கவனிக்க: இந்த மின்னூலைத் தனிப்பட்ட வாசிப்பு, உசாத்துணைத் தேவைகளுக்கு மட்டுமே பயன்படுத்தலாம். வேறு பயன்பாடுகளுக்கு ஆசிரியரின்/பதிப்புரிமையாளரின் அனுமதி பெறப்பட வேண்டும்.
இது கூகிள் எழுத்துணரியால் தானியக்கமாக உருவாக்கப்பட்ட கோப்பு. இந்த மின்னூல் மெய்ப்புப் பார்க்கப்படவில்லை.
இந்தப் படைப்பின் நூலகப் பக்கத்தினை பார்வையிட பின்வரும் இணைப்புக்குச் செல்லவும்: Economic Review 1984.01-03

Page 1


Page 2
“While we have made very substantial gains massive economic problems still remain. I have never tried to conceal the very serious nature of the financial and economic problems which we still face and the many difficult and painful decisions which the Government must take if we are to overcome them.'
A candid comment on the economy in 1984, by the Hon. Minister of Finance and Planning, Mr. Ronnie de Mel in an address to a meeting of Government Agents early in 1984. Our reviews of the economy elaborates on this situation.
Growth of Sri Lanka's GDP 1977-83 G.D.P. growth at constant (1970) factor cost
Points in index 更 t চুম্বন্দলটি00
Intermediate
goods
V»
investment goods,
廖
WHOLESALE PRICE INDEX
1974 - 100 monthly
1982 1
EXCHANG
cumulative per
MONEYS monthl MILLONS Ü-RUPEES
40
000
30,000H.
broAD
suppl.
MERCHANDI AND II
montt
 
 
 
 
 
 

Percent ECONOMIC INDICATORS
vy r, e The Government's medium term
os3 projected GDP growth rate of 5.2 perscent was well exceeded in the first 捻 four of the six years since the target e-2 was set in 1978. However, in 1983 the 其燃 growth rate was the lowest on record for this period and there were many 83==!ه * ゴ。 reasons for this situation as the econo北雲 mic indicators on this page illustrate. リ Monetary management became the -2 major problem towards the latter 辜 part of 1983 and in early 1984 搅 due to certain unforeseen and extrane呜 ous factors like adverse weather and
the July disturbances which disturbed the normal flow of economic activity.
Domestic prices continued to rise E RATES steeply during, 1983 and a significant
hange centage change expansion in credit, together with an excess of liquidity due to a tea price yrrix boom at the end of '83, resulted in
increased inflationary pressures ΟΠ the economy. Speculative activity in foreign exchange markets complicated the situation, while pressures on the balance of payments led to a depreciation of the Sri Lanka rupee vis-a-vis the other major international currencies. The real growth rate of 4.9 percent in 1983 was achieved mainly as NARROWMONEY a result of increases in agricultural SUPPLY production, particularly the paddy sector; and latterliv tea production and export earnings reached record levels and helped to reduce part of the balance of payments deficits, while foreign borrowings continued to play a vital role in filling the resource gap,
COMPOSITION OF FOREIGN DEBT Rupees "OOO Millions
O MILLIONS OFRUPEES LLONS OFFUPEES
50,000 50,000
5.0
45,000 . 45,000 iOther مصر
s Non-Project Loans 4.0 40,000 جه- Commoditov: 490909 در
Project Loans
3.0 35,000 35,000 میسر
30,000 30000 مصر
2.0 &:
25,000 - 25,000
1.O 2000 -s 20,000
15,000 - 15,000 O.O
10,000 10000 مترور
SE EXPORTS 5,000 ~ 50 JJ JJ 500 ملی۔
hly 1973 4 5 - 7s 77 78 79 eo 81 82 83

Page 3
EKONOMIQ REVIEW 蠶 = } Volume 9
Published by the People's Bank Research Department
Head ○ffice。 Sir Chittanpalam A. Gardinar Mawatha Colombo 2. S. anka
M. W. J. G. Men
A. W. Clausen
T. B. Karunaratin
NEXT ISSUE
the ECONOMIC reviews a
promote knowledge of and interest in the 来源 Mineral R economy and econd development 率 Privileged process by a many sided presentation of 岑 Engineerin Via VVS & reportage, facts and debatea ܥܕ_r_܊ Market co
HE ECONOMIC REVIEW is a continity service project of the People's Bank. COVER its contents, however are the result of editorial considerations only and do not necessary refect Bank policies or the officia viewpoint. Signed feature articles also are the persona views of the authors and do not represent the SLLLLL LLLL S LSSLS LLLLS S SS SS SS SSLSSS LLJY Similar contributions as welf as | connents ang Viewpoints are welcome
EE CONOM CREVEV spublished northy and is available both on Subscription and on direct sae
Designed
 
 

Numbers 10-12 January/March 1984
C O N T ENTS
COLUMNS
2 Diary of Events : January/March 1984
16 Constraints on housing construction
SPECIAL REPORT
3 Sri Lanka's Economy
FEATURES
dis l 5 Urban services and share market operations in the promotion of urban regional development
23 Priority issues for 1984 - a World Bank
perspective
e 28 Sri Lanka's apparel products - New
quotas and export potential
圈
esources of Sri Lanka and their development Export Zones ng education in Sri Lanka - some aspects for development
nditions for Sri Lanka's minor export crops
by Palitha Kannangara

Page 4

ECONOMICREVIEW, JAN-MARCH 1984

Page 5
Million Kilograms
240
220 a
Tea
iSS SS iSuSiqS qSS iSuS iSSiSS iSS iSSiSSiS iiS
MILLION METRICTONS
2.5
MILLIONS OF NUTS
3000 A.
2500
2000
SRI LANKAS ECO
Sri Lanka's economic perforinance in 1983 is difficult to compare with that of the previous years as this was in many ways an unusual year for the economy. Against the backdrop of a fading recession that had effected the developed countries and precipitated the decline in Sri Lanka's terms of trade was witnessed (locally) a few events of far reaching consequence, beginning with the new term of office of the government and the mini general election in the first part of 1983. Also, drought conditions early in the year resulted in a lower rate of growth in the agricultural sector. But most
ECONOMICREVIEW, JAN-MARCH 1984
unsettling for the ec
was the civil disturb
week of July when shops, dwellings, WaT cles in the suburban troyed. This was foll of short working h disruption of norma lasted a few more w also a temporary dec port sector and a gene of construction activ sector, particularly t was a noteworthy cas lic expenditure on d activities had to be
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

ン。
U
--
-
口
蜀
NOMY
Onomy, however, ances of the last several factories, :houses and vehi
areas Were desowed by a period purs and general
activities which 2eks. There was line in the transral slowing down ty. The service he tourist trade, ualty; while pub:fence and relief increased at the
cost of other sub-sectors. It is not surprising therefore that the rate of growth of the Gross Domestic Product (GDP) came down to 4.9 percent, the lowest reached since 1977. (See table 1.) Intertwined with these problems and further aggraviting the situation were an unstable balance of payments, and an unprecedented monetary expansion towards the latter part of the year.
The annual growth rate in the
GDP reached its highest point of 8.2
percent in 1978 but declined gradually thereafter. However, the growth rate over the six year period, 1978-1983, averaged 6 percent per annum, which is considered impressive in view of the series of adverse external factors during this period and also by virtue of the fact that the average growth rate exceeded not only that of the pre1977 period but also the government's medium term target of 5.5 percent per annum set at the beginning of
1978.
Considering grovth in the domes
tic product among countries of the region, however, Sri Lanka's performance in 1983 lagged behind nearly two-thirds of the other Asian countries. Of 15 developing countries in the Asian region, selected by the Asian Development Bank from among its member countries, Sri Lanka was placed in tenth position on a comparison of real growth rates in 1983. (See box on page 6).
Agriculture
The Central Bank's sector-wise analysis of the Gross Domestic Pro duct in 1983 has revealed that the real growth rate of 4.9 percent was achieved mainly due to the increases in production in the agricultural sector, which includes forestry and fishing. The 1983 growth rate of 5.1 percent in this sector was twice as much as that recorded in the previous year. The high growth rate in this sector was largely the result of a 14.7 percent increase in the volume of paddy production in 1983. A Maha crop of about 85 million bushels of paddy was harvested and total production for the year reached 118 million bushels.

Page 6
Table 1
Sri Lanka's Production Indicators 1
GDP at Constant GNP at Constant
1970 factor 1970 factor Cost Prices Cost Prices
Year Rs million % rate Rs million % rate
of growth of growth
1974 14,585 3.2 14,449 3.2 1975 14,987 2.8 14,837 2.7 1976 15,431 3.0 15,258 2.8 1977 16,078 4.2 15.934 4.4 1978 17,401 8.2 17,329 8.8 1979 18,501 6.3 18,430 6.4 1980 19,575 5.8 19,456 56 1981. 20,706 5.8 20,257 4.1 1982 21,756 5.1 21,232 4.8 1983 22,824 4.9 22,076 4.0
Source: Central Bank Review of the Economy 1982 and A
Some of the comparatively smaller areas in the agricultural sector such as sugar, milk and fisheries made no noteworthy contribution in 1983 despite the producer subsidies and attractive market prices offered to them. Sugar production in 1983 was estimated at 21,508 metric tons, a decease of 6 percent when compared with production in 1982. Despite a tariff policy geared to maintaining producer incentives as a measure of protecting the local industry and inducing additional investment in the sector the domestic industry was unable to produce more than 10 percent of local consumption requirements last year. Estimates of milik production in 1983 were 419 million litres (including buffalo milik) and increase of 4 percent over the previous year. Although the National Milk Board increased producer prices payable for milk in March 1983 the amount of milk collected by the Board dropped by 2 percent to 54 million litres during the year. Fish production provisionally estimated at 218,500 metric tons in 1983, showed only a marginal increase of 2 percent over that of the previous year. Coastal fish production in 1983 was 16 percent below that envisaged in the Five Year Fisheries Master Plan.
Other agricultural sectors, however, consisting of subsidiary food
4
crops, minor live stock prod contribution t( the sector in 19
The grow sectors for the are given in Ta agro-processing ber and cocon cent in 1983, decline in the added in factc only by 2 per with 8.9 perce This is the met decline in pr owned industr crease in the In the small 4.1 percent observed in 1 10.1 percent g. manufacturing creased margir 1983, compar expansion in 1
Construction
In the co has been only percent in 19 struction act sector seem t

974 - 1983
GNP per Capita Constant Prices
SMSSMMSSSLSSSMMSSSMMSS SLLSLLSL LLLLS S
Rupees % rate of growth
1,088 1.8 1,099 1.0 1,112 1.2 1143 28 1,221 6.8 1,274 4.3 1,320 3.6 1,356 27 1,398 3.1 1,432 2.4
nnual Report 1983
export crops and other ucts made a substantial D the overall growth of 283.
rith rates in various : period 1982 to 1983 able 2, Value added in industries of tea, rubut declined by 4.6 peras against a 5.3 percent previous year. Value bry industries increased cent in 1983 compared nt in the previous year. result of a 15 percent oduction in the state es and a 26 percent inrivate sector industries. industries subsector, a growth rate has been 983, compared with a owth rate in 1982. The sector as a whole inally, by 0.8 percent in 2d with a 4.8 percent
82.
struction sector, there a marginal growth of 1 3. The building con vities of the private
have declined in 1983
for the third consecutive year. The reason for the increase in value added in this sector was mainly because of the high level of expenditure in the Accelerated Mahaweli Scheme; with the completion of Headworks at Maduru Oya and increased construction work on the Victoria Dam and Randenigala Projects.
Value added in electricity, gas, water and sanitary services increased by 6.6 percent in 1983. Electricity generation in 1983 increased by only about 2.3 percent over the previous year. However, the production of gas products increased by about 20 percent.
In the transport, storage and communication sector, there has been a 4.5 percent expansion in 1983, compared with the 6.2 percent expansion in the previous year. The slower growth in imports has been primarily responsible for this slow growth rate.
Value added in the wholesale and retail trade sector increased by 5.3 percent in 1983, against the 6 percent growth in 1982. Here too, the value added contribution from import based trade increased much less than in the previous year.
The banking, insurance and real estate sector grew by 21.4 percent as against a 1 1.9 percent increase in 1982. Value added in ownership of dwellings increased by 2.3 percent compared with a 5.5 percent increase in 1982.
In public administration and de-, fence, a large increase in value added has taken place in 1983.
The other services sector suffered a marginal decline in 1983 compared with a 7 percent growth rate in 1982, largely because of the decline in the tourist sub-sector. The total number of tourist arrivals declined by 17.2 percent in 1983 over the previous year.
The Central Bank has concluded from an analysis of the sectoral performance in 1983 that the Sri Lanka
ECONOMIC REVIEW, JAN-MARCH 1984

