Page 1

EXPORT DEVELOPME
T

Page 2
WORLD TRA
Volume of imports (Thousand Millions of 1980 Doliars)
1,900
 

ADE TRENDS*
Index of Unit Values (Prices), 1980三100
1 OO

Page 3
Volume 10
Diary of Events
M.W. Panditha
A.S. Amerasekera
Premachandra At]
NEXT ISSUE
→奉 The Maha
苓 Chemical
Lanka.
y eie a lice of SLS S S S S S S S S S S S S S S S S SYS
ஒன 崇 The need s the Si VieS కైంese
COVER EDESIGN Gibson. P. Athula
 
 

July/August 1984
Number 3
C O N T E N T S
COLUMNS
June/July/August 1984
FEATURES
The Role of Co-operative Rural Banks in Sri Lanka's Rural Sector
A More Efficient Administrative Service
hukorale 3
16
18
19
SPECIAL REPORT
EXPORT DEVELOPMENT
Policies & Achievements
Export Incentives and other Assistance provided by the Export Development Board.
Export Financing and Export Credit Insurance.
Foreign Direct Investment and Manufactured Exports.
„weli Project: six
years of development on the headworks
engineering and the chemical industry in the economy of Sri
for a more orderly and equitable financial system
thmudali

Page 4

οι ΕνENTS
Rs. 4300 to 47.00
The Government announced
Agency for international De
a grant of Norwegian Kroner 1 milion (approximate
te liquidity crisis which is keepses joing in Workshop's for war : has argenty pressed Governi ecessary tekeep its flet ឪcថ្ងៃ នផ្r.
リ ingariany of its ti
ment for Fis. 159
the road, accordi
station price of kilografir :
The price of Coconut Arrack was increased from
try .
tion (approximately Rs.92. in financed by the Canadian international Development Agency (CIDA) for social services
iri ċertairli li jtejari areas,
etween the Norwegian リぶ。ーぶ。 pement (NORAD) and the Government of Sri Lanka, providing for
Letters were exchanged
ly Rs. 3 million for the strengthening of environmental potution contro measures and this capa
ECONOMIC REVIEW JULY/AUG. '84

Page 5
SDR Min BOO
SRI LANKA BALANCE OF TRADE
18501 1949 - 1982
15OO. Year Price Index Price index Value of Value of Trade
Exports imports EŘports imports Balance 1978- 100 1978= 1 {}{} (SDR Mn} (SDR Mn) (SDR Mn)
1350 1949 - 12.96 7.83 224, OO} 216.21 7.79
1951 21.25 10.56 365.37 325.26 50.1 1953 1674 10.56 3 14.74 434.79 - 29.Ր5 1Դ55 *9.51 942 397 69 310.50 87.19 1200. 1957 1747 9.99 350.85 370.82 - 1997 1959 1776 942 372.79 411.69 - 38.90 961 163) 9.31 358.76 377.05 - 18.29 1963 15.87 9.65 358.6O 392.40 - 33.8C 1965 16.45 1 35 399,79 402.51 2.72 1050- 1967 1456 1135 278.34 334.85 - 56.51 1969 1703 1521 320.41 445.62 - 12521 1970 1718 1589 338.73 391.41 - 53.04 1971 1703 1703 3O773 353.47 - 45.74. 9CO- 1972 1718 1793 282.40 320.34 - 37.94 1973 1994 23.72 3.09.00 348.40 - 39.4O 1974 31.00 42.00 425.00 582.87 - 15787 1975 28.97 49.04 464.01 632.52 - 168.51 ബ 1976 34O6 44.04 484.01 557.02 - 73.01 75Օ} 1977 55.06 54.03 650.98 616.67 + 34.31 1978 100.00 100.00 675.O.O 797.30 - 122.30 1979 109.02 51.99 759.01 1,121.00 -361.99 1980 126.06 217.03 817.98 1,576.00 -758.02 6OO. 1981 128.97 28.95 883.02 1526.00 -642.80 1982 119.07 3O897 919.02 1604.07 -685.50 1983 165.00 375.00 1,001.20 1,670.80 -669.60
450
300
15C
息 鲇 兹 息 1948 50 55 60 70 75
EXPORT DEVELOPME
Export earnings have been a vital factor in determining the pace and stability of growth of Sri Lanka's economy and also the incomes and living standards of her people. The geographicai location of the country, its resource endowment and size and the urgency to contain the widening resources gap have made it absolutely essential to accelerate export growth. The Government firmły upheid this view after 1977 and the policy changes introduced since then resulted in a liberalisation of trade with greater emphasis on exports and a free inflow of imports. But the measures adopted in pursuing these policies and the economic environment have not been sufficiently conducive to development of exports and achieving the intended goals.
ECONOMIC REVIEW JULY/AUG. '84.
A significan in the new policy enactment of the Development Act f which made it a sta to prepare a Nationa ment Plan. I n terms | the Export Developm this work and with specialised committee tò cover the period. importance of expo problems encountere Sector are summed u Plan.
On the imp it states "Export c« of the gross Dome
 

Exports -
حے سے یہ ہے Imports
Deficit IIIIIII Surplus 를
أسسسسسسسسسسسساس.
8O 85
NT
it initia measure objectives was the Sri Lanka Export No. 40 of 1979 tutory requirement ai Export Developof this requirement ent Board initiated the assistance of is formulated a Pian 1983 - 1987. The rts and the major ed by the export p as follows in the
ortance of exports 2ntribute one-third stic Product, one
quarter of the employment generated and about one-fifth of Government revenue. A change in exports affects almost all the other sectors of the economy; and a decline in exports has inevitable repercussions on domestic investment, the production of consumer goods and on the revenue and expenditure of the Government. The country is critically dependent on her export earnings for almost all her requirements of investment goods and a substantial proportion of essential consumer goods
A general overview of the export sector and its significance for Sri Lanka's economy and a detailed discussion of export policies and their mpact appear in the paper on the following pages.
Exports also determine to a large extent the level of activity in the modern industrial sector. Although over the years the economy has become more and more diversified and widened, exports still remain an important determinant of economic growth and have a marked impact on the general well being and living standards of the people. Sound export performance is therefore vital for the stability and the longtern development of the Sri Lanka economy. Exports are also vital for a favourable balance of payments situation. While some scope exists for import substitution, particularly in agriculture, the location, resource endowment and size of Sri Lanka limits the scope for efficient import substitution'.
Drawing attention to specific problem areas in this sector the Plan makes several such forth right comments; 'Two main factors affect the capability of exporting goods from a country; they are quality and costs or profitability. It is a fact that Sri Lanka has lost ground in the world markets whereas its competitors have made substantial gains even in products where Sri Lanka possesses greater natural advantages. During the last few years the cost of production in Sri Lanka has increased steadily not only increasing the price of the commodity but also reducing substantially the profit margins of producers and manufacturers. The problem has been aggravated by the rapid lowering the quality of most of its products. In addition, Sri Lanka has not been able to make any significant advance with new products or new markets.
3

Page 6
4.
EXPORT DEVELOPMEN
Policies and Achievements
Premachandra Athukorale
reres & Management Sri 1
HISTOR|CAL BACKGROUND
The economic structure Sri anka inherited from the colonial past at her political independence in 1948 was typical of a colonial "export economy'. The growth momentum of the economy was heavily dependent on the fortunes of the three primary export products : tea, rubber and coconut, These three items together accounted for about 97 per cent of total export earnings. They directly contributed about 40 per cent of the Gross National Product (GNP) while their indirect contribution via associated supportive services was substantial. Nearly 50 per cent of Government revenue came from export taxes.
Ever since the end of the second World War, there were indications that unfavourable structural changes were taking place in World demand for traditional exports, notably tea and rubber, with possibilities of adverse repercus sions on Sri Lanka's long-term growth prospects. For instance, the World Bank economic mission which visited the country in 1951 reported that, 'the old momentum in the export sector is unlikely to be maintained'. Hwowever, during the post-independence period upto about late 1960, no steps were taken towards diversifying the export structure and be ready with new products in order to face the future challenges. Throughout this period the emphasis of the development policy was on “import substitution' - the development of domestic agriculture and
Dr. Premachandra Athukorate who was awarded a PhD from 1. for his work on international Trade, is a Lecturer at the p
enapura University.
industry to m The expecta expansion of and industry economy to r pace of gro trends in expc
By th import-substit strategy had Against the the newly-e sector had ma more depende export secto showed an o on imported materials whi and foreign e. negligible. O earnings fron continued to savings throu domestic agr significant. Th was Continu balance of pa led to unanti ments, with on the grow economy.
These
rate a new diversificatio leading to a revisions with
substitution
policy measu lishment of scheme (a scl duties paid o in export prc ber 1964, it Voucher Sch
 
 
 
 
 
 
 
 
 

trobe
üniversity partment of C
set domestic demand. ion was that the domestic agriculture
would enable the laintain a satisfactory With despite adverse rt trade.
e late 1960's, the ution development eached a crisis point. original expectation, stablished industrial de the economy even nt on the traditional r. These industries verwhelming reliance machinery and raw le their added value xchange earnings vere In the other hand n traditional exports stagnate and import gh the expansion of iculture was still inhe immediate outcome ed vvidening of the ayments deficit which cipated import curtailadverse repercussions th momentum of the
circumstances gene. emphasis on export n from the mid 1960's number of policy in the existing importpolicy framework. The res included the estaban import duty rebate heme to refund import n imported inputs used bduction) from Decemntroduction of a Bonus eme (an import-entitle
ment scheme for selected nontraditional exports) in 1966, the devaluation of the rupee by 20 per cent in 1967, and the introduction of a Foreign Exchange Entitlement Scheme, FEECs, ( a dual exchange rate system with a premium exchange rate for all non-traditional exports) in 1968.
Despite the shift in political power in May 1970, the policy emphasis on export promotion continued well into the 1970s. In fact, the onset of the oil price hikes in 1973 with their attendant balance of payments pressures, and the increasing debt-servicing burden due to continuous reliance on foreign financing in the late 1960s had made promotion of exports and foreign exchange earnings even more urgent in the 1970s than in the 1960s.
The creation and development of a “new export sector based on industrial production, and thë promotion of minor agricultural
exports' was among the key elements in the Five Year Plan
(1972-77). To achieve these objectives, a number of steps were taken. An Export Promotion Secretariat was established in 1972 to function as the appex institute of directing and co-ordinating the export development effort of the
tion was set up in 1971 with the objectives of promoting gem exports and channelling illegal gem exports into institutional sources. A replanting and new planting subsidy scheme, compiled with provision of extension services, was introduced for selected minor agricultural export crops under the newly established Department of Minor Export Crops. These institutional arrangements apart, a new export incentive scheme - the Convertible Rupee Account (CRA) Scheme - (an import entitlement scheme under which non-traditional
ECONOMIC REVIEW JULY/AUG. '84

Page 7
exporters were allowed to credit a certain percentage of export earnings to specific bank accounts the balances of which could be used for the importation of restricted imports) - was inaugurated in 971. The FEEC scheme continued to be in operation with periodic upward adjustments in the premium rate. Added to these were a number of newly introduced tax incentives including an 8-year tax holiday on export profits of approved exporting ventures.
in line with the government's commitment to the export diversification drive, export-orientsed direct foreign investment was accorded preferential treatment in the White Paper on Foreign investment issued in August 1972. Another noteworthy feature of the foreign investment policy during the first half of the 1970's was the active interest shown by the government in establishing export-orienti ed joint-ventures (for example, Noritake and Wal-ties factories) with capital participation between public corporations and foreign firms. Although action on those lines was not pursued the idea of establishing a Free Trade Zone was among the various policy suggestions in the area of export promotion embodied in the FiveYear Plan.
POLICY REFORMS SINCE 1977
Export promotion attempts p' irs ed since the late 1960's in fact, brought about noteworthy results in the field of non-tradi. tional exports (See Section on Overal Export Trends). However, the rate of export expansion achieved was highly inadequate when compared with the magnitude of the balance of payments disequilibrium brought about by escalating import prices and the poor performance of the traditional export sector. Therefore,
ECONOMIC REVIEWJULY/AUG. '84
strice import cor be in force thro with a dweerse re performance oft The new came into pov was strongly co mea adjustment ing restrictive t not provide a Sri Lanka os econ solution must by shift towards a strategy. The st market mecha the economy wit were considered tions for ent growth and de reaching policy of thinking was Budget Speech p ber 1977, and fi affected subsequ
As the e other developi amply demonst ment of satisfac sion is the sing factor which de lity of the outv lopment strateg change receipts point, start gr sufficiently high of growth of de the country m fall back on C tions in order exchange expe permitted by receipts. While tal inflows and offset a deficit their rate of g. lated to how w are performing policy reforms, has therefore highest priorit development pr The ma policy mix suci quantitative co

trols continued to ughout the period percussions on the
he economy.
government which /er in May 1970 nvinced that pieces within the exist"ade regime would lasting solution to omic crisis, and the found in a radical n outward looking rengthening of the hism and linking h the world system essential pre-condisancing economic velopment. A farreform in this line
announced in the resented in NovemJrther changes were ently.
(perience of certain ng countries has rated, the attaintory export expanle most important termines the viabi
vard-oriented deve
do not, at some owing at a rate ner than the rate mand for imports, ight be forced to quantitative restricto contain foreign inditure at levels foreign exchange orivate foreign capid aid receipts can in the trade balance, rowth is closely rewe export earnings . Under the new export development been accorded the y in the overall ogramme. jor elements of the h as the removal of ntros on most im
ports (trade liberalisation), considerable relaxation of control on many types of exchange payments, replacement of the dual exchange rate system by a unified floating exchange rate, and elimenation of various controls on the domestic economy are aimed, among other things, at generating an economic climate which is conducive for export expansion through private sector initiative. For instance, the abolition of import controls is expected to ensure the timely availability of imported inputs and machinery for export production at competive prices.
Also fair competition under liberalised trade may enhance quality consciousness of local producers enabling them to compete successfully in foreign markets. The relaxation of exchange control on business travel may promote market research and marketing efforts in foreign markets. The maintenance of a realistic external value for the Sri Lankan rupee through an exchange rate reform is expected to preserve and enhance price competitiveness of exports, However, in a country with hardly any tradition of exporting other than a handful of primary products and which still has a strong import substitution bias inherited from the past, the mere improvement of the general economic climate cannot by itself generate the desired export push. On these considerations a number of policy steps directly aimed at export development have been introduced as an integral part of the policy reform. These measures are briefly discussed below:
Institutional Resources
in order to establish a sound institutional background under which the commitments of the government to the export development drive at the highest political level could be ensured, the Export

