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ア |97 い981 い99」 A People's Bank Publication
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Sectoral Composition of Gross Natio
1959 1975
Sectors
Am punt || Percení - || Ampunit || Percent- || . RS. Mn, age Rs. Mn. age i
1. Agriculture, Forestry
Hunting & Fishing. . . 2,302 39.1 3,956 32.2 1, 1 Agriculture . . . 2,148 36.5 3,352 3O.O 1.1.1 Tea . . . (642) (10.9, (733) (6.6) 1.1.2 Rubber . . (183) (3.1) (295) (2.6) 1.1.3 Coconut (404) (6.9, (419) (3.7 1.1.4 Paddy .. (312) (5.3, (479) (4.3) 1.1.5. Other . . (453) (7.7 (1426) (12.8) 1.2 Forestry - - 93 1.6 114 1.0 1.3 Fishing - 61 1.0 137 1.2 2. Mining & Quarrying 3. 0.5 248 2.2 3. Manufacturing ... 682 11.6 1,462 13.1 3.1 Export processing 373 6.3 460 4.1 3.2 Factory Industry 263 4.5 832 7.4 3.3 Small Industry .. 46 7.8 17 1.5 4. Construction 283 4.8 503 4.5 5. Electricity, Gas, Water
Sanitary Services .. 9. 0. 9. 0.8 6. Transport, Storage
and Communications 541 9.2 1 - 100 9.8 7. Wholesale & Retail
Trade 801. 13.6 501. 13.4 7.1 mports - - 139 2.3 125 1.1 7.2 Exports - - 104. 1.8 171 1.5 7.3 Domestic 558 9.5 1,205 10.8 8. Banking, Insurance &
Real Estate - is 5直 0.9 184 1.6 9. Ownership of
Dwellings - 20. 3.4 350 3.1 10. Public Administratio
an Defence 301 5. 646 5.8 11. Services n.e.'s - - 728 12.3 1,513 13.5
12. Gross Domestic
product - 5,930 100.6 11,194 100.2. 13. Net factor Income
from abroad - 37 0.6 27 0.2 14 Gross National
Product ... 5,893 100.0 1,167 100.)
NATIONAL PRODU
The Gross National Product at current factor cost prices in
Rs. 36,139 million. This indicated an increase of 23.5 percent over Product at constant (1959) prices has been estimated at Rs. 13,002 pared with a 4.4 per cert growth in 1977. Sri Lanka's economic gro of growth during the last decade; and almost equal the highest grow ment consists of much more than an increase in GNP or per capita country's people and a steady all-1 ound improvement in their living various sectors of the economy.
The Central Bank maintains that unlike in p, evious years, wh of the economy either remained stagnant or declined, the year 1978 have been only marginal changes in the shales of the various sector the fact that almost all sectors recorded gains in output in 1978. T the growth of the construction sector from 4 to 5 per cent were note ing, construction, electricity, finance, manufacturing and trade. Ac aided largely by the import liberalization. Growth in agriculture arising partly from the new exchange rate, and by the better prices was largely the result of the construction boom that followed the imp
The 1978 mid-year population of Sri Lanka has been provis of 1.7 per cent. Thus the Gross National Product per capita in re pared to an increase of 2.6 per cent in the previous year. Sri Lanl in 1976 and 1977 respectively, primarily as a result of a sharp impro the real national income, which is obtained by adjusting real gross cent in 1978, marginally more than the rate of growth of the real na

nal Product (1959) Factor Cost Prices
1976 1977 量97影 | Percent
age Airí crease Angount Perceni- | Amount i Percenf-i Amount Percent-i 1973 Rs. Mn, age Rs. Mn, age Rs. Mn. (ige 63 ye Ꭾ* 1977
3,568 31.0 3,828 31.9 3,991 30.7 4.2 3,308 28.8 3,568 9.7 3,690 28.4 3.4 (674) (5.9, (715, (6.0) (682) (5.2) (4.6) r (299) 2.6) (296) (2.5) (315) (24) (6.4) (365) (3.2) (332) (2.7) (385) (3.0) (16.0) (513) (4.4 (687) (5.7, (775) (6.0) || (12.8) (1,457) (12.7 (1538) (12.8, (4,533) (11.8 (0.3)
120 1.0 112 0.9 133 1.0 18.8 40 1.2 148 1.2 167 13 12.8 354 3. 3. 2.6 44 3.2 32.2 1,489 12.9 1,505 12.5 1,632 2.6 8.4 432 3.7 435 3.6 446 3.4 2.5 87 7.6 88. 7.3 987 7.6 12.0 185 1.6 189 1.6 200 1.5 5.8 531 4.6 480. 4.0 629 4.8 31.0
99. 0.9 109 0.8 123 0.9 20.6
1,143 9.9 1,198 10.0 1,182. 9.9 7.3
1,545 13.4 1,623 13.5 1,780 13.6 9.7 146 1.3 147 1.2 26 2.0 77.5 126 1. 243 2.0 277 2.1 14.0 1,273 11.0 1,233 10.3 1,242 9.5 0.7
191. 1.7 229 1.9 263 2.0 14.8
353 3. 360 3.0 377 2.9 3.9
676 5.9 703 5.8 760 5.8 8.1 1,593 3.8 1,704 14.2 1,797 13.8 5.5
11,543 100.3 12,042 100.2 13,043 100.3 8.3
37 0.3 25 0.2 41 0.3
11,506 100.0 12,016 100.0 13,001.9 100.0 8.2
CT AND. INCOME
1978 has been provisionally estimated, by the Central Bank to be the previous year. Discounting price increases, the Grcss National million in 1978. This recefits a growth rate of 8.2 per cent, comwith in 1978 was thus estimated at more than twice the average rate Eh achieved in recent times of 8.4 per cent in 1968, Though developincome (it consists rather of a satisfacticn of the basic needs of a staadrinds) this is the only available official indicater of growth in
ten economic growth came mainly from a few sectors, while the rest was characterized by a high level of activity in all sectors. There 's in the Gross National Product between 1977 and 1978, reflecting he drop in the share of agriculture sector from 32 to 31 percent and worthy. The most notable growth sectors were mining and quarry:cording to the Central Bank the growth of trade and industry was was helped by improved producer margins in rubber and coconut for paddy. The expansion of construction, mining and quarrying "oved investment climate as well as the decontrol of the trade system.
sionally estimated to be 14.2 million, reflecting an annual increase :al terms was Rs. 917/- indicating an increase of 6.4 per cent, comca's terms of trade which improved by 35 per cent and 31 percent Dvement in export prices, declined marginally in 1978. As a result, national product by the changes in terms of trade, grew by 7.8 per tional product.

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Volume 4
G. R. Tressie Leita
A. de Vaas Gunewa
Katimla Bhasin and Baljit Matlik
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We have combined up on our backlog our control. We a
annual subscription.
Acknowledgement
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The Child O India's D
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A composite
 
 
 
 
 
 
 

Numbers 10 & 11 Jan./Feb. 1979
FEATURES
20 Proportional Representation
- An introduction
rdena 24 Commodity Agreements
28 Small farmers of Nepal
show the way
SPECIAL REPORT
3 Sri Lanka's Economy - The
1978 Performance
COLUMNS
2 Diary of Events January 1979
14 Foreign News Review-Production inCreases in Asia
15 Education-Myths and realities of Edu
Catition in Sri Latinakça
17 Commodities-SPICES-Exports no in
provement
COCONUT - Production reCO yery
tlete
two issues (January and February 1979) in order to catch in printing which had arisen through circumstances beyond
ssure all our subscribers, however, that the validity of their s would extend over 12 separate issues.
ons of certain sections of the Economy used in this issue have been vailable to us by the Research. Department of the Central Bank,
l and Development evelopment Strategy as a Tool for Development de garments exports
fiew of the Sri Lankaan Economy by Palitha Kannangara,

Page 4
Diary
Jaa.
1.
11.
The Consumer Protection. Law No. 1 of 1979 came in effect on January 1, 1979. It provides for the regulation internal trade, the promotion of association of consume and the establishment of fair trade practices.
Salaries of public servants were increased by 10 perce of the consolidated salary with a minimum of Rs. 5 per menSem.
The Bank Debit Tax was abolished.
The International Monetary Fund allocated a sum SDR 12.4 milion (RS, 241.5 milion) for Sri Lanka und the first allocation of Special Drawing Rights (SDR) f the period 1979 to 1981. This represents 10.4 per cent Sri Lanka's quota in the Fund.
The trade protocol between Sri Lanka and the Peopl Republic of China under the provisions of the Five Ye Trade and Payments Agreement between the two cou tries came into force. A significant feature in the Protoc for 1979 is the exclusion of rice as a commodity to imported from China. Since the inception of the tra relations with China in 1952 rice featured as the m significant commodity of trade.
India could face a major financial crisis, if the go-sl
in the banks continued, reported the Bombay Econon, Times. Industrial production, commercial activity,
well as commodity markets and stock exchanges were
affected by the go-slow.
Natural rubber producers were in a precarious positi as their output was failing to keep up with rising wor wide demand, according to the Asian Wall Street Journ It is predicted that by 1980 production of natural rubb will fail almost 2.5 million tons short of demand. Fail. to meet the demand and the resulting higher prices col place synthetic rubber in a more competitive positi relative to natural rubber.
The facility of permitting debits to non-resident block accounts with Commercial Banks, for local disburseme and credits to such accounts if related to receipts of pe sions, income tax refunds, profits and dividends withc the prior approval of the Controller of Exchange ca1 into effect.
Air Lanka Limited, the new flag carrier of Sri Lanka, w incorporated. It is a public company with an authoris share capital of Rs. 500 million divided into 5,000.0 shares of Rs. 100 each. The Sri Lanka Governme would hold 60 percent of the capital stock and the balan would be held by the Bank of Ceylon, the People's Bal and the Ceylon Shipping Corporation.
Shipping, Airline and Travel Agents were allowed refund unutilised passage tickets, freight and miscell neous vouchers without reference to EXchange Contra for prior approval with effect from January 11.

of Events
13 Norway has pledged an outright grant of Rs. 550 million to Sri Lanka to be used mainly for the Hambantota Inte
to grated Rural Development Programme, according to a of preSS announ Centent. FS,
17 The Government decided to adopt certain revenue measures to raise money for post-cyclone rehabilitation work
int including the imposition of 20 percent surcharge on both 0/- PAYE deductions from January to March as well as an Income Tax for 1978/79 Tax Year; an increase of Excise Duty on tobacco from Rs. 188.52 to Rs. 205.69, which resulted in the increase in cigarette price by 3 cts. per cigarette, increase of Excise Duty of liquor, resulting
of in the increase of the price of arrack by Rs. 2 per bottle ler and increased the duties of imported liquor.
or
Cf
28 The Kirama Oya project in the Mullkirigala-Tangal'e area was inaugurated. This project, to be completed in 3 stages, would renovate the Kirama Oya channel complex and
e's construct two dams at Liyanagedeniya, and Wauwa a. during Stage I. The cost of the project, estimated at Rs. ill- 4.5 million, is borne by NORAD the development assisOl tance organisation of Norway.
16 A Government gazette extraordinary specifi dalist of 84 δSί consumer items, industrial raw materials, building mate
rials and other manufactured products as “essential to the life of the community', and to which the consumer protection law would apply.
OW
nic - - -
as 18 The Government has approved an initial sum of Rs. 10
all million to set up a centre for Fundamental Research in Science in Sri Lanka, according to a press announcement. Research in this institute will include such disciplines as astronomy, space science, physics, chemistry,
On. biology, the origin of life and the causes of epidemics. 慧 The Prime Minister and Minister of Housing gave notice 5e† of presentation of the National Housing Development
1՞6 Authority Bill in Parliament.
uld
20 Malaysia's merchant banks sire being drawn into the mainstream of the country's financial system under legislation proposed by the Government, according to an Asian Wall Street Journal report. The banks will be licensed for the ed first time and will be subject to certain curbs on their acti. nts vities in return for being allowed a wider lending base and 読重ー closer ties with the Central Bank.
'' 24 A Revenue Protection Order was published giving effect
Ol.
ՈՂG to the preferential rates of duty contained in the Bangkok
Agreement.
Mr. Charan Singh and Mr. Rabi Ray were sworn in as
醬 Union Cabinet Minishers in India. Mr. Charan Singh has
ဂုံ become deputy Prime Minister and was given the portfolio of Finance, while Mr. Ray was made the Minister
int of Health and Family Welfa1e. Also elevated Deputy
蠶 Prime Minister was Mr. Jagjivan Ram.
25 A far-reaching liberalisation programme for accelerating the trend towards universal banking and the legislation of
to banking secrecy are key features of a new Austrian Bank|a = ing Bill. Legislation provides for anonymous savings acrol counts and the proection of bank secrecy, states a report
in the London Financial Times.
EconoMIC REVIEW, JAN.IFEB. 1979

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Page 6
level of economic activity during the year. The gross savings represented 17 percent of the Gross National Expenditure as against 13 percent in 1977 and an average of nearly 9 percent during 1972-76.
Inflationary pressures continued to be an important feature of the economy during the year 1978. Highest price increases were recorded in imported goods as against locally produced goods, and in investment and intermediate goods as against consumer goods. While the consumer goods prices have risen by about 12 percent, the prices of intermediate and investment goods have gone up by about 30 percent. The overall rate of inflation in the economy was probably around 16 percent.
There was a substantial deceleration in the rate of monetary expansion as seen by the fact that the money supply (currency and demand deposits) rose by only ill percent compared with the increases of 29 percent and 35 percent in 1977 and 1976 respectively. However, quasimoney supply (savings and fixed deposits) registered an increase of 48 percent, and the importance of these secondary liquid assets in the broad money supply rose during the year. Commercial bank activity was characterised by a sharp increase in credit expansion to the private sector.
Following the import liberalisation, the import bill (measured in SDR terms) rose by about 29 percent. This increase occurred against the background of an accumulated backlog in demand arising from the severe import restrictions of a number of years. The export earnings (measured in SDR terms) showed only a modest increase of about 6 percent. The result was the creation of a sizeable trade deficit of Rs. 2,143 million or SİDİR 133 million. The high inflow of foreign resources, in the form of official transfers, loans and aid, not only covered the trade and payments deficit of the year; it also helped to raise the stock of the country's external assets by SIDIR, 75 million or 65 percent.
The rise in the external assets was, however, more than offset by the recorded increase in the country's external indebtedness. The external public debt rose by SDR 159 milion or 29 percent during the year. Exchange rate movements during the
4.
year resulted in a ciation of the E Japanese Yen and Though the parit dollar fluctuated it was relatively r parity rates with
Government fi characterised by increase in rever over 70 percent) underexpenditure allocations for c. The net result of was that the gov during the year tionary effect on
TABLE 2. Η
Crggs
Tea Rubber Coconut Plantation Paddy .. Main Crop
* Com
In the employ evidence of incre: tion by the econ. the increased le
MOSö SeCÜGrS. (necessarily incor at the end of th unemployment h. 900,000 persons estimated figure 1977. The incol for the unempl during the year, 373,000 unemplo end Of 1978. M. Eastern countries the year and th Sri Lankans wor East has been e 25,000. The rem migrants have about Rs. 300 in The vacancies cre tion also incre opportunities: fo: sons in the dom
The economy vince of Sri Lal damage as a re. that hit this are: 1978. The fulim in the form of capacity and the quired for rehab

considerable depreupee against the (the German Mark. y rate with the US L during the year, more stable than the in other currencies.
nance in 1978 was an unprecedented nue (an increase of and a considerable 2 in the budgetary apital development. these developments ernment operations exerted a contracthe economy.
work, would be felt on the economy only during 1979.
AGRICULTURAL ΕΡΕ ΟΠΟΙ ΤΟΤΙΟΝ
According to the index compiled by the Economic Review, the output of the main agricultural crops (tea, rubber, coconut and paddy) registered an increase of nearly 7 percent during 1978. (See Table 2.) The output of these crops in 1978 was 17 percent higher than the average level of 1975-76. No significant output increases are seen in subsidiary foodcrops and in minor export CIOps.
NDICES OF AGRICULTURAL PRODUCTION *
Crops (1 ', 3) is (1-3 and 5)
1978
1975-76 重977
1 OG 101.8 97.0 100 97.2 量02.4 OG 74 898 100 94.4 96.5 100 140 157.2 100 O
117.3
puted by the Economic Review
ment scene, there is ased labour absorpomy resulting from vel of activity in Available evidence mplete) suggests that e year, the level of ad fallen to nearly from an officially of 1.2 million in me support scheme oyed, implemented had covered about yed persons at the igration to Middle3 accelerated during e total number of king in the Middle stimated at around littances from these been estimated at hillion during 1978. sated by such migra:ased employment r unemployed perestic economy.
in the Eastern Pronka, suffered heavy sult of the cyclone a, in late November pact of this damage, loss of productive extra, resources reilitation and repair
Plantation Output
Tea overall plantation output registered a marginal increase of less than 2 percent. The decline in tea. production was the principal factor in the relatively poor performance of the overall plantation sector. (See Table 3, on page 5.)
Tea
The production in 1978 estimated at 199 million kgs. reflected a decline of 9.5 million kgs, or nearly 5 percent relative to the output of 1977 and a decline of about 10 percent in relation to the average annual output of 1966-70. The decline in production took place mainly in the high and medium grown teas, the decline in these two varieties was in the order of 8 and 9 percent respectively. The production of low grown teas recorded an increase of 5 percent over 1977 and this increase is mainly attributed to the producer-response to better market, conditions in the Middle-East (the main outlet for low-grown teas). The decline in the production of
igh and medium growns is attributed to a number of factors such as the accumulated effect of years of neglect and inadequate investment expenditures, continuing managerial
EconoMic REVIEw, JAN.sFEB., 1979

Page 7
2- problems in the state-owned estates, and the general deterioration in producer margins due to lower export prices and the increased cost of proIn addition, the shortfall in the high-growns has been attributed to the inadequate distribution of rainfall in some months of the
duction.
year.
Tea, prices in 1978 declined
from the peak levels they reached in 1977 in the context of the international coffee crisis. The net average sale price of tea at the Colombo auctions declined from Rs. 13.50 per kilo in 1977 to Rs. 11.59 in 1978, a decline of about 14 percent. On the other hand, the estimated average cost of production of tea, on a national basis (ie, both public and private sector) rose from about Rs. 9.35 at the end of 1977 to Rs. 10.50 in September 1978, an increase of 12 In particular, the midcountry teas received very poor prices during 1978 resulting in a considerable erosion in producer mar
percent.
gins.
Rubber
Rubber
production estimated at
154 million kgs. represents an increase of nearly 8 million kgs. or about 6 percent over 1977 and an increase of about 2.5 percent over
the average of 1975-76. This was
the highest level of production during the last five years. The high production in 1978 is attributed to favourable weather conditions, better producer margins and increased fertilizer usage. There was a marked improvement of rubber prices during the year. The Colombo market price of RSS Grade I which averaged Rs. 4.53 per kilo in 1977 rose to an average of Rs. 6.93 in 1978 an in
crease of 53 percent.
The average
cost of production per kilo which was Rs. 3.75 in 1977 had risen to
about Rs. 4.50 in 1978.
Coconut
Coconut production in 1978 was estimated at 2,207 million coconuts.
ܓܘܐܦܩܘܛܢܝܘܬܐ
Though production showed a marked recovery from the severely depressed level of the previous year, it continued to remain below the historically average annual production level (of around 2,500 million
nuts).
The estimated increase (re
covery) from the 1977 level was about 385 million nuts or about 21. Reflecting this recovery,
percent.
ECONOMIC REVIEW, JAN/FEB, 1979
TABLE 3
1. Tea
(a) Production (mi (b) Exports (millio (c) Colombo Auct Gross averages (d) Fertilizer use (
Ruther
(a) Production (mi (b) Exports (milio (c) Local Price (R (d) Fertilizer use
Coconut (a) Production (mi (b) Exports (millic
valent) (c) Local price of (per metric tor (d) Fertilizer use (
the production of desiccated coconut a 63 percent and 37
ively over the abnor they had fallen to recovery of the co largely a result oft in the weather cond ing the improved su age local market pi products were some 1977 levels but the II modest. Reflectin.
| various administrati
control mechanisms taining better pro prices continued to levels throughout til nut was the only seriously affected damage of Novemb 30,000 acres of coco Eastern province pletely devastated a effects of this on coc would be felt in 19 In all three major the progress of repl
quite slow and has
main below the targ
acreage replanted in
acres of tea, lands, rubber lands and acres of coconut l other hand, fertiliz plantation sector ha ed increase which the production in til coming years. The fertilizer issued to sector amounted to this represents an percent over 1977.

