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Gold Standard
The post-war economic plan valued all currencies in terms of gold in order to facilitate international trade and covertibility from one currency to another. Each nation declared a par value for its currency in both ounces of gold and the US dollar, and had to intervene in foreign exchange markets to keep it within one per cent of the fixed US dollar rate. Changes in the basic par value coukd only occur after approval by member states through the international Monetary Fund.
Balance of Trade This is the balance in the nati ledger between the value of g imported and those exported does not include the money flows from service industries tourism, insurance or shippi Nor does it include the move ments of investment capital or out of the Country.
Balance of Payments
This reflects whether a nation is a debtor or a creditor if the international economy. It is the financial ledger which tallies exports and imports of goods, services and capital. It may not accurately reflect a country's true debit account, Since investment from overseas is counted as a credit rather than a long term liability. In the end, dividend and interest payments on overseas investment may become a drain on the economy.
Thro the W
MnO
- A New Internatio Foreign Exchange Rates di h This is the amount of foreign understan ing the
currency a specific national - currency can buy. Exchange rates international are maintained in two ways.
Pegged or fixed rates -Part and parcel of the gold standard and an important element in the stability of world trade during the post War era. A ● currency's value in terms of other currencies is related to a fixed amount of gold, and after 1945, the US dollar.
Floating rates - The value of a currency in terms of other currencies is theoretically determined by market forces. It is only theoretical because the. float is "managed' by national governments who intervene to iron out peaks and troughs through judicious buying or selling of their own currency on the international exchange markets. Floating exchange rates are inherently unstable and promote speculation and inflation. Since 1971, when the US effectively demolished the gold standard, and in the process fixed exchange rates, most Western nations have allowed their currency to float.
----
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Currency Devaluation
international liquidity. This is spending power created
by the inter national Monetary. . A deliberate government move A to make its currency worth és banks that strulares giobal trade in terms of the world's strongest and investment. The creation of currencies. The intention is to fiquidity should be based on an make exports cheaper, and more actuar increase in fóroduction or . : encouraging :: The Creation of in qui dify
- outside. It ternational contral - via the eurocurrency market .
is Unreated. tó actual world . production and has contributed | to fie generation of global in fation -
=云习 =エ
1. 夸芬 C 拟 继 蜥/继 |将 二二 绯 Stagflation A new addition to the economist's 1. lexi con in the 197O'S. The terrn denotes a combination of rising prices inflation) and economic 帐 recession (stagnation) - previously 雌 thought incompatible.
睐 侏 s
监
"Y bdit: ރޫ///zzސަސަޞަނަމަސް
ford
Ze
malist guide to vocabulary of com omics.
the US, on loans to private banks. The central bank rate is an important tool of monetary [エ policy and acts as a signal to A private banks to raise or lower their interest rates and therefore the availability of credit to 雌 investors and the general public
ial Drawing Rights
were introduced by the ational Moretary Fund in is a new, internationally able currency. They are mes called paper gold. ire now based on the 2 worth of 16 major Cies although they were y valued in terms of gold. ers are allotted SDR's ing to a quota system, 3ent on their membership ts with the IMF. As a of expanding purchasing of poor nations, they have rossly ineffective. Up to 75 per cent of SDR's
i went to rich countries.
s
Eurocurrency
A term used to denote foreign currency deposits in European
Bank Rate/ Rediscount Rate Pl This is the rate of interest charged by a national central bank, i.e. The Bank of Canada Or the Federal Reser ve Bank in
banks, mostly American dollars - thus Eurodollars - and petrodollars - American dollars
belonging to oil-rich Arab nations.
The dollar pile-up is a result of a persistent US balance of payments deficit since 1945 - i.e. more dollars going out of the US tham coming in. Eurocurrency deposits were estimated at more than
ܓ
S400 billion in 1977. Eurocurrency N is controlled by private corporations and banks and is not subject to any national authority. This | lack of control means that huge sums are used by speculators, N adding to world financial instability. Eurodollars are continually loaned and reloaned expanding global spending power and boosting inflationary pressures. -
B

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ECONOM RAVARAVAY
鸥。Peop1es Bank
Researci Deerinent
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S S S SSSS S SSS S SSSSSSS OLttS LLLLS Samar contributions as vel as Ok G t G S S S G GC S SS S LS L S CJ LL S t tttS
E ECONOMIC REVIEW is published north sing available Gm Gn LSL S a GkS SSS SSS LS S S JJSS
Volume 4
Mohdbalb all
Eduard Jay
Robert McN
JOSeph Colli Frances MO{
“Economic ( Weekly'.
፲. S. Feገ‛ገbdገ
MCrCLS Koer
JOhm Kurte,
aՏՏԱՐՑ annual
NEXT ISSU
O The M. lems, a biggest () The B
Sri La
(3) Bankir.
COVER. (A
 
 
 

ܒ
Numbers 6 & 7 Sept./Oct. 1978.
■ - C O N TENTS
COLUMNS
2 Diary of Events September 1978. 16 Urban Development Colombo's Master
Plan,
19 Commodities COCONUT - Pro
duction ፕeGOጊ)eገ‛፲] boosts earnings TEA - Crop and price decline RUBBER - Neij peak prices
22 Agriculture Eactension services
and the Small farmer
sPECIAL REPORT
3 The World Bank and
the World's POOrest
5 Bank Group operations in Sri Lanka,
Haq 6. The Bank's lending policies - a changing
emphasis
O0፰ 8 The Bank and urban poverty
0Iጎ?û0፬ጎ ̇0! 10 Priority for two fundamental objectives
ms and 12 The World Bank - a critical assessment pre Lappe
and Political 14 World Bank annual report-an old theme
in new garb
FEATURES
do 24. On the Kelani Valley Line
штатayake 27 A strategy for land consolidation in dry
Zone purana villages
2. - 31 India's Fish Economy
置
匾
rs Please Note
2 have combined two issues (September and October, in Order to catch up on our backlog in printing which isen through circumstances beyond our control. We all our subscribers, however, that the validity of their
Subscriptions would extend over 12 separate issues.
IE
ahaweli Project - a discussion of current plans and probind economic and social goals and impact from Sri Lanka's
ever development project.
rain Drain - two recent assessments of the problem in nka, and Malaysia.
ng as a tool for development.
view of World Bank sessions and operations as designed by Palitha Kam mangara.

Page 4
SEPT.
DIARY OF
An International Tea Producers and Exporters seminar which concluded in Colombo recorded its concern over the continuing fall in world tea prices, which had already declined to 1976 levels while there had been a large increase in the cost of production. This resulted in an unremunerative return to the producer Stated a report issued at the end of the three-day seminar.
The fees prescribed for medical services available in paying wards of government hospitals and other services offered by the Department of Health at a fee-including drugs, vaccination and medical certificates, laboratory tests and blood transfusions - were raised.
The Asian Development Bank has approved a technical assistance grant for Sri Lanka, to finance an in-depth examination of the country's rural Credit System in all its aspects, stated an ADB news release.
The new constitution of the Democratic Socialist Republic of Sri Lanka became legally effective from mid-night.
Local textile production amounted to only 33.7 million metres for the first Six month of this year against a production target of 71.9 million metres, according to reports received by the Department of Textile Industry states a press report. The reasons attributed for the drop are the high cost of local production and the availa'bility of better quality imported textiles that were available, sometimes cheaper in the market.
The President, Mr. J. R. Jayewardene, in his address to the First Parliament of the Democratic Socialist Republic of Sri Lanka, pledged he would “endeavour to expand and broaden the freedom, the New Constitution creates until the people are assured that the ever-widening freedoms they enjoy can never again be taken away from them.'
The government of India, has reduced its export duty on tea from Rs. 5 per kilo to Rs. 2 per kilo with the objective of making Indian teas more competitive in the world markets, states a report in the Bombay Economic Times.
The President of India promulgated an ordinance for the payment of a minimum bonus of 8.33 per cent for the accounting year 1977, irrespective of loss or profit made by an enterprise. The maximum limit will be 20 per cent, states the Indian Journal Connierce.
An agreement was signed between the Government of Sri Lanka, and the Government of Canada for a loan of Canadian $ 20 million (Rs. 271.2 million) for the purchase of aluminium rods and asbestos fibre, from Canadian sources.
 

EVENTS
8 A 12-day conference of the Inter-governmental Group of Experts from tea producing and tea consuming countries, sponsored by UNCTAD, which began in Geneva discussed a programme of buffer stocks and export quotas to promote stability in the international tea, trade.
20 The Government has banned the export of vegetabies to Middle Eastern countries in order to prevent further rises in the local price of vegetables, the acting Minister of Trade told the
preSS.
25 The 33rd Annual Meetings of the Board of Goyernors of the IMF and the World Bank began in Washington Where among the important decisions of the sessions it was agreed to provide an inter-related package intended to strengthen the SDR and provide the Fund with adequate resources for the next five years. The total of the Fuad quotas is expected to rise during this period from SİDİR. 39 billion to SDFR, 58.6 billion, if all members consent to their quota increases.
26 Sri Lanka, shares the fourth place with three other countries for the slowest growing population among 98 countries of the Asian and African continents according to the World Population Data Bank Sheet. Japan and Cyprus have the slowest rate of natural increase-1 per cent, Hongkong comes second with an increase of 1.2 per cent, while China and Singapore had an increase of 1.3 per cent.
28 The government has decided not to permit the setting up of any more block rubber factories outside the Free Trade Zone as ten Slich factories have already been approved, according to press reportS. The Goverminent has approved a guaranteed minimum price for tea small-holders whereby all owners of tea, lands of 50 acres and under will receive a minimum price of 70 cents per pound for the green leaf supplied by them. This scheme will be brought into operation from October 1, 1978.
3) Plans for district developinent formulated and implemented at grass-root levels will form the basis of three Integrated District Development Projects covering the districts of Kurunegala, Matara and Hambantota. The projects will be financed by the World Bank in Kurunegala by the Swedish International Development Agency in Matara, and by the Norwegian Aid Agency NORAD in Hambantota and work wiil begin in 1979, states a press report.
Economic REVIEw, SEPT/Octr 1978

Page 5
THE WORLD BANI
AND THE
Many billions of dollars a poured into the developing world - able solution t each year through various interna- national # tional agencies tO fina C deve- The putcome of t lopment efforts of the emer a comprehensive
nations. The largest finance of big up two inte Third #/ಸ್ಧಿ today, e IBRD and th
944, in ord
among these A institutions is the to exert their i World Bank Group comprising the 7 World colone International Bank for ReconstrucZ A The World tion and Development (IBRE), the stablished in D International Development Associa- Aowing the Brett tion (IIDA), and the International e, where the Finance Corporation (IFC) uite nations et b . naturally this institution and its International MO policies have been very nuca in 豐 Se o an agenco spotlight over the years and it war-torn e times Sparked of much controversy. Wii. 1015 en l More recently, after about 30 years national Bank f of is existence, the Bank announc d Do Velo ed a shift in its policies and deve Pied Was Sos lopment objectives. "..." pois, is end 器 have been expressed since "" " '' the changes were announced, (and Park irected C reiterated around the time of the Geelopment Banks Annual sessions at the enda WOP 3 sod: LL llLlLlS S 0 S S S S S lSS SL Y S S S kS k k kM SK a view to giving our a ution for develc many sided presentation on this. On 28 crucial subject in the development the Arieles of Aë debate, we present first the Wor aί ΒτείίΟη Wood, Banks viewpoint by three of 驚 gengership nas major protogarists and then at the Countries each other end two critical assess Seroes to the ments which touch on the more im- Over the years portant aspect of the views express- te FC and || III
ed by the Official Spokesmera into the Worl vide more spec
The World Bank and the Inter. A financing to the ( national Monetary Fund were two The original separate but ို “နှီး' ̈နှီဇို့ agen- AIBRI were cies set up, at fik tative of the to assist in e Western industria nations, at velopment of territ the end of the World facilitating the inve
War With the inten of re- productive purposes habilitating a WOrld economi sys foreign investment, tem that was in a state of collapse. l is not readily
All the European economies had able terms; to Sup been largely exhausted or destroyed vestment by after the war. The memories of ductive purposes ou the monetary turmoil of the capi- funds raised by it talist countries in the 20's and 30's Sources; and to pr was still fresh and concern about growth of internati a possible recurrence was wide- maintenance of equ Spread. These memories and con- of payments by cerns, prompted the major Western national investment nations to convene at Bretton ment of the produc Woods, New Hampshire, USA, in Bank's members.”
ECONOMIC REVIEW, SEPT/OCr 1978
 
 
 
 
 

ence on September 27, 1960 and whose administration is the responsibility of the World Bank was set up “to promote economic development, increase productivity and thus raise standards of living in the less developed areas of the World included within its membership by providing finance to meet their important development requirements on terms which are more r to find a work- flexible and bear less heavily on the the task of inter-balance of payments than conventional iC ಸೀConstೇಂ: Oars SC s those of the IBRD and his conference vas. IFC.” blueprint for Sct- ̄ Its assistance was to be concenrnational agenees tretèd on ဦးနှီး regarded aS very e IMF, which were poor mainly Se With annual nfluence OA, the per capità incomes of less than Orde ever Since. 5300. This association was intendBarik (IBERD) was \, : irudi mental Ob2cember 195 fol lectives of the Bank and supple
On Woods COnet- ret, its acti ԱՅՏ.
western The other agency of the World de able Bank the IFC, was set up a few
netary System and years earlier. Though established 7 through July 1956 it became a specialised
{ The IDA, which came into exist
could be restored agency in relationship with the 000M SS J LmLmtmL S L S lLllllll l S S0000SS or Reconstruction While closely associated with the as its name in World Bank, the IFC is a separate tablished primarily legal entity, and its funds are dis
'ို `့် tinct from tOS e of the Balk | ItS 珀臀_蚤
st of its financing "to further economic development by rojects in the Third encouraging the growth of p tive
ay regarded as the private enterprise in its memb international insti- tries, tenia in the less developed )peat financing areas.'
tries which signed The IFC persues its objectives greement drawn up y investing in productive private s量r July,1944重ts Interprises, in aSSociation with prinow risen to 132 vate and, without Governof which Sub ment guarantees of repayment, in nk's capital base. cases where sufficient private capi
its Sub-agencies tal is Oiti availab On relâSOnable D were brought terms; serving a clearing-house d Bank to pro- to bring together investment opporlaised forms of unities private capital (both forleveloping world. eign and domestic) and experiencpurposes of the ed and helping to
Stillate the ductive investment constructionand del of private ita both domestic ories of embers by and forei stment of capital for The ternational Monetary Fund ; tio promote pri (IMF) is sometimes confused with when private capi- the World Bank or one of its agenavailable on reason clies. It must be made clear that the splement private in- was set up as an Organisation ing M02S for Pro that would be responsible for the it of its own capital new Monetary System that was , and its other re- established in December 1945 at 'omate the balanced Bretton Woods. The IMF's objecional trade and the tives were thus clearly defined as Lilibrium in balances follows:
encouraging inter- "to promote international monetary t for the develop- co-operation and the expansion of intertive resources of the national trade; to promote exchange stability, maintain orderly exchange
3

Page 6
within the Bank
arrangements and avoid competitive exchange depreciations; and to assist in the establishment of a multilateral system of payments in respect of currency transactions between members and in the elimination of foreign exchange restrictions which hamper trade.”
The functions and operations of the IMF were such, that they invariably have resulted in the Fund laying down rigidly its terms to governments seeking its assistance, and the measures it has recommended have not been popular in these countries. This has led to much criticism of the IMF, among some of these countries, who in balance of payments difficulties have been compelled to seek the Funds facilities. The World Bank, on the other hand, with its more populist stance, particularly after the Nairobi Sessions in 1973 has, in recent years, come in for less criticism than the IMF.
The World Bank has over the years directed a major part of its loans to commercial development, particularly large scale projects like electric power stations, railways, ports, hotels, mining and manufacturing installations.
About five years ago the Bank gave notice that it was making a complete change in policy and lending patterns and redirecting its programmes with the intention of raising the productivity of the poor and enabling a greater transfer of resources from the more developed to the less developed countries. The occasion was the Annual Meetings of the World Bank and IMF in Nairobi in 1973, When Bank President Robert S. McNamara made his address. Many critics have maintained, however, that the money from the World Bank has not gone to really help the poor people although its activities have been carried on in the name of the poor. “Its been done in the name of the poor, but when you look over the projects there's very little evidence that it's ever really done anything to the poor', said Clarence Long of the US House of Representatives commenting on World Bank assistance. This
criticism of the World Bank caused
a certain amount of resentment towards the US Congress for What it considere di “unwarranted attacks upon successful attempts to assist the poorest of the poor'. This is part of the debate that has gone on in recent times concerning the fundamental nature and purposes of the World Bank. These basic issues have been set
4.
out more simply questions.
Is the World traditiOna1 banki object is to make an adequate ret and investments lopment agency underwriting th likely to promot cial progress am can the Bank su plish both obj
ously?
Bank Official: their’S is an inti agency which needed developm Third World With the problems of 1 are doing so by Of dollars in aid t jects which are cially Successful. it is claimed, is t become more pr Such assistance; tical Strings atta
The critics al. the World Bank, is political; since the financial i elit leading capitalist Bank, according to maintain the p economic, politica of the Third WC ectly, the First expense Of the pOOIr. AS presen gOverned the crit the Bank may be but many questio whether it can op
a development in
stance, the plann. projects, accordin have taken for
eradication of po ned from Centra The reSullt i S tha jects have not be local COnditi OinS , munities for who died Were therefo control of their
point at issue h quantum of mon receives the mai such development
The Bank's s] that its present el ing the poor to of productivity. Had argues, behil grammes is the poor also have to creasing producti also fully benefit

in the following
Bank a bank with ng concerns whose a profit by ensuring |rn on its lending
Or is it a devewith the goal of se projects most econ Omi and SO}ng the pOOr - Or ccessfully accomctives Simultañe
maintain that ernational lending provides critically 2nt capital to the a view to Solving mass poverty. They funnelling billions O development proikely to be finan
Their sole object, assist the poor to oductive, through but with no poliached.
“gue, however, that by its very nature, it is controlled by eS Of the WOrld’S
COuntries. The to this view, helps revailing financial, l, and Social Orders }rld — and indirWorld - at the aspirations of the tly structured and tics maintain that an excellent bank, ns are raised as to erate effectively as stitution. For inng of several bank g the these critics, granted that the verty can be planPlanning offices. t many Such prOen firmly fixed in nd the poor comIn they were intenre unable to take development. The as been not the ey spent, but who Or benefits from
projects.
bokesmen maintain mphasis is on helpraise their levels AS Mahabub Ul d the Bank’s prorationale that the participate in inOn and they must from it; that new
equally necessary to
development strategies must be aimed at the Satisfaction of the "basic human needs' of the entire population rather than at fulfilling market demand; that the Bank has adapted itself pragmatically to the evolving needs of the developing World; and that beside expanding the capacity of the poor to produce and purchase market goods it was redisign and extend public Services such as education, health care, water Supply and public transportation. He maintains that is has been recognised that mOst Of the present Services end by Serving the interests of a privileged few rather than the deprived many and therefore the main emphasis has been placed On S low cost, replicable public Services.
Critical assessments made by Joseph Collins and Frances Moore Lappe and India's 'Economic and POlitical Weekcly”, which contribute to the debate, argue, that the Bank treats the symptoms of poverty and not the causes. They suggest that some projects can “undercut' the very poor it claims to help; as intervening with funds for profit generating ir vestments While opting to keep intact the social structures that generate poverty only strengthen the grip of the elites. The 'Economic and Political Weekly' which deals with the Bank's Annual Report goes further to maintain, as has been done very effectively at many UNCTAID fora, that “the poor countries were forced to use a larger part of their new borrowings to meet the repayment of service obli
gations on their existing debts.'
The Chairman of the Bank's Urban Poverty Task Group, Edward Jaycox, goes on to state that even with much greater effort in rural development there are limits to What can be achieved. Effective national strategies will also require a more efficient approach to urban development. For it is only by significantly slowing population growth and increasing productivity in both urban and rural areas, he says, can any real gains be achieved in temployment and per capita incomes for the very poor.
Several other issues in the debate connected with the Orientation, and thinking within these institutions, also the specific policies they have insisted upon, and even the degree of impartiality of these inStitutions have been dealt with in previous issues of the Economic Reyie) and are therefore not covered here.
EconoMIC REVIEw, SEPT/OCT 1978