Page 7
economy's real output levels are below its potential. This is so in state owned plantation agriculture, particularly in tea, and in public corporation where overall production declined by about 15 percent. Corrective measures in these sectors could greatly enhance the production potential of the economy to achieve a higher real growth rate.
The agricultural sector still accounts for more than one quarter of the Gross Domestic Product, although its share in exports has declined in the last six years from a level of 72 percent to 58 percent. that has lagged behind most in this sector has been that of tree crops.
The area
The potential for exp employment and exp
has been recognised :
problem areas are r receive the attentio concerned. Manufacturing
In the manufact added has grown at 4.2 percent over the Here too overall gr six years has been a as a result of stagi in the plantations w tea, rubber and coc
one third of the value During 1983 out
facturing industry se only 2 percent; cor
Table 2 Sectoral Composition and Increase in Gross Nati
Sector
Value Add (Rs Millio
1982* 1.
1. Agriculture, Foresty and Fishing 24,964 2 1. Agriculture 20,771. 2 1.1.1 Tea 2,418 1.1.2 Rubber 770 1.1.3 Coconut 3,263 1.1.4 Paddy 5,484 1.1.5. Other 8,836 1.2 Forestry 1,710 1.3 Fishing 2,483 2 Mining & Quarrying 2,238 3. Manufacturing 13,601 1.
3.1 Export Processing 2,846 3.2 Factory industry 8,777 3.3 Small and other Industry 1978 4. Construction 7,959 5. Electricity, Gas, Water & Sanitary Services 1,089 6. Transport & Communication 8,536 7. Wholesale & Retail Trade 16,059 7.1 imports 4,167 7.2 Exports 2,861 7.3 Domestic 9,031 8. Banking, insurance & Real Estate 3,192 9. Ownership of Dwelling 3,250 10. Public Administration & Defence 2,812 1. Services (not elsewhere stated) 8,698 12. Gross Domestic Product 92,398 9 13. Net Factor Income from Abroad -2,034 - 14. Gross National Product 90,364
*Provisional
ECONOMIC REVIEW, JAN-MARCH 1984

ansion of output, Orts in this SectOr ind the associated ow beginning to in of authorities
uring sector value in average rate of
period 1978-83. owth in the last diversely affected lation of output ith processing of onut constituting
added. put in the manu
ctor increased by - npared with a 9
percent increase in 1982 this drop in output is significant. The industrial sector has to face several difficulties mainly on account of developments outside its control. Growth of industries such as garments and leather goods, in which Sri Lanka has a comparative advantage viz-a-viz the induscrialised countries, has been inhibited by the protective tariff and nontariff barriers in the markets abroad.
The ethnic disturbances in July 1983 also affected production in the industrial sector. Another reason for drop in output was the power shortage
as a result of drought. Energy
Energy supplies continued to be a problem in 1983. Although world oil
onal Product at Constant (1982) Prices 1982 - 1983
ed Percent Share of GNP Increase/den) Crease OVer" previous year (Rs Million)
983 ཨོཾ་ 1982 1983 1983
6,237 27.7 27.9 1,273 1,810 23.0 23.2 1,039 2,309 2.7 2.5 - 09
833 O.9 0.9 63 2,995 3.6 3.2 - 268 6,252 6.1 6.6 768 9,421 9.8 10.0 585 1816 1.9 1.9 106 2,611 2.7 2.8 128 2,413 2.5 2.6 175 3,710 15.1 14.6 109. 2,715 3.1 2.9 -131 -سي 8,953 9.7 9.5 76 2,042 2.2 2.2 64 8,039 8.8 8.6 80 1,61 1.2 1.2 72 8,920 9.4 9.5 384 6,910 17.8 18.0 851 4,242 4.6 4.5 75 2,870 3,2 3.1 9 9,798 10.0 10.4 767 3,876 3.5 4.1. 684 3,315 3.6 3.5 65 3,673 3.1 3.9 86). 8,672 9.6 9.2 ബ 5.926 102.3 103.1 4,528 2,889 - 2.3 855- 3.1 ܗ 4,037 100.0 100.0 3,673
Source: Central Bank of Ceylon Annual Report 1983

Page 8
prices came down for the first time in ten years Sri Lanka was not able to enjoy the full benefits of this favourable trend as unprecedented drought conditions restricted hydro electricity generation and imported oil had to be used in larger quantities to generate thermal power. Hydro electricity generation declined by 24 percent while thermal power generation increased by 96 percent over the 1982 levels.
Trade
Sri Lanka’s external trade performance began to show an improvement towards the end of 1983. For the first time since 1977 exports grew by 7 percent ( See table 3 ) and import values also declined (see table 4). The balance of trade deficit, however, continued into 1983 too. According
to Customs data, total expenditure on
imports in 1983 was Rs. 42,021 milion (SDR 1,671 million) and total earnings from exports Rs. 25, 183 million (SDR 1,001 million) resulting in a trade deficit of Rs. 16,838 million (SDR 669 million); which is a decrease of 2 percent in SDR terms over the previous year's deficit of Rs. 15,751 milion (SDR 686 milion).
As a result of the relative price movements of exports and imports in 1983 the country's terms of trade improved by 16 percent. This improvement was a significant development because the country’s terms of
trade had been deteriorating continu
ously since 1977.
Balance of Payments
A viable balance of payments position has eluded the country because of the inherent weaknesses in the external trade structure. Although for the first time since 1977 the terms of trade for Sri Lanka improved in
1983, the deficit on the service ac- i
count increased. This unfavourable movement in the services account began around 1980, mainly due to an increase in the payment of interest on
foreign loans and this situation was accelerated in 1983 with last year's significant drop in earnings from tourism. The excess of receipts over payments in the services account which 6
was SDR 38 m
a peak of SDR
in 1981 the s only SDR 10 there was a def
and in 1983 a
llion.
The rate remittances al 1983, although mittances in 19
 

illion in 1979 reached 40 million in 1980, but urplus came down to million and by 1982 icit of SDR 16 million, deficit of SDR 52 mil
of increase in private
so slowed down in the total value of re83 was higher than in
the previous year. The imbalance between foreign earnings and payments continued into 1983. In SDR terms, the trade deficit was SDR 808 million and the total deficit of Goods and Services SDR 860 milion. Private transfers of SDR255 million brought down the Current Account Balance deficit to SDR 605 million as seen in table 4 on page 7.
ECONOMIC REVIEW, JAN - MARCH 1984

Page 9
Table3 Balance of Trade 1978 - 1983
Rs. Million (SDR Mn in bracket
Exports (a)
Year Imports (b) Balance
F.O.B. C.I.F.
1978 13,206 14,687 - 1,481
76 -( )750( )674( ܗ
1979 ༣ 15,273 22,560 - 7,287
(759) (1,121) (- 362)
1980(c) 17,273 33,637 -16,364
)760-( )1,563( )803( ܗ
1981 20,199 35,530 -15,331
(891) (1,567) (-676)
1982 21,124 36,876 - 15.7S 1
(919) (1,605) (-686)
1983 25, 183 42,021 -16,838
(1,001) (1,671) (-669)
(a) Includes value of re-exports Source: Custom.S Sri Lanka
(b) Excluding bullion & Specie Central Bank of Cey, (c) Revised from 1980 onwards
Conversion 1983, also influence
1977 - 1 SDR = 10.42 1978 - 1 SDR = 19.58 1979 - 1 SDR =20.12 1980 - 1 SDR = 21.52 1981 - 1 SDR = 22.67. 1982 - 1 SDR = 22.98 1983 - 1 SDR = 25.76
A notable feature in the production indicators (seen in Table 1) is the wide disparity between the real growth rates of the GDP and GNP in 1983. This difference of almost .9 percentage points in growth rates has drawn attention to the size of the net outflow of factor income. This increase in outflow of net factor income abroad was caused more as a result of interest payments on foreign loan capital than on repartiation of dividents and profits accruing to private foreign capital. Interest payments on foreign loans went up in 1983 by as much as 34 percent over the 1982 figure. Debt service payments made up of amortization of long and mediumterm loans and interest payments relating to long, medium and short-term
degree the drop in rat real per capita inco percent in 1982 to 1983.
Total debt service
cluding IMF transactior
the earnings from merc അ~ത്തെ
foreign loans increased from Rs. 5,292
milion (SDR 231 million) in 1982 to Rs. 7,094 milion (SDR 285 milion) in 1983. This increased outflow of net factor income, during the course of
ECONOMic REVIEW, JAN-MARCH 1984
Table 4
Exports * Imports * Trade Balance * Services
Receipts
Payments Goods & Services Private Transfers Current Account B Financing Grants
Direct Investment Other Private Long Central Govt. (Net Short Term (Net) SDR Allocation Errors & Ommissio Overall Balance Monetary Moveme
Source:Public
*Customs data is

2, lon,
i to a large e of growth of me from 3.1 2.4 percent in
2 payments, inns, as a ratio of handise exports
and services increased from 18.9 per
cent in 1982 to 21.6 percent in 1983;
while the ratio excluding IMF trans
actions increased from 12.9 percent
to 16.0 percent between these two years. The overall debt service payments as a percentage of the receipts. from merchandise exports, services and workers remittances from abroad in 1983 was 17.9 percent as against 15.5 percent in 1982. Details of debt service payments are given in table 5.
It is seen that the increased volume of borrowing on concessionary and non-concessionary terms have over this period invariably led to substantial increases in interest payments; and resulted in the share of interest on public debt increasing from 3.2 percent of GDP in 1978 to 5.4 percent of GDP in 1983. In value terms, interest payments on public debt in 1983 consisted of Rs. 5,314 million on domestic debt and Rs. 1,279 million on foreign debt; with the percentage in
creases during the year being 27 per
cent on domestic debt and 40 percent on foreign debt.
The total foreign debt outstanding as at the end-of 1983, amounted to Rs. 46,025 million, recording an in
Balance of Payments 1978 - 1983 (SDR Million)
1978 1979 1980 1981. 1982, 1983
675 759 818 903 918 988 819 1121 1576. 1596 1808 1796 -144 -362 -752 -693 -890 -808 6 37 40 10 ー16 ー52 99 149 214, 261 303 317 93 112 174 251 319 369 -138 -325 -718 -683 -906 -860
17 37 105 172 240 255 alance -121 -288 -613 -511 -666 -605
46 111 106 136 147 160 1. 36 33 42 58 35 Term(net) 7 7 33 66 182 69 125 121. 1.25 225 231 292 - - 115 8 - 32
- 12 12 12 一、 - S 7 36 23 -4 24 17
65 35 - 166 -26 -24 - hts -65 -35 166 26 24 -
nvestment 1984-88, Ministry of Finance and Planning.
djusted and therefore differs from the figures in Table 3.

Page 10
crease of 33 percent as compared with the 19 percent increase in the previous year. The depreciation of the Sri Lanka rupee viz-a-viz other currencies led to an increase in the outstanding liability by Rs. 5,254 million in 1983, as compared to an increase of Rs. 440 million in 1982.
It was evident that the country was living beyond, its means and incurring heavy dehts to meet its requirements. The debt burden which is
the amount of sive of private the payment O. foreign debts
cent from an es 1980, The grC a result of th rent account C payments has subject of ser years. The
bilities, espec maturity have
Debt Table 5
Item 1979
1. Debt Service Payments 2,383.1
- (118.0) l. 1 Amortization 1,627.4
( 80.8) (i) To I.M.F. 622.6 ( 30.9) (ii) To Others (c) 1,004.8
( 49.9) 1.2 Interest Payments 755.7
( 37.2) (i) To I.M.F. 170.00 ( 8.4) (ii) To Others 585.7 2. Earnings from Merchandise
Export and Services 18,274.7
(907.7) 3. Receipts from Merchandise Exports, Services and Private Transfers 19,210.1
(95.4.0) 4. Debt Service Ratios
(as a percentage of 2) (i) Overall Ratio 13.0 (ii) Excluding IMF Transactions 8.7 5. Debt Service Ratios * (as a percentage of 3) (i) Overall Ratio 12.4 (ii) Excluding IMF Tránsactions 83
(a) Revised (b) Provisional
(c) Does not include amortization payments in res)
loans to other approved enterprises as informat * Calculated using rupee values. Debt Service to variations in exchange rates during the year.
 

external assets, inclutransfers, set aside for I capital and interest for had gone upto 18 pertimated 11.2 percent in with in external debt as e persistingly large curleficit in the balance of therefore been the ious concern in recent mounting external liaially those of short severely handicapped
the management of the balance of payments and the exchange rates. This weakening in the management of the balance of payments has even threatened the very foundation on which Sri Lanka's liberalised trade and payments system rests. The observations of the Central Bank in this regard are worthy of note: "notwithstanding the flexibility given to resident enterprises in conducting business with nonresidents, careful and adequate monitoring of financial transactions is a
Service Payments
Rs Million (SDR milion in Brakets)
1980 1981(a) 1982(a) 1983(b)
2,762.8 4,449.7 5,291.7 7,093.8 ( 137.0) (1974) (230.7) (285.3) 1,781.5 2,084.1 2,563.3 3,131.3 ( 91.4) ( 93.8) ( 12.Q) ( 126.9) 748.5 1,289.2 1,146.3 1,097.3 ( 43.4) ( 59.1) ( 49.9) ( 46.2 1,033.0 794.9 1,417.0 2,034.0 ( 48.0) ( 34.7) ( 62.1) ( 80,7) 981.3 2,365.6 2,728.4 3,962.5 ( 45.6) ( 103.6) ( 1 18.7) ( 158.4) 345.6 487.6 519.5 749.3 ( 12.4) ( 21.7) ( 22.4) ( 30.8) 635.7 1,878.0 2,208.9 (127.6)
22,207.8 26,526.1 28,059.8 32,875.1 (1,032.0) (1,168.2) (1,221.7) (1,305.2)
24,725.8 30,955.9 34,083.5 39,732.0 (1,149.0) (1,363.3) (1,484.1) (1,578.0)
12.4 16.8 18.9 21.6 7.5 10.1 12.9 16.0
11.2 14.4 15.5 17.9 6.7 8.6 10.6 13.2
Source:Central Bank of Ceylon
pect of FCBU loans to GCEC enterprises and some of the FCBU ion is not available. Ratios calculated on SDR values may differ from these rates due
ECONOMIC REVIEW, JAN - MARCH 1984