Page 8
Development Act No. 40 was enacted by the National State Assembly in 1979. The Act provided for the establishment of two pivotal institutions : the Export Development Council of Ministers, and the Sri Lanka Export Development Board (EDB).
The Export Development Council of Ministers, which functions under the Chairmanship of the President, has the assigned task of providing guidance and direction to the national export development
effort. The EDB, which replaced
the Export Promotion Secretariat, is the 'Executive arm' of the Export Development Council of Ministers. Its functions include advising the Council on export development policies, formulating export development programmes and monitoring their implementation and the co-ordination of the activities of various government bodies responsible for various aspects of export development.
Export Oriented Direct Foreign investment
The success of an exportled development strategy depends crucially on the ability of domestic industries to penetrate advanced. country markets. It is believed that product expertise and marketing skill gained through foreign collaboration has an important role to play in this connection. Guided by this belief, a number of policy steps, have been taken to provide an environment conducive to foreign investment. The setting up of the Greater Colombo Economic Commission (GCEC) in 1978 with the assigned task of establishing and operating investment Promotion Zones, relaxation of traditional norms with respect to foreign participation in export-oriented projects, entering into investment Protection Agreements and Double Taxation Relief Agreements with
major investing ranteeing such Article 157 of Sri Lanka, and promotion C Further details port-oriented d ment may be Review (Special na yake PZ - 1982).
Tax Concessior
As alrea year tax hoida the field of non was introduced from 1976 this ed virtually inac decision to |imi based' compan of the new tax in November 1 set up (on or a the exportation exports were n new five year further step, bv the export sect for special trea ing that the fix would be co 31.3.83 only fo this date other in other activ tourist industry tion productio vvere also eligi even more att sions). By the concession was individual entre nerships too (i panies).
With ef 1979 tax year, vertising and t activities, and t connection wit traditiona exp deductable in income. Under Rebate Schem force in April

Countries and guaagreements under the Constitution of launching investor impaigns abroad. on policies of ey. rect foreign investseen in Economic issue on the KatsuVol. 8 No.3, July
is for Exporters dy noted, an eighty for companies in -traditional exports in 1972. However, concession remaintive because of the t it only to 'broad ies. As an element reforms introduced 978, all companies fter 15.111978) for of non-traditional made eligible for a tax holiday. As a the 1983 Budget Cor was singlied out tment by announcve-year tax holiday
intinued beyond r this sector. (Upto companies involved ities such as the (, import substituand construction ble for similar, or ractive tax conces1984, Budget this extended to cover 'preneurs and partaddition to com
ect form the 1978/ the full cost of adhe sales promotion "avelling expenses in i promotion of nondrts have been made calculating taxable
the Turnover Tax
which came into 982, goods or mat
erial imported for export production are exempted from import turnover tax. In addition to these, over the past six years steps have been taken either to completely abolish or to reduce considerably export duties on non-traditional agricultural products.
Special Export incen tives and other Assistance to Selected Product Sectors
Various financial incentives and, assistance in product development and export marketing provided by the EDB, export financing facilities provided by the Central Bank, and various export insurance schemes of the Sri Lanka Export Credit Insurance Corporation come under this category. (See Box on Financial Incentives).
OVERALL EXPORT TRENDS
Table il presents data per
taining to the overal export performance of Sri Lanka over the period 1960-83. Throughout the period upto 1973 export earnings (ih current SDR terms") in ali the years but 1964 and 1965 were below the level in 1960. (Column 2) Since then an upward trend was recorded with the onset of the recent world commodity boom. However, with the cessation of the boom, the growth mornent am has slowed down. For instance, the average annual compound growth in 1978-1983 was 8.2 per cent compared with 18.5 per cent in 1972 - 1977. The analysis of growth in curreret terms is, in any case, misleading since the bulk of value
increases in recent years reflects of constant, export volume column
(4), the export behaviour indicates
* A rupee value export data series is inappropriate for an analysis because of drastic variations in the externa value of the rupee in recent years. it is necessary therefore to covert this series into a stable foreign currency. The most stable currency unit one can use for this purpose is the SDR (Special Drawing Rights).
ECO, NOW i C REVIEW jULY/AUG. '84

Page 9
a rather erratic pattern. Sincs the middle of the 1960s, the real export index has been on the decline with only minor upward deviations in a few years. The overal conclusion is that there has bean no steady acceleration as far as overa export performance is concerned.
From the point of view of the externa payments position of a country, what is more important than the level (current or real) of export earnings is the import purchasing power of export earn
- ** Emport
ings. The index indicate the behav purchasing power" export earnings is 8 of the Table. declined over mo under study, while of decline has acce
years. Import purc 1983 was only 30
prevailed in 1960.
BASIC DATA ON SRI LANKA*S OV
Export Values in Export Current SDR Volume
MqTSLLLLSSSSSSLSSSSSSMLLLLSLLLLLLLL LLLLeASeTLLLLSLLL00LSSLLSMLqSSSLSSLSLSSLTLLLSLLSLLLLLSLLLLLSLLLLLSLLLLLSSLqqLqLSSLLSLkLLCLLLT TTLqMMSqSLSLSLSLS Index *000 SDR Index Year (1) (2) (3) (4)
1960 384,712 OO 1OO 1961 368,923 95 103 1962 379,672 99 141 1963 363,503 94 107 1964 393,952 102 116 1965 409,454 106 121 1966 357,143 93 110 1967 355,042 92 114 1968 342,017 89 117 1969 322,017 84 112 1970 341,681 89 116 1971 327,227 85 113 1972 296.33 77 111 1973 342,988 89 112 1974 432,370 112 97 1975 466,047 122 16 1976 494,856 129 1 11 1977 637,021 166 102 1978 674,478 175 109 1979 758,697 197 110 1980 802,649 209 108 1981 891,001 232 111 1982 919,234 239 ܲ122 ܥ 1983 997.456 259 118
Note:
Unit value indexes are in terms of SDRs. The rupe
exchange rates obtained from the Annual Report original source, have been transferred to a 1960 b, (a) The ratio of export unit value index to impo (b) The ratio of the value of exports to the unit Source ; Sri Lanka Customs Returns (for export value)
ECONOMIC REVIEW JULY AUG, '84.
 

Purchasing Power = Export Value 斑
Export volumex Export p ice ܐܠܬܐ
AAAAiAiAhihiAAiAiAiAiAiiAiAiAiAeiYY
constructed to iour of import * of Sri Lankan * given in column The index has st of the years the annual rate erated in receni. hasing power in import purchasing power is per cent of what the product of export volume and the terms of trade (the ratio of
import ree
(where, Export Price is the Terms of Trade)
ب: بنزین نمازخان نوزانندی زنان زنان زازا:
import Ffjöë
Expert Volume x. Terms of Trade
Table 1
VERALL EXPORT PERFORMANCE 1960-83
苓
Export Import Terms of Purchasing Unit Value Unit Value Trade Power of Index Index index (a) Exports (b)
(5) (6) (7) (8)
1OO 1 ՕO 100 OO 94 1 ՕO 94 95 94 1OO 94 99 94. 111 85 85 94 33 71 77 94 122 77 87 88 122 72 76 81 131 62 70 8O 124 65 72 8O 33 60 63 8O 售42 56 62 8O 154 53 56 70 140 50 55 73 66 44 54 09 278 39 40 97 3O8 31 39 98 240 41 54 48 274 54 61 143 270 53 65 153 శ్రీO2 38 49 162 528 31 40 159 657 24 35 售44 704 20 34 199 854 23 3O
e indexes have been converted into SDR using annual average SDR- rupee of the Central Bank of Ceylon. All indexes, which are on a 1978 base in the
Se.
tunit value index (5)/(6) x 100)
talue of - imports ( (3)/(6) x 100) o and Central Bank of Ceylon, Review ofthe Economy (for all trade indexes).
7

Page 10
average export price to average import price). Escalation of import prices (notably since the onset of the oil crisis in 1972) in the face of declining or slow moving export prices, resulted in a sharp deterioration in the terms of trade through out the period under study. On the other hand, export volume stagnated. The cumulative outcome of these movements was the sharp erosion of the import purchasing power of the economy. It is well known that Sri Lanka has a most no control over import prices, and almost none over export prices. But in the long run, she does have a considerable degree of control over export volume. Therefore it is not logical to place the blame for the decline in import purchasing power only on extraneous world market forces. A significant portion
of the explanation movements must nature of export The esser the erosion of power has been percentage contr earnings to total E import bilI. in th on the average merchandise ex; around 90 per ce total import out centage is, in fa view of strict im valent during t the liberalization in November 97 of the degree of compared with import demand, vious. For instan 85 per cent of im
SRI LANKA’S EXPORT
Year Merchandise Exports (US '000)
World NO-DC Sri Lanka
1950 57,420 17,591 328 1955 85,520 21,380 407 1960 115,520 24,676 1 11 1965 168,000 32,027 4.09 1966 184,600 34,720 357 1967 197,700 35,239 348 1968 216,200 37,686 342 1969 247,800 42,275 322 1970 284,800 46,519 342 1971 319,700 48,777 344 1972 378,800 58,244 337 1973 527,400 84,672 410 1974 779,700 121479 527 1975 804,600 118,568 566 1976 916,700 139,478 57Ο 1977 1041,500 164,7272 753 1978 1199,800 188,084 845 1979 1524,100 245,095 981 1980 1868,300 312,021 1,074 1981 1837,200 323,832 1,065
* NO-DC; Non-oil Developing Countries
Source: IMF, Inte

for these adverse be found in the policy pursued.
tial corollary to import purchasing the decline in the bution of export Expenditure on the e years 1970 - 77, , earnings from ports contributed nt of the country's ay. This high perict, misleading in port controls prehis period. With of import trade 7, the inadequacy export expansion, the country's has become obce, in 1978 about ports was financed
through export earnings. Since then this percentage declined continuously reaching only 56 in 1983. The major portion of the remaining gap was filled through recourse to foreign financing which invariably has a negative impact on future import capacity of the economy by way of 'debt servicing payments" (repayments of Ioans plus payment of interest thereon). The debt service ratio ( the ratio of debt repayments and interest payments to total export earnings) increased from 12.4 in 1980 to 21.6 in 1982. The major portion of foreign finance (about 85 per cent on average) obtained during 1978-83 was longterm debts the amortisation of most of which is due to commence in 3 to 5 years (Central Bank of Ceylon, Annual Report 1983, p. 92). Therefore the debt service
Table 2
PERFORMANCE IN A WORLD CONTEXT
Sri Lanka's share in Share in World Exports
World Exports of No-DC* share in world Exports NO-DC exports
O,566 1864 30,371 O.476 1903 25,000 0.355 1665 21356 O.243 1277 19,063 0.193 1,028 18,808 O. 176 O.987 11,824 O. 158 O.907 17,432 O. 129 0.761 17,060 O. 120 O.735 16.334 O. 107 0.705 15,257 0.088 0.578 15.376 0.077 0.484 16.055 OO67 0.433 15,580 OO7 Ο O.477 14.736 O.062 0.408 15,215 O.O72 O.457 15.816 0.070 0.449 15.676 O.064 0.400 6,081 O.O57 O.344 16.7O1 Ο O57 0.328 7.626
'rnational Financial Statistics, Supplement on Internal Trade Date, 1982.
ECONOMIC REVIEW JULY/AUG. '84

Page 11
Table 3
ANNUALAVERAGE EXPORT GROWTH RATES AT CURR
1965-69, 1970-77 AND 1978-82
Average at
1965-69
1. Primary Products -5.95 1.1 Traditional Agricultural Products -6.35
a, ea 4.62ے۔ b. Rubber 4.62 c. Coconut Kerne Products 4.40
1.2 Non-Traditional Primary Products O.32
a, Coconut by-products -435 b. Spices 3.60 c. Other Agricultural Products 9.37 d. Mineras -6.21
Gems -53.93 Graphits 5.27 Other
2. Manufactured Goods (including petroleum products) 9.77 Manufactured Goods (excluding petroleum products) 9.17
2.1 Food, Beverages and Tobacco 70.90
2.2 Textile, Wearing Apparel & Leather Industries 50.2O
a. Garments 58.18 b. Leather products/footwear 0.23
2.3 Chemical, Rubber & Plastic Products -3.7
a. Chemicas -3.17 b. Rubber Goods
2.4 Petro eum Products
2.5 Non-Metalic Mineral Products (Ceramic-ware and
wall-tiles) -4.92
2.6 Machinery and Equipment 1994
2.7 Other Manufacturing 5.15
3. Unclassified exports O.15
4. Total domestic merchandise exports ('000 SDR) -5.83
Notes : (a) Exclusing processed tea (tea bags and instant tea {b} including processed tea (tea bags and instant tea, (c) Data series starts in 1968 (d) Data series starts in 1970. (e) Data series starts in 1972
Source: Compiled from Sri Lanka Customs Returns (Annual Issues, 1965-82).
ECONOMIC REVIEW JULY AUG, '84.