Page 7
Bank Group Operations in Sri Lanka
Since the beginning of its Operations in Sri Lanka in 1954, the Bank Group has made eight loans totalling US $73.4 million net of cancellations) and fifteen credits totalling US S145,8 million (met of cancellation and exchange adju Stments) in support of 21 projects.
Upto Aprili 1978 about 30 per cent of Bank Group assistance has been for power, 50 per cent for agriculture (irrigation and agriculturall and dairy development), and the remainder for development finance company operations, highways, a program credit (mainly involving the import of raw materials for industry), and water supply. Three early ydro-power loans, the credit for the Mahaveli Ganga Development Project I, and the program credit, together with the program completed Lift Irrigation and iDrainage and Land Reclamation credits have been completed to the satisfaction of the Bank and fully disbursed. Of the two loans made to the Development Finance Corporation of Ceylon (DFCC), US $6.8 million of the US $12.0 million available was cancelled by the DFCC due to a Sudden deterioration in the private investment climate resulting from a change of governmentS in 1970. Under an ongoing IDA credit of US $4.5 million made to the DFCC in 1975, sub-projects for the total credit amount have been approved. A second IDA credit of US $8.0 million to DFCC and an equity investment by the IFC of about US $199,000 equivalent in the DFCC were approved by the Board early in financial year 1978. An IFC non-revolving line of credit of US $2.0 million to the Bank of Ceylon for onlending to local private small and medium scale industrial enterprises has also been approved in financial year 1978. At the request of the GOVernment, a loan/credit for highways was cancelled in 1970, after distbursement of US $0.8 million of the credit, following the Government’s decision to make major changes in the scope of the project. An IFC investment of US $3.25 million to the Pearl Textile Mills Ltd. (Ceylon) was approved by IFC's Board of Directors in Janu
alry, i970, but ca, year because Go" for the project The Bank strategy is focuss “ural sector to su fforts to increas and reduce itS die flour imports, an ductivity in the Sector. Projects try and basic ili also included. İlias agree to a: niënt of Sri Lanka development of th Catclinent Area, velop an implem and to coordinat ance for project implementation. been largely coin tegrated rural de for the Kurunege
WORLë} BANK G.
EBRD LOANS
No. Year Purp
1954 Powe 2 i958 POWe 3. 1961. POWe 4 1967 Deve 5 1969 DFC 6 1968 High (Tech
7 1969 POWe 8 1970 Mah:
EA CREDITS
1968 Lift 2 1968 High 3. 1969 Drai
tion 4. 1970 Maha 5 1974 Purc) 6 1973 POWe 7 1974 Dairy 8 1975 Indu Deve 9. 1975 Agric 10 1976 Tank 11 1977 Mah. 12 1977 Wate 13 1977 Indu 14 1978 Tea, tion 15 1978 Tree
EFC FACHILITIE
1. 1977 Deye Corp 2 1977 Bank
EconoMIC REvIEw, SEPT/OCT 1978

celled the Same ernment approval
was withdrawn.
Group's current di on the agriculport Government food production siderace on rice/ tO improve pľOtree crops sub
to support indus
fra Structure are The Bank Group Si St, the GOVerto accelerate the
• Mahaveli Ganga by helping to deentation strategy : external assistpreparation and Appraisal has leted for an infelopment project la District, and
preparation is under way for a road maintenance project. II. addition, projects in other fields, including irrigation and drainage, and rain fed farming, are being prepared for possible IDA financing.
The Bank Group by April, 1978 accounted for nearly 13 per cent (E33.12k, 3 per cent; IDA, 10 per cent) of Sri Lanka's total external debt outstanding, and about 5 per cent (almost totally Bank) of debt Service. The Bank Group's share in total external debt is estimated to increase to about 17 per cent by 1980 (With the Banks share declining to about 2 per cent). The Bank and IDA Shares in the debt service is expected to show a slight decline.
Details of the World Bank Group financed projects in Sri Lanka are given in the table below.
LGLGGLG S Y00ZL LLLLLSSLLLzLLSLLLL S S LL0SS LLLLLS LSLLLLGLLLLL LLLLLLL 00000
U.S. S. Million amount net of Cancellation and Exchange
DSe aditiséments
AMMOTEmể Ündisbursed
16.5
r 穹.4
5.0
(opment Finance Corp. 1.3
C Project 2 2.0
ways Study
linical Assistance) 0.2
r (CEB) 16.5 0.
veli Ganga Development 145 4.
73.4 4.8
Irrigation Project 2.00
ways Development Project 0.65
lage &z Reclama
Project 2.5
veli Ganga Devil. Project 14.5
lase of Comm0mOdities 150
r. Tiran SiniSSion 6.0. 0.4
Development 9.0 7.8
trial - Agricultural
opment (DFCC) 4.5 1.
ultural Development 25.0 130
Irrigation 5.0 4.9
veli Ganga Development 19,0 19.0
r Supply 9.2 9.2
try (DFCC) 8.0 8.0
Crops Rehabilita
Project 21.0 -
Crops (Tea Diversification) 4.5 - 145.8 63.4
S - --
opment Finance
(Development) Finance) 0.1
of Ceylon (Development Finance) 2.1

Page 8
The Bank's
Lending Policie
-A changing emphasis
MAHIBUB UL HAQ
There has been an apparent change in the Bank's and patterns during the 1970s toward helping to raise
of the poor.
This article by the Director of the Polic
Program Review Department of the World Bank review of the thinking behind the change and briefly discusses
for the Bank's lending policies.
The thinking On economic development has undergone a quiet revolution in the 1970S. The essence of this revolution is quite simple: all of us have finally graduated from a fascination. With the intermediate means of development to a consideration of its ultimate ends. We have recognized that the growth of gross national product (GNP) is absolutely nece SSary but that it must be directed intelligently toward solving the problems of mass poverty. While We still need to worry about how to increase production, We have finally added the critical question: "for whose benefit?'.
Like all revolutions, this One has had its excesses. Growth of GNP was forgotten Sometimes in the anxiety to reach the poor directlly, Some governments and populist leaders tried the futile and short-lived experiment Of income distribution without increasing production. A consensus has finally been reached among those concerned with development that production and distribution policies must be fully integrated. Increased production is a must in a poor Society. But the poor also have to participate in increasing this production, as well as fully benefit from it.
The debate on development strategies is continuing and is likely to go on for a long time. But it is perhaps fair to say that there is by now - broad agreement on certain propositions which would have been regarded as heresies only a decade agO:
O Growth in the GNP often does does not filter down. What is needed is a direct attack on mass poverty.
() The market mechanism is often distorted by the existing distribution of income and wealth in favour of the rich, and is generally an unreliable guide to setting national objectives. Reforming existing institutions is usually more decisive than modifying nrices to benefit the poor.
O New development strategies
must be aimed of the basic h entire populati fulfilling marke
Q Policies distribution of ment opportun integral part of It is generally i Sirst and distri
(). A vital tion policies is ductivity of th investment tow, A drast tolitical and ed ten required ií spread to the population. The World B: cies have taken S of this ferment thinking. The COintributed to th bate, through its 1 WOrk and thrOugh ing patterns, anc self pragmaticall needs Of the del
ANNUAL SPEECE The overall p the Bank during have Often been the speeches of Robert S. MacNa nual Meetings of Of GovernorS. of these speeches attack aSS through both na national efforts. of separate issue these speeches, gradual evolutior major theme of t tiago in 1977 w growth is not fillt bottom 40 per ce tiOnS in the deve conclusion was b first time in the detailed empirica ber of member c In Subsequel MacNamara mad

lending policies the productivity y Planning and is the evolution the implications
at the satisfaction man needs of the on rather than at et demand.
to improve the benefits and employlities must be an any production plan, mpossible to produce ibute later.
element in distributo increase the proe poor by directing ard them. sic restructuring of }onomic power is of
development is to vast majority of the
ank's lending polihape in the midist in development Bank has both le intellectual de - ‘eSearch and policy its changing lendhas adapted ity to the evolving veloping world. I THEMES olicy signals from the past decade conveyed through its President, Mr. mara, at the Anthe Bank's Board A recurrent theme has been how to poverty directly, tional and interWhile a number S Were covered in there has been a of thought. A. he addreSS in SanaS that econOmic ering down to the nt of the populaloping World. This acked up for the Bank with Some l WOrk in a numOuntries. ht Speeches Mr. 2 a distinction be
tween “relative poverty' and 'absolute poverty'. The relative poor were those whose average income was less than one third of the national average. But the main attention was focussed. On the Over 900 million absolute poor, with an average per capita income of less than $100. This group has an infant mortality rate eight times higher, life expectancy one third lower, and adult literacy rate 60 per cent less than the average in the developed countries. There is also widespread malnutrition among 600 million persons, many of them Small children. A distinction was also made between the poorest countries - defined as those With average per capita incomes below $265 in 1975 dollars, where over 80 per cent of the absolute poor live and which require concessional assistance from the international COmmunity - and those middle-income countries with average incomes above $265 which need greater access to international markets, both to Sell their manufactures and to obtain capital.
The focus of national and international efforts, including that of the Bank, was to be directed during the 1970s toward increasing the productivity of the poor. It was recognized that welfare programs, without corresponding increases in the productivity of the recipients, could only be short-lived and even counterproductive. It was emphasized that to the extent that the poor possessed SOme tangible assets, however meagre (a small farm, a cottage industry, or a Small-scale commercial operation in the urban SectOr) nati Onal and international action should focus On helping them to become more productive through better access to credit, extension assistance, and production imputs such as fertilizer and improved Seeds.
It was also recognized that, beSides expanding the capacity of the POOir to produce and purchase market goods, it was equally necesSary to rede Sign and eXpand public Services Such as education, health care, water supply, and public transportation. The main emphasis, however, was placed on low-cost, replicable public services, since it was recognized that most of the present services end up serving the interests of a privileged few rather than the deprived many.
In recent years, the direct attack on mass poverty has also been broadened by the World Bank to
EconoMIC REVIEW, SEPT/OCT 1978

Page 9
include those who have no tangible assets, or those who cannot easily be reached by simply expanding existing public services. There has been an exploration of how the basic needs Of the entire Society can be met in a short time, without sacrificing economic growth or turning this objective into a short-lived Welfare approach. Thinking on this aspect, however, is still in an early and experimental stage. WORLD BANK POLICIES
The past ten years have witnessed a major change in the World Bank's lending patterns and policies in order to help increase the productivity of the World's poorest people.
To begin with, this has meant channeling International Development ASSOciation (IDA) reSOurce:S increasingly to the poorest countries, that is, those with a per capita income of less than $265 in 1975 dollars, even though the formal per capita income cutoff point is currently $520. About 84 per cent of IDA resources are being allocated to these countries. By comparison because of political pressures and “special relationships', only 42 per cent of total bilateral Official Development ASSistance from the Development Assistance Committee (DAC) of the Organisation for Econonic Cooperation and Development (OECD) is being channeled to the same group of poorest developing countries. Thus, IDA has been able to maintain a strong emphasis On poverty in its assistance. This is mainly because IDA is multilateral and nOn political, and because its Overall objective is to reach the poorest people, 80 per cent of whom live in the poorest countries.
Because of the change in the focus of development policies, it was also inevitable that the sectoral em. phasis. Of Bank Group lending should shift dramatically - and SO it did. About ten years ago 55 per cent of Bank Group lending was devoted to infrastructure projects: this proportion had dropped to 30 per cent by financial year 1977. Most of the World Bank's lending is now allocated to those Sectors that directly contribute to increasing the productivity of the poor. Lending for rural development has increased from a negligible proportion ten years ago to Over 20 per cent of tOtal lending tOday. For Social Sectors, such as education and water Supply, lending has more than doubled. In fact, over the past ten years, many new SectOrS and Sub
sectors have been added to the lend
ECONOMIC REVIEW, SEPT/OCT 1978
ing program : am develOpment, prim pulation control, and Services and table).
Sectoral compositi lending (perc
Infrastructure
Conninn UnicationS POWer Transportation
Subtotal Economic sectors
Agriculture (Of which: rural development. Industry TOuriSil
SUS total Social sectors
Education Population Urbanization Water supply Nutrition
Subtotal Others (including program loans)
Total
Not Only have tors broadened, ) and design of p changed con Sidera Sectors. The Ban lly designed “new S the objective of ( the poor people. jective of these 1 is this: at least 51 beneficiaries shoul poverty target gr the bottom 40 per lation. In fact, rience. So far Show age has been far 69 per cent of th the new-style ru projects were in t groupS. Another C of these new-style they are Sufficient beneficiary to be r out the country.
The Bank's le techniques have Other ways. FC yearS agO the Bar to government-ow Finance Companie tually nOne to Sr. prises. Last yea: such Bank lending ment-owned DFCs expected that abO this DFC lending

ng them, rural ry education, p0nutrition, sites
water supply (see
n of World Bank ntage share)
FY 67 FY 77 3.6 2.0 29.7 13.5 21.2 14.8
54.5 30.3
7.7 32.7
20.6( (-ست-س-) 11.9 21.1 l。4
9.6 55.2
4.6 4.l
0.5 二 2.2 0.1 4.2
0.2
4.7 11.2
21.2 3.3
100.0 100.0
· the lending secout the content rojects have also ably within these K has increa Singtyle projects” with lirectly benefiting A minimum Obnew-style projects per cent of their di fall Within the oup constituting cent Of the poputhe actual expeis that the coverhigher. In 1977, e beneficiaries Of tral development he poverty target listinctive feature 2 projects is that ly low in cost per eplicable through
inding policies and also evolved in ir instance, ten k made no loans ned Development S (DFCS) and virnall-scale enterr., 60 per cent of was to governBy 1980, it is ut 30 per cent of will be directed
toward Small business. Ten years ago, the Bank made few loans to State-owned industrial enterprises. Last year, virtually all of the Bank's lending to industry went to state enterprises. The Bank has recognized that it faces a diverse world with complex issues. It cannot afford to be rigid or doctrinaire. It must keep on improving, as indeed it has.
Not Only the content and direction of the Bank Group's lending but also the substance of its policy dialogue with member governments and the scope of its country economic and sector work has changed. A considerable part of this work is now focussed on identifying the dimensions of poverty and on the institutional framework and systems through which the poverty target groups can be reached directly.
It would be incorrect to Suggest that the Bank effort has already made a decisive diference to World poverty. But it would be fair to say that Bank policies have changed rapidly over the course of the last decade to focus on increasing the productivity of the poor. We must recognize that in the final analysis, the Bank's role is nore to persuade member countries and to give the right policy signals. It cannot coerce national governments into adopting appropriate policies for attacking their poverty problem if they neither have the political will nor the institutional means to do S.O.
The Bank's role can thus be Only a supporting one. The Bank, along with the member countries, still has to learn a good deal about how the productivity of the poor can be increased effectively and on a sustainable basis. The developing countries concerned and the international community have still to find out how public services can be eXtended On a nati OnWide baSiS at a low, acceptable cost. We all have yet to discover how alterna— tive delivery Systems can be devised to reach the poor people and to obtain their Willing and enthusiastic participation. The Bank doubtlessly has made some progress in addressing the problems of poverty. But we should neither be immodest nor apologetic about what has been achieved so far. The Bank has taken just the first steps in dealing directly with the vast
needs of the world's poorest: the real challenge for the Bank, and the international community, still
lies ahead.
7

Page 10
he Bank and Urban Power
EDWAR1) JAYCOX
In September, 1973, World Bank President, Robe Outlined in his address to the Governors of the Baik Meeting what he called a major new undertaking fo) rogramme to help national governments alleviate pove growing cities of the developing countries. Jaycox, currently the Bank's Director of the Urban Pro and Chairman of the Urban Poverty Task Group attem background to this major effort, outline the basic s been developed and report on progress to date.
This a
The reason why the Bank is undertaking a major offensive against urban poverty is readily understandable in the light of the realities faced by most leSS developed countries today. Over the past 25 years, the urban population of developing countries has increased at the un precedented rate Of clOSe to 5 per Cent per annum— nearly twice the rate of the overall population growth of these countries. Over 550 million people have been absorbed by the cities in the developing World in a single generation. Today these cities contain over 840 million perSons, or about 28 per cent of their total population. About 25 per cent of the total population in Africa and South Asia lives in urban areas; the proportion rises to between 30 per cent and 40 per cent in East Asia, and North Africa, and to nearly 60 per cent in Central and South Annerica. So while the pace of urbanization over the past 25 years has been faster than ever before the level of urbanization is still relatively low.
This makes the challenge of the future even greater. The United Nations estimates that by the year 2000 another 1.2 billion people will have to be absorbed by the existing and new cities of the developing WOrld. Africa's urban population will triple. IIl Latin America, urban dwellers will exceed 75 per cent of the total population. Except for the poorest countries of South Asia and Africa, at least half of the developing world will live in urban areas. About half these urban newcomers will come from natural population growth and the rest from migration to the cities from the rural areas. Most of these new city dwellers will be poor and unskilled. The resources available for accommodating this urban growth are, and will remain, severely limited. The pressures on these cities and national govern
8
ments are alire by and large, til tries are not Of attitudes, po capacity, Or abi financial and ot ed – for the
The heart urbanization lies bers of the ul City's population the inational ra their illegal, unS tlements, UIl6 employed in lo - are typically Or three times city's populatio
The Bank rently aimOSt C urban dwellers COuntries lack therefore the CC to maintain a 250 milion Of t, access to mini Water, minimal basic education also estimate affe gifOwing by aS bet Ween 15 ՏՕՌՏ ger aiհով: Till Ch MnOre iS Sent trends by 600 million Ur found living ir conditions. T this explosion o Overall e cOnOmi as well as for indeed Stark. all strategies to ation are gene. Overdue and in lated in haste.
POPULATION
DEVELOPMEN
Clearly any has to involve : Overall rate of tion and to at inattention typ development.

ry
't S. MAIC Nanaia,
at their Annual the Bank - a ty in the rapidly ticle by Edward jects Department, pts to set out the trategy that has
3.dy enormous and, he developing COunready - in terms Licies, management lity to mobilize the her resources requirtask ahead. of the problem of in the riSing numaban poor. If a is growing at twice te, the poor — in erviced squatter Setmployed or underw productivity jobs y growing at twice the rate of the in as a whole. estimates that cur
)e. third of the in the developing the incomes and
Insumption sufficient productive life. Over hem lack reasonable
mal nutrition, Safe Sanitation, and and shelter. We
hat these numberS perhaps as much and 18 million perm, and that unless done to alter prethe year 2000 over ban dwellers will be these deplorable he implications Of f the urban poor for c and Social progreSS political stability are Appropriate nationcope with this siturally lacking and luŞt now be formu
AND RURAL T
responsive strategy attempts to stem the increase in populatack the backlog of ically paid to rural These are major
thrusts of the World Bank's operations. Only by significantly slowing population growth and increasing productivity in both urban and rural areas can any real gains be achieved in employment rates and per capita incomes for the very pCOr.
Even with much greater efforts in rural development, however, there are limits to what can be achieved. The amount of land that can realistically be brought under cultivation in most countries is either quite limited or can Only become productive at high and increasing costs - for clearance, infrastructure, irrigation and settlement. Furthermore, even with greatly increased output per hectare, which assumes the continuing spread of technology, fundamental questions remain. How much labOur can be productively absorbed in the development process? Can per capita rural incomes be raised to reasonable level without a Substantial eXOdus of people from the land? The problem is most dramatic in Asia. In the Philippines, for instance, a SSuming that agricultural productivity grows at 5 per cent per annum Over the next 25 years (which would be an unprecederated feat) rural per capita incoales now about $75) will probably not exceed $125 tighless the urban areas abSOrb SOme 30 million people. To achieve $125 rural per capita income in Pakistan by the year 2000 will require nearly 6 per cent per annum real growth in farm productivity, plus a shift of Over 40 million people from agriculture to dependence upon nonfarm employment. If the cities and towns cannot absorb and employ these people, then even these modest levels of rural income are not likely to be achieved.
Persons who will join the labour force every year up to the mid 1990s have already been born. Clearly we cannot expect rural development or population planning to reduce significantly the pace Or Scale of urbanization in the remaining years of this century. Utter failure on these frontS WOuld no doubt unnecessarily aggravate the problems of increasing urbanization, but even rigorous and Successful efforts will not resolve these problens in the near future.
The cities of the developing world, therefore, have an enormous if not overwhelming economic task to perform, assuming even the most favourable increases in rural productivity and decreases in hu
EconoMIC REVIEW, SEPT/OCT 1978

