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LEF. In ההתחתוחה שהם הםח ===== EFT
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ההח הח חשבו שוחחו דווח פתוח שחדחהיהודחה החדישה שיוחד
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III.T.T.
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HE ENVII. It
חום תחום הבלון שהודחה TITUT ITIN
"I Lısı III
HiFFr
George Bic.
Тууга тууйт. К.
Correction
NEXT ISS
C.E.R.
t
 
 
 

اس کے ترے روم / سر 2ے یکصر
NLIInber E NOW-II Her" |975
CONTENTS
FEATURES
21 Can the Poor Support the Rich
kerraf 22 1975 'Crunch' year for Third World
MegaT WAT 23 Sri Lanka and the European Economic
lunityחCorTi
COWER STORY
3 TRANSPERTATTON — An Overview
COLUMNS
2 Diary of Events
16 Banking and Finance
18 Agriculture
I9 (Timičitics -
Due to a block maker's technical difficulty the cover of our Dctober issue carried an obvious error in showing the clouds }ver the Indian Ocean left of Sri Lanka in colour perhaps uggesting that it was an islind. This error is regretted.
LE
Bargaining for our rights at UNCTAD. An extensive discussion ascd on a Seminar held by the Sri Lanka Association for hic Advancement of Science,
oyer artis: G. S. Fernando is one of Sri Lanka’s leading uLLLLLL S LLL LLLLLLCLLLS LLLLL CCCLLLL LLLL LaaLMMMLL LLLLLL Fւբcally won hirin prizes and awards in islandwide competitions,

Page 4
DARY Ol
Oct. 2 The Government announced an increase in
the price of Petroleum by 8o cts, a gallon and the price of kerosene by 48 cits, a gallon as a sequel to the OPEC hike in petroleum prices by US SI.cs a battel.
An IMF team, here to review the Sri Lanka economy in connection with a request for assistiance From the Flı ild, began talks with government officials in Colombo. The Bank of England increased its minimum lending rate froll 11% to 12%.
Norway cut its Bank Rate from 74%, to 5% as Part of it Istoryc tywy". Tills al Illirë: CXP lillsive CCO11) Tilly.
Three major credits from the World Bank Group totalling S450 million are to bc negotiatcda CCording to an a Throuncement in New Delhi. These arc: Soo million for industrialimports, $1oo million as general credit for improvement and expansion of fertilizer plants and SI 5 o Imillion for power tra 15Ti55iUn
The Indian Govern Tent announced extension of a Compensator Support Schcineto help so items of exports including instant tea, packed tea, and tea bags. Exports of these products will now receive cash ՏաբբDrt. All restrictions, imposed by emergency regulations in February 1974, governing the trinsport, possession and sale of paddy and rice in Sri Lanka were repealed through it. Gazette notification signed by the President.
INI)IA'S OII. El IDIARY"
Throughout Octobe were received frotri In in oil exploration.
it. . - (Oil "W".15 5 Lr LID:l;, , ;
Tetris, in the Bombay High L. Magnus', a N.
mersible rig pl-1
part of the Bim So fa zoo rilli: gas reso e hi at Bombay High 9- ()il H.:L 5 l:c:I1 st
2,170 Iletres in the still HIndia. The grup has been, ET LI TIL LITE The first will coist was spidid arid the bil-stri
: 3 India's Petrillel (il and Nil i Lur: signed an agree with the Ph3 till:1 for oil explorat in the Ciutery iči-shi, Hristlig bå:
in profits. 25 - Oil was struck : y el 1 Ft Kh1: T3 Pradesh, : ELLI 1 Trys hIP့်မျိုးမျိုးဦး'ဲ{ ere di5Cre 고, 마다, drilled by the a joint enterpr
ment of Indi:
חiiן1IIl. G - The first welli arci, fırTed rii
E: L5, ci
Bates, wils. spy:
to The Land Reform (Amendment) Bill was moved in the National State Assembly by the Minister of Agriculture and Lands. The effect of this Bill would be to nationalise all lands owned by public companies, both local and foreign, and vest these lands COwering: Isood acres of tea, rubber and coconut in the Land Reforms Commission.

F EVENTS
13 Major oil producers and consumers grecd in Paris to hold a full scale ministerial conference in Paris on December 16 and 7 to dcal with energy, raw materials and development problems and the financial questions connected with these three fields.
Papua New Guinea was unani LORATION mously admitted as the 42nd member of the United Nations ser optimistic reports by the UNGeneral Assembly.
dia Lin her FIFLr Ess
I7 Nearly 23 OC government servants were deployed all at a depth, lif 1.115 over Ell- island оп. а sixth well of thic: taking and verification of the a by the "Haakon assets of all public company 蠶 owned estates wested in the iting in the cent Bay High structuri". Land Reforms CIIIIllissl-III errountries. Cof Chil &qrt[:] immediately after the Speaker been estiblished gave the new legislation final legal status when he put his l f signature to the Land Reform th1= Ierli AIDA :: Ilshore Gil Strikt (Amendment) Bill.
器 Asian Itembers of the United HL'iETIL: крпе н in the Bengal basin, Nಖ್ಖtiಣ್ಣ: norminated Sri ಸ್ನ್ಯ; if the Orissi-Bengal ka’s Ambassador to the UN ed on Sւբttրիer : Mr. Shirley Amarasinghe for ke cuIIIe wil Hin 18 the Presidency of next year's Im Ministry Entl the UN General Assembly. Th: il Gas Commission Presidency is rotated among ment in New Delhi regional grills and it is 醬 點 器 Asia's turn in 1976. Group 1. I ILIllHasin cin il product- endorsement is generally is with a limitati III tantamount to election. again in India in the շՃ Tl1ւ: Soviet Union will buy Ligh in Aruhachal so million tons of U.S. wheat 懿 and corn over a five-year 3 4 chiT LLY" LITE EHITY ni jil. Gjůdd:PCsits period, while the United States , at a depth of but will be el titled trib IIc million in the well being tons per y el of Swiet riil . Oll India Limiteմ, over the Samci period, accordse of the Gowerini = ing to a WhiteHouse anum’ulanal the Bil I Imiiihi Oil
Clt.
E. 蠶| A**靈獸 Tipari, Reading ind approved the draft of a new 盟 international cocoa pact in
H.
(GemeyFEL.
고
The Draft Estimates of Revenue and Expenditure, for the financial year ending December 1976, which were presented in the National State Assembly by the Minister of Finance showed an excess of Rs. 2,495 million in expenditure. The estimated total expenditure is Rs. 8,125 million and revenue Rs. 6: million.
ECONOMIK REVIEW, NOWE, BE: 1975

Page 5
Thc immediate purpose of transport is to move physically, people and goods. Goods include food, industrial raw material, intermediate Products and industrial finished goods. But why do we want to move people and goods?
Thc deeper purpose of transport is to enable specialisation of factoral functions. Goods are fjund, gTרטwn, processed or minufactured in one place and consumed in another. For this end the goods must move and, as one of the factors of production, men must move from where they live to where they takic Part in tkie processes of production.
A simple society, being largely self. sufficient needs little transport service. A complex society needs much transport and adds in the end its own desirc Lo travel either for shccr pleasure or for the pleasure of some thing at the other end of the ride.
It is evident therefore that transport and travel can he minimised both by restraint in the use of goods that must be noved, and by the planning of land-use upon a sort of "methods pattern" so that people and goods need the least moving Within the web of social developT]l-fit.
ECLROM It It EVIFA, SOVEMILK 1975
Alternatives tt ] ther look it the ol tation show tatt
1e"y"e:r «o'y"cr;ıIlogic two main Compet they are social se electronic commur.
The first conce basic objects. Ob and homics are sid Erin sport is mini live in Ehe siclds grow most of the clothing and shelte til TIGve the Inselv gt;titls,
Likcywise cultu People do not rıce theatre or pagentr pilgrimages. Thuis looms, stay-at-hon ference for neigh books and home g with transport.
Secondly, clectr tion competes with conveyance of spc. telephone) the cony (by television, vid Conveyance of dat puter terminals) to “transport’’ of ide: still it competes
 

NSPORTA
ION
An Overview
Transport. A furbjects of transporansport servicesare polies. There are itors to transport: lf-dependence and
Lication.
it ariscs from the viously if factories te by side, personal mised. If people they till, and they l-irt niccids of frodi, t, they need neither res; cor much of
ally self-satisfied d to travclto see Y Or even gQ On sclf-feeding, handac attitudes, prelourhood socict, James all compete
Olic con l'unica
transport. Is the ich (by radio and "eyance of pictures cophone etc.) the a (through combe regarded as is. If it is, then with transport in
the physical sense because a radio listener may not need a newspaper which would Otherwise halve to be transported (not to speak of the raw materials that went into its production). Likewise a TV saturated viewer need not travel to a circlla.
Nature of Transport
Transport generally implics move:- ment. The movement itself is the transport. But movement requires tools and energy. Energy can be got from man or animal or from wind or river flow or by artificial means.
Tools are twofold. N. container and a track. Of course the transport of some things (a jackfruit or a plank of timber for example) can be done without a coltainer. And a rii: Il cal walk. Ficross meadows, rocks, or swamps and can even swim across water. Yet a planned or defined track is a prerequisite for most forms of transport.
Means of Transport
The means are precisely the tools (track and container) and energy. Track consists of navigable water (ocean, lake, river, canal) roads, railways, cableways and Flyable airspace, for all of which special termimals or interfaces are usually needed.
3.