ENT STOR PRICES,
anual growth 1970-77
12.43 6.74
O.O8 11.91 9.42
13.81
10.43 11.37 7.32 65.72
213.65
8.55 112.52
78.22 51.71
56.54
65.21
62.75 O.09
2681
25.23 28.35
44.06
272.28
2O3O
39.07
39.7
9.84
Wg፲eያ
1978-82
O.68 - 1.46
-3.62
3.94 14.74
16.02
9.84 15.32 65.23 2.78
11.66
12.12 87.54
32.22 53.42
15.38
65.64
65.98 O.O2
12.78
9.14 25.32
23.92
2O.74
20.52
110.53
31.16
73
ratio is bound to increase at a rapid rate unless a major break through occurs in the export front. Given invariable institutional limitations on the availability of foreign finance and increasing debt sercive burden, it has now become obvious that 'Sri Lanka cannot expect to achieve its development goals while maintaining a relatively liberalized system of trade, unless our exports increase rapidly. ' (Budget Speech, 1983, p.35).
SRI LAN KA'S SHARE
IN WORLD TRADE
When Sri Lanka's exports are examined in the global context, the most striking feature one would note is the continuous decline in her export share both in world exports as well as in exports from "non-oil' developing countries (Table 2), while world exports (in dollar terms) grew by 146 per cent between 1960 and 1970, and by 475 per cent between 1970 and 1981, Sri Lanka's exports recorded a negative growth rate of 17 per cent in the former period and a less impressive growth rate of 210 per cent in the latter. As a result, Sri Lanka's share in World exports declined from 0.355 per cent in 1960 to 0.120 per cent in 1970 and to 0.057 per cent in 1981.
While world exports grew by 475 per cent between 1970 and 1981, exports of non-oil developing countries grew by 553 per cent. As a result the export share of the latter had increased from 15 per cent in 1971 to 18 per cent in 1981. The most striking feature to be noted is that, Sri Lanka has continued to lag behind the nonoil developing countries as a group. For instance, her share in tota exports of this group declined from 1.864 per cent in 1950 to 0.735 per cent in 1970, and to O.328 per cent in 1981. It is worth noting that Sri Lanka could not show any notable sign of improvement in her relative position even
9

Page 12
in the period 1974-77 when her two major export items - tea and rubber - experienced highly favourable market prices. THE PATTERN OF EXPORT GROWTH
The unequivocal conclusion of the previous section is that Sri Lanka's aggregate export performance agged behind both her own import requirements and the global export experience during the period under study. We now turn to a more detailed analysis of the export sturcture in an attempt to identify stagnant export items and growing items, and their relative contribution to the observed overal pattern.
The di analysis are st 3 and 4. In C. the overa|| ti has been divi periods, with a the impact (if shifts on the 3 is based on
n a compara
nature, Curren |ead to dist( because the flation has
Use Vern a CrOSS Therefore the
rates Wii be constant price as given in Tab
Table 4 ANNUAL AVERAGE EXPORT GR CONSTANT (1980) PI
Comodity Category
Traditional Primary Products
Tea
Rubber
Coconut Kerne || Products
Non-Traditio Qal Primary Products
Coconut By-products
Spices Other Agricultural Products
Minerals
Gems Others
Manufactured Goods (Excluding Petroleum Products)
Food Beverages & Tobacco
Sea Foods Others
Garments Other Manufactured Giods
Total Export (Excluding Petroleum Products)
g
45
67
69 17O
O
-O
Source : Compiled from Sri Lanka Custom
Method :
To obtian constant price estimates, current alue series ofeach Connc l'alue index (vith weights of the Current year) constructed for that weighted (Laspeyer) index, the current-weighted (Paasche) index has account variations over time in the gi'en commodity mix.
10

ta required for the immari Sed in Tables ompiling these tables me period, 1965-81, ded into three subview to highlighting any) of recent policy 2xport pattern. Table current SDR values. tive analysis of this t value figures might rted interpretations mpact of World inbeen considerably various commodities. current price growth supplemented with 2 (real) growth rates │ │e 4.
OWTH RATES AT RCES
ual Average Growth
5-69 1970-77
14 15 O
24 -O.28
69 4.94 88 -3.50
OO 715
53 3.69 56 1823 42 16.71
29 53.13
14 62.14
1O -0.68
53 32.34
53 50.15
92 171.79 OO 156.38
32.59 O2 134.10
.75 2.25
s Returns (Annual Issues,
padity category vyras deflated by a unit
Rate
-O.29
-0.01 28.43
-6.22
1.36
3.44 32.28
-2O55
-22.54
837
1478
1.43
O. 11 13.94
58.03 8.6
-0.6
1965-82).
category. Compared with the based- - 鲁
the added advantage of taking into average growth rates in 1970-77
% verSe nOversientS
GROWTH OF INDIVIDUAL
COM MODT|| ES
The most important aspect
by both real and current price data is the highly unsatisfactory relative growth performance of the 'traditional tripe' tea, rubber and coconut kerne products. Out of these three commodities, only rubber indicated a positive average growth rate (4.9%) during the period 1970-77 in real terms but this too was much lower than the average growth (9.7%) pertaining to the period 1965-69. This supports the view that the fairly high annual average growth recorded by the three products in current terms in the first half of the 1970s was mainly due to favourable world market conditions. In 1978-82, both constant and current price growth rates of tea and rubber were negative reflecting the adin both market price and export volume. The high positive average growth rate (28%) of constant price value of coconut exports in 1978-82 is highly misheading. It merely reflects sporadic export spurts in 1978, 1981 and 1982 over rather low levels preceding years. Average annual real exports value of coconut products in 1978-82 was only 1.5 per cent higher than that in 1970 - 77.
Export earnings (current SDR) from non-traditional (minor) agricultural exports have recorded a noteworthy increase over the period under review. More disaggregated export figure, (not reported here) show that for most of the commodities in this group, this up-turn commenced somewhere in the late 1960s or early 1970s. The other agricultural products category which comprises live trees and other plants (including cut-flowers), vegetabies, bete leaves, oil seeds and edible fruits and un manufactured tobacco has recorded above
and 1978-82. At these items are
ECONOMIC REVIEW JULY/AUG, 84

Page 13
new-comers' to Sri Lanka's ex port ist, With a continuous export history of only 6 to 10 years, Growth rates of coconut by. products, Spices and essentiai oils, commodities which have a longer history of export performance, were slightly below the average growth rates for the whole group. Constant price growth rates of all these categories remained positive in all the three sub-periods. However, only the growth rate of 'other agricultural products' indicated continuous increases. For Coconut by-products and spices growth rates in 1978-82 were much lower than that in the 1970. 77 period.
Export performance of mineral products has been rather disappointing in recent years. Current SDR export earnings of this commodity category indicated an impressive average growth rate of 65.7 per cent during 1970-77. This declined to about 2.8 per cent during 1978-82. The real growth rates for the two periods were 53.1% and -20.5%, respectively. The major contributory factor for this unfavourable trend was the sharp fall in export earnings from gems which contributes about 80 per cent of Sri Lanka's total value of mineral exports. Real export earnings from this commodity recorded an annual average decline of 22.5 per cent in 1978-82 compared with the impressive growth rate of 62.1 per cent in 1970-77
Total manufactured exports have indicated a higher degree of growth dynamism compared with non-traditional primary exports, since about the early 1970s. Current value of these exports increased from the average annual level of SDR 40.5 milion in 1970-77, to SD R 233.5 milion in 1978-82. The average annual growth rates in the two periods were 78.2 per cent and 32.2 per cent respectively. This overall picture is, in fact, misleading since part of the varia
ECONOMIC REVIEW JULY/AUG. '84
tion is due to the of export earnings bunker oil as mer
from 1972 on Warc the previous pract such earnings in service earnings. this single item an for between 50 tC total manufacture
1981 when wearin
the dominant ite meaningful analysi ed export expansi exclusion of this aggregate figure. W is done, average rates for the two and 1978-82, turn per cent and 53.4 tively. In terms of the increase in th level was from S 1970-77 to SDR 1. 80. In real terms growth of non-p factured export e; percent in 1978-82 32.3 per cent in 19 Among th manufactured ex has indicated the steady growth re from a low starting mn in 1968, app pansion at the aV for the two per per cont and 58.1 tively. SDR expo item increased f 1970 to 13.4 in mn in 1982. The n the non-petroleum is sea foods. Expo item has increase mín in 1970 to ! ! . to 26.8 mm in the real growth years has been average growth 0.11%) indicating nomina increase
increase in export an overal point annual growth rat

2 re-classification from the sales of chandise exports ds, in contrast to ice of including the category of Since that year, nually accounted » 70 per cent of d exports until g appare became m. Therefore, a s of manufacturOn calls for the item from the "hen this revision annual growth periods, 1970-77 out to be 51.7
per cent respecabsolute figures, e average annual SDR 4.9 min in 26.0 mn in 1978, annual average etroleum manuarnings was 14.8 2, compared with 70-77. a non-petroleum ports, garments most impressive }cord. Beginning base of SDR 0.4 are exports exerage annual rate iods were 32,.6 per cent respecrt value of this rom 1.3 m n in 1977, and 149.9 ext major item in export category rit earnings of this di from SDR 1.2 3 mn in 1977 and 1982. However, rate in recent near zero (the in 1978-82 was
that the observed is mainly due to
unit prices. From of view, average es of the remain
ng manufactured export items given in Table 4 seems impressive. However, a close look at annual figures of individual commodities reveals that their growth has been rather sporadic. Only a few items, in particular manufactured rubber goods, articles made from coir fibre (mainly brooms and brushes) and ceramic-Ware and wall-ties have indicated rontinuous annual
increases. CHANGES IN COMMODITY COMPOSITION OF EXPORTS
Throughout the period under study, the aggregate share of the three traditional exports declined continously, and since the latter bart of the 1970s the decline was more sharp. in 1982 this share was 46 per cent compared 72 per cent in 1978, and 89 per cent in the late 1960s. If the share is calculated for total exports, excluding petroleum products, the decline is much less marked; but still appears to be considerable. For instance, the revised figure for 1982 was 57 per cent compared with the aver
- age level of 85 per cent during
the period 1970-77. In the late 1960s and the early 1970s, unfavourable price trends was the major reason (notably for tea and rubber) for the observed declined in the share of traditional exports. Since then, both contin. ous stagnation of export volume of these products and higher growth rates of non-traditional.
The simplest way to shed light on these issues is to examine the behavioural pattern of Sri Lanka's export market shares of selected commodities. If externa factors were the sole contributor to unsatisfactory export performance and if exporters exploited the existing market opportunities, the country would then, at least, have maintained its share in world exports of the given commodity. If this has not happened, then the explanation should lie in the count
11

Page 14
ry's own internal policies and various other supply bottlenecks.
Estimates of Sri Lanka's market shares in selected export products for the period 1976-1982 are given in Table 5. Let us examine this data starting with the traditional exports. For all the five commodities - tea, rubber, dessicated coconut, copra and coconut oilthe market share has slipped drastically throughout the period. For instance, the market share of tea in 1982 was 26 per cent compared with 34 per cent in 1976. This decline is even more striking if we use the share for 1965, the peak year of Sri Lankan tea production, as the base for comparison. Sri Lanka's share of the World tea market in that year was 52.5%. It is pertinent to compare Sri Lankan Experience with the other two traditional tea producers - India and Indonesia. During this period, India was able to maintain her export market share at the average level of 37 per cent, with only insignificant annual deviations, even in the face of increasing internal demand pressure. Indonesia's share increased from the average level of 7 per cent in 1970 - 72 to 10 per cent in 1979-81. (Data from FAO,
Trade Year Book).
In the case of rubber, the
decline in market share is less dramatic, However, the overa|| trend was on the decline. For instance, none of the years after 1976 could exceed the 1976 share of 4.4 per cent.
The three coconut kerne products indicate the most unfavourable relative growth record. The share of Desiccated Coconut declined from 35.3 per cent in 1976 to 22.5 per cent in 1982. Sri Lanka's position in the world copra market had reached an almost negligible level by 1982. Market share of Coconut oil has
indicated a high degree of inStability, but again the overal
trends for the period showed a
12
Table 4 A
1955
1956
1957
1958
1959
1960
1961
1962
1963
964
1965
1966
1967
1968
1969
197O
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983

TOTAL EXPORTS, IMPORTS AND BALANCE OF TRADE
IN MERCHANDISE (1953 - 1983) (Million U.S.S.)
Domestic Total Imports Balance of U.S. $. EquiExports Exports Trade valent in Rs.
312.9 329.3 337.6 8.3 (4.7619) 361.O 379.9 2934 + 36.5 f
393.1 4O7.4 306.5 + 100.9
347.O 364.3 342.2 f 22. y
333.5 353.1 378.9 - 25.8
346.8 3592 360.5 1.3 Ꮺ W
355.3 368.3 42, O 52.7 Ꮺ W
372.7 384.6 415 - 26.9
352.9 363.9 3Ꭶ7,7 丰 6.2
370.9 379.3 348.5 卡 30.8
357.9 363.4 315,0 丰 48,4
386.7 393.9 4售4.6 20.7 '',
4023 409.2 309.6 + 99.6 Fr.
352.0 357.C 425.9 - 68.9
333.3 345.4 355.3 9.9 (4.3924) 331.8 341.9 365, - 23.2 (5,9524)
315.0 321.9 427.3 - 105.4
335.2 341.6 4售0.7 - 69.1
3373 340.2 356.O - 15.8
324.2 326.7 364.5 - 37.8 (6.1488)
4O7.1 410.5 425.8 15.3 (6.3752)
517.0 520.7 683.0 - 162.3 (6.6677)
552.1 553.6 739.1 - 185.5 (7.1049)
569.8 571.4 551.3 20.1 (8.4259)
743.4 746.0 675. + 70.9 (8.8982)
844.6 846.6 941.4 - 94.8 (15.60)
978.3 981. 1 1448.0 - 466.9 (15,58)
O46.2 10519 2034.9 - 983. O (16.53)
999.4 1026.8 1806.3 = 779:4 (1967)
996.6 1015.6 1772.9 - 7573 (20.80)
O56.3 1070.7 1786.6 - 715.9 (23.52)
ECONO NA | C R EV | EW JULYAUG '84