Page 11
man fertility. Effective national strategies will require not only continued gains in rural productivity and family planning but a very different and more efficient approach to urban development. THE BANKS PROGRAM
The objective of any responsible urban strategy must be to increase the capacity of towns and cities to absorb the newcomers. Absorption means providing productive employment and essential services at basic levels for the unprecedented numbers of poor people who will inevitably dwell in urban areas. This may SOund obvious, but for many national and city authorities this formulation of objectives would involve a major shift in attitude, away from concern for the preservation of unrealistically high urban standards, and toward, a concern for the national economy and the efficient inclusion of the urban newcomers in the development process.
The World Bank's urban poverty program, therefore, has two complementary thrusts: (1) to create productive nonfarm employment opportunities at much lower capital costs per job and in much greater numbers than would take place Otherwise; and (2) to develop programs to deliver basic services to the maSSes of urban poor. On a very large scale, at standards which they and the economy can afford. The emphasis on low capital investment per job and low cost standard services affordable by poor households is the key to the program. The basic concept is to Spread a larger proportion of the available capital over a larger number of people, so that the poor gain access to some minimal level of individual productivity and to essential services they can afford to pay for. This emphasis on affordability is to ensure that these programs are financially replicable On the large scale that is needed and that unnecessary subsidies are minimized.
In order to make the Bank's urban poverty program operational, a continuing priority has been to refine and deepen our understanding of the nature and extent of urban poverty in specific countries. The statistical information necesSary for a SOund analysis of urban pOverty and appropriate interventions is lacking for most countries. There is a general need to improve this data base, to 'map' urban poverty in terms of employment, income, consumption of basic needs,
EconoMIC REVIEw, SEPT/OCT 1978
and physical loc: is now a part of ecOnOmic analySi Staff.
The country the Bank is a SO In CreaSingly On C graphic, employn Cll StributiOn UrenC implicit and expli gies with respect In this W Ork, th: relationships bet and rural devel policy variables ant fOr managin are being explore ThiS eCOn Om with Special Stu Sectors Or issues Only to provide ject selection anc importantly to basis for policy governments and and its borrowers
The Sectors which have the g create employmer viceS tO the urba Scale, labour-int integrated urban nity development and Serviced sites Supply and Sanita health, nutrition, ning. The Bank in each of these examined in deta: potential benefici lending on the Welfare Of the Ur typical projects a in each Sector. of these “new S being monitored experience is acc be synthesized fo ment of proiect c LABOUR-INTENS PRODUCTION The generatic ployment Opportu tal cOSt iiS a ma the urban poverty bably the most d Most developing C little capital ava ment relative to people that need most countries th average amount C per work place (j age COSt per Wor mOdern nonfarm Scare capital is ed on a relativel

ation. This Work the routine country is done by Bank
ecOnOmic wOrk Of beginning to focus uestions Of dem Onent, and income ls, and to examine cit national Strate, to these trends. he complementary ween urbanization opment, and the that are importg equitable growth d. sic Work, together dies Of particular , is intended not guidance for prodesign, but more provide a sound dialogues within between the Bank
S. of Bank lending reatest potential to nt and prOvide Serin poor are Smallensive enterprises, pr0jects (COmmu, slum upgrading, for shelter), water tion, education and and family plan's operations withSectors have been il to illuminate the tal impact of our productivity and ban poor. Protore being developed The performances tyle” projects are to ensure that the umulated and can ir further developtesigns. IVE N in Of nonfarm enInities at low capijor component of " program and prOifficult tC, achieve. ountries have very tilable for investthe number of employment. In e gap between the of capital available Ob) and the averk place in the Sector is enormous. being concentraty few workers, in
creasing their productivity greatly, but leaving most of the work force without access to capital and with very low productivity.
The Bank's traditional Operations in manufacturing and mining adhere to this general pattern. In heavy industry, work places financed by the Bank have cost well O Ve an average of $100,000 each, whereas in the average operation financed by the Bank through local intermediatary development finance companies work places have cost about $25,000. The average Capital available, however, for each work place needed is $1,000 in India, $1,800 in Kenya, and $13,000 in Mexico. This is not to say that the traditional projects are not economically justified; all indications are that this lending has been highly justified and has used capital Sparingly relative to the manufacturing process being financed. However, it does mean that for the Bank to be involved in large-scale employment generation at appropriate COStiS per job created, it must find Ways of reaching the poor directly in areas that it has hitherto not touched - such as service enterprises, Small-Scale Operations, the self-employed, artisans, and cottage industries. It also means that the Bank, in many instances, must help its established intermediaries develop new modes of Operation or must find new kinds of intermediaries - commercial banks, cooperatives, credit unions - capable of reaching borrowers at the “grass roots' or “curb side'.
Many borrowing countries, too, lack experience in directly assisting their low-capital, small-scale Sector. Basic policy decisions to redirect investment have not been made and the capacity to implement ᎠrᏅgrams often does not exist. In many countries, the policies and institutions are even hostile to the small-scale labour-absorptive Operations to which the Bank is now turning attention.
The typical “urban poverty project' - defined as such by virtue of its performance in employment creation - is one which creates employment at less than the national average amount of capital available per work place. This “new style' project is essentially labourintensive, but nevertheless fully justified in economic and financial terms. It is typically financed through intermediaries, often at two levels: one national and one
9

Page 12
very local. It includes a technical aSSiStance Or “urban extenSiOn” Service, either financed and managed by the financial intermediaries or separately organized. The loan to the beneficiary bears a real positive interest rate reflecting the opportunity cost of capital and enSuring that employment is not reduced by subsidized capital. There is heavy emphasis On the Strengthening of intermediary institutions and the development of a policy environment conducive to appropriately labour-intensive productive technology. The project is carefully monitored for its actual impact. In 1977 the Bank financed about a dozen projects containing components with these essential characteristics. TThere vere Over 90 under preparation at that time. By 1981 the Bank aims to lend over 3400 million per annum (in 1978 dollars) for such projects.
INTEGRATED URBAN PROJECTS
The aim of these projects is to give security of residence and acceSS to ba Sic services to the very large numbers of urban poor who already live or will otherwise live in unServiced, illegal settlements. Essentially there are two types of integrated urban projects: the SCatter SettlementS and the creation of Serviced sites for additional low-income residence. Most Often the projects contain elements of both types. Each project is, of necessity, tailor-made to the Specific problems, needs, and institutional environment of each borrower. HOWever, these projects have certain COITOI characteristics. Their emphasis is On Self-help, and they Supply public finance only for those services that people cannot provide for themselves. The design Of the Service levels and layouts of these communities is based on what the residents can afford, given realSonable acceSS to longer-term credit. Since we are talking Of very poor people, the Service levels are very low by international Standards and executing the projects of - ten requires abandoning existing unrealistic building and zoning codes. Upgrading is accomplished with an absolute minimum of relocation. New sites are selected on the basis of their access to employment centres.
The integrated urban projects attempt to cover those aspects of the community development that are critical to the productivity, health, and welfare of the people. Education, vocational training, nu
10
trition, family pl ness credit, and elements are COI integral parts of project is aime promoting a lo Great emphasis ther the project On a Scale comir size of the proble not meet the B. ria, Which rule un SuStainable “showcase” proje through recovers the beneficiaries aSSure the abili project but also : Over design Sta: BeCallUISe the bene ed to pay the comes not only Sential that th{ the deciSiOS in plementing the
The Bank h of these integra in 25 countries. have been the in the urban pover 70 of these proj paration, many projects in coul OLS projects hav implemented. ains to lend ab annum (in 1978 grated urban pr least 5 million (equivalent to a annual increase tion). Each of ation projects monitored to a post evaluation Inew projects. SECTCR, APPRC
Quite apart Waste dispOSal e grated urban p important in te vested and peo “ney Style” pro: the later and the poor Gil a c. basis. Typicall volve public st: munal WaShing or pit latrine They involve a tion of this part and the develop ed runk and S facilities. The imaginative th tem design, cos pricing strategie With urban deve

anning, Small busitechnical assistance amonly included as the project. Each di at initiating Or Ing-term program. is placed on whecan be duplicated men Surate With the m. If not, it canank's lending Criteout Support of the highly subsidized ct. Self-financing 7 of full costs from not only helps to ity to duplicate a maintains discipline dards and costS. 'ficiaries are expectcosts, it often bede Sirable but eSby participate in planning and improject.
as now financed 35 ited urban projects Up to now they najor component of ty program. Over ects are under preof them “repeater' Intries where prevife been Successfully By 1980 the Bank out $600 million per dollars) for inteojects benefiting at peSOS per annun bout one third the in squatter populathe basic urbanizis being carefully llow in-depth, exand feedback to
)ACHES
from the Water and Omponents in interojects, and more rm,S Of dolarS inple served, are the jects which address Sanitation needs Of ity-Wide or national y these projects inandpipes and connand toilet facilities building programs. ppropriate integraof the system, with ment of, the needOurce Or treatment Se projectS require inking about Sysrecovery methods, S, and coordination lopment programs.
Nearly all the urban-located Water and Sewerage lending of the Bank involves important direct benefits to the urban poor. The aim is to increase these benefits to overcorne the backlog of in attention to the poor and keep pace with their growing numberS.
While School enrollment ratioS in urban areas are typically much higher than those in rural areas, these averages mask marked educational disadvantages for the urban poor, who usually have about the same lack Of access to education as their rural counterparts. “New style' education projects are being developed to directly benefit the urban poor. These projects increasingly emphasize, nonformal education, functional literacy, primary Schooling, vocational training, and adult education. More attention is now being paid to the location of Schools within the low-income neighbourhoods and to encouraging the demand for basic education and skill development.
There is a great deal of evidence that in many countries the health and nutrition Status of the poor in urban areas is inferior to that of the rural poor, due to un Sanitary Crowded conditions, lack Of access to proper and adequate food, less breast-feeding of infants and generally higher costs of living. Also with heavy migration by the young, the fertility of the urban population is often increasing. The main health, nutrition, and family planning aspects of the urban poverty program have up to now been mainly addressed through components within integrated urban projects, but sectoral approaches to these problem areas are planned for the future.
OVERALL TARGET
The overall target for Bank lending to combat urban poverty is that by financial year 1980 at least one third of all urban-related lending will provide direct benefits to the poverty group. This proportion roughly corresponds to the proportion of the poor in the total urban populations of the developing world and Would involve a Substantial gain for the poor above their normal share of benefits from public investments. However, the target is essentially arbitrary to challenge the Bank itself to make the breakthroughs in design, to take the initiatives, and to change its own comparative advantages to be able to help its borrowers with this high priority work.
ECONOMIC REVIEW, SEPT/OCT 1978

Page 13
Priority for two fundamental
ROBERT S. McNAVARA
As one surveys the international development scene today, it is clear that there are two fundamental objectives that must command the priorities of us all.
One is to accelerate overall economic growth in the developing countries, and the other is to reduce the maSSive dimensions Of absolute poverty.
In the World Development Rep0rü, 1978 the initia volume in a ng VN is annual SerieS Of wOrld Bank analySes Of ecOnomic and Social progress in the developing world, these two issues are examined in detail.
Based on a number of feasible - though admittedly optimistic - assumptions, projections for the period 1975-1985 indicate that the ow income countries could increase their Overall growth rate from roughly 4 to about 5 per cent, and that the middle-income countries could Sustain their current growth Gf about 6 per cent
These are not, however, predictions of what will actually happen. They are prospects which are far from certain. To achieve them, both the developing countries themselves, and the developed nations, must increase their effort.S.
The developing countries must, for example, mobilize even greater domestic Savings than they do now. This Will call for difficult reforms in a number of sensitive areas of public policy.
Further, they must expand their export programs, and their agricultural productivity - which
in the case of the low-income countries would mean doubling their current agricultural growth rates, raising them from 1.5 per cent to 3.0 per cent a, year: a difficult but attainable goal.
But if the developing countries were to do all of this - as necessary as it is - they simply could not achieve the projected levels of economic growth without substantially greater support from the developed nations.
That support is required, first of all, in the matter of trade. Just as the developing countries have begun to demonstrate their natural comparative advantage in certain labour-intensive manufactures, a new threat of protectionism is gathering momentum in the developed world.
ECONOMIC REVIEw, SEPT/OCT 1978
This is both shortsighted sinc developing count) range e cOnOmic ultimately decre: ence On foreign Already the COStitute S an in ing market for idUS trialized na demand ad help O'Fir economic the developing cc port, even more from the OECD they both need : then they must Lurn tO expOrt n nations in order eign exchange ne In the end, tjiniSni iS . Self-dé One: for consume less expensive, ar tionary, imports; who are denied to expanding m. What is req rational frameWO trade that三Wil1 On both sides di Simantling of and by broadenir comparative ad industrial countri initiating adjust that can ease t and labour away dustrieS intO mO productive Sector
The expansio trade is, thien, es nomic growth th tries so desperat
Another requ ty for the midd ing nations, is th ance of adequate both the multila stitutions and t markets.
In the reces: the economic early 1970s, th countries had to rOW ing abroad development mOr. national develo and the commer e di to that need biONS rOSe Swiftl
This was, on
positive phenome the recovery proc ed as well as the But as the debt

objectives
inequitable e it denies ies the Only lOngStrategy that can Se their dependassistance.
developing WOrld portant and grOWhe exports of the tions, stimulating ing to hasten their eCOWery. But if Untries are tO imgoods and Services
and
nations - which ind vant to do – be allowed in re
Ore to thOSe Same to earn the foriceSSary to do S.O.
excessive protecfeating for everyrs, who are denied ld hence less inflaand for producers competitive access arketS. uired is a more rk of international reduce prectionism by promoting the non-tariff barriers, ng the scope of true Wantage. In the ties this will require ment procedures he shift of capital from marginal inte competitive and "S.
in of international Sential to the ecoe developing counely need. irement, particularle-income develophe continued a SSurcapital flows from iteral financial inhe private capital
Sion that followed turbulence of the le middle-income rely On heavy bOrto maintain their nentum. The interpment institutions, sial banks, respond, and debt obliga
y.
the whole, a very non, and assisted ess in the developdeveloping nations. grew, there began
the
to be some anxiety that prudent levels might be exceeded.
The World Bank has followed these developments closely, and has concluded that the potential dangers lie not so much in the absolute amounts of the debt itself, but rather i a generally burdenSOrne maturity structure and in liquidity problems that will affect a limited number of borrowgerS.
The poorest developing countries, because of their limited debtservicing capacity must of necessity depend on capital at concessional terms, and are in urgent need of greater Official Development Assist3.ՈCe
If the poorest countries are to attain the very modest economic growth levels projected for the period 1975-1985, there must be an end to the virtual stagnation in ODA flows, and an increase of at least 5 per cent a year in real terms. Though Some Of the Smaller countries of the Development Assistance COmmittee have made a Strong showing, the overall trend in Official Development Assistance is very disappointing. In relation to combined GNP, ODA has declined from 52 per cent in 1960 to 31 per cent in 1977.
But increasing economic growth - as essential as it is - is not the Sole objective of the development task. Reducing the massive and cruel dimensions of absolutely poverty is equally imperative.
And it is here that the World Development Report comes to itS most shocking conclusion: that even if the growth rates projected for the developing countries were to be achieved by 1985 - which is by no means certain - and even if that grOwth were to COntinue for another 15 years, it seems likely that at the end of the century there would still remain Some 600 million individuals trapped in absolute poverty.
Those years will clearly demand a more determined effort from uS all if the central goals of development - Sustained economics growth, and the reduction of absolute poverty - are to have any realistic chance of succeeding.
We mu St be candid ab Out the choices that confront us.
There are no easy alternatives.
But to relax in the development effort, to lose momentum, to procrastinate, to let problems fester and grow worse - that choice can benefit neither us, nor those others Who must follow after us.
1.

Page 14
THE WORLD BANK
I-A CRITICAL ASSESSMENT
Joseph Collins and Frances Moore Lappe
Joseph Collins who with Frances “Diet for a Small Planner' and
Revient was carried in ol
view with the ECOnomic
Moore Lappe *Food First and
issue has sent us this article on the World Bank
vised and updated chapter of their book
They work with the In
be published in August, 1979.
“Food Fir
and Development Policy based in San Francisco, Calif
“Perhaps more tham amy other im Stitution in th Bank is helping large numbers of people mon poverty tolyards a more decent life.'
-WORLD BANK PRE ROBERT S. McNAMARA. A
The World Bank has rapidly emerged as the leading institution for development financing, with lending commitments for 1979 projected at $9.8 billion. PreSident Carter has asked American taxpayers to virtually double their contribution to the Bank. Our $2.2 billion in fiscal 1979, we are told, would help the Bank further its “assault on poverty.'
The World Bank's Assault on
Poverty
Important insights into the World Bank's battle plan can come from reading any of its confidential rural project planning documents (“gray covers'). Here the Bank staff seem to follow a ritual formula - one apparently unaffected by the Bank's “basic needs' rhetoric of the past five years.
Technical and statistical data, are paraded forth. Poverty is quantified. The poor are spoken of in para-military terms: that is, as “the target population”. Despite the stress on “participation' in publicly-touted policy papers (for example, “The rural poor must participate in designing and operating a program which involves so many of them”), poor people, project documents imply, can be reached from the top down. The poor are never seen as the participants, much less the instigators, of their own development.
Project proposals, nOminally written by the local government, are in most cases ghost-written by Bank “missions' that fly in at no small expense from Washington for a few dayS.
12
The presum project design is can be achieved in external reSOu vestment is thou The t a project di going reliance on as a problem.
The projec Section an Ounts Of-all WOrlds pro Of goals plus mO Poverty is simpl hint that forces ing and SuStaini plan is an exerc divorced from p. and cultural fact lity of conflictin level is apparer Government and all presumed to ther to eliminate Results of pr. ed Only in Statis perience of real The Case of Bar With the Bal to ignore the SO( ty, is it Surprisi time after time verse of stated g Take the Ba gOvernment Of IE 3000 deep tubew well can irrigate possible an extr northWestern Bal ing to a Bank Well WOuld Serve a cooperative ir independent Am. Betsy Hartmann who lived for in of the villages c ject, found what

has authored whose interLur January, 1978 based on a rest' which will stitute for Food Ornia.
e Uorld, the World pe out of absolute
SIDENT, PRIL 2, 1978
ption throughout
that development
only by bringing rces. Foreign inght of as essential. Lesign includes Onimports is not seen
st implementation to a series of bestjections. Statement ney equals success. y there with no are at WOrk Creatng it. A project iSe ilin ecOnOmiiCS Olitical, sociological OrS. The possibig interests on any tly unthinkable. Other actors are be working togepoverty. rojects are measurtics, not in the expeople. gladesh nk's projects opting 2ial roots of poverng that they seem to achieve the reOalS? ank's credit to the Bangladesh to fund 7 ellS. Each tube2 60 acres, making a crop of rice in ngladesh. AccOrdpreSS release, each frOmm 25 tO 50 irn igation group. But Lerican researchers and James Boyce, ine months in One overed by the prowas no Secret to
anyone in the village: the tubewell has wound up as the property of one man, the richest landlord in the village. The World Bank (in reality the Bangladesh government) paid $12,000 for each well; this landowner paid less than $300 for his. And the vaunted irrigation cooperative is but a few signatures he collected on a scrap of paper.
Was the Hartmann and Boyce experience atypical? Apparently not at all. Expressing their dismay to a foreign expert working on the project, they were told:
I no longer ask who is getting the well. I know what the answer Will be and I don't want to hear it. One hundred per cent of these wells are going to the "big boys.' The project should not be thought of as simply failing to help the “target groups'. Such a project actually undercuts the Supposed beneficiaries by enriching their enemieS. Thanks to their increased income due to World Bank tubewells, larger landowners will be better positioned to buy out the Small farmers, thus driving them into the growing rankS Of the landleSS. The same foreign expert COmmented:
On paper it all Sounds quite nice. When the officials fly in from Washington for a three-day visit to Dacca, they look at these papers. They don't know what is happening out here in the field, and no one is going to tell them. WOrld Bank OficialS Wh0 find themselves forced to admit the failure of such a project invariably do not question its premises. “More managers', they say, are What is needed.
Not Neighbours, But Rivals
We ourselves investigated anOther Bank rural development program in Bangladesh, a major “pilot'' program called RD-1 (Rural Development Phase One). The stated goal of the $16 million RD-1 is “to reduce the domination of rural institutions by the more prosperous and politically influential farmers and to make farm credits and agricultural inputs...... available to the small farmers through the coOperative system.'
The Bank, you will note, presupposes there could be a cooperatil ve system unot dominated by the elite land OVWnerS.
People in each village we visited, however, told us that the socalled cooperatives Were for the
ECONOMIC REVIEW, SEPT/OCT 1978