Page 6
Containers include boxes and pallets and also vehicles of every desCription from bicycle to traim Eo ocean-going ships. Vehicles subdivide into haulers (locomotives, tractors, lechanical horses) and trailers, yet the distinction between these merge Incore often than mot,
Energy is sometimes there for us to use like gravity (used for wire shoots as well as down-river riding) and windl, Animals andman carı tow or push burdens. Other clergy comes FroIII Ehe conversion JF helt int, collmercial fuels such as coal, oil, natural gas and from electricity, which itself may be generated from one or other of the primary fossil Tutsi.
Chief Transport Modes
The chief distinguishable modes of transport are Water, road, rail and air. Of these water is the easiest, and it has the characteristics of slow specd, and low energy requirement. In fact the cisiest transportation task is that of towing a barge through water. Water transport is cheapest where the track was provided by gcological history, such as ocean, river and lake. Where Iman has Illa de canals, the first cost is often high, but orice built it remains ältlost Fot ever LL low cost except where it is polluted or neglected and may need renovation.
Railways are the secdnd-most Conservers of energy. They were devised (some say first by the Romans, others quote Britain and Germany in the late 17oo's and early 1800's), to make thic Horse's Erisks easier. The horse could multiply his work om a well laid plateway. This economy continues to hic of use though propulsion methods have developed to coal-steali; oil-stealin; diesel; electric and gas turbines. Like canals, railways have considerable first cost but require far more Illaintenance and regulation. Their second charac. teristic is that they are cheap on labout (one train crew can move Io,000 tons or 2,000 people) and on space. The throughput of goods or people over an intensively used railway is very high.
Roads, arc ancient but highways
with durg ble foundations, smooth surfaces and good run-off drainage
4
il re much more Tc. teristic is compari cost, with the cal LP-grading als morn multifaceted availa be used, subject o or physical imped trians, cycles, ca buses ind cyen ele hilyt- a limitution, late countries, thi them wide ind against the finit much of a cit devoted to Ilow much should rei leisure, Highway the great asset to bility.
Airspace is mi that it is tillere, billi becoming like hig regulatable navig It is good for ti and people only si Il LI I Liber LSC it. It tics are high ent Eliis Eo loc defeated ney) and fair-distan
Never track EO notably pipelines : til tit": "1 SITT ISE. Il | over the necd to it by road or rail. tracks, maguctic li cabinways arc also lopment, but even viable they are chal ways' and are the ways or cableway.
Problem of Spac
The constraints Tien Limned in cor) and air. It illso terminals, stations ports. The move Ilal act of interch it are all part o require space.
Societies thath dent on autonilol have almost re: available space. dcveloped counti is a scarce resout loped track spa railways) and e cities.

Int. Their chiractively cheap firstability of gradual y allows, and with ility. A road can lly to special legal iments, by Pedes:Es, lor rics, cars, hants. But Ioads In den sic ca T-popuattempts to make Filent have ILI1
limit of how *s space caп Ele ment and HOW
in for work and s, however, have - CxETe:Ille äCCESSI
ch like rivers in t it is increasingly ghways in that its ability is limited. Hnsport of goods long as a limited 3 other characteris:rgy cost (gravity | tL stätt lL1y CL1rzed stopping places.
Tims : Eilerging, und cryogenic elecCables. Both tilke ransport fossil fuel Things like hover evitation and slung under exotic deveif they do become acterised as "guiderefore akin to rail
of space have been nection with roads itises sorletimes itt harbours and airlent and the terIIninge that goes with transport and all
live become depenilles and air planes Hell the limits of BLI LI even i Il Lindlerles space on land e, especially devece (roads, canals, pecially space in
The problem is already acute in developed countries. Many professional transporters, economists, town planners and others are expressing in Creasing concern for rationing utban space and giving priority to those who use it spatingly and cleanly. Cities are restricting the use of motor cars. Singapore has done this with heavy price tags for using Central streets in the rush period. And even the Head of New York local transportation has taken his plea to an international conference this year for prohibition (of automobiles) "that would free ample space for bus scrvices' wherever there is public transport available and for barring such vehicles even from inter-city usc where public transport exists.
Hence the modern town planner and tariffic manager, whether in developed or under-developed countries, is no longer seeking to widen roads and improve traffic flows, he is now seeking to himper traffic flow but to give priority to public transport which uses road space so nuch more economically.
Problem of Energy
Urban space and laid tracks are a scarce resource almost anywhere. Energy is cquially scarce in all except OPEC countries, and on a world footing, oil is thought to be running out within the next 30-60 years. In Sri Lanka, certainly, energy is a scarce resource, but seo is it in U.S.A.. 5 Titich so, that some leiders have althost undisguisedly elected OPEC price increases as bringing in a sensc of reality. For cample the same U.S. transit leader, (who is also Chair iThin E. Rickefelle's Committee on Critical Choices for America), said at an international conference in May 1975:
The vents of the past year and one half have placed the future situation in a realistic perspective'.
Energy works this way. What you requirc to move a ton of goods by road, will move four times that tionnage by rail or by water,
Where passengers are concerned the ratio in Sri Lanka is approximately that a private car rider requires to times as much energy as a bus or train rider.
ECO), 80 XXII, PTE WIFW, NOVE, BELLIZ, 1975

Page 7
Encrgy has another dimension. When supplicd by thermal gencration of electricity it may conserve fossil-fuel marginally, as against the direct use of oil. Bit where supplied by hydro, or nuclear fiးူ့်’ t:lettricity, thcre is no drawing on oil or coal at all, and very little noise or air pollution to boot. But how can electricity be used for transport? Only by using railways, tramways and trolley buses for passenger transport and railways, canals and cableways for goods. Transport of goods by lorries on roads, and transport of people by cars on roads do not figure in this dimension and are not likely to figure significantly because all the enthusiasm about new types of batterics and fuel cells has died out at least for the time being.
Thus encrgy conservation Inc.cds correct choices both in the modic of transport and in the form of energy.
Problem of Wested Interests
It is now generally recognised, and is increasingly discussed, though rarely put down in black and white, that a powerful conglomerate of vested interests has, whether deliberately or otherwise, distorted the development of transport in several parts of the world, particularly the U.S.A. and Western Europe.
The chief big interests with a comI 11 Oil intercit i Lhiș matter are usually labelled as the Oil, Automobile and Tyre interests. These interests are supported by various ancillary interests in spare Pitts Compgricts, and finish (e.g. paint) manufacturers, and in the vast dis tributive trades handling motor 5llplics at wholesale and retail levels. To these interests are further added the highway construction supply and contract industries and the trucking, taxi and rent-a-car businesses. These Collectively are known as the "highway lobby”.
ut thic highway lobby does not end with profit organisations. It includes professionals and consumers.
Professionals who support the lobby are the highway designers, planners and engineers, the traffic managers and regulators, and even the town planners. All of these, tend to be dedicated professional men բLITsuing their talents and skills in
ECONOMI I I I I w, NO': HER І975
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attempting to sc congestion probl as they see it, of st SVT1 pitið 115 3F a
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economic expendi lane motorways o the prospective ut valuable time sionals are indeed the World Bank a incrtia against cha Very 5 trong indee!
That British arc Ilar at Durham I to the new trend that OECD itselfcase studies (inc. on restraining the city Centres, inde berate congestion caused scarcely a sleWS Or in Sri Lar
And then there : In USA 5 oc curs Population. In

Fig. I Car Ownership per thOLISāmid of population
-୩
--------soo
- - -
E.
卓Q
بھمبر - REST OF YN kl. WÓးဂဲ"| 0OLS00L S LLLTS HHTu S0LLS S S CCTTLLL SSS 0LTTT SYT S S0sseT
'Growth in car ownership tapers of around 100 cars pit thousand population. Japan was a late starter with a very rapid rise, Countries outside OECD hardly count."
lvte the traffic Or em in the interest, }ciety. They see the problem and feel : their expertise to bring in the transwho will justify ture to build Ĝi or 8 In the grounds that Sers will salve their Some new profesemerging even in ld OECD, but the ging the trend is
hitects held a semiJniversity devoted for restraint, and had a conference of luding Singapore) car, pedestrianising ven plantıling dellito discourage cars, ripple in world nka circles. ire thic Consul Tiers. per 1,00o in the Europc 200-400.
In Singapore 8o. In Sri Lanka 8. Even 8 can cause a traffic ja In and hold up public buses. Even 8 consume a good proportion of the public highway for free parking; but whether 8 or 80 or Boo; consumers of motorism like the article. It is in extension of home, a large handbag, a highly converient means of personal mobility, even a liberator from restraints. As long as this consumer thinks that road development will allow him to enjoy this freedom the longer will he support expensive road programs and defer the real answer.
Wherever he be, thic decisionImalter Is One of these con Slimer5.. If the number of Consul micrrs ble Emaill (as in Sri Lanka) the clitic deciders and the automobile consumers are one and the same group. What will they decide given any plausible alternative?
Thus the road lobby is powerful cwen in Sri Lanka which has no auto industry, only ancillary interests, but has indeed professionals and consumers with powerful leverage. Is it possible
5

