite performance indicators.
Similar to the requirement to submit to the Minister the annual report and annual accounts by the Board, there should be a statutory requirement for the Board to present each year, a Corporate plan of the enterprise which spells out its programme of product improvement and technological development, contemplated expansion, market opportunity etc. A corporate plan is generally an integrated plan of the different functional aspects of the enterprise which has as its main purpose the examination of the economic environment of the Corporation both local and foreign, the essential characteristics of the industry, its development market and trends, future opportunities and risks, and strengths and weaknesses of the Corporation in relation to external competition-competition not necessarily in the local market but in the South East Asian region in view of the concerted efforts at exports and the idea of regional industrial development among the Governments of the region. Though there is provision for tabling an annual report on the exercise, discharge and performance by the Corporation of its powers, functions and duties during that year and on its policy and programme under the Finance Act 38 of 1971, generally it is seen that this does not cover the requirements of what I propose regarding a corporate plan.
This measute would also to a large extent ensure continuity of Board policy, even with the change of Board because fundamentally a Corporation has to work within an already prepared corporate plan. I would refer later on to a brief survey on aspects of management in Industrial Corporations I had done, and it is significant to note that according to this survey none of these Corporations have a corporate planning division.
Economic REVIEW, JANUARY Is77

Page 33
For more effective governmental control a Select Committee, on the lines of the U.K. Select Committee on Nationalised Industries, should be seriously considered. As the functions of this body would overlap with those of the present Public Accounts Committee it is suggested that on the creation of such a Committee the P.A.C. would not examine the annual
accounts of Corporations; but the
Auditor General, with an interministerial body functioning under the Planning Ministry or the Treasury, would service this proposed Select Committee on Corporations.
The need for carrying out a management or an efficiency audit of Corporations is another important requirement. It is noted that the Auditor-General has made efforts at widening the scope of the audit of Corporations. But it is my Contention that suitable personnel, competent in aspects of commercial management should be available to do such an efficiency audit. Such an efficiency audit should be referred in the first instance to the Minister in charge before it finally reaches the proposed Select Committee on Public Corporations. It is evident that the functions of this inter-ministerial body would be wider if it is expected to review the corporate plan of the Corporation in addition to an examination of the budget and annual a CCOUlf}{S.
It is well known that technological development as well as product improvement and growth of industries depends to a large extent in the developed countries on the investments in research and development. It is therefore suggested that there should be a statutory requirement for Corporations to provide a certain minimum amount of investment, say 5 per cent of the annual budget, for R & D activities. The specific progress of this R & D programme should be an important part of the proposed corporate plan. In the event of certain Corporations being unable to have an R & D division and therefore the stipulated investment due to lack of qualified personnel etc., such Corporations should make financial grants to scientific institutes like the C.I.S.I.R. or the University to work on particular research programmes that have a direct bearing on their product improvement.
EconoMIC REvIEw, JANUARY 1977
I have indicat various good r. Sri Lanka has be control of Corpc beeħ more so ir personnel matter in keeping with of the Corpora back On the ac porations, when der less minister trol on these has led to siti proved more hai to the organisat fration sector as due to this expe maters on pers ments including salary scales, r. loans, bonuses, dures, trade unio operate under trol. In view of that this positio the preparation regulation and nature of an esta all Corporations. the Corporations of unnecessary c Ministries as we unnecessary pres face from their e.
Another majo tered by most P both in Sri Lank that of general accepted that gen. activities of Trac mate work cond feature and has ni in large measur ditions for about ted the managem effectively to labo ever, it is also ki of Trade Unions í of their due func violation of some requirements of have caused cor and difficulties management. It ted that the func Unions be scrutin the Commissione separate Division porations. This there should be for this Division tions, ensure that consulted in the e
 

