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NY
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N
A.J. Guna: SPIESel; Raji ya Will
P. V UU
E ILM INDUST) - A SPECIAL
Ravi Prasa C
A People's Bank Publication
 

గ్ర -
భ LENINGRAL)
CPSU CHILEE ON RUSSIAN
S S S S S S S S S S S S S
TE
eSinghe
23.
| REPORT.

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While the Gulf War was raging, three academic researchers in the United States Conducted a poll on the role of T. V. in communicating the pertinent facts about the Gulf War. The results were quite revealing as reported by Alexander Cockburn in the British journal New Statesman and Society - "75 percent believe Wrongly that in advance of Iraq's attack the US government has threatened to impose sanctions if it took place; 65 percent thought their government has vowed to support Kuwait with military force". When Saddam Hussein called for linkage, two out of every three respondents asked "linkage to what?" and less than a third were aware that Israel was illegally occupying territories in the West Bank and Lebanon. Of the heavy viewers only 10 percent knew what the Intifada is.
The Survey is not a Complete one and in any case T.V. is not the Only component of media. Still these revelations about the role played by T. V. in imparting knowledge in a country where the media is free of direct government control are extremely important. This is not to say that the freedom of the media is unimportant. But that is not the only criterion we must pay attention to if we want to ensure that media play a productive and liberating role in our Country.
The communications industry is regarded as the Commanding height of the economy by some people today. And the media make up an important part of this industry. We need a media which will not only, provide entertainment but will also empower our people by presenting them with all the pertinent facts about variOus topical issues and problems both local and international. In other words we need a media which will
make apositive contribution to our Society. And freeing
media from qfficial control in itself will not be adequate to achieve this aim.
Prof. A. J. Gunawardana in his Contribution emphasises the need to have a comprehensive media policy. He argues that a media policy need not be "an instrument of coercion or control by the State" but that such apolicy is needed for the systematic development of Our media apolicy which will take into account the needs and the problems of all components of media and address these issues while achieving a holistic view of the media SCene.
Dr S. P. F. Senaratne examines the relationship between the economy of a Country and the control and the content of the media of that country. He briefly
 
 

traces the course of events which led to the state control of media in most developing Countries. And he comes to the conclusion that the control of the media and the shifting of intellectual activities were responses in two different areas to the same set of circumstances and that
in the Third World they are usually found together.
Rajiva Wijesinghe talks of the need to reduce authoritarian control on the media. He also highlights the importance of encouraging Some kind of social input from the media and emphasises the need to establish provincial newspapers as a necessary Component of a process of devolution Currently ongoing in our country.
P. Muthulingam takes a critical look at the Tamil media. Tracing the historical development of the Tamil media he argues that they avoided putting forward controversial viewpoints and ideas. Tamil mass media never became aforum fordiscussing the Socio-political problems of crucial importance to the Tamil Community and the Tamil intellectuals Contributed greatly to this state of affairs by failing to Comment on important, controversial issues in Tamil. As a result the Tamil mass media never Contributed towards the Creation of . public opinion or in grappling with issues related to the people.
Ravi Prasad Herath in is special report on the economics of the Film Industry discusses the Crisis faced by this industry - as indicated by the steep decline in cinema admissions and the number of cinemas operating and the absence of investment in the exhibition segment of the industry. His review is an attempt to analytically understand the root cause of the Current CISIS.
We are also carrying an exclusive short piece by the Head of the Communist Party in Leningrad, Boris GidaSpowon the free election to Russia's Presidency.
Our other articles include the first Segment of a case study of Life Assurance as a forum of investment for an individual by Indra Abeysekera, "Primary Health Care in Sri Lanka' by Dr. Marcus Fernando, and an article dealing with Socio-economic and political perspectives of Sri Lanka during the 15 years from 1975 to 1990 by Dr. Samaraweera. We also carry a research paper on 'Primary Education in Slum and Shanty Settlements' by H. L. Hemachandra and an article on Colombo Stock Exchange by M. H. E. Shariff.
T. G.

Page 3
Published by the People's Bank Research Department
Head Office Si Critanpalam A. Gardinar MavNatha OOOOO 2.
Saka
HE ECONOMIC REVIEW is intended to DOmote KnOWLedge of and interest in the eCOnomy and economic development OOCeSS by a many sided presentation of Views & reportage, facts and debate.
HE ECONOMIC REVIEW is a community Service project of the People's Bank
is contents no ever are the result of ecca considerations only and do not necessarily reflect Bank policies of the Official viewpoint. Signed feature articles also are the personal views of the authors and do not represent the institutions to which they are attached Similar controls as well as Comments and Viewpoints are Welcome THE ECONOMIC REVIEW is published monthly and is available both on Subscription ang On direct sale
Volume 17
Dr. Marcus
Boris Gidas
Scanner
Diary of Ev
A. J. Guna
S. P. F. Se
Rajiva Wije
P. Muthulir
Ravi Prasa
P. A. Sam
Ariya Abey
H. L. Hem:
Indra Abey
M.H.E. Sh
Thilan Wiji
PrOC'UCtiO) P. Stepher
 
 
 
 

Numbers 2 & 3 May/June 1991
FN A CONTENTS 二一ー
COLUMNS
Fernando 38 Primary Health Care in Sri Lanka
pOV 40 Russian Elections
52 China is Booming Again
entS 65 April 1991
SLLS
SPECIAL REPORT
THE MEDIA
Wardana 2 Wanted: A Media Policy For Sri Lanka
naratne 3 The Media: Impact, Content and Control
singhe 6 Towards a Productive Media
lgam 9 Tamil Media Lacks a Critical Outlook
di Herath O The Economics of the Film Industry
FEATURES
araWeera 18 Socio - Economic and Political Perspectives
- صبر
Singhe 21 The Koggala EPZ: The Potential
achandra 24. Primary Education among Children in Slum
and Shanty Settlements
Sekera 34 Life insurance as a Form of investment for
an individual
ariff 48 Colombo Stock Exchange-Beyond 1992
singhe 53 The Diamond Cutting industry
==
Manager Typeset
Fernando Sumathitypes

Page 4
O ME
WANTED: A MEDIA PC
FOR SRI LANKA
A.J. Gunawardaná
Professor A. J. Guna Wardana is the Director, Institu, Studies, University of Kelaniya. He contributes regularly te newspaper and also writes screenplays for films.
S. years ago, as Chairman of the Presidential Committee on the Film industry of Sri Lanka, I urged the need for a National Media Policy for Sri Lanka. This proposal evoked either bemusement or outright rejection. The reason
for this negative and hostile reaction can
be attributed to a general misapprehension regarding the nature and purpose of a National Media Policy.
Critics of the media policy idea perceive it as giving yet another handle to the state to enlarge its hold and tighten its control over the media. Others argue that a media policy already exists in the form of the various pieces of legislation covering such basic areas as radio, television, newspapers and cinema. They say that the different Acts of Parliament together constitute a full and complete media policy statement.
Neither argument is valid. A media policy is not an instrument of coercion or control by the state. Rather, a media policy is a rationalisation and consolidation of the national frameworkfor the development of the country's media in a systematic, ordered fashion which is also responsive to felt needs. The exist
ing Acts of Parliament do not add up to
apolicy in the Overall sense of the term. An Act either define the powers and functions of the several state agencies active in the media field or indicate the rules governing the media. By nostretch of the imagination canthese Acts berecognised as amounting to a media policy.
The aims and objectives of a media policy are perhaps best understood through an actual event - an event that
illustrates what may in the absence of a troduction of televis most Striking case pavahini" made its the early 80s, the affected by televisi ema - were totally new situation. Cons to go through a pe Sometimes agonisi fore Coming to ter role. The travails of more agonising. Th itseCOnomicbase f before its very eye the Speedy diffusior radio, however, the recover from the dr new medium.
The moral is cle effects of television Could have been CC and in some instanc nated, if a coherer been operative in particular moment. ema Would have be the new medium's suffering excessive loss. An active medi prepared the exist Cope with the was ment brought about new medium.
A properly form would have alerted ema to the fact that tremely powerfulme sion signals new
lenges for the existii
 
 

DIA I DLCY
==
e Of Aesthetic 2 an English daily
happenin a country media policy. The inion to Sri Lanka is a
in point. When “Ru
appearance back in media most directly On - radio and cinunprepared for the sequently, radio had }riod of painful (and ng) reappraisal bems with its changed the cinema were far e film industry saw Ounder and crumble S Within one year of of television. Unlike film industry is yet to astic impact of the
ar. The unfortunate on radio and cinema insiderably reduced :es altogether elimiit media policy had this country at that Both radio and cinenable to withstand Onslaught without
disorientation and a policy would have ng mass media to tly altered environby the advent of the
lated media policy both radio and cinthe arrival of an ex
dium such as televi
Droblems and chalIgmass media. This
is something that all mass media practitioners and policy-makers should have learnt from the historical experience of other Countries. ܫܝ
One of the principal functions of a media policy is to achieve a holistic view of the media scene, taking into account
the inter-relationships and cross-influ
ences that link the different media intO One extensive, all-enveloping network. This function alone amply justifies the Call for a national media policy, since both the public and the officialdom are given to the erroneous view that the media existin watertight Compartments,
* isolated from each other.
To insist that media are plural is not to
be gramatically fastidious but to under
line a tangible reality. And this reality, stated in the simplest manner, is that the media world is occupied by a number of diverse channels of Communication which disburse information and shape opinion. These channels are not necessarily in harmony with each other. To use the earlier example, television and cinema are both mass media; both are audio-visual, with emphasis on the visUal. This means that cinema and television battle for the same audience. In this struggle, the electronic medium generally emerges triumphant because, among other things, it brings entertainment direct to the home.
in the Context of television, therefore, the cinema requires special care and extra support. The cinema must be enabled to OCCUpy fresh ground, and Compete with television while retaining its identity. Or, to put it another way, cinema cannot be taken in isolation, or treated as an independent unit, without reference to television and, of course, to video. This principle applies to all the media, print or broadcast, mechanical or electronic.
A media policy, then sees the media spectrum as a whole, as a large and
growing organism with separate limbs,
yet interacting with each other all the time.
The wide, all-embracing viewpoint generated and sustained by a national media policy is importan on several Counts. One of these - that is how the
- Contd. on page 64
Economic Review May/June 99

Page 5
THE MEDIA: IMPACT, CONTENT AND CONT
main IV in South Asia
must begin with a disclaimer, tam not a media practitioner; this article cannot therefore ground itself in the problems
experienced by the professional. Nor is
it based on my research on media issues-in any event sporadic rather than sustained. As will be apparent presently
it derives its form from a somewhat
different perspective - a perspective which has to do with national Systems.
In recent months there has been much discussion in the international media, about the changes which are taking place in the countries of Eastern Europe in the management of their media. State Control is being relinquished. Radio Moscow reported a few weeks ago that consult
ants from the West have been invited to
advice on this process. In many African countries too, similar changes are under way. It is taken in both regions that an unfettered media is a necessary accompaniment of multi-party democracy,
In popular discussion, this is of course the dominant media issue - the issue besides which all other issues appear trivial, even arcane. Other contributors will, no doubt, deal with this question at
some length.
My concern is somewhat different, it is not with the normative question, nor with the degree of freedom that the media should enjoy. It is with a related question: what are the circumstances which influence this level of freedom? What follows is to be taken as no more than a few observations on a Complex issue.
Let me avert a possible misunder
standing. By so choosing my subject,
Economic Review May/June 1991
Dr. S. P. F. Senaratne was formerly on the staff of the Nati Head of the Anthropology Division, as the Assistant Direct as the Acting Director. During the last 12 years or so he consultant on development research to various internatio
do not diminish the other question. AS ir inthe media game, ir its victims, we hav argüe for a high leve
Do we then say m freedom Which We Ol pursuing a freedom spectrum of opinic representation in the freedom which wer is a freedom. Which monopolies are atth mum. This article will usein examiningthe ties of this endeaVOL
Impact
It is commonly agr perform many funct tion that is conveye range from where W. toothbrush to hap; importance. Instructi wide range, present gestible blobs. The follow One course in other to hold this opi that. There is explan phenomena at One stracts philosophica Sues at the other. tained - sometimes
It is no longer ideology that these partially and objectiv the intention to do dispute on this issui another. The med
 
 
 
 
 
 
 
 
 