Page 11
sine qua non to ensure that obligations to non-residents do not overtake Balance of Payment realities'.
The Central Bank in its Annual Report for 1983 reveals the serious
ness of the deterioration in the debt profile and causal factors behind it when it observes: "in previous years the debt ratio excluded certain types of debt mainly due to difficulties in estimating those arising from offshore units. These omissions relate to lendings by the Foreign Currency Banking Units to GCEC enterprises and certain State Corporations and Ceylon Petroleum Corporation borrowings abroad. Given the general tightness of credit in the local market and its high cost, the temptation to borrow abroad was strong, especially as interest rates in the principal money markets were much lower than in Sri Lanka. Bank borrowings and commercial credit which formed a negligible proportion of total External Debt in 1979 had by end of 1983 climbed to 33 percent.
Between these two years long-term concessional debt increased by SDR 1,051 million while short maturity high cost credit from commercial sources increased by SDR 577 million. In consequence there was a significant deterioration of the debt profile. Another, and more worrying feature, was that the debt service to export ratio had by 1983 increased to nearly 22 percent. If workers re
mittances are aggregated to exports,
the ratio declines to 18 percent. On the other hand, if the gains from terms of trade are excluded, the debt ratio would have been at least 24.4 percent or 19.8 percent depending on whether or not worker remittances are added to export earnings. (Debt service ratios appearing here are still considered slightly understated as not all FCBU lendings to GCEC enterprises have been identified.)”
Monetary Expansion
The heavy increase in private sector credit, in 1983, also caused much concern to the authorities and resulted in a tightening of monetary policy measures. Narrow money supply, M1, increased by 25 percent in 1983 as against 17 percent in 1982; going up from Rs. 1 1,759.8 million
ECONOMIC REVIEW, JAN - MARCH 1984
Table 6
Money
അജ്ഞ
End Narrow M
of Supply (l
1978 5,936. 1979 7,669, 1980 9,428. 1981 10,024, 1982 11,759. 1983 14,747.
1984 Jan 14,964.
ത്തത്തെത്ത
in December 1982 million in December increase took place r quarter of 1983 as a liquidity in the ecor tea boom, increasing and cumulative ef deficits.
Certain unforese ous factors like the J speculative activity exchange market an repatriation of export complicated monetar 1983. The expansio latter part of last yea ed in increased infla in the economy. C were therefore in Central Bank, as hig ing continued to cha tolerable limits. The in a credit ceiling on advances with effect 1, 1983. The credit drawn at the end of stead more tradition instruments were in stricting credit: the ment of the deposit Bank advances wa introducing a reser utilised balances of C to the private secto Banks, and by reduci of accomodation rate for grant of commercial banks W to exceed quotas allo the bank rate for tem requirements.

Money Supply and Price Level
Supply (Rs. Mn.) Colombo Central Bank അജ്ഞsള്ള Consumer Wholesale Money Broad Money Price Index Price Index M1) Supply (M2) (1952 = 100) (1974 = 100)
4. 10,892.1 227.8 156.7
3. 15,057.6 252.3 71.6
2 19,860.2 3.18.2 229.5
4. 24,446.8 397.7 289.7
8 30,509.9 423.7 291.5
9 37,256.9 517.8 418.4
3 38,277.2 523.7 454.4
Source: Central Bank of Ceylon
to Rs. 14,747.9
1983. But this mainly in the last result of excess nomy due to the domestic credit fect of budget
:en and extraneuly disturbances:
in the foreign d delays in the proceeds further y management in n in credit in the ır, had also resulttionary pressures redit restrictions Eroduced by the h levels of spendse prices beyond situation resulted Commercial Bank from November
ceiling was withNovember and inall types of policy troduced for rereserve requireis on Commercial is increased by ve ratio on unverdrafts allowed r by Commercial ng the availability under the penal
advances; while vere required not
cated to them under
porary liquidity
Monetary expansion, was held at the level of 22 percent with the policy measures affected in the latter half of 1983 which slowed down the rapid expansion of credit.
The increase in the money supply is generally dependent on three main casual factors, namely, domestic credit; net foreign assets of the banking system; and other items'. In 1983 Sri Lanka's monetary expansion was influenced mainly by the unprecedented increase in credit to the private sector and also the sharp rise in the country's external assets during the last two months of the year.
The net foreign assets of the banking system have been an important factor in influencing the money supply in Sri Lanka. When there is an increase in net foreign assets an expansion in money Supply takes place and this is what happened in the last two months of 1983 and at the beginning of 1984, when external assets (net) of the banking system increased by nearly 34 percent as compared with a decline of 19 percent at the same time one year earlier.
In November 1983, for instance, purchases of foreign exchange by the Central Bank from Commercial Banks (arising from high export proceeds) was almost Rs. 4,000 million, while drawings under an IMF Stand-by Arrangement, utilisation of a Japanese
Yen loan and part proceeds of an Euro
Currency loan raised the holding of
cash and balances in the Central Bank

Page 12
by a further Rs 1,5000 million. All these factors helped to increase, the country's foreign assets considerably during this period. But when there is an increase in foreign earnings the Central Bank has to issue additional money through the banking system to settle the domestic part of these transactions. This pushes up the money supply.
The more influential factor, how. ever, in the rise of money supply was an increase in domestic credit. In this regard, the Central Bank had to adapt various measures to hold the increase in money supply at a “desired" rate or level. The Central Bank's intention
in adapting such restrictive policy
1O
leases WaS a degree of Lanka, partici served that the ed the larges supply had all in the price i. these two pa position more
By early that monetar supporting m adequate in development reasonable p. free market
as measured
indicators, a
 
 

also intended to achieve price stability. In Sri ularly, it has been obe years which experiencst increases in money so recorded a steep rise index. A comparison of rametres brings out this clearly.
1984 it was apparent y policy alone, without |easures, would not be promoting gorwth and under conditions of rice stability within a atmosphere. Inflation, by the available price ccelerated, particularly
towards the end of the year. The Colombo Consumer's Price Index, which increased 10.8 percent in 1982, registered an increase of 14 percent in 1983; while the official estimate of the rate of inflation was 10 percent in 1982, 14 percent in 1983 and 20 percent in the first few months of 1984.
Prices
Although the relative degree of price stability achieved in 1982 (see box) continued into the first few months of 1983, by the middle of the year prices had started a steep climb. As already observed an important influencing factor was the rapid expansion of credit to the private sector and co-operative sector in the latter half of 1983, in order to meet the extra need for credit for rehabilitation after the ethnic disturbances and the increased response to bridging finance for export and trade financing. By December 1983, on a point to point basis, the Colombo Consumer's Cost of Living Index was observed to have increased by 21 percent. The average rate of price increase in 1983 as a whole was 14 percent, as compared with 10.8 percent in 1982. The Central Bank in analysing the factors responsible for the increases in the Cost of Living Index has pointed out that it was mainly the increases on items in the food basket, (which has a weight of 67 percent in the Index) that was instrumental in bringing about this situation. Two notable items were tea, which went up as a result of the upsurge in export prices, while coconut prices also rose to unprecedented levels. In addition the prices of flour and bread, bus fares and kerosene, were revised upwards.
The depreciation of the exchange rate and falling value of the rupee as a result of world exchange movements and the need to maintain a “real effective rate' of exchange was another important factor influencing the price situation. The changes in Sri Lanka's consumer prices were about the highest among the country's, in the Asian region according to the Asian Development Bank. (See diagram) In many of these Asian count
ECONOMIC REVIEW, JAN - MARCH 1984

Page 13
ries which registered a high level of inflation, the depreciation of their currencies in relation to the US Dollar was an important factor in the heavy price increases they experienced. Except for the French franc, the Siri Lanka rupee depreciated against all major currencies in 1983. The depreciation of the rupee against the US dollar was nearly 15 percent, making it a cumulative depreciation of 36 percent against the follar since November 16, 1977. Exchange rate movements show that the rupee value of the US dollar which was Rs. 21.32 at the end
of 1982 had fallen to Rs. 25.00 by the
end of 1983. The Asian Development Bank commenting on thest trends in its annual report for 1983 states that “to improve the competitiveness of the economy the Government devalued the currency by about 10 percent
in March 1983 and again by about 5,
percent in July, while domestic administered prices of imported goods were adjusted in line with world prices and the new exchange rates.'
Wages
The movements of real wage rates
were limited with the acceleration in the rate of increase in prices and the slower rate of increase in nominal wages. While the Colombo Cost of Living Index for all items moved up from 416.1 points in 1982 to 474.2 points in 1983 and the Central Bank's Wholesale Price Index moved up from 283.3 points in 1982 to 354.1 points in 1983 the real wage rates for all grades of workers in wages boards and trades and government school teachers registered a fall during this period.
In the government sector money wages moved up slightly while in the organised private sector they increased 7 percent as against 16 percent in 1982.
In the unorganised private sector, however, the gains were more signifi
cant and according to Central Bank
estimates nominal wages in the paddy and rubber growing sectors increased 18-19 percent.
Employment
The employment situation in the government, semi-government and
ECONOMic REVIEW, JAN-MARCH 1984
Organised private sect
one of stability, alth
no appreciable gains restraint om governim particularly capital e the policy of not projects into invest deciding factors in new employment op government sector. reveals in its annual semi government sec etc.) “under the economic realities a cipline evidenced se actual retrenchment. ployment in other
 

or appeared to be ough there were . However, the ent expenditure, xpenditure, and admitting new ment plans were narrowing down ortunities in the he Central Bank report that the or (corporations imperatives of d financial disbral instances of Increased em
orporations was.
velopments,
barely adequate to compensate for
retrenchment. It is only in the case
of enterprises based on foreign col
laboration, namely the I GCEC and FIAC, that some new employment creation was evident'. Capital Formation
The situation that the Sri Lanka economy underwent in the post liberalised period, though compounded by unfavourable international dearose basically in the attempt to force the pace of development through a heavy investment programme much in excess of avail
able resources. Without much leeway
11

Page 14
to draw on external assets dependence on concessional aid and commercial borrowings to finance Gross Domestic Fixed Capital Formation has been very high. The growth of Gross Domestic Fixed Capital Formation in 1983 increased by only 16 percent as compared to a 30 percent growth in 1982. This was partly due to the cessation of new investment projects in the public sector and also uncertainity in the private sector after the disturbances in July.
Fiscal Operations
The overall performance of the government's fiscal operations showed a considerable improvement during the year 1983 not only in comparison to the previous year but also when compared with the budgetary performance since the fiscal year in 1980. In recent years the fiscal imbalance and its method of financing has been a major source of instability for prices, the balance of payments and the exchange rate. The 1983 picture on the contrary reflected a concerted attempt to enforce fiscal discipline. The 'austerity' Budget of 1983 focussed special attention on the savings effort of the Government in raising the level of domestic savings. This Budget not only emphasized the inevitability of drastic reductions in public spending
but also pointed out the necessity to enhance the revenue base of the
Government. In February 1983, several revenue augmenting measures were taken. These included the raising of basic BTT rates, imposition of duties on hitherto exempt imports and transfer of a part of the profits of the Central Bank to the Treasury. Further, tax oncessions were limited to areas of highest development priority, which essentially covered the non-traditional exports sector. In 1983 the Government was therefore able to generate a Current Account surplus; also recourse to inflationary bank credit dropped to just one percent of GDP from over 4 percent earlier. Another important feature in fiscal operations was the improved revenue performance which was the main contributory factor influencing the final budgetary outturn.
Trends in 1984
The budget of 1984 was formu
12
Table 7
Total Inves
of which
Private Public
lated in the b medium-term
which aims at turn and balan alry managem programme as the reduction
balance of pay
With favo the prices of been possible about likely g is expected tha ly an additio could be coll valorem tea ta trends indicate target. In the on rubber, an 350 million is port duties ar. increment to amounting to further inflow expected as c surplus of p accordance wit decision. The expected to i. venues by ove 1984. Total projected to b GDP.
Between Government Structural tran utilization. Si capital expenc release resour development, private resour development,

Estimated Capital Investment 1984 - 1988
(Rs billion)
Total 1983 1984 1988 1984-1988
helt 35.5 37.5 43.8 202.9
16.5 16.6 23.2 96.6 19.0 20.9 20.6
106.3
c: Public Investment 1984 - 1988; Ministry of Finance d: Planning.
ackdrop of the 1983-87 investment programme, a viable budgetary outce of payments, Budget2nt is regarded in the
a crucial step towards of the pressure on the mentS.
urable developments in plantation crops, it has to revise expectations overnment revenue. It it in 1984 approximatenal Rs. 1,500 million lected from the ad K. Present export price that this is a realizable case of the export duty increase of about Rs. expected in 1984. Im2 expected to yield an arlier budgeted figures over Rs. 300 million. A of Rs.350 million is ontributions from the oblic corporations in h a recent government e and other factors are crease government rer Rs 2,300 million in
current receipts are : around 22 percent of
1984 and 1988, the xpects to achieve a formation in resource ce restraints on public tures are expected to es for private sector the relative share of es for private sector the relative share of
private sector investment is pro-. jected to increase. Of a total investment of Rs. 202.9 billion envisaged over the period 1984-1988 the estimated share of public sector investment is Rs. 106.3 billion and private investment Rs. 96.6 billion. The private sector's relative share however, is projected to increase and finally overtake public sector capital spending by 1987-88. As seen in table 7 below, the private sector is expected to contribute Rs. 23.2 billion to the public sectors Rs. 20.6 billion by 1988.
in order to achieve the desired levels and structure of total investment, it is assumed that domestic savings will play a greater role than in the past. Both the public and private sectors are projected to contribute positively to this end. In fact, private savings are projected to grow faster and reach a level of 15.7 percent of GDP by 1988 as against an estimated 1 1 percent in 1984. Net external inflows of funds are projected to decline (see table 8) and this slack is expected to be taken up by the private sector.
The increase in the money supply by nearly 25 percent continued upto May 1984 and the Central Bank once again had to adopt measures to limit credit expansion. The increase in the money supply was also having its impact on prices with rate of inflation running at 20 percent by May 1984. The Central Bank was compelled to act as inflation kept going up and interest rates could not be brought
ECONOMIC REVIEW, JAN-MARCH 1984