LANTATION PRODUCTION AND EXPORTS
Percentage 1976 1977 1978 change in
1978
llion kgs.) . 197 209 199 - 4.6 n kgs.) " " . 201 185 194. -- 4.9
O. : ale price per kg. 9.25 16.05 14.19 --11.6 000 tons) . . 95.3 80.1 115.5 -- 69.4
1lion kgs.) . 152 146 154 - 5.5 n kgs.) - 37 135 150 -- 11.1 SS 1 per kg.) 4.34 12.4 21.0 +-52.9 000 tons) 13.0 12.4 21.0 --69.4
llion nuts) . . 2330 1821 2207 --21.2 in nuts equi
- - - 803 281 515 --83.3 coconut oil ) 2.910 5640 52.50 - 6.9 30.7 29.1 42.5 - 46.0
C00 tons)
coconut oil and lso improved by percent respectmally low levels
in 1977. The conut crop was he improvement itions. Reflectpplies, the averices of coconut what below their price decline was g the effect of we measures and
aimed at mainducer margins,
remain at high he year. Cocoplantation crop py the cyclonic er 1978. About nut lands in the had been comnd the adverse onut production 79.
plantation crops anting had been continued to re
eted levels. The 1978 was 6,000
9,000 acres of less than 2,000 ands. On the ær usage in the s shown a markaugurs well for his sector in the otal quantity of
the plantation 175,000 tons and increase of 47
Paddy
For the second successive year paddy production recorded a sharp increase. The recorded harvest in 1978 at 90.6 million bushels showed an increase of 10 million bushells or nearly 13 percent over that of the previous year. This increased production reflects both an expansion in the harvested acreage (--97) and a rise in the yield per acre (+4). Favourable weather conditions, increased application offertilizer, liberal supply of creditto farmers during the 1977/78 Maha season, and the higher Guaranteed Price contributed to the increased yield as well as to the expanded cultivation. Fertilizer issues to the paddy sector at Il3,300 metric tons showed an increase of 39 percent over 1977. This was the highest amount of fertilizer used in a year after 1974. There was also a liberal extension of credit facilities to paddy farmers during the year. The total credit provided amounted to Rs. 451 million and this is the highest amount granted in any single year since the inception of the cultivation loan scheme. However, only about 20 percent of the total paddy loans granted had been recovered during the year and this was the lowest recovery rate in the history of this loan scheme. Official procurement by the Paddy Marketing Board amounted to 32 million bushells or about 35 percent of the total crop, representing an increase of 7 million bushells or about 30 percent over 1977. However, storage and milling constraints interfered. With effective procurement throughout the year.
5

Page 8
MILLION BUSHELS
LS SLS S S S 8
止一一 ;"ށދ. J,乐 M,A,M,J,乓 A、S、
PAIDIOY PUROHASES
Paddy Marketing Board paddy purchases in 1977 and 1978
The increased paddy output lead to a relative stability in the open market of rice with prices generally ranging from about Rs. 3 to Rs. 3.50 per measure in most provinces during the year. One favourable impact of the record paddy harvest, was that it led to a drastic decline in rice imports. The total imports of rice at 166,000 tons represented a drop of 69 percent relative to the l977 import level. This decline was, however, partially offset by an increase in wheat flour imports (an increase of 79,000 tons). Thus the total imports of the two stapleswheat flour and rice-declined by only 22 percent in relation to 1977. (See Table 4.)
Subsidiary Foodcrops
Under the impetus of import res
trictions, subsidiary foodcrops registered a substantial growth in the
levels of compet relatively depr appear to have C effect on the p of these crops. duction of cert yams, sorghum a attributed to th bility of subsidi the increased rici market. The G view to balancin Sumer interests stocks for certa items (e.g. chill - bring about a stability. Even prices were mair these crops, the nery was ineffeci of some crops sorghum, procu corded were a su 1978 relative, t Overald output oj sector registered crease during the duction of imp as chillies, oni declined in 197 are not available most vegetables to have recorded
Minor Export C
Judging from t ing the Colombi export levels while the proc pepper, nutmeg. mom has record mon, cloves, co appear to have duction. The to minor crops an ing to Customs 772.2 million ( in 1978 as again. if (SİDİR. 36.2 milli
1970s. Jn 1978, however, higher incentive to im
TABLE 4 PADDY, RICE AND WHEAT FL
1976 1977
1. Paddy production (m. bushels).. 60.0 80.4 2. Net acreage harvested (’000 acres) 1337 1645 3. Average yield (Bushels per acre) 44.13 48.92 4. Fertilizer issues ('000 tons) 72.5 813 5. (a) Cultivation loans issued (Rs. m.) 74.3 99.2
(b) Percentage recovered - 55.2 34.6 6. Percentage of the crop purchased
by the PMB - - 2量.4 30.4 7. Rice imports ('000 tons) 419 534. 8. Wheat flour imports ('000 tons) 380 524.
6
 

ing imports and the assed price levels aused a disincentive roduction of many The low level of proain crops such as ind maize have been e increased availased wheat flour and a supply in the open overnment, with a g_producer and côn, operated buffer in subsidiary food ies and Onions) to measure of price though guaranteed tained for some of procurement machiive and in the case such as maize and trement levels rebstantial decline in to previous years. f the subsidiary food only a marginal inyear; though proportant CropS Such ions and potatoes 8. Although data, , the production of and fruits appears a fair increase.
rOps
he quantities reacho Auctions and the recorded duction of coffee, mace and cardaed increases, cinnacoa, and citronella, declined in protial export value of products, accord
data, reached Rs.
SDR, 39.6 million)
st Rs. 375.3 million. on) in 1977. As an proving the export
OUR.
Percentage
1973 change in
1978
90.6 - 12.7 1787 -- 8.6 50.7 36 1133 - 394 45.4 +-355 0 19.7 - 45.0
35.3 -- 16.1 66 - 68.9 603 -- 15.0
in 1978,
production of minor crops, the export duties were reduced and the subsidies for replanting were substantially raised during the year.
OTHER PRIMARY ACTIVETIES Fisheries
Fish production estimated at 154,121 tons in 1978 recorded an increase of nearly 13 percent over the previous year. Increases have taken place in all three sectors of the fishing industry, namely coastal, deep sea, and inland fisheries. The contribution of deep sea, fishing to the total production rose from an insignificant level of about 300 tons in 1977 to nearly 3,000 tons in 1978, the bulk of which has come from the large mechanised craft, particularly the 36-footers being provided under an. ADB-financed scheme. However, the attempt to use licensed foreign vessels for deep sea fishing had not shown much success, as
seen by the fact that less than 300
tions of fish came out of this scheme. Despite the production increases, the local market prices of most varieties of fish recorded substantial increases during 1977-78 and the average level of prices in 1978 was
about 50-60 percent higher when
compared with 1974-75 average prices. Moreover, the fishing industry had to contend with a number of problems such as shortages of fishing gear and engine spares, inadequate boats and engine repair facilities, and the rise in the pricer of imported inputs into the industry.
Livestock
The livestock sector was characterised by stagnant if not declining production in certain areas. Although production of milk and milk products by the National Milk Board increased in 1978, still a general decline had been recorded in
milk production, from about 59.5
million litres in 1975 to around 49. million libres in 1978. This general fall of production can be taken as a rough indicator of the decline in total milk production in the country during the year. This decline has
been attributed to poor producer margins in the context of high animal feed prices. With a view to improving the incentives available to milk producers, the rate of payment for milik was raised by 34 percent and feed prices were stabilised with effect
f Orη Νογember 1978.
ECONOMIC REVIEW, JAN/FEB. 1979

Page 9
Mining and Quarrying
The output of the mining and quarrying sector is estimated to have shown a substantial increase of about 18 percent in 1978. Gem exports at Rs. 531 million showed a decline in value (of about 5 percent) relative to the 1977 level when measured in SDR terms. On the other hand, the output of bricks, tiles, sand, rutile graphite and salt have recorded significant increases during the year. The increased production of bricks, tiles and sand reflected the expanded building and construction activity in the country during the year.
Manufacturing Output
The manufacturing sector which includes export processing, factory and cottage industries is estimated to have registered an output increase of abouil I percent in 1978. The greater part of this increase was due to
expanded factory output. In the ex
port processing sub-sector, while the value-added in rubber and coconut, processing showed an increase, tea, processing activity declined reflecting the drop in tea production in 1978. The higher level of factory output was largely a result of the
higher production of most state in
dustrial corporations. Substantial production increases have been recorded in cement (--62%), steel (rolled products) (--77%), tyres (十52%), ceramics (crockery) (--187) caustic soda (--24%), chlorine (--76%), sugar and leather goods. On the other hand the production of plywood, mammoties and Valaichchenai paper and paper board and flour milling in 1978 has been lower than in 1977.
Indications are that most private sector manufacturing industries (with exceptions such as synthetic textiles) too have worked at higher capacity levels, largely as a result of the freer availability of raw materials, machinery and spares. Industrial exports recorded a marked increase in 1978. The value of exports of marine products, for instance, increased from Rs. 96 million for 1,875 tons in 1977 to Rs. 233 million in 1978 for 2,900 tons; a 143 percent increase in value and in SDIR terms a 31 percent increase. Exports of other manufactures and miscellaneous products increased from Rs. 480 million in 1977 to Rs. 1,293
ECONOMIC REVIEw, JAN/FEB., 1979
TABLE 5 – PRODUC
Cement ('000 tons) Steel (rolied produt Tyres ('000 standar Petroleum (refinery
000 tons) Ceramics (crockery Hardware (mammo Caustic soda (tons) Plywood (3 piy. equ,
mtrs) - -
million in 1978, a
Crease and in SC percent increase. A industry which sł picuous expansion
Was the export-ori industry. The expo in 1978 at Rs. 44 sented an increase
cent when compa in SDHR, units. ( recently installed c. sector garment expe
to show a faster
in the coming years
The overall tex estimated at 116 has recorded an in 8 percent over 197 Was, however, larg the State-owned Im the capacity utiliz to be a problem V half of the capacit during the year. At Mill (the largest te: country) the capa was only 36 percent sector (which, provi for over one lakh w
TABLE 6 ΤΕ
1. Spinning (million k Capacity utilization 2. Weaving (million n. Capacity utilization of which (a) Handlooms pr
mtrs.) - Capacity utiliz (b) Private synthet million mtrs. Capacity utiliz: 3. No. of garment exp 4. Total export value
million)
SLSLSLSYGSLSLSLSLSYSLSLSLSL

TON OF PUBLIC SECTOR INDUSTRY
SELECTED INDUSTRIES
3ctS *000 tons) di tyres)
products tons) .. ities 000)
ivalent *000 SCI.
169 percent inDR terms a 44 mong these One howed a consduring the year tented garments rts of garments 4 million repreof over 60 perred with 1977
Considering the
apacities in this 1rts are expected rate of growth
tile production
million metres crease of nearly 7. This increase ely confined to tills. Even here ation continued with only about y being utilized b the Thul hiriya, xtile mill in the l, city utilization . The handlooms des employment orkers) remained
- 59.5
Percentage change in |#976 1977 1978 1978
4:18.9 355.5 575..1 - 6.8 28.3 24.6 43。é +- 77.2 1814 156.5 256.9 十64.2
1377 1406 1388 1.3 - یتی۔ === 2383 2996 3541 +- 8.2 378.5 361.4 ー 4.5 1571. 156 1877 -- 23.8
3594 3093 --14.0 -س
depressed with a capacity utilization of less than 30 percent. The rise in the cost of yarın and the competition from better quality imported textiles created marketability problems for handloom textiles and this became a serious problem in the textile industry during the year. The production in private synthetic mills declined by about 28 percent and here again the main factor appears to have been the increased competition from imports.
The impact on the handloom sector and the smaller private synthetic mills was that handloom production in 1978 was only 29.9 percent of a rated installed capacity of 81.65 million metres, though production fell from 24.62 million metres in 1977 to an estimated 24.39 million metres in 1978. But in the smaller private synthetic mills, which have a total installed capacity of 24.72 million metres, production fell from 18.96 milliola metres in 1977 to 14.03 million metres in 1978.
XT LES AND GARMENTS INDUSTRY
g.)
(%)
trs.)
(%)
oduction (million ation (%) .. ic mill productio
- ation (%)
OrfèrS of garments (SDR.
Percentíage
change in 1976 1977 1978 1978
6.41. 6.97 7.87 + 12.9 47.3 51.8 456-2 108.15 107.72 115.87 + 7.6
45.6 43.4 46.7 - 7.6
25.63 24.70 24.39 - 1.3 31.3 30.2 29.9 1.0
16.63 19.02 14.03 - 26.2 56.1. 64.2 56.8 - 21.5 40 55 +- 37.5
7.2 13.0 2.2 -- 63.1

Page 10
Production declines also appear to have occurred in several other industries (such as matches, toys and various assembly industries which had to face direct compettion from an increased flow of imports.
A rough indicator of the changes in the level of industrial activity (in particular of factory industry) is provided by the electricity and fuel consumption by industry. Sales of electricity for industrial uses rose by 15 percent during the twelve months of 1978 compared with the corresponding period in 1977. Overall electricity sales registered an increase of 11 percent during the same period. The sales of furnace oil (another important input of the factory industry) rose by nearly 18 percent during the year. -
Both public and private sector industries appear to have recorded substantial growth in 1978, according to the Central Bank's annual survey of industries which covers a major part of the production in the domestic industrial sector. In current value terms this survey indicated that industrial output expanded by about 28 percent during 1978; while capacity utilization which was about 61 percent in 1977 rose to 70 percent during last year; and employment in industry had grown by about 15 percent. The usage of imported raw materials in industry is reported to have risen from 66 percent in 1977 to 79 percent in 1978. There appears to have been some significant changes in the pattern of growth of the various manufacturing
TABLE 7
sectors, as the dicates.
The major gr in terms of curr to this survey w ducts; textiles, and leather; products; paper and chemicals. growth sectors Food and Beve slowing down due to supply milik, jaggery e competition. the sector of F: ducts, Machin, Equipment (e.g kery, motor tools) appear to back primarily competition. Ti of the wood : industries for succession is a
In the textiles
ments sector it in the output facturing units drop in the pro scale units.
As at the Greater Colom mission had ap projects for t and the total f projects added billion. At cap export sales projects have Rs. 4.6 billion potential at 27, number almos production of
VALUE OF ENDUSTRIAL PRODUCTIO
Industrial Sector
Food, Beverages and Tobacco
Paper and Paper Products
Products
鲁
and Coal) s to . Basic Metal Products
port Equipment
fied)
Real Rate of Growth (%
Source :
Total )
Textiles, Wearing Apparel and Leather Products Wood and Wood Products, including Furniture
Chemicals, Petroleum, Coal, Rubber and Plastic
Non-metalic Mineral Products (except Petroleum
Fabricated Metal Products, Machinery & Trans
other indistrial Products (not elsewhere classi
V:
1976
1,715 680 129 2O3
2,336
360 138
474
Central Bank's Annual Survey of Industries,

following table 7 in
owth sectors in 1978, ent values, according Tere basic metal proreadymade garments non-metalic mineral and paper products; One of the major in 1977, namely, 3rages had shown a in growth possibly problems (e.g. meat, te.) and also import Again, industries in abricated Metal Proery and Transport ... cutlery and crocspares, engineering have suffered a setOn account of import he decline in output and wood products the second year in also of significance. and readymade garappears that a rise of the larger manumore than Offset a duction of the small
end of 1978, the bo Economic Comproved 53 industrial he free trade Zone ixed capital of these upto nearly Rs. 1.3 acity operation, the generated by these
been estimated at and the employment 400. Of the approved t half are for the garments and related
༄976--1978
alue of Production
(Rs. Million) 1977
1978
2,294 2,609 698 1,008 127 124 270 376
2,469 3279
411 592 132 219
571. 590
34 55 7,004 8,851 13 10.6
1978
YSLSLSYSYSLSLSLSLSLSLSLYLSSMSS0LSSTLSL
and Scientific
products. By the end of the year 32 of the approved firms had signed agreements with the GCEC and seven firms were in different stages of project implementation. A major portion of the infrastructure of the Zone had also been completed during the year. While it is too early to review the operation of the Export Pro
cessing Zone, it may be noted that
the progress made upto the end of 1978 (within less than one year of existence) compares very favourably with the initial progress of similar zones elsewhere.
A large number of proposals for industrial projects outside the free trade Zone were also granted approval by the government during 1978. The Foreign Investment Advisory Committee of the Ministry of Finance and Planning had approved 22 projects with a total investment outlay of Rs. 123 million (of which nearly 60 percent is foreign capital) and with an employment potential of 2,430. The Ministry of Industries Affairs had also approved 1,070 projects with a total capital outlay of Rs. 607 million and an employment potential of 23,000. Meanwhile the Ministry of Textile Industry had approved 1,287 textile and garments projects in 1978 with a total capital outlay of Rs. 564 million and an employment potential of nearly 19,000. Iniormation is not available on how many cf these project proposals were implemented during 1978. The bulk of the investments approved in the textiles and garments field are expected to materialise during 1979. Construction
The construction sector was characterised by a higher level of activity and the value added in this sector is estimated to have risen by around 9 percent. The larger share of this increase came from the public sector construction in irrigation works, roads and other infrastructure. Cement sales in 1978 recorded a phenomenal increase of 65 percent. Although the supply of building materials showed a expansion, periodical shortages initially of bricks and sand an 7 later of steel, timber and PVC items slowed down construction Work in many major projects. It is important to note that the shortage
ECONOMIC REVIEW, JAN./FEB. 1979