 
 

~~~கூஉவ.
LBRARY
Onal Museum - as
or and for a period has worked as a nal Organizations,
importance of that
nocent bystanders deed on occasions e no option but to el of freedom.
erely to restore the ince had? Orare We
in which the ful in finds adequate media? if so, it is a ever enjoyed and it
can only exist if eir irreducible mini, I hope, be of some goals and possibiliIr.
eed that the media Ons. The informa2d Covers a wide2 might purchase a penings of global ons has an equally ed of Course in dimedia exhort us to preference to anhion as opposed to ation - of everyday end, and of ab| and religious isAnd We are enterunintentionally.
nContested media asks are done imely even when it is SO. But if there is } there is none on a are viewed as
powerful, able to influence attitudes, to mould opinion and ultimately to induce changes in behavior. This view is held by those who argue that the media must be permitted a considerable degree of
slatitude. It is also the assumption of
those who hold against this approach
and who point to its deleterious conse
quences in the form of mindless ConSumerism and dented Values.
it must be recognized that opinions, attitudes and perceptions are formed,
and changed in a variety of other ways.
It happens through the acquisition of knowledge, whether in the classroom or in lessformal circumstances. It is brought about by engaging in an occupation. It also happens through the interactions which result through participation in civic and social activities. Briefly the roles individuals play and the contexts in which they do so are protent forces of attitudina change.
in most circumstances the media produce little impact if they run counter
to the perceptions generated by these
activities. To this extent, the media are not as penetrative as in commonly be: lieved. Clearly there are ways of thought and forms of behavior which they find difficult to influence and change. Most often they have a reinforcing and a rationalizing function; attempts at transformation, unless these are in the relevant idiomare frequently met with rejection.
it will be apparent then that a media message can appeal to one segment of a Country while evoking a very different response from another. Considera rural Community whose exposure to urban influence is moderate rather than heavy. its economy is relatively enclosed, in many activities its members relate to each other rather than to the World outside. Its dynamic and its values reflect these circumstances. Such a community may well be indifferentoreven hostile to message which are clothed in an idiom which is unmistakably urban and Westernized.
The point need not be laboured. Class, religion, ethnic group and region are all dimensions in which this dissonance can manifest itself. Content, then, is crucial if the concern is with the impact on the receiving community.
ாணு
3.

Page 6
SS M LGL
Content and Control
What is it that determines this con
tent? Let me pick out two factors - the nature of the economy and the type of control exercised by the state over the media.
In a strong economy individuals have more access to the media. They can purchase its instruments more readilyTV sets, radios, newspapers and so on. The investment in media is correspondingly high; plant and equipment have to produce a large output. Workforce are substantial, their skills are many and varied, and, career options are diverse and attractive. In these circumstances the media have a high density; that is, the output is high per unit of population.
While the systems of control are varied the two ends are distinct. At one extreme is the control exercised by the state in a one-party political system. At the other end is the system in which formal control is at a minimum, where a disputation idiom conceals a Consensus on fundamental values and interests, and, where market forces control much of the medias' activities. In between are many forms in which state control operates in varying degrees. Examples of these are quite abundant both in Our own region and in South-East Asia.
in simplified black-and-white terms, letus now examine the relation between economy, controland content. Wehave the following categories:
(1) Strong Economy/Market Control
The media output has a wide range and a high-intensity.
Sensitive political areas are Covered.
The stress on the national interest is usually Subtle.
(2) Strong Economy/State Control.
The range and intensity are almost as high as in the type above.
Sensitive political areas are avoided.
A particular political position is given strong stress. -
(3) Weak Econom
Range and intel Sensitive political above.
Similarly a parti is given strong str
(4) Weak Econom
Does not survive
This matrix mus: more to take in a So, Some countrie Oranother of thes Western Europe a instance, possess dependon marke media. Singapore omy (in the some which I am usingt for market forces American sense. E countries, what ha last two orthree de away from market control. Many of th nearly into either
Sketching throu it provides the ba SiOnS:
* If the econom strong tendency t
* The opposite is may also existin
* While densit economy, conten Control.
Types of Contro
If these Conclusic which really dete. extent of media situation the natu impact in any giv of control (taki therefore media tionally at least t Contro. VVhat di between them?
As examples approach the We

DA m
y/State Control
sity are both limited. areas are avoided as
cular political position eSS.
y/Market Control
for long. -
st be expanded much real situations. Even sfall squarely into one e categories. Those of Lind North America, for strong economies and forces to control their though astrong econ2what loose sense in heterm) has no place in the European or But in most Third World as been evident in the 2cades is a movement control towards state em do not therefore fit (3) or (4) above.
gh this categorization asis for some CQnclu
y is weak, there is a owards state control.
not true. State control a strong economy.
y is a function of the trelate for the type of
ons are valid, the factor rmines the nature and impact in any given re and extent of media an situation is the type ng the economy and density as fixed). Nahere are two forms of etermines the choice
of the market forces , stern Countries exhibit
many similarities in the way in which they handle their media. There are also significant differences. In a recent BBC programme the topic of discussion was Nancy Reagan's "unauthorized biography'. It was generally agreed that while a publication of this type could have
given rise to a legal action in the UK,
there was little hope of an American Court responding to such a move.
Apart from these differences in the notion of freedom, attempts to limit that
freedom do occur from time to time in
many of these countries. There was the
recent decision to narrow the freedom of
expression on American Campuses, followed inevitably by strong protestand reaction. It is believe, James Scott who said that of all the British Prime Ministers he had known in the course of a long career as a political journalist, only one - Clement Attlee - had made no attempt to muzzle or otherwise interfere with the Press.
in the Gulf War it was clear that the Alliance authorities had decided to allow the media only the most limited access to information concerning the conduct of the war. It was also clear that the reasons for this were not entirely those of security. And between its "rights' and the national interest, the media had little option but to accept the limits that were imposed.
All this does not reveal an abstract
ideal, widely accepted and religiously
followed by all. It is much more a situation in which a delicate balance of forces is being maintained with great watchfulness on all sides. What circum
stances, what structure does this re
flect?
Essentially this is a reflection of distributed power. All constituent units - Capital, Labour, Agriculture, Industry, the Military, Academic, the Arts, Entertainment have some power independ
ent of the state, in this set of countries.
These sectors also exist in the other type of system. Why do they not have a similar power in those systems what are the marks of systems which are characterized by distributed power?
Power in any substantial sense, is not derived from the patronage dispensed
Economic Review May/June 1991.

Page 7
by the state or from the funds that it provides. Many of these sectors have their own independent resources. Their prosperity, their significance in a national scheme of things has at times been achieved in spite of the state. At other times the state has had to accommodate itself for the importance of these sectors so that the continuing conflict with other states may be most effectively pursued. In the other type of system state control is prior. It is the state which takes the initiative to develop these sectors; it provides the foundation and the framework. It also sets the limits.
The historical circumstances of the two types of systems are very different.
But even within market control systems there are at least two categories in rela
tion to distributed power. In one category best exemplified by the United States, distributed power follows from the compromise that are essential in the aggregation of smaller units into a larger one. In the other category perhaps best represented by France and England, distributedpowerintomodernformarose from the need to accommodate a new class who represented the strong force of a new commerce.
The Third World
In many Third World countries which were once colonial territories a form of distributed power did exist. This was, in part, an export from the imperial Country. It was also stimulated by the desire of the colonial rulers to distribute favours So that the balance between the Constituent groups of the territory was maintained. We might have expected that with the coming of independence this pattern would have been strengthened. On the contrary, in most places it was not; a sequence of events undermined it and eventually it was transformed beyond recognition.
Independence whether taught for or not, was accompanied by the promises of the new rulers that the millen un was about to dawn. The reality proved to be otherwise. The realization of the economic potential, whose existence was frequently proclaimed, turned out to be
far more difficult than earlier imagined.
Even if it had not intended to do so at
PUBLIC Li8
first, the state Was otal role ingenerat
Despite these m tion and resentime new governments others who promis Unrest, even rebe
Whether governr from that point o came the over-rid this purpose gove themselves more
There was little i. to stop their gover Othersectors-tra ture, academia e small. The idiom reared Was of the Could Contribute | tOWards the de Vell
A faith Was government and possibility that po distributed fashio ance of governme the armed service racy which soon these conditions best a luxury and Vience Was SOOn
Related Areas
This is a gene Sequence Was no identical fashion pendent countrie But it does, I belie sure experienced as the responses
The processe preSSures Were pe and influenced ; media was one O pick out another.
lin many counti led to a partic making. The pers term; the imm governing party sions were take Crisis; there was ering of data ano
Economic Review May/June 1991
 
 

RARY
BA`um
-ൽ ... : forced to play a pivng economic activity.
easures, dissatisfacit began to grow. The were challenged by
|dtodeliverthegoods.
lion followed quickly.
ents changed or not, nwards, survival beng Consideration. For rnments allocated to and more power.
third World countries hments from doing so. ide, industry, agriculC - Were weak and
in which they were | Output variety. They ittle in the short-term ppment of the country.
reposed therefore in with it went out any Wer might operate in a n. Ultimately the reliints was on the police, es and On a bureaucturned to be pliant. In
a free media was at its new role of Subserdefined.
ralized account. The tfollowed through the in all the newly indeS of Asia and Africa. ve, capture the presby all of them as well of the majority.
generated by these rvasive. They reached ill areas of life. The Fthese, | Would like to
les, the new pressure lar style in decision pective was the shortdiate interest of the vas paramount. Deci
in an atmosphere of ittle time for the gathfor appropriate inves
tigation. And for all these reasons the decisions had to be taken by a group which was as Small as possible.
The result was that the demand for knowledge, expect in its narrow quantitative sense, was very limited. The specialist was consulted minimally on matters other than the purely technical or unless he was willing to play the role of the apologist. He was likely to be treated with great suspicion if his skills lay in the analysis of societal phenomena; the possibility of a clash between his views and those of the government were regarded as high. Although the low demand for knowledge led to an indifference to intellectual activity which sometimes amounted to hostility.
The situation might have been even worse but for another pressure that government had to face. În al countries there was a demand for educatirin, as
time went on the demand was for a
tertiary education. To provide this, staff had to recruited and the Universities had to be expanded. It was in the humanities and in the social sciences that this could be done with the lowest outlay. Few governments were happy that they were forced to give support to branches of intellectual activity whose usefulness, from their point of view, was questionable. However, they had little option but to do so.
The point here is a simple one: The control of the media and the stifling of intellectual activity, where the responses in two different areas, to the same set of circumstances. In third world countries, they are usually found together.
The International Context
The freedom of the media is a complex issue, not because ideals cannot be easily stated být because this freedom is linked to the distribution of powerina political system.
This has been further complicated in recent years by another trend. A free media, more particularly a free press, has been used as the measure of the health of a democracy. At times this has even been used as a stick with which to beat countries when they are assessed for the purposes of aid.
Contal, on page 13
5

Page 8
Towards A Produc
MEDIA
T is no doubt now that the Sri Lankan media is in general an object of
scorn to all discriminating viewers and readers. Even the so-called independent press has been brought to heel so often, in various ways, that though one welcomes intelligent editorials and some times illuminating features and news items, news coverage and analysis are never really seen as comprehensively credible. As for Lake House, though individual journalists sometimes try to transcend restrictions, the assumption is no longer questioned, let alone challenged that news as it were is a matter of subjects regardless of what the predicate is. The activities of a or b or C have to be covered, regardless of whether those activities are of interest to the general public.
An extension of this, which makes even more clear the lack of professional discrimination in the media, is that whatever x or y or z says should be Covered is treated as news, regardless of its objective value. Thus, the prolif
eration of news items about the Sonofso and so going on scholarship somewhere,
or the daughter of so and so getting mar
ried. Such items, far from being of interest to the general public, are primarily of
interest only to the triends and relations of the protagonist, who were probably aware of the news in question anyway. One is reminded therefore of Wittgenstein's ironic description of the man who bought a second Copy of the morning paper to ensure that what the first said was true: in Sri Lankaan important func
tion of the media it seems is to shore up the egoes of those whose achievements
are brought home to themselves only
when they see them in print.
It could be argued however that,
symptomatic though these might be of a strange Concept of news, such items are not particularly significant in a newspaper since there are other items to inform us about happenings of general interest. Similarly, though several pages in the papers are full of a static rather than dynamic concept of news (that is, the noun regardless of the predicate, or the pronouncements of people as opposed to their actions), there could be an argu
MEC
Rajiva Wijesinghe
ment that there are ( vey more useful in nately this is not the \ the last few years w sins of omission too, instance of news the to reflect badly on si authority, the neglec ing with regard to ir who do not conform
At the same time, the electronic medi
neWS papers Can Cel vide some food at lea reader anxioustopla
tance in a wider con News, on televisio
more obviously sim formal releases cof
projection not only O tance, but even of
roused the often pu est of the relevant bt
endless procession
tics, never Subjecte and ceremonial occa presented as anythi And going beyond lection of material t edify, which is presu tification of state in one sees purely sub operation. No public tempts are apparer look first and foremc the customer, thept licences and in a vides the State its
The fact that ina and that the whi interests have for does not mean th allowed to obtain. enterprise has bee the freedom of the
Given how the Co Countability has bee years by an increas statistdispensation, the neglect of the wi a politicized bureau State as an abstr fundamental link to:
 
 

IA .
TIVE
other pagesto conformation. UnfortuNhole story, since in 'e have got used to the suppression for at might be thought omeone or other in tor selective reportmportant persons
in comparison with a at any rate, the rtainly claim to proast for thought to the ace events of impor
text. nor on the radio, is
ply a Catalogue of ncerning the selfif persons of impor
those who have rely personal interIreaucrats. Thus an
of passive Statisd to interpretation, |sions that are never ng but wholly ideal. this, even in the SeO entertain, and to umably a prime jusout into the media, jective decisions in cly accountable atht in any quarter to statthe interests of ublic that purchases
broader sense pro
elf with its license.
meant to serve; in that sense, what has occurred with regard to the media is no
different to what has happened in so
many areas where centralized state control has ignored or abused the indi
- Vidual citizen; but it must be recognized
that the abuse of the media is that much more serious, and destructive, for the simple reason that it is one of the primary functions of the media to hold the State to account, to Subject the actions of those who wield authority to scrutiny, to discreminate information without which analysis, assessment and adjustments as necessary cannot take place. Without a free media, those in authority are no better than the emperor without any clothes; and, in sitting like Addison's Achitopel attentive only to their own applause, they are likely to damage their own potential too, by lapsing into selfcongratulatory lethargy.
One should be discriminating however in one's Criticism. The fact that inadequacies are most obvious in the state-controlled media, and that the whims, fancies and personality cults of particular political interests have for so long been assumed to be the raison d’etre of the media, does not mean that all would necessarily be well if private ownership were allowed to obtain. At its simplest, as we have seen in other areas where private enterprise has been encouraged, one has to be careful of what might be termed the freedom of the wild ass. And even if the media Would probably not be the playithing of the robber barons who have made their presence feltelsewhere, the factis thateven in the days of pure private enterprise the media - or rather, the newspapers since the SLBC was always government run and
dequacies are most obvious in the state-controlled media, ms, fancies and personality cults of particular political so long been assumed to be the raison d’etre of the media, at all would necessarily be well if private ownership Were At its simplest, as we have seen in other areas where private an encouraged, one has to be careful of what might be termed
e Wild ass.
ncept of public acin traduced in recent singly self-regarding
One can understand der publicinterestby cracy that sees the action, without any the population it was
the Independent Television Network had Only a brief spell of life because it be-, came a Government Owned Business Undertaking- also had its weaknesses.
The most obvious weakness, that which led indeed to the various infamous Press Bills of successiveSLFP led
Economic Review May/June 1991

Page 9
کسم سے
M
governments, was its partisan approach, which made it so clearly out of step with the country at large on a number of Occasions. This, it should be added, applied most obviously to Lake House, and sprang from the symbiotic relationship between the Wijewardene family and the United National Party. That in
saddest conseq internal Censors caution, that is pe anything an outs can impose. One poore journalists
penalties in a SOC of falling foul of th
There seems in our society to be an absence of a frac independent journalism, but independence in general.
itself however need not have mattered. What was unfortunate was that extermism on either side should have led to
such bitterness. On the one hand there
was the internal censoring, as described by Tarzie Vittachi for instance in the account of how he was exiled to London when he published a story refuting allegations the UNP had made about Mr. Bandaranaike (See New Lankan Review, Vol. 4, 1986, p. 26); on the other hand there was the SLFP, and the left, reacting Crudely and, as it has proved, self-destructively, by taking over one newspaper group and sealing another and thus showing the way (and implicitly providing justification) for a much cleverer and more ruthless taskmaster. Absence of independances
But apart from the polarization, which might be attributed to the particular personalities involved, there were also othere weaknesses that might have deeper roots, and therefore require more careful consideration if we are to do better in the future. Most notably, there seems in our society to be an absence of a tradition of, not merely independent journalism, but independence in gen
eral. There were very few journalists, at
the height even of what now seem relatively palmy days of freedom, who were
of a job, the pauc ties; but the resul freedom to its. lim but aparticularres estate, is rarely it
NoW, there mae would claim, follo assertion of a ASO fearful obsequiot our society. On th mea hangoverfrc authority (as opp relatively democr; recently describ sekere in her tr century Saddhar absolute, becaus between rulers ruled. The rigid in guage based cla: then, involving m Confidence beca either sector, em authority as Sof lenge or compreh tantly, Colonialist where respectabi prerogative of th has been reinforc political dispensa arrogation of all n
Though the reduction of authoritarian controls on theme and this will most readily be accomplished by a managi encourages pluralism, still there remains a case for not on encouraging some sort of special input from the media.
Willing to insist on their professional integrity. There were few people like Tarzie who were prepared to Cock alsnook at those in authority overthem; and even those who were so prepared found in time that, without support from their bosses and often abandoned by their colleagues, they had to give in. The
ity to the centre. devaluation of i consequences fo particularly in the sional responsib comparison with
Connected will
Economic Review May/June 1991

EIDIA
uence of this was an hip, born of extreme erhaps more dire than ide political influence
can hardly blame the
involved, given the iety as small as ours Osein charge, the loss
lition of not merely
ity of other opportuniIt is that the testing of its, an obligation on all sponsibility of the fourth
ever exercised.
ly be socioligists who wing Michael Roberts' kan pardigm, thatsuch JSness is endemic in Ie contrary, it seems to om Colonial days, When Osed for instance to the atic dispensation, most ed by Ranjini Obeyanslation of the 13th ma. Ratnavaliya) was e of the lack of contact and those who were mutually alienating lan
SS structure that arose
ediators lacking in self use without roots in phasized a respect for mething beyond chalension. Equally imporm instituted a system eoccupations were the estate, a system that :ed by the post-Colonial tion with its increasing neaningful major activ
dia must be relaxed, Penment Structure thaf ly expecting but also
The result has been a ndividuality; With dire rall initiative, but most media, where profeslity is set at naught in conformity.
h this of course is the
absence, because it is not a priority, of professional training or development on a Coherent basis. Though there are variOUS Courses in journalism, these take the form of theory, correspondingly, on the job training does not involve the Seminars and discussions and open sessions of no holds bared assessment and Criticism that Would prove most fruitful. When with this is combined the fact that Writing skills are not taught in any specialized way either at School or at university, it is clear that the budding journalist has a number of barriers to Cross; while the working journalist Cannot claim to have developed any professional skills that would enhance his or her job prospects in the wider market. The result is that, in a society in which
job opportunities are in any case limited,
the temptation not to run risks but to Conform to the demands of those at the top is almost irresistible.
Social input
At the Saine tine OWeverit Should be recognized that, though the reduction of authoritarian controls on the media must be relaxed, and this will most readily be accomplished by a management structure that encourages pluralism, still there remains a case for not only expecting but also encouraging some sort of special input from the media. For this whether or not private sector style management is accepted as the desired norm, there. will be a need for clearly articuluated state guidelines, and at least some form of input, as occurs with the Public Broadcasting System in the United States. What should be avoided however is the absurdity that has clogged up so many areas in the country, that achieving social goals necessarily requires statist socialism. On the contrary, the latter more often than not, especially when a readily manipulable media lies to hand, leads only to statist rather than to social goals, with a state that has been hijacked by particular interests or even individuals. For the achievement of publicly beneficial goals on the other hand, discrimination is essential, and hence choice; prescriptions by the state perhaps, and subsidies to help in their achievement, but all this in the context of freedom and accountability.
In respect of the media, how can this be achieved? Clearly it makes sense to

Page 10
look för guidelines from other countries, where the media has contributed to public awareness and discrimination, in this respect, as far as a state owned media is concerned, the BBC certainly has a reputation for even handed excellence, whatever the government in power in Britain. Of course it will be, and has been argued that a developing country needs more restrictions, because the risks of instability are greater. This however is a
nonsense, for practical experience itself
has made clear that instability develops precisely in proportion to the absence of freedom. Indeed that restriction on a free media are almost always Counterproductive is apparent from the fact that
盒
should be encourage mistake to impose the
MEDIA
sure proper implement cially constructive apprc we suffer in particular from what might be ter| concept of the The Bo Board, but also the V Councils the BBC em.
- social role, meet regula in terms of a keenly f
make active inputs into
Such a sense of : should not only be expe demanded in the case nanced institution. In th on the Other hand, wł
The establishment of provincialnewspapers issurely Someth to go hand in hand with devolution. State subsidies could us
to nurture regional initiatives, excellence through competition.
regimes that take over the media in
order to disseminate propaganda fa
vourable to themselves inevitably end up trying to restrict the free exercise of
the franchise; quite simply, people are
not that easy to fool- it is generally only the Subjects of adulation in a media they control who believe what they read or See, and those who manipulate the media on their behalf do them a distinct disservice in keeping them away from
ths, reality and restricting them instead
orily to their own applause.
Restrictions then, on the free dissemination of information and on free comment, should be minimal. However that there mightt be emergencies when such restrictions are desirable must be granted; and the BBC itself expressly res: Congnized this in its charter. The distinction between that, and the censorship that is so readily applied in many other instances however, is that in regard to the BBC it must be done openly, with reasons adduced that are subject to public scrutiny. The nonsensical situation that permitted J. R. Jayawijardene to prevent One of the most distinguished of living Sri Lankans, Prof. Sarch Chandira, from e.Ven, being alo Wedlinto the SLBC, simply through a telephone call to its then Chairman, would be unthinkable in Britain.
The BBC Charter then would provide
a model for preventing abuse, but what is essential too is the personnel to en
that would encourage the de
any particular preconce would be a restriction that would best allow a flourish. Of course the a needs to be prevented,
ment of a Press Coun
that Would inhibit falsi reporting, and ensure t corrections and respons tenance of balance. however the most pos the state could make is of training facilities for to encourage an awa Concerns, and the abili and suggestmodes of skilled reporting and sion. Certainly there need at present to clari facts are sacred and which is used at pres most abject nonsense ists, who have row Onl gies for facts and Com of the media now pres learn that what is S release is not necessa the facts presented news need to be
checked and placed in
also been studied, ed learn that comment p should be intelligent merely a subjective re. on thoughtful analysis
Discrimination the
*
 
 
 

ation and a soach. Here again in this country ned the passive ard; a seat on a arious Advisory loys to fulfil its rly and actively, elt obligation to the system.
ocial obligation cted, but indeed of a publicy fi
le private sector file social ideals
d, it would be a em according to
ing that ought sefully be used (Velopment of
TTLL SMMMMSLLeeS
ptions, since that on the freedom Creative mediato bUSe Offreedom by the establishcil, and a Code, e and malicious he publication of ses, andthe mainApart from that itive Contribution the development journalists, so as reness of S6Cial ty to raise issues progress through Coherent discusseems a Crying fy the dictum that comment is free, 2nt to justify the Aspiringjournaly the pitiful apoloments that much ents, will have to tated in a press ily a fact, and that ୦, the public as nvestigated and a Context that has Jally, they should resented in print ind Coherent, riot pOnse, but based
refore should be
taught, as well as writing skills, involving not only the use of language but also the Organization of thoughts and arguments. This of course need not be the preserve of training courses for journalists aloneclearly, if the managemnt skills essential for a developing country are ever to be readily found, we need to rehaul Our educational system too, so that from
early on it encourages discussion and
doubt and the awareness that there are two sides to a question, instead of being confined to the note-taking and routelearning that is so restrictive at present.
That however is a wider issue than cannot be considered in detail here. With regard to the media itself, another measure that the state can usefully take to develop the range of discriminating journalists is to increase the level of choice in the system. The establishment of provincial newspapersis surely something that Ought to go handin handwith devolution. State subsidies could usefully be used to nurture regional initiatives, that would encourage the development of excellence through competition. Apart from increasing public awareness of various areas of activity that might otherwise be comparatively neglected, and hence encouraging aCCountability as to what might otherwise pass without much scrutiny, a regional media network would allow journalists much more mobility and, by increasing job opportunities, allow for enhanced independence and professional development.
in sum, what is needed is a cohesive media policy on the part of the state that provides guidance and assistance in pursuit of clear social goals. This can be achieved only with the recognition that the media can only be a means, not a goal. The contrary view leads to state control of the media, which is then transformed into a self-regarding monstrosity, totally unproductive because it becomes in effect redundant. A state that relies for information only on what it has itself fed in is as fatuous as Wittgenstein's caricature, while the assumption that the population at large credits such information flies in the face of a historical evidence. The result is that what should be a touchstone, and a tool for development, is transformed into ablindsojo. Esi
Economic Review May/June 1991

Page 11
کس سس
mine TAMIL MEDIA LACI CRITICAL OUTLO
P. Muthulingam
T demand that the mass media should be allowed to function independently is gaining strength in Third World Countries. Modern means of communication have converted the World into a village. Like other countries Sri Lanka, too, has many modern means of Communication such as the newspapers, the radio, the television and So on. However, among the various means of Communication in Sri Lanka, it is the newspapers that are pre-eminent.
in multi-ethnic Sri Lanka, Sinhala and Tamil are the two languages spoken by the majority while the elite belonging to both etbnic groups also speak English. During the Colonial period, these elites began to publish journals and newspapers in Sinhala and Tamil in order that the masses understand the struggle being carried out against the colonialists and to prepare them for this struggle. In this the wealthy Sinhala nationalists played a pioneering role. They showed interest in publishing newspapers in all three languages. It should be stressed that the Tamil nationalist capitalists lagged behind in this matter.
Although the English-educated elite of the two ethnic groups pioneered the agitation for independence, Communalism that raised its head in the thirties disturbed the unity among them. It appears that this event may have sometimes discouraged the Tamil capitalists from investing in the field of massmedia.
The Marxian-Oriented elities who ap
peared in the mid-thirties, rose upagainst
both Colonialism and communalism. These elites brought out newspapers in both Sinhala and Tamil to awaken the Sri Lankan masses. They published a newspaper called "Sama Dharmani" in Tamil and 'Samasamajaya' in Sinhala. These two papers were identical in Content.
With the renaissal period, the publicati pers also increase this grew further
Writers in the nation
as Thinakaran, Vira thy too increased. daranaike who pron General Elections) Tamil the official lar try if he comes tc Communalist Senti 'Sinhala Only' ast after he gained po during this period media gained stren Communalism was
nal unity and class
major content of newspapers. This
Although many newspaperS, Were of various political during the last thre very short-lived. He pers such as Thin: thy that were publ commercial basis owned by Sinhal Virakesari publish firm, have continue larly (Thinapathy is
These newspape on literary articles: publishing Contro essays that are Furthermore, Tam Writing such article Wrote any such arti written in English journals of politica never hesitated tC articles. Since they read, their impact
The Sinhalama ent. Although the { na SS media COin
Economic Review May/June 1991

DIA I
KS A OK
hce in the post-1950 on of Tamil newspad. In the mid-sixties, and the number of a newspapers such kesari and ThinapaMr. S. W. R. D. Bannised in 1952 (at the to make Sinhala and guages of this counpower, yielded to ments and declared he official language Wer in 1956. It Was that the Tamil mass gth and it was when at its height, commustruggle became the Tamil journals and Ontinued until 1983.
journals and weekly published on behalf parties and groups, a decades, they were Dwever, the newspa
karan and Thinapa
shed in Tamil. On a by newspaper firms ese capitalists, and Bd by a commercial Bd to Come out reguno more published).
s mainly concentrate ind news. They avoid Versial essays and ritical of the state. | Writers too avoided Sin Tamil. Ifatall they :les they were mostly On the contrary, parties and groups publish very critical Were not very widely was also limited.
SS media was differinhala and the Tamil nenced around the
same time, the former has gradually grown and their reading public also expanded. The Sinhalamass media not only give importance to current events and issues, they also create aforum for discussing social problems. These fora are opento discussart, literature, social, economic and political issues. For instance, these newspapers have had controversial issues such as the Tamil National Question. "Do Sinhala have a great culture?" The Open Economy and Jathika Chintanaya are also debated in these fora. Thus, the Sinhalamass media playsa key role in Creating public opinion while the Tamil mass media is deVoid of anythinking.
There is reason to believe that the Tamil intellectuals too are a Cause for the present state of the Tamil media. The Sinhala intellectuals unlike their Tamil counterparts, do not hesitate to publish their English Writings in Sinhala. They consider it their bounded duty to publish these essays in Sinhala. But the Tamil intellectuals while preferring to Write in English try to avoid getting inWolved in Controversial issues as far as possible. It may be construed that the anti-Tamil feelings in the country pre
vents them from expressing independ
ent opinion. However they failed to discuss such matters even prior to 1977 when the anti-Tamil feelings were somewhat less or were only latent. In actual fact, the past content of Sri Lankan Tamill-newspapers reveal that the Tamil intellectuals were never Concerned with such issues. Thus, it
may be concluded that the Tamil mass
media never Contributed toWards the Creation of public opinion or in clarifying issues related to the people.
3.
The second important media is the
radio. It is popular in all rural areas. The radio which broadcasts in all threelanguages is state-controlled. Today there are even regional radio broadcasts. Unlike the newspapers, radio can reach even the most uneducated. The radio functions in a manner that even those at the bottom of the social hierarchy could gather knowledge about economic, cultural and development problems and programmes. Although there is a separate channel for Tamil programmes, it is
doubtful whethe, it has any programmes
concerned with social development among Tamils. Lise the newspapers,
COfford Ori) page 40

Page 12
T. film industry had reached the most decisive and critical stage of its entire history. The steep decline in cinema admissions throughout the Country despite the increase in population, the sharp drop in the number of cinemas operating
and the absence of Investment in the
exhibition segment of the industry are symptomatic of the crisis now faced by the industry. The return on investment in the exhibition segment is poor to the point of being almost non-existent when compared to the level of returns in most other fields of business, Understandably, Exhibitors are very wary of making new investment, which is essential for the industry to servive and cater adequately to the needs of the cinema going public. Many Exhibitors have already gone out of business and many more will have little choice but to opt out of the cinema industry if relief is not urgently provided.
The National film Corporation's (NFC's)
viability as an institution is at all times directly dependent on the continued profitability of the film industry as a whole and the continued profitability of cinemas in particular. Being a State monopoly, a majorresponsibility does reston the NFC to ensure that cinemas Continue to be financially viable and capable of generating returns commensurate with the high capital investment and expenditure incurred in operating cinemas. The NFC can best do that by making available adequate supplies of films with goodbox office appeal on terms that allow profitable pperation. -
2 In 1978 the NFC, in keeping with the Góvernment's open economy policy, did
Ravi Pras
away with much of its operations but, in ter NFC Act, permitted e written authority of
source their require language films from Motion Picture Expc America (MPEAA) (y world's largest prod English language film other independent dis Viso for exhibitors to ir written permission of an intergral part of the 1971. Section 2 of the fully with this point).
arrangements the cor films, including detail. are approved by the cleared by the NFC Public Performance E cate issued prior to e.
With minimal investm NFC receives from r Colombo exhibiting films a level of incon riding commission, fill levy which, in relative than what the NFC g individual Cinema it Se
3
The NFC appears to the Conclusion that t huge and annually inc arbitrarily revise tern applicable to the impc tion of English langua should rather examine those of its operation: annual losses and in nancial management. the NFC'Sfinancial Sta
2.
to
 

A
ad Herath==
s monopoly status ms of the original Exhibitors, with the the Chairman, to ments of English
members of the rt ASSociation of
who make up the
ucer/distributor of IS) as well as from tributors. (The pronport films with the the Chairman was
NFC Act No. 47 of review deals more
Under the present
tracts for import of S of titles Selected
NFC, imported and
and viewed by the Board and a CertifiKhibition.
ment on its part, the lease cinemas in English Language he by Way of over m levy and special terms, is far more ets from any other }rvices.
have nOV COme to he panacea for its "easinglosses isto is and conditions rtation and exhibige films. The NFC critically and anew tl areas causing its roduce prudent fiAn examination of tements will reveal
the areas that demand immediate and priority attention.
The present policy of the Government encourages private sector Competition With State institutions in numerous areas of activity, howeverin-no other area is the
private sector participant called upon to
Subsidise the losses, if any, incurred by the state sectorinstitution competing with it. The Sri Lanka Transport Board (operatingata loss), Ceylon Shipping Corporation, insurance Corporation of Ceylon,
State Pharmaceutical Corporation and
the many other state trading corporations competing with the private sector within the normal fiscal structure of the state do not impose terms and Conditions including the payment of tariffs and levies as a prerequisite to permit private sector participation. The State sector in other spheres does not attempt to coerce the private sector into accepting a state monopoly status by resorting to archaic legislation-ananomolous situation which runs Counterto the accepted 'open economy' policies of the Government.
This review seeks to show why the existing terms and conditions relating to the importation and exhibition of English language films should not be arbitrarily vaired so that the Colombo release cinemas can operate viably. It will be evident from the Submissions contained in this review that the NFC's decision to demand more and more from Selected exhibitors simply to recoup its avoidable losses, regardless of whether such
demandscan bemet, is anunbusinesslike
and shortsighted tactic that really adds up, ineffect, to these exhibitors subsidising inefficiency and even bad mashagement at Various levels of the NFC
生
The film industry consists of three seg
ments - the Producer, Distributor and the
Exhibitor. The exhibitor (or cinema operator) makes the largest investment in the film industry and also helps generate the highest employment in the industry. Exhibitors are unquestionably the backbone of the industry. The 1985 Presidential Committee of inquiry into the film industry in Sri Lanka had this to say on the role of the exhibitor. "However, important, productionalone does not constitute the whole of cinema. Without cinema houses to screenthem, films would be
与
Economic Review May/June 1991

Page 13
meaningless as a mass art; hence the well being and stability of the exhibition trade are also essential to the continued existence of a cinematic culture". (Emphasis added).
The operation of cinemas is repidly ceasing to be viable for many reasons. Among them are:-
* The exhibitors being deprived of any alternate source of supply of films be: cause the NFC State monopoly - is the sole distributor of films in Sri Lanka.
* The wide ranging bureaucratic interference by the NFC, in the day to day running of the cinema industry, including unilateral, arbitrary and unjustified directives to continue to exhibit films for uneconomic periods.
* The paucity of films with good naSS appeal.
* The imposition of "ad hoc' levies on admissions by a State monopoly, the NFC, with the exhibitor being deprived of their accepted share.
* The failure of the NFC to offer incentives to cinemas which incur extra expenses in offering their patrons better amenities.
* The heavy capital outlay and funding requirements forthereplacement of plant, equipment and improvements to patron amenities.
* The escalating operational costs that cannot be recovered due to the decline in inCome.
* The serious encroachment in recent years by pirate video film libraries and illegal video film cinemas (not subject to any statutory controls) into the traditional, legal and long established cinema market.
* Competition for the leisure market from television.
Another reason is the prevalent fiscal policies which subject the film industry to statutory levies such as entertainment tax, turnover tax, income tax etc. While competitors such as video libraries
and video cinema negligible capital evade the payme levies, thereby er return on investme tion industry. A m admissions in the entertainment tax sion rate. The re which turn over various segments puted on the box exhibitor pays turr 6% on the entire distributor and prc their share of the
In 1986 the NFC levy on admissio COrne WaS SuppO: improve the Sup films for exhibitio assist local film p levy generating approximately Rs Rs. 7.98M in 198 films had been WC has seriously affe sions. On 22nd De introduced a furth 2.00 term 'special to in detail in Sec
* Cinema admis ing to the NFC's ON Million, by 1988 ac tO less than 30 M
* The number O Sri Lanka in 1979 Operating today is