Page 15
down despite the high level of liquidity. The Central Bank's present strategy is one of keeping down both inflation and interest rates not so much by changes in monetary policy as the attempt to promote stable prices and improve economic conditions. There have also been fears that pressure would build up on the countrys balance of payments through higher prices. As observed from what took place earlier in the year, rising inflation together with the deterioration in the balance of payments caused heavy speculation on the exchange rates and it was in order to minimise the adverse effects of this trend on the economy that the Central Bank decided to restrict expansion of credit. The commercial Banks were required to limit their credit expansion to the private sector only to 5 percent above the level of loans and advances reached on May 1 1. Earlier in the year too the Central Bank had prohibited commercial banks from expanding credit be
yond their March levels for non-essen
tial imports. The intention of the Central Bank has been to discourage
ECONOMIC REVIEW, JAN - MARCH 1984
imports on non esse viding finance for ex ture, including pla Government, throu Bank, has been tryi quality of credit flov in line with its devel
in introducing trictions the hope of was that the mark itself to importing goods using its own ing from the kerb finance companies; costs of such borrow it was expected that essential imports v after a time. But i that at times of crec demand for this typ increasing; and so imports continue te non-banking institut costs, which include management fees that vary between 5 of the costs, but still for such funds.
 

entials while proports and agriculantations. The gh the Central ng to improve the ws and bring them opment priorities.
these credit resthe Central Bank et would adjust of non essential funds or borrowmarket or from
but since the ved funds are high
a decline in nonwould take place it has been found dit restrictions the pe of funds keeps me non-essential o be financed by ions at very high e interest charges, and commissions 50 and 70 percent
there is a demand
Inflationary pressures have built up, over the ten months since July 1983 and have resulted in pressures for higher wages from nearly all sectors, with plantation workers, government teachers and other sectors of government service forcing their demands.
In the first few months of 1984 it
have been induced by two factors, namely, a steep increase in the money Supply and scarcity/shortages of important food items that occupy a significant position in the cost of
living index.
The weather, , once again, has played a major role in creation of crop and food scarcities. In recent years, it has invariably been conditions of drought but in the early months of 1984 the position was reversed to one of excess rains and floods. Vital
items in the food basket such as rice, vegetables, onions, chillies and fish have been affected as a result and prices of many of these items have
may be seen that inflationary pressures
13

Page 16
stayed at unprecedented levels for a considerable period. Unless there is a check on the rise of food prices it will not be easy bringing current inflationary trends under control, in 1984. The other factor is the money supply and excess liquidity to which the Central Bank has turned its attention.
tion of restrict
prolonged perio slow down in same time the policy have to pectations of C not encouraged. The gover carefully evalua policy choices
Table 8 Balance of Payments 1983, 1984 & 1988 ( (U
1983
1. Merchandise
(a) Exports 1056 (b) Imports 1920 2. Trade balance -864 3. Non factor services (Net) 8O 4. Factor services (Net) -36 5. Private transfers (Net) 273 6. Current account balance -647 7. Net aid disbursements 423 8. Directo foreign investments 38 9. Other MLT loans Government 77 10. Other MLT loans: Private Sector and
Public Corporations 74 11. Progress/Advance Payments -71 12. Other financing items (2) 52
Source: The Central Bank of Ceylon in
Note: 1. Figures for 1983 and 1984 are at current market after 1984 are at 1984 constant prices.
2 Includes short-terin borrowing, errors & or
adjustments and changes in reserves.
The Central Bank has been devising various measures to influence the liquidity position in the financial system, and was attempting to bring down money supply from its current growth rate of 25 percent to 15 percent by the end of 1984. The Central Bank in its attempt to siphion off part of the excess liquidity has engaged in open market orperations on a limited scale and is also as a further measure issuing its own securities by auction. Caution, however, would have to be exercised when attempting to reduce the demand for funds; it
could compel businesses to use their own funds but could also lead to decline in production of employment. Furthermore,continua
14
in order to
stabilization p term Structu the economy.
diverted to the in doing so it government bu empt large resc sector. This generating a sul curtailing capita
In recent y position has bé balance and it transfers (fron and official a

ions on credit over a d could cause a major che economy. At the
changes in monetary
be so made that ex
kontinued inflation are
niment would have tC te the limits of possible that are now available
t)
S S Million)
1984 1988
1324 1679 2058 2361 -734 -682
75 178 -168 -232 281 330 ー526 一408 4.08 382 43 SO 13 30
1 11 20 -16 -17 ー59 33-۔
LSLSLSSLSLSSLL LSSSSTSLLSSLSLSLSSSMSSSMSLLLLLLSLSCSLSLSSS
ital Report for 1983
prices while those
missions valuation
coordinate short-term olicies with mediumral adjustments of Resources have to be productive sectors but is necessary that the idget does not also preources from the private may be avoided by plus in the budget and ll expenditures.
fears, the foreign trade een completely out of has been mainly private n remittances abroad)
id transfers that have
helped to keep the balance of paymentis situation within control... Pri
vate transfers, which have acquired significance in recent years are expected to increase by less than 4 percent,
per annum in the coming years. As a result of the tapering off effects in the Middle East job market. By 1988, however, improvement is anticipated in the trade balance (See table 8). The prospects for foreign aid, however, are much less propitious than they have been in the past and there are doubts as to whether Sri Lanka would in the future receive foreign aid on the same scale as before. It means that the country will have to rely far more on its internal resources and own internal efforts to correct the serious imbalances in the economy.
The period from 1978 to 1983 is characterised by high investment levels which were largely introduced by government policy. This period has witnessed a substantial increase in the flow of foreign investment and also in national savings which has enabled the country's gross domestic investment to rise from an average of 16 percent of GDP in the preceeding seven year period to an average of 27 percent of GDP during this period.
The sustained expansion in gover. ment spending and increased activities in the private sector have, as we observed, led to a general expansion in the monetary system which was further aggravated through the developments of the last months of 1983. While production and investment levels increased a number of adverse features have also emerged in the economy. To sum up in the words of the Minister of Finance and Planning, Mr Ronnie de Mel, in the course of an address to Government Agents this year: “while we have made very substantial gains, massive economic problems still remain. I have never tried to conceal the very serious nature of the financial and economic problems which we still face and the many difficult and painful decisions which the Government must take if we
are to overcome them.'
The Central Bank of Ceylon Annual Report for 1983; and the Finance Ministry's Public Investment Programme 1984/88, as sources,
are duly acknowledged.
CG
ECONOMIC REVIEW, JAN-MARCH 1984

Page 17
FEATURES
URBAN SERVICES AND SHARE MARKET OPERA THE PROMOTION OF URBAN REGIONAL DEVE
An Analysis of the Share Issues in the Post - 1980 Period in Sri Lanka
M.W.J.G. Mendis
The increasing activity in Colombo's capital market, after 1980, is associated with signs of the growing sophistication and the availability of professional services which have supported this trend. In this paper Professor Willie Mendis, Head of the Department of Town and Country Planning and Vice Chancellor at the University of Moratuwa attempts to assess the capacity of urban economic services to promote development. He uses the increased volume of share issues as an indicator and analyses this data to determine those sectors of the economy that have benefitted most, He arives at the conclusion that share issues have facilitated regional development, while urban economic services contributed positively towards this situation.
BACKGROUND
The strategy for development in Sri Lanka has assumed the form of a larger reliance on public investments in three 'lead projects'. comprising the Accelerated Mahawelli Development Programme, the Free Trade Zone of the Greater Colombo Economic Commission, and the Urban Development and Housing Programme. These three “lead projects" are expected to provide the necessary Capacity, stimulus, and momentum to generate a host of associated activities in the sphere of economic development to uplift the living standards of the people.
In the above context, Urban Development has thus become a significant area for concentrated activity. The Government in 1978, ... established an Urban Development Authority ".......... to promote integrated planning and implementation of economic, social and phy
ECONOMIC REVIEW, JAN-MARCH 1984
sical development
urban areas', (1) Th been granted a widi ers to carry out its ions and duties. It mulated plans (dra
 
 

TIONS IN OPMENT
of (designated) e Authority has range of powassigned functhas already forifts), for some
urban areas and also exercises
general control over building dev
elopment in all areas brought wi. thin its jurisdiction.
(1) Urban Development Authority Law No. 41 of 1978, p. 1
In addition, the Authority on its own has invested funds amounting to about Rs 2.2 billion upto the end of 1981 (2) most of the latter being on the construction costs of the Parliamentary Complex and

Page 18
16
Administrative Centre in the new capital city of Sri Jayawardenapura, Kotte. Furthermore, the Authority has sold outright and also leased prime property in Colombo and in other urban centres to developers' of Office, Commercial, and Tourist complexes.
The sphere of urban development also received a boost with the granting of very attractive tax incentives, including a ten-year tax holiday and 100% investment relief for "approved property development”. (3)
The activities in urban areas in the field of building construction and other physical infrastructure, have also been supplemented by those arising in these same areas from the general policies of the Government, particularly from liberalised trade, and the positive encouragement given for local and foreign investments in the country.
The cumulative impact of these several initiatives has been the gathering of momentum in the various urban development processes. The latter has included the expansion of the urban capital market - and its associated services.
This was most evident iif Col
ombo city which has become the
epicentre of this growing momen
tum. The self-generating force of
its initial phase has been most manifest in the gradual establishment of the several components of a capital market necessary to sustain a changing urban economy. Thus, twenty four new foreign commercial banks have opened Offices in Colombo. In addition,
two exclusive Merchant Banks, six money broking firms, four leasing
finance companies and one more Development Bank, have begun business in Colombo. There has also commenced some activity in the commodities/ futures market, in the city. (4) Further, a Colombo
Stock Exchange
cently establishe develop the cap financial institu innovated vario mobilise and di those requiringi of these being Deposits.
Another f been significant capital market si areas, comprise of an unprecec shares valued a public subscript menon which h
tum in the pos
Sri Lanka. (5) not only a mea! sation for varic also an index c city and capabil to primote dev areas as well a Country.
The preser the share issue: its inherent po trading will eve high pitch whe ge becomes at issues. have bro
entrepreneurs a vate the establi
tUTes
in these C Planners have share issues. F strengthen the
(2) Reported
News' ol (3) Tax incent engaged i ment are g 22B of - (Amendim 1980. H tives hav
Ventures
March, 19
(4) The ISLA 28 March

Ltd has been re. 2d to promote and ital market. These tions have in turn
us instruments to
istribute capital to t; the more notable the Certificates of
eature which has in the expanding cenario in the urban the successful issue ented 170 million t Rs 1.7 billion, for ion. It is a phenoas gathered moment - 1980 period in It has thus become ns of capital mobilibus enterprises, but of the growing capaity of urban services elopment in its own s in the rest of the
it rate of success of s, is an indicator of tential when share
intually take place at in the Stock Exchan
ctive. The current.
ought confidence to" und as such will actishment of more Ven
ircumstances Urban a triple interest in Firstly, they serve to economic base of
the urban area which provides these services; secondly they provide a link between urban functions and the development of other areas where the actual projects may be. located; and thirdly, they provide an urban development plan with the necessary entrepreneurial capacity for the realisation of its objectives. -
Hence this Paper will analyse the share issues in the post - 1980 - period in order to comprehend their characteristics in promoting urban development with private enterprise.
METHODOLOGY AND CONTENT
The methodology of study employed in this Paper has been to monitor the share issues as known through the Brokers Association of Sri Lanka and also advertised in the daily Press. In this connection, the issues have been studied according to their appearance in two clearly identifiable 'share outcrops'; the first being from February 1980 to May 1982, and the second from December 1982 to March 1983. Both outcrops appearing after the designation by the Government in 1979, of Urban Development as a 'lead project' in its Public investment Programme. (7)
The Prospectus of each issue has also been utilised for analysis in this study.
in the Ceylon 'Daily F 22nd Feb. 1982. tives for undertakings in property developgranted under Section the Inland Revenue
ent): Act No. 24 of హై
owever, these incene been reduced for
formed after 31st 83.
AND' Newspaper of 1983 has reported
that the Government is considering (through its Export Dev
elopment Board), the establish
ment of a Commodities Ex
change in Colombo.
(5). The "Observer's Newspaper of
21 March 1983 noted that 'while only two companies issued shares to the public in 1975, the boom began in 1980 and continued thereafter ..... when there was a sudden upturn in the share market.
ECONOMICREVIEW, JAN-MARCH 1984

Page 19
This Paper has analysed the OBJECTIVES OF P share issues in the context of their composition by type of investment, The principal C
volume of shares issued, and its Paper comprise the monetary value. It has also includ- -
ed an analysis of the actual location i) to ascerta of the projects contained in the the capaci
share issues, and the trends in the numbers of issues being made over time.
N
ડ્ઝ NUWARA
( ရွှံ့\ဇုံမ်း ၄
O3
ECONOMIC REVIEW, JAN-MARCH 1984
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

APER ܒܬܪ
bjectives of this following:
in the trends in ty df urban ero
TSTTSTSSSkSSSLSSLLSLSLeMeSMSSSLSLSS
MAP 1
ONAL DISTRIBUTION OJECTS FOR WHICH HAVE BEEN ISSUED 1980 - MARCH 1983
- Number of Projects
Boun Of ಇಂಗ್ಲ Province
\MPARAI
nomic services to promote
development using the Vol
ume of share issues as an
ii)
iii)
iv)
indicator;
to determine the sectors of economy benefitting from the expanding urban services as reflected in the com
position of, share issues;
to analyse the effect upon regional development through urban services, as reflected in the actual location of the projects contained in the share issues;
to determine the nature of urban financial services, and its requirements in the urban physical fabric, par
ticularly in Colombo city,
v)
that Would encourage private enterprise in promot
ing urban development;.
to generally contribute to the fund of knowledge, in the urban development processes which would facilitate improved urban planning and development in Sri Lanka.
SHARE ISSUES IN THE CONTEXT OF URBAN ECONOMIC SERVICES
Occupational specialisation as found in the urban areas are more
(6) The infant Stock Exchange, although established, is not yet active. (7) The 'lead projects' were first mentioned in the 'public investment Programme 19791983' published by the Ministry of Finance & Planning sin February 1979
st
” ༢༽