Page 15
sharບໍ່ decline. This data shows that the world demand situation can hardly be blamed for the stagnation in export earnings from traditional exports. The explanation must be found in supply constraints which prevented Sri Lanka from maintaining her market position.
Among six minor agri. cultura i commodites only in the case of cinnamon and to a lesser extent, in the case of cloves, did Sri Lanka occupy a significant position in the world market. Among all spices, cinnamon is considered to be the commodity which has least benefitted from the overa|| increase in the world consumption of spices. The high concentration of the major share (nearly 70 per cent) of world consumption of the commodity in a single country, Mexico, which has been confronted with severe balance of payment problems in recent years, and the - rapid market penetration of Cassia, a cheaper but almost perfect substitute for Cinnamon, has led to a continous deterioration in market prospects of this commodity. Given the predominant postion of Sri Lanka in the world Cinnamon trade, the slow growth of her ex
port earnings from t in recent years can mainly to this ac situation. In the c the high degree of market share refect importance of doi factors in determinir ings. The same comm the other items too. these latter items market share remair indicating possibiliti expansion even und
ieve of word deman For mineral p
market data is not meaningful internati son. However, there dence which suggests demand situation C biämed för unfavo growth of these com interesting article th, the Economic Revie Number 5, August 19 N. U. Jayawardena ha sons for un preceden 'record' gem export 77 and their drastic after. The major rea increase in the forn the incentives provi CRA scheme introd in a highly restricte
Table 5
IMPORT DEPENDENCE OF MANUFACTURED EXPOR
Contribution to total manufactured exports
Food, beverages and tobacco Garments Leather goods and footwear
Petro em
Rubber goods
Ceramic and Wai-ties
Machinery and equipment
Other manufactured goods
Total manufactured goods
Manufactured goods excluding petroleum
Source :
Column 2, EDB records,
(%)
8.25 46.57 O.7O
39,10 1.40 1.75 1.52 0.72 1OO 60.90
Column 1, Sri Lanka Customs. Returns
Supplemented with data from the Department of Ce Survey of Manufacturing Industry, 1980.
ECONOMIC REVIEW JULY/AUG. '84.

is commodity
be described verse market se of cloves,
volatility of s the relative nestic supply g export earnent applies for Moreover, for
Sri Lanka's s rather small 2s for further }r the existing
i. roducts, world
available for a onal compariis some evi. that the world an hardly be urable export modities, in an at appeared in w (Volume 8, 982; pp. 17.18) as analysed reated increase in is during 1972.
decline there son for export mer period was ded under the uced in 1972. d import trade
TS 1982
import content of exports
(%)
17.91 71.23 48.71
85.88 22.18 1976 43.2O 3.25 68.78 60.00
sus and Statistics
regime, CRA credits (first 25 per cent and later 20 per cent of exports) allowed to gem exporters for financing scarce imports fetched a premium of 150 per cent to 200 per cent in the market. The upshot was to bring more gems into the open market and to discourage smuggling. With the November 1977 | iberalisation, the CRA scheme was abolished as this type of a scheme was no longer relevant under a liberalised trade regime. However, no new incentives were introduced to preserve the degree of profitability of 'recorded' gem exports at the high level that existed in the CRA era. The result was the resumption of illicit exports. The introduction of a new 5 per cent BTT on gem exports in 1980 (this was abolished in 1983) and the lack of effective action to prevent the ingress of Thai nationals into the illicit gem trade further
aggra- wated this situation.
A reecent ADB study
(ADB 1981) Graphite Mining Project, Finland Report has reported useful evidence on Sri Lanka's performance in the world graphite market. According to this study, Sri Lanka's share in the USA graphite market declined from 7.5 per cent in 1978 to 3.4 per cent in 1980. The decline in the share of the Japanese market (the second largest market for Sri Lankan graphite, next to the USA) was from 6.5 per cent to 3.8 per cent between the same two years. Sharp price increases introduced without considering the level of prices from other competitive sources, and the wrong marketing strategy of attempting to promote higher grade graphite against buyers preferences are the two major reasons given in this study as explanations for this unfavourable market trend.
The degree of world market penetration by Sri Lanka in the field of manufactured exports still remains very low Out of the eight commodities given in
3.

Page 16
the table, leather goods, foot wear and soap have indicated declines in their shares in total developing country exports during 1976-82. Shares of wall tiles, jewellery and fish products have shown erratic time patterns. Both these features support the view that these export
items are not year established Ծr: a sound footing to exploit success
fully the existing market oppor: tunities,
Ceramic ware and garments are the only two commodities in the ist which have recorded contin ous and note-vworthy increases in market shares. The share of ceramic vvare increased from O.39 per cent in 1971 to 5.3 per cent in 1982, while the increase in the garments was from 0, 14 per cent to 2,6 per cent between this same eleven year period. The country-wise data indicates that Sri Lanka's export experience in these commodities compares favourably with other Asian countries. For instance in the case of Ceramic ware, Sri Lanka occupied the seventh position among these countries after South Korea, Hong Kong, Malaysia, india. Thailand and the Philippines. By 1981 she had been elevated to position 4 out-stripping Malaysia, India and Hong Kong. In the field of garment exports, Sri Lanka's overall performance seems to be relatively better than that of the 'Asian new-comers', notably Malaysia, Thailand, Thailand and Indonesia, By 1982 she had out stripped Malaysia and Indonesia in the ranking of Asian exports. Philippines and Thailand sti occupy higher positions in the ranking, but their annual rate of expansion seems to be relatively lower than that of Sri Lanka.
Ouota restrictions enforced by the major importing countries within the Multi-Fibre Textile Arrangement (MFA) have begun the impinge on Sri Lanka’s garment exports since the second half of the 1970s. The first quota agree
4.
ment under MFA Norway in 1976 exports to all oth ir the Western Et America had con agreements. At t the coverage of C was limited only biotuses, buit gra the “popular“ gar inci u ded in the re difficut to tej impact of quota exports is, withou to data at individi However, the grC garment exporters quota allocation, tion of exporters for reducing quic PZ firms, indica trictive impact of is, in fact, real,
Apart fro! impact on expor sion, quotas mi repercussions or viability of the in yet another w of quotas generat ism'' among produ. even among policy ing them from est export productior undertaking nec ments in the pri A minimum sale country is neede cost of export mai The mere : restrictions does r that prospects expansion of ga bleak. One can these restriction: protective functi "new-comers'" ag tablished third & in other count benefitted from East Asian Count it is hard to imag would have penet European and markets at the ra

was signed with
and by 1980 er major markets rope and North he under similar he initial stage, juota restrictions to shirts and dually most of - ment items. Were stricted list, it s how serious the a restrictions on it having recourse Jal exporter level. wing concern of on the issue of notably the agita
outside the PZ otas a located to tes that the resthe quota System
m the immediate t volume expanight have adverse ! the long-term garment industry lay. The presence e l'export pessimicers (and perhaps I makers) preventablishing sizeable capacity and/or :essary improveoduction process. S volume in one i to bear the high rketing.
}xistence of quota ot however imply for the future rment exports is even argue that play a useful on in favour of ainst already esthtries. Exporters ies have in fact estrictions against ries in this sense. ine that Sri Lanka rated the Western North American te she had recordi
ed during the past four years had an open-competitive market environment prevailed. This view is supported by Sri Lanka's declining share in the Middle-East market, the only significant dynamic market where quota restrictions do not exist, in the face of increasing competition from the East Asia export.
ёfS.
Throughout the period since
the early 1970s, quota limits on garment exports from Hongkong, Taiwan and Korea have been highly restrictive. Despite these restrictions, these three countries have managed to maintain their shares in total developing country exports at a steady level. The two major underlying reasons for this success are the successful exploitation of the scope for export increases left to them under the quota System, notably by increasing the unit value of exports and the diversification of exports to new markets, particularty to the capital surplus petroleum exporting countries.
Sri Lanka's garment expofts stii indicate a heavy dependence on items such as shirts, blouses, trousers and jackets which have already attracted quota restrictions. (See Economic Review, Vol. 9 No. 10/11, 1983, pp. 28-33). Therefore, opportunities exist in the short-run to expand exports by shifting to other items. But with the expansion of export volume these items are also bound to come under quotas. Therefore, the longterm prospects are invariably dependent on the ability to increase unit values by shifting to quality garments) within existing quota limits and to diversify exports to non-quota markets. IMPORT DEPENDENCE OF MANUFACTURED EXPORTS
An important aspect to be taken into account in assessing the net benefit to the economy of manufactured exports is their import dependence or percentage of imported inputs embodied in FOB
ECONOMIC REVIEWJULY/AUG. '84

Page 17
exports. The higher the import dependence the lower the contribution of the given export item towards the balance of payments position. On the other hand the essential corollary of high import dependence is low utilization of local raw materials which in turn limit the 'spread effect" (trickle. down effect) of manufactured export expansion on the domestic economy.
Table 5 gives details of import content in FOB export earnings and contribution to local manufactured exports of selected products. According to the table the import co-efficient of total manufactured exports is about 69 per cent. Even when petroleum exports are excluded as an exceptional case, the co-efficient still remains as high as 60 per cent. This high degree of import dependence is the outcome of heavy concentration of exports in garment exports. Garments which account for nearly 78 per cent of non-petroleum exports has an import co-efficient of 71 per cent. The import co-efficients of most of the other products, notably that of resource based products such as food, beverages and tobacco, rubber goods, and ceramics and wali tiles, appear to be significantly lower. However, despite increased emphasis on export diversification, the relative positions of these products in the export mix stili remains very low.
It is pertinent to mention here that estimates of import content do not portray the full story as to the balance of payments impact of manufactured exports. Over the period since 1977 foreign direct investment (DF) has become incraesingly important in this field (See Box). The share of nonpetroleum manufactured exports handled by firms with DF1 participation increased from 24 per cent in 1977 to 46 per cent in 1982; and nearly 57 per cent of the incremental exports between these two
ECONOMIC REVIEW JULY/AUG. '84
years originated
Therefore, other
outflows such as dend repatriatior ments and perhap drains' by way
pulations in intra-f with the exports, tial. The net bala impact can be m sed only through a cal investigation " account at these a
CONCLUSIONS
The above Lanka's export E. the period since t suits in the follow while current expc of SDRs recorded from about the 1970s, this expans adequate compare ration in import p ing import dema nomy. This has le dependence of t foreign sources
payments financi cannot possibly adverse repercuss nomy's long-term tum. When exam context, Sri Lank world exports a non-oil developit continuously deci
the period.
The analy formance of ind ties and comr compared with sir other competitive that, with the ext lated cases (in pa and perhaps garr the commodities satisfactory expo of internal origin tional exports - coconut have c their world mark

in these firms. foreign exchange profit and divil, royalty pay
s other 'indirect
of price maniirm trade, related might be substannce of payments
eaningfully asses
n indepth empiri. which takes into
spects.
2 analysis of Sri }erformance over he early sixties resving conclusions: drt prices in terms an upward trend first half of the sion has not been d with the accelerices and expandand of the ecod to an increasing he economy on for balance of ng, a trend which continue without ions on the eco| growth momenined in the global a's share in both nd exports from ng Countries has ined throughout
sis of export pervidual commodinodity categories milar exports from Sources suggests eption of few isoticular, cinnamon ents) for most of the causes of unt performance are The three tradi
tea, rubber and intinued to lose at positions solely
because of unsatisfactory expansion in export volume, From about the early 1970s non-traditional exports as a group have continued to record some expansion. However, at the disaggregated level a high degree of diversity as to growth rates may be observed. It is noteworthy that gem exports which constituted the most dynamic element in the export mix in the seventies upto 1977 have on the average recorded a negative trend thereafter.
The growth record of manufactured exports seems more impressive compared with other nontraditoional products. However, even in this field, Sri Lanka's export expansion does not, to a large extent, match that of her competitors. Among the main manufactured exports from Sri Lanka only garments and ceramic ware have shown satisfactory market penetration as indicated by their continuous increase in the world market share. Other items do not seem to have yet been established on a sound footing to exploit successfully the existing market opportunities.
When the manufactured export mix is taken as a whole, the most prominent feature is the high degree of commodity concentration. Garments account for about 80 per cent of non-petroleum manufactured exports. As an outcome of this heavy dependence on a single import-intensive item, total import content of manufactured exports remains at the level of 60 per cent (69 per cent when petroleum products are included). This heavy import dependence plus the fact that direct foreign investment has assumed an important role in this field suggests that the net balance of payments impact and the spread effect on the economy of export expansion is much less than that revealed by the growth rate in FOR exports.
5

Page 18

EconoMic REVIEWJULY AUG, 84

Page 19
ECONO M | C REV 1 EW JULY/A U G. 34
 

ates. Ao financia
finance

Page 20
led to Rs 1,2
භූ: ing se 登 experters e e dividente tvuegre (i) The Central B A facilities,
Francia facit
acilities xport credit re-fi
The pre-shipment re-financing scheme for non-traditional exports was introduced in December 1977, and be
- rational from about the second
e financing schem projects was in V this Wise Ferre Withe
Ëhajtëë Atëëëri tienal Gevelopr
18
 
 
 
 
 
 
 
 

re-financing scherne meeting expenses cont Exportation of commo. tea, rubber, coconut
ECONOMIC REVIEW JULY/AUG. '84.