Page 8
in this context for correct decisions to be made in favour of the present and the future, for meeting shortages of both space and energy resources?
The Railway in Sri Lanka
Generally speaking the Sri Lanka. Railway has no corporate or selfimage and therefore no corpora, te ımlı bition. Solle believe this to be the result of its status as a government departillent. Others hold it due to leadership factors during Inst of its Ico years of existence.
The full line extent of nearly Loco miles, was built between 1858 and 1928. Since then except for links to the Cement factory and Clay grounds at Puttalam, there have becn only retractions (Raigala, Yatiyantota, Cipinayake and Puttalam) and one re-surrection (Puttalam). Electrification, proposed by Wimalasurendera in 1918, is still to receive sanction, Not even track doubling has been undertaken since 1930, only a singling (Rainbukkana-Polgahawela). Thus there has been virtually no expansion for nearly 50 years and the length of track is low, by world Compatis Ons in relation to population and land
area, although the favours rail constr.
COin the cothciri hii at least up to 1 development by W. tion of exploitation rolling stock. T intensifications has signalling systern a I motivic pyret, thio lcither Heterli FLI
The table below formance shows th extremely well in t Wagon to empty ". and the ratio of all, to wagon capacity. tant indices of | nearly all the ot Lanka shows po{ Portugal and Gree are among the leas developed in Eur
Of particular dis declining share th of the country's go portation as seen III Perhaps with st plantations, the rubber may pick
т. TRAIN STATISTICS OF SRI LANKA.
SRI LANRA (in miles)
醫T D - 量
FIF iyer ர Farrrrl- Grssr .sr
ந:ா விரிா gir
55 18-1 ,4 ,10:22 II , Éi 고 + + + 3 تا 19 Tឮក៏d . I. 1,013 4,048 Tង្វង់ , I Lof dog 1໘66 II.4 турна || 2:08 3 57 1ւյն} II. IOI 29 1968 T ேே4 ே 壬中中
ஒரே . . " 1 5. قة gg65 -, I7I I. 991 - Ii בודפ1 .33 דְI IS 8. IIIדפ1 IT후 13.0 99. , IIT 후 1『 Tਨੂੰ TC T 쿠79 I . . . 1 구미 + a II 48ຢູ່ SELECTED COUNTRIES (Rilometres) 1973
Sri Linki 25 TC + 581 לדב Spain ... ... 3-44 Ig+ | 5,#37' ++,5ếio I,8ø: E. Portugal - - - ஒ: 35 I00: 7,8I: 575 후 Norway. 12 ל בסם, חhr:HT 1 4:9 1 Swell 器。直 17. || II, 3; z 8 5 I, I 88 II, 2Cs : FRILIITILI. iii 2Š7 - - - Él HILI Ilgary I. 'g6', അ - - 6: TLitürını ... I5. I I I, III: 7,757 호 Greece ... ... I 53 미,45 424
Source: Sri Lanka figures G.M.R.'s Reports.
Other figures UIC International Railway Statistics Year I,

: terrain generally 1 Ctibi.
nd thcre ha5 been, 97o, considerable ray of intensificaof the track and Wr chief aids to
e been the CTC Il til dieselisation 1 F ugh some say that lly exploited.
of comparative perl'at Sri Lank:1 ducs he ratio of l.oldid Wagirl II 13 yerlerlts rerage wagon load
Both are imporproductivity. II. 1er met Sures, Sri prly even against Ce whose railways t sophisticated and
te.
appointment is thic c railway has got bods needing transthe table abG"C. älte take-ower CF share of tea and lp at least to the
full potential of estates within Io miles of railway stations.
the , Railway's Shire of Nation's Torınıf: {'d00 turis)ofselected goods
1933 19றுே (1974 LLeTLLLLSSS LLLLLLL LSLLL LSSuuLLLLLL LSLL LLLLLLlLLLLLLL LSL
Te Rubber ցՀ IT ITC: I亨事 Plumbagai g I고 T He 78 1 8.I 1753, 301 1523 36o LCTTLLLLLLL S SS S KSS 00G tt S STtt S T0K இப்பூடE 187 to II TO Salt 4ಛಿ * TTF T5 TT-3 Fertilizer 137 ICI 2 gli II H. R. Fl-LL 8 후 II Rica Ir-45 ; I Ġ I 36 377 Clician Lil E. - II - O I 5 sig TT[...!
Even om diesel-uil, freight trains arc held to be 3 to 4 timics more efficient in use of energy than road vehicles. With electrification the energy gains are much greater becu 5e Tost 3F Sri Lanki’s electric power comes and will come from hydro source. Even with thermal electricity, fossil fuel is more efficiently converted to electricity at a Central the Illial station such as Kvela IliLissai tháirl (JD 1 board 4 dicšel electric locomotive. If KurunegalaNegombo-Kalutara were electrified there could be a saving, granted
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ECONLI'TC REYTH', FL}"FLIHER, T ;) ;

Page 9
hydro power, of perhaps 34 of the 11 million gallons oil used by the railway yearly. This would be approximately Iococo barrels, which at SI II amounts to Rs. 12 million per annum, or about 3% of the cost of such electrification.
For passenger service, electrification has further advantages especially with regard to acceleration oit of station stops. This means not only a faster journey for the passenger but also better mileage output from the roll. ing stock and crews by reason of quicker turn-round.
With regard to both goods and passenger traffic, electrification has the further advantage that electric equipment (locomotive and rail-cars, or powered multiple unit train sets) usually, has twice the life span of Cq Liivalen. El cliesel stock.
Apart from electrification and capturing plantation produce there is scope for considerable development of the railway as is indicated below.
(a) Еxtensішпз:
Malta ral-le v LI Ildara
Tuttlanti-Amurit dhapura Matile-Naland Kahayatta-Enabilipitiya Harticlea-Al:Hraiրուtu Jani-Point Pedro (b) Rಞ್ಞ!
HITTE 還 Oputy: (e) Multiple tracing:
Erics Fort-Ragınırla. Ericks Pallura Prizg: tricks Polgihaywellai-Kiirunegalla, track: Jala-Negombo (il Containerisation (e) Special II tea Inciling depois:
Bleriential Trinci riile (F) Special rubber handling depots:
ħil u Lura
Gille
On a more visibile, but less economically important scale, there is scope for opening more passenger stations (e.g. Bambalapitiya Flats, and Urugodawatc), for exploiting the Mutwal and Kolonnawa lines for passengers, and for re-arranging significant railway stations to becomic joint passenger travel stations with til C.T.E3.
Calials in Sri Lanka
The canals systems stretching from Puttalam to the Kaluganga and isolated sections elsewhere he largely fallen into disuse by neglect, partly because those in charge failed to see
ECONCEIÇ TREVIEW", NOWESLEIER, 1975
their value. Som ha1Sterled their di LIP, LC) ten yers a illed, until silt crumbling of the itto carry co: Colomb.
The cw revival because canals E advantages in c. labout intensity Corlipatability ang urban storm-wat those who are p will have to rent if the boats are ma men and the SEC: by man-power, Westcd intere SEto Cort, and the rcfill into disuse ag
The comparat Cilals for bull. (including iron salt, a copra, Fibre) disadvantage for Wallie goods whic must be accepted petitors such as C.T.B., the High :"¥"CIn1 With1 rc:Filis: loading of some g canal will postpon highway improver
When Puttalian opened there is in Cement and Salt C send their goods Water, and incanw oil mills can buy lJ:.nk.
Thereafter there the proposed Call should not Trilonsport, canals re tij the Bentar:1 transport of sugar lised and othersch
Trucks, Lorries :
La mka
There is very lit about the work TE}:Lld vchicles in Sr shows a steady inc Vehicles registered in 1971. Thereaft been stagnant, wi retirements have b evenly replaced E There is no certa to how many regist actually in Lise,

e say wested interests emise, because right g) pada boats contiin the canal and tow path prevented It froll Chilaw to
is certainly welcome Lili'ye 5 L1 ch erformous Illergy conservilition, ind environtinental I even as an aid to er drainage, But rofloting the canals in vigilant because, de by village craftsIl diffmest haulage is there will be no defeld water transde-silted canals carı :lin.
ive advantage of Ur heavy goods and steel, cement, 15 II1uch as their deristiable and high th. Imust move fast, by transport comthe Railway, the lways Departinent, tion that the off"Oods from road to e the I1cccll for somme
lt
-Colombo is re0 reason why the orporations cannot
to Colombo by hile state coconut ori on the canal
is no reason why Kaduwell-Oruwala bc dug for steel -stored southwards ganga, Gingangii and Ericks revittleme; шпertaken.
and Wils in Sri
tle publishcd data
done by goods i Lanka. Table 3 гca5c from 27,ooo іп т96; to 34,соо *r registration has lich implics that ceI. ITIOrc. On le=58 by mlew irrimports. inty however, as ered vehicles were
A different indicator of the signi. figliance of lo Fry and van transport is given in Table z which shows that the railway has lost a lot of its potential haulage business. Typically the railway carried 92,000 tons of tea and 17,000 tons rubber in 1955, but only 33,000 tons tea and I,000 tons rubber by 1969. The 1974 position is a little lower, notwithstanding that the state took control of significant plantation acreage and could have directed part of the captured produce to the railway.
The implication is that lorries have captured the business which the railway has lost. The Report of the Transport Commission, Sessional Paper XXIII of 1967 finds that rail ton Ilage remained static while lorries took up the entire tonnage increment reflecting a 2% increase in GDP from 1959 to 96.
The Same Commission cstimated certain data about the lorry fleet.
Registration IgG
Colombo ... 12:ÇíÏÇ Elsewhere ... . . IAC
ໆ.
Payload 16,
24 tons and over . ... I Lower (mostly 14 tons or under) Tరిధిలి
Հ8, ՃՃՃ
Fleet Ownerships
Govertillent departments 후,7다고 dth:rs with II o more ... , Goo
300
While complaining about lack of data in respect of the whole road hau lage activity, the Commission made the following assessments:-
Million tons for Transport 1965
Ngriculture Lirid imports 5.
Export I.OO Go Increment to 1971
Հ52, Ճք 1ցնք I.T.
Industrial raw III|:Literials I- 로
Generated increases
Million tons for transportin
5 .I ... - - - - SדפT
Road Haulage
Sir 'து Ffafr
тов, I, ILŪ
Inı içT&TITLE:n : ճ:
II Iէ, 5 ՀԸ
7