Page 20
pronounced in the large cities. Thus, Colombo, offers a wider range of economic services than other urban centres in the Country.
It can also be stated that after, 1978, with the introduction of liberalised economic policies, there has been a substantial expansion in the nature and magnitude of these services in Colombo. The latter has been most noteworthy in activities associated, with the capital market.
The enhanced capital market activities in Colombo have also been associated with signs of sophistication and with the availability of matching professional services to support them. Thus, as mentioned previously, the Stock Exchange, Merchant Banks, Foreign Currency Banking Units, Money Broking
կ0 -
35 -
PRE - 1980
30 -
25 -
20 -
15
Figure 1 (a) YEAR SCHEMATIC REPRESENTATION OF THE NUMBER OF PUBLIC QUOTED COMPANIES IN THE
18 PRE 1980 a POST 1980 PERIODS
firms, Leasir and other si begun to op addition, ne instruments Deposits, Be: Deposit Cert offered to th all situation, nomic activi stantially, an pact general
Tnent.
In the a vities of the post - 1980
most remark spectrum of Ces that haV discussed la only has it
of a large V Westment in
POST - 1980,
2
O
N
1981
1
9
8
2
 
 
 
 
 
 

Finance companies, nilar institutions have rate in Colombo. In w kinds of financial uch as, Certificates of rer Bonds, and Special ficates, have also been public. In this Qverthe base of urban ecoty has expanded subd has had a direct imy on national develop
bove context, the acti
share market, in the
period, comprise the able from amongst the urban economic servie evolved. As will be ter in this Paper, not led to the mobilisation olume of funds for inapproved development
Figure 1 (b) PUBLIC QUOTED COMPANIES
projects, they have also become an
integral part of the new structure of
urban economic services. Thus, an
increasing number of Companies
have been quoted in the share mar
ket in colombo.(See Figures 1 (a) & & 1 (b) )
The share issues have also been accompanied by the emergence of a host of associated services in the urban capital market.
in particular professional servi-, ces have expanded considerably in Colombo. They, in turn, have generated growth in the 'Services' sector of the G.N.P. Hence, in addition to capital mobilisation, the share issues in the context of urban economic services, have demonstrated the capability and capacity of urban centres to contribute to economic growth.
YEAR NUMBER OF PUBLIC QUOTED
COMPANIES DURING EACH YEAR
1975 - 2
1976 2
1977 5
1978 1.
1979 3
1980 5
伯81 13
1982 20
1983 (end March) 36
PATTERN OF COMPANIES QUOTED IN THE PUBLIC SHARE MARKET, Sri Lanka 1975-1983 ܓ
BY YEARS-1975-1983 Sri Lanka

Page 21
i
SHARES ISSUED IN 1980-1983
世 will now be relevant to analyse the volume of shares issued in the period 1980 - 1983.
The increase in the volume of shares issued represent a good indiCator of the capacity of the urban economic services to promote development. In this connection, it can be noted that from a situation of near non-existent issue of shares during the pre-1980 period, there
was a sudden deluge of shares issu
ed and subscribed in the period 1980 - 1983. The latter was clearly observed as belonging to two 'share outcrops'; the first occuring from February 1980 to May 1982 (ie 27 months), and the second occuring from December 1982 to March 1983 (ie 4 months).
In the periods referred to above, a total of 169,272,289 shar
es were issued to the public as folloWs;
1st outcrop ( Feb. 1980 to May 1982) ... 67,105,052 2nd outcrop (Dec. 1982 to March 1983). 102,167,237
Many of these share issues came into the market in the first
quarter of each cal latter is co-termin quarter of the 'tax
Hence, it can ferred that the fisc tached to each shai a significant influe its actual subscripti
it can also be statistical data gi that there has be 50% increase in shares issued betwe crops. Figure pr representation of pattern of the two by quoted volume c
Furthermore, i from Figure III, thar Ward trend in the Volume of share is When considered i peak volumes.
The study of Outcrops by indivi also indicate that issues have been d post - 1980 period of 21,999,993 sha in the first outcrop 16,000,000 shares,
TABLE 1. COMPOSITION OF SHARE IS
VOLUME OF O1 50,000 100,000 'SHARES BY to to to
CATEGORY 49,999 99,999 249,999 (NO OF SHARES)
1st Outcrop 01 O4. O7 NUMBER OF SSUES IN EACH CATEGORY 2nd Out crop O3 O2 O6
Note: Number of Share issues i
ECONOMIC REVIEW, JAN - MARCH 1984

Indar year. The s with the last year'.
be generally inal incentives ate issue has been ncing factor for
}Ո:
noted from the ven previously, *n more than a he numbers of en the two outovides a graphic the monthly share outcrops, if shares.
t is noteworthy t there is an up
pattern of the sues; especially n terms of the
the two share dual share issues very large share ealt with in the . Thus, an issue res was included , and an issue of
was subscribed
in the second outcrop. These volumes are of a magnitude, unheard of in previous times.
However, it is also significant to note that the composition of share issues of both outcrops, show that there exists characteristics of the 'early stages' of economic development. Accordingly, it can also be seen from Table that a large proportion of the share issues are relatively small in volume; ie. less than one million shares in each issue. The latter therefore being suggestive of the smallness of each venture - typical of the early stages of development.
Nevertheless the large increase in the total volume of shares issued, is an indicator of the growing capacity of the urban economic services to promote development. It indicates further potential in the latter due to the yet undeveloped struct.
ure of the capital market.
ANALYSIS OF SHARE ISSUES BY BENEFITTING SECTORS
It is relevant in the context of the objectives of this Paper to analyse the share issues by the sectors of the economy which benefitted
SUES BY VOLUME
250,000 500,000
to
499,999 999,999
O1 2.5 5 million million miljon above
to to ζΟ 1O 2.5 O5 O milion
mion mion mion
O6
O5 OO O2 O2
O8
O1 O1 O4 O4.
2nd Outcrop includes three rights issues.

Page 22
2O
15
30 ہے۔ ؟
FIGURE 2
MONTHLY PATTERN OF BY QUOTED SHARE VOL IN THE POST - 1980
20
TABLE 2 (a) FIRST SHA
COMPANIES TYPE Number 7% of Total OF VENTURE
15 42.86 Manufacturing
�
O3 8.57 Office/Commercial
12 34.29 Tourism
O2 5.71 Engineering
01 * 2.86. Finance
O2 5.71 Trading/Services
NL O.OO Others
35 100.00 TOTAL
 

27. / . THE TWO "SHARE OUTCROPS" UME
PERIOD, SRI LANKA
3.
2.
-
1918 器 SHARE 1983
TCROP(37)
ARE OUTCROP
SHARE ISSUES VALUE (RS) Number % of Total Amount % of Total
1 7,752,284 26.45 177522,840 26.24
31,199,998 46.49 31 1999,980 46.11
17,160,736 - 25.57 177,206,560 26.19
112,034 0.17 1,120,340 0.17
600,000 O.80 6,000,000 O.89
280,000 0.43 2,800,000 O4.O.
NI L- OOO NL O.OO
67.105,052 OOOO 676,649,720 100.00
ECONOMIC REVIEW, JAN - MARCH 1984

Page 23
from same. It will show the impact of urban economic services by dif. ferent sectors.
Thus, Table 2 (a) Table (b) show that 'Manufacturing '', 'Tour
ventures, it capture of the share value,
The situation outcrop is better 'Manufacturing' co
TABLE 2 (b)
2ND SHA
COMPANIES
Number % of Total
TYPE OF VENTURE
2O 50% Manufacturing
2 O5% Office/Commercial
11 27.5% Tourism
2 O5% Engineering
2 O5% Finance
2 O5% Trading/Services
1 2.5% Others
40 100% TOTAL
Note: Number of Companies which issued shares inc
ism" and 'Property Development', comprised the largest number of Ventures for which shares were issued in both outcrops. Of these categories, 'Manufacturing' dominated both outcrops in terms of numbers of companies.
On the other hand, an analysis
by volume of shares issued indicate,
that 'Property Development' dominated the first outcrop, and
'Tourism' dominated the second
outcrop. Accordingly, they also
captured the largest capital in each outcrop. (See Tables 2 (a) & 2 (b)
It is yet interesting to note tinat by value of shares issued in the first share outcrop, although 'Property Development' ventures comprised only 8.57% of the total number of ventures, it captured 46.11% of the share value. In contrast, although, *Manufacturing” ventures comprised 42.86% of the total number of
ECONOMIC REVIEW, JAN - MARCH 1984
the total ventures, 30.00% of the share trast, “Tourism" col of the total ventures 46.34% of the share
in overall terms, ficant to note that it contributed to severa tures. The latter inc which used 'agricult However, a larger sha of Ventures possessec
It is now useful share issues by the a the ventures to asce tiofmal impact of ur services on developm is discussed in the n this Paper.
IMPACT OF SHAR LOCATION OF VEN
Table 3 indicates
 

distribution of the ventures for which share capital was raised. It shows that in both share outcrops, there was a wide spread of districts that benefitted by the successful issue of shares. Thus, 12 out of a
ed only 26.24%
in the second evelled. Thus, mprised 50% of
RE OUTCROP
SHARE ISSUES VALUE (RS)
Number % of Total Amount % of Total
33,810,582 33.09% 338,105,820 30.99%
10,012,000 9.80% 101,200,000 9.28%
50,556,321 49.48% 505,563,210 46.34%
5,040,000 4.93% 50,400,000 4.62%
1,500,000 1.47% 78,000,000 7.15%
220,654 O.22% 2,206,540 0.21%
1,027,680 1.01% 15,415,200 1.41%
102,167,237 100 % 1090,890,770 100 %
:lude three which offered rights issues.
and captured Value. In Conmprised 27.5% , and captured value.
it is thus signihe share issues al types of venluded ventures ure" as a base. ire of the types | an urban bias.
to analyse the actual siting of rtain the IOCa
ban economic ent. The atter ext section of
E ISSUES BY TURES
the regional
total 24 districts benefitted (See Map 1).
The district of Colombo captured 52% of the total number of projects, with the adjacent districts of Gampaha and Kalutara accommodating a further 19% and 4% of the projects, respectively.
Thus, the Western Province received 75% of the total number of ventures for which share capital was raised.
The above situation corresponds to the availability of matchservices and population market c catchments in the Western Prvince.
However, it is yet encouraging to note that many outlying districts also benefitted as a result of the projects realising capital through the successful issue of shares.
The total value of shares issued for projects located in districts out
21

Page 24
22
TABLE 3
REGIONAL DISTRIBUTION OF PROJECTS FOR
SHARES HAVE BEEN ISSUFD
% SHARES OF DISTRICT NU POPULATION (1981)
DISTRICT
- URBAN RURAL 1st
OUT CROP
Colombo 74.3 25.7 19 Kalutara 214 78.6 O1 Kandy 13.1 86.9 O1 Matale 10.6 89.9 O1 N” Eliya . 7.3 92.7 NIL Galle 20.6 79.4 O1 Matara 11.1 88.9 NI U H”Tota 9.8 90.2 NIL Jaffna 32.6 67.4 O1 Mannar 13.5 86.5 NL Vavuniya 19.3 80.7 NI U B'Caloa 24.0 76.0 NL Amparai 13.8 86.2 NL Trincomalee 32.4 67.6 01 K” Galla 3.6 96.4 NL Puttalam 12.5 87.5 NL A'Pura 7.1 92.9 NL P”nnaruwa 7.9 92.1 O4 Badulla 8.0 92.0 NL Moneragala 2.2 97.8 NIL Ratnapura 7.4 92.6 NL * Kegalle 7.8 92.2 NL Gampaha 27.8 72.2 O7 Mulaitivu 9.3 90.7 NL
SRI LAN KA 35
P
side the Western Province, com- CONCLUDIN prised Rs. 295 millions. THE DEVEL ECONOMICS it can be
ind discussio
The overal impact of the locat- 1980 period ion of projects thus suggest that the by a large nu share Issues in both outcrops did engage in ver facilitate regional development. ed by the
Hence, urban economic services did contribute towards this situation, reinforcing the concept of urban - rural complementarity. The latter could specially be developed through the capital market.
The latter ha
the host of services that ombeo. ln p. services, in contributed

WHICH
MBER OF PROJECTS FOR WHICH SHARES HAVE BEEN ISSUED
2nd TOOUT TAL CROP
19 30 O2 O3 O2 O3 O2 O3 NL NL O2 O3 O1 O1 NIL NL NI L O1 | NIL NL NL NL NI U NL NL NL O1 O2 O1 O1 NL NL O1 O1 NL O4 NIL- NL NL NI U O1 O1 NL NL O7 14 NL NIL
37 72
G COMMENTS ON OPMENT OF URBAN SERVICES
seen from the precedns that - in the post there has been a desire mber of enterprises to itures with capital raispublic issue of shares. d been possible due to professional and other had developed in Colarticular, the financial :luding Banking, had in a large measure to
wards this process.
The initial issue of shares now need to be actively followed up with the development of share trading through the recently established Colombo Stock Exchange. The increased activity in the share market cannot be sustained by the conventional Brokers Association. A modern urban economy needs a comprehensive structure of financial institutions, including a Stock Exchange. Such an organised form of urban economic services will then facilitate sustained urban development that can also serve as a complement to further rural and
regional development.
1n the above context, Urban
Planners need to recognise the physical planning inputs to assist the smooth functioning of urban economic services. In the latter connection, the development of a 'financial district' in city plans is considered vitally necessary. Such a 'district' must include the Stock Exchange and also convenient access to national and international communication networks.
Colombo city has the capacity and capability to accommodate a “financial district". Already a concentration of banking and other financial activity have begun to take shape in Fort. The hub of Telecommunications, and the Chamber of Commerce, are also in this vicinity. It is therefore ideal to locate the Stock Exchange in this same area; a likely premises for this purpose being 'Transworks House', opposite the Central Telegraph Office. -
Urban Planners have thus recognised the importance of the urban capital market as an integral part of their considerations. They view the share issues as a vital component of such a market. It is therefore timely for those specialists associated with urban economic services and Urban Development Planners to work very closely with each other.
ECONOMIC REVIEW, JAN - MARCH 1984