Page 15
Well-Off-generally the top 10 per cent owning six acres or more - Who controllied the records and determined who could join and get credit. For the rest, especially the half owning one acre or less, the payment terms are too stringent and the membership fees too high. Moreover, Without land, coming up with collateral is virtually impossible. “Even if I did come up with a scheme to pay back a loan', Oile landleSS viliager complained, “The cooperative would still not give me credit.'
One caSe in Bangladesh confirms a pattern we have found throughout the world: village cooperatives will inevitably be coopted by the elite groups long as land remains gro SSly un evenly distributed.
Projects dreamed up in a social vacuum play themselves out in the real World of injustice and conflict. As one Food and Agriculture Organization agronomist with 15 years experience in Bangladesh told us, “The thing to remember about the Villages is that the people are not neighbours but rivals'. Similarly the fundamental social reality we were repeatedly told, is a struggle over land: the well-off scheme to get their smaller neighbours in debt to them in Order to foreclose on their land ; the poor farmers desperately manoeuvre to hold on to the little land they have.
Thus the rural elite who now usurp the tubewell - or the new machines or the extension worker's guidance or whatever the Bank projects supposedly earmark for the Small farmer - make Sure the poor will not benefit. This is true even if it means vastly underutilizing the new input. Don't Rock the Boat
A recent Bank policy paper on rural development explains how projects should deal with “the existing Social system', the paper states: “In many countries, avoidiing opposition from powerful and influential Sections of the real cominunity is essential if the Bank's program is not to be subverted from Within."
The Bank's commitment to not rocking the boat is clear when we discover that many of its rural programs do not even make the pretense of aiding the poor Smallholder S. In ASSdult On, WOrld PO)- erty the Bank states that it is allocating almost half of its rural credit to small farmers. But this means then that more than half of the
ECONOMIC REVIEW, SEPT/OCT 1978
Bank’s rural cre ing to medium : who at most pei cent Of all ugraderde veloped |
Ká0:eOver, ci{ project appraisal pe Oil the aert
Ost half” SԱ 'Srrig farmers’.
Ot, WOld Bank the rural poor
i při how the Bain
And if the B attacking rural i É, Offer the neniam tieg VÄ. Hiere a f 2nd? (Ενε η ι conservative esti make up 40 to population). T landless, the “trickle down' told, for exampl dollars for an i generate nore f: boon to the land nann and Boyc aid to the rich ΥΥ1OYe OOOI at : really the Way poor?'
AS un utter the Bank did di in Bangladesh to villagers directly, RD-1 project iir $4000 loan for a Operative to pu: gOvernment a po of land. (There ernment land in well-off have t the WOrkey'S' in that they must villager landown prOgrani am Olunt Sidy for the ric
The program ciudes Only a th village's landless to confront the S erate their land) In visiting th not avoid feeling ing more than signing the co-op noticed signature several European Canada. Were met there being 1 unwitting service image?
The Bank gC not to rock the of outright corru Bangladesh the g sets for the Bal project jumped f

dit vŲill Still be gOand iarge farmerS !onstitute only 20 landholders in the countries. Oser examination of S has taught uS to ab Out even the “alpposedly going to FOI VẪyhether. Or credit is getting to depends, in part, k defines “Smal'. ank is seriOuS abOut poverty, what does y lan die SS in counew monopolize the in the Bank's own nate, the landless 60 per cent of the
o deal with the Bank revives the theory. We were
e, that millions Of irrigation dam will arm employment, a eSS. But as Harte ask, “Is giving
So they can hire Subsistence wages 7 to best help the
tly rare exception, esign a sub-project D benefit landless The $16 million cludes a meager single landless corchase from the nd and three acres is much more govthe village but the Surped it). Since COne is still Such also work for the erS tO Survive, thi S IS to a Wage Subin landowners. 1 -e furthermore iraird of this single and does nothing tructures that gen
e SSeSS. is project, We could I that it was notha Showcase. n 's visitors book, we 2S of visitors from countries and the poor people we underpaid for their to the Bank's
DeS Out Of itS Way boat even in cases ption by elites. In price tag on pumpnik’s deep tubewell rom $9 to $12 mi
lion simply to meet the demand for Super profits by the pump-set importer among Bangladesh's richest citizens.
While “feeding the hungry' might warm the heart of World Bank officials, there is no column on their ledger sheets headed “full StGrnach So. Poor people growing food for themselves do not produce much money and foreign exchange. For only if they sell their production, that is, generate “marketable surplus', will loans get repaid. That is what the Bank is concerned about.
The World Bank, like any comnercial b2.link, Seeks to minimize risk. The Bank itself notes, “Lending (21 iy to thoğae with investment, opportunities sufficient to produce a significarit market ble surplus is perhaps the est Way to reduce the level of default'. Those with investment Cpportunities' is a euphemism for the larger landholders, Besides betting on the largeholder, the Bank often carries its risk minimization one step further: Farmers are "encouraged' to produce non-food crops. This will ensure a marketable surplus. -
The Bank is pushing money, yes, but not giving it away. Loans must eventually be repaid - and with foreign exchange, earned, as We have Seen, largely by the labour of rural people producing for export. Att best the Bank through its TIDA Operation, gives loans on concessional terms. Much of these loans, however, merely serve to create the cash flow that makes it possible to make payments on previous regullar Bank loans as well as private U.S. and European bank loans.
Repaying mounting debts puts a country under ever greater pressure to Orient every aspect of the economy towards exports. The “debt trap' pushes countries away from building a basis of self-reliance, the only foundation for a new internatiOn) al economic Ordero.
More than a Bank
The World Bank is not simply a provider of development loans. Over the past few years it has become a major force in shaping
national economic policies. In the Bank's Own Words:
IDAʼs borroWers, in particular,
would be unlikely to obtain finance on terms as satisfactory as IDA's from any other source; they are therefore unlikely to disregard the kind of advice they may be given by Bank IDA missions whose periodic Surveys of their economies in
13

Page 16
The World Bank's Annual - An Old Theme in New C
States India’s “Economic and Political Weekly.
Is the World Bank beginning to lose Steam? According to the Bank's latest annual report, loans
clude assessments of the soundness
of their economic policies.
The Bank has begun establishing permanent missions in underdeveloped countries, often located right within planning ministries. In an increasing number of countries the Bank puts together and chairs a consortium of the principal bilateral and multilateral lenders that COOrdinate don Or contributions and policies. In many countries, Such as Bangladesh, the Bank is quietly placing advisors in key ministries
Of the government. One trump card of the Bank is that it determines governments' international
credit ratings.
Evaluations are sometimes commiSSiOned Of Out Side but how independent are they, given that their next contract might COme from the Bank One Such major evaluation we heard of was critical. It has been suppressed and the author was Ordered to do a 're-write'. Public reports, we are told, must be upbeat in Order to gain support in the congress and parliaments of donor countries.
While in Ballgladesh informed foreign Sources told us that reCently a miSSi On had flO WYn in frOm Washington and prOn Ounced the RD-1 program We discussed earlier a SucceSS “becau Se it is balSed On Sound principles' and that it should be expanded. Yet only the day before a Bangladesh government Official had shown us an internal Bank memorandum indicting every aspect of the implementation of the project and concluding that the co-op system operates “excessively in favour of the more wealthy farmerS.’’
Some at the Bank might reason that meeting the basic needs of the poor would pacify those working to alter present social structureS. But, even if this be the goal, their programs are ultimately self-defeating. Intervening with funds for profit-generating investments, while opting to keep intact the Social structures that generate poverty, Only strengthens the grip Of elites. The result is that the poor are even further impoverished.
14
consultantS;
approved in the (from July 1, 197 This represented under 6 per cent doubtedly a mod the Standards of RObert MaCN ainm loan approvals h; in 1974, 34 per c cent in 1976 and The trend in similar. At $2,78 ments in 1978 W. leSS than 6 per C 1977. By contra bursement had each in 1974 and in 1976 and 7 pel operations of th Banks SOft loan Same Story. LC the IDA irh, 1978
nay Seen to of 77 per cent is Only because 1977 had had to Of resources. the IDA in 197{ per cent l'O'Wer til two years and little higher tha)
Even more St in the net tra by the World Ba underde veloped ment Of princip. intere:St and Oth rowing countries million in 1978 than 58 per cen ments during th
words, the poo forced to use their neW bOr
World Bank an repayment and On their existing tutiOn.S. This
caught in what described as the net transfer Of underdeveloped
World Bank an just $1,598 mill $2,078 million in a sobering thou! was the Sum to Bank's net cOnt velopmental resi poor countries
make a rough son, this is equ amounting to 5

Report Garb
fiScal year 1978 7 to June 30, 1978). a rise of a little Over 1977 - Unest achievement by the Bank under 313 - The rise in ad been 75 per cent ent in 1975, 15 per 16 per cent in 1977. di SbUlrSementS iS 7 million, disburseere again a little ent higher than in st, the rise in disbeen 30 per cent d 1975, 24 per cent cent in 1977. The e IDA, the World asSociation, tell the anS approved by 3 at $2,313 million mark a big jump over 1977 but this IIDAʼs operations in be cut back for lack Disbursements by 8 Were actually 18 nan in the previous Were Only just a n in 1975.
riking is the decline nSfer of reSOurces .nk and IIDA tO the countries. Repayal and payment Of er charges by boradded up to $2,251
Or equal to more t of fresh disbursehe year. In other r countries Were the larger part Of rowings from the S IIDA tO meet the servicing obligations debt to these instiis part of being has been so aptly “debt trap'. The resources to the countries by the di IDA in 1978 WaS ion, compared to 1977. It is indeed, ght that $1.5 billion ital of the World ribution to the deources of all the put together. TO and ready compariall to no more than 6,098 million were
about 11 per cent of this year’s proposed public sector Plan outlay Of India.
However, President MacNamara is not one to allow the Bank's evangelican aspirations to be circumscribed by the modest dimensions of its material contribution to the cause of the upliftment of the poor, Five years ago, at the annual meeting of the Bank in Nairobi in 1973, he decided that in Order tO improve the condition of the poorest Segments of the population of the poor Countries, the emphasis in the development programmes of these countries needed to be shifted to agriculture and rural development. Accordingly, he set a target of World Bank lending to projects in these areas of $4,400 million in real terms over the quinquennium 1974 - 78. Now, at the end of the five years, the Bank can claim to have exceeded this target. Loans approved by the Bank and IDA for agriCulture and rural develooment during 1974 — 78 amounted to $10,020 million, ecual to $5,950 million in real terms. MacNamara's target of $4,400 million has thus been Surpassed by about 35 per cent,
In the discussion in its annual report on the policy changes recently effected by the governments of the countries of South Asia, the report notes with obvious satisfaction that “governments are reappraising the role of public investment in the economic development prO CeSS. Throughout the region, this reappraisal is leading to a shift away from an earlier emphasis on heavy industry and certain types of infrastructure in favour of agriculture, irrigation, rural development, small scale industry and health'. What is significant here is, of course, the counterposing of emphasis on agriculture, irrigation, rural development and SO on - the need for which will hardly be questioned - against development of heavy industry and infrastructure. The suggestion is that if agriculture and rural development and all the other activities undoubtedly essential for the upliftment of the poor did not make enough headway in the past, it was because undue attenti On was glven to investment and public investment especially in steel, heavy machine building, basic chemicals, power and so on and so forth.
The dangers Of Such a vieW Of the development experience of
ECONOMIC REVIEW, SEPT/OCT 1978

Page 17
the underdewloped countries are brought out sharply in the reference in the report to Other changes in government policies from which also the bank derives great satisfaction. Thus, to quote from the report, “in the wake of major political changes in several South Asian countries, an intense Scrutiny of existing Social and economic policies has started. It has already resulted in important measures, such as liberalisation of import and investment controls, greater recognition of the role of exports and reduced emphasis on import substitutti On...... ' Hallelujah! The poor are opening up their economies to make way for classic patterns in internatiOnal di VisiOn Of labour - concentrating on agriculture and light industries and flogging the products of these Sectors in the world markets to pay for liberal imports of the creations of the developed countries.
It is remarkable how unchanging has been the strategy of Western capitalism and its Spokesmen like the World Bank towards the underdeveloped countrieS. Only. the advocacy has gained in sophistication. Earlier, these same policies used to be enjoined on the strength of arguments about the superior efficiency of private enterprise, international and domestic, and the importance, therefore, of giving such enterprise maximum freeplay. NOW the case is advanced in the name of social justice and "mproving the living conditions of the poorest of the poor in the underdeveloped countrieS.
What is glossed Over - and in this operation, governments and ruling classes of the poor countries are only too happy to aid and abet the World Bank and thOSe for whom it speaks - is that if economic disparities have Widened in the poor countries and the condition of the poor in these countries has failed to improve, or has worsened, it is not because public investment was misdirected into the development of heavy industry and
of infrastructure facilities - such development has been pitifully Small any way - but because the
distribution of productive assets in society, of land most important of all, has been left untouched; because, despite the appearance of government control and regulation, the allocation of investment and the patterns of production have been decided by the flows of effec
EconoMIC REVIEW, SEPT/OCT 1978
BANK, ID.
Commitme made by the
ment ASSOCiat (IFC) during
Annual Repor
The World to 46 countrie totalled $5,759
IDA COmn Were for 99 Cré $1,308 million.
The IFC countries in t tial function loped member loan and equi 1977.
The conn highs. The WæS due to t ASSociation's d Replenishment tion has recei Fifth Replenis was to countri than half of agriculture an lending was to
COMMTMEN
The Annu Executive Dire mitments of $6 lication of the reviewed in a CuSSiOnS Surrol Annual Repc General Capit to grow in rea formal discussi Bank's Article: of the Bank's by the Bank (
NET INCO
In fiscal cent to a leve the Bank's hij
Most of t on June 30, 1: Since 1964, $1, the third lar
tive demand aS highly unequal come and prop result of this, I caded in the di: Of goods and ser the good life of off; and becaus Ces have conseq the production C ties of life for
 

A, IFC commitments top $ 8,700 million
its to lend $8749.1 million to developing nations were
World Bank and its affiliates, the International Develop
On (IDA) and the International Finance Corporation
iscal year 1978, according to details of the Bank's
issued in September.
Bank approved 137 loans - totalling $6,097.7 million - ; during the year. In fiscal 1977, Bank commitments million.
itments in fiscaì 1978 amounted to S2,313 million, and dits tO 42 nations. In fiscal 1977, IDA commitments Were
made 41 investments amounting to $338.4 million in 31 Le past year. By contrast, the Corporation - its essens to assist the economic development of its less deve
countries by promoting private sector growth - made Ay investments that amounted to $258.9 million in fiscal
timent figures for the Bank, IDA, aind IFC were all record 7 per cent increase in lending by IDA over fiscal 1977 he increased resources that were available to it by the onor nations during the first year of a three-year Fifth period that runs through fiscal year 1980. The Associaved $7,731.7 million in pledges from 26 countries for the shment period. Almost 89 per cent of IDA's lending es With annual per capita inicomes of below $280. More all IDA credits (58%) during fiscal year 1978 were for di rural development. AlmOSt a third (32%) Of Bank
that Sector.
TS - FESCAL 1979
al Report states that the Bank's 20-member Board of ectors representing 132 countries - has agreed to com5,800 million by the Bank in fiscal 1979. The annual pub2 World Bank adds, however, that the figures will be few month's time to take account of the progress in disunding a General Capital Increase for the Bank. The )ጎ‛t does state that the need for the Bank to have a al increase sufficiently large so as to permit its leading all terms over the next five years was endorsed during inons - held in fiscal 1978 - on the subject. According to the s of Agreement, outstanding loans cannot exceed the sum subscribed capital, surplus, and reserves. Loans held on June 30, 1978 amounted to $37,796 million.
DME - BANK
1978, the Bank's net income increased by 14 per l of $238 million. The figure was the second highest in story. he Bank's net income is allocated to its reserves (which, 978 totalled $2,245 million), and to the operations of IDA. 225 million has been allocated to IDA, making the Bank gest contributor to the ASSociation's resources.
determined by the distribution of in3rty; because as a esOurces have caS"ection of provision ices to make better the relatively well2 too little reSourlently trickled into f the basic necessithe poor. These
causal relationships between existing institutions and policies on the One hand and the deepening poverty of the poor have been altogether by-passed in the "intense scrutiny of existing SOcial and economic policies' which the World Bank Sees going on in the ruling circles of its client countries. The Bank, of course, could wish for nothing better.
15

Page 18
Colombo's Master
The key features of the newly planned Colombo Central Area in the Colombo Master Plan Project were publicly released in Well illu Strated document in September this year. The Central Area consists of 1,200 acres of land. Now covering Huliftsdorf, the Pettah, the Fort and Galle Face areas it will be restructured as six distinct areas known as: Echelon Centre, Lotus Centre, Marine Drive, Kachcheri Road, Fish Market and the CourtS.
The development and re-development of metropolitan Colombo iS One of the three major development priorities of the Government; the Other two being the Mahaweli Ganga Scheme and the Free Trade Zone Project. The Colombo Master Plan Project is expected to cover about 1,000 square miles of the ColOmbo metropolitan region. Within this area, a plan has been prepared for 100 sq. milles of the Colombo Urban area; while another plan is now being prepared for the 180 sq. miles of the adjoining Greater ColOrabo ECOn Onic Commission area. In the WOrds of the planners
“The Se plan S comprise bOld efforts to rejuvenate and to eCpand the Supply of housing, later Supply, Severage, transport........indeeed all of the equipment and infrastructure that make a modern city. Work is already 2ndert City om improving the Slum and Shanty aredS, on neal) housing construction, on 2pater Supply eacpdnSion, on transpori impropements and im mang Other fields of a Cii) it?.
Batt the heart of a city, 20 here the aspirations of a Society are most dramatically made magnifest, uphere the greatest concentration of employment and generation of wealth is located, uphere the image of a city iS mOSi Sharply pireSemited to visitor and citieen alike, is the city centre. The rebuilding of central Colombo is an important element both in the Government's economic programme and in projecting a neau) image for Colombo and for Sri Lanka’.
The significance of planning the development of the city of Colombo and its environs has repeatedly been emphasised in similar terms.
The Master Plan was Orginally conceived by its present Director in the thid 1960ʼs Wherh he WaS hea, d of the Government's Town and
6
URBAN DEVELOPMENT
Plan
Country Planning main motives in ject at that stag the apprehension attention could b planning of Color quacies of the T Pianning Ordina qualified technica also the fact that eral ignorance Of physical planning in the Mfilinistry Oji influential Officia the establishme partly on the g emphasis should rural areas tha project for plaini rent of Colombo views eventually project was estab 1970's, though in were rights and W of the original rationale and O posed developmer Well Sumarised in January 1978 pre Ombo Ma.Ster Pla,
ThiS revie VKJ 2 wolved firstly an present role and Colombo in the in assessiment of th of Colombo; and of the future Sit All these aire des ecOAOmnic indi CeS, tructure and an objectives of t visualised, and projects and poli and amplified. T SOtnd With or namely the inc “action project tiOn in the urba via the Ayorks of berger.
Need for Nation
Urban Policy
While there aspects in the p also Some major be made. Perha tant iS On the present role and Colombo in the aSSeSSII, ent Of a portance is tanta ification of a na

Department. His m00ting this proe appeared to be
that insufficient e focussed on the mbo due to inade"own and Country ince and lack Of l personnel; and there WaS a genthe importance of among economistS Planning. Some ls actively opposed nt of the Project rounds that more be given to the in a high powered ning and developD. The Director's prevailed when the lished in the early retrospect there rongs on both sides controversy. The utiline Of this prOht plan has been a document, dated pared by the Colin Project.
appears to have inassessment of the likely future role of ational context; an e current situation finally an estimate ulation of Colombo. cribed in terms of population infra Snemities etc. The he Plan have been with these in view cy issues identified he methodology is e welcome feature, lusion of the eight s', a recent acquisiIn planners tool kit Prof. Otto Koonigs
al
are many SOund roposal there are
riticisms that could
}s the most imporaSSeSSmeat of the likely future role of lational context. An Subject of thls immOUnt to the identltional urban policy.
To date no such policy has been identified. Basic issues such as, how a national urban system can help rural transformation and development, how the present proposals fit into a national urban policy and the relation of the urban System to rural areas and the whole in relation to development strategies have yet to be spelled out. The Colombo Master Plan Project has thus far not made public its detailed work on these aspectS. Judging by the content of the present proposal it would appear that the role of Colombo has been overstated.
The authorities quite rightly have recognised that the problems of development of the country's major urban area, will get Worse if there is no planned line of action. A major plan was necessary and is being duly conceived. As to how effectively this plan would help to solve the Socio-economic iSSues confrOnting the country only time will tell. One reason for the mounting problems of urbanisation in many Of the developing countries is that the urban economies have been treated as distinct from the rural, particularly when investments were made for development and this has been the case in Sri Lanka, too. In the Colombo Master Plan Project again the focus of attention, by a high powered team Of technical SpecialistS has been on the problems of Colombo. No similar effort has been made as regards urban problems elsewhere in the island. The result is that the problems of Colombo have been identified While thOse el Sewhere aire escaping attenti On.
An important element in this development planning exercise is the exposition of the cost implied in the Various plans and programmes Of the Master Plan Project. The approximate costs are worked out for two separate periods 1978-1985 and 1986 -2001. In the first period, the total capital investment costs (excluding land) are Rs. 4,584 million, While, the second period, 1986-2001, the total capital investment costs (excluding land) are estimated to be Rs. 7.261 million (See table on page 18). A major part of this capital investment is to be on housing and o! transport, fOlOWed by COmerce. If investment on the proposed. Scale by this project is made in the metropolitan area of Colombo, this may solve some of the immediate problems in Colombo, but it may also create new and Serious problems. All the investiments within this project point towards a more rapid growth and development and
EconoMIC REVIEW, SEPT/Oct 1978

Page 19
increasingly important role i for ColOmbo and its hinterland. But there is a danger that this may exacerbate rural migration to Colombo which upto now has been comparatively negligible.
In assessing the situation in Colombo the Project Report points out that unemployment is in the order of 26 percent in metropolitan Colombo as compared with 19 percent in the nation as a whole. The project sees this situation as one of imbalance where the solution is to correct that imbalance. The report
commenting on t. ployment appears errOneOUS COnclus common misconic the Solutions to th blem of developin states “Obviously critical problem
politan region is t ment opportunitie ly the potential J ployment in the p ticularly agricultu Eacpansion of m the key to the reg
ØጅZV7 X4Z 4ዳየ£4 ሥ%?ሪ2Z≤
W a
tively develop the ment could have the most positive impact. CEC: ing of the new Lotus Centre. (See
శస్త్ర* نت
*३ صحصے క్తి- కితా 2 N リーリー The rebuilding of the Central area of Colombo is among the important
1,200 acre area of Central Colombo.
Z(/)ഴ്സ് (fre Zമ7s (%e 4%%e 2;ffe 4(൫'A(/ Æ
ട്ട് 2(് ബട്
eer as
ూస&ހަޗަޗަހި
جےسے چنگیخچییچے
The Colombo Mas
For instance, there is an A significant feature of the Master Plan is the relocation of these
illustration)
Other major projects
Drive site (16 acres) for luxury housing, the Pettah market project including 3 projects started for the development of selected parts of the Central area.
EconoMIC REVIEW, SEPT/Oct 1978
 
 
 
 
 
 
 
 
 
 
 