Page 10
However, the Commission made no study at all of ton-miles, which is essential to an understanding of the quartity of haulage and of the Flect requirements. The figures indicate that in 1963 lorries of payload 24 tons and over carried 350 tons each per a II num and the new 6,5 og lorries recommended for import would each carry sco tons per annull. Assuming an average haul of too miles an average capacity of 3 tons, the 1965 flect Worked an average of only 40 miles per lorry per working day and the new lorries were to be worth only 33 milles per day.
Table 4 shows operated buses, which can only work during the "traffic day', (i.e. at times of the day when therc are passengers) run about 150 miles per day. Even allowing one in thrcc buses at depot for repair, this is too miles per total bus per day. For a lorry to work only so odd Iniles per day, with less restriction on useful working hours, shows gross under-utilisation of scarce capiԼal equipment.
This emphasises that whereas meticulous cost benefit studies are imposed before investment in railway infrastructure or rolling stock, or in electrification, investiment in lorries is recommended and proceeds without serious analysis.
Incidentally the same Commission recommended the abandon rent of canals and closing the KW railway beyond Hornagami. The analytical approach to road transport, examining the resource cost of transport, the
possibilitics of ir and collparison mode does not : emerged, and is
Un til such anal it is necessary transport on fir: nature of the vel is such that the energy, vehicle-w is necessarily h; water, but allow: in appropriate of the total trip
Ta
Түг.
ថ្ងៃច័ន្ទ , Igéó . 1967 ... - - Igf8
... סדפT I97I 197후 ... - - 1975 ... I4 -.
---
it is also nec that it is no li private enterprise for govern Diment d its transport mod to its own colve Gr loss shown keеріпg process.
BLIS es in Sri L.
Table 4 shows from 1961 to I-97 іп, 1974: —
Таill:4 C.T.B. STATISTICS
tiர fil Wiச நி: Fir- SS
:ே Pசாழ கிரி, சிறு
1961 5、4° T55 Igó: 123 ,7 II I963 - - - - - II 9 5,78후 13 ஒ4ே . - - - - 138 I. 1ցն; - - - Iür> 5:C4°: I-15 1966 I8. 174 II g67 ... 그 6,319 I
주파 1.17 IgGg 로그-T T,67 57 ;5 ,후코7 7, II - - - - - - ס197 197L - 24T 7,41) 17 고구 I - - - בדפI 1975 25 I 25 ISO I974 후 7.9քչ I

rowing utilisation, "ith rail and water spear to have still ldly needed.
led data is available to consider road principles. The cles and the track cost in terms of lar and track wear ther than rail or ice must be given ases for circuitry via rail Cor Water.
1961 – 1973, 1974 HLists CD:r:lt: 2,500. 4, Goo. 43ao
filliar fiser By buses I2C 25, 2:5 By passengers 구 y, 7,
Growth up to 1975 must reflect, to some extent, growth in economic activity as well as growth in bus transport supply. In the case of bus transport it is common in developing countries that suppressed of latent demandis tapped by an increase in thc service provided.
WEHICLE REGISTRATIONS (thousands)
Curr are friar Y Leftriger O Filwyr
Taylor TllLlTSS TTT S S TLL S LCCLCTTTCTLLL SSS LLLLCGLS S LCLTTS
8. I 3 그 구 郡 I 19 85. IS 흐3 卧 IS I 후 8. 후 Iד I דה 8. 8 IĞI 87 I9 l To 茎茎 169 SS 2T T Iלד 38 4. III I 8. I 그 그 7 I82르 茎串 | 로 30 IRS gI 3. I I92.
essary to consider onger suitable for state corporation, -partment to choose e solely by reference nience or the profit by its own book
Inka
considerable growth ; followed by a drop
Fiji Faes i Ririr i'r piler hir ard
ομrrπέρή ஆ
μοριαίίαή
նr از 13 + 2 후, II 파 நீ4 그 후 63 73 CT-9 涧、 9.
໘8 3,ஒேர IO 3,861 1לם -후- 18 4 J- I5 4,799 Iדם 7םI - 후
The drop in 1974 may be attributed to elasticity of demand following stiffare increases in 1974, themselves consequent upon general inflation 15 well as the direct Tal indirect effects of the oil price increase from S5 to So per barrel.
Table also shows a decline in the Last few years in d'aily bus utilisation from a peak of 157 miles per operated bus per day in 1967-1969 to about I 5 o miles per bus per day. This may reflect partly a curtailinent of the traffic day (i.e. less late night services) and of off-peak services, and partly a lowering of scheduling and operating e-Fficiencies,
Whereas in many countries, including even USA and Western Europe, the energy crisis resulted in an increased emphasis on the need to improve the quality and (by subsidy) keep down the price of public transort, a different philosophy seems to have emerged in Sri Lanka.
For example a minimum fire of -/zo seems deliberately intended to inhibit short-rides, though at the time when short rides are not in any case inhibited by queues or crowding, empty capacity is available at practically no cost. Another example is
ECONOMIC ILENTI", ei JVEMLIER Ig

Page 11
the announced strategy of rciducing the number of bus-stops, partly to discourage travel and partiyoto “conserve' brake linings, clutch plates etc. As far as energy is concerned, Figure shows graphically the following relationship:-
Υπήή ή
FUEL CONSUMETION
Asia. Prag.
Frg. gifs. Fis-r
FIFA' Fergas.
Bus, 9. 후 Triin | 1, IC FPLI Eli 9,бор
är . լ7Շ*_** 르
'''if''' IC,300 G ΙΕ και
mmmmmmmmmmmmmmmm
It would not be unreasonable to suppose that other rests in scarce resources are proportiomite, So that if travel is to be discouraged in order EO Conserve foreign exchangc or any other resources, the primary discourager.cnt should be placed upon car travel and not on bus travel.
Moreover, if by apt improvement in thc quality of bus services and by rationalising the bus faire structure, it is possible to lure half of the car travel into buses there would be a saying of no less than is million gallons of petrol Worth say (zo million (not to speak of personal savings to the travellers) as well as parallel saving in Wilr and tear.
Quality of bus service includes very importantly the convenience, accessibility and walking distance to bus stops, the frequency of service, the availability of service at off-peak and late evening, as well as comfort, short overal journey time, and less psychological frustritions in travel. In this context it should never be forgotten that all bus travel starts On foot and ends on Foot.
Automobiles in Sri Lanka
The position of automobiles has already heen discussed as a comparis son i meas Lure in earlicr paragraphs, Table 3 shows that motor cars on the register have increased from 82,000 in 1965 to 9I, CCC in 1974.
Petrol consumption in Table 6 shows the use by automobiles hias declined from 3,8 million Հillans in 1973 to 28 min g:Illins in 1974. This gives a 27% drop in
EMPFFERTI HEWLE'Y, NOW THE DELTE I 1975
consumption, (a mileage) againsta This is a conside
TRANSPORTA" (in Milli
Iյն + 1ஜபி 1ყნö - - - - 1ւյն1 IgĞ8
םלפI T971
구 - - m Aji Fire Petroj Car registratii
slightly more sly lation, so that t declined from a thousand in the per thousand in
pares typically wi
芷
CAR D (Pcf 1000
S.A., CLIH: France Idriftin lri;{ןil. Singapore ... Greece Sri Liitika ...
*Ilota
m וori ס7( ril IסFr
were increasingly
traffic congestion spent on fancy his scheme5) air poi caused by private when thc energy
fores een (als a qu: Price problem), or from COECD, Lo N Commission on
A Titlericans, to the II of Public Transp Institute of Britis been pleading for
Still They are even gei their pleas and na firm steps including
(a) priority for
signāls. (b) one Way for
buses,

therefore of car co% price increase, able elasticity,
ION OIL SALES
ris Gallons)
Pétrol - Fig florisé !
2. 39.6 I- 고.8 -T-C -7-- I 구 ---- 3 5 - 8 43ւն sic,
7 όή. 3 -미- 7-1 38.7 7.8 38.5 7고. 그r. 67.1
euLi Corporation
in has increased vly than the populle Car density has la ximum of To per Tiddle fifties to 7.
1974. This corn
Él:7
ENSITY population)
197 7 firfix frie 斗鹫+ 46 3.13. 후 2.94 --II, II 조T 85 T7. 64 1. புே 7. 枋 Taillible
wirds, when cities unable to manage (despite billions hway and parking ution and noise Tars, and from 1972 crisis was already intity, if not as a ganisations Tallinging els con Rockefeller’s ritical Choice for International Union ort, to the Royal Architects have restraints On the especially in cities. LLITrg TESPOIS est.) ly cities are taking
buses at riffic
| cirs but not for
(c) doWin-town cair licences (Singapore charges S3 per dicim).
(d) legal limits to private parking
places in new buildings.
(e) pedestrian-only and pedestrian plus-tram-only streets in cit
Cetts, (f) no parking on lius and tram
TICI LILLS
(g) thinning roads and bulging (the opposite of rounding) COTT: TE (h) deliberate, planned congestion,
In fact some responsible spokesmen in USA have gone so far as to Helroye OPEC price increases as being a blessing because of their assistance to the advocatcs of car restrait,
Possibly because Sri Lankais con sidered by the relevant authorities to be a Well-to-do nation, nor1e . of these messages seem to have reached Colombo.
Highways in Sri Lanka
The discussion on lorries, buses and cars in the last three paragraphs has necessarily touched upon thc highway which they all share as their trick with such commercial energy conservers as cyclists, bullock carts and pc.dcs trians, as well as with children and dogs and other dalliers and with Iniscellaneous goods for which the highWay is often a free godown.
The Director of Highways Report for 1969/70 (issued-August 73) refers to 13,225 miles of road Linder its jurisdiction of which II, 7; Timiles werc in motorable condition. The Wilbur Smith Report gives the following breakdown of PWD roads in 1962,
Er
8 - II" 8 179 ני. 16"-23" 13 10
그" דI
1---
This excludes Municipal Roads of which Colombo had 55 miles including 54 miles in Class T.
Highways have tended to develop in Sri Lanka at best upon the subjective judgements of district highway engineers and at worst upon whims of political decision makers.