Page 25
PRI CURITY ISSUES FOR 1984 - A WORLD BANK PE
A.W. Clausen
As 1984 starts, the world is recovering from the worst recession in over 40 years. But the recovery is uneven, and many developing countries still confront acute economic probems. The creditworthiness of some countries has been questioned. And in most developing countries, growth in per capita income has been arrested, needed investments are being postpon
ed, and efforts to reduce poverty have
been interrupted.
Let me stress at the very outset today that it will take years to repair the damage that has been done to Third World prospects.
The current recovery will not be enough, by itself, to return the developing countries to growth rates comparable to what they achieved in the past. Concerted effort, in a number of areas and over a period of years, will be required to revive progress in the developing countries. o fail in this effort would have negative consequences for the whole World. .
My intent today is, first, to provide an overview of the global economy, with particular attention to the Third World, and then to focus on four economic issues that deserve priority attention in 1984 and for
some years to come. These issues are :
ECONOMIC REVIEW, JAN-MARCH 1984
improving economic formance in the inc liberal izing trade; rex all capital flows: an nomic policy in the ries.
The global economy
According to the Economic Co-operat ment, the industria group are likely to growth of 3% perc from 2% percent in growth in 1982. Mos due to the dramatic United States; Euro still expected to ex cent in 1984.
Our World Bank the developing cour growth of 3 to 3% pe from less than 1 per less than 2 percent ir population is growing cent a year in the dev average per capita inc in 1982 and '83, and modestly in 1984.
Economic condit among the developin contrast to to the res ing world, ridia, a
 
 

RSPECTIVE
: policy and perdustrial countries; living internationdi improving ecodeveloping count
Organization for ion and DevelopI countries as a achieve economic ent in 1984 up 1983 and negative it of this change Yis : recovery of the pe's economy is band just 1/2 per
estimate is that tries will average rcent in 1984, up
cent in 1983 and
1982. But since | more than 2 perPeloping countries come actually fell will increase only
ions vary greatly g countries. In it of the developand China have
maintained high rates of growth in per capita income throughout the global recession. This is partly because international commerce is less import: ant to these Asian giants; they benefited relatively little from international commerce when the world economy was expanding, but they are also less affected by the world economy's recent dislocations.
The oil-exporting developing countries underwent a sharp drop in incomes in 1983; the decline in average growth for all the developing countries together in 1983 (from the already low level of 1982) was almost entirely duę to this sharp drop for
the oil-exporting countries. We expect
per capita income among the oilexporting countries, to continue declining a bit in 1984.
The headline-catching aspect of Third World difficulties has been the debt crisis, and the debt crisis has dramatically affected Latin America. After suffering a decline in per capita income of 14 percent over the last three years, we expect the oil-importing countries of Latin America to achieve at least some growth in per capita income in 1984.
The low income countries of Africa have been suffering steady de
clines in per capita income for 10
years. Per capita food production has been falling over the past 20 years, and
and the cost of food imports is now
equivalent to a quarter of all the d development assistance that Africa receives. Rising commodity prices may give Africa a bit of relief in 1984, but We still expect no growth in per capita income. In most African countries, political conditions are fragile, institutions and human resources are already
strained, and population is expected to
more than double by the end of the
century.
Some developing countries in other regions also face bleak prospects. But for the most part we expect the
2
3.

Page 26
developing countries to move back during the rest of this decade toward the growth rates they achieved in the Sixties and Seventies.
Wide variations from this projection are quite possible. It depends mainly on how well or how poorly the nations of the world - both the industrial and developing nations - man. age the thorny economic issues that confront us in 1984 and the years beyond.
Improving economic performance in industrial countries
One priority issue, clearly, is im proved economic policies and performance in the industrial countries, so that they translate their present recovery into sustained, non-inflationary growth.
in the United States, economic activity has entered the new year on a vigorous note, and strong gains in employment and income in the United States will encourage growth throughout the industrial World. The OECD expects only a slight increase in inflation as unemployment falls and production rises.
Reducing budget deficits especially in the United States, is essential to maintaining the momentum of today's recovery. Real interest rates are far too high, and the prospect of annual U.S. deficits on the order of $ 200 billion over the next few years may well keep upward pressure on interest rates and dampen business confidence.
And in order to move from recovery into a sustained period of economic expansion, the industrial count ries also need to create an environment conducive to structural change. Economic progress requires change - increasing productivity through new technology, for example, or adapting to evolving patterns of comparitive advantage. Some areas of activity
24
expand rapidly adaptation in t particularly in textiles, has fai need for char years, and that ing returns on
growth. A ne growth will rec dustrial Count facilitate chan raise productivi
Liberalization
And the not be able tC rapid growth domestic impr and rapid grow liberalization C and this is ano" must reduce ba ing trade betw developing cour
Trade barri ered over the successive roun the aegis of G/ riers protect in
1 10s-H
1 OO ----
90 --
80 --
70--
60 - Index comp
primary pro

others decline. But he industrial countries, 2ctors such as steel and ed to keep up with the ge over the past ten has contributed to fallnvestment and to slow w period of sustained uire policies in the inties that permit and ges of the sort that
ty.
of international trade
ndustrial countries will
achieve sustained and on the basis of purely ovements. Sustained th will require further f international trade, ther priority issue. We Irriers to trade, includeen the industrial and tries.
ers were gradually lowast generation through ds of negotiation under ATT. Since trade bar. efficient and declining
industries, more liberal trade stimulated economic growth through increased, productivity. Also, international trade tended to grow faster than output, and thus tended to accelerate the growth of each national economy.
The developing countries sell 60 percent of their exports to the industrial countries. However, in regard to trade between the industrial and developing countries, the liberalization process of past decades was only a qualified success.
Most developing countries maintain higher levels of protection than do most industrial countries. For their part, the industrial countries generally
impose higher-than-average tariffs on products from the developing count.
ries. Agriculture which is important to many developing countries, has not only been left out of the liberalization process, but, in fact, barriers to trade in agriculture have increased. And recently, there has been a proliferation of non-tariff barriers such as the Multi-Fibre Arrangement, so-called 'voluntary' export restraints, and so-called 'orderly' marketing arrangements.
)ICES OF PRIMARY COMMODITY PRECES
(1980 1oo : in US. dollar terms)
la f
Agricultural
ቐ
}
Metals
; . Yn All commodities N همسرطرف Food
فع ه به 1 ق وف طه __ ھ }80 ° 1981 1982 1983 1984
ises spot prices of 30 primary commodities exported by
ucing countries.
Data: IMF. International Financial Statistics.
ECONOMIC REVIEW, JAN - MARCH 1984

Page 27
Trade with the developing countries is vitally important to the industrial countries. Exports to the developing countries account for 28 percent of the total exports and 6 percent of the national income of the industrial countries,
The debt crisis and the associated austerity programs among developing Countries have resulted in lower export sales by the industrial countries. For the four quarters that began in mid1982, the developing countries cut their imports from the industrial countries by $43 billion compared to the previous four quarters. The businesses and workers that lost those sales in turn had less to spend, and these multiplier effects had an addditional negative impact on growth. The industrial countries would have achieved growth of 3 percent in 1983, instead of the 2% percent actually achieved, if the developing countries had been able to keep importing at the 1982 level.
And trade with the developing countries is not only important because of their significant and characteristically buoyant contribution to demand. developing countries have such different comparative advantages, trade between them yields large gains. The continued expansion of North-South trade, with developing countries producing more and more traditional manufactures, offers opportunities for major improvements in efficiency on the supply side of the global economy. There are difficulties in devising
successful adjustment assistance pro
grams. But expanding North-South trade is one of the keys to higher living standards in both the industrial and developing countries over the coming decades.
For developing countries, growing
exports to the industrial countries are essential for the recovery of growth and creditworthiness. To achieve economic growth of 5 to 6 percent a year, comparable to what they achieved in the Sixties and Seventies, the developing countries probably need
ECONOMIC REVIEW, JAN-MARCH 1984
Because the industrial and
基
to expand their e. 6 to 7 percent a Given prospects f growth in their re. modity and fue e well need to expanc ed exports by some
Many developi improve their expo reforming domestic Countries have g faster growth in income. By en market, these cou able to achieve econ
their domestic marl
allowed. Busine economic decisionoriented countries market changes a international compt Ward-oriented econ!
more resilient in de changes in the giо are urging Countrie nate either for or a countries where pro incentives to Se in port markets, resc allocated efficiently
An increasing in ing countries were more open trade po and Seventies. But in 1981, as some co additional import ri with balance of pa
The present dilem
liberal trade is esse growth, but slow
parts of the world for many countrie and developing cou creasing barriers to t
For heavily ir the dilemina is acut will have o genera for the foreseeable cover interest payme Yet financial press these countries to it trpls that will mak

aports by at least year in real terms. or relatively slow venues from com2xports, they may i their manufactur
12 percent a year.
ing countries can rt performance by economic policies. enerally achieved both exports and tering the global intries have been omies of scale that kets wouldn't have ssmen and other makers in outwardlearn to adjust to nd to deal with 2tition. Thus, outomies have proved 2aling with adverse bal economy. We is not to discrimiagainst exports. In pducers have equal the home and ex
ources tend to be
/.
umber of develop2 moving toward licies in the Sixties this trend stopped untries resorted to estrictions to cope yments problems. ma is that more 2ntial to long-term recovery in large
makes it difficult s (both industrial ntries) to resist inrade.
debted countries, e. Some countries te a trade surplus future in order to 2nts on their debts. ures are tempting mpose import cone their economies
less efficient and discourage exports for years to come.
International capital flows
This brings me, then to the issue
of reversing today's trends in international capital flows.
The total debt of the developing countries amounted to about $ 810 billion at the end of 1983. Since mid1982, some 30 countries have renegotiated terms on as much as $100 billion of this debt.
These reschedulings, together with arrears and lower interest rates, have slowed the growth in debt-service payments, but such payments have, nevertheless, continued to rise, some what. At the same time, new commercial-bank ending to developing countries, especial y to major borrowers, has fallen dramatically. As a result, the net, transfer from commercial banks to developing countries (that is, new lending minus debtservice payments) is now negative.
The developing countries are paying
back more to the banks than the banks are lending.
According to the World Bank's Debtor Reporting System, the net transfer of medium- and long-term lending from private sources to developing countries was $ 1.6 billion in 1981. But in 1982, the net transfer was a negative $7 billion. We estimate a negative net transfer of $ 21 billion
for 1983. a
Productive investment yields a
return, and foreign investors should
get back more than they invest. But it is premature for developing countries, as a group, to be transferring resources
to the high-income countries on this
scale. In 1983, the net transfer from the 13 major borrowers among the developing countries to private lenders was equivalent to 2 percent of their national incor:ne.
The other types of medium - and
long-term capital flows have not grown
to compensate for the fall in medium - and long-term lending from the commercial banks.
Because of the slump in commercial-bank lending, many developing
25
-ー

Page 28
countries are making greater efforts to attract direct investment by multinational corporations. But the figures for direct investment nevertheless show a significant decline - from $ 14 billion in 1981, to $ 1.3 billion in
1982, to $10 billion in 1983.
The two main types of medium -
and long-term capital from official sources are non-concessional lending and development assistance. Mediumand long-term non-concessional lending comprises loans by The World Bank, the other multilateral banks, and export credit agencies; IMF resources are not included in this official-lending category. Development assistance comprises grants and highly concessional lending. I DA ( the International Development Association) is the World Bank's concessional affiliate.
Official lending and development assistance can reduce the risks that are worrying commercial investors. But the net transfer of medium-and long-term lending from official sources remained roughly constant between 1981 and 1983. The World Bank, for example, helps developing countries establish a policy environment that is conducive to investment and growth. The World Bank also develops well prepared and appraised projects, and We are expanding the opportunities for commercial banks to cofinance these projects.
Given the likely trends in other capital flows and the continuing need of the developing countries for medium - and long-term finance, continued growth in lending by the World Bank and the regional development banks is essential. bulk of their resources by borrowing on a commercial basis; to expand their lending, they need capital from the governments that own them, although
only a small percentage of it needs to
be paid-in capital.
1/ These figures are net of reverse flows of equity, but they are not net of repatriation of profits.
26
Official lenders raise the
Non-Oil De Trencs in
Ex
bi
o
Othe long
long-term de financia inst
Short-tern Geb
1974-1975
Excluding China
The lowcountries t incomes below son per day - opment assista all the exterr Yet the tota assistance (fr countries and porting coun And 70 perc assistance fro to middle-inc income, devel
The nati DA just co funding level years. They
three years -
in nominal te 1979 for the This disappe continued st stantial falls
assistance in t
We cann result. For countries, esp
 

eloping Countries: he Composition of ernal Debt on U.S. dollars
ong-tern debt Korea Officia/ CreditOffs
private Fr Gebt
O 198 1882 1884
projections
inconne developing hat is, countries with | about a dollar per perdepend on official develince for three-quarters of al capital they receive. flow of development om both the industrial the high-income oil-extries) is also stagnant. ent of the development m bilateral agencies goes some, rather than lowoping countries.
ons that contribute to mpleted negotiating its for the next several agreed on $9 billion for a sum much lower, even irms, than that agreed in last I DA replenishment. binting result suggests agnation, or even sub, in official development he years ahead.
ot be content with this the world's low-income pecially Sub-Saharan Afri
ca, effective programs of official development assistance are essential. So we will continue to urge governments to increase their DA contributions. *Strengthening, DA will be most difficult, but it is vital.
The slump in commercial-bank lending and direct investment, coupled with very slow growth in official ending and development assistance, has forced the developing countries to cut imports. They moderated the cut in 1983 by resorting to short-term commercial borrowing and drawing down reserves, including IMF resources. But by 1983, many developing countries had nearly depleted their reserves and opportunities for short-term borrowing, and were therefore forced to reduce imports drastically - chopping their current account deficit from $85 billion in 1982 to $4.8 billion in 1983,
Looking ahead, we expect most
developing Countries to continue to be
able to import more than they export, and we expect the negative net transfers for medium- and long-term lending from private sources to decline gradually.
Concern in Europe, Japan, and North America about capital flows to the developing countries has largely focussed on the possible impact of the debt crisis on the international financial system. The financial system has weathered the storm quite well. But Cutbacks in imports and government spending among the heavily indebted countries have thrown their economies into deep difficulties. ܡ
Mexico halved its public deficit in one year, and reduced its imports by two-thirds between 1981 and 1983. The Ivory Coast reduced its public investment program by nearly. half, and per capita income in the Ivory Coast has dropped 20 percent in three years. industrial employment in Brazil has fallen 20 percent since 1980, and 25 percent since 1980, and 25 percent of
Brazils manufacuturing capacity is idle.
ECONOMIC REVIEW, JAN - MARCH 1984