 

nis aspect of emto have drawn an ion based on a eption regarding e employment prog countries. It
the central and facing the metrohe lack of employS. Equally obviousOr incredSed emrimary Sector, parre, is very limited. anufacturing holds іот”s future есото
འ མང་ཚན་
nic health’. That increased industry within the Colombo metropolitan region may lead to increased
rural urban migration does not appear to have been sufficiently considered.
In addition to manufacturing, the Plan foresees considerable employment potential in construction. HouSing is a relatively labor intensive activity. The expansion and development of infrastructure, water Supply, Sewerage, drainage, land reclamation, canals, roads, etc. all have major employment potential.
モーリー he objective is
ter Piaa has identified those project sites in the Central area, where redevelop
O S61&C-
area of about 1 a
cres of warehousing in the heart of Colombo's business quent integration of Pettah and Fort areas by buildinclude the Echelon Quare site (15 acres) for office space; the Viarine LLeLeeLLLLLLLL L000LLS LLLLLLLLSrrlLLLS S00LLLL LLLLLLLLS LE00LLzLJSSiukmLLLLLL S GLG0LJLS SYLLLLL SYLLLJS LLSLL S S S SS L00LLLS LLLLLL
17

Page 20
Commerce and service employment has high employment elasticity but its potential for expansion in the near future is limited because, particularly in government and administration, the system is currently saturated. But expansion of the Secondary sector will generate employment in the teritary sector, a multiplier of perhaps 2.0 to 2.5, according to the Plan.
levels of decision in order to bring the economic, Structure. For a urban policy, t planning expertis guide decision ma nal level and als planning WOrk a local level.
Among the more the Work Of the CC
Employment estimates for the Project are the Employment in Colombo Metropolitan Region 1971 -
(in '000's)
1971 1986 Total Metropolitan
Population (a) 3025 4070 Labour force 977 1392-1400 Employment Total 713 1127 Agriculture, Fishing 63 &左 ZMaʼmufacturimg 113 188 Utilities, Construction 30 57 Commerce, Finance 132 215 Transport 83 135 Services 五&0 281 Others Í12 170 Unemployment (job-gap) 264 265-273 (a) Dependent on female participation rates.
Metropolitan Region are set forth in the above table.
Clearly it is Government's objective to eliminate the job gap to those not actively seeking employment. The figures above suggest the difficulty of this laudable objective, but they are not meant to imply its impossibility, adds the report.
In this instance, however, improved employment opportunities in the Plan region in relation to the rest of the island may not be the most advisable as it could encourage migration from the rural area.S.
The details of this Plan help to focus serious attention on the need for preparation of a national urban policy which would take into account fully our overall national development Strategies. The newly created Urban Development Authority may naturally regard this as one of its tasks. Of Special importance would be the relation and importance of Such a policy to the accelerated Mahaweli Project.
Planning of a particular area, however, should not be allowed to unduly influence national policy. This would apply in the present context to Colombo. Development planning in any form would require government intervention at various
18
which have been to the following
1. Each major de area, should be al-S time and nr
Estimated Capita
(RS.
19 transport water supply SeWerage drainage electricity street-lighting. telecommunications gas supply fire protection Solid Waste disposal health education post Offices cemeteries/cremator playgrounds/parks community centres recreation housing land COssl'IslefCe
The grand tot: Total cost exc Total cost exc Of which fore Of which for Cost of land
Cost of land

making and action
about changes in ocial and physical in explicit national herefore, physical
will be required to king at the natiOcomplementary t the regional and
positive aspects of lombo Master Plan “Action Projects'
- 2001.
2001
4800 1767-1794 594
110
289
85
295
195
385
235 173-200
Selected according criteria:
velopment problem represented insofar hanpower permit.
Investment Costs Million)
2. Each should represent a response to an immediate and urgent problem.
3. Each should have an impact beyond its immediate area, that is to say, reverberations should follow.
4. Each should be a pilot programme that, if successful, could be replicated on a larger scale and in other locations.
The eight projects listed include Slum upgrading, Shanty upgrading; Shanty resettlement; Export Processing ZOne; Kotte Stormwater Diversion; ; Pettah Market; Baseline Road; and Sub-centre Homagama.
There are many positive technical geatures too being emphasised by the Project. For instance it accepts that, drainage has been and Still continues to be a major problem in the Colombo region and it emphasises the need for ajudicious balance betweeen the demand for land reclaation and drainage in this region. Following careful consideration of the entire Colombo landsape it is proposed that major emphasis in the drainage plan be on natural gavity flow, limiting capital investment and maintenance costs in pumping stations; while the drainage proposals include bunds for flood protection and Storm water diversion and this Will also serve as locations for
'8-1985 1986-2001 new water mains, sewer lines, other 992 2,459 utilities and roads. One intention 醬 蠶 here is to reduce land acquisition 165 225 problems and provide a means for
80 137 coordinated construction. 25 46 Of the policy issues highlighted, *ိမ္ပိ 19: perhaps the most important is the 107 7 need for an Urban Development Au7 40 thority which it states, would be of 290 vital importance in maintaining the 140 momentum generated through the 5 13 current exercise of the Colombo Masia 7 10 ter Plan Project. The Government has already acted on this proposal 5 - and established such an Authority 3. 1852 which it is hoped would fulfil the as10 287 pirations of the Master Plan Pro71. 7.59 ject.
als are als follows:
luding land 1978-1985 Rs. 4,584 million luding land 1986-2001 Rs. 7,261 million Sign exchange 1978-1985 R.S. 1,196 million Sign exchange 1986-2001 Rs. 2,107 million 1978-1985 RS. 363 million 1986-2001 R.S. 531 million
EconoMIC REVIEW, SEPT/OCT 1978

Page 21
COCONUT
Production Recovery Boosts Earnings
Sri Lanka's export earnings from coconut products were up by nearly 190 percent in the first ten months Of 1978, as compared with the same period last year which proved to be One Of the WOrst years for the coconut industry. The largest increase in earnings was recorded in coconut oil as exports went up by over 2,000 percent Over that of the 1977 period exports were at a virtual standstill. Earnings from Desiccated Coconut exports were also up by about 130 percent, while among the coconut shell products, coconut shell charcoal earnings showed the biggest increase -up by 160 percent. Among the other coconut products, coconut ekel exportS recorded a significant increase, going ury by about 165 percent in volume and about 430 percent in Value.
In terms of volume too, there was a heavy increase with kernel products alone, going up from 189 million nut, equivalents in the first ten months of 1977 to 422 million
nut equivalents i. of 1978, the main slump the indust 1977 and compar
ti OinS frOm the helped in a produ 1978. Thus coconut the ten month 35,275 metric tons metric tons in 197 coconut productio metric tons in 19 tons in the 1978 )
International p) vegetable oils Wel) first ten months O coconut Oil in market was up fr $ 589 per metri period to $ 648 pe: 1978 period.
The largest qua. Oconut Oil Were (6,607 M.T.) U.K. / Bangladesh (3,035 (2,250 M.T.) P Was an increase export value per r nut Oil going up 1977 to Rs. 10,896 1977.
EXPORT OF COCONUT PRODUCTS
January-October 1977
January-October 1
Wolume Walue Volume ། (MIT) (Rs... 000) (MIT) (R
1. Coconut Oil 2,065 10,253 23,359 254 2. D.C. 25,270 226,108 33,950 522 3. COONa 150 888 874 8
4. Fresh Nuts - un - - 5. Sub Total
Kernel Products 189.09 237,249 422.04 785
(Mn., nut (MI). Inut
equivalent) equivalent)
6. Mattress Fibre 44,354 38,778 46,588 83 7. Bristle Fibre 11,006 33,319 7,869 5. 8. Twisted Fibre 23,622 34,551 19,282 5 9. Coir
Yarn/Twine 1,750 4,766 1,649 10 10. Coconut shell.
CharCoal 23,685 15,385 24,740 4 1. Coconut Shell
flour 623 393 583 12. Coconut shells 1,530 419 950 13. Coconut shell
actirated carbon 334 1,638 614 14. Coconut ekes 1919 1,435 5,080 15. Other by products - 16. Non kernel products 130,684 26 17. Total value
of all products 367,933 1,05
ECONOMIC REVIEW, SEPT/OCT 1978
 
 
 

n the same period reason being the ry experienced in ably better condiend of 1977 which iction recovery in t oil production for period rose from
in 1977 to 68,679 8, while desiccated in rose from 24,446 77 to 33,695 metric period.
ices of almost all re up during the if 1978, and that of
the Rotterdam om an average of c ton in the 1977 r metric ton in the
ntities of Sri Lanka, shipped to Italy Europe (6,300 MT) M.T.) and India, riceWise too there With the average metric ton Of COCOfrom Rs. 4,968 in per metric ton in
978 Percentage Value acrease Es. ’000) in value in 1978
,513 2382.3 ,397 131.4 3,951 908.0
5,864 231.2
,898 且其6.4 生676 64. 4,498 57,
,699 1245
10,038 1602
821 1889 595 42.0
6,394 290.4 7,621. 431.1 5,701 冯.94型 102.7
0,802 1856
ΤΕΑ
Crop and Price Decline
PROIOUOTION
Sri Lanka's tea crop is expected to record a deficit of about 10 million kgm. in 1978 when compared with the previous year's production. Up to the end of October production reached 162.9 million kgm. With a total deficit for the first ten months Of the year Of 10.2 millioni kgm. aS compared with the same period of the previous year. High and Medium Grown tea's between them had recorded a deficit of 13.1 million kgm. while Low Growns maintained their favourable position with approximately 3 million kgm, in excess of the previous year and contributing generously to reduce the overall deficit.
The Sales figures for the January to October period show that quantities sold under the category of High Grown's during the past ten months had registered the highest shortfall amounting to 6.1 million kgm., followed by Medium Grown's with 4.2 million kgm., the two totalling 10.3 million kgm. The happy position enjoyed by Low Grown's has helped tremendously to reduce this deficit to 3.7 million kgm.
Despite the deficit in Sri Lanka's crop, World tea production for 1978 was expected to end up about 15 million kgm. in excess of that of the previous year. Mainly responsible for this Situation was the crop from Kenya and also that of North India. and Indonesia. Up to the end of OctOber the tOital Indian production Showed an increase of 6.1 million kgm. while Kenya's production was up by 6.2 million kgm. and Indonesia's by 6.6 million. kgm. (See table On p. 20).
Shipments to the U.S. and Britain, leading markets for tea, were expected to drop in 1978 while prices in these markets have also been on the decline. These lower tea prices have beeen attributed to an increase in crop by SOne of the producers together with a decrease in demand following an easing of prices of coffee.
London auction prices for tea have been on the decline during 1978 and were down from about $ 1.60 a. pound in 1977 to about $ 1 per pound in 1978. Quantities and values of U. S. imports also were on the decline and during the first Se Vel months of 1978 totalled 43,029 tons valued at $ 69.5 million compared with 67,698 tons valued at $ 123.3 million a year earlier. For the whole
19

Page 22
Average Tea Sale Prices at the Colombo Auctions
Jan/October 1978 fall Approx. Differ- GF
Gross Nett ence on Gross
Rs./Kilo
High Grown 13.65 11.37 - 3.33 ... 19.6% 16. Medium Grown 10.66 9,54 - 4.61 .. 30.1% 15. Lown Grown 17.64 13.46 十1.23,7.5% 16.
TOTAL 14。19 i1.57一2.04,,12.6% 16.
of 1977 the U.S. imported 92,086 tons RUS:
of tea, valued at $175.2 million.
PRICES
Colombo auctions prices were trailing well behind those of 1977, though in October there was a favourable change. A welcome situation. emerged when October 1978 prices were compared with those recorded for October last year. High Grown's enjoyed the best marketing conditions and registered a 21.5 percent price increase While the total gross average increase Was 13.7 percent. The position is reversed, however, when January-October figures are compared. Only Low Grown's have moved up in price this year and enjoyed an upward swing of 7.5 percent whilst the other two categories have come down in price. The Medium Grown's have Suffered the worst with a drop in price of 30.1 per cent on last year's levels. Despite the good prices enjoyed over the past few months prices for High Growin's too have come down this year. See details in table above.
There were a few record prices fetched at the auctions in October. Of special significance Was the record of RS. 1,000/- per kgm. established in mid-October which was bettered the following Week when an invoice of Hapugastenne Flowery Fanning Sugar Silver Tips realised RS. 1,200 / - per kgm.
New Peak Prices
Rubber prices cd all records at the during the latter m and by the end of maximum price be latex crepe was R. This increasing lev the end result of t leum prices in rece a 30 - 35 % petrol thetic rubber and petroleum prices earlier demand for had to shift t rubber. With a crease in petroleum ted in 1979, the pro rubber appear eve
Upto date Sri La. able to take advan. ation. In the early
Maximum
RSS No. 1 Latex crepe Scrap Crepe
Sole Crepe Froth and Cutti Curly and Shel Scrap No. 1 Average price in
all grades
Crop figures of major producing countries (in a
Country Total 1977
Si Lanka up to October 173.1 Bangladesh up to October 32.3 South India, up to October 11.5 North India, up to October 382.2 Malawi up to September 24.6 Kenya. up to October 70.5 Indonesia. up to September 49.0 Tanzania. up to August 9.8 Uganda up to September 11.2 864.2
* Estimated
20

7 October 19?
s Nett
Rs./Kilo, 8 14.03 7 12.49 1. 13.44
4 13.34.
BER
intinued to break Dolombo auctionS Dnths of this year October 1978, the ing quoted for S. 11.25 per kgm. el of prices was he hike in petront years. There is eum balSe in Synnaturally with On the rise, the Synthetic rubber OWardS natural 10 - 15 % in1 prices anticipaspects for natural n brighter.
nika haS not been tage of this Situ1970's the Director
of the R.R.I. Dr. Ossie Peiris, predicted that natural rubber would enjoy peak levels between 1978 and 1980 and called for a doubling of the annual growth rate in rubber production. But rubber production in Sri Lanka, Within the first six months of 1978, totalled only 79,837 metric tons, an increase of 9,183 metric tons or about 12 percent when compared to the corresponding period in the previous year. The result, Was that actual exports during this period totalled 83,694 metric tons an increase of only 4,942 metric tons when compared to the corresponding period last year.
The prices were fluctuating at high levels at the major rubber terminals by the end of October 1978. In the Singapore and London rubber marketS values remained steady due to continued forward demand; one reason being the reports of unsatisfactory weather in some areas of South Malaysia.
At the Colombo auctions, Sheet rubber prices were breaking records by the last week of October 1978 and RSS.1 reached an all time high auction price of 8.563 per kgm. on the last date of trading in October, in keeping with the higher values being recorded in other auctions centre S. From available records this was the highest price obtained for RSS 1. during the last 27 years.
closing prices per kilogramme at the end of October
October 'i' October 78 % increase
in prices
Rs. $.S. 4.80 8.91基 85.6 4.70 1.21 138.5 4.36 7.7重 76.8 了.00 11.0 58.6 ngS 3.60 5. 4.9
2.85 3.26 14.3 crease for
4.5 7.8 73.3
s With the rapidly advancing overillion kg.) seas market RSS 1 finally touched 1978 Rs. 8.91; per kgm. at the close of October 1978. The corresponding price 162.9 at the end of October 1977 Was Only 30.5* Rs. 4.80; per kgm. an increase of 108.2 nearly 86 percent during the ten 391.6姿 months of this year. The highest 256* overall price increase, however, was 76.7 recorded for latex crepe where by the 55.6* end of October 1978 prices had risen 11.6 by as much as 138 per cent when 8.7张 compared with prices at the end of
October 1977.
8了量.4
Latex crepes were in good demand during October and there was an in
ECONOMIC REVIEW, SEPT/OCT 1978

Page 23
THE ECONOMY
Money Supply-Expansion Co
The country's
money Supply re
corded a decrease, by aS much as
Rs. 340 million months of this with the 1977. The rate of money supply h
, in the first eight year as compared
corresponding period of
the increase in the as tended to fall in
the months from June 1978 and by the end of August 1978 it had dropped further to 12.4 per cent for the whole of the 1978 period. The increase in 1976 was 35 per cent and in 1977 it was 29 per cent. A compari
Son Of the fir:St
of this year wit period in the previous year
eight month period h that of the same ShOWS
that in the 1978 period the money supply had increased by Rs. 158 mil
lion or 3 percen
t, as against an in
crease of RS. 746 million or 18 percent in the corresponding period of
1977.
The main rea,
SOn for the eXpan
Sionary influence in the money Supply during the first eight months of
this
CI'eaSe dit to government lending of the
year
WaS in COmmercial bank Cre
the private
the sharp in
Sector and corporations. The banks to the pri
vate sector, including the co-operatives, rose sharply by Rs. 1,943 mil
crease of 468 me
Colombo auctionS, When
tric tons sold at the compared
to the previous month and also an
increase of 421 metric tons
compared to the previous year.
The continued
When same period of the rise
in the price of latex crepe was attributed to the reduced arrivals at the
public auctions. crepe Were als the period at RS
The prices of Scrap O Steady and closed 6.66 to Rs. 7.71 per
kgm as COnlpared with the RS. 4.25
to RS. 4.36 at the The maximum
latex crepe at 1978 Was RS.
end of October 1977.
closing price for the end of October 11.21 per kgm. as
against Rs. 4.70 per kgm. at the same time the previous year, an increase about 138 per cent.
For Sole crepe greater demand
too there was a and approximately
188 metric tons were offered during
October, an increase
of 20 metric
tons when compared to the previous months and 78 tons more than that
of October
1977. Even the poorer
sorts and miscellaneous thicknesses of sole crepe sold at Rs. 7.00 to Rs.
11.10 per kgm.
as against RS, 5.47
to RS. 7.00 per kgm. in October, 1977.
ECONOMIC REVIEW, SEPT/OCT 1978
lion while credit g ernment corporat million.
The increase in private sector has a result of the lib ports and the exch while the increase to the co-operati meet the higher l loans to farmers : the high level of Which WaS further upward revision o Guaranteed Price
The expansion increase in bank ( Znain Sectors Was ed by an ir CreaSe net external bank 855 million. The co external banking : major reason for
The princ money Supply marised in th
Change in
Expansionary
1. Increase 2. Increase
Private 3. Increase to Gove 4. Decrease
Contractionar 1. Increase
of the 2. Increase of GOve 3. Decrease from th 4. Increase (net) Of 5. Increase (net) of 6. Adjustmu
Change
(a) Includes ( * In all, eac the fin part 0
7"eSilti
eCCh Sentatt
of the the CO
analys

bintained
ranted to the govOns rose by 552
bank credit to the risen mainly as eralisation of iñmlange rate reform; d volume of credit Tes has gOne to evel Of cultivation und payments for paddy purchasers, increased by the f prices under the Scheme. ary effect of the redit to theSe tWO further reinforcin the country's ing aSSetS by R.S. intinued growth in assets has been a the increase in
ipal factors that contributed to
money supply.
The expansionary influences in the money supply, however, were partly moderated by a sharp decrease in the credit of Government from the banking system. The financial operations of the Government sector have helped to exert a major contractionary influence on the money supply. The decline recorded for the eight months ended August 1978 amounted to as much as Rs. 133 million. FurthermOre, borrowing from the Central Bank declined by Rs. 1,174 million.
Another important contractionary factor was the increase in time and savings deposits of the private sector and co-operatives by as much as R.S. 972 million.
This increase in time and Savings deposits produced a Rs. 1,189 million contraction in the money Supply. The other important factor which helped to contain the expansion in money supply in the first eight months of this year was the increase Of R.S. 661 million in other liabilities and accounts (net) of the Central Bank and of Commercial Banks.
the changes in the
situation between January and August 1978 are sum
e table bellOW.
Money Supply - End December 1977 to End August 1978
Rs. Million
Factors in external Banking Assets (net) 854.9 in commercial bank credit to Sector (a) 1,942.8
in Commercial bank Credit irnment Corporations 551.8
in Government cash balances
y Factors
211.6 + 3,561.1
in Time and Savings Deposits
Private Sector (a) 971.6
in Time and Savings Deposit
rnment Corporations 217.2
in credit to Government
e banking system 1,333.4
in other liabilities and accounts
Central Bank 308.8 in other liabilities and accounts
commercial banks 352.2
ents 220.0 - 3,403.2
in Money Supply + 57.6
Source: Central Bank of Ceylon
co-operative Institutions
ternal banking assets (net) rose by R.S. 1,219 million in st eight months ending August, 1978. A considerable if this, approac. R.S. 364 million, represented increases ng from the revaluation of eacisting assets follouping ge rate Changes and am upward revision in the repreive rate of the SDR in February and April. As this part increase in erternal bankcing assets has mo effect om urse of money supply, it has been eaccluded from the is in this table.
21.