Page 11
TABLE 8 TRANSPORT:
SELECTED INDICATORS
1976 1977
1. Vehicle Population 199,660 208,026 2
of which :
Private Cars 89,795 92.910 Lorries 34,689 35,512 Tractors 20,930 22,450
2. C.T.B. Operations
(a) C.T.B. Bus Fleet - - 6,778 7,636 (b) Operated Kim. (millions) .. 398.6 402.6 (c) Passenger Km. .. de 14,643.0 15,367.3 17 (d) Loss (Rs. million) 2.7 424 3. Port Cargo Corporation :
(Cargo handled 1000 metric tons) Import Cargo - - 1,377 1951 Export Cargo 1,087 1,072
of a single building material could delay an entire construction programme. Scarcities of certain skills such as carpenters and masons was a further constraint on construction activity during the year. Construction activity in most public sector undertakings fell short of the target levels. The most notable shortfall was in the Urban Housing Programme of the Department of National Housing where only 35 percent of the sum allocated was spent during the year. There were, however, instances where these constraints to building did not affect progress of construction activity. The Government Owned Undertaking of Colombo Commercial Company (Engineers) Ltd. for instance, set as its target for 1978 work valued at Rs. 44 million but its ultimate performance for the year amounted to Rs. 60.6 million.
Trade, Transport and Services
The services sector in general - trade, transport, travel, banking and financial services in particular - registered significant gains in 1978. The value added in most of these services showed growth rates in the range 6-8 percent. Wholesale and Retail Trade experienced an upsurge of activity reflecting the increased availability of goods mostly through higher imports and partly also through higher domestic production. Compared with the previous ten years there was a marked increase in the number of new business firms registered during 1978. The increase over 1977 was as much as 85 percent and about 130 percent over that of 1976.
ECONOMIC REVIEw, JAN./FEB, 1979
According to C mates the transpo servatively estimat by 7 percent in 197 in the banking a sector had increas and the output which included h etc., rose by 6 per
TABL
REGISTRATION
Xear
1967 1968 1969 1970. . . 1971 . . 1972 1973 1974. 1975 1976 1977 1978
TABLE 10 FOR
1. Receipts from for
R.S. Million SDR Millior 2. Payments for for
R.S. Million SDR Millior 3. Net earnings fror
Rs. Million SDR Milton 4. Tourist Arrivals ( Passport Issues (l
. Foreign Travel by
(Numbers)
羲

Percentage
1978 Change
1978
31,993 + 11.52
39,523 + 7.12 0.315 + 13.53 27,230 --21:29
7,629 - .09 454.8 + 12.97 - 567.4 -- 14.32 55.7 --31.4
2,062 + 5.69 1,129 - 5.32
entral Bank estirt sector is coned to have grown 8; the value added. nd the financial ed by 15 percent; f other services, otels, restaurants cent.
E 9
OF COMPANIES
No. of Companies Registered 206 215 279 24.0 14. 26. 355 349 284. - - 265 39 592
- CreaSe
There was a conspicuous expansion in the transport sector. The number of new vehicles registered during the year showed an unprecedented increase. New registrations of private caIs amounted to 6,716 (an increase of 389%) and of lorries and vans amounted to 4,876 (an increase of 107%). Reflecting the increased vehicle population, petrol sales increased by 16 percent and autodiesel sales by 18 percent. There has been a 15 percent increase of traffic carried by the CTB in 1978 and the scale of operations of the bus services too had increased by 13 percent to meet the increased demand.
Tourist arrivals in 1978 numbering 192,592 showed an increase of 25 percent over the previous year with the greater part of the inoriginating in Western Europe. The gross earnings from tourism has been estimated at Ris. 750 million, representing an
increase of over 31 percent when
measured in SDR units.
The marked increase in the number of Sri Lankans travelling abroad, following the liberalisation of foreign travel, partially offset
the increased foreign exchange earnings from tourism. (See Table 10)
Money and Banking
The main feature of the monetary developments in 1978 was the substantial decellaration in the rate of monetary expansion. The money supply narrowly defined as currency
and demand deposits (M1) rose
by Rs. 570 million or II percent
'EIGN TRAVEL : SELECTED INDICATORS
Percentage 1976 1977 1978 Change
1978 eign travel . .
198 34 750 +146.7 - - - 20 29 38 +-31.03 Sign travel
24 33 444 - 1245.4 2 3 23 --666.7 in foreign travel (1-2)
- 174. 281 306 +- 8.9 - 18 26 15 -42.3 Numbers) . . 118,971 153,665 192,592. +25,33 Numbers) 21,277 58,234 111,660 --91.74 * Sri Lanka residentS
53,305 66,900 117,075 +75.0

Page 12
RUPEES'000 MLLIONS
17ዜ € .75 76 ገ7 78
MONEY SUPPLY
0.
during 1978 as against a substantially higher increase of Rs. 1,200 million of 29 percent in 1977. Quasi-money (time and savings deposits in commercial banks) at Rs. 4,956 million too registered a lower rate of growth compared with that of 1977 (48% as against 55% in 1977) but the rate of expansion nevertheless remained very high. The broad money supply (M2) consisting of currency, demand, time and savings deposits, rose by 25 percent as against 38 percent in 1977. A sharp increase has taken place in the relative size of quasi-money in the broad money supply - an increase from 38 percent in 1977 to 46 percent in 1978.
This phenomenon reflects the high rate of expansion, in particular, of fixed deposits in the banking system following the interest rate reform of September 1977. The existence of such a large reservoir of secondary liquidity (even though mostly held in fixed deposits) could be a factor with considerable inflationary potential.
The principal factor in the money supply (M1) expansion was the sharp increase in commercial bank lending, in particular to the private sector. Bank credit to the private sector expanded by as much as Rs. 1,890 million or 65 percent during the year. Most of this new credit took the form of advances for commercial and industrial purposes and was largely a reflection of the higher level of
10
industrial and vity in the p) credit to publi panded by 42 chigher expendi hange rate adj pansion in ou second half of Were in operatio to public corpo co-operatives ex cent reflecting loans during til season and a paddy purchase guaranteed price,
The second it the money sup the increase in of the banking s as Rs. 1,523 m valuation of exis ing exchange re rise did not ref export earnings credit facilities : TMF together term capital flo excess of the cur and services) def of payments. It the financial C government mad to the expande In fact, the got exerted a, net fluence on the r by way of de from the banki increased holding
The stringent involving restrail sion to the privé
TABLE 11
Currency Demand deposi Narrow Money Quasi Moneyo Broad Money sı Quasi-money as Externa 1 Banki Commercial ba
།toལ་ཡང་མཁས་ a. Private sect b. Co-operativ c. Public corp d. Governmen
* Time and * Currency,
 

commercial actiivate sector. The Corporations expercent reflecting lures following ex1stments and exput. During the the year ceilings a on bank lending rations. Credit to banded by 36 perhigher cultivation e 1977/78 Maha, higher volume of ; at an increased
nportant factor in ly expansion was he external assets ystem by as much illion (net of reting assets followte changes). This ect an increase in but rather that available from the with other longws have been in "ent account (goods icit of the balance may be noted that perations of the le no contribution di money supply. vernment activities contractionary inmoney supply both Breased borrowing ng system and an 2 of cash balances.
monetary policies nt on credit expante sector and high
short-term interest rates Were continued during 1978 and were reinforced by a ceiling on lending to public corporations.
The Central Bank comments had it not been for the monetary and fiscal restraint that was enforced during 1978, restoration of economic stability in the country, which is essential for economic growth, would not have been realized. There were some complaints of the high cost of credit, but the monetary policy adopted should be viewed as a short-term anti-inflationary measure aimed at restoring monetary stability after two successive years of rapid expansion. It is essential for an expanding economy to pay a positive real rate of interest on savings. In other words, if adequate resources for development are to be generated, savers should be paid a return (which is the rate of interest) which is higher than the expected (or at least, the current) rate of inflation. With inflation running at around 15 percent a return to the cheap money policies of yesteryear will be clearly counter-productive. The very hign demand for credit in 1978 indicated that borrowers have not been baulked by the current level of interest rates.
External Trade and Payments
Following the import liberalisation effected in mid-November 1977, there was a considerable expansion of imports during 1978. According to Customs data, the total value of merchandise imports in 1978 amounted to Rs. 14,484 millions (SİDİR. 743 million) and this represents an increase of nearly 29 percent over the 1977 import level of SDR 577 million. This import level in relation to the GNP amounted to as much as 40 percent in 1978 as against a corresponding figure of about 20 percent for 1977. This inclicates that the import content in both
MONETARY SITUATION (Rs. Millions)
s - Supply (1-1-2)
upply** (3--4)
% of (5) g Assets nk Credit expansio
S brations (net)
Percentage
change in 重976 1977 1978 1978 208 2792 306 -- 8.0 2085 2574 2921 -- 13.5 4量66 5366 5936 -- 10.6 255 3351 4956 -- 479 6321 8717 10892 -- 24.9 34.1 38.4 45.5 + 18.5 109. 4706 5590 + 50.8
2266 2884 4774 - 65.5 663 23. 1674 -- 36.0 1056 1670 23.63 -- 41.5 3267 2989 1863 - 37.7
savings deposits in commercial banks. demand, time and savings deposits.
sig
ECONOMIC REVIEW, JANIFEB. 1979

Page 13
domestic consumption and investment has recorded a fair increase in 1978. Of the total letters of credit for imports opened during the year (amounting to Rs. 19 billion), food imports (rice, flour and sugar) accounted for only 2 percent, as against a weight of about 34 percent in the 1977 import bill. The highest increases were seen in the imports of vehicles, transport equipment, machinery, mechanical apparatus and electrical equipment.
On the other hand, total export earnings according to Customs data, amounted to Rs. 13,206 million (SDR 677 million) recording an increase of about 6 percent in 1978 ove the 1977 level of SDIR 635 million. While the export earnings from tea declined (measured in SDR terms) reflecting the lower average export prices, those from rubber and coconut showed an increase. Industrial export earnings rose, in particular those of garments and ceramics. The slow growth of export earnings in the context of the sharply rising import bill created a balance of trade deficit of sizeable magnitude. According to Customs data, this - deficit was Ris. 1,278 million (SİDİR 66 million) as against the favourable balance of SDHR, 6 il million: recorded in 1977. This deficit was financed partly out of the surplus in the
TABLE 12
EXTERNAL TRADE
services and transf partly out of increa
The high inflow sources (loans an sufficient not only current account d contributed to a s up of external as external assets at t stood at Rs. 747' 370 million) CO Rs. 5,574 million (S at the end of 197 an increase of 25 terms. This level C was equivalent to import bill of 1978.
It is important t foreign assets build outcome of any i the balance of p: of the country. In of trade (reflecting bill and a sluggis registered a sizeabl year. The assets b a sizeable trade ( outcome of an inci foreign resources form of loans and along with the ri of foreign assets, ex ness also recorded increase. The exter outstanding as at t was Rs. 14,811 mi million) as again
AND PAYMENTS
1. Total imports
R.S. Millions SDR Millions 2. Total Exports
Rs. Millions SDR Millions 3. Balance of Trade
R.S. Millions SDR Millions 4. External Assets
at the end of year SDR Millions . 5. External Public Deat at the end of year R.S. Millions SDR Millions 6. Exchange Rates
at the end of year: value of Rs. 100 in (a) US Dollars .. (b) Pound Sterling (c) German Mark (d) Japanese Yeri
1976 1977 19
4645 6007 14.
477 576 4815 6638 13
495 637
170 630.7 - 1. 17.0 60.5 - 6
1402 5574 7,
136.7 2949
4968. 10827 14
4857 29
11.28 6.季4 6.84 3.36 27, 12 1349 33.33 15.45
EconoMIC REVIEw, JAN/FEB. 1979

ers account and |Sed aid loang.
of foreign redi aid) proved to finance the eficit, but also ubstantial buildsets. The total he end of 1978 7 milion (SDR impared with, DR, 295 million)
'7. This reflects
percent in SİDİR f foreign assets about half the
o note that this -up was not the improvement in ayments picture fact, the balance a higher import h export level) le deficit during uild-up, despite leficit, was the reased inflow of largely in the
aid, and hence se in the level kternal indebteddi a substantial nal public debt he end of 1978 illion (SİDİR. 73
st Rs. 10,827
Percentage change in 78 1978
183 +- 141.1 7.43 - 29.0
206 -- 99.0 577 --6.3
278 5.5
477 +- 34.1 69.6 + 25.3
3 -- 36.8 732.1 - 27.8
6.46 -- 0.3 3.16 - 5.2 1.70 - 13.3 12.45 - 9.4
YLSiiSSSYSYYSYSzSTMLLLLSL
RJPEES 000 Milton
琴 COMMERCiA BANKS.. CENRA, BANK 7 GW. FUNDS
TOTAL EXTERNA
ASSEfs
1974 at 75 7s 77 , 78
వకీ
E EXTERNAL ASSETS
RUFEES Q_j it.
复
 ̈ ̆ ፷፰፻፷፰፥ COMMODffy ጵÖÃN5
PROJEC† tČANS STER. ING LOANS خی!
年±
الحبريت منذ نجد . ق .
FOREIGN LOANS
million (SİDER 573 million) at the end of 1977 and this shows an increase of SDR 159 million or 28 percent during the year. It is seen therefore that the recorded rise in external assets (by SDR 75 million) was more than offset by the increase in the external indebtedness of the country. The total project and non-project loans received by the government during the year amounted to Rs. 3,741 million of which 42 percent was in the form of project loans. Of the project loans the three largest were from the Asian Development Bank (Rs. 439 million), Netherlands (Rs. 348 million) and West Germany (Rs. 329 million). Of the non-project loans the largest were from the Trust Fund of the IMF (Rs. 789 million), PL 480 of USA (Rs. 586 million) and Japan (Rs. 462 million).
1

Page 14
PONS IN INDEx
| · 200
- 190
CONSUMER ܐ
GOODS - 180 NVESTMENT - GOODS جمہ =ణాళ 170
27ی
曦。 160
Af 350 . ー
WHOLESALE 140
PRCE
dalerria. 130 -'ನ್ತAE 義
120
110
ళ 100 یقےچےغےخے عسکتے: 1977 ད། 1976 ལོ། 1979
EXCHANGE RATES
A comparison of the exchange rates of the Sri Lanka, Rupee at the end of 1978 with those set on November 16, 1977 following the devaluation, reveals the following developments.
-The Sri Lanka rupee has depreciated by 19 percent, and 17 percent against the Japanese Yen and the German Mark respectively. -Depreciation against the UK pound sterling and the French Mark amounted to 8.4 percent and 12.4 percent respectively. -A slight appreciation of 3 percent was seen against the US dollar. In general, the changes in the Rupee Dollar pality rate during the year were quite minor, compared with the changes lecorded in the parity rates of the Rupee with other currencies. Thus although the Rupee was not officially linked to any major world currency, a high degree of stability in the Rupee value vis-a-vis, the US Dollar has emerged out of the exchange rate developments during the period since November 1977.
Prices and Inflation
Available evidence suggests that the overall rate of inflation in the economy during 1978 was fairly high, probably around 16 percent. The wholesale price index (which includes the prices of consumer, intermediate and investment goods) in 1978 has recorded an increase of 15.8 percent over the 1977 level. Substantial variations are seen in the price increases recorded by
12
different commodit price increases wer ted goods, interme ment goods.
Other notable fe
*The wholesas price goods rose by as muc this is largely a reflecti valuation of Novembel hand, the wholesale domestic origin had ri cent.
* The wholesale pr mediate and investima corded an increase of Over 1977. This increa higher costs of impor since imported goods stantial part of the ir Vestment goods catego
* A11 available indi the average consumer 12 percent higher than Sale price sub-index has registered an incre while the cost of livi City) has gone up by 1.
* Commoditywise c increases reveals that creases were recorded ducts (+47.1%), fuel a textiles and footwear ( chemical products (-- othei halad, the food c: a price increase of on and this was an impo down the rise in the ci
Wages
The Central Bal showed that min government emplo by l.3 percent in again by about 15 The normal wage r:
TABLE 3
1. Cost of Living Indi Colombo Town (1
a. Annual index b. December ind c. Sub-index of
domestic orig c. Sub-index of 2. Wholesale Price I
(a) All items - a (b) Domestic Grc (c) Import Group (d) Consumer Gi (e) Intermediate (f) Investment G (g) Textiles and
Paper produc Non-metallic (i) Metal produc Fuel and ligh (1) Chemical and
Food
SLSLS
 
 
 
 

ygroups. Highest e seen in impordiate and invest
atures were that:
imdex of imported has 49 percent and on of the Rupee-de1977. On the other prices of goods of sen by only 16 per
ice indices of interent goods had reabout 30 percent separtly reflects the ts during the year, account for a subtermediate and inTy. cators Suggset that price level was about in 1977. The wholepf consumer goods ase of 11.7 percent, ng index (Colombo 2.1 percent.
lassification of price Che highest price inby non-metallic proEind light (+41.4%), --41 %), and paper, 28 to 29%). On the tegory has recorded ly about 10 percent rtant factor holding onsumer price level.
nik’s Wage Index
imum wages of yees which rose 1977 rose once percent in 1978. ate of clerical and
technical employees rose by 12 percent, compared to an increase of I percent, in 1977. Similarly, wages of minor employees rose by 16 percent and that of school teachers, by 10 percent, as compared with increases of 2 percent each in the previous year. The major reason for this increase in money wage rate Was the pay rise granted to government employees in December, 1977. Although money wages showed a substantial increase over the previous year, they remained constant throughout 1978. A more substantial wage increase was announced in November, 1978 but this would come into effect only in 1979. Allowing for the rate of inflation in the economy, real wages in this sector appear to have declined, except in the case of minor employees.
Drawing attention to the effects of declining real wages, the Central Bank states that “the available wage indices reflect minimum wages of representative grades and that they do not reflect additional emoluments such as overtime payments, increments, bonuses, and other incentive payments. There is some evidence that, faced with declining real wages, employees in public as well as private sectors have tended to supplement their nominal incomes by needless overtime' work beyond normal hours and by engaging in part-time private vocations, which is reflected by the high degree of absenteeism in normal work places. This is inevitable in situations where inflation is allowed to erode money incomes. Relating wages to productivity and judicious compensation for inflation are more appropriate remedies for this problem than attempts to eradicate such activity by fiat.”
PRICES AND INFLATION
ex 952 = 100)
ex
items of
in o es imported items
dex (1974 = 100) nnual average up-sub-index 3 - sub-index Dods Goods Ocds Footwear
:tS ● 命 products
ts
t - - - - | chemical products
ஒரு
Perceira tage charge in 1976 1977 莺移 1978
2007 2O3.2 227.8 -- 12.1 2015 2O4.6 239.3 + 17.0
1955 2006 228.8 -- 14.1 209.2 1956 243.8 -- 24.6
1 11.9 135.3 1567 + 15. 105.9 115.4 133.9 16.0 95.4 93.0 138.8 -- 49.3 11.8 140.7 1572 + 1.7 1 11.6 117.8 152。4 + 30.5 114.5 30.6 169.2 -- 29.5 120.6 168.6 238.4 -- 41.4 13.2 117.6 152.8 + 29.9 138.0 172.7 254.1 -+- 47.1 96.7 95. 6.9 + 22.9 1334 179.5 253.8 -- 41.4 85.5 62.7 80.5 -- 28.3 10.8 1408 155.5 -- 0.4
ECONOMIC REVIEw, JAN./FEB. 1979