* The reveues frO tickets in 1988 C Island-wide, anda released that yea 150 M, ora monthl per cinema, or F revenues from ot cinema operation making a total rex
* A Conservativ seating capacity the country (on cinema has 500s shows a day on \ on Saturdays and on Poya Days) is
Economic Review May/June 1991

MEDIA
is, with comparatively outlay, successfully 2nt of such statutory njoying a much higher
2nt than the film exhibi
ajor portion of cinema country is subject to at 25% of the admisvenues in respect of :ax is payable by the of the industry is Comoffice collection. The over tax at the rate of box office revenue; the ducer also pay 6% on box office takings.
introduced a new film ns; this additional insedly to help the NFC bly of other language n and also financially roducers. Despite this additional inCome of 8.541 M in 1987 and 38, the NFC's supply of pefully inadequate and cted box Office admis2cember 1989 the NFC her hire charge of Rs. levy' which is referred tion 9 of this review.
sions in 1979, accordWn Statistics, totalled 74 dmissions had dropped illion.
f cinemas operating in ) was 365, the number
approximately 250.
m box office admission Dovering 250 cinemas pproximately 500 prints ar, was only about Rs. yaverage of Rs.50,000 Rs. 300,000 per print; her activites related to S was around Rs.50M, venue of Rs. 200M.
e estimate of the total of the 250 cinemas in the assumption that a seats and operates two Weekdays and 3 shows Sundays, and no shows approximately 100 mil
lion. The actual cinema admissions for the whole of 1988 was less than 30 million, which is a capacity utilisation of less than 30%, or an average daily admission rate of 96,000 islandwide compared with
Rupavahini's primetime viewing public of
Over 3 million.
* The capital Outlay in the industry at present market values is estimated as being in excess of Rs. 1,000M including the investment in laboratories and working capital tied up in locally produced films.
* The revenues when related tÒ the estimated capital outlay, reflect the present state of the industry, a Rs. 1,000 M Outlay should generate a profit of at least Rs. 200OM and net revenues of Rs. 200M.
Despite repeated representations the NFC is as yet not alive to or concerned with the grave predicament of the film industry particularly its exhibition segment. In stark Contrast to the Government's policy of privatisation and increasing priVate Sector participation, the legally and long established film industry in Sri Lanka is perhaps the only private sector industry that is subject to controls in every aspect of its activities. But the newly arrived, thriving but totally illegal pirate video film industry is left untouched, with the NFC making no effort whatsoever to exercise any control Over it.
The NFC's thoughtless insistence on sourcing both English Language and oriental films mainly on a royalty basis withOut Considering the greater benefits of Sourcing English language films on rental, gives cause for much concern. The past performance of the NFC's English language films sourced on royalty basis (as analysed in Appendix 1 of this review) spotlights the losses incurred, and not profits made, as claimed by the NFC. The NFC's earnings on its films sourced on Royalty basis is now even more dismal than before because of the escalating exchange parity rates, costs incurred on attending film markets, enhanced publicity expenditure and poor box office reSults.
5 The advantages and benefits of dealing with MPEAA member companies and Contd on page 14

Page 14
2
 
 

Economic Review May/June 1991

Page 15
سسسسسس
S S SLGL National Film Corporation Act
47 of 1971
The general objects of the NFC (Section 4 and its sub-sections in the Act) make it abundantly clear that the NFC was never intended to enjoy a monopoly status or exclusivity in any or all of the ten areas of operation referred to, including import export, distribution and supply of films, Section 5(d) which Confers on the NFC the discretion to exercise exclusive rights must be read in conjunction with Section 57 (1) which fully supports and endorses Continued private Sector participation in the film industry even after NFC Act 47 of 1971 became law.
The claim to having mandatory monopoly status underthe Actfortheimportand distribution of foreign films is erroneous, as can be seen from the provisions of Section 5 it refers to the Powers of the NFC and has 15 subsections from (a) to
(o). The relevant sul necessary to draw a distinction between 'shal' in this context be read along with S a direct bearing ont
Section 5 and 5 Corporation shall rights and functions be necessary to carr in particular may
(d) exercise the e, port, Sell, hire, supply
The wording of the the Act establishes there was never an mandatory monopol either in respect oft films or in respect of powers specified in
The very next sectic the mandatory "shal cretionary "may" to compliance with t the Government wit industry" in the exerc carrying out of its ob Viewed in isolation frc overall policy of por prise and its Suppor omy”.
Section 57 (1) of th that as from a speci shall import into Cey distribute Within Ce) graphic equipmento ment or accessory
production or exhib
ends significantly,
words without the the Chairman". Sect ous if the legislatur effect of Section 5
mandatory monopol import Licence No.
the importation and other than expose authority of the Cl NFC's contention monopolistic status fore a fallacy. In ar activity is totally unr tion of films. Howe
Economic Review May/June 1991
mesma
 

DIA
D Section is (d). It is ittention to the legal the Words "may' and . Section 5 (d) must section 6, which has hem. ܗܝ
(d) read thus. "The ave such powers, as may reasonably yout its objects and
KClusive right to imand distribute films.
relevant Sections of beyond doubt that intention to Confer a y status on the NFC he import of foreign any of the other 15 Section 5(a) to (o).
)n-Section 6-uses |” instead of the dis
require the NFC's he general policy of h respect to the film ise of its powers and ects. This cannot be 3m the Government's omoting free entert for an “open eCOn
e NFC Act stipulates fied date "no person lon, or sell, Supply or lon any film, photorany material, equip
necessary for the ition of films..." and with the operative Written authority of ion 57(1) is superflue intended that the (d) was to Confer a yStatus. The Special 1 of 1977 permitted distribution of films d films without the nairman, NFC. The that it gave up its in this field is therely case, this field of related to the exhibiver, it needs to be
mentioned that the NFC's involvement in these activities alongside the private Sector would no doubt have passed on the benefits of competition to the ultimate Consumer - local producers and exhibitors. The NFC's reluctance to compete Only confirms its unwillingness to engage in free market enterprise and its marked preference for monopolistic scenarios.
The very working of Section 57 (1), which was an integral part of the Original 1971 Act, leaves no doubt whatsoever that the Act was not introduced to make the NFC the sole importer of foreign films but was designed instead to prohibit the inflow of foreign films carte blanche and without the knowledge and authority of the NFC - which is precisely what is now happening in the illegal and uncensored pirate video-film business in Sri Lanka.
LSLSLSLSLSLSLSLSLSLSLSLSLSLSLSLSLSLSYS
Contd from page 5
This places. Third World governments in an embarrassing position. They state, perhaps not quite correctly, that it would be extremely dangerous to liberalize the media. On the other hand international opinion (and intentions) have to be assuaged by some cosmetic change or at least by the promise of reform.
The freedom of the media has also been given another interpretation with the invasion of one country by the media of another which is more powerful. The right claimed by an American, media empire to investigate matters which Singapore claimed were "internal affairs" was a case in point. The argument advanced by US officials, that market forces should be allowed to decide the issue was effectively demolished by the then Prime Minister Lee Swan Yew (his memo in the form of an article was published in a local newspaper some
i months ago).
A free media relates to rights and liberties which we all cherish and which some of us have the means to enjoy. But while we assert this it is as well to recognize that it is a tool which is also used for purposes which do not have that much to do with our rights and liberties.
13

Page 16
Contd. from page is others who supply on rental terms can be best seen from a comparison of the two methods widely used by the exhibitors Worldwide to source films.
Royalty basis - This has certainly proved most advantageous in the case of oriental films, considering the much larger market for these films in Sri Lanka, which permits the investment made as a Royalty payment to be more than amply re
couped.
In the case of English language films, the Supplier of the film charges a royalty which may vary from US$ 4,000 to as much as US$ 15,000 depending on the area of distribution, the number of prints (of the same film) to be released and, of course, a film's box office potential. This sum has to be paid in advance before the print is supplied. In addition, the local Importer has to meet print and publicity Costs, which would approximately be an additional US$ 1,250. Having made all these payments in advance the Importer of English language films has to take a
gamble on the limited earnings from this
restricted market justifying the heavy financial outlay already made. Furthermore, guaranteed English language box office winners cannot be obtained on a
royalty basis (for outright purchase) be
cause the cost of (or royalty on) such films would invariably be beyond a Sri Lanka exhibitor's capacity to pay and
reCOver.
Rental basis - In this arrangement films are supplied with all requirements of publicity material, without the exhibitor having to make payment 'up front. After the film has been exhibited, the supplier
gets a share of the actual box office
collection (but after deduction of all local publicity costs, which are borne by the supplier).
A comparison of these two alternatives, Royalty vs Rental, spotlights the major advantages of Rental over Royalty as a basis for obtaining English language films for the Sri Lankan market.
* both the NFC and the local exhibitor are automatically protected against serious financial loss should a film prove to be a box office failure.
4.
* with royalty (or put having no bearing Rental, even the prohibitively expensi films become availa public in Sri Lanka.
* the funds that royalty on films co
profitably by the N
the cost of Capital.
* the outflow of f Rental films is muc Royalty films becau
In evaluating the following should als
* The investmen foreign exchange C costs (also in forei tending internationa
* The average English films in Sri performance.
* Expenditure such of capital, publicity ment and administr
* The extended cre est free loans that now by English lan actually supplemen of the NFC.
In Table 1 of th tation of the profit royalty cost of film each and the box of 400,000 a figure th industry norm. Ther correctly be termed sion and the incom Which the NFC Wol even when distribu have therefore bee computation. Ther cial levy have also Consideration in Vie
Section 9 of this r
ance in 1989 at CC
| mas of English lang
terms, the NFC ach tribution unlike the it now incurs on the distributes.
 

DA
chase price of a film) on films supplied on best (and otherwise Ve) English language
ble to the film gọing
Nould be tied up as ld be utilised more FC, thus minimising
Oreign exchange on sh less than that on se of market size.
alternate options the O be COnsidered:-
it involved including omponent and other gn exchange) in ata markets.
earning potential of Lanka based on past
as turnOVer tax, COSt and other establishative COSts.
ditfacilities and inter
are made available guage film suppliers it the working capital
is review is a compuability based on the is being US$ 4,000 ficetakingsbeingRs. at is higher than the evenues which should distribution Commise On film levy - items uld earn in any case ting films on rental - in excluded from this evenues on the spe
not been taken into W of what is stated in eview. The performblombo release cineJuage films on Rental lieveda positive connegative contribution films it sources and
The information contained in this Section together with appendices I, II and Ill clearly establish that it is uneconomical to procure English language films on royalty terms. The NFC should also consider the fact that MPEAA products account for the most successfulfilms; appendix IV of this review sets out the box office hits, released in 1988 and 1989, indicating the distributors of each film. It is obvious that the NFC should reconsider its revised condition relating to the exhibition of NFC films (referred to in Section 8 of this review) so that the movie going public will not be deprived of the best entertainment fare that they have a right to expect, and which they will certainly have from MPEAA films. In the event the NFC persists in procuring films on royalty basis from Sources other than MPEAA, such films could be released and exhibited in cinemas that do not deal with companies affiliated with MPEAA.
6
The NFC's present demand for a radical upward revision of the terms and conditions applicable to cinemas exhibiting English language films is obviously the result of a misconception that cinemas releasing these films (and numbering just 9 out of approximately 250) generate huge profits for their operators and that therefore the NFC is entitled to a larger share of this profit. In determining the income earning potential of these cinemas the following should be considered.
* The average box office takings of an air conditioned cinema in Colombo exhibiting English language films is higher than that from a cinema in the other Category because of the enhanced admission rates applicable. The difference in the monthly boxofficetakingsbetween an air conditioned cinema in Colombo exhibiting English films and a non air conditioned cinema exhibiting oriental films is approximately Rs. 70,000; but the exhibitor is no better off as more than half of this goes towards the film hire and turnover tax payable, while the balance cannot fully meet the increased cost of electricity in providing air conditioning.
" "Utility recovery charge" of an additional 50 cents is imposed at air conditioned cinemas on balcony and rear stall tickets, the electricity costs of an air conditioned cinema is about Rs. 40,000 a
Economic Review May/June 1991

Page 17
month as against Rs.5000 a month for a non air conditioned cinema. Expressed as a percentage, electricity for air conditioning costs 700%more while the"utility recovery charge" is only 50% more - Rs. 100 from non air Conditioned cinemato Rs. 1.50 from an air conditioned cinema.
* The share of film levy on every ticket accruing to an air conditioned cinema releasing English language films is 20 cents - or in fact, 10 cents less than on each ticket sold in a non air conditioned cinema exhibiting other films.
* The capital outlay on an air conditioned cinema in Colombo exhibiting English language films far exceeds that of anon air conditioned cinema in the city; the percentage difference in cost outlay between the airconditioned and non air conditioned cinema is in the region of 200%.
* Maintenance costs for an air conditioned cinema are inevitably much higher than those for a non air conditioned cinema. (For economic reasons one of the | original airconditionedicinemasin Colombo out of the seven air conditioned cinemas in a country-all of which are located in Colombo opted to change its status to non air conditioned and charge the lower rates of admission).
* Because of location, local rates and taxes on air conditioned cinemas are considerably higher than those payable on other cinemas.
* Higher insurance premia are also
payable, as the cover required is on an
enhanced figure to take account of higher building values and equipment.
Today instead of more air conditioned cinemas to take account of increased population there are only six air conditioned cinemas. If the cinema industry fails to attract new investment for much longer, there will soon be no air conditioned cinemas left; almost all cinemas airconditioning equipment is at least 30 years old today and most of them arewell past their economic lifespan. The cost of replacing air conditioning equipment for each cinema is conservatively estimated at Rs. 3M.
ME
It is pertinent and count of income lost tion of capacity by C
to exhibit a stock O.
scratched, filmsfort films with no box of cause of the NFC adequate supplieso cancellation of show trons is not uncorn the cinema industry tion of capacity, car due to physical Cons in other businesses unique to the film in nesses it is possible income subsequen tional shifts, price h
An examination of penditure on opera ing English languag
the level of returns
presentmarket valu tion made by thes Come of the NFC being provided by addmissions has ol only box office rev nues from other rela refreshment bars a Contribute to the O' ema operation.
in Table 4 of mate for operating cinemain Colombo cinema in ColombC tioned cinema in towns in the outstati are based on cine under norma COn sions are not affect beyond the control with an uninterrupt the NFC. The pr business point of positively inhibits fi
A Conservative e requirement for a 100 perches in C excess of Rs. 15N principal town in S Rs. 8M. In the ever air Conditioned fac the incremental cap be approximately occupied by ciner
Economic Review May/June 1991
 

DA
relevant to take acdue to under utilisainemas being forced F vintage, and badly he 9th time, including fice potential, allbe's failure to ensure f films. At such times, vs due to lack of panon, Such losses in due to under utilisanever be recouped trants, unlike losses This predicament is dustry; in other busi2 to recoup losses in tly by working addiikes, promotions etc.
F the income and exting cinemas releasje films would reveal on the investment at les, and the contribua cinemas to the inwithout any services it. The decline in bviously affected not enues but also reveated sources such as nd advertising which verall viability of cin
this review is an estian air conditioned , a non airconditioned ) and a non air Condione of the principal ons. These estimates mas being operated ditions where admisted by circumstances
of the exhibitors, and
ed supply offilms from esent return, from a view, is meagre and urther investment.
stimate of the capital new cinema requiring olombo Would be in M and a cinema in a ri Lanka in excess of it of cinema is to have cilities and car parks, ital requirementwould Rs. 3M. If the area ma halls were to be
rented out for use as go downs the return would definitely be much higher. The disparities in income earning potential is evidence if a Comparison is made between the gross revenue of a cinema and that of a grocery store operating in the same locality.
In the light of what has been said, the reasons for the reluctance of these already in the exhibition segment, as well as entrepreneurs outside it, to invest in the industry become evident. It is a telling commentary on the extent to which the NFC has got its priorities wrong that, 17 yeaars after the NFC Act brought it into existence, the Corporation has failed to live up to one of the Act's General Objectives (Clause 4 (d), and has yet to establish a single cinema of its own insandwide.
For new investment in the exhibition segment to be encouraged the following deserve consideration.
* The removal of the totally anamolous position of having a State monopoly to cater to the needs of the movie going public as well as exhibitors.
* The return on capital must be commensurate with the investment involved.
* The income earning potential and capacity of a cinema should be fully exploited by the exhibition of films having box office potential for optimum occupancy to be achieved.
* Profits should be of a level to permit provision for replacement and upgrading equipment for improvement of amenities of patrons, taking into consideration the unfavourable slide in purchasing of the Rupee.
* The return on capital should be sufficiently attractive for funds to be channelled for further lateral investment in the exhibition segment of the industry.
* Restrictive trade practices, bureaucratic controls and prohibitive tariffs should be eliminated.
" Cognizance should begiven to alternate opportunities available for untilising existing resources invested in the exhibition segment.
5
".

Page 18
| MEI
In addition, and considering the perilous state of the Film industry the Government should providerelief in the form of changes in its present Fiscal Policies applicable to thé Cinema industry.
The NFC's trading activities can be broadly categorised as follows:
* import and distribution of films.
" operation of a sound recording and film processing studio.
" supply of materials and accessories for the film industry.
The import and distribution of films (described by the NFC as its 'exposed film activity") can be classified as the:
distribution of nationally produced films On rental terms.
* Import and distribution of oriental films procured on royalty basis.
Importand distribution of western films procured on royalty basis.
distribution of oriental films procured On rental terms.
" distribution of western films procured on rental terms.
In 1987 and 1988 the "exposed film activity" of the NFC generated a profit of Rs.8,055,593 and Rs. 1,133,930 respectively. The decline in profits in 1988 could be attributed to increased expenditure (referred to laterinthis section) and to the drastic drop in income of Rs. 2,145,080 (1987 - Rs. 6,494,120 and 1988 Rs. 4,349,040) from the importation and distribution of oriental films procured on royalty basis (procuring Oriental films on royalty terms is more advantageous as the market is very much larger, enabling recovery of the investment involved). This opportunity loss was primarily due to the NFC's inability to finance the import of an adequate number of oriental films and also because of its refusal in 1988 to permit the private sector to supply films On rental terms. Consequently, neither. the industry northe NFC could maximise the opportunities available.
it needs to be stress activity achieved:-
A. a positive co importation and dist films procured on re
B. a negative CC importation of Weste royalty basis as Stati review.
In respect of the ot principal activities, tr huge and mounting tion of its Sound recC essing studio incur 6,027,367 in 1987 7,078,588 in 1988.
majority of local prod
have their films pro perhaps commente of the service offered of Rs. 849,630 in 198 in 1988 were also inc supplying materials
the film industry.
The expenditure le the servicing of 250 producers, local anc ers, the operation of: film processinglabo going public, also des are many areas in
Estimated Profitabi
Notes
1. The Distribution Commiss
4 of this review.
2. Turn over Tax is compute
16
 

|A |
ed that exposed film
intribution from the ribution of Western ntal terms.
Intribution from the rn films procured on ed insection 4 of this
her categories of its le NFC has inCUrred losses. The operarding andfilm procred a loss of Rs. and a loss of RS.
The fact that the uCerS Still choose to ocessed abroad is, hough on the quality by the NFC. Losses 7 and Rs. 1,787,098 surred by the NFC in and accessories for
vels of the NEC for | cinemas, local film i foreign film SuppliSound recording and ratory and the movie serve scrutiny. There which Wasteful and
unproductive expenditure is incurred. In the year 1988 the overheads amounted to Rs. 30,886,273 as against Rs. 23,436,262 in 1987, an increase of Rs. 7,450,011. An organisation recording a decline in income should endeavour to contain expenditure levels proportionately.
The NFC believes that the easy way to set off its annually increasing losses in the other areas of its activities lies in demanding more and more from selected exhibitors, regardless of whether such demands can be met instead of:
A. identifying without delay those areas responsible for its losses.
B. exploiting commercial Opportunities and other obvious avenues available for increasing revenue, including a regulatory control over the video market.
The NFC fails to realise that, Considering the nature and magnitude of its losses, it would be impossible to recoup Such losses from a sub activity Such as the distribution of Westerm films procured on rental terms, which only accounts for approximately 20% of the box office takings in the Country and, in terms of number of prints released, for approximately 25%.
The objectives of the National Film Corporation should therefore be:-
increase box office takings to a level
- Table 1 ility on importation And Exhibition of English Language Royalty
Films
ion, Film Levy and Special Levy are excluded in determining profits for reasons stated in Section
2d at the rate of 6% on the Film Hire Receivable excluding Distribution Commission.
Economic Review May/June 1991

Page 19
that would ensure that an average of Rs. Explore possibilit 10,000 per year is earned from each for the operation of theatre by way of distribution commis- and film processing sion, film levy and the NFC's share of the apositive rather that special levy (income Rs. 30M) tion.
Contain overhe level not exceeding (excluding expend
"Maximumopportunitiesnineimportation and distribution offilms to achieve a contribution of Rs. 6 Mayear inexploiting its oriental film obtained on Royalty. This contribution, excludes distribution cornmission, film levy and the share of the
*曇se esse
Sリe○fsb special levy the NFC gets in its capacity ဒြ မုံး၌ ranging as "distributor" but includes the supplier's 7: ܨ
giving cash manag share of the special levy on these Royalty tion films).
* - - - - - * Achieve a profita Engage other trading activities in annum after providi competition with the private sector such 3 perannum to th as the import and distribution of raw films, try. cinema arc carbons, projection and sound equipment, spares, stationery etc. to As stated above it achieve a profitability of Rs. 1 Mayear. tentia Source offinc
Table 2
NFC English language Film Grossings. At Colombo Rele
Release Name of Teatre Date Fi: Screeigned
2010.89 Whste Bove Empire ਪੂ O6.10.89 Mona Lisa Ruby 2 AreekS 3.10.89 French Hans Fafn Rio 2Ageks 27.箕0.89 Goodbye Pork Pie Rio week 15.09.39 Bruce Lee the Legend Rio 4 weeks 03.11.89 Robo Vampire Crown 5 weeks 19.11.89 Man of Fire Savoy 3 Areeks 维了毽89 Gendoline RO 2 22.靠2_8令 Autumn Bells Savoy 5 days 29.甘2.89 Youth of a Genius Savoy 17 days 1901.90 DOctor 2 ne Devil Empire 2 veeks 16.02.90. Creator Centra 1 week 1602.90 Shanghai Surprise Rio 1 gek 02:03.90 Half Moon Street Liberty 3 weeks 02.03.90 A Afonan for All Mes Rio 6. veeks 23.03.90 last outpost CroWin 5 days 23.●3.90 Wheels of Terror Savoy 3Aeeks 30.03.90 Frankenstein's General Liberty 2 weeks
Hospital 30.03.90 Easy Wheels CepatTa 3 weeks 30.03.90 Willie Nelson's 4th Ruby 2 days
July Picnie 05.04.90 A Choice Line Majestic 3 Ayeeks
Notes
1. The following films obtained by the NFC on Royalty terms have been banned by the Public F as to whether the costs incurred including duty, landing and clearing charges. Turn over Ta
suppliers)
Crime Wave Car Trouble
Devils Paradise Mixed Blood
Executioner's Song Showgum Assasin
2. An English language film that does not perf isfactority in Colombo (4 to 6Weeks) wir
exhibitors, and its out of Colombo earning potential is consequently very limited.
3. it is a 'rule of thumb that total earnings on outstation screenings of films with good boxo equivalent to the earnings on these films in Colombo.
4. The NFC's earnings on film levy and special levy have not been taken into consideration in 4 of this review. The NFC's share of the gross takings, include its distribution commission whic
5. it is clear that the NFC will incur huge losses on their films released in 1989 as not even recouped from their share of the Colombo box office takings, as each film would have costa a print).
Economic Review Mayl-June 1991
 
 
 

EDIA ATR ARHOLIAETH
lies of a joint venture the sound recording laboratory to ensure nanegative contribu
ad expenditure to a
Rs. 24-AA per annus T.
introducing effective ernal controls and by ement priority atten
bility of Rs. 10M per ng assistance of Rs. enational film indus
he NFC's largest pobme (Rs. 3OM) is from
base Cineas
Grass NFC Share Collection 50% Rs. Cs RS. Cos.
莓325 20.571-62 45,450.00 22,725.00 4496705 22,483.52 19257.20 9,628.60 추3.63255 71841.27 104.206.60 52.103.30 118.511.10 59.255.55 3彗83520 ±5、9拿了芮 1679355 8.306.77 98.156.05 497802 4691130 23,455.65 18,082.5 9,041.07 27了電雷.60 3.390.80 106623.60 53.46.80 27,885.05 (35.94.252 480235 2,401.17 102.075.00 51037.50 750 1930 37.509.65
94.848.00 47.424.00 3,202.35 1.601.17
146897-85 73448.67
Performance Board (it is unclear IX, eCare TeCD Verable from the
not prove attractive to outstation
office appeal are approximately
view of what is stated in Section hintact, should be discOUnited.
royalty costs would have been theast Rs. 125,000 (US$ 2,500
its distribution activity and this can be achieved provided the NFC.
| distributes films having box office po
* establishes realistic "hold OVers" to ensure that capacity of cinemas are maximised.
desists from issuing unilateral, arbitrary and unjustified directives to COntinue exhibition Of finns for une COinomic
periods. ܗ ܐ
revises annually its distribution flow down so that cinemas having earning potential (based on population, location and merits of cinema) are given priority in the exhibition of films.
liaises closely with exhibitors exercising greater Supervision and providing the best mix offilms for exhibition.
"standards of admission rates depending on type of Cinemaand location so that realistic ticket prices are effective.
eliminates competition from illegal and Unlicensed Video Cinemas and Video libraries.
considers also distributing films on fixed rental (to be decided on the box office potential of each film) which will help recover overheads on the NFC's Operations, investigations and Financial Divisions.
In Table 5 are the grossing of all cinemas for the year 1988. It is evident that the NFC is not even recouping the cost of the services it provides the majority of cinemas; the objective should be to en SUrea Contribution in the form Of “distribution income (excluding exploitation income) of an average of Rs. 10,000 from each of the cinemas the NFC Services. The present contribution to the NFC by each of the few cinemas releasing and exhibiting English language films is in excess of Rs. 25,000 per annum.
it is imperative that a Commission be appointed early to study the working of the NFC at all levels and make reco
mendations on how the NFC could be operated profitably, without burdening
Contd on page 20
17

Page 20
S GLLLLLL Socio-Economic and
Political Perspectives of Sri Lanka. During 19
P. A. Samaraweera
introduction
T essay Surveys the changes that have taken place in Sri Lankasince 1975, and how these changes have affected socio-economic and political perspectives. Firstly, it examines the implications of increasing population, coupled with an expansion of school enrolments and accompanying unemployment among youth, which contributed to unsettled economic and political conditions in the 1980's. Secondly, it looks into the defects of the Trade Liberalisation Policy intoduced in 1977 and the performance of the economy during the period which foll|OWed.
In post-1975 Sri Lanka, though significant reforms had been introduced in the political and economic structure, these appeared not to have addressed the Soaring unemployment among youth, despite the fact that it had been a serious problem for more than a decade. This issue came to the forefront in the eighties when the problem of unemployment was linked to youth unrest, disrupting economic activity and causing politica uncertainties. The youth revolt of the late 1980's was more serious than that of the 1971 insurrection, both of which were organised by the JVP.The ethnic conflict in the North, where Tamil militants calling for a separate state took to arms and the youth revolt in the rest of the country had a direct bearing on the economy, as resources had to be diverted for defence expenditure. Even though it has been claimed that the former is primarily for political reasons, it appears that in both cases, economic factors have contributed to youth unrest. For nearly seven
18
years both groups
against the state C economic instability to total breakdown ir state of political cris
In the economic Sp Liberalisation Policy nomic growth, arise ment, an increase and a reduction in this was short-live eighties, this growt could not be sustair ies, there vere three virtual economic st an economic crisis.
Thus both political the eighties have b matic period in the Lanka.
Population and La
Sri Lanka's popula doubled since 1950 to 13.5 milion in " million by 1989. The ages for the year 20 the high projection i
The annual rate ofg tion, which was 1. increased to 2.2 per 1989, the populatio the rate of 1.3 per C average annual rat population for the pE 1.9 per cent, which o rate of growth. The declining trend in tit growth the size of has remained in the
 

LLLLL
resorted to violence
ausing political and The youth revolt led in law and Order anda is.
here, with the Trade , therewas rapidecoin the rate of investin industrial exports unemployment. But d, and by the midh and development ned. In the late eighte successive years of agnation, leading to
ly and economically, }een the most traUrecent history of Sri
bour Force
ation has more than from around 8 million 1975 reaching 16.8 low projection for all O1 is 20 million while s 21.3 million (1).
growth of the popula9 per cent in 1975, cent in 1980 and by in was increasing at ent per annum. The e of growth of the riod 1975-1989 was was relatively a high erefore, despite the he rate of population he annual additions region of 200,000.
in 1971, about 22.5 per cent lived in urban areas and 77.5 per cent were in rural areas, while in 1985, 21.4 per cent were in urban areas and the rest in rural areas. Thus during 1971-85, there had been no considerable variation in the sectoral distribution of the population.
During 1971-85, the labour force which was at 4.4 million, increased to 5.9 million and out of the total labour force, 67.2 per cent were males and 32.8 per cent were females (2). Compared with the past, the present labour force is swollen with those who have higher educational qualifications and attainments. The labour force projection for 1991 and 2001 is 7.5million and 9.1 million respectively (3).
The increase in population had been mirrored in both the school enrolments and the demand for higher education.
School Enrolments
in 1981, Sri Lanka's literacy levels had reached 87.2 per cent compared with 78.5 percent in 1971 (4). Thus the overall level approached 90 percent by the early 1980's. Female literacy is not as far below male literacy as it was several decades ago.
In 1981, out of 3,371,860 persons who were in the age group 5-14 years, 2,831,960 attended school. In the country asawhole, this was about 84 per cent, compared with 65 per cent in 1971. By 1988, the total number of pupils attending school was 3,938,062 (5). Thus Sri Lanka has made substantial progress in the schooling of young children, although Universal attendance is yet to beachieved.
The number of students who applied to sit for the GCE (Ordinary level) examination in 1975 was 323,323. By 1989 this number had increased to 555,624 (6). Thus during the period 1975-89 the number of students increased by 72 per cent.
The number of students who applied to sit for the GCE (Advanced level) examination during 1975-89 increased by about
200 per cent.
Year Number of candidates 1975 48,432 1980 153,803 1985 104,158 1989
144,808
Economic Review May/June 1991

Page 21
کـــيســـس
E ECC
In 1989, out of 555,624 who sat for GCE (Ord, level) examination, only 144,808 qualified to continue with their studies. The rest were dropouts who looked for other avenues of self-advancement, or joined the ranks of the unemployed. According to past statistics, nearly 80 per cent dropped out of the formal education system before, or after Completing the GCE(Ord. Level) examination. Only about 1.5 per cent enter universities.
University Enrolments
At present there are nine full-fledged universities including the Open university. The following table shows the increase in university enrolments since 1975 (7).
Year Number admitted Number eligible
1975 3,942 15,023 1980 4,857 29,698 1986 6,208 24,004 1987 6,143 31,079 1988 6,100 34,491
During 1975-88, the number eligible for university admission increased by about 130 percent, while admissions increased by 55 per cent.
In 1988, about 140,160 sat for the GCE (Adv. Level) examination, out of which 34,491 were eligible for university admisSion. But the actual number admitted to universities was 6100. The rest turned away in disappointment at not being able to continue their studies and many also left in frustration as their chances of finding employment were not great. Among university graduates, those who graduated in Arts and Humanities had little hope of gaining employment. Partly as a result of this, universities became centres
of youth unrest in the country, universi
ties remained closed for most of the period between 1987 and 1989 (inclusive). During 1987-89, universities were opened twice, but had to be closed due to interruptions by some of the students.
During the past decade, among the unemployed, there was an increase in the number of persons with secondary and higher qualifications. For instance, in 1985, 37.5 per cent of those with GCE (Ord. Level) were unemployed, while the figures for Advanced Level and degree Were 44.1 per cent and 23.2 per cent respectively. In 1989, there were gradu
ates who had bee than seven years medical graduate ployed for two ye; were 8000 gradu employed.
During the 80's people were leav sities with employ Were disillusione find employment imbalance betwe availability of jobs educational qua employment.
Unemployment
During the perit unemployments From 24 per cent mentrate droppe 79, By:1982, une around 600,000 Cent of the abour Of the incidence C 978-82 can be economic activity in the Free Trad emigration, partic
The number of during the years 1986/87 the Un around 17 per ce of the unemploye group 14–25 year
Nearly 70 per C Were in the rural the fact that mo Creating economi Concentrated inth of the rural district fact, increased be activity and mov urban Sectors.
Unemployment sele
1975
1978 -
198O
1985
Unemployment c
1988, the unempl
Economic Review May/June 1991

DNOMY
PUzgi
تاہم ہین
an unemployed for more Among them were 520 is who had been unemars. By mid-1990, there lates registered as un
arge numbers of young ing Schools and univerment expectations, but d when they could not E. Thus there Was an en the demand and the . This raised the level of ifications needed for
bd 1978-80, the rate of howed a declining trend. in 1977, the unemploydito 15 percent by 1978/ mployment had fallento Which Was about 12 per force (8). The reduction funemployment during attributed to increased 7, employment created e Zone and significant ularly to the Middle-East.
unemployed increased which followed and by employment rate was nt (9). The vast majority 2d belonged to the age S.
:ent of the unemployed Sector. This was due to ist of the employment cactivities were largely he urban sector. In Some tsunemployment had in }cause of declining rural ement of resources to
figures (in '000s) for cted years
986.0 1,005.7
857.1 840.2 }ontinued to rise and by oyment figure had risen
to 1.2 million which is about 18-20 per cent of the labour force (10).
lf jobs are to be created for the one million already unemployed and also for young people Coming into the labourforce, it has been estimated that the economy will have to grow at an average rate of 10 percent per annum. With a growth rate of 2.3 per cent in 1989, it seems very unlikely that this target can be achieved.
With increasing population the unemployment situation became acute. The mismatch between education and employment and the gradual decline in avenues of employment caused chronic unemployment among the young.
In the 80's, increasing unemployment among the youth caused frustration and unrest and culminated in widespread violence, destruction of property and loss of human life. In the late 1980's, the youth who revolted, sought to wrest political power by force and terrorism, bringing about a state of anarchy.
By the end of September 1989, the military offensive against the hard-core insurgents was at an end and the country returned to normalcy. A presidential Commission on Youth was appointed in October 1989 to inquire into the causes of youth discontent and unrest. The Commission found deficiencies in the educational structure and to avoid future insurrections proposed reforms as a matter of urgency (11).
One of the major problems which the report highlighted was the lack of coordination between education and employment in Sri Lanka. This was given as the primary reason for youth unrest and it was suggested that this problem be dealt with effectively by the educational system to avoid future repetitions.
Economic Performance
In 1977, with the introduction of the Trade Liberalisation Policy, Sri Lanka experienced unprecedented growth. But this growth momentum was short-lived.
Reforms promulgated in 1977 advocated an increasingly greater role for market forces, for the private sector and
for removal of controls on economic ac
19

Page 22
SSMMM SL LLLLLL
tivity, thus creating an open market economy. The implementation of new economic policies coincided with a higher economic growth rate which averaged
more than 6 per cent per annum during 1978-80 period.
In 1980, even though the growth rate Was 5.5 per Cent, which was less than that projected, it was higher than the average increase in the past decade. The slow growth had been attributed to the low level of production in the plantation sector, poor performance in the manufacturing Sector and the virtually stagnant Construction Sector.
The growth rate in 1985 increased by 5.3 per cent Compared with 5.1 per cent increase in the previous year. During the period 1978-86, the average rate of growth
of the real GDP was 5.5 per cent. By
1987, the growth rate had declined to 1.5 per cent, and the average for 87-88 Was a mere 2 percent, the lowest since 1971 (12). The following year showed an increase of 2.7 per cent. In 1989, Which was worst affected by civil disturbances and work stoppages, a growth rate of 2.3 per Cent Was recorded (13). ECOnomic growth under post-1977 economic reforms has been mainly attributed to the expansion of the service sector, as the growth of the Construction Sector Was short-lived, while the agricultural and manufacturing Sectors were highly Volatile (14). During the period 1978-84, nearly two-thirds of the increase in GDP had originated in this sector. After 1985, with a slackening off in the service sector, there was an overall slowing down in the eCOnOnny.
During the years preceding 1989, economic growth had been restrained due to:
(a) Declining international price levels for primary commodities. The prices of Sri Lanka's traditional exports tea, rubber and coconuts were at their lowest levels since the World War II. In addition, rubber and coconut production recorded a decline during 1987-88. Prior to 1978, these three crops which had earned about 85 per cent of the total exportearnings of the country declined to about 37 per cent in 1987 (15). Sri Lanka is still dependent on primary products for economic viabil
ity.
20
(b) Ethnic conflict bances. This had atWO it affected tourism whic foreign exchange earn increasing cost to the had been estimated at
(c) increasing alloc budget for defence defence expenditure f billion while the estim; 1991 budget is 11 bil second highest Vote (F for defence Which Wa total expenditure ir Was 16.8 per Cent at respectively.
(d) Adverse weathe prolonged drought in North Western and Si reduced agricultural levels, resulting in a hig rice in 1989. The se Western and Sabarag also caused damage
(e) Weakened bala situation. Sri Lanka’s teriorated steadily frO ment industry, which i oriented industry, was by import quotas Setb tries. Garments and t largest exports, and a cent of the country's E
in addition to the Straints on economic growing Current aCC interest payments Ong decline in external as, than expected levels sulting from massive grammes undertaken
All these factors had Sri Lanka's economic ing the past few year:
Conclusion
In Sri Lanka, during there were signs of well as an economic Conflict, terrorist acti slowing down ofecon! on caused political at bility.

MY I
and civil disturfold effect. Firstly, sh is an important er. Secondly, the
economy which Rs. 50-55 billion.
ations from the 2xpenditure. The or 1990 Was O.2 ated figure for the lion. In 1989, the Rs. 8.9 billion) was s 8.3 per cent of 1987 and 1988, it nd 11.5 per Cent,
r conditions. The the North Central, Outhern provinces production tO IOW her import level of Vere floods in the amuwa provinces O CropS.
nce of payments terms of trade dem 1978. The garS the main exportadversely affected y developed COUnea are Sri Lanka's account for 55 per }xport earnings.
above, Other Con} growth were: a punt deficit, large overnment debt, a sistance and lower of productivity reinvestment proin the past.
Serious effects on performance dur
the late eighties, a political crisis as
Crisis. The ethnic vities by the JVP, pmic activity and so ld economic insta
Increasing unemployment among the young led to youth revolt in the late 1980's. Towards the end of 1989, the youth revolt was subdued. This was followed by the appointment of a Presidential Commission to look into the causes of youth unrest. Its report was published early this year. Since then, certain steps have been taken by the Minister of Education and Higher Education and the University Grants Commission to reorganise the educational Structure.
With the Trade Liberalisation Policy in 1977, there was growth and development. But during the late 1980's the generaleconomicenvironmentWeakened and since then economic performance declined. The average growth rate for the three years 1987-89 was a mere 2 per cent compared with an average growth rate of about 6.6 per cent over the three years from 1978-80. The growth momentum of the Open Economy could not be maintained and economic growth reached unprecedented low levels.
As with slow economic growth, unemployment also slackened in the late 1980's equalising pre-1975 levels. Post-1977 reforms were particularly urban biased and were not focussed on rural districts which became "breeding grounds' for youth unrest.
In addition to internal constraints on the economy, exogenous factors such as Weakened balance of payments, deteriorating terms of trade, declining prices for traditional exports etc., as well, Contributed to the slowing down of the economy.
Towards the end of 1990, the Gulf Crisis
made matters worse for the shrinking economy. Oil prices soared, remittances from Middle-East Workers declined and tea exports were disrupted (45.1 percent of tea production were exported to the Middle-East), causing balance of payments problems. The rising oil prices and