Page 12
Where cost/benefit, or viability studies have been done prior to investment (or sometimes as postfacto justifications) they have often proceeded om LWO bases, One of which is invalid ab initio and the other unproved. The bases are:- (a) metis Lu rement of traffic wolume by vehicles instead of content (people and goods). (b) giving value to the time saved by people expected to travel faster after the improvement.
With regard to volume of traffic the only comprehensive study in Sri Lanka was done in 1962 by Wilbur Smith Associates whose ill-island traffic flow maps are based on vehicles. In a special section the Wilbur Smith Report gives the average bus load as 30 passengers compared with 24 CCCLIII parts Per car. Thus in fullction a bus is worth 12 cars although in terms of Passenger per dyna Illic: road space occupation or congestivity, it may be worth 6 cars. Yet the flow naps equate one cat to one bus and one lorry; and bicycles which constituted 42% of the all island "daily' count do not figure in the flows.
With regard to the value of time, several authorities now challenge the formulae (adopted for the British MI) which assume that a man will use bcneficially the time that a better road will save him, and assume that the time-saving will not be cancelled out in the longer term by new traffic attracted by the improvement.
It would be interesting to know whether the Katunayake-Colombo, Galle-Face-Centre and Duplication Road projects, for which considcrable resources have been allocated, could stand up to a cost benefit study which counted persons and goods instead of vehicles and which omitted values for personal tine savings and which took account of parallel under-exploited transportation tracks such as the railways and canal.
A conclusion is not unreasonalle that the decisions Eo construct, wilden or improve highway and bridges TE
The fastgrance of good fransport ra čợfrir fry" ir „ría vifaa ' fiha f 'A'' f. Mto II, force ffed firartically ar af sixia 887 af fir yrith that "etery contry pyr for the 7'r"i:IPy.FÉboʻF"/ f/ ä:g.r MYoA" ga7ʼ°.
Transport Conditions in Ceylon" W93 fillef Ffafra&ur ARs førf, 1594.
O
Energy
Million Oil (56 m
BUS 22
Iliade upon the SyTiptoms (bridg gestion) and noi causes of theses remedies theret
Towards i Sol
The first step բresent Transpor alising a policy surely depend ul (a) identifical
lems (in ჭo ridis). (b) collection (c) a knowle technolog Such study If the skills CF port technolog 蠶 statist and thereafter light of the E political philoso From the til published its w
 

轟
Fig. for personal transport in Sri Lanka 1974
illis P1535E1 Fier Miles;
| gins) (ii.5 billion Inls)
Ε BUS 7,900,000,000
TRANS 1.700,000,000
700,000,000
: subjective view of sources' most serious economic ge queues, traffic con- studies have considered thic
upon a study of the Ymptoms and possible
Lltio II il Sri La Ilk:A.
towards a solution of E problems, and visu
for the future inst FCIl:=
tion of the real probterms of people and
of reliable data.
idge of the available:
15. requires a synthesis town-planners, transists, resource lexicoicians and economists, oint planning in the trevailing social and phies.
Le the Club of R-01Tle Fork on “Firite Ric
Conservation and efficient utilisation of Scarce resources to be the paraInouilt guide for development. This applies no less to transport than to any other field. It could therefore be suggested that the future of transport in Sri Lanka should be Häsel upon a Policy with ait least some of the following guidelines, wherever there are no compelling reasons to depart from thern:-
(a) The location of activities to
minimise physical transport.
(b) The use where feasible of liniIlial power, man-power and electric power in that order as propulsive energy. The use where feasible (and where intensity of traffic Vicolu Iue justifies installation and maintenance) of canals and railways in preference to roads. The use of public carriers in preference to private carriers on roads.
(c)
(d)
ECONOMI. HEVIEW, NOVEM. En 1975

Page 13
(e) The allocation of highway development funds to rural roads, and to improving foundations for roads needed by heavy vehicles, in preference to widening roads and bridges needed to cope with private vehicles.
WORLD RHAILIWAYTIRENTDS
The directions of world railway development, as evidenced by deciision-making in the last few years are mainly construction of new lines in socialist countries, substantial electrification allotter the World, containerisation and unit-trains for cargo in developed countries, sophisticated metro lines in metropolitan conurbations, and railway bankruptcy in U.S.A.
Starting with the last, U.S.A. the fortress of private enterprise, is in dilemma because most of its privately owned railroads in the N.E., and -Weil One in the mid-west, Have entered bankruptcy. Why? And passenger carrying except for cornmuter and subway trains would have been a thing of the past had Congress not set up "AMTRAK' to take over and operate, at a loss, a few inter-city trains. Why? And now Congress is considering (CONRAIL Eo operate all or most freight trains in the North East. The answer is very complex. Railroads have shed passenger trains as quickly as allowed to over the last decade. Freight trains are governed by antiquated work rules which demand a five-Tian Crew Railroad track was perhaps over built in their heyday. Passengers have deserted to automobiles, bus lines and airlincs. value light freight has deserted to highway trucking. All this, plus excessive federal regulation (of prices, routes, interchange, merger etc.) to gether with the American emotional inability to consider nationalisation as a means to rationalising the use of railroad resources and facing the bookkeeping losses, as gother countries do fron national taxes, have led to the decline of the railroads which were once the constructive, developmentive and binding factor of the U.S.A.
Unit-trains, where cargo is booked and moved in train-loads (ofanything between two and twenty thousand tons) instead of wagon loads or less.
ECONOMIC REYLEY, NOVEM IER 1975.
and containerisati are stuffed into large containcts (t or 40' x 10' x 8" and destination F Hill over the indi וטווSpeed up the T tivity of expensiv shipping plant { resource all over ls of the goods th sation of Hitler the lecdli for leges SCL TCC res Cource: i. tries.
In large cities, låtion CF I Emil Lic:
F
railways (undergro on median strips ol are being built or cost to defit triF so enable public t faster journey than But cities that h; private car have EXPE-13 e.
Entirely new I considerable lengt structed in U.S.S socialist countries,
Electrification Hii age of expansion. shows the extent train miles and in selected countr following is a sho: the significant dewi announced in 1974 high-woltage A.C. ()
and everlooooy
 

On where the goods (r de-stufted from 7pically zo'x Io" x 8" at points of origin ave been developed Istrialised world to rement and producrailroad, port and which is a scarce the world) as well 2İmselwes, Mechinig has also led to labour, which is a 1 developed coun
mostly with popuIl of Ill Orc, metro
3.
und, clevated, and i express highways)
expanded at great fic congestion and rails it passengers a private car riders. lve restrained the
been saved this
ailways, some of h, are being con, R., China, most Canada and Japan. is entered a big new Table 9 (as II fage 1 4) of electrifical lines,
gross ton miles ies in 1973. Thc rt list of some of elopments or plans L and 1975 most at II,000 W t} : 5,000 W ) and commercial
frequency (5o or 60 Hz) but some at the morc traditional DC 3, ooov or 1,500V. All these will gather "juice" from overhead catenary, third rail being used only for metro urban rapid transit railways.
Denmark: Plans for mainline electrification submitted to Parliament in September 1975.
Greece: Five year plan 1976-1980 includes clectrifying Athens to Domokos main-line.
Italy: Electric traction on CiampinoColleferro (part of Rome-Naples main line) inaugurated in 1975. Ciampino to. Caserta 2cc km, now
Constructing Bottlenecks
fodrwy user farn: rif i'r llai'r Tŵr i'r faker'r 'la солғfrнегing airfificial" &g//kлғe&л аға ғаad ir ferrorfiau flag Figurado Egri Grad Federe W33ார்: சரி க ச ரி. ragger fiori, 7'éir figure figur gir fhir baf bren fore in the a re ofa røgd grid.
being electrified. Rimini-RavennaFerrarra on thic est coast is next in the plan.
Taiwan: West Coast mainline 494 km. electrification now under Construction by British contractor.
Portugal: The 1974-1979 plan will increase electrified track to 470 km.
Paraguay: Asuncion-Callcloo kill. to be electrified with Japanese aid.
West Germany: Further 276 km. of main linc to be completed and handed to clectric traction by end of 1975.
Pakistan: Khanewal-Samasata (73 miles) and Lahore-Rawalpindi (18o miles) electrification projects issued in January 1975.
Poland: Elcestrifical tibrı of Zalı","İçerici-- Radzicc I43 km, to be completed in 1976.
1.