Page 24
AGRICULTURE
Extension Services and the Sm
Many of the problems faced by Small farmers in the rice growing regions of the developing nations arise from the lack of ity of extension services. In Sri Lanka, (1) for instance, as far as the small farmer is concerned defaults in the repayment Of loans has been a major problem. Numerous reasons have been attributed to the non-repayment of loans by Small farmers, but the basic causes have been traced to defects in the agrarian and credit Qrganisational structures and attitudinal conditions not favouring repayment. A fundamental drawback in the agrarian structure which haS prevented the small farmer from repaying his loans has arisen simply out of his inability to obtain a Sufficient income to repay what he has borrowed. The main reason for this is that his family subsistence expenditure and other immediate financial commitments exceeds his farm income; while he is unable to generate an adequate income Owing to inadequate agricultural inputs. It is here that the country's extension services have failed him -the productivity potential of his land holdings has been low, with irrigation facilities and other inputs such as fertiliSer and pesticides of good quality and at reasonable prices not available to him in time, while proper storage, milling and marketing facilities and remunerative prices have not been readily available. Any attempts to increase agricultural production therefore necessitates a more effficient system of extension Services than what is now available to the Small farmer in this country.
Agricultural extension COWeS those activities directly connected with the improvement of cultivation practices and is basically meant to change the outlook of the traditional farmer in order that he may improve his farm conditions and also help him to adopt improved practices and develop new skills. Extension services no doubt have created a very favourable impact on agricultural production but the exact extent of this impact is not easy to assess. Agriculture is a very complex activity with many interacting factors making it almost impossible to determine exactly what part of any increase in production is due to which variable. For instance, it is difficult to adjust
22
for variations in complicates com different years. C Sons between farr those covered by as against those r. the same year, car the grounds that better off farmers the extension Serv they would have yields. Or even i) farmer Who follo tural Exten Sion C use of a particula, ing and his yield, Would be difficult it was because of he uSed mOre fert his Water bette labour. If it is th bination of exten other factors, wh Sion's Share?
Perhaps the testimony to the e. extension approaс] Of the field-level In many countries found to be ရှို့ချကြောမျိုး ခြို ညှိနှီးနှီး adequate administ. nical support and vation. In the fev they have contin thusia Sm their Ser rently been effecti
An attempt to mental aspect of of agricultural e Was made recent When the ARTH C2 On “The Effective tural Externsion - M study found th contact with the
Distribution
Reasons
For advice Obtain seed pac Obtain other se For pesticides Obtain fertilise
pies more than ) hours of an exten this, according to was considered effective method
information to the

all Famer
Weather and this parisons between Ir again comparihers, for instance extenSiOn ServiceS ot covered during ( be questioned on perhaps Only the were included in ice, and therefore obtained higher the case of the WS the Agriculfficers advice for manner of SOW3 increase, still it to assess whether this step or that ilizer or managed r or increased e result Of a ComSion services and at is the exten
most convincing ffectiveness of the h is the reaction extension Staff. they have been ԱՕ, us task, with inrative and techinsuficient motiV instances Where led to show envices have appaVe.
aSSeSS a fundathe effectiveness XtenSiOn ServiceS ly in Sri Lanka. rried out a study ness of Agriculethodology'. This
Among the most popular methods adopted by local extension workers are inter-personal contact; demonstrations, field aids; farmer training classes; mini kits and production kits; journals, advisory leaflets and radio programmes. The ARTI study Which was confined to the Amparai District revealed that inter-personal contact, though it is the most costly extension method, Specially in 线 "Small farm - high population' Situation Such as is found in Sri Lanka, Still appeared to be the most effective. The number of clients that could be reached through this method, however, is low and this reSults in a tendency to concentrate contact with farmers Who show “a friendly, co-operative and progressive' attitude', often at the expense of those who may need the extenSion worker most. The ARTI study maintains, however, that though the “efficiency of personal contact as an extension method is questionable under these circumstances it could be widely used by the extension workers as a means of identifying the “key' people who by their innovativeness would help in the lateral spread of information, thus causing a multiplier effect. This helps in establishing a base for the gradual use of less personal methods', says the Study.
Inter-personal Or individual contact methods are exemplified by the extent and frequency a farmer SeekS the assistance Of the extension Worker in his area, which is invariably dependent on the personal relationships that the extension worker has established. With his clients. According to this study over 90 percent of the farmers knew the Agricultural
InStructOir (AI) and KrullShikarma, Wiyapthi Seveka (KVS) and have visited both officers during the
at interpersonal period of the two seasons under
farmer still occu- study. The purposes Of these visitS
of farmers by reasons for visiting AI and KVS officer
N = 15
A. KVS No. % No. %
16 74. 104
idy 107 68 93 59 ed 5. 32 28 17 25 16 22 14. S 9 5 4. 2
5 3 2
half the working sion worker. And the ARTI study, o be the most of diseminating farmer.
are ShOWın in the table bellOW.
The table above however reveals that an equally large proportion of farmers did visit AIS and KVISS fOf the purpose of seeking advice when compared to those who visit for plan
ECONOMIC REVIEW, SEPT/OCT 1978

Page 25
ting materials and other inputS. However, two earlier ARTI studies revealed that only a small percentage of farmers knew the AI and the KVS and made visits to their offices, While more farmers visited the Offices for inputs rather than for advice.
The latest ARTI study shows, however, that the Agricultural Instructor nas an average of 3,000-6,000 farm families and a KVS an aerage of 700-1,000 farmers in their area. Of Operation and very frequent contact With a few selected farmers Would be at the risk of neglecting those who may need extension personnel most. It is apparent that this meth. Od COuld result in the Specific needs &nd priorities of the low income agricultural producer and WOrkers being overlooked. It is gener3 ally established that most Off the early adopters of the new extension methods comprise the higher income group within the village, who could afford to take the risk and avail of the facilities involved in the new technology. However, the basic question, as to whether the extension and training methods being advocated are aimed at the better endowed farmers who are usually hailed as being “progressive' has not been raised. The ainm Of Our Agricultural ExternSion WOrkers appears to be to help farmers to increase their production. These extension Workers have not realised that their efforts should not be at the expense of a better distribution of their Services and Of improving the producing power of the wider groups of farmers who are less wyell-off. Often the extension worker carries on with his objective of helping to increase rates of production, but as to who benefits from the increased production is rarely conside’ed.
initiative Stified by rigid structures
This problem is not confined to Sri Lanka, alone, it appears to be typical Qf the ASian Region. At a recent “Participatory Training for Development” programme, organised by the FAO sponsored Freedom From Hunger Campaign, where participants visited Several Asian countries, the ir Oe Of government servants as change agents was discussed at length with the farmers themselves. It emerged from these discussions that village people often had a bad opinion of government servants. Some of the peasants whom the group met said that the officers came as masters to push and order them around. They seldom had the time
ECONOMIC REVIEw, SEPT/OCT 1978
tO Sit dOwn tO tall) with them. They ( inspiring uniform afraid Of SOiling th dust of village p1 Were interested in from their bosses lations with the group felt that ind ment Service Canni ed for their behar the rigid structur Service. All orders The pe Ople in the implement whatev
ports are given than actual work. alright, you are a the case the field w of their time doin; emphasis is on p. rather than the fa Seldom consult the fore laying down lating programmes Of Such cases Were Since there is li įtiative and driv against the curreno who join the gover) initiative, drive an after SOme time. there is very little frank di ScuSSiOn W Offices. Those who an honest Soul-se do it outside the C curricular activity
This problem Out by recent Studi In the course of Bank Study on agr the Polonnaruwa, a tricts it was foun rity of farmers w that Extension Off ed them. In the the farmers Went O. if Extension Office they felt they ha from these officer traditi.Ona, khOWled were good enough. either the techniq Si On Officer: S Were ough for farmers te new knowledge or aloe 1mOre CO2 Cefthe( and paper work in Targets
Another recent; pects of Agricultur Robert Chambers a remana yake, publis bridge Commonwea the title “Technolo. Rice-Growing Area and Sri Lanka”, d: the problems of tar of Agricultural E.
 

k to them, to live ame in their aWeand were always em in the dirt and 'oblems. All they was good reports and nOt. gOOCl repoor people. The ividuals in governot alWays be blamviour because of es Of government COme from top. field have Only to er is Ordered. Remore importance If your report is lright. This being Forkers spend most g paper work. The leasing the bosses armers. The bosses field workers beOlicieS Or formul. Various examples
cited. title scope for inre, and swimming t is difficult, those ament Service with d idealism, lose it It was felt that scope for free and 7ithin government are interested in arching have to ffice as an 'extra,
7.
is further borne ies On Sri Lanka. a recent People's icultural credit in nd Wawuniya disd that the majoere of the view icers rarely visitVavuniya district in to add that even rS visited them ld little to learn 'S and that their ge and techniques It is possible that les Of the Externnot effective enD benefit from the that the Officers i with the reports their Offices.
study on these asal Extension, by ind B. E. W. Wickhed in the Camlth Series under gy and Change in S. Of Tamil Nadu. raws attention to gets and reporting xtension Officers.
They maintain that the achievements of targets becomes “largely a bookkeeping affair' and they quote - a study by Byron Mook of the Institute of Development Studies, Sussex, where the District Agricultural Officer tells his extension Officer “De have achieved all our targets. Do you understand? Make all the necessary arrangemens in yOur blockso. They argue that the credibility of the exten SiOn, W Orker becOmeS a CallUISe fOr doubt because of the pressure to falSify and invent returns and the conInivance at this, all up the line. While this system persistS, without reform, the extension agent becomes discredited in his Own eyes, in those Of his supervisors and in those of the public.
A corollary of targets is reporting. Wickremanayake and Chambers, whose study covered the Hambantota district, show how one Agricultural InstructOr was required to submit no less than 29 reports and returns a month Or 348 a year. New reports are added but old ones are not stopped. They go on to state that in Sri Lanka. One effect of the creation of an extra Ministry in Col OmbO was to add to the reports required from the field. Moreover, as part of the food War there Was a flow of urgent demands for ad hoc information, demands to the District Agricultural Extension Officer having Often to be repeated tO AIS and frOm them to KVs who then reported back to AIS Who reported back to the DAEO.
“It would be an over-statement to say that the food War became a paper War, but the food war did add to the reports and information required from the and information required from the field, did increase the burden of paperwork on junior staff, did consume more paper, ink and typewriter ribbon and did perversely tie extension staff more than ever to their offices. Often too, in such situations, much of the extra infor
mation demanded is already available in
other reports but senior officials do not bother to find this out. This common failing is remediable, Without reform the extension agent becomes a clerk.'
These issues only bring into focus the urgent need to make a complete evaluation of the objects and effectiveness of the country's Agricultural Extension Service. There is hope, however, that it is been increasingly realised that development cannot merely be brought to a people. It must come largely from within them through the unleashing of their enthusiasm, creativity and energy; and it is they who have to be actively involved in the process of change.
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Page 26
FEATURES
On The Kelani Valley Line
. S. Fernand 0
The future of that 87 miles of narrow rail track that runs from Colombo-Fort, through the Kelani Valley, upto Opanaike has been the subject of much debate in recent times. Here II. S. Fernando, a keen student of transport discusses. Some practical solutions to the problems of the K. W. Line. Mr. Fernando, who served in the Transportation Department of the Railway for several years, was last the head of a newly created "Traffic Costing Unit' in the Railway. On his initiative many railway statistical systems were modernised in order to provide meaningful data to monitor the Railway's activities for in-depth studies and for traffic costing.
Whenever the future of the KW Line comes up for review, it immediately rouses widespread interest though the enthusiasm generated is not always matched with facts or meaningful analysis. The KW Line is a historical antiquity; its construction commenced in 1900, just 36 years after the first broad gauge train ran from Maradana to Ambepussa. It rapidly expanded during the early years Of the century but started to shrink during the Second World War and again in recent years. In the Colombo commuter area, the users Of the KV Line are mostly Government servants who have their season tickets heavily Subsidised by the Government and in the rem Ote area S thOSe WhO dO not have ready access to road transport. These groups along with some non-users have clamoured for its retention and improvement. On the other hand, the pre-occupation of the operators, that is, the Railway, appears to have been centred almost wholly on the problem of procuring and maintaining an adequate set of rolling Stock for service On the Line. The question of viability, or profitability, does not seem to have engaged the attention of any particular grOup seriously. This is understandable because in the context of a heavily losing Railway enterprise - the annual losses being in the region of Rs. 100 million - it could be argued that the losing lines
24 ممبر
of the Railway w Line Only and th be treated no di other losing line There are, h tal differences b gauge and the nay not be Wid Was, even in the school of though tWO-gauge syste) cessfully resisted troduce a narrOV country even thC So noticeable no Of a two-gauge have been as ev the KV Line Wa narrow gauge, th planting the all cle SO that the n handicaps did co to transport u Situation has ch vehicle has encro Way preserves, a between the broa lines have become ever. The widt gauge is 2 feet 6 5 feet 6 inches o ItS maximum that is, the ma trains permitted Only 20 m.p.h.. as On the broad gan en CeS Under the : cause wide differ
The average ing paSSenger tr m.p.h. On the KV m.p.h. On the bro paSSenger carryir full length passe KV Line is about capacity of a do Set. It is easily s fOr One traill hOU Will produce 33 ti miles produced by also means that, the same On both the Salme revenu On both gauges t the KV Line Wo much as 33 tin miles produced by results are almo considering the g the values are di approximate valu to show that wit and output there

Ould not be the KV at this Line should fferently, from the
owever, fundamenetween the narrow DrOad gauge Which ely known. There pioneering years, a t which Opposed a n and which Sucthe attempt to in7 gauge in the upugh the differences w in the operation system would not ident the In... When S constructed as a e Railway Was Suphinal-drawn Vehiew Line despite the Infer an advantage serS. Today, the anged. The motor ached on the Railind the differences di and narrOW gauge : more marked than h Of the narrow inches as against f the broad gauge. permissible Speed, ximum speed of On the track, is against 50 m.p.h. uge. These differOperation of trains ences in output.
Speed of a Stoppain is about 14 Line and ab Out 25 bad gauge, and the ng capacity of a nger train On the half the carrying Duble pOWer COach een from this that lr the broad gauge times the passenger 7 the KV Line. ThiS Since the tariff is gauges, to produce e earning capacity he train hours. On uld have to be aS les the paSSenger V the KV Line. The st identical when Dods service though fferent. This is an e but it is sufficient h regard to effort is a wide gap bet
ween the KV Line and the broad gauge, a gap which cannot be bridged because of the limitations which have been built into the KV Line. Apart from the relatively high effort needed to earn revenue, its potential to attract traffic Or to earn revenue is also loW. PaSSenger traffic is not attracted to the KW Line because parallel road Services are much cheaper for long distance travel and the Services much faster. Goods traffic has been declining Over the years and what is left-over now moves one-way, being mainly food traffic Originating from Colombo. For economy in Operation traffic must be two-way. Though there is traffic in the region it is not rail bOrne.
The KV Line - as it was until recently – ran frOm FOrt to Opanaike, a distance of 87 route miles. It formed 9 per cent of the total route milleage or 12 per cent of the total track mileage, that is, the mileage of track available for the running of trains. But the train miles operated, the passenger journeys undertaken, and the goods moved did not exceed even 4 percent of the total. The train miles per track mile WaS leSS than half that On the broad gauge. There was, therefore, a serious under-utilisation of available track capacity.
The KV Line as it is now constituted has several unsatisfactory features and it would, therefore, be difficult to support a case to extend the KW Line as a narrow gauge. There are other matters requiring priority attention such as, for example, the situation in the broad gauge where goods traffic has been declining at an accelerating rate from 1970. From the all-time high figure of 228 million ton miles moved by Rail in 1970, it had dropped to . 184.1 million tOn milles in 1975 – a. drop of 19 per cent in 5 years.
What then should be done with the KV Line, it may be asked. There are really five options. It will be useful - the reasons will become evident later - to break up the length. Fort / Opanaike into Fort HOmagama, and Homagama/Opanaike. The options are:-
. Closure of the whole KV Line;
II. Broadening the whole KW
Line;
. Closure of Homagama/Opa
naike and operating Fort/ Homagama, as a narrow gauge;
EconoMIC REVIEw, SEPT/OCT 1978

Page 27
IV. Closire of HÃomagama/Opanaike and broadening Fort/ Hoimagairmal; V. Operating Homagama/Opanaike as a narrow gauge and broadening Fort/Homagama. Closure of the whole KV Line would remove at One blow all the problems of Operation but it would be a drastic solution paying no heed to Social consequiences and to the possible existence of less drastic alteratives.
Broadening the Whole Line along the existeing track Will only increase the payload capacity of trains. If the curvature of the track is retained and the speed remains unattered this will bring in no advantage. The under-utilisation of track capacity will worsen if traffic di CeS not increase in the Same proportion as the increase of track capacity. Additional motive power and rolling stock will be required to provide a suitable service since these G SaaaLazzLS0a0L S S S 0SzL0 LLL00Saac0 S ccLcLLSS S0L00GzS
Even though the permissible speed is brought up to the level of the main line the KV Line will have to depend largely on goods traffic because long distance passenger traffic will still continue to patronise the cheaper road Service. To broaden the KV Line the following conditiiOns muSt, at least, he SattiSfied to Start with.
Additional locomotives and rolling Stock to meet the entire needs of the service would need to be imported; the fare differential would have to be eliminated either by raising road fares or by lowering KW Line rail fares; the track must permit a speed of about 50 m.p.h for more than half the tOital di Stance; there must be a guarantee of sufficient goods traffic, say of more than one train Oad each Way daily (about 340 tons make up one * train Oad). The conditions Of purchase and construction can only be attained at high cost. Phere Äill be difficulties to implement the conditions regarding traffic. The fifth option will not work in the long run. Passengers will not put up with all the inconveniences which will result when having to change gauges and With the slow n2rrow gauge speed. The transport of goods at the break of gauge will delay goods and rolling stock, since labour intensive methods will have to be used. The third option is what the Railway is doing at present and this too is not a long term solution,
EconoMIC REVIEw, SEPT/OCT 1978
Broading the HOImagama — th, Will without er dou Of pa:SSenger traf of the Other con sections, namely, Painadillra and FC vided the speed a right; and provid close tO – the pro Tevenue Which Wiji the traff C na S CO Of the broad gal tions will probabl tling costs but no But to COInpenSa will be a Saving for example, a sa authorised load power coach Set which is equivale 60 passengers in
he K. W. Lin
Colombo Fort W diagram shows t ing it with the l ter Colombo aire
One pOWer coach t city for, say, 23 also be savings i and pollution, and to those who conn Of the KW Line ai combinatioin Of ra Steel Factory at about 2 mille S fil connected by rail goods load is a SSl could approach c lity.
 

KV Line up tO e fourth Option - ot, bring the level fic up to the level nparable Suburban the sections Fort/ Art/Gampaha, proind the Services are ed the Line keeps esent track. The ll be earned When me up to the level 1ge Suburban Secy cover the Operathe capital costs. te for this there in other area.S aS, wing in buses. The of a double unit is 1380 passengers it to 23 buses with
each bus. Thus,
It will be necessary to import about 6 to 10 power coach sets to provide a satisfactory Service. Since the service will have to be operated on single line and will have to serve traffic in both directions power coaches WOuld be more Suitable than loco-hauled trains. If the traffic in any one of the power coach trains exceeds its capacity then the question of replacing it by a locO-hauled train can be considered.
However, the decision to brOaden the Line up to Homagama should not be based on the factor of viability but on important Socio-economic grounds. The rail area encircled by Gampaha, Panadura, and Jaela at a radius of about 16 miles from Colombo forms the Inner Suburban Area. There is heavy cOncentration of traffic. Within this area,
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e covers 87 miles of narrrow gauge rail track running from ia, Homagama, Avissa wella and Ratnapura to Opanaike. The he areas by this Line serves and the possibilities of integratheavy rail traffic within the suburban sections of the Grea
a.
rain has the capabuses. There will in road congestion di a Saving in time mute into and Out rea by rail or by a il and bus. If the Oru Wela Which iS Om HOmagama, iS
and a reasonable red then the Line onditions of viabi
with a peak of about 2 hours in the morning and a Super-peak within it of about 50 minutes. The Railway is the best mode of transportation for such a concentration of traffic and to provide for future growth. The addition of Fort/Homagama to this Area is the next logical step to provide efficient transportation for commuters residing within it.
The whole project of broadening the KV Line could flounder if a. reasonable Speed cannot be attain
25