Page 21
ECONOMIC REVIEW JULY IAUG. 84
 

Page 22
-
PERCENTAGE CONTRIBUTION OF FOREIGN FIRMS TC 1979 AND 1982 (EXPOR
1977
Total Export share of Foreign
Firms
Exports KHPZ. NonSITC Division % (1) (2) (3)
31, Food, beverages, and Tobacco 12535
- سر 9075 y Fish productsܢ
Processed tea 1228
Other 2232
32. Textiles, wearing appare and Leather
industries 鲁4495
Wearing apparel 13737
Leather products/footware 758
35. Chemicals, rubber & plastic pruducts 1923
Chemicals 1642
Rubber goods 281
36. Non-metalic mineral products
(ceremic-ware and wall tiles) 2991
38. Mechinery and equipment 2383
39. Other manufacturing 1389 r
Articles made from coir 132
Jewellery 36
Toys & sport goods 43 -
Other 1178 -
Total manufactured goods 35718
Total merchandise exports 34846
Notes:- - indicates zero values
a. Tea bags and instant tea b. Excluding petroleum products
Source:- Compiled from unpublished firm-wise export records, C.
20

DOMESTIC MERCHANDISE EXPORTS BYSECTOR OF ORIGIN
VALUES ARE IN THOUSAND SDRs)
1979 1982 r.
total Export share of Foreign Export share of Foreign
-- Firms Total Firns
Total Exports KIPZ Non- Total Exports KIPZ Non
KIPZ% % % KIPZ% % % 4)=(2+3) (1) (2) (3) (4)=(2+3) (1) (2) (3)
10.29 10.29 19822 - 8.78 18.78 30159 2.04
6.42 6.41 15279 . 11,61 161 18872
1 118 - - 3332 9.36
30.52 30.52 3425 - 56.86 56.86 7.955 3.81
31.70 31.70 563O8 5,70 2529 30.99 153967 36.73
29.49 29.49 55599 5.76 2458 30.34 15699 36.38
71.69 71.69 709 3.99 80.34 80.34 2268 60.56
1.51 1.51 2876 2.24 7.74 9.98 6669 65,70
O.50 - 0.50 2251 4.35 4.35 2098
7.48 7.43 425 14.11 25.68 39.79 4571 95.66
61.50 61.50 48G1 - 85.51 85.51 5695 O.36
8.12 8.2 3889 - 2.28 228 4962. 21.83
35.89 35.89 24O2 O.O1 29.33 29.34 7628 37.51
609 - 2255 26.0
- 18O 1.13 1.13 996 1.63
150 - 1182, 83.61
42.30. 42.30 1464 -- 48,31 395 36.63
23.54 23.64 99898 3.64 27, 16 30.8O 209080 31.34
1.90 1.90 756,486 0.43 3.76 4.19 9 O2O23 8.49
fonas Department
ECONOMIC REVIEW.JULY/AUG. '84

Page 23
M.W., Panditha
THE ROLE OF CO-OPERATIVE RURAL BANKS IN SRI ANKA’S RURAL SECTOR
This paper was read by
the Rural Credit Scheme
Rural Banks or Co-operative Rural Banks (CRBs) as they were subsequently renamed (1) celebrated the 20th anniversary of their establishment in March this year. This banking system was launched by the People's Bank during its formative stages as an institutional device through which the Bank could supplement its programme for provision of banking facilities to the rural sector through the Cooperative Movement. A CRB is not a Bank in the conventional sense but, it is the financial arm of a Multi-Purpose Co-operative Society. It is not a separate legal entity and does all its business in the name of the Multi-Purpose Co-operative Society of which it is a part. At present, there are 298 CRBs and 576 CRB branches covering the entire island.
In this paper, an attempt would be made to describe the objectives and functions of these institutions, the rationale for their setting up and their role in rural credit.
BACKGROUND
The concept of combining credit, marketing, resource mobilization and other general purpose activities at village level in one single organisation is not new to the Co-operative Movement, Raiffeisen, the father of the Credit Society himself appears to have harboured similar views. (2)
In Sri Lanka too, in 1957 when the proposal for re-organisation of the Co-operative Movement was
CONOMIC REVIEW JULY AUG '34
M. W. Panditha, Deputy General Manager Development, Accounts and Planning of the People's Bank at the
tive Group Study/Observations Programme 1984 of the Asian Agriculture Credit Association held in Colombo, Mr. Panditha was iated with the Rural Credit Departingent and during the period of the
adopted and the
Co-operative Societ gamated into Mu operative Societies, banking as one of t these Societies wa essential for the
they were expected development of the
The Committee mended the forma purpose Co-operati l957 inter alia mad observations: * It should be
Multi-purpose C Societies will b Banks and the District Bank Development matters for SI discussion Wii Bank.'
— у — изъ
into a lar Rural Bar
(2) 'The obj both maf through t members needs, to ings Bank
(3) The Co-C see the li Bank wit,
(4) Cenαμς ο (5) To Gove! Relation (15.5%),
(6) In early unlimite Sales Soc
 
 
 

-mയേഞ്ഞഭ
Co-operative enior Execucific Region closely assocs pioneering of
Single purpose Les Were amalti-purpose Cothe inclusion of he functions of S accepted as
dynamic roke
to play in the rural economy.
which recomtion of Multie Societies in e the following
noted that all Co-operative
e primary Rural ir relation with or Co-operative Bank (3) are attlement after h the latter
I shall
now outline briefly Some facts of the rural setting as it existed before establishment of the People's Bank, as a backdrop to the understanding of the role of CRBs,
Of the 4.5 million acres of agricultural land, about 2.3 million acres were cultivated with tree crops, mainly tea, rubber and coconut which form the principal agricultural exports. These crops are run mostly on commercial lines. On the other hand, the agriculture of the small farmer is primarily paddy Cultivation. The size of holdings in this sector is small, and are uneconomic at the lower end. The number of holdings stood at 1, 189,801 of which paddy holdings accounted for 49 percent. An average holding being 1.9 acres the farm sizes differed widely. (4) Natural hazards pose a constant threat.
Approximately 72% of the population live in village areas and are engaged mostly in agriculture. Since agricultural incomes are seasonal and subject to wide variations, specially among small farmers, there is a constant need for Credit in the rural sector both for purposes of production and conSumption. Due to lack of adequate
with the amalgamation of Multi-Purpose Co-operative Societies ge Primary Societies, Rural Banks were re-named Co-operative ks.
act of the society is to improve the situation of its members, Brially and morally, to take necessary steps for some to obtain ze common guarantee the necessary capital for granting loans to for the development of their business and other household bring idle capital into productive use for which purpose a Saywill be attached to the Society'
perative Development Bank referred to above however did not ht of day, but in its place was established in 1981, the People's
almost identical objectives.
Agriculture 1983, ment (2.5%); Co-operatives (4.1%); Commercial Banks (1.1%); and Friends (44.2%); Landlords (8%), Private Money Lenders Traders (11.5%); Others (13%),
fifties institutions which provided rural credit consisted of credit societies, Co-operative Agricultural Production and eties, Kacheries and the Dept. of Food Production.
21

Page 24
institutional credit facilities in rural arcas, (5) villagers have been compelled to obtain their credit requirements from private Sources at high rates of interest. This heavy burden of debt had also contributed inter alia, to the poor productive capacity of the village cultivator. A Survey of rural indebtedness conducted in 1957 (6) revealed that 48% of rural debts was from 'undesirable sources of credit.' This survey also exposed the inadequacy of the then existing Co-operative (redit structure to make a significant contribution in the sphere of rural credit.
It also revealed the inherent weaknesses of the single purpose Co-operative Society and its inability to be an effective instrument in developing the rural economy
Besides, the tenurial reforms which were introduced in the mid waranteed the establishment of 50’s institutions to finance tenants who were hitherto assisted by the land
OWnerS.
The re-organisation of the large number of single purpose Co-operatives into Multi-purpose Co-opera
tive Societies was considered to be
the answer. It was expected to be “the Village Bank, the Village Stores Society, the Marketing, Society and the Labour Society, all rolled into one: The establishment of an islandwide network of Multipurpose Co-operative Societies was therefore undertaken in 1957. Studies which made an identification of credit requirements of farmers in 1957 pointed out that the newly formed Multi-purpose Co-operative Societies should make arrangements for provision of not only productive credit but also non-productive credit such as expenditure on ceremonies., festivals, etc., and for redemption of existing debts. The Establishment of the People's Bank
Provision of funds for this vast network required the establishment of a powerful Co-operative apex Bank. This Bank was established in l961 as a Commercial Bank under the name of People's Bank. The purposes of the Bank were to develop the Co-operative Move
22
ment, rural ba
credit.
After the People's Bank cial assistance Movement ing a marked deg represented m the already ex were provided Banks rather to develop ru envisaged in t the initial stag ed a large n specially in a been hither to Banks. It also the people in who could from other But these fac mostly to fix lower income
Il COII süccess in : fixed earners,
make a Woth
1sphere of agri rural sector. absence of bi regular patter inherent defe inhibited to Bank's ability the rural s inadequacy of commercial credit-worthi tors and th problem itsel from finding to this proble The First Stel Towards the The Ban sector throug was confined of paddy pu other tradi. MPCSS, was time in 196
(7) F
(8) 1

king and agricultural
establishment of the provision of finanto the Co-operative cased in quantity to ce. But this increase 'rely an expansion of isting services which by the Co-operative han a new departure all credit on the lines he Bank Act. During es the Bank establishumber of branches, reas which had not served by commercial opened the doors to lower income groups lot obtain facilities commercial Banks. ilities were provided ed income earners in levels. ast to the Bank's assisting such small was its inability to while impact in the cultural credit in the Access to credit, ankable securities, irn of income and other 3ts in rural agriculture a large extent the to expand its role in ector. Besides, the the normal canons of lending in assessing less of rural cultivae magnitude of the f precluded the Bank an effective solution n on its own.
Rural Sector c’s lending to the rural h Co-operatives which initially to financing chases, consumer and lig requirements of 2xpanded for the first 3 with the launching
of the Extended Rural Credit Scheme. Under this scheme, short and medium-term credit facilities were made available to certain selected MPCSS for re-lending to their members. (7)
Short-term crop loans were however not provided as there was a scheme already in operation by the Government.
A review of the performance of this schemic by the Bank in early 1984 surfaced several weak aspects which are described below and formed the basis for an improved system. (8). (a) The managerial capabilities of the staff had to be strengthencd by providing external Support and training. (b) In providing credit, pre-Sanction and post-sanction evaluations of applications should be done in a methodical way. (c) Methods will have to be evolved (i) to accept securities available at village level such as lands without clear title (ii) to recognize the credit standing of borrowers who could not provide documentary evidence of their worth. (d) There is a need for delegation of authority of the Boards of Societies to sub-committees and Credit Managers to enable quick decision making in disbursing credit. (e) The procedures relating to (i) proper custody of documents; (ii) maintenance of up-to-date Book-keeping records, (iii) security arrangements and (iv) loan documentation, should be strengthened.
(f) This scheme as it was constituted, was inadequate both in terms of its scope and its operations to meet the rural credit requirements and to act as a catalyst in promoting the rural sector.
cilities were granted for the following purposes initially Production s. 2,500/-); Consumption (Rs.500/-); House Repairs (Rs.2,500/); ademption of Debts (Rs.2,500/-); with a maximum of Rs.3,000/-
'r member and was extended later.
is scheme continued till 1979 side by side with the Rural Bank Sc
፵ፕጌé.
ECONOMIC REVIEWJULY/AUG. '84.