the UN-imposed trade embargo had a severe effect on the demand for exports
of Sri Lanka.
Thus, the uncertainties and instability of the 1980's manifested themselves in political and economic crises, causing a deterioration in the social and economic infrastructure of the country.
Contd. on page 58
Economic Review May/June 1991

Page 23
سمع سے
Galle port, the organizing of a package
DEV
THE KOGGALA, EPZ:
THE POTENTIAL
1. Background
P. Ranasinghe Premadasa's appointment of a high powered task force toplan, implement and monitor the progress of the Koggala Exports Processing Zone, within the framework of the Master Plan for the Southern Province Accelerated Development Programme is timely and is a step in the right direction. Some of the plus factors are - the area is endowned with 220
: acres of crown land, 30 megawatts of
electricity are available, water is available from the Polwatte oya, ground Water of 400,000 gallons per day is readily available, no sewerage and surface drainage problems, proximity to the Galle harbour which can take 40 containers per day availability, road and other infrastructure etc. The President has stressed that the KEPZ should concentrate on production for export, on em
ployment generation and on industries
linked to the local economy- thus contributingto the generaleconomicgrowth in the region. The uniqueness in this "regional" approach as against the "proect" approach is that it will fit in well with the broader regional matrix.
The prerequisites to alongterm KEPZ development are the development of the "Ruhuna Expressway", the widening of the Galle road, the development of the
of investment incentives to attractinvestments to KEPZ. Broadly, priority industries identified have been light engineering, food processing, gems and jewellery, and wood work. It is believed that these carry high potential for both male and female employment, for skillbased industrial development and for links to the domestic economy.
2. The Port of Galle
The port of Galle is a natural harbour of 320 hectares with facilities to berth
ty
Wessels in the si side the jetty. T cated betweent, water off Gibbe fore, narrow. Thị the Ocean by sto
| ters and the Buo
soil of the Seabe Orsity sand. Inth boulders and rO. the channels ol breakwater Were 9.9 meters and about 850,000ct
Cu. m of rock dré
During the Sol Winds make it d water conditions Southwest. A fis bour, aslipWaya around the bay.
Port facilities the following:
- facilities to bert and along the jet - a quay of apprc. alongberthing C water depth bein - two Warehous prox. 5400 sq. In age. -transit cargo storage. -approx. 12,000 cargo could bes - offices. - CUSomS a.CCO - rest roomTS, Ca - a rail link part encroaçhments - Colombo - H. A 2 runsbesides ter for the port. - 500-ton, 65 Shipway and En
a machine shop
- a fishery port refrigerators, we making factory a
Economic Review May/June 1991
 
 

ELOPMENT
جليحة
team as well as alongDe portfacilities are-lohe quay and the break
islands and is thereport is sheltered from ne masonary breakwana Vista peninsula. The d comprises, a sand silt
e seabed of the bay are
cks. Between 1982-84
Jtside and inside the dredged to a depth of 8.9 meters removing II. m. inclusive of 25,000 Edging.
ith West monsoon the ifficult to ensure calm as the bay opens to the hery port, a yatch harnd a factory are located
provided are limited to
h vessels in the stream ty. x. 425 meters enables if two small vesselsg8.8 meters. es which provides apn. floor space for stor
sheds of 8000 sq. m.
m. tons of baggage tored.
mmodation. hteen, toilets.
carried out (railroad needs to be cleared). ambantota trunk road, the North-East perime
on shipway (of Galle gineering (Pte) Ltd)and for repair work.
2duipped with modern
rehouses, and an ice nd ayatch harbour.
Suggested improvements according to a study done by the Overseas coastal Area institute of Japan (JICA) are:-
(a) a breakwater and/or a new wharf system to minimise monsoonal effect.
(b) seabedrocks and boulder clearance in the operational area.
(c) dredging of channels in the opera tional area. -
The benefits from the longterm investments are likely to bring the following:-
(1) the Port of Colombo is on the verge of Saturation.
(2) a high proportion of container transhipment is destined from India.
(3) unlike Colombo, Galle is situated adjacent the shipping line, thus, reducing the nautical miles.
(4) Galle has potential for bunkeringleading to employment, income general tion, low investment activities.
(5) cargo handing facilities can beshared with the Colombo port.
(6) easily dovetails with the Southern Province accelerated development programme. -
JICA concludes "the development of the Port of Galle must take place in conjunction with the development of the regional economy".
From 1960-1965 the total tonnage handled annually varied between 136,000 tons and from 1977 it rose to 110,000 tons. In 1985, it handled only 69554 tons (Source: Galle district situation report - 1987). Its potential is evident from the cargo handled in the prenationalized period. Before 1963, tea exports from the Galle port exceeded 40,000 tons annually but since 1971 it
has not been an outlet for even low
Country teas. The cargo discharged at Galle has declined very significantly. Galle handled only rice, flour, Sugar, imports occasionally general cargo, cement, fertilizers. This harbour handles exports of Some rubber and miscellane
2.

Page 24
EDEVELOP
ous items sometimes. Since large vessels could not reachthejetty without releasing a part of the load temporarily at theanchorages located outside the harpour, port development was undertaken to deepen the access passage and completed in 1984 at a cost of Rs. 100 million. However despite this the cargo handled by the port is considerably below the levels of the 1960's - 1965 period. Part of the problem is the failure of the Port of Galle to cater to new trends in international cargo handlingcontainerisation. Other is the lack of economic development in the Southern Province to feed the Galle harbour.
There is much scope at present for multiplying port operations of cargo destined to the South and originating from the South. About 90,000-100,000 tons of rice imported to Sri Lanka could be handled through Galle. Galle could have another flour mill using imported wheat to feed Southern Province flour demand. Raw sugar molasses could be imported and refined into sugar and molasses. About 11,000 tons of general Cargo couldbehandled. It couldloadlow grown and mid grown tea (50,000 tons annually), rubber (20,000 tons), COCOnut products (fibre, rope, charcoal), cinnamon, essential oils (cinnamon oils, citronella oil), salt, frozen fish, fruits and vegetables. Once the KEPZ starts, both discharging and loading cargo could be expected to increase significantly. In the long run development of containerisation through transit sheds, vehicle parks, container stacks, trailer parks, workshops and office building ways beCome essential. 懿
3. Airports Development
internal airstrips with high potential for development are the Koggala- (20 Km from Galle town) and Wirawila, (25 Km from Hambantota). Eraminiyayatoo has been identified for development. Since Koggala is to be developed as a EPZ it is questionable whether its present status with a paved runway of 1030 m.x 45 m. would be adequate. The development of the Wirawila airstrip could serve the needs of visitors to Yala Reserve, Kataragama pilgrimages, domestic and business community (flying distance from Wirawilato Kolggala aerodrome is Km). A domestic private air service
or helicopter service c. aged.
4. The Railway Extens
The Galle-Matara ra missioned in 1895 at a combined population ol Hambantotadistrict was over 3840 Sq. Km, a de sq. Km. The present p million with an average per sq. Km. in the conte tion and economic grow Hambantota, particula Walewa and LunugamW extension of the railway passengers and goods
5. The Ruhunu Highw
A new highway linking 15Km away from the posed. The highway Horana, Elpitiya, and B proceed from Galle tot
port at Eraminiyaya in
continue up to Wellaw. tiya.
in the Southern Prov of all passenger miles tonne miles are by roa main roads (A + B class comprise 44.7% of the carrymore than 60% of of vehicle miles. The provement programme
- Colombo -- Galle - bantota road (A class). - Matara - Thiagoda - Mawanella — Kotap miles (77.2 Km).
— Galle — DeniyayaA - 91.70 miles of W Southern Province).
- Pelmadulla -- Nona - miles 0.43 in 44-54, i ince).
In order to improv better passenger trans roads mentioned belc provement.
(1) Galle — Udugama ments from Nakiyader
(2) Akuressato Uduga
22

puld be encour
ion
lway was com
time when the the Matara and 125,000 spread ensity of 35 per opulation is 1.2 density of 312 xt of the populath in Matara and rly in the Uda ehera areas the line would bring traffic.
ау
Colombo-Galle, coastline is prowill run through addegama and he proposed airJoda Walawe and aya via Embilipi
ince nearly 90% and 95% of all d. The trunk and ) of the province network and they all traffic interms trunk route im
should cover:
Matara-Ham
- Kamburupitiya
bla (B class) 48
Madampe (Class nich 56.5 in the
gama - (Class A in Southern Prov
2 and provide a port service the W Will need im
road (improveiya — Udugama)
ma road
(3) Mulatiyanato Kotapola road
(4) Makumbura-Ketanwila-Akuressa road
(5) Baddegama — Nagoda — Udugama road
(6) Suriya Wewa — Mirijjawila
(7) Tissa - Wirawila - Kirindioya road
(8) Karapitiya-Dodella road, Galle road.
There is also a need to develop fisheries roads. In a nutshell, the strategy for development of the highway networkfor investments to follow roads should be:
A. Identify the sections of A + B class roads needing immediate rehabilitation or reconstruction.
B. identify the links in the minor network requiring upgrading.
C. Construction of the Ruhunu ExpressWay.
6. Energy Supply
The demand for electricity increased at the rate of over 10% annually between 1980-87 and the consumption increased from 1668 Gwh in 1980 to 2707 Gwh in 1987. The power generation in the country increased from 421 MW (1980) to 1146 MW (1987) to meet the higher level of demand. The Commencing of Victoria (2169 Gwh), Kotmale (482 GWh), Randenigala (516 Gwh), Ukuwela-Bowatenna (280 Gwh) Ratambe (253 Gwh) increased the capacity to 4217 Gwh and Malaweli added 60% supplies to the national grid. The commissioning of the Samanalawewa will produce 140 MW of power increasing the national installed capacity of 12%. The existing 30 MW at Koggala could, thus, be augmented, to meet any new need for industries.
7. Urbanization and Unemployment
The Southern region comprises of a total population of 1.8 million persons. This is 12.7% of the total population of the country. The urban component of
Economic Review May/June 1991

Page 25
the population in the Southern Province is 281,000 persons which amounts to 14.9% of the total population of the Province. This is comparatively low when compared to the national average of Urban population which is 21%.
in terms of the 1981 Census of Population the Southern Province has one of the highest rate of unemployment. National unemployment rate is 17.9% Compared to Galle (26%), Matara (27%) and Hambantota (18.6%), which are higher than the national rate. The highest unemployment rate is in the age group between 20-24. This age group Comprises 36.8% or over 1/3 of the total unemployment. The literacy rate in Galle is 82.6%, Matara district 78.4% and Hambantotal 73.6% compared to the national average of 78.5%. There has been a high rate of out migration to other areas, from Galle and Matara districts and a marginal increase in population was seen in Hambartota especially with the Lunugamvehera project. This reflects the lack of employment opportuni ties in the region. There are 19, urban Centres in the Southern Province with Walasimula TC (2318 persons) to Galle MC (77183 persons).
8. novestment Pottential at KEPZ
Although, the approved investment in the Southern Province is Rs. 760.9 million for 22 projects under the FIAC, the actual investment u poto Jan. 1988 was only Rs. 456.4 million. Under the LLAC, investment of Rs. 296.16 million was approved for 161 industrial units. The Small and Medium industry loans to the value of Rs. 23.7 million for 204 projects and to the value of Rs. 166.7 million for 447 projects have been given. But these are dispersed all over the Southern Province. However, the local resources based industries with linkages to regional resources are Worth examination.
(A) Mineral Based industries
Coral mining should be strictly restricted to inland Coral deposits and the industry, should be organised in a 0derly manner and raised above the level of Cottage industry. Kaolin and clay based industries may be developed
Economic Review ways June 1991
DEVELO
through manufacture tery and ornamental
Kaoline refinery, lime tery centres should be a scheme of link in KEPZplantputingth and packaging. Sa industries could be Paranthan) in the Sa occuring in the South be a base to manufa metalsmelting as well
in electric motors and
atomic reactors. Ge industry could also b
(B) Agro-Based indi
There are nearly 2 ducing units in the S An industrial unit be KEPZ to manufactur products like coir Ca coir carpets. rubberiz and other products. machanical processu
in the green form anc
duction tire from 6
proximatety 40 minut
ment in each unit Wöll but indirect employm be 250 persons
tion of husks, transp the yarn). The mat manufactured and
available, if Such unit in all Coastal areas. |linked to the KEPZ fa sary backward and
could be built. There
upgrade the coconu
sector for the mart.
quality mats and na duction of powerfoort
There is also the Handicraft working in lack making, jewelle embroidiery, Wood shellware, horn, reeds all based on local raw raw materials Could to
rivers and swamps. C
der, Coconut Shell C carbon are other indu introduced.
Ruttoer Oased in C potential. Rubberwoc
 

PMENT
of exportable potearthenware. The plant and the pot! upgraded through dustries, with the efinishingtouches itbased chemical developed (like in it areas. Graphite Srn Province Could
cture crucibles for
as carban brushes | as a moderator in m and jewellery, e encouraged.
ustries
25 White fibre proouther Province.
estabilished in the
e Whitefibre based arpets, rubberized ed auto Car Seats The village level SeSCOCOrutusks i shortens the pro8 months to apes. Direct empioyuld be 20 persons, lent per unit would (for the collecort and spinning of chinery is locally loan facilities are Is are encouraged in the South and Ctories the necesforward linkages is also a need to it fibre handloom facture of export rting by the introS.
handicraft sector. goid, siiver, brass, ry, gern polishing, Carvings, coconut vare, rushware are materiais. Á such e developed along Poconut shell powarcoat, activated stries that could be
ustries has much di based industria,
products including furniture, a centrifaged latex factory, banbury mixer for making rubber components available to small industries. A wide range of sports goods, rubber based industries, rubber seed oil and resins, are few of the vast potentialities. -
Tea bulk packetting for export through ܝ ܝ
the Galle Harbour, is another potential work of expansion. Manufacture of tea chests, battens, tea machinery, rubber machinery are other possibilities. It also possible to have a large oil mill and manufacture coconut oil based products like the soaps, detergents, toothpastes, glycerine etc. The shifting of the largestate owned oil mill and soap
manufacture from the heart of Colombo
to the KEPZ with joint venture private sector management could be seriously considered. A feed mill to provide provender to the livestock sector development in the South would also be useful.
Essential cil distillation for export would be suitable for KEPZ. Cinnamon based essential oils, extraction of downstream products like eugenol, use of bark oil in
perfumery, pharmaceuticals, flavouring
food industry for export, distillation of citronella oil, lemon grass oil, Vetiver root oil, clove oil, eucalyptus oil, ginger oil, palmarosa oil, and possibly introduction and the development of jasmine, rose, mint in uneconomic lands to supply the needs of essential oil distilleries to be estabilished in I KEPZ WOuld be ideal. Machinery for distillery could be fabricated locally, Technology is available from the CSIR and the UNIDO.
Other agro-industries that would be
established at KEPZ wouid be herbal based industries. Instead of importing
esservices of synthetic flavours primier carbonated coia producers can be encouraged to established plants to brew carbonated herbal teas from Goukola, Ranawara, tramusu, Polpaia, Neeramulla, and Beli mai for local and export markets. Canning of balaya in the form of ambulthiyal, canning of bilin beduma with sprats, canning of del (breadfruits), waraka, polos are good possibilities. Uneconomic paddy fields in Southern Province could be used to grow okra, japanese egg plant, zucchini, yams for canning for export. Canning of fruits like
-জুন A - Conid on page 33.
23

Page 26
Primary Education an
EDUC
Children in Slum and Shanty Settlements
S. early 1940's education has been viewed by successive governments in Sri Lanka as a strategy for reducing social injustices and inequalities, narrowing the gap between the have and the have nots and enhancing developing. This commitment to education is safeguarded and guaranteed in the 1978 Constitution of Sri Lanka which states in the article 27that "the complete eradication of illiteracy and assurance to all persons of the right to universal and equal access to education at all levels."
(1)
As a consequence of this political Commitments educational reforms and measures were introduced Over the last five decades making education compulsary upto the age of 14, expanding education through a network of primary and secondary school spread throughout the island and democratising education by the introduction of free education from the kindergarten through university, making the mothertongue the medium of instruction at all lėvels, providing a common curriculum including Science and English for all schools upto the GCE (O/L), establishing wide range
BV H. L. Hemachandra -
of scholarships inc sity and giving free books.
Studies howeve achieving national ment in primary ed rewarding. The Wo
States that investm
cation in developing percent more econ same investment i further goes on to economic return o mary education are than that in second cation. (2) This prov stabilising a sounc and functional liter foundation for natic
Because of the programmes imple five decades Sri La Aenrolment rate rose 1946 to 83.7 pe literacy rate of thos has increased from to 84.2 percent in
Despite all these mary education in childrenor 13.0 perc going age (5-14 yea percent of 5-9 ag percent of 10-14 ag no Schooling (4) Du year 1986/87, of the lation from Grade had dropped out. 0.88% in grade it and from 5.21% in grade 8 (5) This d Lanka is still far from primary education.
Sector wise anal difference in the
24.
 
 
 

ATION
nOng
lusive of the univermid-day meals and
}r, revealed that in goal it is the investucation that is most ld Bank Report 1987 ent in primary educountries gives 100 omic return than the in physical assets. It state that the rate of f investment in priconsiderably higher ary and tertiary edufides the rational for i primary education acy as a necessary onal development.
various educational mented over the past nka's primary school : from 57.6 percent in cefit in 1981 while e 10 years and over 62.8 percent in 1946 985/86.(3)
developments in pri1985/86, 478,000
:ent of primary school -
urs old) children (21.5 e children and 4.2 e children) have had ring school Census total students popu1 to 8, 4.25 percent The rate varied from o 3.06% in grade 3, grade 4 to 7.11% in ata reveals that Sri hachieving universal
ysis shows that the rate of non school
admittance among primary Schoolgoing
age children between the urban sector and rural sectoris minimal (10.6 percent in the urban sector and 11.7 percent in the rural sector), but this rate, is relatively very higher in the estate sector (37.7 percent). (6) However, in the intersectoral analysis it seems that there are Several Sub locations with lower rate of school participation in terms of non admittance, late admittance, repetitions and drop outs in the rural sector as well as in the urban sector. While in the rural Sector these sub locations are remote
areas in the interior of the island and the eastern coast where the rural muslims
live in the urban sector they are slum and shanty settlements.
Slum and shanty settlements can be seen in the city of Colombo and in provincial towns such as Jaffna, Batticaloa, Kandy, Dehiwella, Mount Lavinia, Kalutara and Moratuwa. But the largest number of slums and shanties are in the city of Colombo. Contrary to the people living in the estate sector and in remote areas, slum and shanty dwellers living in the urban sector particularly in the city of Colombo are in the close proximity to good schools and other basic facilities such as health centres and roads. In this context it is important to study why there is low School participation in slums and shanties in the city of Colombo. Proper understanding of this problem would lead the planners to raise primary school enrolment among the children in slum and shanty settlements in Colombo city, other urban areas; and thereby to improve the national level of primary school
enrolment even by a small percentage.
It was decided therefore, to make a preliminary study of the problem - non enrolment, late admission, irregular attendance and early drop outs, among the children in primary school going age in slum and shanties in Colombo city and to identify the reasons for under utilization of educational facilities available to them.
Objectives
In order to obtain background knowledge which would be necessarily useful fora detail study the preliminary study is mainly aimed to: s
Economic Review May/June 1991

Page 27
سمصر
تحریر
سمگے
D. EDU
() Gather information on the socioeconomic background of the slum and shanty dwellers in the Colombo city.
(ii) Conduct an exploratory study regarding;
(a) level of school participation,
(b) reasons for low school participation among primary School going age children, (i) in a limited sample of 4 slum and shanty settlements in Colombo city specifically and (ii) in all slum and shanty settlements in Colombo city in general.
Methodology
Collection of data necessary for this study was done on a multi-method basis.
(i) Going through the literature relevant to the problem
(ii) Examine the readily available eduCational StatisticS.
(iii) Discussing with the officials in relevant governmentaland non-governmental institutions such as Ministry of Education, National Institute of Education (NIE), Faculty of Education of University of Colombo, United Nations Children's Fund (UNICEF), National Housing Development Authority (NHDA), Urban Development Authority (UDA), Institute of Margaand Redd Barna; and individuals Who are interested in the problem.
(iv) interviewing parent and when necessary children inapurposive sample of 40 families in 1 slum settlement and 3 shanty settlements in 2 wards of Colombo Municipality area namely Dematagoda and Wanathamulla. Sample ratio is 7.3 percent.(See Table1)
While information was Collected ingeneral about the total number of 81 children who are in primary School going age in 40 families, information was colected in detail of only 34 children who
are not in School, particularly regarding
the reasons for their non school participation. Though a pre-determined simple questionnaire was used in these interviews, informal discussions were also Conducted to gather more details.
Economic Review May/June 1991
Slum/shanty settlements
181/A, Aramaya Place, Dematagoda
186, Aramaya Place, Dematagoda
66, Aramaya Place, Qematagoda
54, Watta, Baseline Rd, Wanathamulla
Total
Background info Shanty Settleme
Colombo becam island after 1815 who already rulec inces captured the The city grew rapid Because of its Str. came the Centrefol ping. The small formed to a protect developed as the island.
By mid 19th cent of the city were co Fort, Pettah and H the late 19th cer towards Mutuwal, island and Kollupi tury expansion oft by the Kelani Riv water logged area the Sea on the Wes sion of Colombo la South and South which consists of 4 the financial and C the country. Alth Centre has now suburb of Sri Jayaw share of administra remaining in Colon
Residential areas and underprivilege city are identified a dwellers. The slum types. They are (i)t (ii) old houses in a and are now Sut units.

CATION
Table 1 - Purposive sample of slum and shanty families
Condition Total No.of % of
No. Of families families families inter- inter
Viewed viewed
Improved 89 O 11.2
Not improved 60 10 16.7
-do- 150 10 6.7
-do- 248 10 4.0
547 40 7.3
'mation of Sunn and ht of Colombo City
he the capital of the When British Rulers the meritime prov2 Kandyan kingdom. ly in the 19th century. ategic position it becommerce and shipsea port Was transed harbour and it was principal port of the
ury residental areas nfined to the present ultsdorf areas and in ntury this expanded Maradana, Slave tiya. In the 20th cenhe city was restricted er on the north, by s on the east and by it. Therefore, expanLrgely confined to the -East. Colombo city 7 wards at present is :ommercial centre of ough administration been shifted to the rardenapura, a major tivefunctions are still mbo city. of the most deprived d people in Colombo as slums and shanty ls are mainly of two enement houses and reas of urban decay divided into small
With the growth of the plantation sector
in the country industrial and commercial ventures were expanding in the Colombo city. The industries of processing, packing storage, shipping etc. of plantation products in Colombo city required a big labour force. During this period people migrated to Colombo from various parts of the island to engage in the newly created labour activities. -
The first category of slums - slum tenements - were built to be rented out to new labour force in the city. These houses were mostly privately owned and built before the introduction of Rent Control and Municipal Building by-laws. They were built in close vicinity to the Working places like the harbour, factories and Stores.
The tenements are single roomed units occupied by one family. These were built in rows, occasionally with an open verandah. Each roW Consists of about 10 rooms and has common Water and toilet facilities. They are usually situated in a block of land generally called a "garden" (Waththa) and hence they have common garden. Tenement gardens vary widely in size, containing anything from five and hundred tenements. With the introduction of rent control the housing landlords found it no longer profitable to maintain these tenements. The neglect of the buildings, lack of maintenance, over-crowding, over-use of the limited facilities and lack of adequate sanitary facilities led to rapid deterioration of these tenements over the years.
The slum houses are the once residential houses occupied by the middle class
25

Page 28
| I EDUCA
people and the urban elite. With the
expansion of the commercial and trad
ing activities into these residential areas, in the late 19th century, the owners shifted to the less congested areas of the city, and part of the vacated houses which was not used as stores and offices, were sub divided into small slum units and occupied by the low income workers of the city. The absence of repairs and maintenance and Over Crowding accelerated the deterioration and soon reduced these houses to the slum condition.
Shanties were originally put up by people who lost their houses by floods etc. Later these houses have been built by people Coming mainly from suburbs andruralareasin search ofcity facilities.
The large majority of shanties are temporary structures built hastily of non durable materials such as cadjan, cheap Wood; and plank, tin and old zink sheets while some of them are semi-permanent structures built of a mix of temporary and permanent materials. These houses have been built on private, government or municipal lands by Squatters coming mainly from Suburbs and rural areas who have no legal right to these lands. Generally, these are low lying marshy lands which are in most cases, not economically viable to utilise or not marketable and are Occasionally road reservations. For obtaining water and easy disposal of Sewerage, generally shanties were built near river or canal banks, public baths and latrines and water logged areas where temporary wells could be dug. In many instances shanties can beseen as shantygardens (clusters) and sometimes they can be seen in rows but with separate entrances. Some gardens or clusters are really a mix of both slum type and shanty type houses. This is partly due to some of the married children of families having moved into newly built shanties in the same tenement gardens.
Studies have shown that conditions in these housing Settlements are not conducive to healthy and decent living. Generally both these slums and shanty dwellings are overcrowded and Conjested due to the inadequacy of floor areas and number of rooms; and the
lack ventilation owing of doors and Windc slums and the large are single roomed floor areas of slums about 300 sq. ft. anc tively. The large m have only one doo dows. Sanitary fac amenities in both typ terms of Water Servici etc. are very poor. generally one roadt mon toilet serves abc In Some instances t
Density of Sil
26
 

TION
to the inadequacy VS. Part of these ajority of shanties hile the average and shanties are 150 sq. ft. respecajority of Shanties without any winities and basic is of settlements in and toilet facilities case of Shanties p and One Comut 50 shanty units. nere is not even a
single toilet for an entire shanty settlement. Environments of both types of these settlements are very unclean, noisy and troublesome. Diseases, particularly water borne diseases, malnutrition child mortality and infant mortality are Comparatively higher among them owing to lack of sanitary facilities and unhealthy environment.
However, as a result of the introduction of laws restricting the ownership of houses, after mid 1970's a considerable number of slum dwellers became the owners of the slums. The transfer of
Im And Shanty Dwellings in The City of Colombo
Wards
1 Mattakkuliya
Modera MahaWatte Aluthmawatha Lunupokuna Bloemendhal Kotahena East Kotahena West 9 Kochchikade North 10 Gintupitiya | 11 Masangas Weediya
12 New Bazaar 13 Grandpass North 14 Grandpass South 15 Maligawatte West 16 Aluthkade East 17 Aluthkade West 18 KehelWatte 19 Kochchikade Sout 20 Fort 21 Kompaninaweediye 22 Wekande 23 Hunupitiya 24 Sudurwella 25 Pan Chikawatte 26 Maradana 27 Maligakande 28 Maligawatte East 29 Dematagoda 30 Wanathamulla 31 Kuppiawatte East 32 Kuppiawatte West 33 Borella North 34 Narahenpita 35 Borella South 36 Cinnamon Gardens 37 Kollupitiya 38 Bambalapitiya 39 Milagiriya 40 Thimbirigasyaya 41. Kirulla -42 Havelock Town
43 Wellewatte North 44 Kirilapone 45 Pamankade East 46 Pamankade West 47 Wellewatte South
Slum dwellings
Shanty dwellings
Economic Review May/June 1991

Page 29
کس
(EDU | سمص
slum ownership encouraged a good part of these slum dwellers to improve the conditions of their slum dwellings.
Since late 1970's through the implementation of various types of urban sector housing development programmes such as Urban Basic Servioes Programme (UBS), Slum and Shanty Upgrading Programme (SSU), Community Development Programme, and Urban Housing Sub Programme (UHSA) of the Million Houses Programme (MHP), alarge number of Slum dwellings were provided with some basic amenities while about half the shanty dwellings were up-graded to a certain level. However, these developments are not enough to meet dwellers' basic requirements adequately. Nearly half the shanty dwellers have not received any basic facility yet and they remain the most deprived and underprivileged section of the city.
One study reveals that in 1979 about half of the total population in Colombo city lived in unfavourable housing settlements of slums and shanties. (7) According to another recent servey at the end of 1987 almost half of the total housing stock in the city was slum type upgraded old Settlements and shanties (27 perCent was slum types upgraded old Settlements and 23 percent was shanties.) (8) The same survey reveals that by that time 17 percent of the city population or about 109,000 people were in the shanties while it is estimated that 29 percent of the city population or about 180,000 people were in the slum settlements. (See table 2.)
At present slum ments are Scatter: city but at differen tion (see map). F Centration of sun seen in the wards tah — the Centre Of mercial activities ( in the Wards such: KOCh Chikade SOU angas Weediya, thkadeWest, Keht watta. Shanty s. concentrated in th ern and Eastern f as Mattakkuliya, N Grandpass No Wanathamulla an be seen relative trated of slum and a cluster of Ward Gardens, Bamba HaVelock TOW n \, dences of the mic
When the age CC and shanty pop analysed it can be the 6-14 year age the target group fo age children, con cent and 36 perce tion and shantypc Children 5 years enter the target years are about 8 cent of the slum shanty populatior date suggests th school going is shanty settlemer higher percentagé
Table 2
Distribution of Housing Stock and Population in Colombo City
Type of Housing
Type of Housing Housing Units
%
Goodhouses 40,861 49.64
Upgraded old
settlement 22,338 27.14
Shanties 19,118 23.22
Total 82,317 100.00
* Source: Report on the survey of squatter settlements in the city of Colombo
Note:
Population in upgraded old settlements (slums) was estimated by using the avera
sium housing unit in 1979 as revealed by the Policy Paper of Slum and Shanty Upgrading
Economic Review May/June 1991

BATION Di
ls and shanty settle2d in every ward of the it levels of ConcentraRelatively higher Conin Settlements can be around Fort and Petthe trading and comof the city, particularly as Kochchikade North, th, Ginthupitiya, MasAluthkade East, Aluel Watta and Panchikaettlement are highly he Wards in the Northringe of the cility such Modera, Bloemendhal, rth, Dematagoda, dBOrella North. it Can aly very low concenshanty settlements in S. Such as Cinnamon lapitiya, Miligiriya and MWhere there are resiidle class and elites.
Imposition of the slum lation of the city is 2 Seen that children in group, who belong to rprimary Schoolgoing Istitute about 28 pernt of the slum populapulation respectively.
and below who will group in the Coming 3 percent and 11 perpopulation and the respectively. As the e problem of primary more serious among its since they have } of children belonging
at the end of 1987 by
Population No.
337,000 53.83
180,000 28.75
109,000 17.41
=ത്ത
626,000 100.00
enumber of members in a
Colombo Municipal Council.
to this age groep. However, average household size is higher in slum (5.8) than in shanties (5.2) since there is a lower percentage of older people in Shanties. -
The large sector of the labour force of these slum and shanty settlements engaged in blue collar work, while a Small percentage of them engage in clerical and professional work. Most of the White Collar and blue Collar Workers are in the fields of commerce, trade and Services. They engage in Work of Working places and institutions like the harbour, Pettah Market and Colombo Municipal Council. Their working places are in the vicinity of their housing settlements or in the close distance which can be reached quickly by easy transport. A Considerable number of Women too Work in Middle-East countries as domestic servants. Further, in areas which are predominantly slum and shanty areas informed economic activities are very high and Women and children too in these areas engage in these activities to earn their living.
COMPARATIVE ANALYSIS OF NON SCHOOL PARTICIPATION RATES
It is difficult to compare the non school
participation rate of children in slums
and shanties in Colombo City with the national or sectoral rates because though few studies have been done on School participation rates of children at national leveland sectoral leveland in slums and shanties in Colombo city these studies are not based on the same age group.
Non School admittance
School participation rate of 40 slum and shanty families which was surveyed in this study could not be properly used for this type of comparison mainly because of Smallness of the sample. However, attempts were made to Compare non school participation rate in slums and shanties in Colombo city with the national and sectoral rates using available survey results though they are based on different age groups.
A Survey conducted on a sample of 2,337 slum and shanty families in the city of Colombo in 1984 by the Nonformal Education Branch of the Ministry of Education reveals that 19.3 percent Conta on page. 41
27

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Contd. from page 17
the exhibitors and the movie going public more and more. The NFC after all, is one of the several state owned undertakings known to be running at a loss and cannot be unaware of His Excellency President Premadasa's ultimatum early last yearto all Government Corporations that they make themselves financially viable. It is unimaginable that the
Presidential directive calling for financial
viability via efficient management could, in fact, be used by the NFC as the ostensible imprimatur for its blatant attempt at extortion, to cover up plain bad management of its OW'n affairs.
8 The NFC's stated reason for changing its terms and conditions is because of “changing circumstances and the financial plight of the Corporation" Although exhibitors have sought for long to focus on the financial plight of the Corporation, the NFC has used this point ostensibly to justify demands that are clearly unjustifiable while at the same time dismissing references to its bad financial management as "hair splitting arguments". The revised terms demanded by the NFC for ganting approval to exhibitors for sour
cing their requirements of English lan
guage films are;
i. A minimum commission of 10% from the opening day of each film,
2. No payment of commission by NFC to the Agents in respect of outstation screenings of Agents' Films.
3. The Main Release Stations should screen alternately KRS films and NFC films.
4. Duty surcharges, clearing charges on each of the films, and accessories Supplied under these contracts to be borne entirely by the Exhibitor.
5. The respective clauses in the Agreement with regard to the custody and distribution of films to be amended by substituting "NFC" for "Exhibitor".
The observations on the NFC's revised terms and Conditions are:-
1. The over-riding Commission accruing to the NFC (from 5% now when the film
ME
Table 3
United
Rank Film
1. Fatal Attraction 2. Crocodile Dundee
3. Three Men and a Baby
4, A Fish Called Wanda 5. Coming to America" 6. Good Morning Vietnam
7. The Last Emperor 8. The Jungle Book 9. Buster * 10. Beetlejuice
1. Batman
2. Indiana Jones And
Last Crusade 3. Lethal Weapon II 4. Honey Shrunk. The Kids 5. Ghostbusters 6. Look Whose Talking 7. Parenthood 8. Dead Poets Society 9. When Harry Met Sally
10. Turner and Hooc
Note Box to date up to De
Notes
1. *Denotes independent di 2. The above information h
hire payableto the SL
from the opening da release screenings w be approximately 20 than What aCCrues tC arrangements.
2. In their capaci exhibitors are entitle the quantum having a three Way discu exhibitor, supplier a event the NFC is un pay the commission Could COnsider
A. paying the princ settle with the agent B. stop distributin Outstation cinemas.
The combined age accrues to the local a Ceylon Theatres at Limited on the exhib
28

LLLL S S
Box Office Hits 1988 - 1989 Top Ten Films - 1988
ingdom United States Of America
Distributor Origin Film Distributor Origin
(UIP) US Rain Main (MGM/UA) US (UIP) Aus Who Framed (Buena Vista) US Roger Rabbit (Touchstone/
Warner) US Coming to America (Paramount) US (UI) UK Big (20th Fox) US (UI) US Twins (Universal) US (Touchstone/ Crocodile
Warner) US Dundee (Paramount) AUS (Col/TriStar) UK Die Hard (20th Fox) US (Disney/Warner) US Cocktail (Buena Vista US (Vestron) UK The Naked Gun (Paramount) US (Warner) US Beatlejuice (Warner) US
G) 1989 Entertainment Data, Inc ---
Top Ten Films - 1989
(Warner) US lndiana Jönes (UIP) US And the Last Crusade
(Paramount) US Who Framed Roger (Touchston/Warner) US (Warner) US Batman Warner) US Buena Vista US Rain Man UP US (Columbia) US The Naked Gun UP US (TriStar) US Licence to Kill (UIP) US/UK Universal US Lethal Weapon II Warner US (Buena Vista) US Twins ՍIP US (Columbia) US Dead Poets (Touchstone/
Society Warner) US (Buena Vista) US Cocktail TOUChStone/
Warner US
hic 3, 1989
stributors who are not members of the MPEAA as been extracted from Screen intrnational Magazine issue of January 6th 1990
Ipplier is 40%to 10% ay) on the Colombo ill, in absolute terms, O% more (not 100%) it under the present
ity as local agents, 2d to a commission, been agreedon after ssion involving the und the NFC. In the willing to collect and due to the agents, it
:ipals who in turn will ES, Or g such films to the
ncy commission that agents of MPEAA i.e. hd Liberty Cinemas ition of MPEAA flims
in cinemas other than from Colombo release cinemas is only in the region of Rs. 600,000 annually. Payment of agency commission is an accepted business practice and is also declared for tax purpOSes.
3. The discretion to exhibit films should lie with the exhibitors who from experience are the best judges of the product they can market. The comments made in the last paragraph of Section 4 of this review should also be considered.
4. Having originally got Exhibitors to agree to a 5% commission to cover its expenses on Customs Duty and clearance charges on English language films, the NFC now demands an increased Commission of 10% while at the same time refusing to handle the very tasks for which the commission was agreed on initially.The overall commission of 5% the NFC receives at present on films released is in excess of the overal customs
Economic Review May/June 1991

Page 31
- صسر
ܐ ܢ .
duty and clearing charges that the NFC incurs on these films. Table 7 of this review lists the MPEAA films released in 1988 indicating againsteach film the overriding commission of 5% received by the NFC. A scrutiny of customs duty and clearing charges incurred by the NFC will revealthe un necessary CostSincurred by Way of demurrage and transport.
5. The existing Contracts clearly stipulate that any amendment must be by mutual agreement, hence the NFC's attempts to arbitrarily and unilaterally vary the terms and Conditions is a clear Violation. The MPEAA have indicated that such variation Would be unacceptable to them.
It is unfortunate that the NFC only stresses on its income on overriding Commission while choosing not to mention its substantial income (for no services) from the other Components of the 'ticket price'.
Underthepresentarrangements the NFC gets:-
A. 53% of the film levy from the very first day of exhibition with the exhibitor receiving 27% and the supplier of the film 20%.
B. 5% over-riding commission on the box office takings dependant on whether a film is classified as a 'special'ora “nonspecial" with 80% of the films falling into the "non-special" category.
(The NFC receives the 5% overriding commission on nonspecials from the 2nd Week onwards. On specials the exhibitor pays film hire to the supplier for the first t'yo or three weeks at percentages varying from 70% to 50%, based on a film's cost of production and box office potential, thereafter the share payable is 40% with the NFC receiving an overriding commission of 5%fortherest of the film's run).
C. Of the special levy of Rs. 2.00 the
NFC gets Rs. 1.55 with the exhibitor
receiving 45 cents. The comments made in Section 9 of this review elaborate further. -
Comparative charts in appendices VII and VIII (based on the capacity of the
Economic Review May/June 1991
صبر محمحنسیسی
ME
Regal Cinema Co division of box office Utility Recovery Ch Special Levy when to the supplier is 6( the folloWing scena
A. Present terms Levy imposed)
B. Following the Special Levy;
(1) under the pres
(II) increasing the Sion to 10% from th
(III) with the NF suppliers' share of
It must be emphas payable to the Supp times also 70% and two or three Weeks,
Table 4 Esti
Particulars
Box Office Receipts Utility Charges Film Levy
income
Film Hire
Film Levy
Overheads Salaries and Wages Bonus
Overtime
EPF
Trust Fund
Gratuity
Electricity Repairs and Maintenanc Repairs and Maintenanc Printing and Stationery Operating Room Expens Postage and Telegram Travelling and Transport Telephone Turnover Tax Rates and Taxes
Depreciation
insurance
Licence General Expenses Security Fees Expenditure
Contribution of Film Exhi Refreshment and Bar Pr Slide and Filmlets incom
Other income Profit 1 (Loss)
Notes
1. The annual depreci
2. The special leyy ha
s

DIA
Ombo) illustrate the 6% is on the gross receipts, the share takings including the accruing to the exhibitor will be very arge, Film Levy and much less than the percentages the film hire payable indicated in these charts. It is clear that %, 50% and 40% in the share already accruing to the NFC rios. With minimal investment and Services on its part, is more than adequate and the (but before Special NFC has no grounds to make further
- demands.
introduction of the Therevenue from a film ("ticket price") is shared among the exhibitor, distributor and supplier/produceronapredetermined
ent terms; percentage basis (excluding entertainment tax). This is the most equitable : Over-riding Commis- basis and is accepted international prace opening day: tice in Sri Lanka, however, the "ticket price" consists of four components - C appropriating the Admission Rate, Utility Recovery the special levy. Charge, Film Levy and Special Levywhere the percentage share accruing to sised that as film hire the three segments vary depending on lier on "Specials" is at each component of the overal ticket price. 65% on the first One, This deviation from the usual practice and Turnover Tax at makes the sharing inequitable. The two
nated Annual income & Expenditure ByType Of Cinema
Aircondition Non Air Con
Colombo tioned Colombo
RS. Rs.
2,400,000 1,800,000
420,000 340,000
300,000 260,000
3,120,000 2,400,000
1,200,000 990,000
210,000 143,000
240,000 240,000
450,000 300,000
37,000 25,000
60,000 40,000
54,000 36,000
13,500 9,000
18,750 12,500
480,000 75,000
e 150,000 100,000 e Air Con 60,000 O
24,000 18,000
eS 60,000 50,000
2,400 2,400
12,000 12,000
18,000 12,000
187,200 144,000
125,000 55,000
200,000 150,000
24,000 16,000
2,500 2,500
12,000 12,000
60,000 30,000
3,736,350 2,492,400
bition 616,350 92,400
Ofits 350,000 250,000
e 50,000 50,000
20,000 15,000
(196.350) 222,600
Non Air Concitione
Outstation
RS.
1200,000 260,000 240,000 1,700,000
624,000 132,000 120,000 200,000 17,000 30,000 24,000 6,000 8,500 55,000 60,000 O 12,000 40,000 2,400 18,000 12,000 102,000 15,000 100,000 14,000 1,000 1,000 20,000 1,625,900
74,100 120,000 24,000 15,000 233,100
ation charge would be much higher for new cinemas
is not been taken into consideration in view of the dispute with suppliers.
29

Page 32
Tables
30
rank theatre Coiffectioia Rak Tefse Tyyn
Rs. -