Page 28
COMPARATIVE TABLE OF SPEEDS AND DISTANCES
Homagama/ Gam
Maradiana, Ma
1. Route Miles 5 1. 2. Time taken by best
commuter trains (mins.) 77 5 3. Time allowed for stops (mins.) 12. 4. No. of stops 2 1. 5. Maximum permissible Speed (m.p.h.) 20 5 6. Average speed, with
stopping time (m.p.h.) 12 7. Average speed, less
stopping time (m.p.h.) 4. 8. Average length between stops (miles) 1.2
ed to operate a train service. The KV commuters will want a speed comparable to that enjoyed by the broad gauge commuters. The increase of passenger traffic as forecast cannot be attained unless a reasonable speed is assured. A comparative table of speeds and distances which is given above will reveal some points both useful and worthy of note.
On the broad gauge the average speed of Operation for a stopping train is 25 m.p.h.. though the maximum allowed is twice that Speed. On the KV Line the average speed is much closer to its maximum value. The average distance between stops is the same in the narrow gauge and the broad gauge, being 1.2 miles. This low value acts as a constraint to the attainment of high speeds by stopping trains. A paralled Situation Operating in the Upper District can now be brought in for comparison. A commuter Service operates between Kandy and Matale where the maximum permissible speed between Kandy and Katugastota (3.54 miles) is 20 m.p.h. and between Katugastota and Matale (13.83 miles) is 25 m.p.h., while the average speed, less stopping time, is 19 m.p.h. Thus high maximum Speeds are not required by Stopping trains.
It will be obvious that the maximum permissible speed should be higher than the present speed. On the KV Line and, taking the example of the Upper District, it should be higher than 25 m.p.h. It has also been shown that the upper limit may not be as high as 50 m.p.h. Such a high speed is required mostly by long distance passenger trains running express and this does not apply to the Fort/Homagama section. Between these two wide speed limits lies a narrower range, which could be deduced.
26
The componen time taken by a t consecutive stops : ACCeleration tC Running at st is, running at th missible speed);
Deceleration f Three accept: will now be made Working. It will deceleration Which acceleration is tWi acceleration and, train should run tance at the stead half the total stops, that is, for Thirdly, a value (See FOOtnote) will Can IOW be calculat mum permissable s circum StanceS need m.p.h. For speeds 30 and 24 m.p.h.. th by a train under tions, to cover th between stops are 209 Seconds res Selected Speeds ha ference. The diffe time taken between is 29 seconds while
36 m.p.h.. is only 12 speed increases th ney time de CreaSeS tances it may not as high aS 42.4 m circumstances assi mum permissible s tween 30 and 36 in
There is thus broadening the lir na. The fact that gle track Will, if pediment only to not to the develop The Steel Factory, Homagama. If th

paha/ Panadura/
radana. Fort
6 16
51 2 12 2 13 O 50
9. 19
5 25 2 1.2
tS of the total rain between two aᏗᎵᎾ :
steady speed; eady speed (that e maximum per
rom steady speed. able assumptions to simplify the be assumed that is faster than ce the rate for secondly that the a reaSOinable di Sly Speed, Say, for distance between half of 1.2 miles. for acceleration l be assumed. It led that the maxispeed under these di nOt exceed 42 :, say, of 42.4, 36, e total time taken the same condile Same distance 151, 163, 180 and pectively. These ve a 6 m.p.h. difrence in the totali in 30 and 24 m.p.h. between 42.4 and 2 Seconds. As the e saving in jourIn the circumsDe neceSSary to go .p.h. Under the umed the maxipeed can lie beh.p.h.
a clear case for he upto Homagat it Will be a Sinat all, be an imoperations, but Dment of traffic. is 2 miles from le railway is ex
tended to the factory it will be connected to the entire Railway System, to all its sources of raw materials and to its fuel supply.
Commuter traffic originates as a result of separation of dwellings from work places. If the area around terminals is developed with dwellings, say, upto a distance equivalent to journey time of about 20 minutes whether by bus, foot or both then that area has potential commuter traffic. The Section Maradana/Bambalapitiya Of 4.3 route miles is Studded With WOrk places. Most of the commuters On a morning detrain in this section. On the narrow gauge the WOrk places are on the section Maradana / Narahenpita of 3.51 route miles. The total route mileage exposed to work places, with the broadening, will now be 7.90, say, 8 route miles, Again, the area upto Homagama has a high density of dwellings on both Sides of the track and compares favourably with the coastline, which is exposed Only on One Side to rail influence, and to the Main and Negombo lines Which run through sparsely populated areas. Because of the improved accessibility Of work places in the Colomb O region, there will be an increase in traffic not only in the broadened section but also in the other SectiOnS.
It may not be widely known that two-thirds of the total SeaSOn ticket journeys undertaken in the Railway lie, that is, Originate and terminate, in the area enclosed by Gampaha / Panadura / Ja-ela, of radius 16 miles from Colombo and of length 34 route miles. The traffic is Self-contained Within thiS area. Though there are 829 route miles opened for passenger traffic, the SeaSOn ticket traffic is concerntrated in this area of 34 route miles, The addition of the broadened line upto Homagama, which is also of 16 route miles from Colombo, will bring the total to 50 route miles. A satisfactory train service provided for this area will Solve two thirds of the total season ticket traffic problem of the Railway. In any scheme to electrify the Railway System, priority should be given to this area first rather than, say, electrifying the stretch to Polgahawela, also about 50 rout miles from Colombo.
ECONOMIC REVIEW, SEPT/OCT 1978

Page 29
A Strategy for Land Consol Dry Zone Purana Villages
Marcus Karuna nayake
The need for consolidation of the fragmented paddy lands of the peasant farmers in the dry ZOne purana villages with a view to increasing productivity is discussed in this paper by Marcus
Karunanayake, Dean Faculty of Arts, Vidyodaya, Campus. Dr. Karunanayake has carried out
studies and Written many papers on the attitudes of peasants in Sri Lanka's Dry Zone villages to land consolidation, adaption to droughts and other agricultural practices of peasant farmers.
Consolidation of the heavily fragmented paddy lands in the rice growing countries of ASia can help to a large extent in the more efficient use of water for irrigating those lands. This is a principle now accepted in many of these countries where it is acknowledge that through increasing the efficiency of existing irrigation Systems and exploiting known ground water resources could be found the greatest potential source for stepping up levels of food production in the South Asian region. Several Studies of agriculture in the various countries of Asia have highlighted the large and undeveloped potential for irrigation in this region; India, Pakistan, Bangladesh and Burma being the outstanding examples. More important is that even Where irrigation capacity has been built water is Often used inefficiently.
In many Such places, irrigation Systems are less efficient than they should be because their design characteristics are antiquated or becauSe farm holdings are fragmented into large numbers of irregular plots. Many of these traditional Systems do not seem suitable to preSent day inten Sive cultivation. It has been found that many modern designs for new Systems and renovation of Old Systems can add SubStantially to the amounts of Water available right down to the Smallest farmer, thus ea Sing the redistribution of Water and expanding the total Of irrigated area with a resultant gain in productivity. But land consolidation, though it is generally agreed is a good thing, has not been easy to achieve.
A recent Observation. On the agricultural situation in the low income Asian countries made in the
EconoMIC REVIEW, SEPT/OCT 1978
*World Developm issued by the Wor draws attention follows: “Consolid ted holdings has of the agrarian decades in Low I tries. It serves o Sides efficient wa for example, la shaping, reducing boundaries and reguired to trave It also simplifies But little land consolidated. Eve COinSOlidation ha incomplete and ) With any Systema SOil and Water di Statement is an a the situation in Despite the provi Paddy Lands Act the Agricultural No. 2 of 1972 litt) been made at 1 even where att made these have Owing largely to p
There is now consolidation of h ZOne plurand (an central problem t land in the patran be brought und annually left fallo cient Water i S av cultivated. Once in largely due to ex tion of land. It Optimum use Of possible. Howev is annually broug tion there should greater contribu paddy production addition of capita In any case the of tenure also g adoption of innot irrigated paddy c the urgent need f to be given to th consolidation in t aS Dry ZOne deve cOnceptualized bOʻ many large Scal Schemes and the (tank) based villa radhapura distric Well Over 700 le. The average exte

idation in
ent Report 1978”, ld Bank in August, to this aspect as lation of fragmenbeen an objective policy for many hcome Asian counther objectives beter distribution - nd levelling and the land used in cutting the time among the plots. land use planning. has actually been in where it has, the s generally been not in accordance tic plan for land, evelopment'. This CCurate Surmise Of Sri Lanka, as Well. isions in both the NO. 1 of 1958 and Productivity Law Le Or nO effOrt haS and consolidation; 2mptS have been met With failure hea,Sant reSiStance.
a great need for Loldings in the Dry Cestral) villages. A Oday is that much a villages that can Ler cultivatiOn is W e Wen. When Suffi.-- ailable or may be a few years Only, cessive fragmentamay also be that land may not be er, if all Such land ght under cultivaundoubtedly be a tion to national even without the l intensive inputs. 2 present pattern prevents the easy vative practices in ultivation. Hence, 'or serious thought e problem Of land he plurana villages lopment has to be th in terms of the 2 land settlement multitude of Deluya lgeS. (In the Anut alone there are Ua based villageS. nt of paddy under
a Delba Varies frOm 50–75 acreS.) Furthermore, water and not land is the limiting factor in Dry Zone peaSant agriculture. Hence, there is the need to maximize On the available Water reSOurceS. But in the purana villages Water could be land augmenting only by an effective and rational approach to the problem of land COinSOlidation.
PATTERN OF LAND TENURE
As a prelude to an examination Of the tenurial System of the purama villages of the Dry Zone it is necessary to consider the underlying principles. Since water is the Scarce factor the rights to irrigation water are of utmost importance. This has resulted in an elaborate and finely worked out dispersed system of land tenure which ensures social equity by a fair and equal access to irrigation Water. The need to provide Social justice by way of equal access to irrigation water has resulted in the fragmented ownership of paddy land; this has also ensured a more Or less equitable distribution of the fertile and infertile land among the different yaya Owners. The yaya (paddy-fields) below the tanks are laid out in several Sections. The number of divisions into which a yaya is sub-divided depends on the irrigation potential of the yaya, i.e. a larger village tank will have a larger number of units within a yaya than a Smaller One. Indeed the fields under the realitively Smaller tanks may not be sub-divided. At Parangiyawadiya - a village in the Hurulu Palatha, the yaya is in 4 unequal sections. Again at Ihala Puliyankulama in the Puttalam district a still more complex pattern is in evidence. The major tank is Supported by a number of Smaller tanks; each tank provides for a distinctive Jaya pattern depending On irrigation potential. Investigations in the field reveal that in its pristine form the tenurial system was designed to provide each Owner a pan-gu (Share) in each Section of the yaya. This is a rational and convenient arrangement whereby the problem of differential access to water is overcome by the yaya shareholders. In particular it ensures maximizing on the available water supply in the drought prone Dry ZOne environment. That is to Say, the System permits the yaya cultivation in reduced units (determined by the drought intensity) without effecting the relative return per share per owner.*
27

Page 30
This practice in the parlance of the Dry ZOne peasant is called the beth ind (division) system. However, it should be noted that the System cannot function efficiently unless there is equality or moderate
inequality in the pattern Of ownership. 耳t becomes increasingly evident that rising
inequality in land ownership is constraining the operation of the bethma principie on the basis of finely WOrked Out joyd divisions and require more flexible arrangements as those described by Yarran for Vilavya - a village in the NorthWestern Province. 4
In an environment, where Scarcity of water is the crucial factor influencing Settlement and agriculture, the rights to irrigated paddy land are of the utmost importance, This haS, for example, resulted in a highly complex and finely worked. Out System. Of land tenure an Ong the peasants of Parangiyawadiya The division of the yaya, in four unequal sections provides the framework within which the tenurial System is operated. It is argued that the fragmented ownerShip of Jaya land may not be a problem when labour is the only in put in agriculture. However, if
other capital inputs are to be introduced and utilized efficiently in peasant agriculture, the fragmented ownership of land is bound to place constraints. Thus, it is seen that land conSolidation is an essential prerequisite in the modernization of peasant agriculture. This fact is recognied in recent legislation relating to the peasant sector. of Sri Lanka. (e.g. the Agricultural Productivity Law No. 2 of 1972).
It is claimed by the peasants Öf Parangiya Wadiya that the fragmented ownership of land is an important factor in the proper maintenance of the channel system which forms a vital component of irrigation. Unless the channel bed is clear and graded, it is not possible to ensure the equitable distribution of water among the different sections of the yaya. The failure to achieve this results in an inadequate supply of water especially to the lower sections of the yayd, there is also the attendant problems of water loss due to evaporation and seepage. Further, some parts of the yaya may be affected by a surfeit of water. It is, therefore, suggested that the present system of dispersed ownerShip of land is a factor which contributes to the collective maintenance and management of the channel System. There is the fear that
28
consoliciation of the localization ( terest in the yaga the neglect of the
TÈThe peå Saint II consolidati Un is a the fear that it W disintegration. Of Out cultural prac maximize or the and provide Socia COmmunity. A clo the cultural prac ilh, e€3eSSairy fOr the Oï tile point ait i seen that the usua gated agriculture fields farthest fro and then work i Wards the source BEV er if the eintire wated (based on C When the peita w cient), the Same p) to, i.e. cultivation thest point. This tice Since it ensur located at Some C
Dead will have tion. On the con COS er to the pe first it might not vide SUfficient Wya tions Of the Jaya. Hent to Hention principle is adher Saints of Parangiy further advantage
T'aebbie - l- GүyN
Ownership Patter
Shares in 貂 Shares in Shares in Shares in
Source: Field
adaptation descri) therefore, a comm tioned by tradition paratory stages Of tion Water is con
rary channels c u t 2, C. OSS above those i channels are
cuitous. It is the minimize the loss ration. It should
Such practices are the peasant is SO to adhere to grOu it the group as a iose. It is feared tion WOuld remov pulsion to obey g creating problems

and, resulting in of individual inB, might result in channel network. resistance to land lSO Supported by Ould result in the the finely worked tices designed to Scarcity of Water li justice to the Se examination Of tices involved iS proper appraisal SSue. Thus it is all practice in irriis to irrigate the In the Deal), first a progreSSion toOf water Supply. gdgic is not cultioiective decisionS atter is insuffiErinciple is adhered begins at the faris a Sensible prac"es that the field:S listance from the Water for cultivatrary, if the fields Ud are irrigated be possible to proter to lower SecIt is also pertithat the Udiguld ed to by the peaawadiya, to derive from the cultural
NERSHIP PATTERN
ment
WTater.
The dispersion of shares within the gaiga iS alSO a COInvenient arrangement to overcome the differential fertility of the gayd. It is observed that there is a progressive increase in fertility from the upper to the lower end of the gaga. this has much to do with the flow of irrigation water i.e. the coarser material is deposited nearer the source of water supply while the finer silts are deposited in the lower reaches. Thus the situation arises where in the upper reaches there is an assured water supply combined with low-fertility. and in the lower reaches a less reliable Water supply combined with high-fertility. Hence, the tenurial principles Outlined above tend to balance the inequalities of the landwater relationship.
and utilization of irrigation
It has also been argued that the Snail units of cultivation permit better regulation of irrigation water and allOW fOr im Oíre inten Sive US e Of the ligoddas (fields enclosed by bundS).5 Further, fragmentation permits the proper maintenance of the irrigation system because it ensures collective responsibility for the channel System.
It is useful at this stage to examine the more specific characteristiCS Of fragmentation. The Statistics given in the tables relate to
EN RELATITIO IN 'TO YAYA DIVISIONS
ra =-- 8"T Number
till 4 divisions 57 3 divisions only 19 2 divisions only 07 a, (ಶ್ಲೆ
division only
survey
Oed ab Owe. It i S On practice Sanch that in the precultivation, irrigaducted in tempo
(wagula) which
fields li y in g irrigated. Such usually non-cir
refore, possible to es due to evapObe noted that e possible because icially conditioned p norms; without whole Stands to d that con Solidae the Social Congroup norms thus
in the manage
Parangiyawadiya, but in the author's experience the generalizations drawn from these tables hold true for other useupa - yaya systems of the Dry Zone.
The data, in table I reveal that of the 87 shareholders of the yaya, 66 percent Own land in all four divisions Of the yaya. (It has already been mentioned that the yaya in Parangiyawadiya is in four unequal sections). But 13 per cent hold Shares in One or two sections Of the yaya. Another 22 per cent have Ownership rights in three divisions only. The inequality of pangus evident in the table is a negation of the ideal referred to earlier. It is clearly a recent development and is a Sure indication Of the increas
EconoMIC REVIEw, SEPT/OCT 1978

Page 31
Table -
OWNERSHIP OF PARCELS OF PADDY
Number of Number
1 - 4 垒7 5 - 8 22 O 12 = س------ 9 18 - 16 06 17 - 20 O .01 24 -س- 21
Source: Field Survey
ing pressure of population. On land.
Table III clearly indicates the nature of fragmentation arising from the dispersed ownership of paddy land. The data reveal that 54 per cent of the owners held 1 to 4 parcels of land; but 46 percent owned between 5 and 24 parcels of land.
The figures relating to the size of holdings show that 94 percent of the parcels are below one half acre in extent; indeed 47 percent of the parcels are below acre. Only 3 percent of the parcels are over 1 acre in extent (Table III).
Need for Consolidation
The principles of the tenurial
Table - III
Favourable market (chena) crops, ha shift of interest t Sides there are o' Quite Often labour put in hem cultival to labour expende cultivation also ma degree of individua unlike in yaya ci necessitates coll making ; it is impe vidual decisions at Η ΟΥΙΩS.
In Some instar. author there is th: Of land received u.
PARCELS OF PADDY LAND
Extent in Number of Percentage
acres plots
1/16 74 14 1/16 - 1/8 113 22 1/8 - 1/4 57 11. 1/4 - 1/2 249 48 1/2 - 01. 17 03 03 14 14 س-- 01
Source: Field Survey.
system discussed above indicate the tiement expansiol rationale behind fragmented hold- at Parangiyawadiy ings in an environment subject to point. The new la
periodic droughts. The question, therefore, may be posed as to why a system of land tenure that has undergone cultural Selectivity needs change or to rephase the question, What is the need for land COnSOlidation?
The Smooth operation of the traditional System necessitates that the Ceuta - Jaya System is the focal point of interest of the community. It is then only that elaborate cultural practices aSSociated with irrigated paddy cultivation could be
completed in time. Further, the collective - co-operative effort of the COmmunity is needed in the
sequential cultivation of the yaya.
However, the pressures of change have eroded the importance of the Jaya as the focal point of economic activity of the purand village.
ECONOMIC REVIEW, SEPT/OCT 1978
larger unitS (2 acri and Such land d'Oe the rigid social an adhered to by the respect of the pur the approach is m and cultural pr: beth 7ng Which : right over indivi ignored. This in a the addition of c. the adoption of i CᎾᏚ.
All this mean position occupied yaya System Origir gated to a peri: 20eua-ydya system tion only after th relating to the cu fields” and hem hav If too much time
 

ANO
Ownership percentage
54 25 11 O 0. 01.
prices for hen We resulted in a O the hena. Beher attractions. is the only inpion; and returns is are high. Hen kes for a greater l decision making ultivation which ective decision rative that indicord with group
ces noted by the 2 preferential use nder village set
Cumulative percentage
14 36 47 95 98 101
h. The Situation a is a case in and received is in es per individual) s not come under di Cultural nOrmS
community in ana yaya. Thus Dre individualistic actices Such as isserts collective dual rights are Sense encOurages pital inputs and innovative practi
s that the focal by the De)0 - ally is now releheral One. The receives atteninitial activities ltivation of new e been completed. of the agricultu
ral calendar is taken up by these activities in a particular season it invariably follows that the purama fields will be left in fallow or not used to full capacity. There is also the added point that the uyeuctyaya system demands a collective co-operative approach. The cultural practices associated with the cultivation of the yaya demands that cultivation should begin at the lower End Of the /diya. Unless all yaya holders work in uniSOn it will not be possible for the upper reaches of the yaya, to be worked because the upddula principle sanctioned by custom demands that Water be taken to the lower sections of the yaya by means of temporary channels to minimize the labour expended and reduce water loss due to seepage and evaporation; these temporary channels cut - across liyaddas in the upper and middle divisions of the yoyd. Therefore, failure by individuals to meet COmmon WOrk Schedules retard the entire Scheme of Jaya Operations and frustrates the efforts of enterprising individuals. It is such factors, therefore, which contribute to the apathy shown by the peasantry towards the cultivation of the purama fields. However, the crucial point is that owing to the above there is a large-scale neglect and non-operation of purand fields which can be ill afforded from a national point of view.
It is thus imperative that a well formulated policy of land consolidation be implemented in tine purama villages of the Dry Zone. Hopefully, con Solidation will result in larger holdings that will facilitate ea,Sier and better cultiValtion. It Will also provide the incentive to adopt innovative methods. The agricultural practices in the purdna Jaya at present functions, often at a level or 'static - efficiency' because of limitations set by the terminal System. But it has been demonstrated that this System of tenure evolved in response to the drought hazard. Hence any scheme for land consolidation should take note of this factor and the alternative Strategies should be capable of overcoming the “cultural inertia' of the peasant to change a time honoured system."
SUGGESTED STRATEGY FOR CONSOLIDATION
This section introduces a Strategy that may be adopted to consolidate land in the purana villages of th e Dry ZOne. It takeS into con Sideration three crucial variables influencing peasant resistance to
29