Page 15
Government Finance
In the sphere of government finance, there was on the one hand an unprecedented increase in the government revenue. On the other hand, the expenditure side was characterised by a high level of underexpenditure (a shortfall of realized expenditure from the budgetary levels) particularly in the capital budget.
Some important changes are seen both in the level and the structure of the government revenue. The total revenue provisionally estimated at Rs. 11,567 millions showed an increase of Rs. 4,881 million or 73 percent over the 1977 level. This was the highest revenue increase recorded in any single year in recent history. The government revenue, GNP ratio rose markedly from 23 percent in 1977 to about 30 ercent in 1978. While revenue from all major taxes showed significant increases, the largest increase was from export duties. The higher export duties (principally on tea, rubber and coconut) introduced after the Rupee Devaluation of November 1977 (to siphon off a part of the higher income accruing to exporters) brought in a revenue of Rs. 4,247 million which was almost a 600 percent increase from the export duty revenues collected
TABLE 14
1976
1. Government Revenue 5750
of which
a. Export duties ... 421
b. Import duties .. 476
c. Turnover tax 711
d. Income tax 936 2. Taxes on foreign trade and
p2yments aS of total Govt.
1՞ՇV611 կՇ 34.3 3, Government Expenditure 7848
of which
Current 5.177 Capital ... 2671.
4. Underexpenditure in the
capital budget (%) . . a o 5. Net Food Subsidy . . 938
of which
a. Rice subsidy 680
b. Flour subsidy .. s 53 6. Overall budgetary deficit 3044
of which
Foreign Financing * Provisional
in 1977. In 1978 became the large of government rev for nearly 37 perc revenue for the ye reVeille as a pr total export earning amounted to as r in 1978 compared 9 percent in 1977 higher import bill, revenue (Rs. 1,46 has recorded an in 183 percent over creased turnover ir and industrial sect in the turnover nearly 60 percent collections rose by the year. An imp change seen in revenue is the sh relative share of t trade in the totali r during 1975-77, t foreign trade and I and import dutie contributed about the total governm 1978 this source half of the governm
It is customary preparation to all 25 percent under the capital budget cent in the red
GOVERNMENT FINANCE (Rs. Millions)
1977 197, 6686 1566
620 4247 518 1465 662 O56 1005 1213
34.2 49. 7765 14726
5672 992.1 2093 4805
27 45-51 1043 21.84
833 1063 127 101 2117 5051
1005 (33%) 1070 (50%). 3789
** Estimated figure published by the Ministry of Plan Im
EconoMIC REVIEW, JAN./FEB, 1979

export duties 5 single source snue accounting int of the total ur. Export duty portion of the s of the country uch 32 percent with only about Reflecting the the import duty 5 million) too crease of about 1977. The inthe commercial or led to a rise ax revenue by and income tax 0 percent during rtant structural he government arp rise in the axes on foreign svenue. Whereas he taxation of Jaymerits (export s and FEECS) 35 percent of ent reventie, in yielded almost ent reWeMUte.
7 in budgetary low for about
expenditure in and about 2 perurrent outlays.
Percentage increase in '8ቑ 1978
+ 73.0
+ 585.0 - 182.8 + 5.5 - 20.7
44.4 52.7
75.0 129.5
109.3
27.6 696.0
138.0
75%) -- 25.0
lementation
According to the provisional data compiled by the Ministry of Plan Implementation, the actual underexpenditure in 1978 far exceeded these estimates and had reached “unprecedented levels'. Almost quarter of the capital budget of 1978 had remained unspent by the end of the year. In most previous years the underexpenditure had been below 30 percent of the budgeted expenditure. Even in recurrent expenditure the extent of underependiture (which had been generally small in the past) has been tentatively estimated at around 25 percent. According to official sources the high level of underexpenditure is indicative of "various constraints and administrative impediments ranging from Overoptimism at the budget preparation stage, unrealistic assumptions on the absorptive capacity of the economy, and perhaps most importantly, an inadequate implementation effort'. The heavy underexpenditure was an important factor in the contractionary effect exerted by the government operations on the economy during the year under review.
The food subsidy expenditure in 1978 estimated at Rs. 2,184. million represented an increase of over 100 percent in relation to 1977. The rise in the food subsidy bill despite the withdrawal of the rice subsidy from about half of the population was the result of the higher rupee costs of rice and wheat flour imports following the Rupee devaluation, the higher world price of flour, the higher flour draw-off during the year and the higher local procurement price of paddy. The sharp increase in the flour subsidy from Rs. 127 million in 1977 to Rs. 1,010 million in 1978 was a principal factor in the higher food subsidy bill in this year.
The overall budgetary deficit during 1978 amounted to Rs. 5,051 million which represents an increase of 138 percent over the Rs. 2,117 million deficit in 1977. Foreign financing was the principal instrument in bridging the gap and amounted to 75 percent of the total deficit in 1978, as against 50 percent in 1977 and 33 percent in 1976.
13

Page 16
FOREIGN NEWS REVIEW
Production Increases in Asian Region
The developing countries in Asia. recorded moderate overall economic progress and an increase in their per capita incomes although several of them faced setbacks in their balance of trade. An overall economic growth rate of 5 percent and a 3 percent increase in per capita, income during 1978 were recorded in the developing countries who are members of the Asian Development Bank, the latest annual report of the A.D.B. has revealed.
The ADB's report for 1978 indicates that most of the twenty or more Asian and Pacific developing countries and regions, having business links with the Bank, have more or less increased their production in industry and agriculture and made substantial economic progreSS.
The overall national economic growth rate of these countries and regions in 1978 reached an average of 5 percent as against 4.7 per cent in the previous year, with Thailand achieving 8.7 percent; Bangladesh. 8.0 percent; Indonesia, 7.5; Malaysia, 7.4; Burma, 6.7; the Philippines 5.8; Sri Lanka 5.7; and Pakistan also a relatively high growth rate. However, 1978 saw a decrease in india's growth rate from a level of 7.2 percent in the previous year to 3.5 percent. Fiji's growth rate also dropped to 3 percent from that of 4.3 percent in the previous year. (Sri Lanka's growth rate, according to latest official estimates, is estimated at 8.2 percent as against the 5.7 percent growth rate given to Sri Lanka. by the A.D.B.)
Food production in these countries and regions reached 255 million tons in 1978, an increase of Il million tons as compared with that of 1977, of which rice took up 194 million tons. During the year, the import of foodstuffs reached 10.3 million tons, equalling that of 1977 and 4.3 million tons less than 1976. Grain production
4
in Bangladesh i as 10 percent but crease in Malaysi
The Bank saj that “developmen bearing fruit and performance in t coming relatively to the vagaries o
It is significant net foodgrain iu countries remain level of l.0.3 mi] well below the p) ports of 14.6 m
The most unfa ment in 1978 was in the balance of ing countries tha: Bank, the ADB s
After shrinking cutive years, the aggregate trade Countries doubled $ 11.3 billion in billion the previou
Trade deficits pluses narrowed developing memb year, the report
ASIAN TRAD
Estimates of trade b developing me (in millions
Bangladesh Hong Kong India
Indonesia Malaysia Pakistan. Philippines Singapore - - South Korea. . . Sri Lanka Taiwan Thailand
exception was Ta. than doubled its $ 1.68 billion fr in 1977.

ncreased as high b there was a dea, and Vietnam.
id this indicates it efforts . . . are that agricultural she region is ber less vulnerable f weather.’’
that last year's mports by these ed at the 1977 lion metric tons, revious years imillion tons.
vourable developa 'major reversal' trade for developat belong to the aid.
for two consereport said the deficit of these to an estimated 1978 from $ 5.5 is year.
Widened and surfor almost all the er-countries last
said. The main
3. BAELANCES
allaces for Selected anbar-contries of dolars)
1977 978
- 7.5 - 749 - 829 - 1952 ー、417 ー1.050 1,259 26
1,534 1,191 ー1。276 ー1。833
- 1.119 - 1,782 - 2,065 - 2,900 - 764 -2.261 58 - 933
826 1,683 - 1,126 - 1,286
iwan, which more trade surplus to om $ 826 million
Imports of developing membercountries grew 23.3 percent last year as against 18.8 percent in 1977. Export growth declined to 16.7 percent from 19 percent.
The Bank had no figures on 1978 orrowings, but said they must have been 'substantial to meet this trade deficit. Without naming any countries, it said the debt-service burdens of a few 'seem to have been pressing against prudent limits’.
The Bank said imports jumped partly because some countries had eased trade and tariff barriers, mainly Taiwan, India, and South. Korea. India's trade deficit ballooned to $ 1.05 billion from $ 417 million, and South Korea's tripled to $ 2.26 billion from $ 764 million.
The report said continuing high economic growth rates in most member-countries also tended to increase their need for imports.
Control of inflation also was described by the bank as “satisfactory' for most countries in the region. Consumer prices rose an average 8.2 percent last year among all reporting countries except India, where they rose only 2.5 percent.
The report said these figures compared well with an average 8.2 percent rise in prices for countries in the Organization for Economie Co-operation and Development.
The report included these other trends:
-Overall dependence on imported energy was 'significantly higher' last year among developing member countries than in 1977, as their growing economies demanded more oil.
-There was a sharp jump in the rate at which financial resources flowed into developing membercountries last year. The Bank had no figures to back up this
conclusion, but said it must have
happened because international reserves reported by a nearly complete list of these countries rose to $ 30.8 billion from $ 25.9 billion despite the growing trade deficit.
ECONOMIC REVIEW, JAN/FEB, 1979

Page 17
EDUCATION
Myths and Realities of Edi
in Sri Lanka
* Education reforms will pave the way to a long-term. So, of the causes of most of our troubles'.
–Anesa. Ved, in an astrological forecast for 1979 titled “1979-a year of political change", published in a local weekly.
You cannot blame the astrologer when he draws such conclusions but when educationists, social planners and other 'experts' make such generalizations they are more than clouding the issues. One of the basic premises on which educationists and many experts have based their conclusions in recent years has been on observations such as the following by Louis Emmerij, a prominent member of the ILO's World Emiployment Programme in 1971, that 'education is definitely responsible for one of the problems of structural
imbalance (in the economy): that of
matching employment opportunities and expectations. This is one of the lessons to be drawn from Colombia, and Ceylon. . . ., in particular the latter’’. Emmerij has suggested here that the key to educated unemployment is to be found in what the educational system does to the career aspirations of students, and he hints that this Source Of Structural imbalance could be removed by appropriate educational reform; a myth so firmly held and profoundly stated by many educational experts'.
Few have realised that social and educational realities are overlaid with myths in Sri Lanka and that these obscure many of the country's actual problems and only confuse priorities. One of these myths exploded in the course of a recent presidential address at the annual sessions of the SLAAS was exactly this area, of the relationship between education and employment in Sri Lanka. Put across convincingly, in her address as President of the Section on Social Sciences, Swarna, Jayaweera emphasised that the education system has been mistakenly held responsible for the rapid increase of unemployment and for its attendant social and economic ills.
ECONOMIC REVIEw, JAN./FEB. 1979
Over the last ten ye at foreign centres ha educational system example of a struct functional’in the cor ment needs. Local echoed this view and practically condition assumptions that the Our present situation as the I LO report the content of educe lated to the occupa the economy, that t cation imparted and culcated are at var. opportunities; and t has overeducated it and created a 'm Ween expectations all opportunities.
The facts, howev, attitudes to employm by the employment st than the school Curri fessor Jayaweera, leat cally to the conclu would be as naive to cation is the Cause ment as to claim tha rollments in educatio economic developme ment runs as follo Ws
'In its historical evol teenth century the educ used to create a dualistic the elitist products of English schools, and the to third class “ Vernacula ed two different difest separate educational, c. Worlds. The structure O system and its content v the needs of the colonial the limited demands oft tor on local skills, the n. agriculture, the absence O and the expansion of t services and the professi premium on a literary ( to English examinations elite which established it preneurial activities in business turned to the lo tem, and to Oxbridge to for the professions and fi

Ication
bstion
ars discussions e dissected the as a “classic' [re that is “dystext ofdevelopobservers have we have been ed to accepting root cause of is the fact that, stated in 1971, tion is not re5ional needs of he kind of eduaspirations intance with job hat Sri Lanka s labour force is match betnd employment
er, prove that Lent are created tructures rather Culum and Prois us quite logiision that “it say that edu
of unemployt increased enin ensure rapid nt. Her argus
Lition in the nineation system was : society in which western-oriented masses relegated r’ Schools followfles and lived in Lltural and social f this educational as determined by 2conomy in which he plantation Sec2glect of domestic findustrialization ne administrative ons placed a high urriculum geared Even the local elfthrough entreagriculture and cal education Sysequip their sons hr politics. In the
twentieth century the gradual Ceylonization of the higher levels of the administrative hierarchy enabled more Sri Lankans to join the elite through the education System, and achievement in education became firmly linked with employment in the service sector. Excluded from this new World by language and education the majority continued in “vernacular” schools which reflected the poverty of peasant agriculture, rural crafts and urban slums. The development of the educational system since the thirties was similarly determined by environmental demands...... -
The colonial economy continued without structural changes with its heavy dependence on external market forces. Agricultural settlement policies were conceived largely as welfare measures and failed to inject any dynamism into the rural sector. The incentive structure was not affected by industrialization. Salary and wage differentials reinforced the demand for professional and clerical skills. Till the sixties educational development was thus determined by social and cultural imperatives rather than economic pressures. Given the psychological and social climate of those
years expansion was inevitable. Repli
cation of the system took place largely in the absence of radical economic changes. Imbalance between education and employent opportunities therefore reflected the dichotomy between social and economic development in national policy which education was powerless to bridge.
The so-called malfunctioning of the education system during these decades must be viewed also in the context of rapid population growth and economic stagnation. Falling prices for exports, adverse terms of trade, foreign exchange constraints and inflation in industrialized countries all acted to slow the rate of economic growth in a country in which the average annual population growth rate Was between 2.8 percent and 2.7 per cent for nearly twenty years. The education system in fact contained the increasing population in the fifties which then erupted into a shrinking labour market in the sixties. In a situation in which the economy had not developed sufficiently to absorb this labour force, large-scale unemployment was inevitable whether education expanded or not. Education merely converted some of the unemployment into the “educated unemployed.
Market demandas distinct from development needs created conditions in which at least 70 percent of the 15-25 years age group failed to obtain employment during the last ten years. It is contended that negative attitudes and unrealistic aspirations inculcated in schools preclude large numbers of unemployed and particularly O.L. unemployed from using availtable employment opportunities. The majority (60%) of the unemployed and for that matter the employed are school “drop-outs' and have had only a primary or incomplete secondary education. Recent local surveys indicate that the aspirations of the majority of the unemployed are not unduly high or unrealistic.
Many O.L.. qualified were prepared to accept any employment. Several Survey findings in recent years have shown that
15

Page 18
both men and women are concerned more with income and security than with status concepts.
It is true that more of the O.L. and A.L. qualified seek professional sub-professional and white collar employment. In a country in which education leads to high-level employment, government is the major employer, income generation continues to be minimal in agriculture and industries, and self-employment entails risk and poor returns without the basic infrastructural facilities, then job preferences of secondary school leavers would seem to be determined in fact by a realistic appraisal of incentives. Parents in particular have a clear perception of what they aspire for their children. The middle class look as far the international labour market and the poor naturally want their children to escape from their deprived circumstances. Attit: des to em i ğ ment are created by the em o ment structure rather than by the sch ol eurric: lum, and it would be as naive to say that ducation is the cat.se of unemployment a ti claim that in reased enrolments in edupation ensure rapid economic development
Vocational Fiacy
She emphasised that, those who speak of solving economic problems through the school curriculum have overlooked the fact that the history of education in this country records an endless series of unsuccessful attempts to adapt the content of education to meet occupational needs. The unsuccessful effort in the seventies to diversify the arts curriculum in the universities to meet development needs is one more example of the futility of restructuring education on the basis of theoretical man-power forecasts. The apparent oversupply of gradU.ates in areas Such as estate management and development studies as a result of the introduction of these job-oriented courses exacerbates an employment situation in which these graduates are even ineligible for teaching posts.
A review of past trends throws up two definite facts. Firstly, that education can produce skills but that the demand for skills is created by the incentive structure; and that the use of skills is determined by the economy. Aspirations cannot be changed and employment opportunities cannot be increased by education alone. Swarna, Jaya weera, quoting the experience of other developing countries in similar circumstance3, Cf what one ed Icationist terms the vocational fallacy in educational development, shows
that Ghana, is an Cutstanding ex
16
ample of an Afri vocationalising
produced poor re is one outstandi Asian country. heavily in techn. has been overta ment of skilled b
The other fact tation of educati mert in, s ) cieties standards among of the population inequalities. Ed. tustains in South of apartheid, is ciple of adapt: argues when col urged the adapt: to the needs of thi munity and whe tutions in indu. speak of educati lopment or of cula’’ what was . actual fact is a cation for a, client victims of discrin nomic policies. think that a spec check rural exod ment is tied up v the prices of prim world market, a of rural society ca by multi-pronged education has a secondary role.
Her conclusior in Sri Lanka, has in come distribut. social developm adequate provisi condary and Un as well as en education deper availability of absorptive capac education canno without the supp and institutions. education are th tions in the de and their ultima: in national Socio and in a restr national economi
High Participati
Among the O Prof. Jaya weer attempted to bl held belief that

can country where school education Sults; while Burma, ng example of an Burma has invested cal education but Ken by unemploy}chnical personnel.
is that the adapon to the environwith unequal living different sections tends to reinforce Ecation in the BanAfrica, the product based on this prination. Jaya weera Dnial policy-makers tion of education 2 agricultural comin planners in instistrialized coutries On for rural deveappropriate Curriund is envisaged in se cond class eduele who are already ninatory socio-eco
It is fanciful to ial curriculum can us. Rural developwith such issues as alry products in the ld the regeneration. Lin, only be a chieved policies in which an important but
is that education helped to promote ion and accelerated ent. But since the on of primary, seiversity education, hployment-oriented nds largely on the resources and the ity of the economy, t, transform society Ort of other policies The problems in e result of dissovelopment process, te solution must die D-economic policies ucturing of internic relations.
on Rate Questioned
ther myths which a, in her address, ast was the widely Sri Lanka has a very
high rate of participation in education-one of the highest in the economically developing world, and particularly in Asia. In her opinion we in Sri Lanka, have subscribed to this view for almost two decades and have bicome smug, self-satisfied and complacent and even superior in our attit Jde to the problems of literacy and enrolment in schools . . . There was relative justification for such satisfaction till the early 60s, but the euphoria generated has
blinded us to the fact that education
participation has tended to decline during the last ten years.
In quantitative terms the proportion of the 5 to 14 years age group in schools increased (over seven years) from 57.6% in 1946 to 71.6% in 1953 and (over the nextten years) to 75.1% by 1963; with the proportion of the 15 to 19 years age group increasing from 11% to 36% inten years. Even the University of Ceylon was compelled to change its elitist admission policies so that its stt.dent population increased from 2,030 in 1950 to 4,723 in 1960 and then to 14,422 in 1966. Inevitably the literacy rate also increased from 57.8% in 1946 to 71.6% in 1963.
The fifties and sixties witnessed a similar expansion of educational opportunities in many other excolonies, and UNESCO was sufficiently emboldened in 1960 to set a target of seven years of Universal elementary education by 1980 for the ESCAP region. In 1965 this Plan was revised and Sri Lanka, was one among only six countries expected to achieve universal enrolment before 1980. Sri Lanka, with a primary school enrolment ratio of 85.8 percent in 1965 was among the first group of countries expected to have universal primary education
before 1980. Regrettably, how
ever, Sri Lanka, is the only country in this group whose participation rate actually declined in the next decade to 75.1% in 1975. Of the other countries, the Republic of Korea, has a chieved universal primary enrolment, the Philippines and Singapore were very near it aid Malaysia, and Thailand not far behind by 1975. One country in the next or intermediate group, Mongolia, has almost as high a participation rate as Sri Lanka, and Burma, Indonesia, Iran and India. are catching up. Contrary to the
ECONOMIC REVIEW, JAN.IFEB. 1979