6. Jayanthi Pamadura 747,889 62 New MinerWa -- Kafutara 63 : Rex Badelphia 715,840 64 Gemunu Vattata 65 Regal Ambalangoda 709,509 66 Central Mătate B7 i New Trivoli N'Eliya 702,909 88 - Sarasavi Galle 69 Neff Cife Fra fiatara 688,308 70 Vijandra Apura 7 farzafi Kegalle 675,328 ፳2 ፩፱.1. ኽ. AvissaWelia 73, Quiñon Nügegoda 658,198 74 Broadway Matara 75 Chandra * Asavivella 630,157 76 Zainstan Colombo 亨亨茎、S。歌。 Watara 629,374 78 Jupiter Komegala 79 Sigiry 3’arawela 617,214 80 New Cinema Knegata 81 jezina Coogg 603,586 82 - Eros Colombo 33 Sagra Waitialia 584,316 84 - Samrock W'puva 85. Seedevi Piliyandala 580,757 86 New Reka KaduWela 87 Ashok BerVAyela 556,817 83. Do Plaza Kalutara 89 WAfifidsor Jafna 540,482 90 Mipura Negombo 9i Antra A"langoda 537,248 92 New Champilka ingiriya 93 Wijeya Badaku mbira 513,631 94 Nancia • KosWaffte 95 Raja Jaffna * 506,607 96 Jayanthi Ponaruvaya 97 Wijaynthi Kaduwella 500,247 98 A. S. G. Epitiya 99 Apsara Homagama 682,992 100 Sigiry Weyangoda 0 Feafi Chiavy 472,736 O2 i Rani Jaffna 103 Sri Lankar W"puwa 455,240 104 Regal Ampara is 105 Wijaya Ampara 457,394 î06 i Malekam Kuiyapitiya 107 fÅÅGdern Konegala 445,840 308 Prisa Kalitara 109 Dharshana Kosvavadiya 436,462 î0 - ASOka Hofana 箕能 Regal Diyatalawa 422,569 112 Sagara Chiavy $$3 i Gafrifi Mirigama 405,616 i 14. Nanda Jaela 115 Samodaya Mawatagama 396,640 116 Wijitha Fattom 箕子 hweri B'Weła 383,060 1 3 . LaVisia Nugegoda Í 9 Mandhafa jafna 379,391 120 Sigurafranaise Maħavivewa
2 Neeła Dankotu vya 371,300 122 - Chitra Katara 123 New Town Embitipitiya 388.748 24 Chafidarni Welligama
25. Sandya Gampola 368,081 126 Diffitisha N'pitiya 27 Gankanda Peñadulta 359,950 28. ÅTada Gampola 129 Liberty Hatton 351,73 130 Lekha Hermagama
3. Mfidiad N'pitiya 347.54 32 Aska Puttalam 33 jegWafii Alaviftwa 344,562 134 i Wellington safna 135 Chaya ātāfeļa 336,359 36 - Sri Mafia Kopitiya
37 - Minneri Hlingurrakgoda 326,970 338 Syarija Galewela 39 : Sarasavi Atavya:Aya 325,552 140 Piyakaru Warakapola 4. Samupakara Hlingurankgoda 31,694 42 Minira Mirigama 643 Niñafi Hanŵeila 308,012 144 New Wasaka Embilipitiya 145 - Afrika Passara 303,163 î46 Wijitha Masketiya 147 Mane Moraga 302,098 148 Princess Faton :
49 Eight Kochchikade 289,596 150 Cey Movieton Daugama 15 Wfilasini Weilampitiya 283鑫40 1525 - Nevoy Jamaiki Matugama
S3 S. Uragasmanhandiya281,574. 154 Sandalanka SandalamikaW 155 New Rohana Tissamaharamaya 272,903 156 Saaaa Bagawanthala 157 N. !. ኽ. Yatiyantota 270,116 158 Ranjani Padikka 159 Saringa Dummalasuriya 257987 50 -- Dhiafasiri Warakapola 6 kasalaka asalaka 253,651 462 . Sooriya Wŵfeirniada, 163 i Gafrifiai Matugama 238,055 64. Hara săfră 165 - Weefs favafella 237,984 166 Hameediya Mfiad fakuli 67 H. R. Cinema. Dickwela 233,530 168 Tharanga M'wangoda 69 Siriya Wariyapota 23,745. 70 \iii Ehaiyagoda 171 Liberty Authួama 229,89 72; . Ceirfa -N' pitiya 173 - Patiña Rattaiana 215,045 74 - Shanti MAReciavÁvachchi 175 Re8fG Kaluitaifa 205,723 476 Elphinstone Cofofoo
V7 ēA črā šiītādā 203,780 78 Sitha Deniyaya 179 gan Mathithumagaia 199,138 80 Fa KekisaWafa
8 VÅfins addilwita 192,895 182 Rupika Divuipitiya 83 grani Nafaffffaia 190,822 184 Royal Kahaviata í85 Hafischandra Krindiyea 183,255 186 Jälthy Gaafa 箕子 Belco Seiiatta 176,139 Þ88 Wasan Bellapane 189 Geming Nittagibt gya 183,585 190 Saliya Ambalangoda 9. Saiñaiñaia Maisipura is8,532 92 Sifas Aaaduwa 193 Mahayei Bible 159,693 194 Champika Pitigala
95 - Sañaaa Kuruwita 158,399 196 Regina WầWalsiñula 197 Sujatha Mac 15,772 198 Everest RujvyaTVAyela 99 Rundful Tangala 136,679 200 hisara dstadampe 20 Nawajothy i Gagamuwa, 134,540 202 Vasanthi PusSeiania 203 - Diamond Galadedera 30,590 204 - Santara Naththandiya 205 Gan Ehayagda 128,547 206 Crisantha Bingiriya 207 Parakrama a Kegalle 124,637 208 Wasanthi Wivuniya 209 - Safatha Gaigamuwa 121.614 2G : Wilassifi Kahayatte 2 Suranganie Kochchikade 16,129. 22 Royal Vavuniya 23 - Wisaka Dafta 109,61 214 Katyani Rafbukkana 215 -sa Aguinukollapellassa 103,927 26 - Wakatine Wethara 217 ** Sri Murugan Wavuniya 102,459 218 i Ranjani Hettipola 219 Ranjani Kasara 101,806 220 Deepa Nivitigata 221 ' Dharshana Akijfessa 93,667 222 Weelington Vatchchana 223 Nanda Niksweratiya 87,886 224 Lakahini Třinconalee 225 Jayamini Nochchiyagama 83,996 226 i Gaffini Ragala 227 - indra - Fundayoya 79,754 228 Sooriyamaha Hembantota 229 – Amura Medirigiriya 230. Ganga Yakkalanuia 23i Anoma KSfale 75,698 232 - Ney Rex Alavvathugodé 233 Newyf GefT) Pagama 73,794 234 : Saraswahi Teo 235 Easterf Sammanha 69,296 236 - ficfcflavị Aluthagama 237 aksi Neiady 68.287 238 aikai --Ragata 239 led Agrapathana 68,842 240 Rani Kotitale 24 drafi Nikaveratiya 64,144 242 Rajeswari Batticakoa 243 Wellington Kantalai 60,546 244 Devedra Chavakacfcf 245 Chandrika - Bandaragama 57.222 246 Subharajee Batticafoa 247 festerii Udupussellawa 56,039 248 Sripali Warakaopla 249 Kalyañi Athurugriya 55,451 250 , Abhaya Huluganga 25 Sħanati ana 46,778 252 . Pragash Pundaluoya 253 Adre, Tricolaes 45889 254. Nahams Chinnakan 255 Ridgeway Mahabage 37,953 258 巽Q Jaffna 257 Eăsfăța kocc 39.405 258 Lanka Wadduwa 259 iš PalinS Pesalai 34,410 260 Astra Katunayake 26 - Nianta Kahatagasgiriya 30,404 262 janthi Rattiota 263 Creaseñt Futsañ 26,627 264 Shihara Trico 265 e Farashakthi Kiñocchi 20,300 286 i Saradha Kalavanekg 287 Vijaya Baltietakoa 9,437 羲、268 Kama Deramiyagala 269 Regent RakkSasa 17986 270. Astra Katunayake 27 Shan chenkalacy 272 fasana Hiiripitiya 273 Âynn fasistar 12,805 274 - Kismaran Manmar 275 Rajanayakişi K. K.S. 12,167 276 Lakshiri Neilliady 27 Sevi Pandithiriippu 9,609 278 Wesley Manipay 279 - Yoganayak W. W. Thurai 8,365 280 a Naharme Msammar 28 P. S. Kalutara 8,400 282 Yari K. K. S. 283 i akiññiñi W og 3,405 284 liberty Atchuvely 285 Orchie Hiiripitiya 1995 286 Safadha Chenikadady 287 Sivajothy Mullsitivu 745
Tofal Grossings
 
 
 
 

COSCtjof Rs.
741,778 714.168 703,292 700,027 681,65 666,932 657.795 630,019 627,720 606,884 592,904 580,901 563,140 542,259 537,529 531,720 509,420 503,750 487,243 477,726 471,378 455,035 477.395
wa27,110
265,324 257,289 253,351 237,995 235,403 232,989 231,368 224,874 210,967 205,759 200,759 193,079 191950 156,253 1866 73,732
A
components of the "ticket price' which have been introduced adhoc by the NFC, and which are also shared contrary to accepted international practice, are the Film levy and the Special levy.
The utility recovery charge of Rs. 1.50 on admissions to air conditioned cinemas and Rs. 1.00 on admissions to non air conditioned cinemas was imposed in mid 1982 and early 1983 with the benefit accruing to the exhibitor to offset escalating utility costs, particularly the increased cost of electricity. The local authorities, recognising the predicament of the exhibitor, exempted this charge from the payment of entertainment tax (international practice accepts that, by mutual agreement, the entirety of a particular charge of component of the ticket price may accrue to only one segment to meet a specific cost borne additionally by that segment alone). The equitability of this arrangement (in respect of the Utility Charge to meet the exhibitors' increased cost of electricity) has now been nullified by the introduction of the Speical Levy, as will be evident from the following:-
9
The film levy of Rs. 1.00 imposed on all admissions with effect from October 1986 does not attract entertainment tax on admissions to nationally produced films, whilst on admissions to imported films 25% entertainment tax is payable, thus reducing the film levy on this category of films to 75 cents. The film levy is shared as follows:-(See Table 6)
The Special Levy of Rs.2.00 introduced in December 1989 by the NFC gave the exhibitor 45 cents, the balance Rs. 1.55 beingpayable to the NFC, Rs. 1.15 of this Rs. 1.55 is passed on to the local producer, and 40 cents is retained by the NFC. The NFC have advised exhibitors that this levy does not attract entertainment tax, but exhibitors have yet to receive confirmation from the respective local authorities.
This hire charge of Rs.2.00 is applied to all admissions irrespective of the existing
"ticket price" to the various classes or half
rate and service tickets. The cinemagoertherefore is, in fact making an additional contribution to the NFC's coffers without receiving any additional benefits. Had the normal admission rate been
Economic Review May/June 1991

Page 33
ME
Table 6
Exhibitor Distributor Su
Pr Cits Cts
Nationally Produced Films 30 10 Imported English Language Rental Films
- Release Cinemas 20 40 - Other Cinemas 30 45 Imported Oriental Films 30 45
"Although this levy was introduced in October 1986, the basis of sharir upon, the NFC has offered only 10 cents of the levy whereas the supp cents in terms of their discussions with the NFC.
"The NFC being the sole importer of Tamil language films purchase suppliers' share also accrues to the NFC.
Table 7
Overriding Commission. To NFC On English Language Fit
Title Cinema Supplier Release
Date
Staying Alive Liberty PAR 01:01,88 Woman in Red Regal FOX 01.01.88 Butterfly Revolution Central CPL O1.13.89 Raw Deal Liberty CPL 01.13.89 Young Lady Chatterly Il Central CPL 01.1588 Fire Walker Majestic CPL 01:15.88 Hercules Empire CPL 01.1588 Resiño Regal FOX 0售22.88 Fx Murder By Elution Majestic FOX 01:27.89 Club Paradise Liberty WB 0.29.88 Two of A Kind Regal FOX 02.05.88 Violent Street Empire UA 02:05.88 Hard Knocks Empire STR O2.10.89 Murphy's Romance Empire COL 02.售2.88 White Roses For My Coloured Sister Regal STR O2.1288 Girls For Renta Central SJ 02.1789 Out of Africa Liberty UNIVERSAL 02.1988 The Ice Pirates Empire MGM 02:19.88 Moving Violations Regal FOX 02.1988 Give My Regards To Broad Street Majestic FOX 2 Jagged Edge Regal COL O2.24.89 Burglar Liberty WB 02:24.89 Platoon Majestic FOX 02:24.89 Stuck om You Empire DGT O2.24.89 Black Cauldran Empire WB O2.26.88 Bruster Millions Liberty UNIVERSAL 03.03.89 Live And Die lin La Majestic UA 03.0488 Living Daylights Regal UA 03.0488 Pickup Artist Regal FOX 03.10.89 Police Academy liberty WB 03.11.88 Jim Kata Empire MGM 03.11.88 Beverly Hills Cop Il Liberty PAR 03.17.89 Raising Arizona Empire FOX 03.17.89 Girl From India Empire DGT O3.24.89 Heartbreak Ridge Central WJO 03.31.89 ExOfCist Centra WB 04.01.88 Witness Liberty PAR : 04:02.88 Quick Silver Empire COL 04:02.88 The Crazy Jungle Adventure Empire CLP 04.07.89 Extreme Close Up Empire STA 04:08.88 Fantasia Majestic WB 04.1588 Delta Force Liberty CPL O4.1588 Friday The 13th Part II Central PAR 04:21.89 Karate Kid. Two Majestic COL 04:22.88 Bad Medicine Empire FOX 04:28.89 Best Defence Central PAR 04:29.88
Economic Review May/June 1991

HLL SS S
pplier Entertain
ñeñt
oducer Tax
Cits Cits
60 ni
15 25
壹查 25
萤演 25
ghas yet to be agreed
lier has insisted on 15
d on royalty basis, the
一二一 ns - 1988 & 1989
Bok Office NFC
Gross Commisson
5%
172,162 3,579 126,479 3,984 90,715 2,439 332,741 8,995 659,022 28, 152 281,828 6,287 102,565 1,241 78,927 1,716 177,692 * 3,321 13,007 6,501 37,300 1865
9,804 O 48,824 964 17517 O
20,658 O 236,086 8,913 114,508 2,127
16,656 O 47,736 1254
63,619 1,605 33,874 O 849,879 3,1009 112,526 3, 181 30,091 631 67,772 1352 323,384 11,846 527,266 10,303
28,413 O 141709 1885 83,199 2423 209,663 5,126
14363 O 51611 1,227 87,834 2,436 134,787 6,739 676,571 2,074
20,570 O
53,436 1,074 139,408 4506
41,935 O 894,100 38,340
23,257 O 177,051 3,728 34,344 483 15,617 O
-—ജ്ഞി
increased by Rs. 2.00 on which Entertainment Tax of 25% (or 50 cents) would have been payable the exhibitor's share would have been 75 cents, the balance 75 cents being shared by the supplier and the NFC. The basis of sharing the RS. 1.55payable to the NFC by exhibitors on admissions to other language films procured by the NFC on rental terms was not agreed upon at the time fo the imposition of this new hire charge. Agents representing suppliers of films on rental terms and suppliers have protested and made submissions with regard to the apportionment of this special levy.
The overal basis of dividing the various components of the "ticket price" when film hire to the supplier is 60%, 50% and 40% of the admission rate is illustrated in Table 8 and Table 9 the basis of sharing the Utility Recovery charge, Film Levy and Special Levy is as stated earlier in this section. The observations on these appendices are as follows:-
1. Prior to the imposition of the special levy the exhibitors' share of the "ticket price" when the film hire payable to Supplierwas 60%, 50%and40%Was47.10%, 54.98% and 58.94% respectively.
2. The NFC's share of the "ticket price" prior to the imposition of the special levy was 4.04% When the film hire to the supplier was 60% and 50% and 7.98% when the film hire payable to the supplier was 40%.
3. Consequent to the introduction of the special levy the share accruing to the exhibitor when the film hire payable to the supplier is 60%, 50%, and 40% declined to 42.96%, 49.53% and 52.82% respectively.
4. The share accruing to the NFC following the introduction of the special levy increased from, 4.04% when the film hire payable to the suppliers is 60% and 50% to 6.71% (over 66.09%) and when the film hire payable to the supplier is 40% it increased from 7.98% to 10.00% (over 25.31%)
5. In terms of the proposed increase in the over-riding Commission the exhibitors' share of the "ticket price" when the film hire payable to supplier is 60%, 50%
31

Page 34
MED
and 40% drops drastically to 36.40%, 42.97% and 49.54%, when turnover tax is also taken into consideration the share accruing to the exhibitor is only 30.40%, 36.87% and 43.54%. The NFC's share under the proposed arrangements further increases to a Constant 13.28%.
6. The NFC's attempts to increase its
share from 4.04% and 7.98% to a COn
stant 13.28% an increase of approximately 228% and 66% Without any input on its part (the exhibitor now being called upon to bear customs duty and clearance charges) will be a crippling blow to exhibitors and will prove Counter-productive, in that the cinemas which have been the NFC's major sources of revenue will opt out of the industry in favour of other business avenues offering a more realistic return on capital investment.
7. The inequitability and unfairness of the NFC's attempt to appropriateforiteself the percentage of the "special levy" which is rightfully due to the Suppliers is evident from the fact that 22.94% of the "ticket price" accrues to the NFC (without any investment on its part) leaving only 40.66%, 34.09% and 27.52% for the supplier of the film when film hire payable is 60%, 50% and 40% respectively.
8. The disparity of the division is further amplified if half rate and service tickets are taken into consideration. In Table 9 where, for purposes of illustration of this disparity, the capacity is computed at halfrates and the division applied, the unfairness is Crystal clear. A norm can be struck by considering 10% of the admissions at "half rate" ticket prices and the balance at "full rate".
At the risk of being repetitive it must be
reiterated that the contribution (in excess
of Rs. 25,000 per month) to the NFC by cinemas releasing English language films in Colombo is, in relative terms, much higher than the Contribution of any other individual cinema in the rest of the Country. This Contribution is Without the provision of any Service by the NFC unlike in the case of other cinemas. The NFC's own statistics on its income from Distribution, Commission, Film Levy and Special Levy will establish the Veracity of this
Table 8
Suppliers Share
43.45%
60% 6.00%
50.55%
36.58%
50% 6.00%
57.42%
29,72%.
Spe
Pres
943% *
40%
60.85%
Table 9
Suppliers Share
48.86%
60%
4.04%
47.10%
40.98%
50%
4.04%
54.98%
40%
7.98%,
58.94穹
32
 

or
ial Le' Supplier Р b
it Term D
Levý
S
9.23%
44.08%
O Rs. 1.15 of Special Levy to Special levy
ар
fffS Proposed Terms
46 89%
27.78%
·9 O
%
2286% ماهیه
4.51% 27.78%
H. D. J. E.
N.F.C. Exhibitor
Supplier
Spe
cial Levy
i HII I
R S appropriated
rior to -
Present Terms Proposed Terms
s, 1.5 of pecial levy
by NFC Disputed
82% 43.54%。三湊 43.54?る
تپهat ||-....
sein |

Page 35
ME
The NFC's allusion to "the plight of the Corporation" is admission enough that the NFC is a continuing and annually increasing burden on the public purse. While cinema exhibitors and the NFC are agreed on that, where they clearly differis on how to resolve the problem of the NFC's rising and recurring losses.
It is the exhibitor's considered view that no useful purpose will be served, even in the short term, by the NFC attempting, as it were, to sweep its losses under the carpet and maintain a facade of exemplary management simply by tightening its stranglehold on a cinema industry that is already financially battered.
The NFC must examine critically and anew those of its operational areas causing its massive annual losses and endeavour to put its house in order without delay. There can be no substitute for prudent financial management in all spheres of human activity, even organised charities, when run properly and Well, are invariably managed like a busineSS Venture.
The NFC's decision to vary terms and Conditions only for 9 of the approximately 250 cinemas in the island, with all other cinemas Continuing with unaltered terms other than of course the film levy and the special levy (both of which were applicable to all cinemas), confirms that they are under a mistaken impression. Had the NFC responded to the exhibitors'
offers to provide it with complete details
On the operation of cinemas, the NFC would not have sought any variation in the existing arrangements.
The principal causes of the present shortage of films which has deprived the movie going public of the entertainment it has a right to expect are:-
A. The NFC's nonpayment of long outstanding dues to the MPEAA member Companies, resulting understandably in the MPEAA stopping further shipment of films on Contracts already approved by the NFC.
B. The arbitrary introduction of the special levy by the NFC and its unilateral variation of terms and conditions, which prompted MPEAA member Companies
to direct that their fil Screening.
C. The NFC's fa Contracts for 198 Concluded With Col tries incorporated, cations Company, Films incorporated tures Corporation
covering 42 films fr
International Corp International, Orion and Warner Brothe same period were the NFC.
Although the NFC the import of Englis been liberalised no itor has yet impor NVC's revised term simply, the import new terms is no lon sition. When other lies were liberalise was quick to move able opportunities sation Was not aCC tive and/or prohibit tions, as the cinema today.
The NFC’s propos Conditions for 9 Col ing on top of the Sp imposed by the December 1989, wh the exhibitors' shar operation of thes Equally importanti that the proposedr to be apermanent. numerous shortCO more than anothe policy changes whi deepening of the C the cinema industry in today.
O
This review reitera monopoly by the N distribution of film: Government's acc ated principle of Sectorencroaching and exclusively th Vate SectOr.
Economic Review May/June 1991
 

LL MM
ms not be released for
ilure to approve four 2 covering 33 films umbia Pictures indusMGM/UA CommuniJniversal international and Paramount Picalthough contracts om 20th Century Fox oration, Buena Vista Pictures Corporation rs international for the earlier approved by
; has announced that sh language films has private sector exhibted any films on the is and conditions; put ation of films on the gera business propOstate Sector monopo2d the private sector in and seize all availbecause the liberali:ompanied by restrictive terms and condiIndustry is faced with
alto revise terms and lombo cinemaS, COmecial Levy of Rs. 2.00 NFC as recently as ichadverseyaffected e of income, will make a cinemas unviable. s the exhibitors' view evisions cannot prove banacea for the NFC's mings, and is nothing r example of ad hoc ch can only result in a risis that the NFC and f both find themselves
tes that the Continued FC on the import and S runs counter to the :epted and oft-reiternot having the State on what is essentially e preserve of the pri
Conto from page 23
mangoes (from Moneragala, Middeniya, Hambantota, Walawe) passion (from Yatapatha and the periphery), papaya (from Uda Walawe) production of dried fruits from papaya, lime, lemon, banana, manufacture of manioc starch are other agro-based industrial possibilities.
(C) Manufacturing industries
Manufacture of Yatches, shipbuilding, assembly of micro electronic items like TV's, radios, videos, telephones, Computers (the microchip based information industry), garments, textile finishing and printing, scooter, chally, motorcar, lorry, buses, two Wheel tractor assembly and foundry industry are possibilities. Pharmaceutical manufacture is yet another possibility.
(D) Service industries
Offshore banking, ship service, information including software exports, printing of books and publications for exports are some of the many service industrial facilities that can be attracted.
9. Conclusion
Before looking outwards to the West or Near East, KEPZ authorities must encourage the small, medium and large local entrepreneurs who are from the South to invest in the KEPZ. An identification of investment opportunities at KEPZ and identification of successful local entrepreneurs and linking them with joint venture partners abroad who have technology, markets and managerial expertise through an investors Forum as the UNIDO did in Fiji in 1984 for South Pacific countries would be a very successful first step. Instead of SriLankan representation going abroad to seekinvestors, it is best that we prepare project profiles, train local entrepreneurs and bring foreign investors to an investors Forum after wide publicity through our missions abroad and through the UNDO. This would be a more pragmatic investor promotion approach than spending much exchange to get small results as was the case in the past.
弹
33

Page 36
| INSU| Life Assurance as a Fc investment for an
individual
டி
By Indra Abeysekera
The author was a Consultant at Coopers & Lybrand from 1985 to Capital Development & Investment Company Ltd., as an investme to 1990. Presently he is serving at the United States A. I. D. Miss
Program Specialist.
止
I. DEVELOPMENT OF LIFE
ASSURANCE
the middle ages, according to extant records, loans of the type known as "bottomry" and "respondentia" were made use of to hedge the burden of the risk in general Commerce. Evidence from Babylon also shows that Contracts similar to bottomry was knownto merchants in that country and originated with the expanSion of Commerce as far back as 40003000 B. C. Evidence from India also shows that "bottomry" was practiced by Hindus in 600 B.C.
In this type of Contract the money lender will lend money to the merchant at a higherinterestrate than the market interestrate and the merchant will pledge the cargo and the vehicle (ship) as Security. If the goods and the vehicle (ship) pledged are destroyed then the money lender will stand to lose. Since the lender assumed the risk of loss the borrower enjoyed the benefit of Contract. In fact the lender has provided the borrower with insurance protection.
in ancient Greece, this concept was used for maritime loans as early as the fourth century B. C. This same form of loan agreement was used by Romans on maritime loans in the middle ages and later this spread to Europe. This practice represented the seed of modern insuranCe COntract.
The Concept of Life insurance originated in ancient Rome. The first evi
den Ce Of this is Th a guild Organizatiot ers & Slaves, Whic bury its members. T inCOme for the SOC monthly dues to the the forerunner of m
The Guilds which tence in Middle A ments on specified flood and robbery, i ments made at buri
The first Life insura established in the U terian Ministers' F charter from the Pr nia in 1759. For SOr: engaged in Writing men. Ten years lat were setup in New Pennsylvania forth Clergymen. Later r panies were set up Surance. The stabil life underwriters W judged by the unde tall. The epidemics and other diseases for the growth and Surance as a bus USA. In 1809, the L nies further With t number of innovat quirement of an ap examination to det payable based on cant. Still by 1800th cyholders largely C
34
 

RANCE ... -
−മ്മത്ത
b. 1989. He worked at nt Analyst from 1989 on to Sri Lanka as a
أسسسسسسس
e Collegia tenuiorum, n for free wage earnh provided a fund to he principle source of iety was a system of fund. This Guild was Odern Life InsuranCe.
later came into exisgeS made disbursedisasters such as fire, in addition to the payial.
nce Organization Was SA When the Presbyund Was granted a Ovince of Pennsylvanetime this company annuities for clergyer similar Companies fork, New Jersey and a benefit of Episcopal nOre and more ComtO UnderWrite - Life lnty and security of the ere by and large Writers paid up CapifSmallpOX, diptheria provided an impetus expansion of Life inness venture in the fe insurance Compahe introduction of a Ons Such as the reblication and medical ermine the premium he age of the applie number of 100 poliue to lack of under
standing of the benefits that can be derived from obtainment of a Life insurance. At a later point of time, Bubble Companies were organized and frauds were practised by criminals. People began to look at Life Insurance with suspicion. The control and supervision of the business were lacking. In 1837 the General Court of Massachusetts passed a law requiring Insurance Companies to maintain a fund adequate to reinsure all outstanding contracts (this is the forerunner of today's unearned premium fund). In 1851 in the state of New Hampshire legislation was enacted to establish the first board of insurance Commissioners. Later Such enactments spread to other states in the USA. With more control by the government through legislation and superviSion, Life Insurance began to gain acceptance and popularity among the general public, The life assurance policy Contracts were liberalized and Supplementary benefits such as disability and hospitalexpenses Cover were attached to make Schemes more attractive.
Following the revolution in 1917, insurance was nationalized in the USSR and is now being administered by the organization called Gosstrakh. Personal life inSurance coverage is available but on a Voluntary basis. By 1959, over 10 million people were reported to have obtained life insurance.
Insurance in Japan is mainly in private hands although government agencies Write insurances such as Crop, livestock, forest fire, fishery, export Credit, accident and health, sales Credit as well as Social Security. The rates of premia are controlled by voluntary rating bureaus so that they are reasonable and non-discriminatory'. In 1968 Japan ranked as the secOnd in the total life insurance inforce.
In Sri Lanka, prior to the year of 1962, life insurance was disderwritten entirely by the private sector. Companies incorporated outside Sri Lanka were also allowed to underwrite life insurance. However in 1962 insurance business was nationalized and insurance Corporation of Sri Lanka (ICSL) was formed. In 1980 National Insurance Corporation (NIC) came into existence with a view to introduce competition and a better service. The NIC carried out business through
Economic Review May/June 1991

Page 37
INSUR
eight principal organizations which were private sector institutions. These eightorganizations are (i) Aitken Spence Ltd. (ii) Carson Cumberbatch Ltd. (iii) Whittal Boustead Ltd. (iv) Mercantile Credit Ltd. (v) James Finlay Ltd. (vi) Protection and Indemnity Ltd (vii) Ackland Finance Ltd. and (viii) Ceylinco Ltd.
it was the View of the Government that if the private sector is allowed to underWrite insurance business, the quality and efficiency of service provided can be enhanced further. As a result the Control of Insurance Act (Amendment) of 1987 was enacted by statute outlining strict conditions to protect the investing policyholder.
As a result of the private sector being allowed to underwrite insurance business three private companies were incorporated in Sri Lanka under the Companies Act of 1982. They are (i) Union Assurance Ltd. (UAL) (ii) CTC Eagle Insurance Company Ltd. (CTC) (iii) Ceylincolnsurance Company Ltd. (CEY).
UAL is a consortium set up by Aitken Spence Ltd., Carson Cumberbatch Ltd., Mercantile Credit Ltd., & Whittal Boustead Ltd. The major shareholders are the members of the consortium, Merchant Bank of Sri Lanka, IFC, ADB & the general public. As at present no technical Collaboration is established for life insurance. The reinsurance is done With Munich Reinsurance of Germany.
The major shareholders of CTC are
Ceylon Tobacco Company Ltd., James Finlay Company Ltd., and the general public. The technical Collaboratoris Eagle Star Company of UK. The reinsurance is placed with Victory International Special Reinsurance of UK.
CEY is a member of the Ceylinco Group of Companies. CEY is the first Sri Lankan Insurance Company and came into being in 1939 with the name of Ceylinco Insurance Company Ltd. No technical collaboration is established for life insurance. The reinsurance is placed with Mercantile and General of UK and FranCOna Of SWitzerland.
All the three companies are quoted in the Stock exchange. Along with the three
Companies, the two S tions, in the business a Competitive marke
|CSL and NIC func Both have not retain laborator Onlife inSU places their reinsura reinsures with Swiss pany of Switzerland.
II. ROLE OF LIF
2.1 Life Assurance Of insurance
Both Life Assurance be Considered as afo tary compensation ir or damage to life, if th the life insured tak granted period of pr ance is defined as " the insurer, for a cert premium proportione profession, and oth{ the person Whose li that if such person period limited in the p pay the sum specific cording to the terms SOn in WhOSefaVOrSU
However to m schemes more com. tractive to prospec Various other benefit basic Coverage of p addition to the basi death one can also against total and ment, waiver of fu premium in such a sitt disablement. is
Life assurance diffe of insurance (gener. eralways. These diff in a broader Sense clear Cut.
(a) in Life Assuranc to investa certain su cally (generally mor yearly or yearly) for time; and during this dies then the nomine be awarded with a money, lf death doe:
Economic Review May/June 1991

ANCE
tate Owned corpOffa
of insurance Create t。
tion independently. ed anytechnical Col"ance. However NIC nce with ||CSL. ICSL
Reinsurance Com
E ASSURANCE
Vs. Other Classes
e and insurance Can rmofseekingmonethe event of a loss he loss or damage to es place within the otection. Life insura contract by which ain sum of money or 2d to the age, health, Sr Circuinstances of fe insured engages Shall die Within the olicy, the insurer will ed in the policy, ac
thereof, to the perIch policy isgranted.“
ake Life assurance betitive and more atbtive policyholders, sare added on to the rotection. Today, in C COverage against elect compensation permanent disablerther investment of uation, againstpartial
s from other classes all insurance) in severences are outlined though they are not
e the Insured agrees Im of money periodithly, quarterly, halfan agreed period of period if the insured be of the insured will guaranteed sum of s not take place dur
in႕ဂျီးခြံစီချွံခြံüငါးfied period, the money invested is normally refunded with an added
interest.
General insurance, normally does not compensate for the loss of life. If it does then in such cases the premium is not refunded at the expiry of the policy if the policyholder is alive.
(b) Life assurance policies are normally contracted for a period of more than one calendar year (However there are Life assurance schemes which are effective only for a periodas shortas one calendar year though such schemes are not so popular).
General Insuranceschemes on the other hand are effective only over one calendar year but they should be renewed every year.
(c) It is an accepted norm that no specific value can be placed on a given life. The Sumthat is assured on a life is hence decided by the prospective policyholder (unless the Life scheme has placed an upper limit).
in ģeneral insurance, compensation obtainable is automatically limited to its market Value Orto its reinstatement value.
(d) Life assurance Compensates against death and is a contingent liability and not a contractual liability. Therefore Life assurance is not a contract of indemnity. General Insurance on the other hand is a contract of indemnity. Perhaps it is for this reason that insurance of lives is known as Life Assurance and not as Life Insur.
an Ce.
3.2. How Life Assurance Schemes Work
An individual can chose to enter a life assurance scheme virtually at any given age. Each scheme has its unique characteristics which distinguishes it from the other. Schemes. However Insurance Organizations normally do not entitle a minor to enter into a Life assurance scheme. The upper age limit varies depending on the life Scheme but normally does not exceed 65 years of age.
The sum payable in the event of a loss of a life due to natural causes (natural
35

Page 38
HINSUR
death) is known as the 'Sum assured" (or basic coverage). A natural death is defined as any form of death except by accidental death. Accidental death is described as loss of life occurring at an unexpected time at an unexpected place under unexpected circumstances.
The prospective when he has decided to enter into a Life Assurance scheme, should investa sum of money regularly in advance. The sum of money the policyholder has to invest is known as the "Premium". This investment can be made monthly for each given month, quarterly for each given quarter, six monthly for each given half-year or annually to cover a period of twelve months. The frequency of investment that is to be made is known as the "mode". Normally the premium payment made yearly, is lower than the annualised half yearly investment and the annualised half yearly investment is lower than the annualised quarterly investment and the annualised quarterly investment is lower than the annualised monthly investment. The premium sum Varies depending on the sum assured, required, term elected, age, status of health and the type of the scheme.
Entering into ascheme commences with the signing of a presented form given by the insurance organization which asts as a contract between the client and the insurance Organization. Insurance Organization in return issue a certificate detailing the conditions of agreement. This is calledaLife Assurance"Policy'. The holder of Such a policy is known as the Policyholder (insured). Once the policy is issued by the Insurance Organization to the Policyholder, the contract becomes valid and the Insurance Organization undertakes to bear the risk of the policyholder, aş defined by the policy. The policy terminates with either the death of the policyholder during the term of the policy or at the expiry of the term, or in the event that the policyholder does not keep the commitments.
For a Life Assurance scheme to work in practice, several individuals should contribute to the Life Fund. Since death is a contingency and is based on probability (chance). The premium chargeable on a given individual is computed in such a way so that the Life Fund generally does
36
not get depleted atar a minimum number entered a given sche
in the long run an Fund can be shown
premium paid to da on premium
= death claims+boni profits to the Co.
Under most of th invested is refundec the policyholder if he the term of the polic "Maturity Value". Ince the maturity value is holder in installment during the policy ter|
In most of the Sch Insurance Corpora (ICSL), National Ins (NIC), Ceylinco Insul the basic Sum aSSur natural death) is et value of the polic schemes offered Company Ltd. (CTC greater than the ma
CTC has two mat called the Guarantee the other is calledth
Table-1 Rel
Event
1. Loss of life by natural c during the term of the p 2. loss of life by accidents during the term of the p 3. Survives til the end oft end of the term of polic
Table Il-2 Rela
Event
(1) Loss of life by natural
during the term of the p (2) loss of life by accident during the term of the p (3) Survives till the endo
M=term in yrs. n=term yea
Table a-3 Relar
Event
(1) Loss of life by natural - during the term of the p (2) Loss of life by accident during the term of the p (3) Survivestill the end of
end of the term of polic

LLLLLL S SSS SSS S S S S
ly point of time, Once of individuals have
ԳՈՅ.
operation of a Life as follows:
te + interest yielded
JS declared--Surplus
e schemes, money With an interest to
is alive at the end of y. This is called the rtain otherschemes spaid to the policysat defined intervals
n.
2mes offered by the tion of Sri Lanka surance Corporation rance Company Ltd., 'ed (in the event of a qual to the maturity y. However in the oy CTC Insurance ), the sum assured is turity value.
urity values. One is 2d maturity value and e Illustrative maturity
Value. Guaranteed maturity Sum is the sum that is guaranteed to the policyholder under any circumstances. Illustrative sum is the sum of money CTC insurance Co. Ltd., attempts to award the policyholder.
However there are exceptions to the rule. In the Treble Benefit Scheme of fered by ICSL, in Multi Benefit ASSurance Scheme offered by NIC and in the Five Benefit Scheme offered by CEY, guaranteed twice the maturity value as that of the sum assured on a natural death and the sum assured on an accidental death is thrice the maturity value. The following illustration describe sums payable under various hypothetical events, for the said Schemes.
Pure Endowment Schemes On the other hand refund only the premium in the event of a loss of life but at the end of the term of the policy shall pay the assured sum (which is the maturity value in this Case).
When an insurance Organization makes profits, a part of the profits is Sometimes passed onto the policyholders. This share of the profits that is to be passed onto the policyholders is called "Bonus' and is decided by the Board of Directors. The policyholders do not have any right to decide on the bonus. When such bonus is
lationship Between Sum Assured & Maturity Value (Exception1)
auSeS olicy all causes olicy
he
Sum Awarded (Rs)
=2" Maturity Value
= 3" Maturity Value
= Maturity Vaue
tionship Between Sum Assured & Maturity Value (Exception 2)
tal causes olicy the
arin which the event take place
Sum Awarded (Rs)
X (1.05)n 1 (1.05)n
X" (1.04)n 1 (1.05)m
= Maturity Value
ーリ
tionship Between Sum Assured & Maturity Value (Exception 3)
ՏՅԱSBS olicy 4 a causes olicy
the
Sum Awarded (Rs)
Premium refunded
Premium refunded
= Maturity Value (Sum Assured)
Economic Review May/June 1991

Page 39
: INSUF
paid it is credited to the maturity value of the policy. However a given Life Assurance Scheme should qualify to receive bonus payments, since all schemes do not qualify to receive bonus payments.
2.3 Extent of Protection Offered
To make Life assurance Schemes more attractive, in addition to the basic death COverage many Schemes offer additional benefits that can be selected by apolicyholder. For example a policyholder can select: a multiple of the basic sum assured in the event of an accidental death; Compensation against total and permanent physical disablement; to waive any furtherinvestment of premium while maintaining the benefits of the scheme till the end of the term of the policy during a total and a permanent disablement; Compensation against partial physical disablement. Certain other schemes offer to pay a regular sum (like a monthly salary) to the nominee of the policyholder (ex. family) after the policyholder's death. There are still other Schemes where one could elect Compensation against partial disablement.
A number of benefits available in the market are outlined below:
A. Natural Death Benefit
A natural death is defined as a loss of life due to natural causes (other than accidental death). In these circumstances, Only the basic Sum assured is paid.
B. Special Term Rider
Here the nominee of the policyholder can ask for Compensation equal to twice or many fold the basic sum assured if he dies naturally during the term of the polісу.
C. Accidental Death Benefit
An accidental death is described as a death occurring at an unexpected time, place, in a manner and the policyholder SUCCumb to death. Within three months after the incidence. The sum assured under an accidental death is at least the basic sum assured. The policyholdermay elect for a higher death benefit.
D. Total and Permanent Disablement Benefit
Total and permanent disablement is
described as loss (o legs above the ankle above the elbow, O both eyes, ora Comt eye orleg oran arm. tion) should be due noto due to a diseas
If the policyholder
manent disablemer tional cover Such a guaranteed with an
sum assured which
made in addition toth extra Sum is norma StallmentS OVer a te term of the policy exp often years, the bal due will be paid wit payable to the policy the term of the polic
E. Waiver of Premi
When a policyholt and permanently di stood that that perSC may reduce drastica
policyholder will not
premium due in the f benefits provided by
If a policyholder é premium benefit and and a permanent di cyholder will not have due to continue With disablement. HOWex will enjoy the bene policy as before the ablement. It should Waiver of premium elected against the disablement (not ag; ment).
F. Partial Disablen
Here, compensati policyholder becom as a result of an acci provided for the foll disablement and the be as follows;
T
Event
-of either arm , -Of either hand
(at or above the wrist) -of either foot
(at or above the ankle) -of sight in either eye
Economic Review May/June 1991
 
 

ANCEE
dysfunction) of both or loss of both arms loss of eye sight in nation of loss of One The loss (or dysfunco an accident and
lects total and percover as an addiolicyholder shall be amount equal to the San extra payment e Sumassured. This ly paid in equal inyear period. If the ires before the lapse ance sum of money h the maturity sum holder at the end of /.
Im Benefit
der becomes totally sabled, it is underins earning capacity tly and perhaps that be able to pay the urture and enjoy the
the policy.
lects the Waiver of in the eventofa total sablement that poli2 to pay the premium the policy after such fer the policyholder its provided by the OCCurrence of disbę noted that the benefit can only be otal and permanent inst partial disable
|ent Benefit
n is paid when the is partially disabled lent. Compensation wing categories of Sums awarded Will
The partial disablement cover is offered by only one insurance Organization in Sri Lanka (i.e. Ceylincolnsurance Company Lfd,). This additional benefit can be selected in any of the policies offered by Ceylincolnsurance Co. Ltd.
If a policyholder wishes to enjoy the benefits provided by the policy after the partial disablement the policyholder will have to continue paying the premium till the end of the term of the policy. No waiver of premium can be elected.
G. Family income Benefit
Certain Life Assurance schemes agrees to pay a sum of money monthly or quarterly to the nominee of the policyholder in the event the policyholder dies within the term of the policy.
In addition to the basic benefit (i.e. basic
asum assured in the event of a death), other supplementary benefits can be elected in single or in combination, if a given scheme is tailored to offer such benefits.
It is observed that a fair number of life aSSurance SChemes Offer ACCident Bene瓮 Total and permanent desablement benefit, Waiver of premium benefit, as supplementary benefits.
The supplementary benefits offered are specific to a givenscheme. In many of the Schemes each supplementary benefit will be granted only up to a certain maximum age stipulated by the scheme (ex. 65 years of age). Thereafter that supplementary benefit lapses automatically and the policyholder will not be entitled to enjoy that given benefit any further. Some schemes may not offer supplementary benefits at all.
Contd on page 60
ble Il-4 Sum Assured on partial Disablement
Sum Awarded (in Rs)
75% of basic sung assured 50% of basic sum assured
50% of basic sum assured
50% of basic sum assured
37

Page 40
Dr. Mai
1977 the Thirtieth World Health ASsembly decided that the main social target of governments and the WHO in the coming decades should be "the attainment by all citizens of the World by the year 2000 of a level of health that will permit them to lead a socially and economically productive life".
In 1977 the government pledged itself to "restore the high standard of health care and disease prevention that existed earlier, and make further improvements in our health services, particularly in the rural areas through both Ayurvedicand Western systems". This commitment was further strengthened when in 1980 the government signed the Charterfor Health Development with the World Health Organisation, thereby formally endorsing the concept of "Health for all by the year 2000" with Primary Health Care as the key approach.
Primary Health Care is essential health care based on practical, scientifically sound and Socially acceptable methods and technology, made universally accessible to individuals and families in the community, through their full partici
pation, andata costthatthe Community
and Country can afford to maintain at every stage of their development in the spirit of self reliance and self determination. It forms an intergral part of both the country's health system of which it is the central function and main focus, and of the overal Social and economic development of the community. It is the first level of contact of individuals, the family and the community with the national health system bringing health care as close as possible to where people live and Work, and Constitutes the first ellement of a Continuing health care proceSS.
The government provides health care free of charge to the entire population of
Sri Lanka through a institutions Scatte! country and a cac health personnel.T are curative and pri services are provi Officers of Healthth by home visits and well-baby and Fam Curative services a a variety of institt visiting stations to hospitals. Preventic ures in relation to rosy, sexually trans respiratory disease by vertically orga paigns.
Significant progre: improving the healt in Sri Lanka during as indicated by th mortality, maternal birth and death rat
Infant Mortality Maternal Mortality Crude Birth Rate Crude Birth Rate
While these indic these national ave the numerous defit the present healths deficiencies are:-
* Lack of pure wat majority of the p
* Lack of propers:
'Prevalence of mal
and acute.
* illnadequate atten
* A weak referrals
* A wide gap betwe and the people.
38
 

rcus Fernando
network Of Over 900 ed throughout the dre of about 40,000 he services provided eventive. Preventive ded by the Medical rough their fieldstaff through ante-natal, ily Planning Clinics. ure provided through Itions ranging from base and provincial on and Controll measmalaria, filaria, lepmitted diseases and Is (T. B.) are carried nised special cam
SS has been made in hstatus of the people the last four decades e indices for infant
mortality and crude eS.
9/1000 live births 0.6/1000 live births 21/1000 population 6/1000 population
es are encouraging, rages tend to mask ciencies that exist in ystem. Some of these
2r for drinking, to a eople.
Lnitation.
nutrition, both chronic
tion to risk groups.
ystem.
en service providers
"Prevalence of communicable diseases such as malaria, dengue, diarrhoea, infective hepatitis, dysentry etc.
* increase in non communicable dis
eaSeS.
" Rapid increase in population.