Page 14
Soviet Far East: In addition to collleting clectrification of the entire 醬 Railway, the new "BAM' cut-off line (Krasnoyarsk - LenaZeysk-Komsomolsk-on-Amur) of 3200 km. length is to be electrified after initial working with diesel. Bulgaria: 95.7 kill, of new track has been built since 1945. By 1972, electrification covered IoI6 kill. The 6th five year plan includes
electrifying another 59.6 km, of TILlt L.
TRENDS IN WORLD TRANSPORT
The liminant role of rail and water in the transport of goods and passengers, which reached its world-wide zenith in the 1920's, has declined significantly and to some extent irreversibly since then.
The decline was the result primarily of Ellic evolution of the si Thaill scailc internal combustion engine, and of the design of aircraft. These two developments have stimulated great leaps forward in the design, construction and management of highways and of airports and of means of regullating theni. The pipeline has also made a significant intrusion as a transporter of liquids.
These trends towards highway, air and pipe, and away from rail and water have been most marked in the OECD countries. Yet the sa Tic trends are beginning to emerge in Eastern Europe, as evidcaced by the holding of an International Road Federation Conference in Budapest in September 1974, just as three braking factors are beginning to slow down the trend where it originated. Perhaps the two opposites arc interconnected, because if OECD air and all to growth is slowing down, if not yet declining, the manufacturers Inlay wish to lubricate a vast potential market for their products and technologies in Socialist Europe.
The three significant braking forces on aiuto and air growth in USA, Japan and Western Europe are ENERGY (both price and impending scarcity). POLLUTION (air and noise) and SPACE SHORTAGE (evidenced by incurable congestion).
Hence in the wake of the Club of Rome and various macro socioeconomic studies of world growth limits kill finite resources OECD is
12
sponsoring studies ÇAr Is con SL milling of Fuels and Tet combustion engine pollution and nois inconvenience into: how citics, and th cLil turc :: that lives sti Flecl.
Environ Tental logists are taking along with those to tion (atmospheric, AlfPOrt 11018e, LLT1CO man-made climatic tation to such an ext tries have state de tutions charged w protection, And Fi Cabinet Illinister
F Life'.
It is perhaps sik tain's Minister, in the Environment subject of transport of Transport, whic
Highway truckin also coile under their noise, pollut: energy intensiven Constructionl llas C because of its dis: social COIT) munities isolating them privacy to the wo
Motor vehicle conforming relucta. laticdl Standards ir emissions, exhaust treid noise, and || train, tram, and but
Wrl R.
Соннигу,
T LI.E. A. . Callic: 3. ALIš trillia
Sweden 5. Britain հ. IIւբan 7. Portugal 8. Czechsle) yılkiai
Io, Zambia. II, L.S, S.R. I . Sri Lanka 3. RuIII liitilia 1. Palkistan I , India IĜ. Nigeria TIT. CH. ini:
Will
השhn Horr.
1975, Αιτ

Flow the motor imited resources s, how internal
and taking air beyond human health threat, and commerce and in them are being
rGաբs ald cCOup these issues industrial polluhermal and noise) trolled effluence, hange and defore5= int that many counartiments Jr instith environmental ance even has a or the "Quality
ni Ficant that Brii Department of as taken over the from the Ministry 1 no longer exists.
gandairways have attack because of int emissions and iss and highway onie under attack ruption of settled
by splitting them, ir opening thcir Lld.
manufacturers in re ntly to newly regul1 tille Inatters Of
noise, and tyre he red hick to ; though advocated
by all the ad-hoc advisory committees and task Forces appointed by Presidents and Ministers is not yet showing marked performance. Meanwhile most railways, most airlines, and lost busines the world over lose money, and this is complicating the problem. Thus in the industrialised capitalist countries transport of goods and persons is in a state of indecision (in the USA an impasse) and although the solution is l:nown, InoveIIlent in the desired direction is impeded by consumer life-styles, vested interests, and the shfire costs involvcd i Ti Construction of rail alternatives.
The picture is different in the Socialist countries, where the motor Car and in its wake the super highway has not yet, except perhaps in Czechslovakia, become ai i Tresistable "growth' urge. Hence transport by water and rail is more planned, and Illore eyicilent sol fır il such countries, where each mode of transport tends to play its appropriate part. It is possible however that the decisionmaking clite in these countries, treasuring the motor-car for its convenience to their own life styles, and not foreseeing that this benefit dimi nishes as cair ownership spreads, will ordain highway development to ease the growing visible problems of congestion, and so set in train the whole series of developments that take away traffic from rails.
Such trends have not been sharply ar rested by the “energy Crisis” Per蠶 because the USSR is the largest oil producer in the world and does not yet see as a problem the exhaus
WORLD MOTOR WEHICLES 1973
Pfulla fiợr "grafia : செ PrЈанг
(Αντίίστή ar fir γαία, ODO per
{flam rai Pryd) (rho Parr (Taf). Pa fi i'r llafigwr
-II 1Ճ1,7ն- 그, 8 1후 2C 76 트.
그- 『, 후 I ,357 9,620 דופל 다.
13 415Ꮈ6 T,5,583 דדס ჭ45
고, 후 т64 3,566 -
56 13,497 1,185 I,82. -II
IJ4J I. 후 마 파 7.
8 구로 후 II 구 TE I. I 95 28 144 83. I로 로 I과 37 385 חדו 그T T II. I 고 1,8 Ι ή 5, Ĝio 6,87ነ 158 ד I3 89 -7 15ն ל I4명
si ד37 그 79 לדז 57. 구78 TT I,289 758 St. דני I56 1. 고효 마 பிரg – 6,5 si 5,67ց 23ჭ,5ნნ 6,5 GI Հgն,537 67 I5
mobile Ficts and Figures, Detroit
ECONOMIC REVIEW, NOYEMBER 1975

Page 15
tibility of fossil fuel. In any event, as late as September 1974, nine months after the big OPEC price increase, socialist engineers and planners got together in Budapest with their counterparts from OECD countries to discuss highway developIll:11TS
In developing countries (and China ranks with them in this matter) natural resources are not so recklessly squandered on transport. Most personal movement is by public transport, and most goods by resourceeconomic means such as bullock catts, man-pushed barges and railways. Yet the trendtowards highways is clear. In fact the ruling attitudes, and therefore the allocation of capital funds for transport development, are influenced by the exclusive nature of the elite. All decision makers and all of those who influence the 11 are non-users of public transport, and with almost absolute mutual cyclusion those who use public transport are not decision makers and have no influence upon decisions or even 器 the thinking processes of the
Tt.
lence obvious misallocations of resources are not perceived as misallocations, and devious means of curing balance of payment problems, improving the quality of life etc. are not scen. Despite this railways are being built in developing countries, especially where heavy minerals have to be carried, but the messages emerging fron professionals in UN, UIC, UITP, OECD and other international bodics are either uhcardi in developing countries or misinterpretcd, perhaps wilfully, as that of industrialised countries not wanting the poor to develop a taste for exhaustible world TSOLTS
CHARGING FOR PASSENGER TRANSPORT
A year or so back Rome ran its Eran and bus scrvices free for two weeks. The purpose of the experiment was to induce city travellers to leave their cars and scooters in their suburban homes and travel by public transport. The city thought that it would cost less in social terTIls to run the transport service free than to cope with traffic congestion, automotive air pollution and noise caused by private vehicles. The experinent
ECONOMIC REVIEW, NOVEMBER 1973
Average C. Aut
Standard Sieg Aut Milkilu
Transit Bus, Off-Pe. Heavy Rail (Subw O-Pe. Cominuter Rii| Ca
Trikrisit Bus, Crus
Heavy Rail (Subw.
δοητες 74 -
failed to attract st effective, and Pro a predominant det who can choose public transport.
In Nottingham ween fringe carp are free. This si because cars are going where the why not charge Nottingham's inst Wanted a deal to be in exchange for second that the ci special buses is in to the social co clogging, stifling : the central busin pays the highest r.
Both Rome ant Others have trical ingredient in sic congestion. Othe free trips as a mc Si TC 8) l'e5. 11an-Power is sca conductors are ha can cost up to 40% cost and, if fares over 40% of the there to recover. is common but di answer the cost p work of collectin tickets, (irrespecti cation of the ga down the vehicle all costs per dista
Hence it is argue costs by collecting general ratics and

Fig.
Frog" Comparisan of Urban Transporalian Mud
T | III. Eile
OIIlobile Ill Load
Lihat
oly) Car. iki Load
, Diesel 'covered
h Lali
t') Car, 蔷
75 Transit Fact Book
ifficient riders to EJ: Ved that Cost is not Timinant for people between privateo.
buses plying betfiks and city centre therne is a success - restrained from buses go. Then for the bus trip? "Er is thlt First they traded to Inotorists the restraints and st of running the Egligible compared st of motor cars ld deconomising ES5 district which էլ:
Nottinghain and free buses as an leIlles to relieve S have considercd Tills of Overcoming Il CICLIII litries where Pe, bus and tram to get. They is the total journey o not Cover cost, rice they are put ne-mail operation is not completely ble III because his fares and issuing ! Öf the sophistsets used) slowsnd thuis increases :: travelled.
saWe llam-power ares through the es System.
LT LL uDiDu LLTu LLL LLTT S u S S LSSSKSSLLL
Washington D.C.
Flat fares are often used on Syster118 (especially in U.S.A.) to ease the faire collection problem. But the short distance rider Pays Illore than his
llc share, thus subsidising the long ride passenger, especi ly if the firc: is inlltended to bi Profitable. But there is a bigger Probleril. The Flat fare inhibits the operator from čxteriting the route as development נןTG= ceeds beyond the terminál.
Could free travel be Contemplated for long distance rail journeys? Would they stimulate wasteful demandr Would they encourage, for example, long distance commuting? If demand was drawn away from more resourceintensive modes of travel the nation would gain and would have a Problern only of re-adjusting internal incomes, but if demand was unduly stimulated from non-travel the Position would be different, but light to be measured before being disiissed out of Hiini.
If completely free travel is rejccted undesirable, would taken Dayппепt be ap, like the twenty five cents paid for hospital service
The difference would be made Liբ by subsidy from local or central government, in other words 獸 by the tax-payer at large instead of by the specific rider.
This subsidy is El Cepted all over the world. In Sri Lanka it has cell accepted de facto, but not Willingly. Elsewhere the Concept is willingly adopted.
For example British
Rail in 1975
million after ICCeiving a
13