Page 25
(g) The provision of a credit line and Supporting Services in themselves were inadequate to restore the confidence of the rural community who had witnessed for nearly half a century the disbursement of credit by Co-operatives. The Credit Department of Cooperatives had to be given the image of a Bank.
(h) The Societies' lending should be linked to Bank lending. Setting up of Rural Banks
The lessons drawn from this experiment and thic agonizing reappraisals of its Own limited role in the rural sector, led the People's Bank in 1964 to develop the concept of banking through CoOperatives into a practical and working proposition. The result was the formulation of the Rural Banking Schcmc.
The objectives of Setting up Rural Banks were then enunciated as follo WS
i) To provide credit facilities in a fruitful manner to members of societics.
ii) To provide crcdit supervision for facilitics granted.
iii) To up-gradic the bookkeeping and documentation system.
iv) To develop methods for
savings mobilization. And the scope and functions
of Rural Banks were framed thus : i) To provide loan facilities for any purpose within a limit of Rs, 3,000/-i, Facilities above this limit to be considered by the nearcst branch of the People's Bank, ii) Linking credit with mar
keting.
iii) Development of Rural Banking and Depsit Mobilization.
iv) Pawn Broking as People’s
Bank's agents.
ECONOMIC REVIEW JULY/AUG. '84.
To ensure t new schemc was those MPCSS wh the eligibility c (10) Priority was operating the successfully.
Fligible Soci their application join the schem Bank did the se by case basis at and Scrutiny of Sclected, the Soc ent cred into an Out the terms an which the R u ra Operate.
As an initial lishment of Rura cd Societics w amend their B. thcm to establish People's Bank in following : (a) f for on-lending: (h tance by secondi employees; (c) Stationary and cq ing ; (d) Supervisio inder this sc lities were madc bers for producti redemption, tra emergencies and fication. These f vided both as mcdium-term lo ments ranging f yearS.
Thcse Rur authorized to en ugents of the Peo
Crop loan f sonal nature ht introduced as a s Cultivation loans the Government, However, provis! Bridging finance visaged against SU
(9) ide .
(10) (i) A shoul, (ii) S Wኽ1é}?{; Strony

eir viability, the thrown open to "h conformed to Ecria prescribed. given to Socic ties tended Scheme
tics could make to the Bank to Thcrcaifft cer thc action on a case cr an inspection he Society. Once ity and the Bank greement Setting conditions under Bank was to
step for the estabBanks, the selectare expected to '-laws to enable Rural Banks. The turn provided the nancial assistance ) managerial assisng Onc of its own safes, counters, uipment for pawn
量。 theme, credit faciavailable to mcmon, housing, debt ic, consumption, for rural clectriacilities were proshort-term and ans with repay"om l year to 5
al Banks were age in pa w ning as ple’s Bank
acilities of a seaWever Were in Ot cheme of granting
implemented by
Was in operation, on of temporary
facilities was enh loans.
Facilitics were made available both for members and 11 Ο11members to maintain different types of Savings accounts such as, ordinary Savings accounts, minor's savings accounts and Investment Savings Accounts. Members were expected to enter into a Marketing Agreement with the Society. All sales proceeds were expected to be credited to their accounts. Fixed Deposits were also accepted from
members and non-members, Cur
rent Account facilities too were provided to members of the first three Rural Banks at the initial stage after which this facility had to be hastily withdrawn when certain legal impediments were encounted. Had these current accounts been maintained, more innovative credit facilities would have been evolved.
By 1971 this scheme had been extended to 11 Societies and the number of accounts attracted had grown to 60871. By this time this institution had not only gained the confidence of the rural population, but had also attracted the attention of academicians, researchers and officialdom as a new banking concept worth taking seriously. The establishment of banking sections in all amalgamated MPCSS was accepted as Government policy. * Changes in Rural Banks after Amalgamation of MPCSs
The amalgamation of a multitude of small MPCSS to a relatively small number of large MPCSS covering a wider area of operation, necessitated in l973 certain organisational changes in the structure of Rural Banks. These Banks which were hitherto run on unitary lines, became a branch banking system with Head Office operations and Branch Operations. Most of the former Rural Banks became branches of the new Banks. The namo
ural Credit and Banking Circular No. 1/84 of 22-03-64.
nimum membership of 500; (ii) Shares of at least 75% members be upto date; (iii) There should be no default by any creditor; Ciety is run at a profit; (1) Should be atteast 3 'ears after establish(vi) Should be an agent for paddy purchases, (iii) Should have a
building.
23

Page 26
Rural Bank too was changed to Co-operative Rural Bank. A new cadre of Co-operative employees designated “Marketing and Credit Manager'(1 l) was placed in-charge of these Banks. Accounting and maintenance of records were centralized. The role of the People's Bank became more supervisory. This change, brought in its wake a weakening of the People's Bank's control over these institutions.
In 1973, to cope with the newly introduced expanded crop loan scrime, functions of CRBs were re-defined and widened as follows - (a) Mobilisation of deposits from members. (b) Provision of loan facilities to members for production and consumption purposes attuned to MPCS development programme. (c) Pawn broking facilities for members and non members. (d) Provision of money, payments and transfer services. The provision of crop loans was also brought within the ambit of CBRs. The Co-operatives however lost their monopoly over cultivation credit as the Bank of Ceylon too joined the scheme in 1973. The concept of considering the farmer as a unit of production and assessing all his credit needs within a comprehensive plan under which a credit limit was to be approved for each farmer was introduced and was called the Comprehensive Credit Scheme.
Although different types of credit requirements came under a single credit limit, refinance from the Central Bank was available only for crop loans. Therefore, different lending schemes came to be maintained separately.
Lending Schemes
Thus, three main lending schemes came to be operated - (1) Short and Medium term facilities provided under the Comprehensive Credit Scheme and the original Rural Banking Scheme. (2) Seasonal crop loan facilities for paddy and other subsidiary food crops
(11) They are now called Bank.
ing Service Managers.
24
CRB CREDIT F,
Purpose
Production
Housing
Debt Redemption
Trade
Consumption (Puri of consumer durab radios, sewing mac
Emergencies
Electrification
Maximum Ioan lim individual member
Agricultura Produ
Consumption
industries
Housing
Redemption of De
rade
Anima Husbanda
Electrification
Others
provided unde Credit Schem. People's Bank's
Short and Mei
Purposes facilities are terms are giv also shows th limits under Current rates C for CRB fund re-lend to n

TABLE 1
CILITIES Maximur
Maximum Amount Repayment
Period 1964 1968 1973 1980
2,500 5,000 7,ԵՍՍ 15,000 1-5 years
2,500 5,000 7,500 15,000 3-5 years
2,500 -5.000 5,000 5,000 5 years
- 1,000 2,000
:hase les like hines) 500 500 1,000 5,000 1 year
2OO 200 2OO 500 1 year
600 1 OOO 3,000 5 years
it per
3,000 5,000 7,500 15,000
TABLE
TOTAL ADVANCES
No. of Accounts Balance (Rs.)
ction- Sub total 13082 23,901.671
3, 186 4,571. 157
2.914 6,279,481
28,220 79,416.215
ots 7,677 12425440
8,441 5725.127
у 4853 6,959,074
978 1,800,458
3813 6,625,096
ΤΟΤΑ - 67364 147,703,669
the Comprehensive :... (3) Pawning as
agents.
lium Term Lending
Or which these credit provided and their n in Table 1. This : gradual increase in each purpose. The lending to Societies ng is 18% p.a. CRBs embers retaining a
margin of about 4 - 5 %. The People's Bank does not specify the on-lending rate. Loans upto Rs. 5,000/- could be obtained again
st the guarantee of two acceptable members, and for those above this
limited collateral security is taken. There is provision even to accept lands with undivided ownership as security. Village notaries attend to little investigations and mortgages. Loans against 90%. of fixed and savings balances are also provided.
ECONOMIC REVIEW JULY AUG, '84

Page 27
ప్రతిy
Within the prescribed ceilings, funds are provided for the full cost of a project, without calling for an enquity contribution. (1 2).
As at 31, 12, 1983, Medium and Short-term loans outstanding was Rs. 147.7 million in respect of 67,364 loans. A purpose- wise breakdown of these facilities are given in Table II
A regional-Wise analysis indicates that 92% of the loan volume has been disbursed outside Colombo District thereby demonstrating the strong rural biased dispersion in lending.
Lending operations and credit disbursements have not been upto expectations. Apart from the mimum share requirements for borrowings, relatively high interest rates, internal administrative problems, the lack of emphasis on identification and appraisal of small scale rural projects too appear to contribute to this position.
Crop Loans
Since 1973, the provision of seasonal crop loans too were brought within the CRB Scheme. Credit facilities are provided for paddy and sixteen Subsidiary Food Crops for purposes such as land preparation, seed, fertilizer, agrochemicals and for harvesting. The scales of finance per acre are periodically decided by the Ministry of Agriculture in consultation with the Banks, (13) Under this scheme the Central Bank provides 100% refinance facilities and the People's Bank lends these funds to MPCSs which, in turn relend to member farmers through the CRBs. The performance of this scheme is summerised in Annex II.
(12) This is however counterbalanced by the share contribution requiremeniť μp to 10% ofα ιοαη,
(13) At present these scales vary from Rs. 1,400/- to Rs.2,400/-, per acre of paddy.
ECONOMIC REVIEW JULY/AUG. '84.
Since a fuller disc scheme is being mad paper, suffice it to a Proposals for major expand the coverage c scheme have been m to the Central Bank, due recognition has b the setting up of an in ism for re-scheduling way of a ST abilizat cover loan defaults d hazards, a problem bedevilled many a le in the past.
Pawning
Loan Facilities g. pledge of jewellery ( dered as the most su ing operation of the { ies could engage in p with their own fui obtaining overdraft f the People's Bank. P are given both for poses and consumer non-members and me advances are repaya year. Renewall of adva ever allowed after pa annual interest. The funds for these purpc at 23% p.a. and the re-lend at 28 - 30 3 l. l 2.83, pawning a at Rs.243.9 million 350,265 advances. Savings Mobilization
CRBs have prove effective medium ( rural savings. Both t savings and the num bear witness to this As at 31.12.83, Savi Deposit balances out Rs. 718 Mn. Of this Rs held in 1,6 l 2,000 sav Another noteworthy savings mobilization i savings deposits and accounts were held members, which der extent of confidenc the rural communi
The deposits a position under the C at 31.12.1983 could as follows:-

ussion of this e in another did here that
changes to if this lending
ade by Bank under which been given for built mechanof loans by ion Fund to ue to natural which had inding scheme
'anted against can be consiccessful lendCRBS. Societawning either inds or after acilities from 'awning loans essential pur
purposes to :mbers. These. ble within a inces are howyment of the
Bank lends oses currently CRBS in turn % p.a. As at ivances stood in respect of
i to be a very f mobilising he volume of ber of savers phenomenon. gs and Fixed standing were 590 Min were ings accounts. feature of s that 63% of 9% of savings by nononstrates the ... reposed by y in CRBs. nd advances RB scheme as e summarised
Volume No. of
(Mn) Accounts
Advances
1) Short and
Medium-term
-oan's 147.7 67,364
2) Pawning 244.0 339,816
3) Crop Loans
scheme since 73/74 (Maha) 507.1 898 a
Deposits
Savings 589.7 1.6|12.485
Fixed Deposits 29.2
7189 24,765
Although the gross loans/ deposits ratio indicates a lending surplus, when cultivation loans for which Central Bank refinance is available, to the People's Bank are set aside, the advances/deposits ratio is only 54%. ,
Much has been said about the short-fall of lending vis-a-vis, the deposits mobilized. One cannot overlook the fact that the bulk of savers being non-members are ineligible for loans except pawning advances, Viewed in this light the position does not look so unfavourable. Investment of Supplies Funds
The People's Bank provides facilities for Rural Banks to invest their surpluses in the form of Fixed and Savings Accounts. Surpluses built in current accounts are periodically transferred to Savings Accounts maintaining only minimum balances required in current accounts. In addition CRBs too invest their surpluses in the National Savings Bank when their rates are more favourable, Besides, the healthy savings surpluses position has enabled a large number of societies to satisfy the demand for credit from their members
25

Page 28
with their own resources, Latest figures indicate that, of the 843 Rural Banks 685 are managing with their own funds,
Profile of a Co-operative Rural Bank
The Board of Directors of a MPCS holds the overall responsibility of the CRB through the General Manager who is assisted by an Executive Grade Officer designated as “The Banking Services Manager', whose sole function is the management of banking activities. Generally, a CRB will have 2-3 branches. These branches are under the control of Branch Managers. A typical CRB branch will be a small unit consisting of a Branch Manager and assisted by one or two clerks. There will be about 75 - 100 transactions a day covering savings accounts, pawning and other lending operations. Monthly about 10 loan applications would be handled during off seasons and a heavier work load during the cultivation season. The processing time of loan applications would vary from 1 - 6 weeks, depending on the nature of securities and the
purpose.
Applications for credit by members are entertained at a Branch of the CRB or Society. These are examined by the Branch Manager and the Branch Committee of elected members and are referred to the Banking Services Manager åt the Head Office of the society. Processing of applications are generally handled at the Head Office and are referred to the Sub-committee of the Board of Directors where the General Manager, People’s Bank representative and a few members of the Board participate, in making recommendations to the Board of Directors. These applications are thereafter submitted to the Board of Directors for approval. The Banking Services Manager is delegated with
authority to grant loans for emergencies, and he thereafter seeks the
26
covering sancti Directors.
Banks are generally from p.m. but in are extended u Most CRBs ar on Saturdays a
Overall Profital
It may als examine the Ov Rural Banks. income of Ru trest received fi es. Their adım fairly low as th ed by a small of the 843 Rui ed to be runn: total profits w the total loss were Rs.414,0 have become profit centres (
Financial Safeg
Certain S been introduc financial viabi tions and Safe these arranger expected to in ment of the set apart a p( profits to a Doubtfull Deh: also required to a special S People's Banl Deposit Gua amount equ of 1% of the made by del Savings AccC them and (3 for pawning which the Cl ly a portion ( and is meant are not cover
Supervisory : Review Mech
Operati are reviewed

in of the Board of
open for business about 9.00 - 1.30 ertain areas hours to about 3.30 p.m.
open for business well.
ility
o be of interest to erall profitability of he main source of al Banks is the inom pawning advancinistrative costs, are ese units are managstaff. As at 31, 12.83 'al Banks, are reportng at a profit. Their ere Rs. 16.9 Min and of the balance 42 D0/-. Thus, the CRBs one of the main fMPCSS.
guards
afeguards have also ed to strengthen the lity of lending operaty of deposits. Under ments (1) MPCSS are nake an annual assesdelinquent loans and rtion of their annual Reserve for Bad and ts.’’ (2) All CRBs are to deposit monthly avings account at the styled “Rural Bank rantee Fund”. Ain valent to one-tenth otal monthly deposits Ositors to Fixed and unts maintained with a Contingency Fund has been set up to Bs contribute monthf the interest received, to recoup losses which 'd by insurance.
nd anisms
ns of these institutions periodically by several
institutions. In addition to the internal audit conducted by the Society itself the Development Assistants of the People's Bank are also expected to audit all vouchers and transactions handled daily by CRBs. These audits are conducted normally during weekly visits. They are also subject to the annual Cooperative Department's Audit. The Regional Offices of the People's Bank carry out annual inspections and quarterly surprise checks to review lending operations and other activities. As at 31.12.83, 620 of 843 CRBs had been inspected by the REgional Offices during the year. In addition, the Rural Credit Department of the Central Bank of Ceylon also inspects the Rural Bank which are selected at random,
Conclusion
Now that the CRBs have come of age and have siomonstratcd their capabilities to undertake wider responsibilities, some of the lines on which further expansion could be examined are -
a) introduction of Current Accounts, enabling provision of facilities through these Accounts, as Overdraft facilities revolving credit facilities etc., for which amendments to existing law would be necesSary ;
b) delegation of authority to CRBs to act as the People's Bank's agents and accept and transmit to the People's Bank, applications for larger facilities from members and non members,
c) to bring these institutions closer to the development process by permitting them to lend under special schemes such as, Integrated Rural Development Projects, Dry Zone Development Project, etc.
Our Bank is presently examin1ng the feasibility of expanding
their services on these lines.
ECONO M | C REV | EW J U LILY/A U G ' 84