Page 29
Some developing countries used foreign borrowing to finance Consump tion rather than investment, particularly in the few years leading up to the debt crisis of 1982. Those countries that borrowed and postponed needed adjustments must undergo more abrupt adjustments now. But some countries that generally used foreign borrowing well have also been affected by the general decline in international lending, and idle plant and workers don't help any country repay its debts.
The debt crisis has had a most damaging effect on the private sector in the developing world. Almost the entire drop in commercial lending in 1982 was suffered by private nonguaranteed borrowers. Public-sector control over private financial institutions has increased in countries such as Mexico and Chile, and thousands of enterprises throughout the developing world have gone bankrupt.
Sustained growth and resistance against protectionism in the industrial countries will help most of the developing countries with large debts tO meet their debt obligations and resume growth in per capita income, but the borrowing countries will also need improvements in their domestic economic policies. Difficulties resulting from today's debt problems may be with us for as much as a decade. Some countries will have to generate a trade surplus to cover part of their interest payments, and several countries with promising medium-term prospects will face acute short-term financing problems because of uncertainty among lenders. There are likely to be more reschedulings, and we expect a "hump' in debt-service obligations between 1985 and 1987, partly due to scheduled repayments to the IMF
Economic policies in developing countries
Improved economic policies in the developing countries themselves is a fourth area for action to restore the global economy to health - an essential
ECONOMIC REVIEW, JAN-MARCH 1984
complement to sust the industrial world, increased capital flow
The developing pursue economic pol iy and tenaciously, solutely fundamenta tion of their econor gress. It is not m \ tempt a comprehens types of policy re developing countries I want to stress, by illustrations, that thi reforms are comple time to bear fruit.
Policy managem ficult, and it is esp the developing Cou because they must
ems at once. Th financial discipline balance-of-payments and, at the same tim additional policies t to economic develo creditworthiness on
For example, r must cut back on p cluding public inv With immediate fi But, at the same tin prove the quality using their remaini for those projects greatest, most need ing the quality of pu volves difficult ar ments, and its full realized for many ye
Another way encourage economi medium-term is tC scarcity values. T dence the price dist nomic growth, and tions favour rela groups at the exper people. In the Six quite a few develop major efforts to r

ained recovery in liberal trade, and
S.
countries must cy reform urgent
because it is ab
to the resumpnic and social prointention to ative outline of the form that many
require. Rather Vay of a couple of 2 necessary policy x and will take
ent is always dif
acially difficult in
ntries right now, tackle two probey must improve to keep their under control, e, they must enact hat will lead back pment and restore a lasting basis.
many governments
ublic spending, in
estment, to cope nancial pressures. he, they shoufd imof investment by ng resources only that will have the 2d impact. Improv|blic investment ind delicate judgeeffects will not be
earS.
for countries to c growth over the let prices reflect nere is strong eviortions retard ecomany price distorlively privileged se of lower-income ties and Seventies, ing countries made duce price distor
tions, and some of these countries sharply accelerated their economic growth. But such reform programs
proved complex, politically difficult,
and not without short-term costs, suggesting the importance of reproducing price distortions with determination, but gradually.
Many developing countries have already taken impressive policy measures to improve their balance-of-payments position and restructure their economies. We must be mindful that the speed of adjustment is limited by the need to maintain political cohesion and stability. The process is difficult, and specific adjustments must be tailored country-by-country; there are no simple, patent recipies.
While the International Monetary Fund uses its resources to SU DOOrt policies designed to address balance-ofpayments problems, our responsibility at the World Bank is to help developing countries design and enact complementary reforms to foster a revival of economic and social development. Because such reforms entail dif. ficult structural change and take time to come into effect, it is appropriate that the World Bank together with other lenders, both commercial and
I official, provide assistance for this
purpose. Within the World Bank, We have begun an intensive process of reflection on the institution's future role. And one thing is clear: World Bank support for improved economic policies in the developing countries will be extremely important - for some countries, decisive - in the years ahead.
Summing up, then, the condition of the world economy at the outset of 1984 is more promising than a year ago. But to achieve a new era of sustained growth worldwide, the developing, countries must give the highest priority to policy change, and We will need to improve economic policy and performance in industrial countries, liberalize trade, and increase both commercial and official capital flows.
27

Page 30
SRI LANKAS APPAREL PRODUCTS NEW QUOTAS AND POTENTIAL
According t T. B. Karunaratna projections for
based on the assi would be utilize For 1982, in vie in international quota items has the 1981 level. 18 million pieces the G.C.E.C. are
Importance of
The relative for Sri Lanka a G.C.E.C. are giver
From the b portance of USA apparel product the 'Free Trade z exported to oth total apparel pro of a manufactul as much as 51.3 posed in the US proportion had in 1982 it still
Sri Lanka's foreign exchange earnings from appare exports are expected to grow at an annual rate of 26 percent over the five years upto 1987. The Export Deveopment Board estimating the export potential of apparel products has pro- Table 2 iected a growth in earnings from SDR - 129.33 milion in 1982 to SDR 403.0 -l-
million in 1987. The export targets have Year been worked out on the basis of marginal growth rates allocated to the items ... covered under quotas, the investment 1980 likely to be made and the development 1981 of new markets. The following table 1982 gives the projeced total volume of exports 1983 in million pieces and exports under various 1984 categories. --------=========
Table Projected Exports of Garinents
Volugi
1982 1983 1984
Shirts 13.51 16.96 9.01 Blouses 16.55 21.01 2386 Trousers/Jeans 9.02 11.75 3.72 Jackets/Anoraks 5.86 7.2O 3.05 Dresses 2.52 3.61 4.69 GloWes* 0.90 1.07 122 Jerseys/Sweaters 136 1.82 2.29 Others 10.20 10.23 35.40
Total 60.00 O8.24.
* in dozen pairs
The export Plan includes projected exports of non quota items of the G.C.E.C.
28
 

EXPORT
the export plan the xport of garments are Imption that full quotas d from 1983 onwards. w of the slack conditions markets, the exports of been assumed to be at An additional export, of of non-quota items from expected during 1983.
US and E.E.C. Markets
share of major markets parel products excluding | belloW.
aginning of 1980 the im
as a buyer of Sri Lankan is manufactured outside one has superceded those er destinations. Of the ducts exported (composed es) during the year 1981, 3 per cent had been dismarket. Although this iropped to 49.4 per cent
constituted a very high
EEC Country Quotas on Sri Lanka's Apparel Products Exports and Ectual Export Performance against Quotas in 1982
Α: OOο
u ducta & Performance
2 God
: :
yQ $ණු જ્ય : { 兽
茎 赛 않 ま。
로
} 53 ܡ݂ܵܦ g
- is 6 -
3. figure in contrast to the 18 per cent
and 19 per cent exported to West Germany in the year 1981 and 1982 respectively, Total exports to whole of the EEC during 1981 and 1982 did not exceed 34% and 37.9%.
Export of Non-quota Items from G.C.E.C.
Volume (in million pieces)
Value (in million rupees)
5.59 223.81
1255 41722
1882 625.55
28.33 938.33
4235 1407,49
me (in million pieces) The market share of USA has differed widely, if individual product categories
1985 1986
21.26 23.92 27.31 31.49 16.19 19.13 9,12 10.53 S.O.9 7.92 1.31 140 2.91 3.09 531 O 79.65
137.30 77.83
LTLS LS SMSLMMSL TTTTMLLLSS SLLLLL LS LSSMSLLLLS S SMSSSLS SSLSLMSLSM S SMSSSSLS SSSS
are considered. For instance, in the case of shirts a 50 per cent share in 1981, and 33 per cent in 1982 had gone to the EEC. in the case of blouses 30 percent, and 39 per cent respectively had been destined to the EEC. USA's share of these two items in 1981 had been 32 per cent and 37 percent respectively, in 1982 the proportions amounted to 50 percent and 46 percent.
Imposition of Quotas
USA for the first time imposed qui otas on Sri Lerikan apparel exporters in 1979, after the second multi fibre agreement was concluded. At that time the quotas were confined to 10 items such as Woven Cotton
ECONOMIC REVIEW, JAN - MARCH 1984

Page 31
Table 3
Relative Share of Major Markets for Sri Lanka'
Apparel Products
Ouantity:
Country of Region 1978 % 1981 % 19
U.S.A. 5.8 43.7 箕3.4 51.9 47 E.E.C. 3.4 25.8 1.O.O. 34.1 35 Scandinavia 1.1 8.4 1.8 5.7 7 Middle East 1.7 13.2 O.6 2.0 2
Source: Ministry of Text
Shirts, Woven Cotton Blouses, Cotton March each year) at Gloves, Cotton Coats for men and women, Table 5. In the ea Cotton Trousers, Cotton Jeans, and Shorts, only ten categories W This time the numb
Woven Synthetic Shirts, Woven Synthetic Blouses and Sweaters for males and females. For all the items imported from Sri Lanka the U.S.A. had allowed an annual growth rate of 7 percent.
The European Economic Community quotas imposed under MFA II were for mens and boys shirts, women and girls blouses, mens and womens trousers, jerseys, pullovers and T-shirts. The growth rates varied
from 1.5 percent per year for the mens shirts and womens blouses, 5 percent per year for mens' and womens trousers, 6 percent per year for jerseys and pullovers and 10 percent per year for T-shirts.
in the quotas imposed under the recent bilateral agreement signed under MFA III (effective from January 1983 upto 1986), the European Economic Community has imposed community quotas on four categories and regional limits on two categories. The respective quotas for the years 1983 - 1986 and the growth rates connected with them are given in the Table 4 below.
EEC has allowed the same 1.5 per cent per annum increase as under the previous agreement, for mens shirts while the growth rate for mens and womens trousers is reduced from 5 per cent per annum to 4 per cent per
an unt. The 1.5 per cent growth on womens blouses is increased slightly to 2 per cent. The limits for jerseys, pull
overs and T-shirts are eliminated from the new quota. For UK there is a special limit for mens and Womens underWear, Their quota is measured in terms of tons (not pieces). France has asked for a limit on woven and knitted dresses, the product which has always
been regarded a threat to her local
industries.
Categories of products on which
quotas have been imposed by the
A. and the quota limits on such categories for the years 1983/85 (April to
ECONOMIC REVIEW, JAN - MARCH 1984
brought under quota fifteen. Man made (synthetic) of some categories have been new quota, mainly urers who were earlie items and were unable
Table 4 European Econom
SLSLSLS 0MS SqqqLMMSLS SLSMS L TMeTM qTSqS S LSSSqSqqqSqSMSM SAA qMSLLL ܢ ܗ ܗ ܩ ܡܶܗ ܩܘܣ ܚ ܦܘܦܗ
* Community
Limits
Mens and Womens Woven Trousers & Mens Shorts & Breeches
Women's woven & knitted blouses
Mens woven shirts
Parkas, An oraks Wind cheaters and the like
WOWen
Regiona!
Limits UK Mens woven underwear Other than shirts
France-woven and knitted dresses
 

S
Million Pieces
32 %
4 49.4 .9 37.4 7 8.0 O 5.1
ile Industr“ies ,
'e given in rlier arrangements sere under quota. per of categories have increased to fibre products of the previous put under the because manufactir producing such 2 to increase pro
duction owing to quota constraints had shifted to synthetic cloth based products to fill the vacuum in capacity. This has increased manufacture
of man made fibre based clothing products in the categories of gloves, male's
cotton coats, female's cotton coats, male's woolen sweaters, females' woolen sweaters and trousers substantial
ly during the year 1981, both of factories within and out side the Katunayake Free Trade Zone, The new quotas are a warning on possible action regarding the anti-surge clause of the MFA intended to check the manufacturers moving fast towards new lines.
An examination of the US quotas for the period upto 1988 reveals many features
of interest. In all products the quota for the
year 1984/85 is about 2.2 percent less than quotas for 1983/84. This situation could cause difficulties for manufacturers whose products are exported to the US market as they will be compelled to cut down on output and face the resultant adverse effects.
ic Community Qyotas on Apparel Products 1983-1986
Ouantity =000 pieces
1983 1984 % 1985 %986 %
O O Growth O. Growth O. Growth
Pcs 2200 2288 4.O. 2379 4.O 24.75 4.0
Pcs 3350 347 2.0 3485 2.0 3555 2.0
VJOVе А Pcs 3500 3552 1.5 3606 5 3660 1.5
PCs 225 O 2340 4.O 24.34 4.0 2531 4.0
Tons 125 130 4.0 135 4.0 14霄 4.0
Pcs 2O8 2640 225 4.0 23440
Source: Ministry of Textile Industries
29