Page 16
T: g SOME INTERNATIONAT. RAILROATO FIGUR
Caiffafr y Sir Raffe Airw. Tir Er.
(муїїїїon) Walay Mr. On
Pop. f. pr. Tafal eller. Tofal eller.
LISA ... - - - 3,6 8דןI * 冕,24臀 미 865.p - CLima kli 18 852. Gó,3G7 I 17-- - Indią 4:33, II, 263 GO, TI+9 I, 333 473.4 30.5 Japan ... ... 93 T-4 41,599 ճ:961 7E1.5 475.1 FILTCe ... ... 4) 후 13 , , 8 , Britilin ,, ,,. 53 18,277 3.6 L 452. Iso.: Czechoslovakia 9 T3,295 8 248.5 39 تاوة, Sраіп , , . - - - 학 19- 13,298. 3-13 13.6 G.I. Portugal 3. 3,583 It ਹੈ . Zaire ... ... I4 ցՃ5 Հ.ցնI 858 to. Sri Lanka ... 15 - I2.
subsidy totalling (91 million from the Central Government and various regional governments.
AMTRAK, the quasi-federal sole operator of passenger trains in US, which has no other function, lost $529 million in 1974 after receiving a grant of $190 million. The federal government paid, and will continue to pay both operating losses and capital grants.
Chicago Transit Authority (operating buses and subway trains) lost $62 million in 1974. The loss is shared by City, County and State governments as an act of policy not as a reluctant bailing out operation.
Of course in these colltries the problems arise from congestion created by enormous car populations. Unless public transport takes some of the people off the highways the latter Will coke to death, Hence highway users as much as transitriders arc willing to pay to keep transit going. Part of the public transport problem is slow bus services due to motor car congestion, and poor incomic due to poor patronage.
In developing countries the car populations are low, but it may pay cven those who own and usic the cars to keep it that way, Hence payment by all for good public passenger transport services is not really a subsidy, but payment for a benefit received.
SOCIAL NATURE OF TRANSPORT
It is accepted throughout the World that some services are social
14
or infrastructural SLE lighting, Pι Parks, footpaths, great cost, but r when a consumer them.
In Imost, or at li the entire highway tion system, the h provided as a frce
In all these cas not asked to pay and benefits by services are prov: and technically a tions that operati a loss.
In sole cases, w of charging is ap other countries charged for, the a : thiy bu word subsidy is r
Should not tra regarded? One highway system except in a few tolls are charged ches, as a social why not the track trails? And If th vehicles which a the The: Ils of II goods as is the vehicles now c.
There are two regarding all try overhead or inf the objectives o clearly seen in Poh observed by Pro Secondly the re.

S 19구
{Groegr. / gryf...yw...
(ημίλιακή
ffer είες,
2,739,7ճ4
533,939 - 558,48a 17,34 367, αξύ Σαξ, και
13,787 37,81, 4.99 후4 T
Ꭲ, " 97 6,476 2,753
by nature. Hence
lice patrols, public
are provided at O charge is made uses or benefits by
last IIIany countries - system, the educa
calth system is also
service.
cs the consumer is cach time he uses the service. The ided at great cost, least, the institui: them, operate it
where thic possibility arent, or where in Ehicsic Scrvices are cost is regarded as in other cases the Lot Lusecl.,
nsport be similarly
aspect of it, the
is so provided, laces where usageon Particular stretinfrastructure. So used by barges and : track why not the 'e as much part of lowing people and rack on which the
chief advantages in nsport as a social astructure, Firstly transport will be ysical terms and not tland loss accounts. ources used would
tend to be measured against the output of service,
For example a telephone system, once installed at whatever investment cost, can handle simple messages at negligible cost in resources, much less than that of manufacturing, Writing and carrying a post card. At a more sophisticated level a half-hour telephone conversation costs much less in the consumption of scarcic resources than does the travel by one party by car to the other party's residence to engage in the identical conversation. Yet in both these cases the cost to the consumer, or at least the apparent cost, the immediate, out-of-pocket, cost, is much less for the message made that costs lost in resources, and in each case the price of the phone call inhibits |5 11.5 :
This example is in the comparison of one mode of communication with another. But an examination of transport in comparison with other cconomic activities is also apt.
Employces can be brought to work by employer-owned lorries, by free issue bicycles, by public transport, or by foot if housing is close by. The employces social function is bus, not riding. He must be transported to work el se he will no contribute to cconomic output. Hence the service of transporting him is more useful to the employer and the society than it is intrinsically to the employee himself. This is easily scen in the case of to-work trips,
But what about from-work trips? If a convenicnt and healthy return trip is also socially desirable because the worker must feel induced to travel to work on the morrow, the froy-lar trip is also a social service. Then what about the workers ride to the cinema, or the zoo, or a pilgrimage for his family, or his children's rides to and from school?
In most, if not all of this riding, the ride itself is not the object of consumption, but an inconvenient impediment between the rider and what society wants him to produce, or what he wants to consume,
With goods too, transport of produce from surplus or manufacturing areas to deficit or consuming areas does not add intrinsic value to the
ECONOMIG H EWIEW, NOVEMBER 1975

Page 17
Produce. The product does not wat it or need the movement itself, but only the market which has been separated from it by some human historical process. If a country is to remain cohesive, goods and people Illust be moved over the distances that sepirate the 1. This movement is : social service arising from the spread of a nation, and the investinent in the means of movement is social infrastructure.
Yet, it can be argued, what about textiles. Is not the production of apparel a social service, and the inLKLLLLLLL L LLLLaLLLL LLLLLL K LLL infrastructure. The question is also one of proportion. Minimum of modest clothing may add to national Cohesive ness, blit most clothing is not so socially caused, whereas most EITATSPOTL is.
Everybody accepts street Fights, law courts, parks, and the Kandy Lake as social needs or amenities. Everybody accepts cinemas, playing cards, novels, electricity as personal consuller items, But where dogs transport fit between these extremes. If it is placed as a social need the questions will arise of how to charge consumers for the capital cost of the infrastructure, and the avoidable cost of each trip or haul.
Most of the world provides highWays frec, (but not so cinals, railways and airports), but separately charges taxes on things likc petrol, whisky, cigarettes, part of the proceeds of which are rised for capital and maintenance charges on the highway Systeml.
Many countries charge for parking private vehicles on public highways or adjacent land, Sri Lanka urban govern Illents charge buses for such parking, but only Singapore charges differentially for the right to use highway space where and when it is
Il CSI ET TIL,
In Chicago the capital cost of a new electric Tailway service Was contributed by the Federal State, City, Country and Willage governments presumably because all these authorities thought that treasures garnered from general rates and
EEI IFI LII: HEYIEW, NCIYEMIRLER. 1975
tAxes should Cr rleed.
The cluestion is al sacial servic: CCramf:TIlic fictivit of the allocation the return soci: may accrue from thc criteria for TITLIT.
THE SIGNIFIC TRANSPORT
{)Ll I o'ye:r"yrieTyr
with the purposes Ille 13 Till ChileF Find then taken ! problems of spac interests is the Thereafter, the tra fils ProTt s Luch : trucks, lorries an and highways air LLIIIrleet-H writ| analysed. The r Field of transport, sphere, and rept recent dicvelopmn WYTere Teixit dealt , to the key issue Passengers shoul transportld Ha of this qui estion - slature of transpo
The Fictors p iš SLIK:s is that tramı nication ate vital t growth. They structure without. trial nor agricultu Possible. Transpor tribu Les to cicon. enlarging the m: further stimulating zation; helping til additional resource accessible; :inci Fic lishment or expan dustries. In asso favourii ble factors lopment would en to boccome more di forward on its ow Wards higher effic OLitբut.
The transport 's mainly roads, roi Ways, Ports and ha airports and aviatic

tribute to a social
whether transport or an independent goes to the root of resources for it, or Financial that thic allocation, and easuring the social
ANCE OF
has concerned itself 1lternatives, naturc, Thodes of transport
closer look at thit energy and vested affect transport. lain formins of local s railways, canals, el vans, by Lises, cars the Illain issues them were further major trends in the in the international ircussions of most ents in this field rith and this led on
of why and how d pay for public lly the very essence which is thic social
arvading all these Sport and commulo general economic provide the infrahich Incitherindusral development is development conmic progress by irket and thereby
economic specialihe exploitation of is by making them ilitating the estabision of other iniation with other transport deveable the economy ynamic and move "Il L11OT1 etLIL LOtiency and higher
system' comprises l transport, railrbours, shipping, in, and posts and
telecommunications. Tn the Casic of Sri Lanka, we have a comparatively well-developed 'system of internal communications. What is required is that the existing system is kept in a state of efficiency and then that it is expanded to meet growing de Inflnds.
With the need for a progressive expansion in the transport sector to meet the economic development requirements of the country and also with the pressing dellands on the scarce resources of the country, it is necessary that a transport programme for providing economical and effcient transport services at charges related to expenditure should be provided at as low a cost as possible in terms of the real resources of the nation.
Integrated Planning
An obvious aspect of this goal is that it is necessary to adopt a coordinated transport policy. The different competing forms of transport, as We have seen, are rail, road, air, canal and inland waterways, and coastwise shipping. All these forms of transport in competition are mutually destructive, and unless integration was provided the very excellence of each system would lead to adverse economic consequences to the country. Integration must be designed to ensure that traffic will flow naturally along the particular channel of transport that suits it best, and for this purpose it is necessary to eliminate the two great civils of unnecessary duplication and wasteful COImրctIt IOn.
The development of the various modes of transport needs to be planmcd in such a manner as to afford the maximum satisfaction of the transport requirements of the national economy at the lowest cost in terms of the nation's real resources, preserving, at the same time the clerilents of healthy competition, and the inherent advantages of each node. Existing transport shortages arc likely to be seriously aggravated by future demands of economic development. Transport capacity must therefore be expanded as quickly as possible. Transport should not only respond to the derlands inade unit, but bc all instrument for furthering cconomic development,
15