* Absence of Coordination between
preventive and curative services.
*Underutilization of services and institu
tions.
* Lack of manpower.
*Uneven distribution of health resources.
* Overemphasis on Curative services.
* Lack of Community participation.
* Increasingly complex nature and cost
of health care.
inability of the health care delivery system to provide the basic health care needed by the individual or family warranted a radical change in the existing health system and a draft proposal for PHC emphasized a change in strategies.
The corner stones of these strategies were as follows:-
(a) The establishment of a National Health Development Network to ensure intra-sectoral and inter-sectoral coordination for health developmentactivities.
(b) Decentralization of health administration.
(c) identification and prioritization of PHC components for implementation.
(d) The development of an implementation model for subsequent application on a national Scale.
The main objectives of thes strategies afes
(a) To strengthen peripheral health services with increased reliance on community participation and promotion of self reliance.
Economic Review May/June 1991

Page 41
سمي
(b) Guarantee a basic package of health care to all people which consist of 17 areas of activeity:-
1. Proper and adequate nutrition. 2. Safe Water. 3. Basic sanitation and hygiene. 4. Maternal care. 5. Child care with emphasis on the
infant and pre-school child. 6. Family Planning. 7. Immunization. 8. Prevention and control of common
Communicable diseases. 9. Prevention and control of Common
non communicable diseases. 10. Appropriate and early management of common minor ailments and inju
ries. 11. Simple rehabilitation. 12. Mental Health. 13. School Health. 14. Oral Health. 15. Occupational Health. 16. Prevention of Blindness and Visual
impairment. 17. Health Education and community
organisation for PHC.
Figure 1
Post Graduate Teaching Hospital
Teaching Hospitals
Provincial/General Hospitals -
Base Hospital, Large District Hospital
Samli District Hospitals, Peripheral Units MOH Office
Rural Hospitals, Central Disp. and Maternity Homes, Central Disp.
Mat. Homes, Branch Dispensaries visiting stations.
Provincial/Gen eral Hospitals
District Hospital one for each dis
divisional Health Centre one per 60,000 population (one for each AGA Division)
Sub-Divisional Health Centres one per about 20,000 population
Gramodaya Health Centres One per 3,000 population manned by one PHM (clinic cum residence)
Healt
(c) Promote integratin curative services.
(d) Promote better util eral institutions.
(e) Promote cooperatic and other services.
The Model for Delive ices by the Ministry of
Figure
(a) At the base of the Gramodaya Health Ce midwife, one for eac area. The Public Healt Health Worker) will b points of contact forth health care delivery provide a comprehel primary health care scribed above and d level of training and gramodaya Health C adequate referral, m gistic support from t
Classification of Existing Institutions
Post GradUlate Teaching Hospital (1)
Higher Teaching Hos- providi pital (4) training
(9)
trict
Economic Review May/June 1991
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

g preventive and
lization of periph
on between health
ty of Health ServF Health. See
yramidwill be the entre, headed by a h Grama Sevaka thmidwife (Family le one of the first he people with the
system and will isive package of
services as deetermined by her competance. The entre Will receive anagerial and lohe higher levels.
Level Institutions ng specialised care,
and education
Primary Health Care 3omplex
This basic functional unit of the Gramodaya is responsible fordelivery of health services to an average population of 3000. The Public Health Midwife Will reside in her area. It is planned to provide all public health midwives with residential quarters and a clinic room.
(b) Above the Gramodaya Health Centre, will be the Sub-Divisional Health Centre. This institution will be under a Reg. Medical Practioner/Asst Medical Practioner and have only out-patient facilities. Two PHill, a Supervising Public Health Midwife and a Public Health Midwife will be attached to this place. They will work both in the institution and in the field and provide comprehensive services, up to their capability and the facilities available. Patients will be referred to the Divisional Health Centre Or the District Hospital, depending on their condition. As no downgrading of existing institution is envisaged, all Rural Hospitals, Central Dispensaries and Maternity Homes, numbering about 538 will be classified as Sub-Divisional Health centres. Eventually each AGA Division will have about 2-3 Sub-Divisional Health Centres, each serving a population of 20,000 population.
(c) At the next level will be the Divisional Health Centre, one foreach Divisional Asst. Govt. Agent area. These institutions will provide all health care services including in-patient care and will be headed by a Medical Officer. The majority of the District Hospitals and all Peripheral Units will be converted into this category in the first instance. The service function of the (MOH) Health Units will be incorporated into these Divisional Health Centres. All the present staff will be absorbed into these Health Centres. Divisional Health Centre will be a 60 bed hospital. The Medical Officer in charge known as the District Health Officer will be responsible for the health of the 60,000 population of his area. This institution will provide essential health care to a population of 3000 around the centre and also function as a referral centre (to examine and treat patients that are referred from sub-divisional and gramodaya health centres) for its population of 60,000.
(d) The proposed structure will have at its apex the higher level health institu
Contd on page 59
39

Page 42
election Russia's
of their depend.
aust be essentially a unifier and a creator able to rally the people
prograiules will first President
of the republic.
multinational and tormented
I particularly favour ilikolai Ryzhkov over the other five candidates though I am aware of his weaknesses. But he has two qualities which give him an edge over the other challengers. First he has a broad economic vision and can organise economic activities. Second I like his personal qualitiestolerance, ability to listen and adjust his own opinion. These qualities are to be respected. My appraisal is based on my special relationship With Ryzhkov. We were together in Chernobyl. I saw hiia working on the second day after the earthquake in America where we also went together. I realised he was a man of effective and quick decisions. fie /can act energetically and work day and night. Openness and progressive ideas are anong his Laajor assets as well.
I aun very much concerned over the disintegration processes affecting the Russian federation. As for whether the Presidential election can result in the consolidation of the peoples of Russia, the debates and discussions on this matter have not inspired ne with optimism so far. The vote counting procedure will deliberately ignore the opinion of residents in autonomous entities where only the total nu imber o of votes considered . We know full well why this happened. This political action is designed to clear the way for Boris Yeltsin. I am not a gainst hilum as a person, but I all against such approaches.
I aan not very enthusiastic about the Russian Presidential election. I personally don't like the approach of any of the candidates to those probleins affecting us, their views and most important their entourage. I guess it is on the challengers entourage that the ilunplementation
The election day a very inportant d life. Unlike other three iLaportant eV in Leningrad - Republic's Preside Mayor and an opi restoration of th nane St. Petersbur. viction that the of restoring the neither here nor til tical action recoil group of city Man attract to the thousand two hun thousand of tine c hold dear the cul city. Despite a stand off, it is v half of the vote stations. The na will of course at to vote in groups. inisers of this acti their pri Emary objec scheime is doorned very idea of the constitutional move
As for a likely , for the Mayor's of Anatoly Sobchak other candidates all as likely winners of transforming t free enterprise 2 problemá of the futu to develop infr which Will Call fo aany billions. The such expenditures Therefore I am ve such programmes til vinced advocate of in Leningrad.
As to how Yeltsin he be elected R. he will have to ad As a realistic po ignore the proce the Russian fed he will remain
down town Moscow.
40
 

June 12th will be ate in Leningrad's regions in Russia, ents will coalesce elections of the int and the City's mion poll on the e City's original 吕· It is ay conlast issue - that City's name is nere. It is a poliunended by a small agers in order to
Police Stations ired and fifty ity's veterans who rrent manue of tine certain political tery hard to gather rs at the polling ine change action ...tract unany people flowever, the orgaon will not achieve ctive and the winole
to failure. The
poll is an anti
winner in the race fice, I think that ill win although so have been tipped
As for the idea he region into a One this is a re. It is necessary astructure first, r investiaentis worth state cannot afford
at the monent. ry sceptical about lough I an a conforeign investinents
would act, should assia's President, just his viewpoint. Litician he cannot sses unfolding in ration. Otherwise President only in
=ങ്കിൽ
Conto from page 9
radio also avoids discussing controversial issues. Literary discussions and news are given primary importance.
Ever since the radio was brought under total state control, successive governments that came into power followed a communalistic policy. This prevented the radio being used by the Tamils for their Welfare. The Weaknesses of newspapers were repeated here. Controversial issues were never taken up for discussion. News which held an important position in radio broadcast became highly relating to the North and the East, the suffering of the masses was concealed. This turned the people, who Once had much faith in the Sri Lankan radio, towards the B. B. C, the All India Radio and the Radio Veritas for more reliable information.
While the up-country Tamil group which has been recognised as the most backWard among the Tamil community in this country is given only half an hour weekly, the Muslim commuity is allotted an hour daily in order to promote its own social and religious development. This is indicative of the relative importance attached to the two Communities by the State.
Television that was introduced during the last decade is very popular among the Tamils. But the time allocated to Tamil programmes is utterly inadequate. Of the six hours daily television telecast, the time allocated to Tamil programmes is minimal and on certain days only the news is telecast in Tamil.
On the request of certain Tamil Ministers some additional time was allocated on Sundays between 2.00 and 3.00 p.m. While the rest of the middle class take their afternoon naps, the Tamil middle class is deprived of it. Furthermore, whenever an unscheduled programme is to be included, the Rupavahini is ever ready to sacrifice scheduled programmes in Tamil. It seems to be a universal Law in this country, that if some one has to sacrifice, it should be the Tamils.
On the whole, the Tamil media lacks a Critical outlook on major issues. As long as the mass media is under state control, it would not be possible to bring about any constructive changes in the Tamil mass media. As referred to earlier, only private sector Tamil newspapers Currently have national status.
Economic Review Mayl-June 1991

Page 43
Contd. from page 27 of children within 6-8 year age group and 9.8 percent of children within 9-14 years age group in these slum and shanty families had not been admitted to school. (9) (See Table 3).
The Labour Force and Socio-economic Survey of 1985/86 reveals that 21.5 percent of children within 5-9 year age group in the island had not been admitted to school. According to the same survey percentage for the children in same age group in urban sector, rural sector and estates sector were 18.0 percent, 20.3 percent and 46.0 percent respectively. From the above two surveys it is observed that non school admittance rate is slightly lower among the children within 6-8 year age group in slums and shanties in Colombo City Compared to the national average.
However, the rate of non school admission among children within the 5-9 age group is higher in the Labour Force and Socio-Economic Survey particularly due to inclusion of 5 year old children. Rate of non school admission is comparatively higher among 5 year old children in the Labour Force and Socio-Economic Survey mainly due to two reasons. () Generally 5 year old children form and highest percentage of those admitted late to school, (ii) Some of the children who have completed 5 years at the time of conducting the national survey (Labour Force and Soci-Economic Survey) has not completed 5 years in January of that year. Therefore, these children had not been admitted to school when the national survey was conducted. Under these conditions it is expected that the rate of non-school admittance is higher among 5-9 years age group than the 6-8 year age group at the national level as well as at sub levels.
Though the non school admittancerate was slightly higher among the children within the 5-9 age group in the country than among the 6-8 age groups in slums
and shanties in Colombo city, according.
to above explanation it can be reasonably expected that non school admittance rate among early primary school going age children should be higher in slums and shanties in Colombo city than in all the country. This situation is more clear in shanty settlements than slum settle
Economic Review May/June 1991
EDUC
ments in the city. A analysis the rate tance among early age children shou slumandshantyse city than in the rura compared to the non School admi higher among the Shanties in Colo compared to the es tionally most disac is very obvious t school admittance conducted in 198: Education Branch Education reveals children within the aset of interiorvilla colonies) in the An educationally disa not been admitted paredeven with th area in the interio of children within th 8 years) in slur Colombo city had
School.
According to th Socio-Economic S percent of children going age of 10-11
Table 3
Rates of non-s
Area/Sector
Colombo Sums Colombo Shanties Colombo Slum and Sha Urban Sector Rural Sector Estate Sector
Asland === Sources: 1. Report on B
Groups in th 2. Labour Forc
Table 4
Rates of non
Area/Sector
Colombo sums Colomboshanties Colombo slums añd sha Urban Sector Rural Sector Estate Sector
Asland
Source: 1. Reporton Ba Groups in the 2. Labour Force
 
 

ATION
ccording to the same of non School admitprimary school going ld be much higher in ttlements in Colombo sector. It is clear that urban sector, rate of tance is very much children in slums and mbo city. However, state Sectoran educaivantaged sector - it hat the rate of non is very low. A survey 5 by the Non-Formal of the Ministry of that 11.3 percent of 6-8 year age group in ages (old villages and uradhapura Districtdvantage area - had i to school. (10) Come situation in a remote * a higher percėntage he same age group (6- ns and shanties in not been admitted to
e Labour Force and Survey of 1985/86, 4.8 in late primary school 4 years in the country
had not been admitted to school while that percentages according to the same survey for the children in same age group in urban sector, rural sector and estates sector were 4.1%, 2.9% and 24.9% respectively. (11). Accordingly as shown in Table 4, when late primary school going age children are considered it is very clear that the rate of non school admittance is very higherinslums andshanties in Colombo city than in the all island. In the sectoral analysis it can be seen that the rates of non School admittance are very higher in slums and shanties in Colombo City compared to Urban sector and rural sector. However, again non school admittancerate is lower in the slums and shanties in Colombo city than the estate sector. According to the survey conducted in 1985 in a set of interior villages in Anuradhapura district, 5.7 percent of children within 9-14 year age group in these villages had not been admitted to school. (12) Accordingly rate of non school admittance among the children within 9-14 age group is higher in slums and shanties in Colombo city than the interior villages.
Late School admittance
According to a recent Case Study on primary schooling in 4 slum and shanty
chool admittance among early primary school going age children
Age group
6-8 age group
6-8 age group
mties 6-8 age group 5-9 age group
5-9 age group
5-9 age group
5-9 age group
Year % Of non School
admittance (1984) 16.7 (1984) - 22.1 (1984) 19.3 (1985/86) 18.0 (1985/86) - 20.3 : (1985/86) 46.0
(1985/86) 21.5
aseline Survey on the Educational Needs of Non-school Going Children. Among Low Income
e City of Colombo
e and Socio-economic Survey 1985/86, Sri Lanka.
school admittance among late primary school going age children
Age group
9-14 age group
9-14 age group
inties 9-14 age group
10-14 age group 10-14 age group 10-14 age group
10-14 age group
Year % of non School
admittance (1984) 7.8 (1984) 11.7 (1984) 9.8 (1985-86) 4.1 (1985/86) 2.9 (1985/86) 24.9
(1985/86) 4.2
Iseline Survey on the Educational Needs of Non school going Children. Among Low income
City of Colombo.
and Socio-Economic Survey 1985-86, Sri Lanka.
41

Page 44
Communities in Colombo city out of the total number of primary School going
age children in these 4 communities 21
percent had been admitted to School later than the normal school admission age. Children who had got late to be admitted to School had been late for 1-5 years. While 13 percent and 4 percent had been admitted one year later (13) and 2 years later respectively the balance percent had been admitted more than 2 years later. Due to the non availability of late admittance rates among primary
School going age children at national
level of sectoral levels, it is not possible to compare the rate of late School admittance among children in slums and shanties in Colombo city, with that of all the island and sectors.
According to the Sarrie case study when only the children who had been admitted late tio school Was Considered 67 percent, 23 percent and 10 percent had been admitted late to school by year, by 2 years and by more than 2 years respectively. According to the school census in 1986 in the island, of the children those who had been admitted late to school 74 percent, 16 percent and 10 percent had been late to School by year, 2 years and more than 2 years respectively. (4) if these two sets of data are examined it is clear that out of the children who had been admitted late to School, higher percentage had been by
more thar one year later in the sluins
and shanty settlements than to the all
Early School drop outs
The Survey conducted ís84 by tine Non Forma Education Brar Can Of the
Ministry of Education revealed that of
the children who entered school and belonged to the 6-8 age group and were living in slums and sharities in Colomo
City, 22.3 percent were early School drop outs. This was 2.0 percent for
slums and 23.7 percent for sharities. (15) According to the school census in 1985 the national drop out rates for grades , 2 and 3 were 1.3 percent, 1.7 percent and 3.7 percent respectively. National average drop out rates for grades, 2 and 3 vivas 2.2 percent... (6). Children
studying in grade i to 3 in schools are generally belong to 6-Ց age group. But
|42
EDUCATI
Table 5
Rate of School
Åreas Colombo slums, 6-8 age group
Colombo shanties, 6-8 age grc
Colombo slums & shanties, 6-8
A sland, grade 1-3 இைைஇண்ைண Sources: 1, Report on the Bas Groups in the City 2. School Census 9
Table 6
Rate of school
Arga
Coongo sus,
Colombo sharities
Colombo sums & sharities
A said Grade 3-8
3gួgg: . Rep. ○リásé Groups in the City of Colombo,
2. School Census 98ង
Tabte 7
Primary School
Children attencing school
Acinited at ÅCitad gggg ឧg g acifission sggg age to school
36 氰 )13.5( {4- بھ4)
ணைவணைவை
drop outrates of these (children within 6-8 a. Colombo slurs and s diren, Studying in grae goverinent school) ca.
accurately. This is bec
Sium and Sharity c dropped out fronin scn ticular year fluas bee drop outs while in Cast (of children studying i. in all government scin those who dropped out that particuliar yeariniai as drop outs. That was for large difference between Ciniciren in si
(22.3%) and children Howeverinis arge dir
 

dropout among early primary school going age children
Year % dropouts
(1984) 2.0
up, (1984) 23.7
group (1984) 22.3
(1985) 2.2
line Survey on the Education Needs of the Non-school Going Children. Among Low income
of Colombo. 35, Ministry of Education
drop-outs among late primary school going age children Age group Year % of school dropouts
9-1 4. age group 1984) 22.7 9-14 age group (1984) 2. .7
3-4 äge group (1984) 22."
(1985) 6。贯
Survey on the Education Needs of the Non-school Going Children Ancing Low icone
, Ministry of Education
Going Age Children in The sample by Type of Schooling
Gārdetai
Children not attending school
Not admitted to school
Sub Siiiii in Fassed Sub Dopped Sub total SctioԵt school Total ೧ä Total
admission admission
ఇg8 age
47。 8. 割さ 34 (53.0) (9.9) (8.6) (18.5) (23.5) (42.0) (100.0)
indicates that school drop out rates
22 sets of children
ge group living in inancies, and chiles 1, 2 and 3 in
anong early primary school going age children are higher in both siums and Shanties in the city when Compared to
innot becompared the national average (see table 5). ause in Case of The samme survey revealed tinat the hildren those who children who had entered school and
ool Upto triat parna COinSi Cered as
belonged to the 9-14 years age group and were living in slums and shanties in the city, 22.1 percent had dropped out of
0 AA AAA00 AA a aA SyyySySSYSSy SB0B SySSL grade 1, 2 and year national school drop out rates varools if the island) fed from 3.7 percent in grade 3 to 7.7 from schoolwithin percent in Grade 8. The average naSbeen considered tional drop out rate for grades 3 to 8 was is the main reason 6.1 percent. Thus apparently, rates of in drop out rates school drop out among late primary ums asic Shafties school going age children are higher in
in all island (2.2). ference apparently
both slums and snancies in Colombo city than the national average. (See table 6).
Economic Review May/June 1991

Page 45
It is also observed that though the drop-out rate is higher among the higher age group children at the national level there is no significant change in this rate between low age group children and higher age group children in slums and shanties in Colombo city. In other words compared to the national situation, in Colombo slum and shanties more children are drop out at their younger ages (See table 5 and 6).
When examining the 40 families surveyed in this study of 81 children in primary school going age, 47 children (58%) are attending school while the balance 34 children (42%) are not attending. (Seetable 7). Of 47 children attending school only 36 children (44.4%) have been admitted to school at the correct school admission age while the other 11 children (13.6%) have been admitted late. When examining 34 children who are not attending school 15 children (18.5%) had not been ever admitted to school. However, about half of them (8 children) are within the 6-9 year age group and therfore it can be expected that part of them may be admitted to school during the next 2 or 3 years as late school entrants. The other half of the children (7 children) would not enter the formal school system since they have passed even the late school admission age. 19 children (56% of children who are not attending school or 24 percent of total number of children in primary school going age) have dropped
Table 8
EDUCA
out before complet schooling. (See table
Accordingly if compa is clear that school rates i.e. school no school drop outs aren primary School going families in the 4 slum ments surveyed cor and shanty settlemer (See table 8 and 9).
Reasons for LOW
In this study informa relevant literature, C interested in the pro and children of the S. identify and analyse tributing to low sc among primary scht dren in 40 families ir settlements in partic and shanty settleme in general. These poverty to poor hea school facilities, fami of parents, parental of residence, non certificates, poor hic environment etc. Whi health are given Though there are re ous levels among th analysis reasons a aratley for easy pi
Area'sector Age group
40 slum and shanty families
Rates of non-school admittance among primary school going a
sample, in slums and shanties in Colombo city and in
Year
surveyed (sample) 5-14 age group (1990)
Colombo slum and shanties 6-14 age group (1984)
All island 5-14 age group (1985/86)
Table 9
Rate of School drop outs among primary school going age childr slums and shanties in Colombo City and in all isl
Area/Sector Age group Year % school
40 slums 8 shanties 5-14 age group (1990) 2
Colombo slums and shanties 6-14 age group (1984) 2
AIsland Gr. 1-8 5-14 age group (1985)
Economic Review May/June 1 991
 

TION
ing their primary
7).
arisons are made it
non participation In admittance and nuch higher among age children in 40 and shanty settlempared with slumits in Colombo city.
School Participa
tion gathered from fficials, individuals blem, and parents ample was used to the reasons Conhool participation pol going age chil4 slum and shanty ular and in all slum nts in Colombo city easons vary from ith of child, lack of ily dispute absence negligence, change availability of birth busing, distributing le poverty and poor more prominence. lationships at variese reasons, in the re discussed sepresentation. at the
ge children in the all island
% of non admittance
18
13
13
SLSLS
en in the sample in and
drop outs
29.8
23.0
4.6
analysis of each reason first analyse how it effects non school participation among children in 40 families in the sample specifically and then in all slum and shanty settlements in Colombo city in general. (See table 10).
Poverty
As explained in table 10 of 34 children not attending school 7 children do so mainly because of poverty. Of them 4 children have not been admitted to School since their parents could not incur expenditure on children's school admission. One child has stopped his schooling since his parents could not spend to maintian him at school. Another female child has been compelled to stop. her schooling to engage in a casual job at a garment factory. Another female child had stoped her schooling mainly to engage in household work and to look after younger brothers and sisters.
Though teaching, textbooks and midday meals for school children are provided free, some money has to be spent by the parents on children's admission fees, facility fees, clothes, writing and drawing material and other requirements. Families those living below poverty line in slum and shanty settlements in Colombo city find even a little expenditure on their children's education as a big burden. Most of them are not in a position to spend to admit their children to school and maintained them there. High inflation of School stationery over the past and high School admission fees (ranging from Rs.200/- to Rs 350/-)has further aggravated this problem.
in addition to the cost of education the opportunity cost of education has also contributed to keep these children out of school. With or without their willingness children are compelled to leave school before completing their primary education in order to supplement their family budgets by working in the informal sector such as petty trade, street vending, manual work and domestic service in middle class houses. Female children are forced to stay at home without schooling to help in household work and look after youngersiblings. Since their parents generally engage in casual or temporary jobs their meager earnings
43

Page 46
IEDI
are subject to higher fluctuations due to
a variety of reasons. When earnings come down it badly affects the children's Schooling.
The survival needs of the poor families in these settlements surpasses the educational needs of their children. Their poverty has prevented them from making use of even available educational facilities.
inadequacies of the formal school system
Four children are not in School due to
the inadequacies of the formal School system. Of them 3 children had not been admitted to school. Though parents of 2 children had sent applications to admit them to schools very close to their settlements, the schools did not admit the children. According to these parents, when they inquired later, they have been informed that these children were not admitted due to the lack of facilities in these schools. While 2 of these 3 children are only 6 year olds, the other one
is a 9 year old. Parents of the 9 year old
child had not tried more than once to admit their child to a School partly because of parents indifference. The other 13 year old child had stopped his schooling at the age of 11 years. The reason given by the child for this is that number of teachers to teach in his class were insufficient. The parents also have not taken enough interest to send him to another School.
Unlike the primary School going age children in remote areas, children in slum and shanty settlements in Colombo city have easy physical access to more than one school. But these schools are notable to absorb all the children seeking admission due to lack of facilities or Some other reasons, this situation leads to a high rate of non admittance and late school admittance among children in slums and shanties in the city.
Compared with city Schools catering to the children of middle class and city elite, schools which serve predominantly the children of slums and shanties are highly disadvantaged and ill equipped in terms of inadequate classrooms, insufficient furniture, non availability of ade
44
quate and/orq
lack of pure we etc. In additior the classroom ing methods i attractive to negative featu incidents ofirre class repetition ings. As a rest behaviour Orla school attenda Studies and ni sary school sta teaching and O Schools teach teaching in til schools. This
effectOn childre
Table 10
* Reas
1. Poverty
2. inadequacies
formal school
3. Il-health oi chi
4. Low aspiration feelings andi towards scho
5. Absent of pare
6. Dispute in fam
7. Cahnge of resi
8. Non-availabilit birth certificat
Total
ass
health of ch
As a result C not attending suffered from and chickenpo the parents at the nearest SC school had reli cording to hisp for refusal was

CATION
alified teachingstaff and er and sanitary facilities to these disadvantages environment and teachthese schools are not etain pupils. All these es contributę, to a high gular school attendance, S and early School leavit of children's stubborn sk of discipline, irregular ince, lack of atention On in availability of necestionery and inadequacy of her physical facilities in rs have little interest in ese underpriviledged has a further negative n's school performances.
age. The parents have not made any other attempts to admit him to another School. However, they send the child to the evening classes conducted in the same school. One child had been admitted to school at the correct admission age. However, since the child could not speak properly both teachers and parents have allowed the child to stop schooling at the age of 7. Another child who had been admitted to school suffered from illnesses frequently, as a result of that he had repeated grades 4 times when he reached grade 3. Since the class teacher of this child had asked the parents to stop his schooling, the parents have done so. Another child had refused to go to School at grade 4 after staying at home for about one year under
Children not attending school in the sample by reason for not attending
Children not Admitted
to School out of school Total ዘኽ Still in Passed School Total
-school admission
admission age age
2 4 3. 7 (25.0) (28.6) (26.7) (158) (20.6)
of the 2 3 4 | system (25.0) (14.3) (20.0) (5.3) (11.8)
dren 1 t 3 4
(125) 耆{67) (15.8) (11.8) , negalitve 2 2 ndifarence (10.5) (5.9) ol education nt 2 6
(12.5) (14.3). (13.3) (21.0) (176)
lies 5
(14.3) (6.7) - (21.0) (14.7)
dence 2 2
(10.5) (5.9)
| go IS 2 2 4 4
(25.0) (28.6) (26.7) (1.8)
15 19 34 (100.00) (100.0) (100.0) (100.0) (100.0)
dren
Filhealth 4 children are school. One child had heasies at the age of 6 : at the age of 7. When 3mpted to admit him to
ool at the age of 8 the
sed to admit him. Acrents the reasons given hat the child Was Over
Children dropped Grand
medical treatment. Though the child was in a position to re-start his schooling after his recovery parents had not given enough interests to that matter.
Studies reveal that malnutrition is very high among the children in poor slum and shanty families in Colombo city. This weakens learning capacity of children and contributes to keep a large number of these children out of school.
Economic Review Maylune 1991

Page 47
Heim: ... -- EDUCATI - ܠܢ
Provision of mid-day meal in forms of biscuits, kola-kenda (and later granting money for mid-day meals) to school going children has not had desired impact on strengthening their nutritional status (18). Children in slums and shanties Constantly subject to illnesses and diseases mainly because of lack of pure Water and sanitary facilities. Due to prolonged ill-health or disease these children are admitted late or not admitted to school, their attendance is highly irregular and thus they repeat grades many times and drop out of school at early stages. Comparatively the handiCapped and disabled children are more in these slum and shanty settlements partly due to the poor nutrition of pregnant mothers andmothers negligence in child bearing, Almost all these handicapped and disabled children are not in school since their parents have not made attempts to send them to other schools specialised for these type of children.
Low aspiration, Negative feelings and indifference towards school education
Two school drop-outs or their parents Could not give any direct reason for the dropping out. However, during indepth informal discussions conducted With the parents the author realised that there was negligence, negative feeling and low aspiration towards the children's school education. Parent of a male child who dropped out of school at grade 5 expressed the idea that they could not obtain economical gains by giving further school education to their children. Tamil parents of another female child had decided to stop her schooling after she attained puberty at the age of 12 as they think female children should not go to school after attaining puberty.
Low aspiration, negative feelings and indifference of parents of slums and shanties towards their children's education have negative effects on their children's primary education. The low aspirations regards their children's education among the urban poor is associated with their low socio-economic conditions and their low aspirations towards upward social mobility. Their negative feeling towards School education is partly due to their bitter experiences such as
difficulities of admitting schools near-by and d tion taking place even priviledged schools a children, and due to th dence towards Schoo indifference towards e. with their low educat awareness of importa cation. And also this inc because they are bus related to their essent
Parents lack of know encourage and help studies and schooling Children's non Schoolat settlements. Negative larly of Muslim and these settlements tha should not study bey school level, and they school after attainingp female children away fore they complete eve
Ing.
Low aspiration and towards education ul negligence on a child" result of negligence these settlements do tions at all or send ag the schools to admit many cases, when pa their children to a Sch don not try another scil in certain instances reached the school ac ents do not know a handicapped children ted to the normal Sch try to admit them to as catering to them. All tribute to high incider admittance and late : among these childrer
Absence of parents family
Eleven children a mainly due to absen and disputes in their í 7 year old child had to School since his fati doing his job at a dist staying there. Child knowledgeable enot
Economic Review May/June 1991

ONE
their children to Je to disCriminain certain undergainst their poor Ieir lack of confiand education. ducation is linked ion and lack of nce of Child edulifference is partly y with problems a needs.
ledge on how to children in their also Contribute to tendance inthese attitudes particuTamil parents in female children fond mid primary should not go to uberty keep these from School bein primary school
negative feelings timately result in seducation. As a some parents in not send applicapplications late to their children. In rents fail to admit hool near-by they hool in the vicinity. when children dmission age parbout that. When can not be admitbol parents do not specialised School these things conCe Of non School chool admittance
or dispute in the
e not in a School ce of their parent amilies. Of them a hot been admitted er was a labourer, ant place and was 's mother is not gh to follow the
procedure of school admisison, and filling up of forms which are necessary when admitting a child. A father had left his four year old child alone at the child's grandmother's house when the child's mother died. Now the child is 9 years but she has not been admitted to School mainly as a result of loss of his parents. A ten year old child has not been admitted to school since his mother lost her way of main income after her husband had left his family when the child was a baby.
A ten year old child had stopped her schooling after the mother's death since the father had no interest to incur expenditure on the child's schooling. Another 10 year old child has stopped his schooling since his father had left him at his grand mother when the child's mother died. A mother of two school gong children (8 years and 10 years) had gone to Middle East as a domestic servant and as a result of that after about one year both children had stoped their schooling. However, father also had not paid enough intereston the schooling of these children. Another 3 children in two families had stopped their schooling (at the age of 8, 10 and 13 years respective) after their father had desserted their families. Their mothers lost their main source of income and therfore they could not afford children's school expences further. Another child had stopped schooling as a result of his father becoming drug addict.
A quite number of moihers in these slums and shanty settlements have migrated to the Middle East countries as domestic servants owing to their poverty and also due to easy access contracting foreing employmentagencies in the city. Most of the primary School going children in these families not only discontinue their schooling but also begin to engage in various activities unfavourable to themselves and society since they have been released from the attention of their mothers who had looked after them and their education. Specially the girls are compelled to stay at home to engage in domestic work and to look after their younger sisters and brothers in the absence of mothers.
it is common in these settlements that fathers, in most eases who had been the
45

Page 48
EDU
breadwinner of the family have left deserting their families. In the cases of these broken families and at the death of either prent or both school going chilldren in these families are compelled to discontinue their schooling due to lack of money to be spent on their schooling or because they have to engage in some
Work to Supplement family budget or
they have to engage in household activities.
Over the recent past number of chief households those who becoming drug addicts in these slum and Shanty Settlements have been increasing rapidly. They weaken themselves and economic conditions of their families very fast and lead family disputes constantly. This affects very badly not only their children's Schooling and concentration on studies but also on these children's mental health, personal development and day to day life.
Change of residence
After the communal riots took place in ashanty settlements at the Kelani bridge one family with two female School going children had shifted their residence to a same type of settlement at Baseline Raod (54 Watta),which was surveyed. After changing residence parents were not able to re-admit the 2 children to a school in the vicinity of the new settlements as a result of parental negligence and difficulty of re-admitting them to a school in the vicinity.
Considerable number of slum and
shanty families particularly, shanty
Table 11 Of the children who are attending school in the same those who have been admitted late to school by reasons for late admission
No. of Reasons for late admission late admittance
Poor economic conditions 3
(27.2)
incapacity of the formal school system
(9.1)
Physical disability of children 2
(18.2)
Change of residence 1
(9.1)
Non availability of birth certificates 4.
. (36.4) Total - 11
(100.00)
families change time to time with due to the distru floods, riots et children in Scho to new resident them to admitth in the vicinity o apart of these ch Some of them
School. Whenth tal area With sch to the difficulties a school nearby became early
However, this cause they areb Settlements with Such as putting
partly due to the schools in the
ments for their C
Non availabili
Parents could School due to r dren's birth Certi sidered necessa School admissio the birth certifica When their hous they were living i. Sedawatta few children have p misisonage. Par ried family expla had made a nu could not obtain their two childre children are stilli of 6 years and 8
COnsiderble these settlemen to schools duetc birth certificates have their birth number of reaso not paid enough their children's Certificates have slum and shant residents, birth victimised to th were destroyed families and att these settlemen
46

ΟATION
their residence from in the city limits mainly ctions of their house by 3. When families with of admission age come al areas it is difficult for eir children to a School new residence. Thus ildren admitted late and
are never admitted to
ey shift to a new residenool going children, due of re-admitting them to part of these children drop outs of school. situation is partly beusy in early days in new
other necessary Work up of new shelters and ir negligence in finding vicinity of new settlehildren.
y of birth certificates
not admit 4 children to on availability of chilificates Which are Conry documents for their n. One family had lost te of their two children e was set on fire when nanother settlement at years ago. Now both assed the School adents of another Unmarained that though they mber of attempts, they the birth certificates of in yet. However, these in School admission age years respectively.
number of children in is could not be admitted non-availability of their These children do not certificates due to a is such asparents have interest on registering births. children's birth been misplaced when
dwellers shifted their
certificates have been ! floods and fires, they at the disputes in the e various type of riots in ES;
۔۔۔۔۔۔
Physical environment of slum and shanty settlements
Studies had proved that there is strong co-relation between home environment and child's educational performances. It is rather difficult for a child to concentrate on studies in noisy and troubleSome environment of these Settlements. Non-availability of minimum number of furniture necessary for child's studies, lack of space and number of rooms and conjestion in these houses disturbchild's education very badly. Though slum and
shanty children are compelled to attend
only to the disadvantaged schools in the
city, environmental difference between eventhese schools and children's homes disturbs. the children's education at school.
Conclusion
Non school particiption rates are higher among children in slum and shanty settlements in Colombo city compared with
the National rate and the Sectoral rates
except that for the rural sector owing to a number of factors which are operating more seriously in these settlements against children's schooling. These factors at broader level are poor eco
nomic and social conditions, poor health
of children, lack of school facilites, parental negligence, disunity in families, change of residence, non availability of children's birth certificates, unfavourable environment and bad housing conditions.
Non school participation rates are
higher among children in shanties than
among those in slums in Colombo city due to the fact that factors contributing to their low school participationare operating more unfavourably in shanties than in slums,
in contrast to the national situation non school participation is higheramong girls than boys in shanty settlements 18 bacause compared to the national situation more girls in these settlements are not sent to School afteracertainage limit due to their parental attitude and social COUStOmS.
According to 1981 census non school
attendance rate among primary school
Economic Review May/June 1991

Page 49
.÷ EDUCA
going age chidren was higher in the Urban sector of Colombo district than in the entire Colombo district( 19). This is mainly do to the fact that slums and shanty dwellers among whose non school participation rates are comparatively higher are highly concentrated in the Colombo city (urban sector). Findings of this survey are supportive of this Conclusion.
However, according to some case
studies there are certain slums and shanty settlements where non school attendance rates among primary school going age children are lower than the national average. (20). While a very large majority of parents in slum and shanty settlements send their children to underpriviledge schools in the city a very small percentage of parents in these settlements who are having relatively beter educational, economical and SOcio-political capacity together with aspirations for upward social mobility is capable of sending their children to privilledged schools in the city.
Within Colombo city limit, between schools catering to the children from slums and shanties and schools catering to the children of the middle class and city elite there is a high dispropor - tion in resource allocation, partly as a result of that, there is a high educational, wastage too in the first category of Schools.
Though children from slums and shanties could not make full use of even the illequipped formal school facilities available for them children of upper middle class in the city make use of better school facilities supplementing these facilities by very efficient private tution system too (21).
Problems of charging various forms of school fees and consideration of birth certificate as a necessary document at the time when a child is admitted to
schools can be solved by giving neces
sary instructions to these Schools, and thereby non admission and late admission could be reduced to a certain level in these settlements in a very short term. By providing minimum amount of necessary physical requirements to these Schools to admit all the children seeking