Page 19
image of Sri Lanka, as one of the most educationally developed countries in the region it is apparent that eductional opportunities have decreased even at the basic primary school level'.
At the University student numbers declined from 14,287 in 1967, fluctuated around 12,000 till 1975 and again reached the level of the midsixties in 1977. Meanwhile, the proportion of the 20 to 24 year age group in the universities and other tertiary education institutions was reduced from the already low figure of 1.6% in the sixties to 1% in 1975-one of the lowest in Asia.
Professor Jaya wəera, points out that, in Sri Lanka just as much as the increase in the literacy rate was the result of rapid educational expansion, declining enrolment has affected the literacy levels of the younger age groups. The overall literacy rate of 78.1 percent at the 1971 Census has blinded us to several disturbing features and trends.
(i) The literacy rate for males has not changed since 1963 (85.2%). The increase in the national rate is solely due to the rising level of female literacy in the rural sector. (The male literacy rate has remained at 85 percent for fifteen years though in m ost countries there has been a steady increase)"
(ii) Urban literacy has declined for
both mates and females.
The literacy rates of the 10 to 14 age group-urban and rural male and female-have registered a decline in the inter-Census period.
(iii)
(ν)
Urban and male literacy rates have declined in the 15 to 19 age group.
It is likely too that the declining participation rates in schools in the seventies will have a corresponding effect on the present literacy rates of the younger age groups.
What she regards as other myths and falla cies are :
"A myth which seems to have penetrated even official documentsnamely, that over half of the University student population consists of women students.’’
'The illusion that there is statutory provision in Sri Lanka for compulsory education till the age of
毫 *
“That education is synonymous with formal schooling and university education (this has resulted it high expectations from schools ani the University)
ECONOMIC REVIEW, JAN./FEB, 1979
commod.
SPIC
Exports-no improvi
Export earnings 1978 reached Rs. presenting an inc cent over 1977 fig contributory facto) world market pric F.O.B. prices of creased, with the crease ranging fr in the case of pep percent for clov cinnamon.
On the contra different spices Colombo Broke Weekly auctions very encouraging. of spices offered 1978 was 11 per of the 1977 volu cardamoms and indicated an iner during the year recorded a decli cloves, mace and p
Table II shows th for auction and v in 1977 and 1978.
Of the quantit 1978, substantial i corded by carda mace and pepper. increases were off in exports of cle cent and cinnamoi to register an ove crease of 0.10
When compared wi
Volume of
Volume
Commodity 197, Cardamoms 50.27 Cloves 12.89 Nutmeg 4.54 Mace 0.03 Pepper , 126.99 Cin. Quins 37.22 Cin. Chups - Total 231.95
Source: Produc,
 

TIES
'ES
’ement
from spices in 273 million, rerease of 75 per ures, a, principal being increased es. The average all spices in: percentage inom 39 percent per to over a 100 res, nutmeg and
y, quantities of offered at the S Association have not been The total volume for auction in cent below that Lime. Except for cinnamon which ease in Volume all other spices ine, particularly epper.
Le voltame offered olumes exported
ies exported in El:CreaSeS WeÍe I'e- moms, nutmeg,
However, these set by a decline oves by 76 perh by 24 percent call marginal depercent in 1978, եh 1977.
An interesting feature of comparison in the above table is between the quantities entering the auctions and that exported, where it is seen that the former is only a fraction of the latter, clearly indicating the increasing tendency amongst sellers to bypass the Public Sales Room.
linspite of a poor overall export volume favourable world market prices helped to boost Sri Lanka's spice export earnings considerably. Although the Public Auctions recorded increased prices only for cardamoms, cloves and cinnamon there was an increase in average F.O.B. prices recorded for all spices. The most significant increases were recorded by cloves, nutmeg and cinnamon where levels of over 100 percent were achieved in comparison to 1977 price levels.
Details of these prices are shown in Table II.
With total export earnings for 1978 reaching Rs. 273.84 million there was a 75 percent increase in value when compared with 1977. This increase is largely reflected in the earnings from cinnamon which went up over 100 percent in 1978 and contributed to over 50 percent of the total spice export earnings. Increases in earnings were also recorded by all other spices, except cloves where earnings declined by about 50 percent. It is of interest to note that while in 1977 cloves was the second major contributor towards spice export earnings, in 1978 it had
TABLE Spices Auctioned and Exported in 1977 and 1978
(Metric Tons)
2 Auction 4. Over Volume Exports 9%. Over
7 1978 1977 1977 1978 1977
”70.49,+40.20 71.48 115.36 108.00 0.61 2.34 -82.00 978.21 229.88 - 76.00 0.01 - 4.42 - 2.60 144.88 370.56 155.80 0.01 0.01 -65.50 8.43 24.48 190.40 000 ) 73.68 -42.00 632.22 1205.48 90.70- 0.06 54.79 47.20 5206.24 5182.12 - 24.00 0.01 - - 533. 12 404.88 - 0.50 -
5 205.72 -11.00 7574.59 7566.12 - 0.10 -
e Brokers Reports and Sri Lankan Customs.
17

Page 20
TABLE II
Average Prices-Colombo Auctions and F.O.B. 1977
Auction Price %. Over F.O.B. 1 1977 1978 1977 1977 Cardamms 199.27 228.22 14.50 137.63 Cloves 88.04 19.30 35.50 59.22 Nutmeg 39.29 27.85 -2900 1 .27 Mace 36.21 24.88 - 3 1.00 23.60 Pepper 28.3 1 25.77 — 9.0f: 21.00 Cinnan, on 14.9到 15.58 4.20 1384
Source: Produce Brokers Reports and Sri Lanka Customs
TABLE III Value of Exports - 1977 and 1978 (RS. millions a
Commodity Val. 1977 Val. 1978 % over % of SD. Rs. Mill. Rs. Mill. 1977 ίοία! να 197" Cardamom 9.84 32.28 3.10.2 14.8 O.9 Cloves 57.93 28.27 ー 51.0 10.3 5.7 Nutmeg 1.63 8.56 424.3 3. 0.1 Mace 0.20 0.85 328.1 0.3 0.0 Pepper 13.28 35.4 164.6 12.8 1.3 C. Quills 71.74 158.14 10.4 57.8 7.1 C. Chips 1.83 2.53 38.4 0.9 0.1
Total 156.54 273.84 74.90 100.0 15.6
Source: Sri Lanka Customs
fallen to fourth place Cardamoms and pepper contribted 15 per cent and 13 percent, respectively towards total earnings.
The situation should not be regarded as too optimistic particularly when performances are compared in terms of SDRs, as a decline of ll percent has been recorded in 1978; the corresponding values being SDHR, 13.99 million in 1978 ais against SDR 15.65 million in 1977. Amongst individual spices earnings from cloves in SDR terms declined by 75 percent while all other spices recorded substantial increases. (See Table III)
The market for cardamoms opened at Rs. 200.00 per kilo in January and moved up steadily in February and March. However in April and May the market was dull and inactive. Increased foreign inquirie strengthened the market in June with a slight decline in August/September and thereafter better demand and greater foreign inquiries resulted in a sharp increase in a total quantity of 10,000 kilos for sale in December alone. December also recorded the highest prices for cardamoms at Rs. 297.90 per kilo. In comparison to cardamoms the market for all other spices remained quiet.
18
Once again Sri been able to expl world market foi Whilst 1977 recor ports of 13 perce 1978 there has decline of 0. Il pe figures, indicatin, production.
COCO
Recovery in 1978
Coconut produc appear to have má 1978. This is t emerges when the duction and valu the two years are when considered i of normal produ recovery of 1978 i. as the 1977/78 col reveal. Coconut, p. had been the low nearly two decades in a crisis for the nut and Copra ind a threat of Ince future of the entire Fortunately, this did not continue the signs of imp not be regarded a The estimated pro million nuts in to the 1977 figure Inuts may seem a si

and 1978 (Rs./Kgm.)
but it remains far below the production figures of the pre-1976
10 锣 period. Production over the % مPr 2737 97.20 ye'*'s from 1970 has been estimated 1325, 1676 as follows:
23.11 105.00 醬 體 懿 Total Production Exports 30.52 11640 Year (Million nuts) (Million nuts)
1970 2.445 905 1971 2,668 醬
●球运é 1972 . . 2,828 1,23 id SDR milions) 3% : 影
Ꭷ 1974. 2,030 49 * 瓷 * 影 2,585 914 7’ 197ရွိ’ 1977 1276 2,330 794 1977 1,825 233 8 2.06 110 1978 2,208 507 翼 (一) ° 2,225 (provi- 596
0.4 sional 2 0.04 g estimate) 3. 1.79 5 7 8.08 13 Sortice: Coconut Marketing Board and 8 0.13 - 28 Census and Statistics Department
5 13.99 - 1 1.
Lanka, has not bit the favourable spices in 1978. ded increased exnt over 1976, in been a marginal 2rcent, Over 1977 g stagnation in
NUT
tion and exports lde a recovery in he picture that volume of proe of exports for compared. But, n the perspective ction years the 3 not as dramatic mparative figures oduction, in 1977 est recorded for and had resulted Dessicaf ed Coco - ustries and posed rtainity for the coconut industry. production slump in 1978, though ovement should s too optimistic. duction of 2,208 1978 compared of 83 million. tisfactory figure,
Together with the lowest ever production of 1,831 million nuts in 1977, a far greater percentage of coconut is said to have been utilised for both industrial production and consumption when compared with the pre-1977 period. Observations have been made that coconuts produced before 1977 had been larger in size and had a higher utility value, particularly for D.C. Copra, and Coconut Oil. Thus, earlier if the output obtained was approximately 135 kgm. for 1,000
nuts, in 1977 output had dropped
to approximately 120 kgm. for l,000 nuts. As a result, more nuts have had to be used in the manu - facture of both D.C. and Copra, production. (Also the housewife, knowingly or unknowingly, is reported to have used more kernel for curries, sambols etc.) Due to the poor quality of nuts a comarpison With previous years of ‘n Uit equivalents' in the production of D.C. Copra, etc. or the computation of economic returns on this basis may tend to give a distorted picture.
Since coconut is an important
| food item in the daily diet of the
people of this country the shortfall in production has resulted in consumer price levels going up to nearly Rs. 11 - per nut in urban areas as against 32 cts. per nut in 1975 and 45 cts in 1976. The situation in 1977 was characterised by a drop in the quantities available as well as quality which also resulted
ECONOMIC REVIEW, JAN./FEB. 1979

Page 21
in the actual value of nuts being reduced in rupee terms. In 1978, however, there was a favourable change in this trend. Though the qualitative and quantitative performance in 1978 did not improve to the pre-1977 level there was a definite improvement over that of the 1977 situation, resulting in a slight drop in prices, but as would normally have been expected with increased supplies, there was no impressionable drop in local prices. This was due to the regulatory valve' of control manipulated in favour of exports With the increase of exports of DC, Coconut Oil and Copra, more nuts were utilised for industrial purposes, and the price level was thus determind by the export prices. The extent to which prices could have fallen from the high prices that prevailed
in 1977 was theref nuts were also ma export. In previous sumption of the co was around 50 p. balance 50 percent ports. In 1977 and sumption in the fo absorbed nearly 7. total crop.
The export situ appeared somewha in 1977, though nut reached its lowest export performanc factory despite a available for expc a slightly higher terms in 1977 as that of the 1976 ret But, in 1978 the export earnings
EXPORTS OF COCONUT PRODUCTS-JANUARY-DECEN
Volume (metric tons) Value (
% 1977 1978 Variations 1977
1. Coconut Oil 2,133 28,267 1225.2 11,399 31 2. D.C. 31,597 40,664 28.7 323,350 62 3. Copra 276 924 234.7 2,188 4. Fresh Nuts - -
5. Sub-Total 233.2 507,20 117.4 336,937 95
Kernal (Million Nut products equivalents)
6. MattreSS Fibre 51,997 54.253 4.3 52,576 9 7. Bristle Fibre 12.379 9,350 -24.5 45,914 6 8. Twisted Fibre 28 135 24,296 -13.6 47,249 6 9. Coir Yarn/Twine 2,081 2,077 - .2 6,803 1.
10. Sub-Total (Fibre
Products) 94,592 89,976 - 4.8 1525.42 24
11. Coconut She
Charcoal 28,212 31,058 10.0 21,189 5
2. Coconut Shell
Flour 738 696 - 5.7 525 13. Coconut Shells 1,838 1,010 -45.0 596 14. Coconut Shell
Activated Carbon 401 696 73.6 2,174
15. Sub-Total (Shell
Products) . 598,516 668,533 11.7 24,484 6.
(In '000 Shell eqi.)
16. Coconut Ekels 2,513 5,921 135.6 2,268 17. Other
By Products - — - 1,376
18. Sub Total (Non
Kernal Products) - - 180,670 32.
19. Total value of
All products യ - - 517,607
1.27
EconoM1C REVIEw, JAN./FEB. 1979

ore limited. Less de available for years local conconuts produced 3rcent, with the t going into ex
1978 lo cal con - rm of food nuts 5 percent of the
lation, however t brighter. Even production had evels the general e seemed satissmaller quantity rts. There was value in rupee compared with
urns on exports. rupee value of reached un -
ÆBFR 1977/78
Rs... 000)
% 978 Variations
7,225 2682.9 6,263 93.7 9,811 448.4
3.299 1829
8.724, 37.8 4,774 4.0 8.288 445 3,584 99.7
5,370 60.9
2,211 146.4
973 85.3 636 6.7
3,186 276.5
2006 153.2
8,893 292.1
,672. 384.8
!,941 78.7
146.5 240
precedented levels and was up by 146 percent when compared to the earnings in 1977. On kernel products alone earnings were up by 183 percent with coconut oil exports going up as much as 2,683 percent. Export of kernel products had been restricted to a large extent in 1977 due to a short supply of nuts but was liberalised in 1978 within certain limits.
When comparing the performance in foreign trade, however, the variations in values of currencies and exchange rates have also to by considered. With the indirect devaluation in late 1977 export earnings were naturally expected to go up by 100 percent. But even making allowance for this 100 percent, the increase in export earnings was at least 46 percent when compared with that of the previous year. In SDR terms also the increase in the value of coconut exports was about 40 percent when compared with the previous year.
In terms of nut equivalents the quantity exported in 1978 had more than doubled. This export performance had been regarded as very encouraging when compared with the performance of 1977. In the export of by-products, particularly that of fibre, there was a drop in the quantity exported, though values showed an increase over that of 1977. The quantities of both bristle fibre and twisted fibre exported in 1978 were much lower than those of the previous year. Coconut shell charcoal exports recorded an increase in terms of both quantity and value; but the quantities of coconut, shell flour and coconut shells exported in 1978 were less than those of the previous year. The quantities of activated carbon exported continued to register an increasing trend, while prices were very much better for this item than in previous years. Another significant by-product exported was that of coconut, ekels. On the whole, however, the year 1978 was generally successful for the export trade in coconut products and forecasts for 1979 are even more optimistic. A comparative picture of the export situation in 1977 and 1978 emerges in the table at left.
19

Page 22
FEA TURES
Proportional Representat - An introduction
G. R. Tressie Leitan
The Party List System of Proportional Repreesntation has been accepted by law for elections to the National State Assembly and the Local Government Authorities. With the Local Government elections in May this new system will come into effect for the first time in Sri Lanka. In this paper Dr. Tressie
eitan, a lecture in political science and public Administration of the University’s Colombo Campus, discusses the broad features of this system and in a subsequent paper will discuss the implications cf the Sri Lanka system.
There is general agreement today that the expression of the wishes of the people through the ballot box, is a necessary and preliminary step to genuine democratic government. Yet the method and machinery by which elections are conducted vary from country to country; and the arguments of some writers are that the confusions and abuses which are apparent in the political scene today are to be attributed to outmoded electoral system.
The method of election adopted in Britain and the U.S.A. as well as in a number of Commonwealth countries (and which has prevailed in Sri Lanka, upto the present) is the relative majority on the 'first past the post system. Most Western European countries on the other hand adhere to some form of Proportional Representation.
The Relative Majority S sten
According to the relative majority system, the candidate who secures the highest total of votes in each constituency (which returns only one member) is declared elected even though he fails to obtain an absolute majority (more than half the votes cast). Thus in a particular constituency, the winning candidate although he has polled the highest number of votes, may
20
in point of fac only a minority constituency i.e. : candidates contes combined votes
candidates may w votes obtained by
This often leac where a party win of seats in the in when it has poll the votes cast ir a whole. The sys cised therefore that it frequently ing power in t cabinet form of a party which h support of a me Tinis means in effe of seats won by not reflect corre support judged ( basis.
In Britain, for 1922 and 1966 ments (1931 and obtained more th number of votes elction, and in f: and 1974 (Febru ment party polle the largest single in the opposition.
It also follows : governing party passage of legis fundamentally op parties. In this nationalization p. British Labour be quoted as a c Labour Party wh a majority of I British House of
1. The multi-memb to as many votes 2. Under the major the two candidate thereby obtains :

of votes in that f more than two the elections the of the rejected ell Outnumber the
the Victor.
is to a situation s a clear majority ational legislature 2d less than half l, the country as tem can be crition the grounds gives the governhe parliamentary government to as not won the jority of voters. at that the number
each party does ctly its electoral on a nation-wide
instance, between only two govern
1935 Coalitions) an half the total cast in a general ct in 1929, 1951 ary) the governdi less votes than party which was
therefore that the can secure the lation which is posed by the other connection, the rogramme of the Government can ase in point. The ich had Obtained 46 seats in the Commons at the
election of 1945 was also (despite opposition from the other parties) able to carry out its nationalization programme. Yet the Labour Party had gained only 47.8 of the votes CaSt.
Advocates of this system however argue that it is neither necessary nor desirable to have mathematical exactitude in the representation of groups within the electorate. It is sufficiert, they aver, if the composition of the legislature reflects broadly, the main trends of political opinion.
However, the system often results in startling discrepancies between the votes obtained by each party and its strength in the legislature. Table II, on the following pages relating to the British elections of 1970 and 1974, gives an idea of this discrepancy.
It can be seen, for instance, that in February 1974, the Labour Party won the elections with a total of 301 seats as against 296 obtained by the Conservatives yet its per - centage of votes (37.2%) was in fact lower than that obtained by the Conservatives (38.1%). In October 1974 the Labour Party which obtained 50.2 percent of the seats, polled only 39.3 percent of the total votes; the Liberal Party on the other hand, which polled 18.3 percent of the votes obtained only 13 (or 2.04%) of the seats.
This discrepancy between votes and seats obtained by each party is quite evident in the election results in Sri Lanka, also. Tables 2 and 3, depicting the election results of 1960-1977, illustrate quite clearly the differences between these two factors.
For instance, in the election of March 1960 although the United National Party won a total of 50 seats (or one-third of the total
er constituency is also used sometimes, the voter being entitled as there are seats to be filled. ity system of election, sometimes a second ballot is held between s who have obtained the highest totals, so that the winning candidate an absolute majority of votes.
ECONOMIC REVIEW, JAN,/ EB. 1979