Page 32
land consolidation viz, (a) scarcity of water (b) the differential fertility of the land and (c) the size of individual holdings.
Land consolidation necessarily implies a change in the present practices relating to irrigation Water use. It has already been Observed that the Scarcity value attached to Water is a factor in the present system of land tenure. If the water supply can be assured for both Maha (rainy season) and yala, (dry season) it will be possible in large measure to overcome peasant resistance to land consolidation. However, it calls for a change in the methods of cultivation as now practised. The usual practice at present is to commence irrigated paddy cultivation after the peud is filled to capacity by the Maha rainfall. As a consequence much of the initial fall runs to waste. However, the Dry Zone farmer is also adept at rain fed paddy cultivation under certain conditions. In the terminology of the Dry Zone peasant, rainfed cultivation is known as kekalld 72. The technique of rain fed paddy cultivation is less exacting than that for flow irrigated paddy cultivation. It is suggested that by a combination of both techniques it is possible to maximize on the available Water Supply. This will necessitate rainfed cultivation of the yaya in mahd thus conserving the ved water for yala cultivation. If necessary wewa Water may be stringently used to supplement rain fed paddy cultivation in maha. An alternative strategy for madhg cultivation (is that of utilizing sub-surface water by recourse) to lift irrigation as suggested by Madduma Bandara. This, however, involves a wide departure from existing cultural practices.
The adoption of the charges Suggested above calls for a better System Of Water use than that available at present. Therefore, it is imperative to do away with the present permissiveness in irrigation water use. It will, therefore, be necessary to introduce strict Supervision and discipline in water issue and serious thought has to be given to evolving an efficient institutional mechani Sm at village level for the enforcement of irrigation rules. As Chambers suggests these measures would be ineffective without political support from the highest level.
The process of consolidation itself could be a gradual one. It will assess the importance of land consolidation through practical experience. An example will illustrate the
30
point. It has bee
the gydya is in Parangiyawadiya. been observed th mentation within the yaya. It is S first step the di of land in the of the yaya be a chieving con Soli Section. Total col ings -- i.e., the C enti rety of an ir: in the different is into “One block' . a pre-determined
In effecting due consideratior the extents held differential fertili has to be taken would, therefore, those owning Sn allocated land il Sections. It need in passing that
tance tO land COr by those ownin extents of land. ger extents will h dated in the le This might call on the part of th tiationS. In deed pulsory acquisiti lude to land COl gard tO thOSe Gy. of land it may a explore the poS. ling them el SeW tent of land allo Settlement expan ciently attractiv deciSiOnS Of the fluish his rights t Once land co a reality measur to prevent Sub mentation. This the traditional ) allow for the tr perty both th females10 howeve be great ressist legislative measu fying the rules ( Way Out Of this 5e to make a. the unit of own Òf operation. It that while prope ded for the pur the consolidated should be main Paddy LandS AC cognized this di it did not lead results because

in pointed out that four divisions in It has further lat there iS frageach Section of uggested that as a spersed ownership different di ViSiOS maintained while iation within each nSolidation of holdOnSOlidation Of the dividual's holdings ections of the yaya may be effected on
time - Scale. tOtal conSOlidation* must be given to by individuals. The ty of the yaya too into account. It be necessary for hall extents to be the more fertile is to be mentioned the greatest resisSOlidation is shown g relatively Small Those owning larave to be accommoSS fertile Sections. for forceful action e village level instiin Some cases COmon may be a preSolidation. In rening Small extentS lso be necessary to sibilities of resettthere. But the excated under village lsion must be Suffle to influence the pea Sant to relinO the puliralna gjaya. nsolidation becomes es Should be taken division and fragis imperative as aWS Of inheritance anSmiSSion of prOrough males and r, there is bound to ance towards any res aimed at modif inheritance. The impasse appears to distinction between 2rship and the unit could be legislated rty can be subdivibose of inheritance, units of operation ained intact. The t No. 1 of 1958 restinction. However, O any far reaching this provision pri
marily applied to land held by tenants Only.
CONCLUSION
It has to be borne in mind that land consolidation is a means to an
end and not the end itself. Theoretically, land consolidation by faci
litating the application of more efficient methods of production
should lead to a rise in productivity. However, this cannot be achieved by the act of land consolidation alone. It is necessary that supporting measures for agricultural development should be made available to the peasant by further strengthening infrastructural facilities.
NOTES AND REFERENCES
i Karunanayake M.M., 1977. “The Attitude of Peasants to Land Consolidation: a case study of a Dry Zone Village in Sri Lanka, National Geographer 12, 25-34.
Kall’unanayake M.M., 1976, “Adaptation to droughts in a Dry Zone Village of Sri Lanka' in R. L. Singh et all (ed) GeOgraphical Dimension of Rural Settlements. BHU.
3 Leach, E.R., 1960. “The Sinhalese of the Dry Zone of Northern Ceylon', Social Structure in South East Asia Viking Fund Publications in Anthropology N0. 29 pp. 116—126.
2
4. Yalman, N., 1971, under the
Bo Tree, Berkeley. 5. Farmer, B.H., (1960) “On Not
Controlling Sub-divisions in Paddy Lands Transactions of the Institute of British GeO-. graphers 28: 225 - 235.
6. For a discusSiOn Of the finely worked out, cultural practices aiSSociated with the nuwe Ua - ya ua systern see Karunanayake, M.M. (1977) and (1976) op. cit. On peasant resistance to land COinSOlidation See KarunanaWake M.M. 1977, op. cit.
8 Madduma Bandara, B.C., 1977 "The Prospects of Recycling Subsurface water for Supplementary Irrigation in the Dry 2. One' in Agriculture in the Peasant Sector of Sri Lanka, Ceylon Studies Seminar.
9. Chambers, R. 1977 “On Substituting Political and Administrative Will for Foreign Exchange in Agriculture in the Peasant Sector of Sri Lanka, Ceylon Stulldies, Seminar, Peradeniya.
10. Leach, E.R., 1960, op. cit.
EconoMIC REVIEW, SEPT/OCT 1978
7。

Page 33
India's
Fish Economy
John Kuriem
The evolution and development of India's fishing indu recent times, has in many ways been on the same lin Sri Lanka. In India, however, there has emerged a ne form of an "ultra-modern sector, in the industry. John incisive analysis of India's fish economy and the impact of big business concerns into fishing in India, publis Economic and Political Weekly, first discusses marine potential and then traces the evolution of the fish econ
makes his aSSeSSnent.
Part III of this paper, continues
of the ultra-modern sector and concludes possible future trends in India's fishing industry.
With the fin
The current involvement of big business in fishing is basically the logical extension of trends that set in mGtion intO India’s fish eCOnOmy about three decades ago with emiphasis on modernisation and the introduction of capital intensive technology. This was greatly facilitated by the existence of plentiful resources and a rapidly expanding market. However, with the proclamation of a 200-mile Exclusive Economic ZOne (EEZ) which spurred off a debate on the future trend in fisheries developInent, a new twist is being given to the entry of big business interests to exploit our newly acquired deepSea resources. The argument has been that the involvement of big business is an inevitable step taken Only to ensure that the extension of our fishing rights will not bring a fall in world fish out-put because of our presel. It inability to exploit the resources for want of capital and technology. To this debate a “humanistic' overtone has lately been added by viewing with concern the multi-faceted impact of this 'new' phase on those traditionally involved in fishery-related activities. The con Sen SuS Seems to be that While traditional fishermen be safeguarded., our commitment to the global community must be honoured.
To understand the implication of the entry of big business in fishing in terms of the concrete reality, One has to take an overview of the evolution of the fish economy as a whole. At the same time it is necessary to examine and be informed of some characteristics of the aquatic terrain and the potential and the exploited marine resources of India's Exclusive Economic Zone.
(Having discussed the characteristics of the acquatic terrain and the potential and exploited marine resources Of India's Exclusive Economic Zone the author makes a brief review of the evolution of the Indian fish
EconoxEIC REVIEW, SEPTAOCT 1978
e COOmy. In the fi tempts to highligh Sues that confront fishing interests an the whole fish ec
Evolution of Fish
Let uS 1n.OW i bori{ historical evolution nOmy. This is bein Spite of the limita exercise, for two r will portray the cCinditions Under spite of which - t sently engaged in to achieve Such hi ploitation of resoul will help to highlig of trends which
ment Of “new” in expose and examin tion, providing an inansler in Which t tapped resources w
The fish econ Om consists of particip the activities of p. ing), marketing an fish. It is presentl sectors, tradition each consisting of ties.
The traditional S base of the econor. of Well over half men using Over a types of non-mech: are Spatially disp fishing villages all and account for a the total marine : country. The bulk
buted by an equa
of Small distributo on their heads Or C dominantly rural Sector is really th gradual evolution individuals confro option of making a The modern sect ly shorter history.

չtry, upto very s as those of y force in the Kurien, in an
of the entry ned in India’’S Sin reSOCeS Dmy beiore he with the entry all impact and
nal part he att the crucial is
India's deep-sea. d their impact on bniony).
Economy
:fly review the of the fish ecog undertaken, in ions of Such an easons. First, it process and the which - and in he perSons prefishing were able gh levels of exices. Secondly, it ght the Sequence ed to the developterests in fishing, e their motivainsight into the he remaining unill be exploited. y of the country ants engaged in roduction (catchd consumption of y made up of two al and modern the three activi
ector forms the sy. It consists now a, ImilliOm fisherlakh of different anised craft. Nhey erSed Over 1800 ong the coastline out 70 percent of fish catch of the of this is distrilly large number rs who carry fish yn cycles to a pre
clientelle. The e conseWuence of and innovation of hted with the sole living from fish. or has a relativeIt became promi
nent only in the post-Independence period of development planning. The producers of this sector are also by and large traditional fishermen numbering about 65 to 70 thousand and operating around 11 to 12 thousand Small mechanised boats Which COntribute a little Over a quarter of the total marine fish Catch. Much of the landings, restricted to about 250 centres, are initially handled by big merchants who transport it by road and railway to distant inland urbain centres. It is consumed there by the upper and middle income consumers. (The approximate figures given in the descriptions of the sectors are roughly extrapolated for 1977 from data, given in several sources pertaining to different points in time).
A third sector, which we term as the ultra-modern sector is now in the making with the emerging trends.
Tradițional Sector
The traditional fishermen. Of Our country, residing On Cne 1rlinges of the boot) km. or our coastline, belong to CCIIIImunities which have II Or centuries been involved in this castebased activity. Over the centuries they have evolved their own craft and gear and fishing techniques which were best suited for their local conditions. Their greatest asset is the accumulated knowledge about fish, fish habits, waves, currents and stars handed down from generation to generation.
The labour intensity of their technology and the Space limitations on their craft restricted their operations to the shallower waters nearer the coast Which abound in large quantities of the Smaller species of fish.
I'hough fishing is a sort of perpetual harvesting operation, the low productivity of the traditional techniques prevented any rapid depletion of the resources. Yet, even at very low levels of productivity - because of the perishability and the fact that it formed only a small portion of the producers' consumptionthere were large surpluses available for disposal and trade. The increasing demand from communities outside the fishing villages provided an outlet for these surpluses to be bartered or traded. The initial trade activities were taken up by the wives of fishermen and Subsequently men from other communities, who did not consider fish trade a taboo, also got involved. The perishability of fish posed the main limitation to the expansion of this trade.
Preservation techniques like salting and drying which increased the
31.

Page 34
shelf-life of fish partially the problem of perishability. further expanded the potential for disposals of larger surpluses. The production and use of ice revolutionised trade potentials further and as a consequence there was a greater proliferation of activities related to on-the-beach transactions: icing, packing and transportation, bulk disposals at inland centres; and so forth.
These developments provided opportunities for a larger number of people to make a living out of activities allied to fishing. Since not many from among the actual producers came up to tap these opportunities gaps developed between the production and consumption stages and these were filled up by outsiders. They initially entered as agents, functioning as 'buffers' between producers and traders/small distributors, and between big traders and Small distributors. Generally they began to perform the role of financiers, especially to producers to whom they would advance money for making craft or gear or for consumption. To avail of this, produ. cers had to pledge to sell their fish Only through the mediation of the financier. In this manner SOme of them extended their influence into the realm of production while others established a firm footing in the marketing activities. Progressively this new class of middlemen-agents began to exercise a degree of monopsonistic power proportionate to the extent of integration, control and manipulation they were able to wield. This concentration of power also meant gyration of surpluses to their fold with the result that practically all further expansion in productive activities depended considerably on them and the 'sharks' share Of benefits would also accrue to them.
Prior to the expansion of trade the consumers of the traditional Sector were those in the immediate hinterland of the fishing villages and much of the transaction was barter exchange. The improvement of preservation techniques resulted in an extention of the market and also a greater degree of monetisation. Purely in terms of numbers the clientelle was basically rural Or Of
tackled This
the lOWer incOme groups in the numerous coastal trading centres. (The vegetarianism of the upper
castes was also probably an added reason for the restriction of fish consumption to the rural and lower income groups) For this segment
32
of the population came an import and a Crucial pl large collective from the rural are continued growth form of producti spurred the activi tributors and assl fish at low and the Small COnSumt This maSS, rura large number of tors and consume 1'er to as the tra ( the fish e cOnOmy,
The producers pre-capitalistic tions, used laboul logies that were yet yielded prop surpluses. The Small distributors fOr SubSiStance a vely to the wide growing segment SumerS. These Wel pants of the sect was with the fina were gradually ga vicious foothold i and marketing a
Modern Sector
The early period saw the
of indu Stry, tra in the urban are a greater movem tiOn tO the Se cel of roads and rail these centres mo) and this opened disposal of fish a ces considering til The up and comi trenched finance the opportunities plus production C trol to these new making full use C Simultaneously, development was plementation in : State government the planners the ditional fisherme productivity lead penacea for pove production and cretely it meant the old, tradition the mOdern mec Successfully in cOuntrieS like Br SO OI,
The finance ca moves for mech: boats. They inf state-encouraged

fish gradually beant animal fOOd otein intake. The iemand emanating as encouraged the
of the traditional on which in turn 3y of the Small di SLred the supply of accessible prices to
Iで。 l-based Sector of a producers, distriburs is what we relitional sector of
were confined to production relaintensive technoof low productivity
Ortionately large large number of undertook trade
nd catered effectily dispersed and of low income cone the main particior but the control ince capitalistS Wh0 ining a crucial and Into the production ctivities.
post-Independence faster development de and COmmerCe as accompanied by ent Of the populaIntres. Improvement way facilities made ce easily accessible up new avenues for t much higher prihe greater demand. ng class of well encapitalists seized t0 divert the Surpf fiSh in their conportals of demand if the new facilities. planned fisheries ; taken up for im– a big way by several JS. In the eyes of problems of the train was one of low ing to poverty. The :rty was to increase productivity. Cona graduation from all fishing crafts to hanised crafts used the industrialised itain, Norway and
pitalists backed the anisation of fishing iltrated the heW
primary fisher
2
men's co-operatives in an attempt to corner the sizeable number of mechanised boats issued through them to the fishermen. With the extent Of control they already haud over the fishermen, this was a mattter of ease and where attempted spelled great Success.
Fishing with mechanised boats and nylon nets yielded very substantial increases in production and productivity and spurred out the beginning of bulk movements of the larger species of fishes to the urban centres. The mechanised boats not Only resulted in increased productivity but also in a Whole new realm of costs -of diesel, engine oil repairs -unknown to the operators of nonmechanised craft. All this meant more financial requirements and made the fishermen who operated the boats more vulnerable to the Overtures of the increasing number of financiers who are willing to advance money to tide over expenses of oil, fuel and repairs in return for the right to sell the fish caught On the boat.
The increased volume of catches also resulted in Small fish distributors being easily edged out due to their lack of funds and control On the producers. They had either to move out of the trade or purchase fish, On very unfavourable terms, from the many financiers, who were also becoming large merchants.
In this manner the traditional sector of producers as Well as the new class of fishermen. On the mechanised boats who continued to be predominantly from the fishing communities-got integrated into the large network of marketing chanelS. This network now extended across states linking the hitherto peripheral villages to more distant inland urban centreS. The rural ConSumers in the immediate hinterland and within cycling distance (a new mode of transportation taken up by the distribution) still formed the consumer base and accounted for the bulk of the consumption. both in terms of volume and value. But the urban consumers provided the impetus for expansion of trade. The network of movement Of fish from surplus landing points to big demand centres obscured the rapid
ly emerging exploitative links between the vested interests at the two ends of the trade circuit. The
producers, still faced with -buyer's market, received no significant returns for increased productivity. The consumers, in a sellers' market had to bargain hard Over the Soaring final prices in spite of persistent
EconoMIC REVIEw, SEPT/OCT 1978

Page 35
poor quality Oi fish, decaying for Want Of Sufficient ice and proper care in handling and transportation. With the emphasis on modernisation' of the fish economy a whole new infrastructure Of research, development and training institutions in the field of fisheries was set up in important fishery centres all over the country to cater to and Spearhead the programmes for largescale development of the fishing industry along the lines of the industrialised countries. International collaboration and advice from Such international Organisatiorus as FAO Was SOught for much of this activity 2nd some concrete country-to-country development projects were arranged.
lake the case of Kerala. Where the Norwegians were at Work On a project for “integrated fisheries development'. They ruled out the possibility of an intermediate form of technology to mechanise the traditional canoes Or catamarans, and instead introduced the new Pablo mechanised boats. They also set up a Sales Organisation with the intention of developing a network to handle the processing and marketing Of fish. Thus, technOYOgy then prevalent in Norway and forms of Organisation Suited there Were transplanted to the calm and quiet fishing village accustomed to its tradi — tional and deeply rooted System. Of operations. The Sales Organisation failed before too long. Its OWn internal structure and ecOnOmicS made the fish that moved through it to O Ostly for the COn SumerS airOund the area. Later, even concentrating On the upper-income strata, of one urban centre did not provide a sufficiently large turnOver. The local interests Of the middlemen and the big merchants also Scuttled its functioning by out-buying the Sales Organisation when the catches Were low and withdrawing from the shore When there was a bumper catch. A quick Succession of such situations and total chaos prevailed. Along with the catches, of the mechanised boats came small quantitles of prawn - a crustacea that does not have much of an internal market but which has a demand in the dried form in Sri Lanka and Burma. Resource Surveys Showed that the region. Off the Kerala coast has a plentiful resource of these crustacea. The Norwegians saw that the introduction of freezing technology and the diversion of the prawns in the frozen form to the U.S. Where the demand for it was picking up would be the solution to their knotty
ECONOMIC REVIEW, SEPT/OCT 1978
problems. With or discovered the W Self-defeating int costly technology COO COI). Sulle a ʻ,O avOid ('':Ornflict interestS.
BOttOn tra Wl n. Cid, frezing plantS contracts W 3rd i US and the prav (BOttOm tra Wl ni catch the fish ( sal species) which tOn Of the Ocean, tacea, Ora WinS is O large and heavy Of the Water actil it necessitates th: cal power to Ope method of fishing feasible from craft).
New Vistas Opene
A Whole neW vis the early sixties became a Sector W port potential in : foreign exchange All and Sundry Wh the risks of enter encouraged. Pers Other Wise have Sil ciation. With fish C a new responsibil
On the One han C was breaking Oper fOI CeS and intere seemingly stagnar SOOn Well Within the World capitali On the Other han relations deepened and modern Sect( FOr the traditiona the non-mechanis Was not a new Spe They caught it in be neVer ate it t. times of bulk and it Of as manure f plantations. For th transition of an i to their 'gold Was hen SiOn (Between share Of prawns t exports, of India, i. increaSed frOm 30 cent and in terms per cent to 90 p. value realised in 3.32 per kg. tO during the period capacity to catch were even happy ti Cash advances giv the Off-Season for sell their prawn ( merchant/middlen

e stroke they had ay to avoid the }rnal logic Of a. Superimp OSed Oll nd also the path With the Wested
etS Were introducwere set up, trade stablished in the in rush was on its are used to called the demerinhabit the botOf Which the Cru Sne. TheSe net S are and the pressure ng dOWnwards On use of mechanirate them. This is therefore not non – mechanised
d
ta was opened. In fisheries Suddenly ith en OI'm OUS EX. SituatiOn Wher Was a crucial need. O ventured to take reneurship were Ons Who Would hunned any aSSObr fi Shermen found ity in prawnS.
the fish, ecOnOmy to a new Set Of StS. An Other WiSe nt ecOnOmy WaS the tentacles of st market forces. d, the semi-feudal in the traditional ors of production. l fishermen using sed craft, prawnS cies in their catch. its SeaSOn, may emselves, and in ingS even diSpOSed Or coastal coconut hem this Overnight nedible species inbeyond compre1960 and 1974 the O the total marine n terms Of VOlume, percent to 77 perof value, from 41 er cent. The unit creased from R.S. Rs. 19.10 per kg. ). They had the more Of it and ) accept the liberal en to them during the mere pledge to atch to the same han. In fact until
the late sixties this class Of prOducer contributed Over three-quarters of the catch of prawns which finally found their way to the luxury hotels of the US and the Wedding ceremonies Clf wealthy Japanese. In this manner the traditional fishermen Were linked to the WOrld malket through a hierarchy of middlemen culminating in India with the
n'Oveau riche merchant capitalist Owners of freezing plants and inSulated van S. They in turn ex
ported the frozen prawns to a trade agency in the importing country Which distributed it through the chain of department stores and frozen food retail outlets to an uitra modern consumer in the develOped industrial countries of the World.
Emerging Ultra Modern Sector
The involvement of the industrial capitalist- big business houses and the multinational corporationsin the lisheries Sector came at this stage in the history of the evolutiOn Of the fiSh eCOnOmy.
Ihe big houses initially entered the fisheries; SectOr and more particularly the marine export trade to fulfil their export obligations as 2xport houses and later as a result of their acquiring import licences in terms of the Import Trade Control Policy. Under this policy an export house Was required to export nontraditional goods (Of which canned and frozen fish Was One) the f.o.b. value of which was to be equal to four times the value Of the licence.
To achieve this SOme Of them initially acted as merchant capitalists buying products from processors and exporting it under their own brand name. (Taking advantage of their position as eXperier.ced ExpOrt HOuSes became a lucrative prOpOsition for both the business houses and the proceSSOr. The former was assured of steady supplies of the processed product without having to produce Or procure it, the latter had an edge over the other processors because higher returns were offered by the business house in the form of a 7 to 10 per cent commission On Sales value. Additionally the bother Of export formalities and the COmplexities of marketing were done away with). Some others went a Step further to give a few financial doles to "enterprising young men and institutions' to buy their own fishing boats and start fish processing firms. The understanding was that the exportable species would be sold to the bisiness honse.
To be concluded

Page 36
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