admisison, and by e ents about the impo dren's education,
could be raised by a these settlements ir
Teachers should b Schools on a selectiv wilingness to work dren as a main Criter should be given asp with these children, a be granted incentive ties or remuneration to improve the teach ship and to retain Schools.
Understandably til the Children Who hav are neither literater while the majority c dropped out before (year 4) are not pro merate. Since the admittance and earl Comparatively high dren in these sett important to expand tion classes among will be a clear obsta dren's future individu for proper impleme ment programmesir
In the attempts of mal education clas children making kno and children abol educating them abo
- the classes, increa
classes, conducting places and times cor are equally importar
This priminary stu in detail, a more rep of children in prima and their parents livin houses in Colombo teachers catering to
(i) Analysis socii tural background shanty dwellings.
(ii) Analyse educat able for children if middle ClaSS familie
Economic Review May/June 1991

TION
ducatingthese parrtance of their chilschool attendance good percentage in
the medium term.
appointed to these e basis, taking their among these chilon. These teachers ecial training to work und alsothey should S in terms of facilisor both. This helps er-student relationchildren in these
he large majority of enot gone to school hor numerate at all, if the children who Completing grade 3 perly literate or nurate of non School y school leavers are er among the chillements it is more | non-formal eduCathem. Otherwise it acles for these chillaldevelopmentand ntation of developthese settlements.
expanding non-forsses among these wledgeable parents ut the classes and ut the importance of sing a number of g these classes in Invenient for Children it.
dy suggest to study, presentative sample y School going age gin slumandshanty city and schools and these children to:
O-eCnOmic and Culof these slum and
ional facilities availupper class and as and in slum and
shanty families in Colombo city.
(iii) Find out (a) the rates of various types of non-school participationie, non admittance, late admittance, irregular attendance, class repetition and early drop out; and (b) the total non School attendance rates.
(v) Find out and analyse factors contributing to various types of non-school participation and educational Wastage.
These rates and contributory factors should be analysed according to slum and shanty children, male and female children, early primary and late primary School going age children and attempts should be made in possible instance to comparethese ratesandfactors ofslums and shanties in Colombo city with that rates and factors of all island, Sectors total Colombo city and educationally disadvantaged Sub geographical location and Sub population groups. Finally this detailed study must try to present possible remedies which could be implementedinorderto reduce non school attendance rate in these settlements.
References
1. Government of Sri Lanka, (1978) Constitution of the Democratic Socialist Republic of Sri Lanka: 1978 Sec. 27.
2. World Bank, (1987) World Development Report 1987, Oxford University Press, pp. 63.
3. Department of Census and Statistics, (1951) Census of Ceylon 1946, Vol. 1 Part 2.
Idem, (1986) Census of Population and Housing 1981 General Report Vol. 3.
Idem, (1987) Labour Force and Socio Economic Survey 1985/86 Sri Lanka.
4. Idem, (1987) Labour Force and Socio Economic Survey 1985/86 Sri Lanka.
5. Ministry of Education, School Census 1987.
6. Department of Census and Statistics, (1987) op. Cit.
7. Urban Development Authority (UDA), Ministry of Local Government Housing & Construction, (1979), Slum and Shanty upgrading in Colombo Municipal Council (Unpublished Policy Paper)
8. Karunasena, A., (1988) Report on the Survey of Squatter Settlements in the city of Colombo, Colombo Muncipal
Council, pp. 4, 9, 128.
9. Non formal Education Branch, Ministry of Education (1984) Report on the Baseline Survey on the Educational Needs on Non School going children among Low income Groups in the City of Colombo, UNICEF, Sri Lanka, pp. 1922.
10. Idem, (1985) Report of Baseline Survey in the Educational needs of Non School going Children in three AGA Divisions in the Anuradhapura District UNICEF - Sri Lanka pp. 32.
Contd on page 59
47

Page 50
EXCHANGI
i FN
COLOMBO STOC
T Colombo Stock Exchange can lookbackonayearin which positive ellements held the upper hand. Price trends on the Stock Exchange were highly satisfactory. The Colombo Stock Exchanges' All Share Price index registered again of 204.90 points. This was the largest annual gain ever made. Despite the Stock Market boom and government measures inducing Companies to go public, the number of listed Companies and issuing activity has still not gathered momentum, Thus pointing to the fact that the private sector is still noticeably hesitant to engage in equity financing. See Tabel l.
Both Capital increases by way of rights issues and new listings have still not shown a significant growth, see table
.
In relation to the upward momentum in price trends and higher market capitalisation the growth of both Rights issues and as well as New issues remains low. If the market is to show sustained growth with price spreads more evenly distributed relative to value of individual stocks then there must be a growth in New issues to justify higher market capitalisations. Nevertheless, a perceptible improvement in the situation has been visible in the last few months. New is
The opinions expressed are the Writers own and does not reflect the
views of the organisation he works for.
48
sues have started one month or so tw. Ceylon Oxygen L. TOUrists & Hotelli Bayroo) were ov than a Week from Worthwhile to note Which remained c. following the the tionalisation polic With the Land Ref the subsequent quoted Companie number of tea, estates, began to mism as early a alone there Were ti and a total quantity
Period of Queta
Upto 1948
1949 to 1977 1978 to 1988 1989 to 1990
Total less-s-s-s
Source: Dept. of
Rig
Year | R
1988 3. 1989 s 1990 4.
SLSLSLSLSLSLSLSL
Source: CSE Annual Re
se
 
 
 

pckbrokers (Pvt) Ltd past wo years). 3. Strike
to pickup. In the past to new issues, namely fd. and International ers Ltd. (Beach Hotel ersubscribed in less the date of offer. It is that the share market Hormant in the 1970's n government's naby which took effect orm Law of 1975 and state acquisition of es owning a large
rubber and coconut
show signs of optias 1983. In this year wenty-five new issues of 170 million shares
valued at Rs. 1.7 billion were issued for public subscription. The largest offerso far attempted on the Colombo Stock Exchange was Rs. 383 million, by the Pewate Sugar Co Ltd. One likely reason for the rise in shareownership since 1980 is the high level of Confidence, due to the strength of the economy and personal finances of individuals. But one should not forget that investments in shares must compete with savings. Howeverthere is a growing acceptance of shares as a key part of many savings portfolios. It is for this reason, that the Stock Exchange considers thatthe Conduct of a fair and orderly market requires every listed company to make available to the public, information necessary for informed investing; and to take reasonable steps to ensure that all who invest in its shares enjoy equal access to such information. In this regard the exchange has specific policies concerning disclosure embodied in the Colombo Stock Exchanges' Rules 8.
ratedisclosure policies insection 8. While Sections I & II of the same document enumerates aspects concerning Criteria for Admission and Continuing Listing Requirements.
It may be pertinent to state here that companies want to be quoted on the stock exchange for several reasons. In the Report on the Survey of Public Quoted Companies of Sri Lanka 1984 by D. L. L. P. Jayawardane of the Department of Registrar of Companies the
Tage
ion Number Guoted Percentage
27 1483 57 31.3i 95 52.19 3. 1.64
182 100.00
Registrar of Companies,CSE Annual Report, CSE FactBook several issues.
Table II
hts issues, New issues during the period 1988 to 1990
ights issues No. of Companies New Listings No. of Companies
20:373.610 12 79,462,500 8 30,696,350 7 140,000,000 2 34,903,516 12 7,000,000 f
ports 1988 and 1989, CSE FactBooks several issues.
Economic Review May/June 1991.

Page 51
following are cited as some of the reasons for obtaining a Quotation. According to the findings of the survey, “The need to raise part of the capital" has been given by over a third (38.9%) as the principal reason that influenced them to seek a quotation. The second highest proportion of companies which obtained aquotation was influenced by the ideas of 'obtaining a ready market value for their shares'. The proportion of companies adducing this reason was in the region of 20.4%. While 16.8% of the companies sought a quotation with a view to broadbase the share structure in order to bring share ownership within the reach of the common man. Financial and tax incentives available to quotedcompanies has attracted 16.1% of those listed, see table ill.
I would like to further enlighten the reader with particular emphasis on reasons for obtaining a quotation.
1. The need to raise capital
Sri Lanka has a long history in company formation, share and share trading. The first Companies Ordinance in the then Ceylon was passed shortly after similar legislation in England in 1875. This period saw the establishment of the large number of coffee plantations by the British Community with Capital brought from the mother country, and private ownership being the predominantform of ownership. After a few decades tea replaced coffee as the principal crop when misfortune reached its culmination, with the destruction of coffee plantations due to a leaf fungus. The large increase in the plantations necessitated the formation of limited liability companies and com
TABLE
Reasons Agriculture Manufacturing
angi other industries
No. No.
1. To Raise part of Capital - 25 40 2. To Benefit from
Tax incentives 2 25.0 10 箕合.4 3. To Obtain a Ready Market
value for Shares 5 62.5ー二9 重4.8 4. To Gain. Access to
Markets- - - 1 16 5. To Broad Base Ownership 1. 12.5 15 24.6 6. To Facilitate the purchase - -
and Sale of Shares - - - خدے 7. Other - 1 1.6
Total 8 100.0 61 100.0 Source: Dept of Registrer of Companies.
FINAN
panies Were forme and London for the ing capital to develc The lack of capital tc. mercial activities lec Colombo Share Bro 1886, and the con floated were able to sary finance by we through this marke pioneered Coffee, te business as stores
always persons with their own. Therefore money from others. bank they needed st tees. They would n sets but a bank coul non-existant plantati formed companies of the Venture and of public. The Colom: Association allowed advertise the prospec and Sell their shares investors. This me funds to flow from t require it to those business. In this way business was raised mercial crop that wa economy by the Britis 1880's. Coconut was a part of commeric Through exports, the to earn sufficient for finance all essential
rice in which the Cou
sufficient before 188
independant era the dualistic export eco tWO Sectors; One Was isational structure
producing for the wo other was traditiona
REASONS FOR OBTANNGA QUOTATION FROM
Expert Banking fia heinport 3
Tracing
No. 8 No. . . . No.
4. 箕9.0。能 50.0 2
4. 19.0 - - . 1 7 334 - 1 soo
3 - - ܀ 14:3 ܙ 3
3. 14.3 c. - - .
21 100.0 2 100.0 8
Economic Review May/June 1991.
 

CE
both in Colombo Jrpose of harnessb the tea industry. expand their comto the birth of the erS ASSOCiation in panies that were obtain the necesof share issues The British who a and associated suppliers were not
much capital of they had to obtain If they went to a reties and guaranortgage their asd not finance a yet on. Therefore they O hold the property Fered shares to the
O Share Brokers ,
such companies to stus of their Venture to a wide range of chanism enabled hose who did not Who needed it for capital to launch . The other ComSintroduced to the h was rubberin the also organised as al domestic Crops. 2 country was able eign exchange to imports, including ntry had been self O. During the pre! economy Was a nomy divided into modern in organand technology, ridmarket, and the in both regards,
producing for the domestic market. The dynamics were extremely simple in this economy, and rapid growth was limited to the plantation sector, resulting in top sided development of the economy. The predominance of the export Sector, rendered the economy as a Whole vulnerable to fluctuations in the prices of the Country's three main exports; tea, rubber and Coconut in the World market. Although commercial banks were established mainly to Supply the requirements of the plantation sector before 1948, the independant government spreadbanking facilities into the sectors of the economy. The two major domestic commercial banks, the Bank of Ceylon and the People's Bank which are controlled by the government, owned 90% of the bank branches in the country in 1980. In the year 1904 the name of the Colombo Share Brokers Association was changed to Colombo Brokers Association. (CBA), and trading on a call over system with representatives of Brokers ASSociation. (CBA), and trading on a call over system with representatives of Brokersfirms continued upto 1984 June under the bi-laws of the CBA. The heyday of the Sri Lanka tea, rubber and Coconut plantations lasted for a century. between 1850 and 1950 and left behind a legacy of 266 quoted companies in the Colombo Share Market.
With the eclipse from a plantation economy to an industrial economy, and the new economic policies of 1977 and the re-emergence of the Private Sector as a dominant force in the economy resulted in the re-structuring of the Stock Market with a Trading Floor open to the investing public from 2nd July 1984.
Other than export processing units, there were few factories before the inde
THE STOCK EXCHANGE BY NOOF COMPANES
ce pyestent
No. %
250 33.3
重2.5 = -
12.5 ー -
375 - -
1252 66.7
100.O. 14 100.0
Other ga - 23 DSVe. ånd and Tourist Construction indsutry
No. % No % No. %
... --
5 35.7 22 61.1 s 35.8 : 65 38.9
1. 7.1 8 222 " 7.1,27 氰合.售
2 14.3 4. 11.1 5 35.7 34 2穹4
241 4.3 2 - -نه تیم .7.1 3. 21.5 - 2 5.6 -1 7.1 28 6.8
- - - - - 6 3.6 2 重4.3。一 - 二 - 3. 1.8
36 OO.O 36 1000 14 100.0 - 167 100.0
49

Page 52
| eo | FINAN
pendence of the country; a Cotton mill, a tile factory, two distilers, two match factories, and few engineering workshops dealing with estates. During World War II the colonial government and the private sector started several factories to produce basic consumer goods, which could not be imported due to the war. However the free flow of imports after the war discouraged most of these manufacturing units.
A large number of the prevailing industries were established during the last three decades or so. These industries include cement, tyre, ceramic, steel, paper, chemicals, petroleum, fertilizer, hardware, garments, large scale textiles and some food factories, sugar, flour milling and dairy products. All economic plans prepared for the country have recongnised the necessity of industrial development. Continuous expansion in this sector will be required in future to absorb the increasing labour force and to diversify and increase export earnings, because the development of agriculture has its own limitations. Expansion into foreign markets is necessary for greater industrialisation, because it will help to overcome both the foreign exchange problems and the limitations due to the Small domestic market. Most of the manufacturing industries in the country were started after independence in 1948 and are the result of the government import substitution programmes.
The new industrial strategy was introduced by the Ministry of industries with a view to restructuring the overall domestic industrial policy. This was approved by the Cabinet on December 27, 1989. The new industrial strategy intends to (a) transform the import substituting industry to an export oriented industry, (b) provide greater employment and income opportunities, (c) diversify the economy and stengthen the balance of payments and (d) ensure a more equitable distribution of income and Wealth. The strategy also includes policy measures aimed atmobilising resources for investment and exports; encouraging foreign and local investments; reforming public enterprises; promoting a competitive environment; establishing linkages between large and small industries; promoting research,
training and marke administrative obsta production and expt
In recent months encouraging revival the Colombo Stock benefit of both save In the past five years change has raised success. In addition years have also See enjoying a specta their capital base sues. A rights iss of shares made to ers in proportion to for the purpose of ra for the company. Rig fore offered at a pric the market price of e erwise there would shareholders to acc there is no obligatior to accept the offers lapse, Furthermore renounceable whic holder Can Sell or tra does wish to take it can be traded on specific period. A funds raised by a ri versial, there areas Companies which util in this manner such to keep leverage a benefiting from th having to borrow at eSt.
2
Whilst rights issues companies wanting tali, new capital issit by new companies known local or forei in the case of joir private Companies V established and Wi floating (selling) a on the market. Ther in which the share ( quoted for the first Exchange:
(a) an issue by pri
)
(b) an offer for sal (c) a placing
)
(d) an introduction
50
Seba4

ICE
ting and removing cles to investment, DrtS. there has been an of capital raising on Exchange, to the and entrepreneur. or so the Stock Exmoney with great to new issues, these n many Companies cular expansion of by Way of rights isJe is a new isSue 2xisting shareholdtheir shareholdings aising further capital hts issues are therebe which is less than }xisting shares, othbe no incentive for :ept the offer. Since on the shareholder so he may allow it to a rights issue is n means the shareansfer his rights if he hem up. The rights ihe exchange for a though the cost of ghts issue is Controsignificant number of ise this mechanism. Companies are able t its minimal whilst he advantage of not high levels of inter
3 are made by quoted to expand its capiues are made either promoted by wellgn interests (or both, ht ventures), or by which have been long sh to “go public" by portion of their share eare four main ways of a Company can be time on the Stock
OSpectus
e
Advice on new capital issues - the form of capital, the amount that can be raised, the different methods of issue, timing, preperation of the prospectus, application for quotation, issue ex
penses, underWriting etc. can be ob
tained from members of the Colombo Stock Exchange, development banks and merchant banks. Most public issues are of ordinary shares. Companies applying for quotation of ordinary shares are, as a general rule, expected to meet the following requirements:
(1) Have a paid up capital of at least Rs. 5,000,000/- (ii) The following percentage of the issued capital should be in the hands of the public depending on the Category to which the company belongs:
Below Rs. 10,000,000 40ھی۔%
Rs. 10,000,000/- to
Rs... 25,000,000/ -30% Above Rs. 25,000,000
-25%
When complying with this requirement the following are to be excluded:
(a) Holding by parent, subsidiary or associate Companies,
(b) Holdings by Directors, members of their families and/or their nominees.
2. Obtaining a ready market value for shares
The price of shares of a company on the secondary market is determined by the simple forces of demard and supply — what buyers will pay and sellers acCept. The rewards of investment are not always in the form of dividends. If the price of a share rises between the time of purchase and the time of sale, the investor makes a capital gain or profit. This would enable major shareholders to sell a portion of their holdings in order to invest elsewhere.
3. Financial and Tax incentives available to quoted companies.
At present all Public Quoted Companies are subject to income tax on profits at a concessionary rate of 40% (as opposed to 50% applicable to other companies), provided it complies with the following requirements:
Economic Review May/June 1991

Page 53
سے۔
(1) The number of persons registered as shareholders of the company should exceed 200. (II) No five persons together should hold directly or through nominees more than 60% of the total issued share capital of the company.
Additionally shareholders in listed companies have the following tax benefits:
(1) Capital Gains arising from the sale of shares in a Public Quoted Company will not be liable for taxation if the sale occurs after a holding period of one year.
(II) Dividends distributed on or after 1st Arpril 1991 by a publicquoted company to its shareholders would not be subject to any withholding tax thereon.
(l) The 15% withholding tax would however continue on dividends payable to non-resident shareholders.
4. To broadbase share ownership
Almost every entrepreneur has a dream that he will be able to build up his own business as a private Company, and then, because of its success and opportunity for further growth, be able to sell it to the market. For many the happiest solution is to find large numbers of individuals prepared to buy a total stake, of say 40%, so that the original founder and his family may retain control, while utilising the cash generated by the sale for a different venture. This is possible because the Stock Exchange acts as a financial intermediary in raising money for business and enterprise. It has developed from two complementary economic needs - an organisations need for funds and an individual's need to invest his surplus money efficiently. The result is that surplus money is invested in organisations which need it. Therefore astrong advantage to an expanding business in being listed on the Colombo Stock Exchange is that the company attracts unsolicited funds. If investors think that the company is doingwell, any number of investors will buy its shares.
The need for a second board?
Dr. Darin C. Gunasekera in his article titled "The Provision of Capital to Stock
FINAN | ܗܘ کے سرع
Exchange Listed C that "167 listed com for only 47,341 jobs amounts to an issue vintage rupee of Rs. This is a high per job of the national econd domestic Company gests that the quote high capital intens Lankan Commercial ally confirms econor Market was being measures that made and provided Gove ments to increase re we diverted national market where capita ally speaking impor modern buildings we
| am of the view til evolved to be what acceptability orden ensuring marketabil tant that risk capital to medium and Sm via the Stock Exch because this sector cantly towards the CC therfore has the gre growth in the long companies will not m ria set out for large quires funds to finant UCt Where inCome Ca to flow. It may be a establish a secondb. tion on size for Car and for ongoing oper at least one years support of its entry to
GLOSSARY
Al Share Price index measures the State based on the performa
Broker - An agent W and Sales between ott mission (brokerage).
Broadbase - To spr
among more individua
Public Company -
persons associated fo by subscribing their na dum of association a?
requirements of the
registration.
Economic Review May/June 1991

companies” wrote panies accounted ;. This incidentally d capital of various : 128,000/- per job. cost both in terms my and by general standards. lt Sugld companies are ity end of the Sri | sector. This actunic logic. The Stock promoted by tax : cost of capital low 2rnment enhanceturns to capital. So resources into this l intensity - generted machines and as much higher."
nat the market has it is purely due to and for shares thus ity. Yet it is impor
is made available all scale industries hange. Particularly contributes signifiJuntry's output, and Batest potential for term. Since Such heet the listing Criter ones, but still reCe a projector prodnsoon be expected timely measure to oard with no restrichdidate companies ation but must have financial records in the second board.
- Statistical tool that of the Stock Market, ance of shares.
ho makes purchases ner parties for a com
ead share ownership is.
Any seven or more or any lawful purpose mes to the memoran
nd complying with the
Companies Act after
Private Company - In the case of a private company two or more persons are sufficient to incorporate the Company.
Listed/Quoted Company - These are public companies whose shares are available for trading at the Colombo Stock Exchange.
issued Shares/Capital - issued is that part of the authorised capital that the company has already issued to the public for subscription.
Dividend - The distribution of usually part of the profits at the discretion of a company's board of directors.
Diversification - Spreading investment among different shares of different companies in different fields. Diversification is also offered by the shares of several individual Companies because of the wide range of their activities.
Leverage - The effect of fixed charges (ie. debt interest or prefered dividends, or both) on per share earnings of ordinary shares. increases or decreases in income before fixed charges result in magnified percentage increases or decreases in earnings per ordinary share.
Market Price-The list price at which a share sold at the trading floor of the Colombo Stock Exchage.
Par Value - The stated face value of a share, expressed in rupées pershare. Par value of an ordinary share usually has little relationship to the current market price.
New issue - An offering of shares sold by a company for the first time.
Offer - The lowest price which a person is ready to sell; as opposed to bid, the highest price at which one is ready to buy.
Rights issue-A temporary privilege granted to existing ordinary share holders to buy additional shares of a company.
Prospectus - A legal document which describes shares being offered for sale to the public and various particulars concerning the project or enterprise.
Stock Exchange/Sharemarket - is the market place for issued shares which are tradeable. New issues are offered to the public via the Stock Exchanges' primary market.
Shareholder - A person whose name is
registered in the records of a company whose shares he holds.
Conid on page 59
5

Page 54
BEIJING — China's bOOm-buSt eCOnomyis booming again. Production, ConSumption, Wages and bonuses are all sharply higher, but inflation, brought under control last year, is rising again, according to official reports published over the Weekend.
The official media call the data good news, but some economists have said that China's unwieldy economy could become overstimulated and lurch out of control again.
"The Worry is the government is pouring too much money into the Wrong places," an economist said, "and inflation could get out of hand".
Retail sales, squeezed into stagnation last year by a tough austerity program, jumped 14 percent in the first two months of 1991 against the same period in 1990, the Xinhua news agency said. Retail prices in January and February rose 4.5 percent from 1990 levels, more than twice the average rate for all of last year. In 35 large and medium-size cities, prices jumped 6.4 percent in the two-month period.
Unprofitable state-owned enterprises, many of which already have huge stockpiles of unwanted goods, produced 12.2 percent more in January and February than they did last year at that time, the agency, quoting the State Statistical Bureau, said. ' -
During all of last year, output of stateowned industries grew only 2.9 percent. Production by large and medium-size enterprises grew 14.3 percent in the first two months of the year.
Total wage volume grew 14.6 percent, bonuses jumped 15 percent and government income soared 23.9 percent, good news for officials worried about the bur
den ofbailing outind ing consumers agai
The Economic in China's exportengin selling $8.04 billion seas in January anc Cent more than int year. Imports rose billion in the period.
The bad news in mists and analysts the good news was ment's pouring Crec particularly in the la
Economists quotec problems in econo
BEIJING - China specialzonesto er ogy, the official Chi
The zones will be economic zones in have attracted foi preferential regula said China's Cabir new zones, but it c would be.
The "special sc zones" will be a
52
 
 

ustries and subsidiznst price rises.
formation Daily said Le continuedtObOOm, worth of goods overd. February, 31.9 perhe same period last 1.7 percent to $6.2
the reports, econosaid, is that much of due to the governdit into the economy, st quarter of 1990.
d by Xinhua said that mic performance in
cluded the money supply rising too quickly and the issuing of large numbers of bank notes. The agency did not give details, but officials have said that bank loans in 1990 jumped in value by 22 percent, far above the 5 percent the economy as a
whole grew.
Inflation, while more than double the 2.1 percent in 1990, is still far below 17.8
percent in 1989.
Western diplomats and Chinese economists said the government was very concerned that prices not get out of hand again, Prodemocracy demonstrations and unrest in 1989 followed inflation that reached 30 percent in cities.
"They'll be O.K. if they can keep inflation below double-digits," a diplomat said.
In another economic report, the official Beijing Review magazine said that by the end of last year the program of economic retrenchment had eliminated 35.2 percent of companies in existence in 1988.
is ready to start 20 courage high technolIna Daily said recently.
a based on the special southern China, which reign investment with
tions. The newspaper
het would approve the id not say where they
ience and technology major part of China's
Courtesy - international Harald Tribune.
economic restructuring, it quoted Song Jian, the minister in charge of the State Science and Technology Commission, as saying.
Existing special economic zonesinclude
Shenzhen and Xiamen, and the government has also been promoting development of Pidong, near Shanghai.
Meanwhile, cities in northeastern China are aggressively wooing South Korean investors.
Economic Review May/June 1991

Page 55
Thilan Wijesingh
Formerly Senior Consultant at Coopers & Lybrand (Management Cons
and since January 1991, Manager - Planning & Special Projects at S
1.0 introduction
A. present the diamond cutting industry is inadepressed state. Worldwide Over-capacity in cutting and polishing, Combined with increases in the price of rough diamonds and weak demand in the traditional retail markets of USA and Japan, and more recently, the Gulf Crisis, have contributed to the present situation. The industry is now in the process of rationalising itself to meet the new challenges ahead.
This article broadly analyses the events leading to the current situation and attempts to assess its impact on the diamond cutting industry in Sri Lanka and presentsstrategies for promoting investments with this sector.
2.0 Brief Overview of the Diamond
Cutting industry in Sri Lanka
The evolution of diamond cutting into an important domesticexport industry in Sri Lanka can be considered a result of the following factors, listed according to the probable order of importance:
(a) an innate ability to obtain the best "make" from rough diamond.
(b) good eyesight Combined with a high degree of manual dexterity.
(c) high literacy rate and the ability to follow simple instructions - i.e. high degree of trainability.
Economic Review May/June 1991
(d) low wage structure
in general, it can centuries old history in artisan culture, combin average literacy rate O helped foster within Sr force ideally suited for
The estimated expor Sri Lanka’s diamond ir below:
Year
(R:
1982 1983 1984 1985 1986 1987 1988 1989
Source: Export Develo
Diamond exports h about Rs. 220 million 3225 million in 1989, portDevelopment Boa represents an exchang Compound annual ave of about 34% for the pe Lanka had about 300C average output from operation totalled arou
i per month. Although S
has been accomplishe
 
 
 
 
 

ultancy Division) ampath Bank,
be stated that a gemming and an ed Withanational f over 85% have i Lanka a labour diamond cutting.
t performance of hdustry is shown
_, 4 Exports S. Milion)
219 449 273 434 1215 1248 1629 3225
pment Board.
ave grown from in 1982 to Rs. according to Exd statistics. This erate-adjusted rage growth rate riod. In 1989; Sri Cutters, and the 12 factories in nd 25,000 carats ignificant growth d in the past, Sri
鑫「事轟**
Lanka's output still remains an insignifiCant O.25% of the World's demand for cut
and polished diamonds, estimated at
over US $ 20 billion per year.
For the sake of comparison, if the performance of the garment industry is compared with that of diamond cutting,
although no correlation exists between
the two except they have both been high growth export industries in Sri Lanka, it can be shown that garment exports far exceed diamond exports in terms of value as well as employment generated. In 1989, over 350 factories were operating in Sri Lanka exporting about Rs. 17 billion in garments, more than 5 times the value of diamonds exported.
The parallel which can be drawn here is that in considering the relatively superior skills in diamond cutting available in Sri Lanka, and probably a greater Comparative advantage in Comparison to garment manufacture, the export growth performance of the diamond industry during the last 3 years has been somewhat limited. Most of the real growth in
exports recorded appears to result from
existing factories expanding production rather than new entrants into the business. In an industry which held much promise for growth in the 1980's only
about 11 factories commenced operastions during this decade. Hence there
appear to be significant barriers to entry into diamond Cutting from the point of view of local investors.
Briefly, the main barriers to entry into this business are given below:
(a) extended learning curve in achieving full productivity, and the need to rely on expatriate trainers at very high cost.
(b) limited success by Sri Lankan investors in identifying joint venture partners and/or suppliers of rough and distributors of polished goods in major trading centres such as Antwerp and Tel-Aviv. In comparison, Indians are in a favourable position to obtain reliable supplies of rough andmarket finished goods due to a large Indian Community taking up residence in Antwerp durig the earl
1970's,
Today more than 100 Indian families
have at least one member residing in
53

Page 56
Indi
Antwerp, thus forming an invaluable link between the 4trading floors in Antwerp and the cutting factories of India. Similar family ties have been established between the Jewish community in Antwerp and cutting factories in Israel. Therefore the traditional family ties prevalent in the business automatically places a potential Sri Lankan investorata comparative disadvantage in establishing links for supply and marketing.
(c) the difficulty in raising working capital financing. Foreign suppliers, particularly in the case of new factories, often impose the burden of purchasing rough outright on local investors and require up to 60 days credit for marketing. Thus large sums of working capital financing are required, with banksgenerally requiring 100% security cover on their exposure. (Diamond stock is usually not accepted as collateral).
(d) multiple foreign exchange conversion and bank charges. Exchange Control regulations have also affected the industry since diamond exporters, other than the few 100% foreign owned Companies, are required to carry Out multipleforeign exchange conversions when effecting imports and exports. These multiple dollar-rupee-dollar conversions resultinadditional bank charges which erode profit margins available to cutting factories. N
The above factors, combined with the inherent fluctuations in the diamond market have contributed towards inhibiting the growth of this industry in Sri Lanka. In the following paragraphs, strategies to enhance the Country's Competitive position are discussed.
3.0. The Diamond industry - The
Global Situation
3.1. Overview
After nearly 9 years of steady growth in turnover and profits, the diamond cutting industry is presently undergoing difficult times.
Israel, which processes almost half the value of the World's rough diamonds has seen a 20% decline in carats processed this year as compared to 1989.
Some of the country's 700 or so facto
54
ries have either cli
workers or moved ness. India by fa fected by the pre the industry. In a 800,000 workers rectly involved ir least 200,000 are
The following analyse the unde slump and prese the future of this
3.2Factors Affe Industry
The present si mond cutting indi a result of a seri the De Beers di factories and ret Given below is a the event leadir ation. TheSe eV lated, are not quence in which
Expansion in li
The mid to profitable years with the expan economic grow lar, industrialists India Were sna profits which en
(a) expand cap
(b) purchase sources other t pliers at highel stockpiling anc Due to strong in ans Were ablet by paying pre diamonds.
The above sit ply of low qual being dumpec eventually cont all depression medium sized
Increase in til monds
Partly top st in cutting Cape

ustry
Osed down retrenched into the trading busiir has been worst afsent recession facing Country in which about are directly or indidiamond cutting, at reportedly out of work.
paragraphs attempt to }rlying reasons for this 2nts the prognosis for industry.
cting Cutting
lump faced by the diaustryfór smallstonesis es of events, involving amond cartel, cutting all markets in general. a summary of Some of ng to the present situants, although inter-renecessarily in the se
they occurred.
hdia
ate 1980's were very for the cutting industry sion fuelled by strong h worldwide. In particucutting and polishing in king sufficiently large abled them to:
acity, and
rough diamonds from han their traditional sup
prices for purposes of
cutting and polishing. arket demand, the indip make adequate profits mium prices for rough
lation led to an oversupty, cheap Indian goods
into the market. This ibuted towards an Overprices for most small to diamonds.
e Cost of Rough Dia
m the Indian expansion city and stockpiling, the
Central Selling Organisation of DeBeers increased prices of rough diamonds by about 25% and 5.5% in 1988 and 1989 respectively.
Slackening of Demand in Major Retail Markets
Japan and USA account for more than 65% of global sales in cut and polished goods. The fall of the yen against the dollar and the financial turmoil in Tokyo combined with a weakening US economy has contributed to the general slowdown in demand.
General Shift in Consumer Prefer
enCe -
With the glut of badly made Indian goods resulting in an overall depression of prices, consumers found small good of a better "make" affordable and perceived them as a betterinvestment stone (the "make" of a diamond refers to the quality of the cut and clarity). Therefore, in broad terms the market demand for Small diamonds shifted towards better quality, with customers being more selective of goods purchased.
The combined effect of the above factors has been the erosion of profits margins to cutting factories and an ensuing rationalisation of cutting capacity
through closures and lay-offs.
The net result has been that cutting factories have been on their own accord forced to obtain better market prices for finished goodstoremain profitable. The only way of achieving this desirable end, in an environment of increasing prices of rough and slow down in demand intraditional markets, has been to produce a better quality stone and move up-market.
Invariably this would mean better production management and the use of improved technology which automatically places the Indian industry at a disadvantage since it functions primarily on a sweat-shop/cottage industry type model, making quality control difficult.
4.0. Outlook for the Diamond Cutting
Industry in Sri Lanka
4.1. Overview
As pointed out previously, the diamond Cutting industry is at Crossroads.
Economic Review May/June 1991

Page 57
With significant shifts in consumer demand patterns, increasing prices of rough and over capacity in Cutting the industry is now undergoing a process of rationalisation. Analysed below is Sri Lanka's position vis-a-vis this changing environment.
4.2 impact on Local Factories
In comparison to India, the impact on local factories arising from adverse trading conditions has been minimal. This has been primarily due to the Sri Lankan diamond industry functioning according to an "organised factory" model as opposed to the "cottage industry" model prevailing in India.
The Organised factory concept allows Sri Lankan facilities to consistently produce better quality goods which are marketable in relation to Indian goods of poor"make". Thus profit margins to local factories, although Comparatively less than margins obtained during the boom years between 1984 and 1988, have been adequate to remain in business.
In contrast, the cottage industry model
makes quality Control virtually impossible since a single Supplier usually supplies rough diamonds to literally dozens of sweatshops; the supplier then receives finished goods which are of in
consistent quality, thereby not being .
able to Command premium prices in the marketplace. Furthermore, these sweat shops are often poorly lit, lacking in air conditioning, with equipment rarely maintained and balanced, and workers are often plagued with poor eyesight and poorly remunerated. The combined effect of these factors is a poor quality product.
However, virtually all Sri Lankan factories operate as well organised production Systems, with airconditioning, sufficient lighting and a relatively comfortable working environment. Very often quality Control standards are stringent. Therefore loss of jobs have been marginal resulting from the currentevents in the market place. Nevertheless, it is reliably understood that about 200 to 300 cutters have either been retrenched or have voluntarily left their jobs due to the Current industry slump. Contributing
Indus
to this has been the in stringent quality stan the daily output of the ping below acceptabl means lower earnings linked to productivity
The above suggestst factories are better pete in the marketplac counterparts. Hence it Sume that if the lnd remain Competitive, C ing operations needt an organised producti
However this is not tion in the near term Control laws, taxes bureaucracyprevailing ent Cottage industry Indian diamond trader operating through th Furthermore, channe diamondsin and outo established Over Seve is unlikely that there w shift in the overall stru industryintothe organi A more likely event we paring down of the co eration to manageable ally thousands out of manently.
In the final analysi margins to the cuttir meant that the Israeli it due to high labour CO: industry due to poor ation presents an attra for Sri Lanka to pene further to pick up th industry, since under conditions for small st competitive position is its low wage structure for quality. Hence an
țhat Sri
Economic Review May/June 1991
 

try
roduction of more lards resulting in se Workers drop2 standards. This since wages are and quality.
hatthe Sri Lankan
quipped to Comethan their Indian is realistic to asan industry is to utting and polish) be structured as On System.
be a realistic opdue to exchange and a frustrating in India. The presmodel offers the an ideal means of le black market. ls for smuggling findia have been ral decades and it ill be a significant cture of the Indian Sedfactory model. ould be the Overall ttage industry op2 levels with liter
employment per
s, the erosion of ng industry has ldustry is affected sts and the Indian quality. This situ|ctive opportunity }trate the market e slack in the
prevailing market ones, Sri Lanka’s enhanced due to and reputation argument can be Lanka's industry
ers such as Sri Lanka.
should be poised for expansion.
5.0 The Potential for Growth
Based on the above analysis, it is reasonable to assume that the cutting and polishing of diamonds in Sri Lanka has the potential to grow into a major export industry, generating significant gains in employment and net foreign exchange earnings. If Sri Lanka achieves a mere 5% share of the world's market for cut and polished stones, it can be roughly estimated that more than 60,000 would gain directemployment, about 20 times more than the present levels. Achieving significant growth within this export industry is made possible inconsidering that:
(a) it is generally acknowledged that the average productivity of Sri Lankan labouris superior to that of India, Thailand and China. *
(b) due to the inherent multiformity of diamonds, automation in cutting and
polishing is not expected to significantly
diminish the importance of manual labour in the long term.
(c) the rationalisation presently underway within the industry is expected toirreversibly enhance the competitive position of low cost, high quality produc
However, the above optimism does not necessarily lend itself to Sri Lanka embarking on a hastily executed large scale capacity expansion programme; it merely suggests that if properly planned, the potential exists for Sri Lanka, with its liberal exchange control laws, zerotaxation on exports, highly trainable labour and experience in operating large scale
organised factories, to become the major
growth centre for diamond cutting in the 1990's.
55

Page 58
Indt
The argument against Setting up new factories, based on the present industry situtation is that:
(a) a new factory's output during the initial 1-2 years of production is usually of a poorer"make" and lower yield due to the relatively lengthy learning curve inherent to diamond cutting; and as stated previously, the market for lower quality goods is Weak.
(b) due to Antwerp's general reluctance to supply new factories on a "cutting fee” basis, enhanced by the fact that Sri Lankans do not have ethnic links to the trading floors of Europe, new factories are additionally burdened with raising vast amounts of working capital finance (usually running into more than three times the cost of plant and equipment) and bearing the interest cost thereon.
Therefore factories commencing operations in the present business environmentare subjectto servere financial constraints through the combined effects of profit margin erosion, high finance charges and costs of expatriate trainers. In the final analysis, starting a new factory Currently would mean extraordinary losses during the initial years of operation; and unless the marketpicks up dramatically, getting started in diamond Cutting must necessarily be limited to parties with sufficient financial clout to withstand initial losses and those who are committed to long term profits and returns.
it is therefore natural to question as to what point intime a new Sri Lankan diamond factory can operate as a viable concern. The answer is as Son as the factory has adequately demonstrated to Antwerp that:
(a) it is owned and operated by individuals (preferaby family members) of impeccable repute and financial stability. (b) the factory has sufficient installed capacity, is well managed and its output is of a consistently good"make".