Page 23
壽
TABLE
RESULTs OF ELECTIONS (1970 AND 1974) IN
Purflies Ψοίας
General Elections 1970 Conservative 13,145,123
Labour 12, 179,341
Liberal 2,117,035
Others 903,299
General Elections Conservative 11,924,755 Feb. 1974 Labour 11,654,726 Liberal 6,063,470
Others 1,690,275
General Elections Conservative 10,428,970 Oct. 1974 Labour 11,468,136 Liberal 5,346,800
Others 1944,700
Seats Percent
total
330 46 287 43 O6 7 07 3
296 38 301 37 14 19 24 5
276 35 319 39. 13 18 27 6.
Source: Parliamentary Elections in Britain. (Central Office of I1
June 1976).
seats in the House of Representatives) it polled only 29.62 percent of the votes. In July 1960, its percentage of votes in fact increased to 37.57 per cent. Yet it gained only 30 seats (19.9%) while the Sri Lnaka Freedom Party, while winning 75 seats (or 49.7%) polled only 33.59 percent of the votes.
Similarly in 1970 although the UNP polled 37.92 percent votes it won only 17 (or 11.3%) of seats whereas the SLFP obtained 90 (or 60%) of the seats while it polled a lower percentage than the votes obtained by the UNP.
Again at the last general election of 1977 the UNP was swept into power with a total of 140 (or 83.33%) of the seats in the legislature (the National State Assembly) while obtaining 50.92 percent of the votes cast; the SLFP although it won only 8 seats actually polled 29.72 percent of the votes.
Yet another effect of this system is that smaller parties tend to get underrepresented. The number of
seats won by Britain's Liberal Party
for instance (as is evident from the figures given earlier) has consistently been very much less than in proportion to the votes it has
polled. For instance, in 1964 the
Liberals received 11.2 percent of the votes cast, yet won only 9 seats although proportionately it would have been entitled to 70 seats; and in October 1974
ECONOMIC REview, JAN/FEB., 1979
while it only obt (see Table 1) it obtained 116 seats to the votes polled.
GENERAL ELECT
IN
General Election
March 1960
NJuly 1960
1970
Source: Economic Re

In Sri Lanka, at the last General Election (1977) while the Lanka. BRITAIN Sama Samaja Party and the Comge of Percentage o, munist Party polled 3.6 l per cent otes total seats and 1.98 per cent respectively of - the votes, neither party obtained
a single seat. 5 0.9 1. 1.1
In fact, the verdict of Enid 46.6 L. - - 2 47.4 akeman on the relative majority 3 2.2 system of election is that: 4. 3.8
8 43.5 3 50.2 It cannot be relied upon either 3 2.4 to give a parliament reflecting 6 4.2
all the main trends of opinion, or to place in power a government backed by a majority of the electorate or even by the largest single body of voters . . . . .
formation London
ained l3 seats It cannot be relied upon either should have to give one party power to in proportion govern un hindered according to
its own ideas, or on the other
TABLE 2
ONS IN SRI LANKA-PERCENTAGE OF SEATS WON RELATION TO VOTES. (1960 AND 1970)
Seats Percentage Percentage
Party KAHVOng of Seats of Votes
United National Party 50 33.1 29.62 Sri Lanka Freedom Party 46 30.5 21, 12 Lanka Sama Samaja Party 10 6.6 10.50 Communist Party O3 2.0 4.62 Mahajana Fiksaith Peramuna O 6.6 10.62 Tamil Congress O 0.7 1.25 Federal Party 15 9.9 5.75 Jathika Vimukthi Peramu na O2 1.3 O.36 L.P.P. 04 2.6 4.08 S.M.P. O1 0.7 0.79 S.L.J.P. O 0.7 0.36 B.B.P. O1 0.7 0.32 Independents O7 4.6 8.83 Others O O.O 1.78
United National Party 30 19.9 37.57 Sri Lanka Freedom Party 75 49.7 33.59 Lanka Sama Samaja Party. 12 7.9 7.36 Communist Party O4 2.6 2.96 Mahajana Eksath Peramura O3 ' 2.0 3.38 Tamil Congress O 0.7 1.54 Federal Party 16 10.6 7.19 J.V.P. O2 1.3 0.46 L.P.P. O2 1.3 0.96 Independents 4.0 4.62 Others 00 0.37
United National Party 7 11.3 37.92 Sri Lanka Freedom Party 90 60.0 36.63 Lanka Sama Samaja Party 19 12.7 8.75 Communist Party 06 4.0 3.42 Mahajana Eksath Peramuna OO 0.0 0.94 Communist Party OO 0.0 0.07 Tamil Congress 03 2.0 2.33 Federal Party 13 8.7 4.96 S.M.P. OO 0.0 0.4k Lindependents 02 1.3 4.56
piew, May 1977.
21

Page 24
TABLE 3
GENERAL ELECTIONS (SR
Political Party
United National Party Sri Lanka Freedom Party . . Lanka Sama Samaja Party . . Communist Party - Mahajana Eksath Peramuna Tamil United Liberation. Front Ceylon Workers Congress Independents ༡
LANKA) 19
Seafs %
140 83 08 4
18 10
O1 O
O1 O
hand, to produce government by consent’s
Proportional Representation
These deficiencies of the relative majority method of election have cast doubts about the democratic nature of the system and have led critics to recommend the adoption of some form of proportional representation.
While a number of variations of the representation exist, the most widely used seem to be the Party List System and the Single Transferable Vote.
The Party List System is accepted in one form or another in the
Scandinavian countries, in Belgium,
Holland, Italy and Switzerland; it was also adopted by France under the Fourth Republic. In accordance with the constitution of the Democratic Socialist Republic of Sri Lanka (1978) (Section. 99) and the Local Authorities (Special Provisions) Law No. 24 of 1977, the party-list system of proportional representation has been accepted for elections to the National State Assembly and to Local Authorities, respectively.
According to the Party List
System, in every constituency,
(which has to be a multi-member constituency) each political party puts forward a list of its candidates for the constituency, the numbe of candidates nominated generally corresponding to the number of seats to be filled. The order in which the names appear on each list is decided by the political party, so that this system gives the party machine a larger degree
22
system of proportional
of power and lir of choice of the
Under what is ca
list system the
to vote en bloc foi list of his choice. Ti which is to be
Lanka, but with
Parties
A. B C
is not permitted t between candidate Under variations Cross-voting bet v is allowed, so that of discretion is voter either to VC dates of a single his vote among di
As already point tuencies are mult tuencies. Within therefore, followin are allocated to parties on the bas quota, which is dividing the num by the number instance, in a c 200,000 valid vro seats, the quota The votes obtaine list is then counte 40,000 seats being seat, another se two seats and is
3. Lakeman, Enid.
electoral systems. 4. The implications (

77
Seafs %. Votes
33 50.97
.76 29.72 - 3.61
- 1.98
- 0.36
71. 6.75
06 1.00 06 5.65
mits the freedom individual voter.
alled the “blocked voter is required r the entire party his is the method adopted in Sri variations.4 He
which is entitled to two seats gets the candidates whose names appear first and second on its list elected.
In practice, since party lists rarely obtain exact multiples of the quota, the votes obtained by each party over and above the quota (or its multiples) can be weighted in different ways. The two most commonly used are the largest
remainder' and the 'highest average methods. Under the 'largest remainder' system the
party which has the highest number of votes left over after the seats are allocated on the basis of the quota, gets an additional seat. For instance i.e. in a five-member constituency, where the quota is 40,000, the results are as follows:
Total Vo fe:S
93,000 58,000 49,000
Seats allocated on
Remainder of basis of quota
J/ofes
2 13,000 1. 18,000 9,000 -܂
to divide his vote is of rival parties. of this system, veen party lists a greater amount allowed to the te for the candiparty or to split ifferent parties.
tied out, all constii-member constieach constituency g the voting, seats
the contesting is of an electoral
determined by ber of votes cast
of seats. For onstituency with tes Containing 5 would be 40,000. bd by each party l, a list obtaining g entitled to one suring 80,000 to so on. A party
According to the largest re
mainder method the 5th seat would go to party B. Under the "highest
average system, the total votes obtained by each party is divided by the number of seats it has obtained plus one. Thus in the foregoing example the resulting averages would be:
A - 93000
-- - 31,000
3.
B - 58000 = 29.000
2 and C - 49000 ஐ 24500,
2
A thus secures the fifth seat. The former system favours smaller parties at the expense of the larger, while the latter is advant
How Democracies Vote. A study of majority and proportional (Faber and Faber 1970) p. 55. yf the Sri Lanka. System will be discussed in a later article.
ECONOMIC REVIEw, JAN, FEB. 1979

Page 25
ageous to larger parties at the expense of the smaller.
The Single Transferable Vote (STV)
The Single - Transferable Vote System of proportional representation was first advocated by Thomas Hare 5 and was upheld by John Stuart Mill in his book * Representative Government” (1861).
This is a system of preferential voting based on multi-member constituencies generally containing 3 to 7 seats. It is adopted in the Republic of Ireland, in Northern
Ireland since 1973, Malta, since
1921, in elections to the Australian Senate since 1949 and in two states in Canada.
Each voter is entitled to only one ballot paper which contains the names of all the candidates for the constituency (generally arranged in alphabetical order). The voter therefore does not vote for an entire party list, but is required to mark his preferences among the candidates. Thus he has to mark 1 against the name of the candidate he favours most, 2 against the next candidate in order of his preference, and so on. This system, it is obvious, gives more freedom of choice to the individual voter than under the Party List system. Here he is able to cross - vote between parties; even within the same party, it is the voter who indicates his order of preference and not the party.
The first stage in the counting is the establishment of the quota necessary for winning a seat. This is done by dividing the number of votes cast (in the constituency) by the number of seats to be filled.
This is referred to as the 'Hare Quota’. The "Droop Quota i.e. total votes -- 1
is also used
total seats -- 1
At the first counting, only the voters first preferences are taken into consideration; thus only those ballot papers where l appears against A's name are counted as his votes, those on which l has been marked for B are assigned to him and so on.
EconoMic REVEw, JAN. FER. 1979
The candidates obtain the requisi first counting ar. declared to be elect
If however, the of seats fails to first count the generally adopted the surplus votes ( already elected on quota are redistri others in accordanc
second preference. added to the total
by each candidat preferences. Thus 4,000 and candidat 3,940 as a result o the re-allocation votes of the win according to second well give him th votes he requires quota, and thereb. tain a seat.
If some seats st filled, the method is the elimination at the bottom of one and the real votes according ferences and addi totals already obt required number o
---- *表ーリエリ
This system thus candidates who ar. will infact be select if not as their first as second (or s preferences. It al. votes are not "'s capable of being tr; ing to voters prefe:
Proportional Rep ly is able to of the deficiencies majority system. not without its dis STV method, fou supposes the existe electorate which i prehend the prefe.
5. Machinery of Rep
6. See Roberts, Ge Reform in Governn

andidates who 5e quota at the e automatically ed.
required number be filled at the method that is is the following: if the candidates the basis of the buted among the te with the voters These votes are obtained already e according to if the quota is e X has received f the first count, of the surplus ning candidates preferences may e additional 60 to reach the y qualify to ob
ill remain to be that is adopted of the candidates the poll one by location of their to second preng them to the jained until the f seats get filled.
ensures that the e finally elected ed by the voters,
preference, then ometimes later) So ensures that wasted' but are ansferred accordcences.5
リ
resentation clearovercome most
of the relative It is, however, (advantages. The
instance, preince of a literate is able to comential system of
voting. The party list system reduces the freedom of the voter considerably in the exercise of his vote. It is also pointed out that in a multi-member constituency the individual Member of Parliament loses close contact with his constituents. Besides being confusing to the voter, it is not a guarantee of absolute proportionality, in that small groups, in any event, would find it difficult to obtain the necessary quota in a particular constituency. The fully proportional system is that recommended by Thomas Hare according to which the entire country is considered as a single constituency containing that number of seats which is prescribed for the national legislature.
While a fully proportional system. may not be the outcome, nevertheless the experience of its use in countries like Ireland shows that results have
been fairly close to proportionality.
In Britain the revival of interest in electoral reform as a result of the disproportionate relation between seats and votes in the 1974 elections led to the appointment of the Blake Commission of 1975 under the auspices of the Hansard Society; and one of two alternative measures it has recommended is the Single Transferable Vote.
However, the chief drawback of proportional representation, according to its critics is that it encourages minority thinking and therefore multi-party systems and coalition governments. The representation of differenti interests and the con
sultation of these interests in the
formation of a government may be a sign of political maturity; but a strong and homogenous cabinet able to form a stable government, they argue, is an advantage which should not be lightly sacrificed so as to obtain mathematical accuracy in the representation of various groupings in a society.
esentation 1857; Election of Representatives (1859).
ffrey K. Point of Departure? The Blake Report on Electoral ent and Opposition Vol. 12 No. 1 (Winter 1977).
23

Page 26
COMMODITY AGREEMENT
A de Vass Gamawardena
Commodity proposals have dominated much of the discuss agenda and without a doubt will be the predominant issue at Manila, in May this year. UNCTAD's Integrated Programm now occupying the centre of the stage differs fron the taditiona odity-by commodity approach and is widely accepted by the co World. Commodity problems have been discussed and eng of international organisation for more than half a century. H dena, who as Assistant Director Planning of the Ministry of P has several years of experience in this sphere attempts to lopments in the field of commodities from its historical begin question whether commodiy agreements are the only way out.
The problem of commodity agreements was first examined on an international level in 1927 at the World Economic Conference held in Geneva, under the auspices of the League of Nations. At this time the existing regulation schemes were almost exclusively in the form of private (non-government) agreements or in other words cartels. By 1933, when the League of Nations sponsored Monetary and Economic Conference convened in London, inter-governmental control agreements had come to be regarded as a form definitely superior and preferable to producers cartel arrangements. The Conference approved a report defining the principles which should be observed in establishing and operating intergovernmental control arrangements. They were, first, the commodity must be one of great importance for international trade; the agreement should include the greatest possible number of producers and secure the co-operation. of the consuming interests in the importing countries, thirdly, it must be fair to all parties by maintaining prices at reasonable remunerative levels; and finally, it should be as flexible as possible to permit a balanced growth of the market.
League of Nations Review
In 1937 a special committee was set up by the League of Nations to review the then existing arrangements. A clear distinction was drawn between cartel agreements of a purely private character and government-controlled agreements. Whereas the earlier schemes were designed solely to raise prices by
secondly,
controlling supplies, the more recent
schemes, it was noted, were arrived
24
at for stabilisatic control over stoc recommended t buffer stocks, joint control COH. Still ME'S .
In 1943, the Conference on culture, convene U.S.A., conclud priate internat should be Cre: establish a body defining the commodity arral
The Havana C
The Economic of the U.N. by February 18, 19 an Internation: Trade and Emp ference, in whic cipated, met
December 194 and drew up the for an Internati sation to be Goverments rep ter of the I
Organisation is
countries that the Organisatio mutual commel **Havana, Charte pose of Intern
Agreements a achieve a res. stability, on t
prices as are faj
provide a rea
producers, hav desirability of
equilibrium bet supply and den also established for the negotia arrangements, i.

S
on of the UNCTAD E its fifth session at le on Commodities l fragmented communtries of the Third aged the attention Here VaSS Gunawar'lantation industries summarise the devnings and poses the
on of prices through sks. The Committee he constitution of operated under the of producers and
2 United Nations Food and Agried at Hot Springs, ed that an approional organisation ated in order to of broad principles pattern of future ngements.
harter”
: and Social Council
a resolution dated 946 resolved to call all Conference on loyment. This Conh 57 nations partiat Havana, from to March 1948 } Havana, Charter onal Trade Organisubmitted to the resented. The Charinternational Trade a code under which Decome members of a will conduct their cial relations. The ar' declared the purational Commodity s instruments to usonable degree of he basis of such r to consumers and sonable return to ing regard to the securing long-term ween the forces of hand. The Charter
general procedures tion of commodity ncluding preliminary
present.
study, wide representation in nego
tiation and administration and full publicity at all stages. Although the * "Havana, Charter had not been ratified by any country, the principles enunciated therein relating to the conclusion and operation of commodity arrangements have been endorsed by the United Nations in 1950 when the Economic and Social Council requested the membergovernments to adopt the prinCuples lagd down in the Charter as a general guide.
The 'Old Model
For half a century attempts have
been made at commodity agreements
but with little success. There are only five commodity agreements, on coffee, cocoa, sugar, wheat and tin and none of them is operational at The model that has been followed so far is that of onecommodity, fixed-money price range and primary form only, with the
- agreements taking three basic forms.
They are: the multilateral contacts; quota arrangement; and buffer stock scheme.
The International Wheat Agreement is a multilateral purchase and sales contract, where purchases and sales are stipulated as import and export quotas. The actual price at which the quotas are traded is allowed to fluctuate between the maximum and the minimum and as long as the price remains between these limits, the agreement does not interfere with the market mechanism. It is a basic requirement of the mechanism that total import quotas must always be equal to total export quotas. This type of agreement sets no limit on production and does not prevent the emergence of new and/ or cheaper producers. - -
Agreements based on quota. arrnagements regulate the quantity which may be produced or exported by allocating fixed quotas to each country. The Sugar and Coffee Agreements are examples of this type of arrangement. Quota, arrangements with their percentage sharing of the market tend to freeze the existing pattern of production and/or exports. Moreover, they are liable to breakdown unless the agreement covers virtually all producers or unless the consuming countries restrict their imports from outside.
Economic Review, JAN.-FEB., 1979

Page 27
The Sugar Agreement, for instance, covers about 40 per cent of the World Market and excludes trade in the Commonwealth and U.S.A.
A Buffer Stock agreement is an arrangement for maintaining price stability by buying and withdrawing supplies from the market when prices are deemed to be too low. The purpose of a buffer stock is not to interfere with the price trend unduly, but to moderate fluctuations by buying at low prices and selling at high prices. The International Tin Agreement and the Cocoa Agreement relies partly on buffer stock operations and partly on a system of export quota restrictions.
For four of the ten “core com" modities earmarked by UNCTAD for special attention under the Integrated Programme, there are agreements between exporting and importing countries, and as stated earlier none are functioning. The Tin Agreement which has been in existence for over 20 years, lost control of the market at the beginning of 1978 and prices rose above the 'ceiling' level; this agreement ran out of tin because the size of its stock (20,000 tons) was too small to support constantly rising prices. The Coffee Agreement collapsed with unilateral action by producers. The heavy surplus supplies of sugar in the World, combined with the failure of the United States to ratify the agreement, and the refusal of the EEC to join has plagued the Sugar agreement which came into force in January 1978. The negotiations, have so far failed to make an impact on the market prices.
It is seen that the agreements based on the 'old model commodity-by-commodity approach has had a patchy record and has failed. However, these agreements have had limited aims such as reducing shortterm instability in international prices and have not been intended as instruments of economic development. Also, there has been no provision to contribute to the transfer of income from the richer to poorer countries. The general aspiration of producer countries, to effect a real transfer of surpluses from industrialised to the developing countries remained outside the traditional agreements.
ECONOMIC REVIEw, JAN./FEB. 1979
The Integrated Prc
UNCTAD’s Integi on Commodities
from this 'old m attempt to evolve ( ments on a multimon fund. The II this programme co up a series of inte a common fund, foi multilateral comm compensatory final sion of processin countries. The mi tween the tradition the UNCTAD con phasis it puts on
coverage of con national buffer s creation of a Co spread the stocking of effort in this pac is towards solution of commodity e. arrangements for le ment of commodit vestment and mark
tions only for sudd
trade. Also, any co ments should be ne ducted to meet a nomic circumstanc and longer perspel subscribes to the
loping countries : right to exercise co, national resources.
The Ten ‘‘Core” C
The Integrated P sidered to be the fr
PRESENT
Agreements
Coffee Brazil,
Rep), Iv,
Cocoa Brazil, Ghana U.K., C
Sugar Austral South A
Wheat Austral
Egypt,
Rubber Indone Thailar
Tin Malays France

ogramme
rated Programme
is a departure odel and is an }ommodity agreecommodity commain elements of insist of building }rnational stocks, r financing them,
itments in trade
ncing and expang in developing ain, difference behal approach and cept is in the ema comprehensive himodities, interstocks, and the mmon Fund to
costs. The thrust
kage of proposals is to a wide range Xports, covering Dng-term developy production, inKets and not soluen disturbances in mmodity arrangegotiated and convariety of ecoes taking a wider ctive. It further
view that deveshould have the mmand over their
ommodities
rogramme is coname within which
effective arrangements could be made for dealing with the problems of a range of commodities. Initially a list of 18 commodities was suggested, because on the one hand, they were storable and consisted of nearly 60 percent of primary product exports of developing countries. Out of this list of 18 commodities, ten 'core commodities have been identified for attention by the Common Fund. They are Coffee, Cocoa, Tea, Sugar, Cotton, Rubber, Jute, Hard Fibres, Copper and Tin. Along with the ten 'core commodities Bananas, Wheat, Rice, Meat, Wool, Iron Ore, and Bauxite making a total of 17 commodities are to be considered for integrated programme arrangements. Trade in these commodities embraces the majority of the developing countries, though it is by no means considered to be an exhaustive list. The commodity groupings are given in Table li.
The Common Fund
The Common Fund is conceived as the source of finance for individual commodity organisations, who would trade in individual commodities, by buying and selling and owning and disposing of stocks. However, in non-organised markets, it would intervene, exceptionally, for a limited period, so as to provide price support.
Since the political consensus reached at UNCTAD TV in Nairobi, in 1976, lengthy negotiations have taken
TABLE 1.
STATUS OF COMMODITY
Main participants
Columbia, France, Germany (Fed.
NEGOTIATIONS
Developing Mechanism Countries
100 Export quotas
Dry Coast, Uganda, U.S.A.
Fiance, Germany (Fed. Rep.), 10 Ivory Coast Netherlands, Nigeria,
I.S.S.R.
a, Brazil, Canada, Cuba, Japan, 70
frica, U.S.S.R.
ta, Argentina, Brazil, Canada, EEC, 4
Export quota and buffer stock
Export quotas and buffer stock
None at present
(ndia, Japan, U.S.A., U.S.S. .
ံး, Malaysia, Singapore, Sri Lanka,
ia, Thailand, Indonesia, Netherlands 90
U.K.
100 Nationalisation of production and
buffer stock
Buffer stock and quotas
25