Page 29
A MORE EFFICIENT ADMINISTRATIVE SERVICE
A.S. Amaraskera
A.S. Amaraskera who has been with the Sri Lanka Administrative Service since 1975 served a four year term as Sri Lanka's First Secretary (Com. mercial in Singapore during this period. He makes these observations strictly in his personal Capacity, from his experience and study of both, the Sri Lanka Service and the Singapore Service
At a time when much controversy has arisen regarding the role of the Administrator, his importance vis-a-vis the professional and a host of other questions about the administrative structure of out Country and its effectiveness in development, it seems appropriate to examine the Sri Lanka Administrative Service (SLAS) in relation to an equivalent service in a developing country in the region. The Singapore Administrative Service: (SAS) has been chosen for this comparison mainly because of the nature of its achievements over the past two decades which has resulted in its acceptance worldwide as an exemplary Administrative Service. This paper is the result of over four and a half years of close contact and association with Singapore's premier service within its public service (still called the Civil Service) and the experience thus gained in working in an environment and with a system the objectives of which always appear to be improvement and achievement.
The Singapore Administrative Service (SAS) is the country's premier service in all respects-prestige, functions, wages and importance. It is generally referred to as the No. 1 service and is ranked higher than the Engineering, Medical, Scientific and other professional services. There are several similarities as well as differences between the structure, concept and functions of the SLAS and the SAS. While some of the differences are obviously results of the disparity in the stages of economic
ECONOMIC REVIEW JULY AUG, .34
development of t Some differences Other sources too. been occasioned the two services and have been i. On the British Ci ever, the nature objectives of the tive Services as t are far different British model.
Recruits t from among per academic qual this is true of the of SLAS recruits of SAS officers as the total Civil Seri while the compa. the SLAS is abc Both services inita maintain law a collect revenue years been gradua and now engage in tion in developm their respective col ers of the SAS as are transferable : perform a varied and duties as they service. Finally th recruits to each se the rank of Perm (Secretary in this is considered the n and prestigious pc. service. The diff the SAS and SL become clearer on tion of the SAS.
RECRUITMENT
Only per obtained a first degree or a sect livision) are elig to the SAS. Alth takes place imme their obtaining t selection takes years earlier soo. General Certifica (GCE) “A Level

e two countries,
originate from Similarities have y the fact that both stem from itially modelled il Service. How
functions and two Administraley stand today to the original
the SAS are sons with high cations and greater number "oo, The number a percentage of rice is .3 percent rative figure for ut .34 percent. ited primarily to nd order and have over the ally transformed direct participaent activities in untries, All officwell as the SLAS and as a result set of functions progress in the Le goal of most rvice is to reach lanent Secretary country) which nost high ranking ost in the public erences between AS are likely to a closer examina
sons who have t class Honours ond class (upper ible for selection ough recruitment 'diately following he degree, actual place, generally, n after the local te of Education results have been
released. At this stage applications are invited from those who have performed exceptionally well. Candidates who have passed the preliminary examination for admisSion to the Universities of Oxford or Cambridge are also eligible to apply. Selection is by interview by the PSC or panel or board nominated by it. On selection the prospective recruits are offered a Scholarship through the University on condition that they join the Service and serve the government for at least eight years after graduation. The assessment of their academic prowess at GCE 'A' Level is so accurate that almost all those Selected after 'A' Level reach the required standard of a 1st Class Honours or a 2nd Class Upper Division. The probationary period is two years during which the 'cadets are trained at home and abroad. They are also assigned brief planned postings under the Superivision of experienced senior officers,
A factor worthy of note is that the subjects offered for the GCE 'A' Level or the degree are not material in the selection process. Candidates from such varied disciplines as the Arts, Sciences, Engineering, Medicine, Business Studies and even Languages are given an equal opportunity provided their achievements conform to the basic academic excellence required. Once recruited and trained, the government sees to it that maximum use is made of the particular subject or discipline the officer has specialised in. As a result, the knowledge, expertise and experience of these officers in their varied fields are never lost to government. Recruitment is also carried out to a very limited extent by means of open advertisement in the newspapers. The minimum qualifications required are the same as those outlined above. This affords an opportunity for late developers who may not have performed exceptionally well at the 'A'- Levels but have succeeded in obtaining the required honours degree.
27

Page 30
in the recruitment procedure, academic excellence and intellectual ability are not the only criteria for sclection to the SAS. Aptitude, character and leadership qualities receive equal weight age. The Public Service Commission (the appointing authority) has laid down the following requirements for entry to the SAS:
"A good Honours Degree. Apart from goc' aro ademic qualifications. Administrative Officers must possess integrity', self-discipline and commitment to the service. They' should ha'e a clear and analytical mind, able to sice up problems or situations and come up quickly with practical solutions. They should also be self-assured, innovati'e and adaptable, coping well with the demands and pressures of change and able to get work uune quickly'' (1,.
Although these requirements are not specifically stated, it is presumed that Selection Boards look for these qualities when sclecting officers for the SLAS and therefore in this respect the criteria are similar The differences however are more marked and greater in number. There are three methods of selection to the SLAS, namely Open Competitive Examination, Limited Competitive Examination and the Merit Promotion Scheme. The number taken in under the Open Competitive Scheme is the largest, comprising 60 percent of the intake while the other two schemes cater to 20 percent and 20 percent respectively. While the Open Competitive Scheme is purely for graduates it laid down (until recently) no specific academic excellence except the possession of a degree.
A significant difference bctween the schemes of recruitment to the SAS and the SLAS (Open Competition) was the emphasis placed on academic distinction by the SAS and the total absence of such a requirement for entry to the FLAS. An SAS recruit must necessarily possess a list or 2nd class Upper (Honours) Degree
28
but the SLA with a mere sis on high did howev Ceylon Civil ment schemr (since its foi the SLAS S gama, writi Review in the “Haibi dominated vice. The S tiated in a 'radical system” ha on academic
The was in two tion Test : The Elimini of two pap ani ( b ) li no ful candida ction Test Essay paper viva voce although th schemc of excellence, did not at of academi a decision to go back tion' and sit for 4 general pap Comprehen Knowledge. SLAS cade basis.
The Exam is fic have served ates five) a generally fc bably serv the 'top' w of promotie service. In selection is trast the
persons of 1st class ( idonours II entertain C either thro
it.

S entrant could get by pass degree. An emphaacademic qualifications 2r, exist under the Service (CCS) recruite and for some years imation in 1963) under chemele Sarath Aṁunung to the Economic 1977 refers to this as ary Tradition' which the Colonial Civil Sercheme which was ini977 which he called departure from this d no such such stress I learning
examination for entry parts - (l) an Eliminaand (2) Sclection Test. at in Test was made up crS - (a) Comprehension el'ig^nce Test. Successtics then faced the Selcwhich consists of an , a General paper and a
It will be seen that c very basis of the SAS recruitment is academic the SLAS entry Scheme that time require a test knowledge. However, nas been taken recently to the "Hailbury Tradicandidates, have now to Subject papers and 3 ers-General Intelligence, sion and General In fact the intake of S in 1983 was on this
Limited Competitive r those in service who Over ten years (graduld the Merit Promotion ir those who have prod longer and reached ith no further avenues in open to them in their all three schemes final by interview. In conAS has no room for her than those with Second Class Upper cgrees, and does not ficers from the ranks gh competition or mer
The SLAS Scheme of recruitment appears more democratic in that it gives a chance through its Limited Competitive and Merit Promotion schemes, to intelligent officers who may not have been able to graduate due to lack of opportunity, to prove their capabilities and qualify to enter the service. In a country where educational opportunities and facilities vary considerably from district to district such arrangements are both humanc and democratic. However, from the point of vicw of the usefulness and the effectiveness of these two schemics in the furtherance of government policy and development, arguments could be raised against as well as for them. For instance those competing for entry through the Limited Competitive Examinations are usually in the clerical and allied services and have thus been Working at levels below the Administrative Over long periods. As a result, these mature officers... have formed ways of thinking that do not measure up to management level and are not therefore Suited to take (in a new and more demanding role which necessitates an almost complete change in Outlook. Again, those promoted on merit arc advanced in years and may serve only 3-5 years before they retire. The bencfit here is mainly to the officer as he would draw a higher pension in retirement but the benefit to government is possibly minimal as he serves only a brief period in his new role. As against these disadvantages, these officers have experience in working within the System, have gained a knowledge of governmental activities, programmes and procedures and are therefore equipped in a sense to fit into their new nositions.
The Singapore Administrative Service recruitment procedure is, on the other hand, autocratic. There are no second chances. Either one makes the grade at a particular stage or one loses the opportunity altogether. However, the formulation of this rigid system appears to have been governed by
ECONOMIC REVIEW JULY/AUG, '84

Page 31
two important factors which are peel liar to Singapore. Onc is that the Sinhall population of 2.4 million places limitations on the availability of human resources With the high level of attainment required t () en er the SAS. The best inlclect and talent (herefore has t () bc. put to the best use.
A Scnior Singapore Civil Servant has put this rather simply but forcefully as follows:
"Singapore is a Sinall colt It! I'. We do not hai'e resources such as minerals, nor ha'e i s'e got the gixpanse of land to de relop argil culture. But one thing ve do have and that is human resources, and the philosophy for development is to navimise the use of our citizens' abilities in the development of the economy'.
Thc sccond rcason lics rin orc in thc Singapore Concept of the "Administrator' as compared with our own and this mcrits closer scrutiny.
CONCEPT
In terms of the Singapore Concept, the Administrator's responsibilities could be conveniently crystallised into three basic functions thinking, planning and decision making. As a thinker it falls within the purview of the Administrator to project his mind forward not a month or a year, but decades and to assess the state of development in thc world as well as in the region and its possible repercussions on his country at that point of time e.g. in the year 2010. He is expected to do so by making use of statistical data, reports and other information in the relevant areas, which are made available to him. As a planner, the Administrator must then, necessarily assist in the formulation of plans and programmes to meet the demands that would be made on his country in terms of the assessment he has made stage by stage.
ECONOMIC REVIEW JULY/AUG '84.
year by year,
As a
esult ()
the Singapore
gramme has be the needs of th the Family P envisages :
million in the y
point
On Wards
to achieve a Zer gro Wth.
As a di
Administrator deal with a hos crop up in thc
pr() gra pelled under have ultima
mmc S. C to mak
great pre | () bc dji tc g(3al
Objectives and thinking and To borrow ar Professor G.G.
ᏣᏬfᏚ 8Ꮈr
c docris o.
for doing.
Singap ί 13 ίΟΥ
Thc cx ore Conco given a
over simplified sidered basic ti the Singapore subject. Thc foll
the “S
as Out
cope and lined in :
the SAS would
this:
“The Administrat
premier Holding
Service in key pos
and departments, Cers assist minime te
and in
plementati
policy as well as and improvement
chinery. pecially ing and growing
Work in t, challenging will be inc complexit
of Government acti
What bec
clear from the fo SAS officer do
routine
work

decade by decade. his type of activity
i ducational Proin drawn up to mect c year 2010, whic anning Programme population of 3.4 car 2030. From this
Singapore expects J rate of population
ecision maker the is called upon to it of problems that
implementation of is constantly come quick devisions SSure; his decisions 'ected towards the
of achieving the
targets set by his planning activities. | expression from Thomson, SAS offir think crs preparing
planation of the 'pt of the Adminisbovic may appear but could be conO thc thinking of authorities on the owing extract from
Nature of Duties' a memorandum on
serve to illustrate
i'e Seri'ice is the
the Ci'il Service itions in ministries Administrative Offi?rs in the formulating on of Go'ernment in the co-ordination of Go'ernmen f miliahis elite serice is es7, l'arried and revy’ardreasingly so nv'ith the and modernisation vities, ’’’
omes increasingly regoing is that the ès not engage in or establishments
work as the SLAS officer knows it. He will not approve the granting of an increment to a subordinate nor approve applications for leave, He is not concerned with an underpayment of a few hundred dollars to government or thc refund of an overpayment. His Own time and energies are too vuluable and cannot be spent on these day to day matters. These are left to the Executive Officers' - a kind of middle grade in the Civil Service which functions at a level het ween thc Administrative and the Clerical. The functions of the cxecutive
officer are similar to those of thc
Office Assistant (OA) or Chief
Clcrk (CC) in the local set up. He attends to office administration routine or establishments work and leaves thc SAS officer's routine' consists in at lending seminars, confer cinces, discussions at ministry and interministerial level, engaging in studies, compilation of reports and handling special assignments both at home and abroad. It will therefore be seen that he clearly functions at a level and in an area in keeping with the intellectual abilities and commitment that are required Of him as an SAS Officer.
When one considers how often SLAS officers at all levels (this does not exclude permanent' Secretaries) are hampered by having to see to routinc matters which leaves them little time to engage in thinking, planning and formulation of policy and programmes, one Wonders whether it is not time that the scope and nature of duties of SLAS Officers is re-examined in the light of the Singapore Concept. One weakness may lie in the lack of a proper definition of the seope and nature of du ties a deficiency which could be set right without much difficulty. While total absorption or imitation of the Singapore Concept is not intended, the possibility of modifying it to suit the role of the SLAS officer in the local environ ment seems to be desirable.
29