Once these attributes are demon
strated, the very supliers who initially.
would have required the Sri Lankan factory to purchase rough diamonds through them on COD terms and be paid
for polished whe to take the "risk diamonds, in ver cutting fee basis.
At present the traders who are Antwerp willing te sawn goods and pointers rough or from US $ 0.75 tc However supply factory having bee 18 months. Also Would be carried C output and produ as the financial st the owners. The la considering that is carried out larg mentary letters of tradition import/e: the exception rath
Because some ( Willing to supply quantities excee per monthon acU existing factories an equivalent of mondcutting, lite of potential foreig are lost to the CC can be roughly e. cutting and poli pieces a month ment for about 44 eign exchange about Rs. 50 mil
Hence Sri La conflicting situal and poor qualit many factory c India respective looking towards Cutting and poli
* * ever, Sri Lanka
producer has ir skilled operato Moreover, forei ally reluctant to located in Sri La ries being inhe from abroad, general prefere trading rathert
Nevertheless Antwerp are w
56

old would be willing of supplying rough
arge quantities on a
are many reputed lso site holders in upply to Sri Lanka, akeables of about 10 a cutting fee ranging US $ 2.00 per stone. s contingent on the operational for about exhaustive checks it on the quality of the ion methods as well ngth and standing of ter is necessisated in he diamond business ly on trust; and docucredit which prevail in port businesses are er than the norm.
sealers in Antwerp are rough diamonds in ding i00,000 stones tting fee basis, only to in Sri Lanka passing a“litmus test” in diarally millions of rupees in exchange earnings puntry. For example.it stimated that a factory shing 100,000 Swan would create employ10 persons and net forearnings would total ion per year.
ka's industry faces a on: high labour costs having contributed to DSures in Israel and s, diamond dealers are alternate sources for hing diamonds. HoWas a relatively efficient ufficient capacity and to meet this demand. h investors are generake equity in factories ka due to cutting factotly difficult to manage
k of family ties and
ce to make profits from in manufacturing.
2puted sight holders in
ng to enter into agree
--
ments with Sri Lankan investors on the following basis:
(a) new factories with unproven capability would have to purchase rough diamonds on COD terms from suppliers who will retain a brokerage commission of upto 2%. When cut and polished, the diamonds would be marketed by the same supplier who would again retain a commission of upto 2%. Exports from Sri Lanka would be on documents against acceptance with the period of the draft averaging aroeund 60 days. This means that the local factory would need to carry the burden of a large working capital financing facility to cover around 30 days of roughstock and 60 days of receivables. This model involves no risk to the supplier who would agree to supply rough and market polished at best prices prevailing in the market; his reputation in the trade would be the main yardstick available to the Sri Lankan investor to ascertain that the supplier is acting in good faith.
(b) once a new factory has established itself as a reliable manufacturer, usually possible after 12 to 24 months of operations depending on the quality of management, the Antwerp traders would willingly supply diamonds on a Cutting fee basis. Thus the need to tie-up local Working capital finance for diamonds is minimised. In certain cases the supplier may even take equity in the Sri Lankafacility to partially finance capacity expanSIOՈ:
Note that the transition from the first to the second model is a reflection of the supplier's willingness to reciprocate the "trust" placed in him and analogous to a successful courtship leading to marriage ldeally, a "mature" diamond cutting factory in Sri Lanka should be operating on both models. The first model enables the Sri Lanka factory to obtain a higher value added, particularly when market conditions are propitious. The latter allows the factory to expand production at a faster rate without the burden of obtaining enhanced facilities for working capital financing and offers protection. against market downturns.
Nevertheless, the critical issue this report wishes to address is that the road to
Economic Review May/June 1991

Page 59
achieving "matured factory" status is a difficult one, and which many Sri Lankan investors are reluctant to take in view of short term losses and other constraints discussed previously, it cantherefore be argued that a situation has arisen where Sri Lanka's private sector is unable to take advantage of apotentially lucrative long term business opportunity without the benefit of Government policy Concessions directed exclusively towards promoting this industry.
6.0 Government Policy issues
The incentives for developing the diamond cutting industry should primarily be directed towards minimising the barfiers and constraints faced by entrepreneurs during what can be termed as the "incubation period" of a new diamond cutting factory. That is the period from start-up, to having a fully trained contingent of workers required to qualify for receiving goods on a cutting fee basis, which under normal circumstances should not be greater than 2 years.
This report does not attempt to go into a lengthy discourse on the range of incentives which should be made available to the diamond industry, but highlights critical issues which need to be addressed when deciding on Government policy options for promoting this
sector. Considerationshould be givento
the following:
(a) loans at concessionary interest rates to finance the cost of expatriate trainers and exemption from the 25% tax on total emoluments for Such trainers. (At present the Export Development Board has a loan scheme for new factories to finance 50% of training costs, Carrying an interstrate of 5% per annum, repayable over 5 years. Ideally this scheme shold cover factories choosing to expand capacity as well).
(b) facilities to operate US dollar ac
counts though Foreign Currency Banking Units (FCBU) of local commerical banks, for the purpose of using export proceeds to pay for imports, thus avoiding multipleforeign exchange Conversions which result in excessive bank charges and erosion of profit margin. Permission to operate FCBU accounts,
though presently granted to companies
Industry
with foreign equity, shoi 100% locally owned d factories. This concessic benefit of lower interest critical factor affecting C in the diamond industry capital exposure is hig should replace the Ce nanced packing Credit S inefficient in the Conte of trade prevailing in th dustry. (Note that during 70's cheap interest we Israel's diamond indust edge over many of their and New York, who were ent on the changing sé mercial rates.)
萎
(c) establishing separ visions" within local CO Specialising in meetin needs of this sector. The Commercial banks in të Antwerp, TelAviv and Bo
Economic Review May/June 1991
 
 
 

d be granted to iamond cutting on has the added rates which is a }ompetitiveness where working gh. This facility ntral Bank refi
scheme which xt of the norms e Carmond inthe 1960's and is vital in giving ry a Cognpetitive ivals in Antwerp a more dependeasons of Con
te "Diamond Dimmercial banks g the financing a role played by he evolution of prnbay into finajor
diamond Cutting centres canot be emphasised enough. Schemes such as "imprest Systems", margin accounts and trust receipts have been used by commercial banks in these cities to facilitate obtaining Working capital finance. However the critical attribute required of bankers to the diamond industry, which is lacking in Sri Lanka, is a specialised knowledge of the business (valuation techniques, market trends) and that of the individual diamond manufacturer. (factory capacity, production techniques, Security systems etc.).
(d) extension of pre-shipment credit guarantees by the Sri Lanka Export Credit insurance Corporation (SLECC)
at a higher level than has hitherto been Offered to Cotihes export industries. A case can be inade that in yiew of the very high value of the imported input in diamond cutting, the insurance cover offered to cornercial banks under the Pre-ship
المر
57

Page 60
In
ment Credit Guarantee Scheme of SLEOC should be increased from 66-2/3 percent to 90 percent with a view to promoting this industry.
(e) creation ofa special task force consisting of representatives from the Diamond Manufacturers Association, relevant Government ministries and investment approving agencies and commercialbanks in formulating specific policies and guidelines in promoting this industry. The terms of reference of such a committee must include the carrying out of an indepth study of the functioning of the cutting industry in established and emerging centres such as Antwerp, Tel Aviv, Bombay, Bangkokand Beijing and recommending policy measures to promote similar growth in Sri Lanka.
in considering the above, it should be noted that Sri Lanka has not historically targeted policy concessions to develop one specific industry. Therefore, the implementation of these recommendations would result in representations by exporters that such measures should
necessarily benefit other export indus
t es as well. The following arguments can be presented to justify preferential treatment for the diamond sector:
(a) Historically, the growth in diamond Cutting and polishing and subsequently trading within the world's major cutting centres evolved as a result of Government policies specifically directed to promoting this industry.
(b) Diamonds being the most concentrated from of value among all traded commodities, the working capital exposure in relation to fixed assets employed is much higher than any export industry in Sri Lanka.
(c) in view of a lengthy learning curve where operators may take more than one year to achieve full productivity, expatriate trainers are required for a relatively long period of time at high cost.
(d) Very often net foreign exchange earnings as a percentage of net sales is presented as an important measure in qualifying for special investment incentives. This is a misleading indicator in the context of diamonds where value
addition in perc ranges from 8on the type of essed. Howeve earnings in fore mond exports exports due toth modity.
(e) The exp: quite apart from employment ca. ment of a majo. Sri Lanka, Sbrin! tional buyers an towards expand industry as well.
it should be in turing sector in E responded to the to low wage Co. i çomputerisinga
`--involved intrans
into cutand poli nology is known ductivity by 4 ti methods. Howe automation is hi cannot be usec diamonds and brilliant cut only tance of the lab
Nevertheless term, there is nic that relatively Continue to be a automated tec costly and limi Therefore, one Lanka is to rer long term, this the necessary manufacturing that profits can nologies being 7.0 Conclusic
Thailand anc newgrowth ce ishing incompe if Sri Lanka is ' parativeadvant tries, the Govel cessions to ni through its incu to above. The Sential in Consi nature of the Would eventua
58

lustry
ntage terms generally .0 percent depending ough diamonds procin absolute terms, net gn exchange from diacan far exceed other a high value of the com
nsion of this industry, generating significant
lead to the establish
diamond exchange in ying together internadisellers, and contribute ng the jewellery export
oted that the manufacelgium and Israel have loss of comptitiveness untries by successfully lmost all the processes forming diamond rough shed stones. This techto increase labour porb 8 time that of manual verpresently the cost of gh and this technology on all types of rough imited to producing the 1. Therefore the imporour input prevails.
in the medium to long warrant for assumption cheap labour rates will vailable in Sri Lanka and nology would remain ted in its applications. should expect that if Sri nian competitive in the industry should be given incentives to expand its base in the short term so be invested in new techevolved.
China are emerging as tres for cutting and poltition with Sri Lanka and, o fully exploit her comage overthese two counnment must extend Conrture the local industry pation period as referred e COincessions are fesering the inherent closed diamond business and
ly result in greater for
eign investment in this sector.
if the history of cartelisation is ana lysed for this century, without any doubt, the De Beers diamond cartel can be considered the most successful. To enter into this exclusive "fraternity" of diamond cutters and traders, one must necessarily prove oneself worthy of "membership". Upon entry into this diamond fraternity, the cartel treats those falling in line with its policies and guideline benevolently, ensuring that traders and Cutters shall make adequate profits in the long term, though short term windfall profits and losses are inevitable. Even the slightest violation of the "trust factor", all important to the functioning of this industry, would mean expulsion from this inner circle and re-entry into the business could literally take a generation, if at all. Similarly traders prior to benefitting from the supply of rough on favourable terms, and equity participation.
Therefore even if government policies are in place to assist local entrepreneurs during the so called incubation period, it can be qustioned whether Sri Lanka's private, sector has the resolve and the requisite management skills (having been pampered on industries and business opportunities yieldingshort terms profits) to weather the initial losses in anticipation of longterm profits, characteristic to diamond cutting. In the absence of ethnic and family ties to the major diamond trading floors of the World, there are no shortcuts to success in this industry.
Conid from page 20
References
1. Statistical abstract 1985, Dept., of Census and Statistics,
Sri Lanka 2. LabourForce and Socio-economic Survey-1985/86, Dept., of Census and Statistics, Sri Lanka, P.31 3. Statistical Pocket Book of the Democratic Socialist Repub lic of Sri Lanka, 1989, Dept., of Census and Statistics
bid. P. 15 Ibid. P. 44 Department of Examinations, Sri Lanka Department of examinations, Sri Lanka Tilakaratna, S., The Post 1977 Economic Reforms: An Assessment, Economic Review, April/May 1988, P. 38 9. Socio-economic trends and patterns in Sri Lanka, Central
Bank of Sri Lanka, 1956, P. 56 10, Tilakaratna, S. Some Factors in the Current Economic
Crisis, Economic Review, July/August 1989, P.9 1i, Ibid. P.9 12. Economic Performance, Problems and Policies in 1989, Central Bank Annual Report 1989, P.1 - 13. Tilakaratna, S., The Post 1977 Economic Reforms: An Assessment, Economic Review, April/May 1988 P. 37 14. Sri Lanka's Economy in 1988, Economic Review, April
May 1988, P, 11. 15. Sri Lanka's Economy in Crisis, Economic Review, July/
August 1989, P.3
Economic Review May/June 1991

Page 61
Contd from page 39 tions such as Teaching Hospitals, Specialised Hospitals and Provincial Hospitals as at present. The present Base Hospitals will remain as they are with the number increased to have One Such hospital for each Administrative District. To be inline with this geographical basis, these hospitals will be redesignated as District Hospitals. However, in districts that have anexisting Provincial Hospital (General Hospital) it would serve the function of the district referral Centre. It is possible due to local variations and the policy of not downgrading any existing institutions certain districts Would have more than one such institution.
They will at least provide general medical care as well as medical care in
the main four specialities and will be the
basic referral units.
The model worked out is being implemented in 33 AGA divisions with the assistance of the Asian Development Bankatacost of US 9 million. The whole programme is estimated to cost US$ 170 million. It is to be implemented over a period of 10 years.
Heal
Progress in imple
One of the most si cal steps taken to\ ment of the HFA go establishment of th Development Netw National Health CC tional Health Devel are two important NHON.
The National Heal tablished in March 1 manship of the Hon. Hon. Ministers from istries. This Counci leadership necessa tion of HFA activitie:
The National H Committee is Chaire Ministry of Health a bers the secretaries represented in the Council and a few s related departments The 3 tier model tha the delivery of PHC assure Comprehens tics, referral and su.
Conta from page 47
11. Department of Census and Statistics. (1987)
op. cit
12. Non-formal Education branch Ministry of Education (1985) op. cit. p. 32.
13. Hemachandra. H. L. (1985) "Primary Schooling in slums and shanties: A Case Study of Four Slum and Shanty Communities in Colombo" Sri Lanka Journal of Social Science, Vol. 8, No. 1 and 2, June/Dec. 1985. The Natural Resources Energy and Science Authority of Sri Lanka (NARESA). pp. 75-78.
14. Ministry of Education, School Census 1986.
15. Non formal Education B (1984) op. cit, pp. 22-24.
16. Ministry of Education, Sch
17. Non-Formal Education Br op. cit, pp. 22-24.
18. ldem (1984) Report of B tional Needs of the Non Sch00 income Groups in the city of CO pp. 24
Contd. from page 51
Capital Gain or Loss - Profit or loss resulting from the sale of a capital assert.
References:
Report on the Survey of Public Quoted Companies of Sri Lanka 1984 - Department of Resistrar of Companies Colombo - 2. Management Accountancy in Sri Lanka by A. H. M. Bennett (Volume I), 1987.
Rules & Regulations - Colombo Securities Exchange. Colombo 1. A Macroeconometric Model for Sri Lanka by A. G. Karunasena, Central Bank of Sri Lanka. Colombo Securities Exchange (Gte) Ltd - Annual Reports 1988 & 1989.
Economic Review May/June 1991
CSE FactBooks - Jul
Subsidiary - Compal by another company Ownership of the majc
Underwriting-Thep. share by an investme)
Flotation - issue of s
Asian Stock Markets, Anthony Rowley - 19:
Central Bank of Sri L 1989.
 
 

h
entation
nificant and practiards the achieveal is the successful e National Health ork (NHDN). The uncil and the Na
pment Committee
onstituents of the
h Council Was eS180 under the chairPrime Minister and Health related Minprovides political sy for implementa
. alth Development d by the Secretary, hd has as itS memof all the ministries National Health senior' officials from
twas developed for D was expected to ive coverage, logispervising support.
The proposed structure can be looked
at as a pyramid. See Figure 1.
The model worked out has been implemented on a pilot basis in certain AGA divisions.
To further strengthen the preventive health services, it is proposed to appoint one medical officer of health per AGA division, and it is hoped that by 1992 one such officer would function in each AGA division, with a total of over 280 Medical Officers of Health in the island.
The PHC proposals calls for community participation and involvement as a key strategy. Active involvement of people individually as well as collectively for solution of health problems is consideredindispensable, andmoreand more emphasis is being placed on community participation through involvement of volunteers and community leaders at grassroots level in the implementation of health programmes.
It is anticipated that by these measures deficiencies stated would be overcome to a considerable extent by the year 2000 or before and that essential health care would be provided to the entire population on a continuing basis.
anch, Ministry of Education
ool Census 1985.
anch, Ministry of Education,
aseline Survey on the EducaGoing Children among Low lombo, UNICEF - Sri Lanka,
19. Department of Census and Statistics, Census of Population and Housing Sri Lanka 1981.
20. Hemachandra, H. L. Primary Schoolig in Slum and Shanties. A Case Study of Four Slum and Shanty Communities in Colombo, Sri Lanka Journal of Social Science, Vol. 8, No. 1 & 2, June/Dec. 1985. The Natural Resources Energy and Science Authority of Sri Lanka, pp. 70-71.
20. Idem, (1982) "The Growing Phenomena of Tuition Classes: The Perceived Reasons and some Latent Social Factors." Sri Lanka Journal of Social Sciences, Vol. 5, No. 2 Dec. 1982. The natural Resources. Energy and Science Authority of Sri Lanka NARESA, pp. 39-71
he & December 1990.
hy which is controlled usually through its rity of shares.
urchase for resale of a ht Company bank
hareS.
The inside story by 37.
anka, Annual Report
The 3rd Market - The International Stock Exchange of UK, 1987.
How the Stock Markets Work by Collin Chapman, 3rd Edition 1988. -
New York Stock Exchange-Glossary, 1987.
Public investment 1988 - 1992 - National Planning Division, Ministry of Finance and Planning, Colombo, Sri Lạnka, 1988.
The Provision of Capital to Stock Exchange Listed Companies by Darin C. Gunasekera, Economic Review March 1989.
59

Page 62
Contd. from page 37 24. Benefits of a Life Assurance Scheme
2.4.1 Benefits to the Policyholder (1) Benefit Against Death
This is the basic benefit the policyholder can receive by obtaining a Life policy. This sum of money that will devolve onto the dependents (or to the nominee).
(2) Benefit Against Total and Permanent Disablement
A total and a permanent disablement may cause a loss of income to the policyholder. Further the disablement can cause further expenditure on medicine and health care. The sum of money paid to the policyholder as an extra payment (in addition to the life cover) can well be used to meet such needs.
(3) Benefit Against Partial Disablement
Here too the policyholder will receive an
extra sum of money as a lump sum pay
ment which perhaps can be used to meet the expenditure incurred in hospitalization and health care.
(4) Negotiable instrument
The life policy is accepted as a bankable instrument to use as direct Security or as a collateral, when raising a loan from a financial institution.
(5) An Investment
In most schemes, the premium paid into the policy will obtain an interest. At the end of the term the policyholder will receive the money invested with an added interest as maturity value. In some other schemes the premium payments are refunded in parts giving opportunity to the policyholder to invest outside the insurance market (ex. as a fixed deposit).
(6) Surrender Value
if the policyholder so wishes, he can surrender (give back ) the policy (normally after three years) to the insurance Organization and demand a refund of the premium invested along with any accrued interest after deducting a sum for the risk borne by the Insurance Organization.
60
INSU
SCHEREES OFFEREDB
Scheme
1. Whole Life Assuran
2. Limited Payment Lif ASSUranco
... Endowment Assura
Marriage Endowme
3
4
5. Educatinal Annuity
6. Pure Endowment
7
... Convertible Life
Assurance
8. Joint Endowment
Assurance
9. Double Endowment Assurance
10. Treble Benefit Plan
Assurancs
11. Multi Purpose Assu
12. Mortgage Protection
13. Podhu Jana Raksh:
of Assurance
14. Jana Setha Life
Assurance
15. Three Stage Policy
SCHEMESOFFERED
1. Whole Life Assuran
2. Limited Payment W
Life Assurance
3. Endowment Assure
4. Pure Endowment
5. Joint Life Endowme
6. Anticipated Endow Assurance
7. Multi Benefit Endo Assurance
scHERE OFFEREDB
1, Whole Life. Unlimit Payment Policy 2. Whole Life Limited Payment Policy 3. Endowment Policy 14. Advanced paymen 5. Five Benefit Policy
SCHEMES OFFERED
1. Union Endowmen 2. Union Super Bene
3. Union Family Ben 4. Union Home Prote
Policxy 5. Child Welfare Ber
Policy
SCHEMESOFFERED
1. Convertible Term
2. Piripun Policy
3. Dashake Policy
4. Apeksha Policy * 5. Rampatha Policy

Table II-1: Product Range
NsurANCE CORPORATION OFSRI LANKA
Age Fange (Yrs)
18-60
18-55
g 18-60
18-60
18-60
3-45
na i8-45
18-60
18-60
Aax . Cate= Age gory Policy Can b9 ed
na
65 III
65 W
65 W 65 l v
nila V:
65
W .
65
65
65
65
65
65
65
W
W
Vi
BYNATIONALNsurANCE CORPORATION
C9 18-55
hole
18-55
Lice 18-60
η/a
t 18-60
ment
18-60
went
CEYLINCONSURANCE CO.,LTD.
na
65
70
na
7Ο
70
70
III
Wi
VII
18-60 na
18-so 70 na
18-60 70 V . Policy 18-60 70 V
18-60 70 VII
BY UNIONASSURANCE LTD.
Policy 18-64 70 V it Policy 18-65 70 VII
fit Policy18-55 70 ction
18-60 70 V
18-45 60 V
BY CTCNSURANCE CO,Ltd.
Policy 18-60 70
18-50 70 V
18-60 7Ο V
18-58 7Ο V
na i.e. V
Economic Review May/June 1991
Terns supplementary Benefit A Wallables - - - (Yrs) Acclid. Ben Tot, Disable, walv Prem partial Olsa
na yes yes yes no
10-47 yes yes yes O
10-47 yes yes yes O
5-20 yes yes yes O
5-20 yes yes yes O
40 o ΤΟ ፫ገ© no
10-42 yes yes yes O
10, 15, 20 25, 30, 35
10-35 yes yes yes no
10, 15, 20, 25 ΠΟ O O no
10-30 yes yes yes no
10,15,2030 TRO ΠΟ O O
10, 15, 2025 yes yes yes o 30,35, 40
15, 20, 25 yes yes yes O 30,35
10, 15, 20 yes yes yes ΠΟ
n/a yes yes yes ബ
10-45 ye8 yes yes በO
10-50 yes yes yes ΠΟ
5-25 no O O ΠΟ
10-50 yes yes yes ΠΟ
10, 15, 20 yes yes yes no
10, 15, 20, 25 yes yes yes ΠΟ
n/a yes yes yes
yes yes : yes 5, 10, 1520, 25, 30 yes yeğ yes 10, 15, 2025 yes yes yes 10, 15, 20, 25 lu yes yés yes
5-30 yes yes yes ΠΟ 6,9,12,15,18 yes yes yes ηO 21,24,27,30 - 10-30 ΠΟ yes yes ng:
10-30 በO " ΠΟ ΠΟ tó
5-15 ΠΟ " በ© no గం
10, 15, 20 O O O no 25, 30, 35 - 25 yes yes yes ΠΟ 10, 15, 20 yes yes yes o 12, 16, 20, 24 yes yes yes 5 ηO no O no

Page 63
INSURA
(7) Flexibility to Operate The Policy
if the policyholder is unable to meet the payment of premium, either of the following options is available to continue with the policy;
(1) Can requesta grace period and Continue with the payment of premium after the grace period. The termination of the policy will be extended by the grace period obtained.
(ii) Can request a grace period and recoup the nonpayment of premium during the grace period. Hence the termination of the policy will effect as it was before the grace period.
(8) Tax Benefits
A taxpayer receives additional benefits due to incidence of taxation. They are as follows:
(i) The policyholder can deduct the premium paid into the policy (except in the case of Pure Endowment Policy) from the statutory income in calculating the tax payable for a given fiscal year. The premium deducted should not exceed one third of the total statutory income or Rs 50000 whichever is lower for a given fiscal year.
(ii) The payments received as compensation or by way of maturity of the policy will be exempted from income tax or Capital gains tax.
2.4.2. Benefits to The Economy
(I) Social Security
There are only a few schemes available to compensate for a loss of life or in the event of a disablement. The Life Assurance schemes meet this need which in fact is a social security Scheme.
(ii) Economic Growth
The premium invested by the policyholders and the shareholders Constitute the reserve base ofan insurance Organization. Under the Control of insurance (Amendment) Act No. 42 of 1986, every. insurer should invest 50% of its reserve funds in Government Securities and the
Organize
CSL NIC CEY UAL OTO
An illustration citing
Assumptions:
Policyhok Term (pe Basic Sul Accident Total and
LOSS OF LIFE
(1) occur: (2) occur (3) occur (4) occur
TOTAL. & PERMA
(1) occur (2) occurs
SURVIVAL
(1) till the
LLLLLLLLSLSSLSLSSLSLTLSLkTLSLkLkLSSLSLSSLSLSSLSLSSLSLSSLSL
ജ്ഞ
Organization
ICSL
NIC
CEY UAL OTO
An illustration citing
Assumption:
Policyholder "Age a Term (period for wr Basic Sum Assured Accidental Benefit Total & Permanent
HiyporhvAvrical Ev
Event
LOSS OF LIFE
(1) occurs during te (2) occurs during te (3) occurs after the (4) occurs after the
TOTAL 7PERMAN
(1) occurs duringth (2) occurs after the
SURVIVAL
(1) till the end of the
LLLLSSMSMTTTTTTSSSTTSSLSLSSLSLSSLSLSSLSL
balance 50% in inve Securities, deposi banks, deposits a State Mortgage a and in Quoted com the government.
Economic Review May/June 1991
 
 

\NCE ||
Table V-1 : Schemes Under Category 1
tion Schere
n/a n/a n/a
Union Family Benefit Scheme Convertible Term Policy
hypothetical events and the extent of compensation under each such event is given below;
ders Age at beginning of policy = 25 years riod for which policy is taken) = 25 years m Assured = RS 100000 Death Benefit elected = n/a Permanent disablement benefit = n/a
Event Sum Awarded (Rs)
s durig term of the policy by natural causes , 100,000/s during term of the policy by accidental causes 100,000/s s after the term of the policy by natural causes 100,000/s
s after the term of the policy by accidential causes 100,000/s
NENT DSABLEMENT
s during the term of the policy s after the term of the policy
end of the term of policy
Table IV-2: Schemes Under Category ill
Schème
(i) Convertible Life Assurance (ii) Whole Life Assurance Whole Life Assurance Whole Life. Unlimited Payment Policy
n/a n/a
| hypothetical events and the extent of compensation under each such event is given below;
it beginning of policy ich policylistaken)
elected disable ñeñtbenefit
Peints:
irm of the policy by natural causes by natural causes 100,000/= irm of the policy by accidental causes 200,00/s
term of the policy by natural causes n/a term of the policy by accidental causes n/a
ENT DISABLEMENT (EXTRA)
le term of the policy term of the policy
B term of policy
n/a n/a
=2 years
still death
= RS 100000
2" basic sum assured selected
Sum Awarded (Rs)
100,00/s n/as
n/a
stments (i.e. approved ts with commercial ind investments with hd Investment Bank, 1panies) approved by
The money invested in the Government and in approved investments will help growth the economy by increasing the level of employment, thereby Consumption and furthering demand forgoods and Services.
61

Page 64
INSU
benefits.
III. PRODUCT RANGE
individuals have varied needs but their affordability vary considerably, a number of schemes are offered to the public by insurance Organizations with different packages of reward to suit their affordability and their needs. All Insurance Organizations have their own product range. Each product (Scheme) offered by a given insurance Organizations is matched by other insurance Organizations by adding minor changes to their product. Some of the minor changes are the premium payable.The supplementary benefit offered and the maximum term for which apolicy can be taken. Every insurance Organization keeps monitoring and innovating differentschemestomeet the changing needs of customers or to create a need or to satisfy a yet unsatisfied need offered by Life ASSurance Schemes.
Each scheme stipulates the minimum and the maximum age a prospective could enter a scheme. A given scheme may also stipulate the maximum term for what policy could be obtained. A scheme may be offered in twoforms viz, one sub-scheme qualifying for bonus
62
TableV-3: Schemes Under Category III
Organization Scheme
lCSL Limited Payment Life Assurance
NIC Limited Payment Whole Life Assurance ΟΕΥ Whole Lie Limited Payment Policy UA n/a
OTO n/a
A Policy holder can elect the accidental death benefit disability benefit and waiver of prem
An illustration citing hypothetical events and the extent of compensation under each such
Assumption:
Policyholders Age at beginning of policy =25 years Term (period for which policy is taken) = 25 years Basic Sum Assured = RS 100000 Accidential Death Benefit elected =2" basic sum Total and Permanent disablement benefit = elected
Event Sum
LOSS OF LIFE
(1) occurs during term of the policy by natural causes 100, (2) occurs during term of the policy by accidnetal causes 200, (3) occurs after the term of the policy by natural causes 100, (4) occurs after the term of the policy by accidental causes 100,
TOTAL & PERMANENT DISABLEMENT
(1) occurs during the term of the policy 100, (2) occurs after the term of the policy ༥
SURVIVAL
(1) till the end of ther term of policy n/a
and the other with payable on the sul fies for bonus pa higher than the SC qualify for bonus.
Oraganization
ICSL NIC CEY UAL OTO
An illustration citing
Assumption:
Policyho Term (pe Basic Su Accident Total & F
Event
LOSS OF LIFE
(1) occurs during te (2) occurs during te
(3) occurs after the
(4) occurs after the
TOTAL & PERMA
(1) occurs during th (2) occurs after the
SURVIVAL
(1) till the end the o
ബജ്ഞങ്ക

um benefitas suplementary
event is given below:
assured
Awarded (Rs)
DOO/e )00/s )00/- DOO/e
)00/- Ol=
Out it. The premium b-scheme that qualiyments is relatively heme that does not
The following are the products available in the present market. (See Table IV-1.)
IV. CLASSIFICATION OF SCHEMES
For the purpose of analysis Life AsSurance Schemes were classified into seven broad categories. The technical classification of life assurance Schemer was ignored here.
Category
Here the premium ispaid foran elected term and the coverage is provided for that elected term. A sum asured is not paid (only the premium paid is not refunded) for the policyholder. Hence ther is normaturity value in the schemes described under this category since money is paid only at the death of the policyholder. The schemes falling into this category do not offer the accidental benefit, disablement benefit and waiver of premium benefit.
The schemes coming under this category are not very popularity and generaly are suitable to individuals who look for a bigger coverage at a lower premium. The following schemes are avail: able in the market (See Table IV -1)
Table IV-4 Schemes Under Category IV.
Schene
Pure Endowment Policy Oyre endownment Policy
na n/a n/a
hypothetical events and the extent of compensation under each event is given below.
der Age at beginning of policy Iriod for which policy is taken) massured a Death Benefit elected Permanent disablement benefit
sm of the policy by natural causes rm of the policy by accidental causes term of the policy by natural causes term of the policy by accidental causes Ofs
|ENT DISABLEMENT
a term of the policy term of the policy
the term of policy
=25 years
= 25 years = Rs 100000 s2' basic sum assured selected
Sun Awarded (Rs)
Premium refund Premium refund Ofs
n/a n/a
100000/=
Economic Review May/June 1991.

Page 65
HNSUR
Table V-5:
Scheñe
Schemes Under Categoy
Organization
ICSL Endowment Assurance
Marriage Endowment Educational Annuity Double Endowment Assurance Multi Purpose Assurance Podhu Jana Rakshana Pian Treble Benefit Plan of Assurance
NIC Endowment Assurance
CEY Endowment Policy
UAL Union Endowment Policy
OTO Piripun Policy
Dashaka Policy Rampatha Policy
A policyholder can elect the accidental benefit, disability benefit and waiver of premium benefit
An illustration citing hypothetical events and the extent of compensation under sach such even
Assumptions:
Policyholders Age at beginning of policy s. 25 years Term (period for which policy is taken) s 25 years Basic Sum Assured = Rs 100000
Accidental Benefit elected Total & Permanent disablement benefit
s 2 basic sum assu selected
Event Sum Awarded (Rs)
LOSS OF LIFE
(1) occurs during term of the policy by natural causes 100,000/= (2) occurs during term of the policy by accidental causes 200,000/s (3) occurs after the term of the policy by natural causes O/s (4) occurs after the term of the policy by accidental causes O/s
SURVIVAL
(1) till the end of the term of policy 100,000/=
Category ill
o Here the premium is payable til the Organization time of death of the policyholder and ICS
hence the term of the policy cannot be defined (of schemes under Category, II & IV where premium is paid only for a defined term). The sum assured is payable to the nominee of the policyholder at his death.
The policyholder can elect the accidental death benefit, disability benefit and waiver of premium, benefit as supplementary benefits.
No maturity value but only a Sum assured is available in the Schemes described under this category since money is paid only at the death of the policyholder.
The schemes under this category can be beneficial as a measure of mitigating tax liability. The schemes offered under this category are also not so popular.
s
Economic Review May/June 1991
A policyholder can elect the The benefit given at totalanc
An illustration citing hypothet
Assumption:
Policyholders Age Term (period for w Basic Sum Assure Accidental Benefit Total and Perman
Event
LOSS OF LIFE
(1) occurs duringt (2) occurs duringt (3) occurs after the (4) occurs after the
TOTAL. & PERMA
(1) occurs duringt
(2) occurs after the
SURVIVAL
(1) till the end of th
-—തുജ-—
s
 
 

ANCE
The schemes available in today's market are; (See Table IV -2)
Category Ill
The premium is payable by the policyholder for a defined term and the coverage is provided only for the term of the - policy. No maturity value is available in the schemes described under this category since money is paid only at the death of the policyholder. The sum assured is paid to the nominee of the policyholder at his death.
as supplementary benefits. The schemes coming under this catet is given below: gory are normally, taken by individuals who want to ensure that their dependents' (or nominees) financial base is not eroded with their death.
red
The Schemes available in the market are: (See Table IV -3)
Category IV
A defined term can be elected on the schemes falling into this category. Only the premium invested is refunded the - policy if the loss of life actualize during the term of the policy. However a matur
Table IV - 6: Schemes Under Categoy VI
Șcheme
Jana Setha Assurance
accidental benefit, disability benefit and waiver of premium benefit as supplementary benefits I permanent disablement will be equal to the sum assured at the time of disablement.
ical events and the extent of compensation under each such event is given below;
at beginning of policy =25 years rhich policy is taken) =25 years Pd (at end of term) = RS 100000
elected - =2' basic Sum assured ent disablement benefit = elected
Sum Awarded (Rs)
erm of the policy by natural causes depend on term & maturity value erm of the policy by accidental causes - doB term of the policy by natural causes - O/s eterm of the policy by accidental causes - Ofs
ANENTDISABLEMENT
/ر he term of the policy depend on term & maturity value
a term of the policy -0/=
he term of policy 100,000/=
63

Page 66
| EINSUR
ity sum is paid if the policyholder is still alive at the end of the term of the policy. These schemes are not so popular especially among the taxpayers since the premium paid into the schemes falling into this category redemption do not qualify the tax liability for tax.
The schemes availability under this category are listed below. (See Table IV -4) Category V
The coverage is provided only during
the elected term and the premium is
payable during the term of the policy. The maturity value is payable to the
policyholder at the end of the term.
Majority of the schemes offered in the market today fall into this category. These schemes are popular. The premium payable is relatively lower than in those schemes offered under Category V.
The Schemes available in the market: (See Table IV - 5)
A policyholder can elect the accidental benefit, disability benefit and waiver of premium benefit as supplementary benefits. Category VI
Only one scheme of this category is available in the market. Here the cover
age provided will preceding yearate end of the term of the maturity value maximum basic provided at the en maturity value is =) a given year (n) C following formula: Basic Sum Assure
(m+term in years, the event take pla
(See Table IV -6)
A policyholder Ca benefit, disability premium benefit benefits. The ber permanent disabl the sum assured ment.
Category VII
Here the Covere the elected terma during the term of ity valueis paidini - intervals duringt
The intervals by are paid to the pc in the scheme ch
Apolicyholder C benefit, disabiliby
Organization
ICSL NIC
CEY
UAL OTO
Table IV-7: Schemes Under Categor
Scheme
Three Stage Policy Anticipated Endowment Assuran Multi Benefit Assurance Advanced Payment Policy Five Benefit Policy Super Benefit Policy Apeksha Policy
An illustration citing hypothetical events and the extent of compensation under each st
Assumption:
Policyholders Age at beginning of policy = 25 years Term (period for which policy is taken) = 25 years Basic Sum Assured = RS 1000 Accidental Benefit elected =2" basic
Total 7 Permanent disablement benefit = élected
Event Sum Awal
LOSS OF LIFE
(1) occurs during term of the policy by natural causes 100,000/= (2) occurs during term of the policy by accidental causes 200,000/= (3) occurs after the term of the policy by natural causes O/s (4) occurs after the term of the policy by accidental causes 0/s
SURVIVAL
(1) till the end of the term of policy . 100,000/=
64

ANCE =S
increase by 5% of
ach given year till the .
the policy. However will be equal to the ife coverage that is do of the term. If the , the sum assured at an be shown by the
(1+5%)m n+term year in which се)
in elect the accidental benefit and waiver of
as supplementary efit give at total and ament will be equal to at the time of disable
age is provided during nd the premium is paid the policy. The maturInstallments at defined
he term of the policy. Nhich the installments.
licyholder are defined OSՅՈ.
an elect the accidental benefit and Waiver of
VII
ch event is given below;
Um aSSUred
led (Rs)
premium benefit as supplementary benefits.
A unique feature in the schemes under this category are that irrespective of the amount of installments, received by the policyholder, the basic and the supplementary coverages elected by the policyholder will continue without any abatements, till the end of the term of policy. (See Table IV - 7)
Contd. froт page 2
different media can economically affect each other - has already been noted, With reference to cinema and television. Given that the mëdia spectrum is constantly expanding, this economic relationship is fluid. Thus, for instance, the arrival of a third channel for broadcast television will inevitably impinge upon the economic fortunes of both TN and Rupavahini, impelling these two institutions to re-vamp their programming to meet the new competition. Will the programming improve as a result or will it decline? Will the current financial, technical, artistic resources of ITN and Rupavahini suffice for this purpose? If not, how is the extra support to be found? Such guestions need to be asked, and they can best be asked within the parametres of a national media policy.
it is perhaps clichetic to say that a media policy should be future-oriented. Nevertheless, one must insist upon this matter. The media World is never static. Hourly, daily it is acquiring new technologies; information and entertainment are becoming profit-oriented enterprises with a global sweep. CNN is an intimation of things to come in the 21st century.
is it possible for a tiny national entity like Sri Lanka to preserve its self-hood under such conditions? Only a well thought out media policy can provide an answer, and an executable plan of action.
But the best argument for a media policy in the Sri Lankan context lies in the fact that a media policy will open eyes, and guide practitioners, policy makers and analysts to see the totality. At least, it will rid us of those media pundits who talk about the responsibilities of the press (i.e. the newspapers) in finding solutions to hational problems while completely ignoring the roleplayed by radio, television, video and cinema in
Economic Review May/June 1991

Page 67
April
The Colombo Consumer's Cost of Living Index for March 1991 was 1,102.3 according to the Department of Census and Statistics. In February 1991 it was 1,083.1 while in March 1990 it was 964.2. The average rate for the last 12 months was 1,031.5 as against 856.92 for the previous 12 month period-indicating a 14.5 point increase in the index over the last 12 months.
Sri Lanka has expressed reservations about the original Indian project proposal for the joint exploration of oil in the Gulf of Mannar. There is a major snag in the January agreement reached between the two countries highly placed, officials revealed.
Minipe-Nagadeepa Rural Development Project constructed with Japanese aid to the value of Yen 1,158 million (approximately Rs 289 mn) will be formally handed over to the Sri Lankan Government. The main aim of the Minipe - Nagadeepa rural development project is to provide suitable drinking water to farmers and improve the road network.
The Ministry of Finance and the US Ambassadorsigned two important agreements. Under the first stage the United States Agency for International Development (USAID) will provide US$12 million (Rs 480 million) to help Sri Lankan private industries to choose, acquire andmaster new technologies. This six year technology initiative project for the private sector aims to increase the international competitiveness of Sri Lankan industry and raise employment.
Despite severe losses resulting from the recent Gulf Crisis, Air Lanka has achieved a record profit of US$ 3 million (Rs. 120 million) after meeting all costs for the financial year 1990 - 1991 airline sources said.
India and Sri Lanka began official talks to establish a joint commission to speed up the growth of bilateral relations. The joint Commission will meet once a year. Two Sub Commissions are also proposed to be set up. One of them will deal with social, cultural and educational relations, while the other will deal with trade, finance and investment.
China has agreed to meet the full cost of the proposed Chilaw Water Supply Scheme that is to be commissioned in 1993 which will provide pipe borne water to 28,000 people in the first phase and 38,000 people by the end of the decade.
 
 

22
23
24
Finland will provide Rs 180 million to meet 85% of the cost of phase two of the Kalutara Integrated Rural Development Project. The Sri Lankan Government will meet the balance 15% of the cost as well as customs duty.
Ministry of Lands Irrigation and Mahaweli Development is preparing a feasibility studies on Constructing a dam across Kaluganga to inject additional 200 million Cubic meters of largely untapped water of Kaluganga (part of Ambanganga).
The Canadian Government has agreed to grant Rs 25 millionto Sri Lanka for the provision of facilities for Court Houses island-wide. This Canadian aid would be used to improve the conditions in the court houses in the country, Secretary of the Bar Association said.
President has moved swiftly to counterm and the withdrawal by the Central Bank of the re-finance facility extended to garment exporters. The facility will continue until the government comprehensively examines the issues and evolves new measures, Ministry officials Said.
President disclosed at Nawalapitiya that the Asian
Development Bank (ADB) would be releasing funds to provide electriéy to every village in Sri Lanka. The process of rural electrification is being correct in stages and would be completed by the year 2,000 with every rural house having electricity.
Food and Co-operative Ministry will appoint three foreign bondsmen to import 200,000 mt. tons of rice as a Security buffer stock following the decision to liberalise rice imports, the bondsmen are Andried of Switzerland, Samsung of South Korea, and Recofia of France.
Garments retained its number one position in the Export Sector, with exports grossing Rs 25.2 billion for 1990 as against Rs 17.6 billion for the previous year, Central Bank sources said.
The Canadian Ministerfor External Relations and international Development has approved a contribution of C. $ 13,333,000.00 or approximately Rs 453.3 million Over a five year period to continue the activities of the Sri Lanka - Canada Development Fund (SLCDF) in Support of local non-governmental Organisations in Sri Lanka.

Page 68
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