d earlier that due to asons the trend in bn for greater central rations, and this has establishment and s. This may not be the original concept ion. But looking ivities of the Corthey functioned unal and central conmatters, it often lations which have mful than beneficial on and the Corpoa whole. Possibly trience, fundamental innel and establishcertain recruitments, ites of allowances
disciplinary proceIn privileges etc. now lose ministry conthis it is suggested in be formalised by of some uniform procedures in the blishment guide for This would relieve of a large amount torrespondence with ll as overcome the sures they have to Imployees.
: difficulty encoun'ublic Corporations, za and elsewhere is abour unrest. It is uine and responsible le Unions on legitiitions is a desirable o doubt contributed
e to improve con
r, as well as prompent to respond more ur problems. Hownown that activities air outside the scope tions and actions in of the fundamental industrial relations |siderable problems for Corporation is therefore suggestions of the Trade ised more closely by of Labour with a dealing with Corwould mean that statutory provision 1 to supervise electhe general body is vent of trade union
action, and that such decisions are taken on a secret ballot. Along with this, labour disputes which cannot be resolved by management should be referred to an independent arbitrator by the Commissioner of Labour and such decisions should be mandatory for both parties to accept. To ensure the ministerial involvement in these arbitrations and resolution of labour disputes, the Commissioner of Labour will not communicate the decision except with the concurrence of the Ministerin charge of the Corporation.
It has been mentioned earlier that the prices of the basic consumer commodities and industrial goods produced by Corporations have a critical bearing on the general price structure in the country. In all countries the prices of Corporation products are subject to ministerial control. Here too any change of price, particularly an upward revision requires the approval of the televant ministerial Sectoral Committee, and sometimes of the Cabinet. However, it is my contention that the application for price revisions do not receive the scrutiny that they should get, due to various reasons. Essentially before a price revision is approved an exhaustive Overall management study should examine cost of manufacture, specially in relation to whether cost reductions are possible. In U.K. the National Board for Prices and Incomes is equipped to do such a study and before approval of any price revision they satisfy themselves that the cost increase on which the price revision is requested is outside the control of the industry. In Sri Lanka the National Prices Commissionis supposed to play the same function. However unfortunately it has neither examined any price revision requested in this manner, nor has it made public the results of such investigation on the basis of a request for a price increase. Looking in general at some of the price increases of the past few years among the Corporations, the main reason advocated is the increasing cost of imported materials. However, a detailed examination may reveal in many instances that the overall cost increase on which the price revision is requested is not based only on increase in the cost of the import content of the product. In countries like Sri
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Page 34
Lanka where inflation is due more to the imported inflation' it is the duty of the management to contain price increase to levels not beyond that contributed by the increased component of imported materials. It is therefore, suggested that the National Price Commission or the interministerial body of officials suggested earlier should, with competent personnel, examine this aspect thoroughly before any price revision is approved by the Government.
Measures for Effective Management within the Organisation
A Corporation is like a normal business entity except that certain decisions are outside areas of management discretion. Even so when one looks at the “core of its operations the more effective and proven internal management approaches and methods of successful business firms could be used.
I have outlined two of them earlier, namely the need to have a corporate planning division and a “Research and Development’ or 'Product Development” division. The creation of such divisions and thereby giving importance to these functions is a fundamental requirement when One considers the commercial practices of
most successful enterprises in the
World. The magnitude of the operations and the technologies that are used today all point to a definite indication, that these two functions should form a part of the internal management processes.
Productimprovement and consumer services are the cornerstones of any successful commercial organisation. However, it is common knowledge that most Corporations here do not give sufficient importance to this aspect. In fact my earlier proposal to have certain representations of the consumer group at the Board should initiate the necessary management practices to give weightage to these aspects.
In this context I draw attention to the results of a limited survey on some aspects of management of Industrial Corporations I had conducted. This study revealed that
(i) None of the Corporations had a
Corporate Planning Division.
(ii) Only I/3 of the C Planning Manag Group.
Only 1/3 of the C
Research & “Technical Deve duct Developme a Senior qualifie
Though over 3/4 stated that they
deal with custor quality defects in been taken up at
(iii)
(iv)
Management of a C prise requires a very its finances and thei rative that its highet both competent in f ment as well as pla emphasis to this funct ment of the enterpr have been made in th in the transformation finance from merely ing to that of a more management. I have
that the Head of the
should be represente the Finance Direct this there should be accounting as well accounting practice Corporations. Th I referred to earlie cated that most of th have introduced a fa modern financial cor ment practices. If t no need for any furt brought about.
The analysis of came up for board form of Board Pa clear indication of phasis placed by 1 these subjects. Th out by me revealed important functions of view of effective not get the necess and board attention the following:
(i) Only I per cent o: devoted to long - term planning.
(ii) Only I per cent o devoted to pro and improvemei
Only 5 per cent were of technica and improvemer
Marketing, adve motion and distr. ed by only 3% of

Corporations had a er or a Planning
Dorporations had a Development' or
lopment” or “Pro
nt’ division under d manager.
of the Corporations had machinery to mer complaints or one of these have
Board level.
;ommercial enter
good control of efore it is impemanagement be inancial manageace the necessary ioninthe manageise. Vast strides le business world of the concept of financial accountdynamic financial a stated elsewhere Finance Division
d at the Board as
Dr. Along with very effective cost
as management 3 adopted in the e survey which of course indilese Corporations ir amount of the trol and managehis is so there is her changes to be
the subjects that discussion, in the pers, provides a the relative emmanagements On e survey carried that some of the
from the point management, do arry management as evident from
board papers were g-term and short
fboard papers were duct development 也,
of board papers |production aspects ts.
rtising, sales probution were coverthe papers.
(v) Personnel matters, appointments, disciplinary matters etc., were covered by 2.8% of the papers.
Personnel and Related Policies
One of the major shortcomings for the effective management of the Corporations is a lack of suitable com
petent personnel and with this an arrangement to develop such a management cadre. I referred
earlier to the need to build such a group of managers who could move to the highest position in the Corporation, of course accepting the fact that a certain amount of transferability is possible though the work of Corporations is within specific industrial specialities.
Along with this it is necessary to
consider providing attractive remuneration as well as other benefits which would not be
second to the management benefits in the private sector here, and in similar industries in other countries. This has been referred to on many occasions before. It has been accepted that unless there are such incentives the environment for the growth and development of such managers would not emerge.
I mentioned earlier that these public Corporation will have to provide the leadership for a concerted export drive along with expansion and diversification. It is therefore imperative that technical managers be given full opportunities to acquire the rapidly advancing technology of their industries. It is my contention that these aspects have unfortunately not received the attention they deserve and the technologists are expected to work without the desired exposure to new technological ideas as well as research findings. India quite rightly placed a heavy premium on technical and scientific development by which they provided the necessary facilities and incentives for their technical and scientific personnel. It is suggested that special attention be given to this aspect and provision for frequent travel and an exchange of ideas of our technologists with other scientific personnel be provided through some fund to be administered by an appropriate body like the National Science Council of the C.I.S.I.R.
EconoMIC REVIEW, JANUARY 1977

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SS S S S S 0 S SS SS
The village to be “developed' ...... a collection of humble dwelllings... belonging to almost another world from the “developed
surroundings we have seen.
Their livelihood consists of backbreaking work such as this
at the pits....
And on the coir loom. Daily
earnings a few rupees.
They live in simple thatched houces. A diferent d' ling from the Rs. 3oo,ooo spent on a room for
developed hotel.
 
 
 
 
 
 
 

This is the 'Supper Club of the village. Cost of a plain tell 20 CES., a plain biscuit and plantain fill the stomach.
They weave their thread of life ... a life of quiet desperation.

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