Page 28
TABLE II
COMMODITY GROUPINGS
Major Commodifies in Major storable Common Fund “core
exports of con modities commodifies
Developing countries
Coffee
1. Coffee 1. Coffee 1.
2. Cocoa 2. Cocoa 2. Cocoa
3. Tea, 3. Tea 3. Tea,
4. Sugar 4. Sugar 4. Sugar
5. Bananas
6. Wheat 5. Wheat
7. Rice 6. Rice
8. Maize 7. Mai Ze
9. Vegetable oils 10. Meat 11. Cotton 8. Cotton 5. Cotton 12. Rubber 9. Rubber 6. Rubber 1 13. Jute 1 Jute 7. Jute 1. 14. Wool 11. Wool 1. 15. Hard fibres 12. Hard fibres 8. Hard fibres 1. 16. Copper 13. Copper 9. Copper 17. Iron Ore 14. Iron Dre 1. 18. Tin 15. Tin 10. Tin 1. 19. Bauxite 16. Bauxite 1 20. Zinc 17. Zinc 21 : Lead 18. Lead
place on the formation of the Com- dity producer and mon Fund. Agreement (a compro- in the Fund's de mise on the functions and finance of cess. Some of t the commodity common fund) was stood in the was finally reached in March 1979 to were raised by establish a $750 million buffer stock commentator, Ia fund with each nation participating latest issue of th in the fund contributing a minimum ment Forum', is of $ 1. million. The rest willcome from agreement was r. negotiating groups: 68 percent from on March 20, 197 Group B (Western market economy - countries); 17 percent from the The talking is in -- Y - interim Committe Group D (socialist countries): five
- -- - - to tighten the agi per cent from China: and 10 per cent : ince Will from the Group of 77. 30nferenge
- fully, before the
The Third World has been given '5" the articles an advantage in the voting formula. UNCTAD estima which could determine how the seven weeks, at money is used: the Group of 77 has million, will be 47 per cent of the votes; group B 42 per cent; group D eight per cent and 轟 mai" ( China, three per cent. The Fund will f e runt, Will Inc - - - - ore 1981. Londo contain a $400 million first window tioned designed to finance commercial ope- " ' ' P rations by reserve stock managers to The final plena buy commodities contained in the up several import Fund's scope in times of falling group D objecte world prices, and to sell them in votes and contrib time of high world prices to iron out are deeply concer. excessive fluctuations. The Fund window will noth will also contain a second Window to make it viable of $350 million to pay for export countries-Irelan promotion, and other similar pro- had also argued t grammes to boost commodity trade. proposed contribi However, what has not been resolved was unfair. A fo. is the weightage to be given to rich, sought within OE and poor countries and to commo- them of further p
26

Selected commodities: ntegrated programme
arrangerneil IS
Coffee Cocoa Tea Sugar Bananas Wheat Rice
Meat Cotton.
Rubber Jute
Wool Hard fibres Copper Iron ore Tin. Bauxite
consumer nations cision-making prohe issues that have 7 of an agreement
a knowledgeable in Guest, in the e UN’s “Developoon after general eached in Geneva, '9, when he stated:
ot, finished yet. An e has been set up reement, and a full meet again, hope2nd of the year, to of agreement.
vites that a, further a cost of $1.36 needed.
optimistic forecast, it be operating beon is already being ossible host.
ry session brought 5ant reservationsd to its share of tions; the Africans ned that the second ave enough capital ; smaller Western and New Zealand throughout that the ution of $1 million. mula is now to be CD to help relieve ayments.
The United States, too, is dissatisfied. The Americans are determined not to pay more than 19 per cent of group B's share, and have stated firmly that the allocation of votes is unacceptable. Allan Wendt, head of the US delegation, said it indicated "a clear imbalance. One British delegate said that the principle of votes for groups puts us on a slippery slope and could set a dangerous precedent.”
The Western industrialized countries, for their part, have kept the Fund well below UNCTAD's original plan for initial capital of $2 billion. Their delegates point out that the Fund will not interfere in commodity markets to control price fluctuations. They also feel that individual commodity agreements will be left relatively independent. The manager of a buffer stock will be free to choose whether to join the Fund. Once he has decided, however, the Fund must be his only source of finance. He will estimate the maximum financial needs of his stock, and deposit a third in the Fund, as well as warrants for any stocks in storage. Using these, and its own capital, as collateral, the Fund will then raise as much money as the agreement needs. The most immediate question, however, is whether the Fund can salvage UNCTADS overall commodity programme, which even enthusiasts agree is limping badly.
New Patterns
In the quest for a new international economic order new patterns of production and trade are being sought. As commodities constitute the most critical area, the Integrated Programme on Commodities with its package of measures on each of the major exports of developing countries is expected to stabilise trade and sustain real incomes among other things. These agreements on key commodities would provide for indexation, maximum and minimum price ranges and their adjustments, buffer stocks and intervention procedures, and access to supplies. It also envisages the forward integration of Third World primary producers into marketing structures, market information generation and market management. This is expected to reduce the role
ECONOMIC REVIEW, JAN./FEB. 1979

Page 29
of the present, often destabilising,
terminal markets and brokerage
firms.
Other Schemes
There are also other multi-commodity schemes such as the IMF facility for compensatory financing and the Stabex plan in the Lone Agreement. Another suggested scheme is that of indexation, linking primary product exports to manufactured goods imports. The financial compensatory approach is complementary to earnings stabilisation by commodity agreements and is included by UNCTAD as an element in the Integrated Programme. This facility includes compensating either commodity export shortfalls or total export shortfalls whichever is the larger and compensating on the basis of real export earnings. improvements that have been suggested are increasing the grant payment and linking repayment to export re
covery and relaxation of balance
of payment test. The compensatory approach has found favour with the developed countries and the reasons are obvious. They do not interfere with market mechanisms and if the schemes are vested in the IMF, as they are present, control is in the hands of the First World which supplies the money.
The Stabex scheme of the Lome Convention involving the nine countries of the EEC and 52 countries in Africa, the Carribean and the Pacific (ACP) is in effect a compensatory scheme. The scheme was first applied in 1977, and is a form of insurance against losses in the value
of exports due to bad crops or low
world demand. The less advanced countries are not called upon to repay the amounts they receive.
One of the advantages of indexation of price ranges to some agreed world trade-price index would be the lessening of the need for renegotiation of price ranges. The developing countries have made demands for a system which links the prices of primary products that they export, to their imports. The problem faced here is that of selecting the basket of commodities in a situation.
where there is so much variety in
the trade structure of the developng world.
ECONOMIC REVIEW, JAN./FEB. 1979
Limited Success
The developing
creasingly looked
agreements as a n.
transfer of resour
towards a new i nomic Order. HaN a chance of s producers action achieved has t cultural exporters
of their resource:
posals are conceiv
lift the purchasin own exports. It h that these agreem have had limited only been capable short-term uphea curve, as evident Tin Agreement,
one of the fairly ever, with the reached on the est Common Fund th some grounds for
Confrontation
In the context gress made and su the objectives of
national economic
interest to conside confrontation, wh ducers adopted suc
The success of C the fact, that the O trolled a, commod degree of importe limited possibilitie combined With th hold supplies. A interruption in the consequence of di nomies of the col Further, the huge that some of the O up made them be face confrontation pay their import b SeVe S.
The conditions, were prevalent in t not be present in t the case of other C concerted action several commoditi tional strength. suggestions by T. ducers of commod tin and palm oil form cartels to bo( they received for t.

Countries have into commodity eans to achieve a tes and as an aid international ecote these proposals uccess. The oil and the success rged the agrito achieve control and these proed as a means to g power of their as to be admitted ents and schemes success and have of smoothing out vals in the price in the case of the acknowledged as successful. Howecent agreement ablishment of the ere appears to be optimism.
of the slow proccess in achieving the new inter3 order, it is of Sr the concept of ich the oil processfully.
DIPEC, was due to
il producers conlity, with a high r-dependence and s of substitution, 2 ability to withAny reduction or supplies had the imaging the ecoSumer COULIntries. financial surplus il producers built tter equipped to in being able to ills out of the re
listed above that he case of oil may
hat magnitude in
ommodities. But by producers of es will have a ddiThere have been hird World proities like rubber, that they should ist the prices that heir commodities.
This approach appears to be necessarily simpler, cheaper and more effective, than the long protracted programme initiated by UNCTAD. This demand stems from the fact that the preparing of a commodity agreement is a painstaking, timeconsuming process, combined with the lack of seriousness cf purpose in the industrialised countries for negotiated changes. This is not to state that confrontation is a preferred option, specially in view of the interdependence of countries. However, concerted collective action needs to be taken by all the countries critical to a commodity, to achieve a Credible negotiating position, backed by the alternative of confrontation.
A New Economic Order
Incessant pressure and mounting Third World negotiating will, since the unilateral actions of OPEC in 1973-74, has made the industrialised countries pay greater heed to the need for negotiated changes. But it has also shown that it is much easier to approve a declaration setting out a programme of action of mutual cooperation, than actually implementing it. Of course, there are abundant reasons for action, but is the will there on the part of the First World? Although the Third World. has looked to the Integrated Programme on Commodities as an aid towards a new economic order.
The First and Second Development Decade strategies of United Nations drew upon the thinking that Third World countries must integrate their own economies closely with those of the First World in order to develop. In other words, the country had to belong to the system, otherwise it was condemned to permanent poverty. Within this system the country had to produce what the system would buy, at the price the system would pay. To grow, a country had to produce what the system wanted and not what its people wanted. This was the style of development by imitation. The new economic order requires a reformulation of the relationship between the Third World and the international system. The concept of self-reliance is based on the reality that development comes from within. This collective self-reliance disCards the institutionalised mendi
27

Page 30
COMMON FUND
The UN Conference discussing a Common Fund under the Integrated Programme for Commodities reached agreement on the fundamental ellements of the Fund, including the establishment of first and second windows of nearly equal size.
It also adopted a resolution requesting the Secretary-General of UNCTAD to convene an interim Committee to consider elements requiring further elaboration, to draft the Articles of Agreement of the Common Fund, and to make recommendations regarding the preparatory work required to bring the Fund into operation’.
The key elements on which the 101-nation Conference agreed included: a first window with resources of S 400 milion from direct governmental contributions to be used for financing of international buffer stocks. A part may be allocated to the second window which would finance measures other than buffer stocking such as research and development and productivity improve ment. The target for the second window would be S 350 million; Under the scale established, the Group 77 (developing countries) would contribute 11 per cent, Group B (industrialized countries 68 per cent, Group D (Socialist countries) 17 per cent and China 5 per cent.
One of the main issues in previous Conferences on the Common Fund was the percentage of maximum financial requirements, which International Commodities Agreements associated with the Fund would be required to deposit with the Fund. This has now been set at 33 one third per cent.
As to voting rights, the following distribution was agreed: Group of Seventy-seven 47 per cent, Group B 42 per cent, Group D 5 per cent, and China 3 per cent. The most important decisions, including those with significan financial implications for member states, would be taken by a majority of three quarters of total votes cast.
cancy that was endangering the earlier negotiations. The Victorian age when charity was deferentially accepted by the deserving poor was gone and UNCTAD IV in Nairobi demonstrated more firmly the resolve of the Third World for a new economic order. The Integrated Programme on Commodities, one of the building blocks of the new economic order, by itself is unlikely to provide an adequate transformation to provide for self-reliant development.
28
SMALL SHOW
Kamla Bhasin a
A successful most developing Nuwakot distric farmers and lan The Nuwakot S not only to peop lopment. With some of the dist Kamala Bhasin, *Change Agents field workers fro: by this project. experience and
Twice in the we travelled or road from Kath village called T District. Tupche shuli valley abo Kathmandu, sul some of which during our seco (1978).
In a tin
(about 7 feet can accommoda they sit on cha. if they sit on 1 office of the Snr lopment Project kot area in Nep visit We saw a one of the out office saying 'N banner, we wer now permanent duty for the b number of visit has begun to a this, frankly, we
What brings to this small vil is the success that has been barely two years organize the ve marginal farm labourers of tw strong and effe idea, being tha effective groups, farmers would tion to receive a benefits Of rura,

FARMERS OF NEPAL THE WAY
id Bajit Malik
| Small Farmers Development Project is not easy to come by in countries today. Nepal appears to have produced cine in its t, where ar experinent to organise very poor small and marginal illess labourers in strong and effective groups is showing results. ..F.D.P. is providing food for thought and directic in for action le within Nepal butto several othe Asians involved in rural devethe present emphasis on an integrated development approach in icts of the island this experience is worth studying and trying out. who was in charge of the FAO's Freedom from Hunger Campaign training programme visited this project early last year with 10 m Bangladesh, India, Nepal and Sri Lanka and was quite impressed
She and her journalist husband Baljit Malik recount here their he value of this experiment.
last six months the hilly, windy mandu. to a small upche in Nuwakot is situated in Triut 70 kms. west əf rounded by hills,
were snow-clad nd visit in April
'semi-pucca room by 7 feet), which ate 4-6 people if irs, or about 10-15 the ground, is the hall Farmers Deve(SFDP) of Nuwabal. On Our Second big red banner on side walls of the WELCOME’. This e told later on, is ly on welcoming enefit of the large Ors that the SEFDP tract. On hearing felt a little guilty.
so many visitors lage and tiny office of the experiment going on here for 3; an experiment to ry poor, Small and ers and landless to Panchayats into }ctive groups. The at organized into the poor peasants, pe in a, better posiind make use of the l development.
The reason why so many visitors come to Tupche is that some of those ideas on development which are normally only discussed at conferences, are actually being practised here. The seeds of some currently popular concepts of development have been carefully sown in this project. What is more, the small farmers and landless labourers of this area, have accepted these seeds as their own. After first being cautious, even suspicious, they now believe that the FSDP, unlike other projects which started and finished without benefitting them, is good for them. In fact, they are the ones who are now very much involved in actually running the project. They have become the subjects of development and are not merely its passive objects. The peasants and farmers covered by the project have an air of selfconfidence about them as they also experience the excitement of planning and implementing their own development.
How the project began?
This little project has long connections, connected as it is to a big organisation, like the FAO. What is remarkable, however, is that inspite of these high connections the project has maintained its smallness, simplicity and austerity. Normally, the very mention of such connections makes one think of smart offices, imported vehicles, machinery, and, in addition, foreign experts - the usual package of expensive commodities. Happily
ECONOMIC REVIEw, JAN./FEB. 1979

Page 31
the SFDP is mostly free of such un necessary inputs’- except perhaps the overfrequent visitors from international organisations.
In 1973, FAO, UNDP initiated a regional project called Asian Survey on Agrarian Reform and Rural Development’ or ASARRD in short. The main objective of ASARRD was to examine the achievements and to identify the bottlenecks or problems in implementing agrarian reform and rural development with reference to the needs of the small farmers/fisherfolk and landless agricultural labourers and how they could be tackled. The political, social and economic conditions in which these people have to earn their livelihood were also studied. The results of the country workshops were then discussed in a regional follow-up seminar in Bangkok.
For the purpose of ASARRD the term 'small farmer was defined to include share croppers, landless agricultural labourers, small owneroperators, small livestock farmers small fishermen and women - all of those whose common lot is subsistence farming and various shades of economic and social inនocឃty.
On the basis of the field workshops information was collected which led to the conclusion that the following were the main problems of small farmers and peasants in all the countries conCerned :
-smallness (or absence) of holdings and
insecurity of tenure;
-limited or non-availability of institutional credit, chemicals and protective inputS:
-nonoculture;
-limited or non-availability of irri
gation;
-lack of alternative employment oppor
tunities; ݂ ݂
-unfavourable market mechanism and
DrᎥCeᏚ ;
-incapability or disinclination of existing institutions for action in favour of low-income Small farmers and labourers; -
—little share in the control and ope
rations of rural institutions;
ECONOMIC REVIEW, JAN. F.B. 1979
—extension, and trair only at the bette who are usually
progressive;
-inappropriate rese: technology that small peasants and
It was also clear
ments of most o covered by ASAR whole more interest production than in distribution and chasing power for Who produced. I what cost, and who the increased prod considered as relev ing a tempo of duction. As a resu. perts and administr; the specific needs a rities of low-inco producers and word
The other signifi reached by ASARE
-under pressure of there has been a per status, and the II means liying of the small faring decline in status as farmer to part-owner/ cropper and eventually
- There is an incre taking place in the ru one hand is the new, preneur class, which co: agencies and which is interests and gets are of peasants than was the Ord. On the other han and disadvantaged pea: 'sile at Enajority.
— a most contes,
been able to renaia in agricultural development
What then is the w;
majority in the rural development that special attenti given to the too farmer/peasant sec would continue te hazy hinterland of less a basic depart trends could be ef menting policies crimination towar of the main reco ASARRD was
receivingfutilizing

ng methods aimed endowed farmers hailed as being
rch, and new crop largely not for and less abourers.
hat the governthe countries D were on the ed in increasing
ensuring better Improved, purhe poor people. hore, how, at
benefitted from action were not int, as maintainincreased proit, planners, extors overlooked ind special priome agricultural KEI’S.
Bant conclusions 3D were:
new development, ceptible decline in
and conditions of ir and peasant. The been from ownerpart-tenant, share
ο HaίδοtireΕ.
ឧsng segetation 'al Sector. On the
Raide-leyel entretimes capital supply less andful of the Sinai farmers and
paternalitic land| aire the Saïy income sants, the so-called
and reforza has not the mainstream of é.
ay?
i.e. the marginal
mainstream of
ASARRD felt on needed to be neglected small bor. This sector remain in the development unIre from current Fected by impleof positive disis it. Thus one mmendations of lihat an active system had to
be built up among small farmers and peasants at the grassroots to enable them to take advantage of the facilities and services being made available by the local delivery system, or different government programmes. Only through group action would small farmers and peasants be able to receive the benefits of developments. In ASARRD's view, small, multifunctional groups of small farmers would need to be organised, not as a confrontation movement to secure more rights, but as a step towards bettering the socio-economic strength of small farmers and peasants by establishing a greater role for them in production.
The experiment in Nepal
Nepal was the first country covered by ASARRD to implement an experimental project on small farmer development in two different agro-ecological areas of the country-one in Janakpur District in the Terai and the other in
Nuwalkot District in the hills.
The Agricultural Development Bank (ADB), the agency responsible for the SFDP, is assisted by a National Coordinating Committee composed of representatives from the different ministries, departments and corporations directly involved in small farmer development. This committee functions as an overall policy-making body. At the project level, there is a SubProject implementation Committee whose members are the various district level officers from different line agencies. This committee, whose secretary is the GO/ARF, is responsible for the actual implementation of the project.
The project aims at assisting 6,000 families drawn from lowincome small-farmers, tenants, share croppers and landless agricultural labourers in the Dhanusha. and Nuwakot Districts to raise their income and overall level of living over a period of three years.
Four Group Organisers/Action Research Fellows (GO ARF), two in each project area, are working on a full-time basis. Two of these are bank personnel and the other two have been deputed to the
29