Page 32
|
Mens & Boys/Womene & irls Woolen Sweaters synthetic Gloves pairs Mens & Boys Synthetic C@會歸屬
Womenos & Girls Synth-,
etic Coats
Mens & Boys Synthetic
• Shirts
Womens & Girls Synthetic Blouses Mens & Boys/Womens & Girls . Synthetic Woolen Sweaters Womens & Girls Synthetic Trousers
_)~~~~ ~~
l;l;.$/i,'$6 631 63& 635 6!!0 6! 4 sosygoo 648
→ • • • • • •
ጥ 17ዛጔ56 338OOO!!
1299996
21ዛ5OOO 4447766 5733192
570000
1950000
409\,856 3307200
1272OOO 2098800 1093692 5609712
1ኅዛሓ8oo
1908000
•2• 15 -2 - 15
-2 - 15 ~2. 15 『2』15
-2-15
•2•15
『B・15
1405842
3505632
o 13ų8320 2224728
1159308
996288
12131,88 2022ł80
60
6、o
6-0
6、o
6.0 6、o
6-0
6-0
1446864 3745968
1ዛ2922ዛ 2358216 1228872 6303072
1286292 24ų3824
6.O 6.O
60
60 6. O 6.0
6、O
6. O
1128036 3938928
154976 2ų99708 1302600 6681252
4363ķ76 227246l!
Source-; Ministry of Textile Industries
© cae

Table 5
Quotas Imposed on Sri Lanka's Apparel Products Exports byUSA 1983 to 1988 March with Annual Growth Rate
Quantity/Volume: pieces
CategoryCategory1983/8ų1984/851985/861986/871987/88 |ło.VolumeGrowthVolumeGrowth i VolumeGrowth. VolumeGrowth 『at@rateraţe rate· |CottonGlovessés33111ጥዛ78921090778ķ| –2. 15115622526.O1225598ķ6. O1299-13}\\ *& Boys Cotton- - C@嘗歸33ķ2173O2O2126208 | -2, 1522537806.O23890086.O2532348 Womens & Girls Cotton- -·|- -- Goats335159255615582ķ8 | -2, 15165171,0 || 6.017፵O8ኳ81 6•O1855896 |Mens & Boys CottonShirots| || 3!!057302285606808||-2. 15 || 5943216 | 6.0 || 6299808|| 6.0 || 6677796 Womens & Girls Cotton--|- Blouses .3\},57331925609712|| -2, 1559ķ6288 || 6.06303072|| 6.06684252 Mens & Boys Gotton--- Trousers-3ķ7 lạ295652lự203132|| -2. 15l;l;.3532l}6、o #7226366、O5006004 Ĥornens & Girls Cotton- - - - - |--膚『-闘き きい34 46520 | -2 - 45 | 33035ols || 6–03504720 || 6.0園g

Page 33
Table 6
USA Country Quotas for Sri Lanka and is
Peyêකෝෂම දෘෂ 19දී2
Itega Country Quota Performances
Woven Cotton Shibits 249 434 OO த549792 Woven Cotton Blouses டி9டித968 5186856 Woven aan maade shirtas 964284 'ኳ17792 Woven aan made blouses 5080908 5968هاوية Cotton Gloues 96.17160 96.16152. Cotton Coats mens 1975880 1649டித6 Cotton Trousers 27%776242552 ס |Gotton Coate womens 1874,640 1டிடித972 Cotton Jeans & Shorts 5700000 த338952 Males & Females
Sweaters 1620000 ጥካ798ኴO
S.
US Country Quotas on Sri Lanka's Apparel Products. and Actual Export Performance against Quotas in
Pieces /ο ορο
&Ooo
6,రిరిం
4. Ooo
ඊ. ෆරඟ
奖 魏 স্থত 2 e 3. 5. s
ECONOMIC REVIEW, JAN-MARCH 1984
Country 8. Perfort
 
 
 
 

තුෂාෆ් -
Quantitys pieces
Performances percentage
of quota
712
10b9. 33 102.7 100,0 ᏄaᏫᏍ Ꮱ 88。3 77 1. 586
9
Exports 1982
翼 器。 tis ඵ් 勤
Utilisation of US quotas
Table 6 shows how the quotas allocat
ed for the year 1982 compare with actual
performance. This table shows that of the ten itéms allocated quotas, performance on
four items - namely, woven cotton blouses,
woven man-made blouses, cotton gloves and men's cotton coats - the quota was either
fully met or exceeded in the year 1982.
Woven cotton shirts, cotton trousers, cotton coats and wollen sweaters for males and females (items 445/446) reached high levels of performance although they could not completely fulfil the quotas allocated.
Table 7 gives a comparative picture of performance in the US market during 1981/1982. It may be seen that in the six selected items the proportion of CU Otas fulfilled in 1982 had grown considerably over that of the previous year (in Categoris
ing these six items it should be noted that.
cotton and man made fibre products are merged.) The slow growth in the quota performance for shirts is due to a low performance in the man-made fibre shirts, where quota performance amounted to only 43 percent. ܫ
Performance on European Economic Community Quotas
Total quotas imposed by the EEC and quotas for individual community members, together with the export performance against these quotas, during 1982 are shown in table 8. The percentage of actual performance for specific categories of products against quotas are also given in this table.
Considering the community as a whole the product which recorded the highest level of performance was blouses where exports amounted to 90 percent of the allocated quota. The next highest performance was for parkas and anoraks (76%); followed by shirts (69%). Performance on the other three items was as low as 20 percent for T'shirts, sweaters and skirts; 12 percent for trousers; and 11 percent for jerseys.
Actual exports of shirts to France exceeded the allotted quota in 1982; while exports of blouses to UK exceeded the quota. Exports of both shirts and blouses to Denmark and Italy also reached considerably high levels. The lowest levels of performance for shirts were Benelux and Ireland, while for blouses it was France and
reland.
Exports of parkas and anoraks to Benelux exceeded the - limit;
while export of these items to France was considerably high, reaching 78 percent of the allotted quota.
In the case of both trousers ånd jerseys and pullovers, actual performance
31

Page 34
has been very low - the highest percentage being against Denmark's quotas, namely 58.3 percent for trousers and 57.3 percent for jerseys and pullovers.
The other group of items where actual performance was extremely low was Tshirts, sweaters and skirts; the sole exception for these items being West Germany where exports reached 59.4 percent of quotas.
Among the individual countries of the EEC the highest export quotas granted for Sri Lanka's apparel products has been from West Germany. The West German quotas have been twice as much as the next highest country quota, namely, that of the United Kingdom. An interesting feature in these two countries may be noted in the quotas
and performance for shirts - while the West
German quota was doubled that of UK, actual exports to UK were more than those to
West Germany. exaggerated in pullovers. Ex Germany reache while exports o
Table 7
Shirts
Blouses Trousere Jerseys & Sweat Gioves
Coats
Europeaa Eo Oraonaio COIRNY
Table 8 and Export
Category of Total West Üni Pročacts E.E.C. Geraany Kin
Shirts - Quota 3,226,000 1,286, Ooo 61 Performance 2227,346 67う。1o7 | 69 Percentage 69 هO 63.2
Bloras es Quota 3,392。500 | 1,312。うoo | 65 Performance 3,055,369 1, 127,311 68 Percentage 90.1 彦、
Trousers Quota 1945,000 906,000 lic Performance 238,226 72,82% 2 Percentage 122 56
Jerseys "a 884,000 396,000 17 Pullover Performance 99,386 4,652 s
Pere entage **。2 11
T-shirte Ruota 1,464,000 340,000 36 Sweaters Performance 292,7ዛሓ 2O1,840 l Skirtas Pere entage 20 O 59。蚌
Parkas & Quota 355 نهايOO 2 Anoraks Performance 719,096 Percentage 762

This situation is even more percent above the full quota. The exports
the case of jerseys and of blouses to all the EEC countries has been
ports of blouses to West considerably high, with the result that the
d 86 percent of the quota highest level of performance for the entire
this item to UK went 4.8 EEC was for this item.
'roportions of Quotas Fulfilled by Sri Lanka's Products in the US Market in 1981 and 1982
percentages
1981 1982
54.8 57.2 70.1 - 107.9 65.6 88.3 erS 雀5.4 91.4 59.7 1OOO 65.7 12O.O
Source : Ministry of Textile Industries
Lunaity Questas for Sri Lanka, Performance in 1982
Quaatity: piece e ted Benelug France Denmark Ireland Italy ligdom
| 1,009 607,900 || 22,009 56,000 28,000 414,000 10,056 210,820 229,238 46,975 14。586|36o。5ok
112.9 3峰。7 102。3 83。9 52. 1 87. 1
5,000 307,000 76,000 82, OOO 14,000 546, OOO 6,295| 300,644 | ララ2,243 | 78,888 9,884 520, 1ols
1Olኔ •8 97.9 69.8 96.2 66 353
10,000 219,000 111,000 68,000 18,000 223, ooo 2,556 102,759 ly 60 59,627 se s 56 46.9 Ꭴ• Ꮵ ラ8。3 e 7,000 5う。900 | 114,009 33,000 8, Ooo 103, ooo
10,800 13,618 18,910 s e 29 30 20.4 119 57。う s 7,000 369,000 167,ooo 48,000 15,000 158,000 う。212 1う。488 29, եՕե 800 s 12。3 #。2 1766 | 17 s ago
5,000 339,000 341,500 s s |o,522| ラ事1,768 | 266,806
420 100.8 78. 1
ECONOMIC REVIEW, JAN-MARCH 1984

Page 35
Table 9 Utilisation of Quotas Allocated by EEC on
Apparel Product Exports in 1979
percentages
1979 1980 1981
Shirts 102.8 128.9 86.9 Blouses 68.3 100.2 87.7
Trousers vn 91.1 90.8 21.6 Jerseys and Pullovers 14.1 7.4 T-Shirts, Sweaters and Shorts 16.0 17.5 Parkas 86.2 44.2
Anoraks
Table 10 Potential Export Expansion in US Market in 1 (Country Quota 1983 - Performance 198
Quant Category Category Performance Country
No. 1982 Ouota
1983
Woven cotton shirts 340 3518792 5730228 Woven cotton blouses 341 5186856 5733.192 Man-made fibre shirts 640 417792 1117764 Man-made fibre blouses 641 5080908 5733766 Cotton gloves 331 96.16152 11147892 Cotton coats 335 1649436 1592556 Cotton trousers 348 2425452 31851 12 Cotton coats 334 1445172 2173020 Cotton Jeans & Shorts 347 3338052 4295652 Wool sweaters & Jerseys 445/446 1479840 1174356 Synthetic Gloves 631 58992OO 338OOO4 Synthetic coats 634 1135812 1299996 Synthetic coats 635 2043672 2145000 Synthetic Sweaters Jerseys 645/646 604428 117OOOO Synthetic Trousers 648 1939 116 95OOOO
Table 11
Possibilities for Expansion in Apparel Exports to EE
Category Category Performance Aggregate
No. 1982 Country
Ouota 1983
Shirts 8 2,227,346 3,500,000 Blouses 7 3,055,369 3,350,000 Trousers 6 238,226 2,200,000 Parkas and Anoraks 21 719,096 2,250,000

The level of quota utilization for various categories of items over the four years Sri Lankan 1979 to 1982 may be observed in table 9. 32 This table reveals a deteriorating performance for certain items in recent years, particularly shirts and trousers. Specific items 1982 are dealt with in the next table. The biggest drop recorded is in the export of shirts, where quotas were exceeded by almost 29
69.0 -- percent in 1980 and then kept declining till 90.1 it reached only 69 percent of the quota in 1982. Blouses also dropped to 87.7 percent 12.2 in 1981 and showed slight improvement to 11.2 90.1 percent in 1982. The most regular 30.1 drop was recorded in the exports of trousers 76.2 which fulfilled around 91 percent of the quota in 1979 and 1980 but thereafter the drop was precipitous. T-shirts, sweaters and shorts is a group of items where level of performance has been consistently low. Export Potential in US Market
983 The differences between performance 2) in the year 1982 and the quota limits set msnmma for 1983 are an indication of the growth ity : Pieces possibilities for apparel products in the US market. As seen in table 10, in three items, Difference namely, cotton coats; wollen sweaters and jerseys; and synthetic gloves, the 1982 export performance had exceeded the quotas allocated for 1983. In these three items 22104.36 Sri Lanka's exports would need to be cut : down below the 1982 levels. it was observ652858 ed earlier that the US had imposed new quotas on several items made from synthetic 1531,740 textiles. It is apparent that in bringing more 5688O such items within quota limits the U.S. %န္တိမ္ပိ was eager to discourage Sri Lanka's producers from switching over to any new products 95.76OO they could produce and promote viably. 305484 According to the existing levels of produc2519 196 tion on such items there was very little
1641.84 room for expansion in 1983. 101328
Export Potential in EEC Market 6: There were two groups of items where
exports to the EEC markets were comparatively insignificant and these items had therefore been released from quota restrictions in the EEC. The items are jerseys and pullovers; and T-shirts, sweaters and skirts.
The potential for increased exports in these C in 1983 two groups of items is quite clear. The possibilities for the other items still under Difference quotas are shown in table 11. This table indicates that, with the exception of blouses all other items had very high potential for exports to the EEC markets during 1983.
mill The item: where greatest expansion was 1272,654 possible is trousers, followed by shirts.
294,631 The specific markets (see table 8) where 1961,774 potential existed for export of trousers were 1530,904 West Germany, UK, France and Italy;
while for shirts the markets were available in 'Benelux, Ireland and West Germany.
ECONOMIC REVIEW, JAN-MARCH 1984

Page 36
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