Page 32
TRAINING
The training of SAS officers is carried out by the Civil Service Institute (CSI) which is in many ways the counterpart of the Sri Lanka Institute of Development Administration (SLIDA). The induction training for SAS cadets lasts two months culminating in a two week tour of the ASEAN countries. The CSI conducts courses for all levels in the Civil Service but those relevant to the SAS are the Middle Management Course and the Senior Management Course. Middle managers are instructed in the principles of management, quantitative analysis and economic policies. The subjects are reminiscent of those covered by SLIDA for SLAS middle managers.
The more interesting and significant course is the Senior Management Course which is a residential course for Heads of Departments and Permanent Secretaries. This course deals mainly with concepts of management. The CSI also conducts English Language Courses at all levels but concentrates on the Senior and Middle level management. It is well known that the Singapore Prime Minister once made all Permanent Secretaries follow a two weeks English Language Course at the Civil Service Institute.
PROMOTIONAL PROSPECTS
Opportunities for promotion to higher grades in the SAS are
attractive: depending on the ability.
and performance of each officer. The higher grades of appointment with salaries appliable to each are given in Table 1 at right.
An Administrative Service
officer begins his career as an Administrative Assistant drawing S$ 1600 p.m. Within a period of
4-6 years it is possible for him,
depending on his abilities, to reach the grade of Assistant Secretary which carries an initial salary of S$ 3300 p.m. The next grade called
30
Principal Assist be reached v years and wou remunerations:
usually tant Secretary maximum in be eligible foi Deputy Secret which he wou In this categor levels Grade E carry Salaries () p.m. respectiv officer reaches he would hav years service & ministries anc would now be Permanent Seq Grade C dra' From this po tion is slowe Secretary can salary of S$21 grade of the nent Secretary far as the writt is at present the closest bi the Permanen of Finance S$18,000 p.m.
Two
note in the
scales is the r and the incr after reaching nent Secretar nation' at an an atmosphel ability and pe
Table II
Permarnert Secre
(a) Staff Grad: (b) Staff Grad: (c) Staff Grade (d) Superscale (e) Superscale (f) Superscale
*S$ 1 - Rs 10
سسسسسسسسسسسسسسسسسسسسسسسا

nt Secretary could thin another 3-4 i bring as monthly 43 O.O.
a Principal Assiswould reach the wo years timc and promotion to the ry Superscale Gin i earn SS5500 p.m. there are two other and Crade D which S$6500 and st7500 ly. By the time an Superscale Grade D, 2 put in about 15 ind served in Several departments. He cligible to become a retary in SuperScale ving SS 9,500 p.m. nt on Wards promobut a Permanent aspire to receive a 700 p.m. in the top ervice called PermaStaff Grade III. As ær is aware no officer drawing this salary eing that drwan by t Secretary Ministry who draws almost
features worthy of composition of the apidity of promotion bases in salary even the rank of Perma 7. There is no 'stagpoint thus creating e of recognition of formance.
tary
III* SS21, 700 p.m. II SS1B, 800 I S$15,900 Grade A S$13,600 rade B S311,500 Grade C S$9,500
approx.)
Sir Derek Rayner Adviser to the present British Prime Minis ter Writing to ``The Administrat Or`` has made two significan observations on the lack of recognition of ability and performance in the UK and the need to correct this situation. Sir Derek says that "Too often it is the capacity to avoid error which collects the remarks' and in the same vein states elsewhere in his paper :
“Successioni planning should be del'elloped to ensure that those who are known to hai'e capacity' are promoted to top positions when the time comes and not those who claim to sahne” is seniority".
Further, in the context of living costs in Singapore an SAS officer has few finacial problems as his salary is more than adequate for his needs and the maintenance of his social position. This is because wages are based on actual cost and allowances made regularly for inflation.
Salaries in the private sector are, as in most developing countries, more attractive and jobs are accompanied by the usual fringe benefits. On the other hand, while a post in the SAS is both secure and satisfying, employment in the private sector though more remunerative, lacks stability. This is partly borne out by the fact that job hopping is a common phenomenon among private sector establishments in Singapore. Again an SAS officer could look for a job
Deputy Secretary
)Superscale Grade D S$7500
(g (h)Superscale Grade E S$6500 (ii)Superscale Grade G S$5500 Principal Assistant Secretary (j)S$4300 - 300 x 2 - 4900
Assistant Secretary
(k)S$3,300 - 250 x 5 – 4550
ECONOMIC REVIEWJULY/AUG, '84

Page 33
outside only after his 8 year complusory 'bond term which acts as a deterrent. Thirdly officers in the higher echelons of the service have a sense of commitment which may very well be the deciding factor in their desire to continue in the SAS. Whatever the reason, “defections' to the private sector are few and far between and have never posed a serious problem to the authorities,
POLITICAL INTERFERENCE
It would not be correct to say that members of Parliament do not attempt to interfere at alil
in dealings the public as with the
bureaucracy. However, such interventions often involve only an ex
change of letters. To take an ex
ample : a Member of Parliment may at the request of one of his constituents write to the Permament Secretary of the Ministry of Housing inquiring as to why one of his constituents has not been grant ed a Housing Board Flat although he has applied for one and been on the waiting list for over 2 years.
The Permanent Secretary would send the MP a polite reply (probably) stating that (1) 2000 flats have been allocated (2) the
CO i Stillë1. S it ing list is 3, would he (the his constituent to wait for his from this exch both parties a situation caniac Sy Stenni nalist
This is the basi. between the Servant and it and respected.
THE ADMIN THE PROFESS
AS ment
Singapore Adr
the professions
cond place. W. sion the scale maximum enjoy trator is way a арparent in a c Salaries of pro
iable i below.
{{ ಳ್ಯ {}} except for the the initial salar: with the SAS : initial salaries Dental and Ps
Table II
Initial Post Salary highest Grade Engineer ESO (Gr. XI) ESO Gra de Mechanical S$15ԱՍ हैं। Electrical S$15ԱԱ 證 Civili S$1500 尊 CharTrical S$1500 Architectural S$15ԱՍ 翻醫 Defence Engineering and S$1600 Defence Engi Scientific Officer Scientific
Superscalie E lgdical Gfficer BES 5$20ՅԱ edical Offi
Grs + Ailošs Detal Officer BDS S$1800 Dentali Offic S: - O + filloui Psychologist Gr (V) S$1 700 Psychologist
Division I
Superscale G
ECONOMIC REVIEW JULY/AUG 84

limber on the Wait22 l and therefore
MP) kindly inform
that he would have : turn. It is obvious lange of letters that re a Ware that the Dt be changed. The
not be violated. S of the relationship MP and the public is always recognised
ISTRATOR AND
ONAL
ioned earlier, in the ministrative set up al always takes sehatever the profes
of Salary and the Ved by the Adminispove it. This will be 'On parison with the fessionals listed in
be noticed that Engineering Service / Of Which is on par at S$ 1600 p.m., the of the Medical, ychologists Services
are higher. However, the maximum in any Service does not exceed
S$ 9500 p.m. In comparison, in the SASS$ 9500 is the starting salary of a Permanent Secretary (SuperScale Gr. C in Table 1). The Permanent Secretary scale rises from this point toS$ 21,700 whic" is the maximum in the Scale While no Other professional or scientist could aspire to receive more than S 9500 in the service. However, as mentioned earlier, officers who have achieved academic excellence in other fields could always apply to join the SAS when vacancies are a dvertised.
CAREER DEVELOPMENT
Up to the middle of 1983 the Confidential Report System, which is followed in Sri Lanka too, served as the basis for promotion as well as for career development. However, it had been felt over the last year or two that there had beer so much emphasis over the past two decades on economic development that little attention had been given to the development of human resources. The Singapore Government had also seen the need to develop the Administrative Structure to meet the demands of the next few years. In this context it was recognised that a special unit
ESS should be set up to appraise the Salary performance of officers in the Service with special attention to the Superscale SAS. The new Division set up to S$9500 handle career development is to S$9500 implement what is known as the S$9500 Open Appraisal System as opposed S$9500 to the earlier Confidential Report S$9500 System Under this scheme an neering and S$5500 officer would be rated at the end of each year on his performance fficer Gr. I, and not on a Confidential Report submitted by his superior or Head zer Superscale S$8500 of Department. The new appraisal aCe S$1750 is to take the form of an interview er SuperScale S$8500 or discussion with the officer on afice S$1750 the role he has played over the past Gr. I S$5500 year with special reference to his successes as well as his failures, his
-
31

Page 34
abilities and inadequacies etc. Steps would then be taken to see that the officer is supervised and trained so that he would be able to perform better. Consideration would also be given to Snecial artities and skills in appointing the officer to subsequent positions. Thus there would be a 'real appraisal with a view to career dev'r' pin ent as opposed to the former piirely subjective Confiidential Report. This new system is een adopted by the Singapore su', 'rnment after a team of oftie is headed by the Permanent Scietary of the Ministry of Finance had made a detailed study of the Open Appraisal System (now being in pen ented by Shell in the United Kingdom) and made its recommendations to Lie governinct.
The SLAS too depends on the Confidential Report System and the form of its operation at present leaves much to be desired. Reports are called for months or even years after an officer has left the department. The head of department who prepared the report is very often unable to recall sufficient information about the officer in order to write an accurate report. On the other hand some he 3 us feel that the officer would riot stand a chance of promotion arless he gives him 'A' gradings for all the qualities and abilities he is asked to report on, All these hy ve contributed to making the Confidential Report System a rneaningless exercise and the scheme needs looking into. Perhaps a degree of appraisal may be considered initially until an entirely new scheme is formulated.
CONCLUSION
The appointment recently of a 'high powered Cabinet
•ာ့၇
Sub-Committee salary scales C See IS mOSt ( light of the ba in this paper wh below.
(l) Should of recruitment tinue or should recruit persons the best contrib
try
(2) Should open to techni Officers.
(3) Should structure of th to make it thi Should it rem service.
(4) Should Administrator
he could perfo thinking, plan mulation or sh devote his tin
BBLOGRAF
(1) Public to the
(2) A Soci 4 тити
(30 Sri La
(4) Openin Dr. An
(5) Hallma, G.C. T
(6) “Careei Placerîn,
(7) The E present March

to look into the of public servants Dpportune in the sic questions raised ich are Summarised
he present schemes to the SLAS conthey be modified to who would make pution to the coun
the SLAS be thrown cal and professional
the present salary le SLAS be revised e premier service or hain a second rate
the concept of the be redefined so that }rm the functions of ning and policy forould he continue to ne to routine work.
(5) Should the System of appraisal through Confidential Reports continue or should it be discontinued and a study made with a view to introducing a new scheme, possibly Open Appraisal,
As mentioned at the very outset, the Singapore Administrative Service is committed to improve and achieve and this it has done admirably over 2% decades. The secret of its success appears to be that officers are content in their jobs. They have no financial burdens. Promotional prospects are good and promotion is quick. Ability and performance are recognised and rewarded. Above all there is a sense of commitment to the task the Administrator is ultimately involved in-the task of nation building. If nothing else, this should commend the SAS as an example to be followed by the Administrators.
PHY
Service Commission (Singapore) Memorandum of Recruitment Singapore Adrinistrative Service 1981.
ological Analysis of present recruitment to the SLAS - Sarath gama - Economic Review - May 1977.
inka Government Government Gazette No. 221/16 of 3/12/82.
g Ai-ress at WITS Seminar (CSI Singapore) March 1983 by direy hew, Permanent Secretary, Ministry of Health, Singapore.
rks and Attributes of a Good Civil Servant'Address by Professor Thomson, Visiting Professor Nancyang University, Singapore.
's in Singapore' - published by Professionals Information and ent Service, Singapore, 1982.
Business of Government' by Sir Derek Rayner Adviser to the British Prime Minister - Paper appearing in "The Administrator' 1983.
ECONOMIC REVIEW JULY/AUG. '84

Page 35
FACTS AND TRENDS
New Map - New World?
How We look at the World
N
E.
Mercators || Agair
| prOection || Pistat. || magni
Shows true direction and shapes.
For
Agair Shows area Distor accurately. Li and sh"
appea rough
l MD 1147 it is lo
 
 
 
 
 
 
 
 
 
 

st: ces and areas fied towards les. DistOrts Soviet Union m) looks larger a (30msq km).
the top
)
ast
ts distances hapes. Despite rance, Africa is lyas wide as
Դ9. صبر لـ----
Most of us have an idea of what the world looks like- but we may be very wrong. For our mental picture of the globe comes mostly from wall maps drawn according to a system devised to help navigators 400 years ago. Now a new way of projecting our spherical world onto a flat sheet of paper is gaining support, because it pushes Europe away from its usual position in the centre of the world and reduces its artificially inflated size. Gemini News Service looks at at controversy which literally affects the way we look at the World to achieve directional accuracy Mercator stretched his map, at the poles. He also lo wered the equator so that the northern hemisphere occupied two-thirds of his map. This made the northern landmasses appear much larger than the south
CTIl Oll CS.
These anomalies would not matter if Mercator maps were employ cd Only for navigation. But this projection is very widely used as the basis for political and commercial maps of the World as well.
The most important claim made for the Peters map is that it shows all areas of the World - whether countries, continents or Oceans according to their actual size.
Some of the claims made for the Peters projection may be exaggerated. But the existence of a new map does expose the folly of treating Mercator as if it were the definitive picture of the world.

Page 36
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