Page 32
project from the Agriculture Department. The GO/ ARFs are responsible for organising groups of small farmers and landless agricultural labourers. They are not expected to duplicate the functions of the other development departments but to act as links between the different departments and the farmers groups. The GO/ARFs are also encouraged to conduct actions research which will hopefully throw light on the nature and practicability of grassroots institutions, the procedures and regulations regarding lending and repayment of loans to low-income small farmers and landless agricultural labourers, the problems of small farmers and suitable solutions required to overcome them and other associated matters.
On the basis of a US $ 20,000 grant from FAO/UNDP to serve as a guarantee-cum-risk fund, the ADB has undertaken to extend ten times the amount to the small farmers and landless agricultural labourers without requiring collateral. In both areas, cumulative loan disbursements have amounted to about Rs. 1,600,000 through 72 groups which have been organised in the last two years.
A closer look at the SFDP
The total population of the two Panchayats, Tupche and Karki Man Kamme, in which this project is operating is 9,000. There are 1,580 households in all. About 1,000 households own less than 0.4 hectares of land. About 90 percent of the people are in the category of small farmers. 24 households have no land at all. Only 26 percent of the land is irrigated.
The GO/ARF who is in charge of the Nuwalkot SFDP is a tall, lanky man, 40 years old and his name is Chandra Kant Adhikari. He has been working here singlehanded. More recently he was joined by an Assistant. Group Organiser. Chandra, Kantji ((ii) is - South Asian honorific) has been in service for the past 20 years. He started work as an extension worker and gradually came to be an Agriculture Development Officer
30
for a District, deputation from: of Agriculture te
Chandra Kant ability to unders establish an exc them is perhaps rural backgroun from a poor ri Owns about 0.5 Because there v his village he seven days to to join a school, not afford to sen so lhe underwent ing in agricultu began his ‘Wor extension agent. poverty himself, can not only peasants but als with their lot.
The first thin did was to con survey of the Through this he people and their found out that in Tupche faced as small farme They had very fertile land. In irrigation facilitic pended entirely had almost no of any kind. No out of reach, bu ment personnel provided them. conditions of g. banks and the p were so cumbers
Île VCI’ e VeÎì COI getting a loan f sequently they at the mercy of both consumptic loans. The rate C to pay was any to 100 percent p.
What the smal on their land w, feed them for 6 the rest they ha ( alternative empo. going hungry. W ployment was ve forced them tC The vicious cir

and is now on l the Department
the SFDP.
ji's simplicity and stand peasants and ellent rapport with ; due to his own d. He is himself ural family which hectares of land. was no school in once walked for go to Kathmandu. The family could d him to a college, a-year long trainLire extension and king life as an Having lived in Chandra Kantji understand the o identify himself
g Chandra Kantji duct a household. two Panchayats. got to know the problems. He soon the small farmers similar problems És anywhere else. little or not very the absence of es' the peasants deon the rains. They access to inputs t only were inputs it also the governwho could have The terms and etting loans from rocedures involved ome that they had me near to ever rom a bank. Conhad been entirely money lenders for on and production if interest they had 7thing between 50 et al.
l farmers produced as enough only to to 8 months. For 3 to look for some loyment to avoid lages for such emry low. This again borrow money. cle was complete
and almost impossible to break through.
Many children of small farmers did not go to school as they were needed at home for work. The literacy rate was very low; medical facilities available only at the district headquarters, and in any case farmers were too poor to afford medicine.
Furthermore, on account of their low economic and social status, small farmers were not sufficiently represented in any local institution of importance for economic development.
There was no end to the problem. It also became clear to those who were implementing the project that a variety of solutions would be needed to make a multi-sided attack on the farmers' poverty. The people best suited to attack these problems were those whose problems these were, i.e. the small farmers themselves. The best vehicle for effecting changes were thought to be strong multi-functional groups of small farmers and landless peasants which would give them a common voice and strength of their own.
The first few steps were the toughest
The initial cautious attitude of the peasants towards the project was expressed thus by a group leader:
“When Adhikari came to us for the first time we were a little sceptical. We were not quite sure how these groups would work. We were afraid to take loans from the Government thinking it would get us into un necessary trouble. But we decided to give this idea a trial, anyway.
Once the first few groups got to be organised, the idea, lost much of its original vagueness. Small groups of 7 to 20 persons, all small and marginal farmers, came to be formed around an economic activity. With the help of the GO/ARF the groups began to formulate production plans and to apply for loans from the local branch of the Agriculture Develop
ECONOMIC REVIEw, JAN./FEB. 1979

Page 33
ment Bank through the local cooperative society. Because of group guarantee the small farmers and landless peasants were not required to furnish any collateral to become entitled to receiving loans.
Some statistics about the groups
There are now 37 groups in Tupche with 658 members. This constitutes 39.5 percent of the small farmers in the project area. Among the members are 88 women who have been organised into 7 subgroups. Among the member farmers organised into groups 79.7 percent under the category of 2-8 ropani and the rest are in the category of landless and I-2 ropani. (There are 30 ropanies in one hectare). Loans amounting to Rs. 10.78 lakhs (1.78 million) have been disbursed for short, medium and long-term income raising activities. Rupees l.72 lakhs have already been repaid. The repayment of loans is almost 100 percent, thanks mainly to group responsibility and group pressure. With no default in repayment the small farmers have proved to be better lcanees than rich farmers whose default rates are quite high.
It has been the experience that through, discussions and consensus, the groups have been able to identify and plan viable projects which have been acceptable to the banks. The different activities for which loəns have been taken are the following:
% of Activity tofal
loan
Crop Production 9.0 Buffaloes 60.0 Goats 16.0 Oxen 6.5 Pigs apd Poultry 0.5 Fruit Farming 1.0 Handlcoms . . - - 3.0 Sheen - - 4.ü
Joint production activities
Encouraged by the achievements of group action with regard to getting loans, some groups have even ventured to initiate certain
ECONOMIC REVIEw JAN./FEB. 1979
joint-production example all the one group have ta of Rs. 7,200- to poultry farm. To the group membe constructed a shed land bought by ti group savings. A son of one of the has been employed Ris. II 0U a month the poultry farm.
Two more enter of the same groU a rice mill with a lo from the bank. Ti rice mill in the in perhaps the first o by such small faI of the two owne become a self-taug
Another group, of which belong tribe, has recently goat rearing proje share the responsil after the goats. Me shed for the goats on the long list of the group has plan
Members of ano us that to become they decided to ste orchard. They bol
next to a piece of
gradually occupied also to extend the area of 1..5 acres. Ti of the area, wante this “audacity'. viously not happ 'monopoly on auc illegal occupation *But due to our they were not ablı was the proud boa members. A land now been employe salary of Rs. 100/ orchard. The grou all the figures regar and kinds of frui orchard on their
was something q in terms of colle joint responsibility.
We discovered t started joint - weav a number of gr. even sold the cl

activities. For 25 members of en, a joint loan tart a, common. house the birds Ers have jointly on a piece of e group ott of young boy, the group members, on a salary of to take care of
prising members p have started an of Rs. 15,000 his is the first earby area, and he to be owned mers. And One rs has already ght mechanic!
all the members to the Tamang started a joint2t. The families bility of looking ιking a common. is the next item future activities ned for itself.
ther group told 3 more cohesive lirt a community Jught some la Indi barren land and the barren land orchard to an he bigger farmers d to discourage They were ob7 to lose their lacious actis like
of land etc.)
group strength è to disturb uso st of one of the less person has d on a monthly to manage the p members had ding the number (, trees in their inger tips. This uite remarkable stive effort, and
hat, women had ing activities in ups, and they oth jointly. In
addition construction and running of fish ponds, smalle-scale irrigation systems and common afforestation are also being done oy some other grOUIps.
The plans for future joint-ventures were more ambitious and at the same time not less realistic.
Production oans are fine,
how about immediate Reeds. The poverty of small farmers and landless people has been so acute here that they have not been able to survive without taking loans for food, medicines childbirth, marriage death, etc. Whereas production loans take care of their future, the consumption loans are what ensure their survival on the one hand and their continued exploitation by the money lenders On the other.
Not exactly happy to see their small permanent clients, the poor peasants, getting stronger through group-action and getting access to institutionalised credit for their income raising activities, the money lenders tried to teach the small farmers a lesson by refusing to extend them loans for emergencies and immediate needs. As banks do not usually provide such loans in any case, the money lenders hoped to break the unity of the small farmers.
but
The way out of the dilemma, proved to be 'group saving. Each group decided to organise its own saving fund into which each member was expected to deposit a fixed amount every month. Out of this fund the group then started giving consumption loans, loans for medicines, deaths, marriages etc. As money earns money, the funds started growing. Now the groups even give loans for production purposes out of their own saving funds. In all, the 37 groups now have about 20,000 rupees as savings.
How much money is to be deposited every month; who is to receive how much loans for what purposes at what rate of interest - all this is decided by the group members.
Members feel that the saving funds have not only helped them
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to meet their immediate needs but have also helped to further more unity amongst them. Moreover consumption loans for us are production loans. How can we produce if we do not eat?——was how one wise peasant put it.
Not by economics alone
Although the groups started as loan facilitators, they soon took on responsibility for other incomeraising activities as well as for other activities to promote the education, health, hygiene and social status of their members.
The following activities have been undertaken by the various SFDP groups during the last two years in the Tupche area :-
Economic Activities
-information has been provided on
compost making.
–2,000 fodder plants and 35 kgs of
grass seeds have been distributed.
–350 fertile eggs apd 150 birds of improved quality have been distributed to encourage and improve poultry.
-altogether 3, 188 summer and winter fruit plants have been distributed. Every member has been encouraged to plant at least five fruit trees near his/ her hut.
-40 kgs. of improved seed of paddy has been distributed for seed multiplication. Farmers liked the new variety with the result that now about 3,000 kgs. of paddy seed are with the farmers for the next year. The Agris culture Extension. Office has purchased 600 kgs, of seed from these peasants.
-improved seeds of maize, wheat and potato have also been distributed.
-twice a month a market is arranged jointly by the local cooperative Panchayat and SFDP. Peasants themselves are the buyers and sellers here.
Educational Activities
i-With the help of the Education. Office two centres for adult education have been started to provide literacy skills to school drop-outs and adults. More such centres are on the way.
-With the help of the Agriculture De
partment Officer, seven gronp leaders
have been given training as leaders in agriculture.
-41 group leaders from Tupche and Janakpur have participated in an exchange programme between the two projects.
32.
Health and Hygiene
—About 75 percer already constru units;
-Education on a Planning have 1 members have While others hav traceptives;
-Services of a m vided twice a m
-A vaccination p undertaken for til
Emergence of a SI.
pressure group
Through the f groups not only status of the improving but and political stat mechanisms' of are being created On the basis of th the peasants are out of their so-c silence”. They ha now to demand from the differe and local institt are becoming me) operatives in numbers. Alread group-action 45 s been elected to bodies. Slowly bu increasing the stre peasants vis-a-v holders and mone
In the frequer take place in this people from dif departments, fro small farmers, distinct changes noticeable. No llo farmers and lan sit passively at meetings. They the centre of t cipating in mee confidently. An they as afraid a to air their views officers. They ev tics about thei faltering and w witten reports.
As they put it Because we are

activities
of the members have ted temporary toilet
di services for Family een provided and 32 Ot vasectomies done a taken to using con
dical doctor are pronth, and
'ogramme has been e children.
all-farmer
Irmation of small is the economic small farmers also their social ls. The receiving the small farmers and strengthened. eir group strength gradually coming alled 'culture of live a group voice various services 2nt line agencies utions. And they mbers of local coever - increasing y as a result of small farmers have local Panchayat ut surely all this is bngth of the poorer is the big land y lenders.
Lt meetings which area, now between ferent government m FAO and the there are certain that have become inger do the small less peasants just
the outskirts of are very much in hings nOW, partisings actively and no longer are s they used to be, before government en reel out statisgroups without ithout the aid of
in their own words, a group now and
we stick to each other, we have suddenly become more powerful. The money lenders are afraid to exploit us now. The government officials speak to us, they even speak nicely. We are also no more afraid to enter the bank or the office of the cooperative society.
Another peasant said 'we used to be like frightened mice. At the sight of a better-off person (a cat) we used to run away. After the formation of our group we feel like cats ourselves. We don’t run away when we see another cat'.
The SFDP has given these peasants hopes of a better future; a new basis for dreaming of a better life. Half jokingly and half in earnest a peasant said - May be now some of our wishes can come true. I for one wish that my second son should one day eat rice from a plate in the middle storey of my house'. ''INSHA ALLAH' we wished him hoping that one day he and others like him. ought indeed have a three-storey house to enable a middle storey to make his wish come true
Group problems in Tupche
However, it would be wrong to get the impression that everything has been smooth, sailing for all the groups. There have been problems. One of them has been reluctance on the part of some members to respect liability. They want to enjoy the benefits of groupaction without maintaining group discipline. Sometimes discussion, was enough to deal with such cases, in some other cases group pressure had to be applied on some members in order to avoid letting the group breaking up as a result of lack of discipline or default in loan re
payment.
Another problem has been that the burden of group work has fallen too much on the group leaders in a few cases. This has led to a certain amount of tension in the groups. Problems such as these have been remedied through discussion and better division of responsibility within the groups.
EconoMic REVIEw, JAN./FEB. 1979.

Page 35
There have als o been instances of money lenders trying to disturb the groups indirectly. So the peasants have had to be constantly on their guard to fend off such threats and over come problems as and when they have arisen.
Gradually these different groups are moving towards the formation of larger association of small farmers’ groups. Such an association while further increa, ing the strength of the small farmers, could also take on more responsibilities and provide even more services to the grOlips.
Also on the cards is the setting up of a modest training centre at Tupche to facilitate and provide different kinds of training to group members and group leaders. The training Would be in animal husbandry, poultry, handloom operation, first aid, simple accounting, leadership, social dynamics and other social skills related to group work and Organisation.
Why is Group Formation Catching On
It may well be asked what is it that makes the SFDP click so well in terms of helping the poor - especially in view of so many past failures of programmes such as this one? The main reasons would appear to be the following:
1. The fact that “the village' has not been seen in this project as a homogenous whole. It was decided to include only the small farmers in the project and inspite of pressures from the better-off sections to 'gate crash', this dxcision has been strictly enforced. Thus there are no divergent class interests within the groups. ,
2. The fact that the groups have been deliberately kept small making intensive and open discussion possible between the members on a basis of equality.
3. The fact that programmes have not been imposed from above. The group
embers decide which activities they want to start first and they plan these out with help from the CO/ARF. Because of this planning from below the group plans have been need-based and realistic.
4. Also the fact that the group leaders are not nominated but elected by the members.
ECONOMIC REVIEw, JAN/FEB. 1979
5. Also because un the groups has been bu cific functions like repa ing the saving fund ar meetings.
܂ܢܛ3 6. Continuous guic from the GO/ARF anc departments has also h
7. Another positive support and continuou the project by the Sub tation Committee, the nating Committee and Small Farmer Develop With action at the field flection and analysis h; at these different level. Separately.
Evaluation has
the project. In th Evaluation Worksh and 1978, a partici logy of evaluation
Small farmers wer these evaluation s have been in runni
The evaluation up with suggestior the field action p) for policy-makers
Similarly at a na on "Two-way Proce (another ripple caus in March 1978, focussed on the and how it coul through the parti farmers using the the SFDP.
Besides agreeing for planning from unanimous agreeme shops on the need
SFDP to other part
Mutual Learning at
The SFDP is for thought and dir not only to peop but also to other in rural developme
ences gained throu have been shared a ings attended by

ty and cohesion in ilt up through speying loans, managld regular monthly
lance and support | other government Lelped.
with SFDP work in Bangladesh and the Pnilippines.
Recently Chandra Kant Adhikari, the GO/ARF of Nuwakot participated in a seven week Regional Change Agents Training Programme
organised by FAO's Freedom From
factor has been the S guidance given to -Project Implemen-- National Coordiby FAO, Bangkok's ment Unit. Along level, constant reas been carried out s jointly as well as
been built into he two Annual ops held in 1977 patory methodo
was used. The 'e as active in essions as they ng their groups.
Workshops came ns not only for rojects but also and planners.
tional workshop ess in Planning”, ed by the SFDP) attention was planning process d be improved cipation of the experience of
g on the need below there was ent in the workto expand the is of the country.
Asian Level
providing food ection for action le within Nepal Asians involved ent. The experi
gh SFIDP Nepal It regional meetpeople involved
Hunger Campaigns Action for De
velopment. Ten field workers from government and non-government development projects in Bangladesh, India, Nepal and Sri Lanka spent two days at Nuwakot to understand and learn from its experiences in group action. Chandra Kantji visited the projects of the other ten participants. A useful cross-fertilization of ideas and experiences took place, during this training.
Not at the Expense of Quality
Expansion of the project in many more areas of Nepal is what everyone is talking about now. In fact the Agriculture Development Bank has already decided to etend it to fifteen more districts. Successful projects should indeed be multiplied, especially the SFDP as it is . neither expensive nor a project which required too much additional personnel or structures.
While expanding, however, the same amount of flexibility and innovativeness would have to be ensured as there was in the pilot projects. Ample time would have to be allowed for the projects to take root in each area. What happened in Tupche can merely be a guide te action, not a set formula to be imposed on other people in other areas. Like a stream which takes the shape of the area and terrain it is in, the new projects will have to be flexible enough to respond to the special needs and character of the people and areas where they are to be implemented. It will be a pity if quantitative achievements were to be at the expense of quality, for what is impressive about the SFDP, Nuwakot, is its quality and effectiveness. And there are no better statistics to prove the point than the newfound enthusiasm and high spirits of the little peasants of Tupche in Nuwakot.
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