Page 18
Banking
THE BUD GET BANKS AND INFLATION
New Directions for Local Banks
In his Budget Speech, on November 5, the Minister of Finance stated emphatically that he would introduce a new approach to banking this year "as a matter of definite policy'. The series of measures he would introduce in this regard include a more liberal system of financial assistance from the Banks to those 'who have nothing to offer as security except their good ideas, physical strength and education'; iind a decentralisation in the decision-making process of the
liitionalised blinks.
Two other vital areas in which the nationalised banks will be called upon to play a more effective and dynamic role are-firstly, the plantation sector, particularly the Government's subsidy schemes and financing of the nationalised plantations inclustries and also those ခြိုးမျိုးူ fulI Iuctions relevant to the operations of the export trade in tea, rubber and coconut which were earlier handled by the Agency Houses. Secondly, a strcia E-Inlining of the Poroccss of financing State Corporations and closcir: supervision and financial control. Also, encouraging foreign banks to mobilise external capital for development projects in the country and drawing on the expertise, management skills and technical know-how that they could possibly attract.
Financing Enterprises of Educated Youth
Educated youth who have nothing to offer by way of property or guarantees will become credit-worthy to thc extent that new enterprises to be organised by and illn by them, mainly agricultural, can be cstablished with bank finance. A sum of Rs. Loc million will be made available to the domestic nationalised banking sector for this purpose. Money, however, will not be given in the form of handouts. It is intended that in every case of assistance the banks will provide management services, establish project feasibility studies, provide extension services and take
I6
all the steps neces guidance, advice necessary to ensur
all such projects. Decentralisation
The Minister felt of the nationalisc. mained highly cent tically all the decisi Head Office level. that private sector sing in the Preser problems. It has to of a massive bureaulic makcs for expediti ing nor takes ade commercial profital ence of bureaucr: evitably breeds coi ferring as many of R to a decentr
banking system is
Plutting an eild to E policy would ther centfälise Ehe ban So as to make it po decisions to be tak
Pla Intations
In the administrat produccr-subsidy se ter announced that with his colleagues, avoid a great dea bureaucratic proces ind the like o cus will undertake the service to persons the bank. The ban take the responsib the agent of the Controller, of th Commission, of th Import and Expor the Exchange Co. they undertake fin on behalf of thes relation to agricul or trade.
The actual su administration of s proper utilisation w upon by the banks tions which Lised respect of the Est thic estate departim companies could be efficiently and v banking system

Finance
ary to give the Lnd supervision thic success of
that the control banks has realised with pricns being taken at His Wicy Yas investment licensystem has its run the gauntlict racy which neither us decision-mikluate account of ility. The existtic Controls inruption. Transthese decisions as alised and Flexible one method of nese ablises. The efore Bbc tc» , cle:s' administration isible For effective in it local levels.
ion of thic diferent thclines the Minis, in consultation he has decided to of the existing s of form filling Lro th:it thc banks : totality of this being financed by k will also underility of acting as Tea and Rubber Land Reform e Department of El Control and of troller whenever Arıcing operations c departments in ural development
erwi8ion of the Libsidies and their ill also be checked
Even the funcbe performed in ite Companies by ints of the agency worked extremely "ell through the thereby avoiding
many of the problems that arose under the earlier dispensation. The administrative arrangements to make this possible within the banking system will require training, the recruitment of personnel and a whole new approach to the system of banking as we know it. The Minister cxpressed confidence that this change of direction is something he would be able to achieve Within a short space of time.
State Corporations
A policy with regard to State Corporations obtaining their financial requirements from the banking sector was explicitly spelled out. The system of providing finance to the State Corporations through the banking sector would continue. But, in any case where a Statc Corpo ration is shown to be running losses not due to adverse trading conditions or misfortunes of an in for seeable kind, but due to plain downright mismanagement or absence of necessary financial controls the Bank should report every such instance to the Government. Where the Government thereupon thinks it desirable to set the affairs of the Corporation in order by imposing limitations upon its autonomy, through the ininistry in charge of that particular corporation, it should do so by imposing budgetary controls in much the sa Ille Tiarner that local governi ment institutions or co-operatives which are not well managed are made to function Better tham befUTe.
Foreign Banks
The foreign Commercial Banks have been engaged mainly in the financing of the import and export trade in the sectors not controlled by State Corporations or Government Departments and financing of the estate plantations and the cxport trade in tea, rubber and Coconut through the Agency Houses. With the nationalisation of thic cstates as phase two of land reform, ownership and economic control of our greatest asset, the lands of this country, are also now in State hands. In these circumstances, the banking functions relevant to their operations will be transferred to the nationalised bank
ECONOMIG REVIEW, NOWEMBER 1975.

Page 19
Finance
ing sector, viz. the Bank of Ceylon and the People's Bank. This is tanta mount to a de farfa nationalisation of the private activities of foreign commercial banks.
What was expected of the foreign banks was not merely a mobilisation of domestic resources and its channelling out to the traditional forms of investment. What was requircd is the infusion of new external capital from private sources to be used in the establishment of new enterprises in this country, to provide new employment for our people to teach them new skills, to develop new Projects, to provide management con Sultancy services and to provide a catalyst service to bring to them the talents and skills, technical competence and know-how that has to be brought in here to modernise our nation and to bring it in line with the international community. For this purpose, quite apart from the existing forcign Commercial Banks, new foreign banks interested in coming into this country have been invited not for the purpose of sharing in the Iimobilization of our domestic TCsources but in order to bring into the country new capital, new expertise, technical know-how, management skills and compatence.
IN FLATION
Right at the outset of his Budget Speech the Minister of Finance took on the subjects of inflation and devaluation. He summed up his views om inflation thus: “What is relevant is not the budget deficit as such, which is financed Év bank borrowing, but thic need to ensure that the overall limits set to money supply taking the Government and private sector together are 'safe' in the sense of not provoking an excessive rise in prices. I am far from being a believer in outright inflation, which is simply a disguised form of taxation and fraught with dangerous consequences." Later on the Minister explains in his speech the repercussions of inflationary and recessionary trends throughout the Wold and how they are being dealt with. (See Box)
The UNCTAD Secretariat also reported recently on this trend. It
ICONOMIC REVIEW, NOVEMEER 1975
Margy of the of the prese da La Ŵ4,7 styf f'Air, esperity in devel. froy a vide deg Failing ing f'Wie iera Fiмум/fiтудейлугу дf; rediter i file ili vaifa έη ή Γιεν Αλαίει οι irported easy ared varitifierfre, fire/. Is Hill' in creating in fiбДarу імурасf б. rhanging the eroi lihole, fire regri of the entire day. Ma Jr interna riorital, fberg fx fernas rhoe дriafғ}y dèа/? дїѓії Weżyfir fra situairce la fer raffar Powea Fiorer of deflat, frүг/муғw//r, dkfrfrуғ; Felix R. Dias Bar Мілігfer of FIданғғ. Budget Speech, Noy
concluded in the
terms that bothilf in the devicloped c. problems for the
T:
Major Problem f Countries
The seventh sp General Assembly Flatio inti the dewie: creating a major developing world.
In Flation in the economy Countries
Imenon—it has rii post-War rcCOn St L period. Since the
ever, its pace has nating in the highe in the moder 1 eC these countrics.
Why has inflatio vasive Feature of th pattern of the ECOTCH I lly Countries cannot be a simple hatno il flation ci out national gov the economy with why is morc monę increased output

Banking
coloric difficialties | Prof zwerely in Sri ghoff the 'orld, big coirie, rise e g/ ifation prefrériTired soft/Istrie." h a referrior Hěřů for good, A1 εί τη με city orie FFFF" fiail y, ke it CTI itery of ør forigid, 'otilad Teғ. мауғre!у ал ішуfЛа| Gir écongroy # frrie firsfir: a, a. ing recorrideratiary τέή έήριξε. Η ξε y rerogired that {лага мууолл стррга = y p:த்ir Tagfe restling irythart by fitfored oilary dag eftir adta' Alla developrewert. di TatiaLike
ember 5, 1975
following simple ation and recession xuntries pose grave developing coun
or Developing
acial session of the h:5 identified illoped countries as problem for the
developed market is no new phenoirkcd the cntire ction and growth late 1960's, howAccelerated, culmist peace time rates nomic history of
1 been such a per: Post-war growth eveloped market
Obviously, there 1115 Wer. It is clear Il take place with:rnments fuelling new money. But * Created thān the f goods and ser
vices justify? A widely accepted answer is that built-in institutional pressures leave no other options to politicians (at least if they want to stay in office). These pressures are, in particular, industrial concentration, unionization and the protection demanded by the weak and uncompetitive sectors.
In Wage negotiations, trade unions in sectors where productivity has gone up usually lead the battle for wage increases. They set the pattern for increases in less productive sectors, whose employees expect to be treated equally. Thus, the wage rate for the economy as a whole will be determined in the sectors enjoying the fastest productivity growth. In sectors where productivity is rising at a slower pace whilst wages follow thc trend, prices will rise as enployers defend their profit margirls. These price rises are generally mot Compensated by price falls in the Sectors where productivity has gone up and profit margins have increased. Inflationary pressures on prices are increased through government protection of high cost industries accorded out of social considerations or appeasement.
If the supply of money is not augmented, people will be unable to buy the generally higher priced goods. Firms will sell less, and unemployment will follow. In the trade-off between uncmployment and inflation, governments have generally preferred higher rates of inflation to higher rates of unemployment because, traditionally, the public is more sensitive to higher rates of unemployment than to inflation. There is a certain point, however, when public concern over inflation becomes so great that governments need to take action.
At the same time, the struggle among the social groups for a bigger piece of the economic pic continues, pushing up wages, prices and profits, and governments find themselves torn between policies of inflation dampicning and employment creation. In the Course of these Stop-go policies, inflationary pressures lose their stimulating effect on the economy, (செர்ரீ ராஜி: T8)
17

Page 20
The result is 'stagflation' inflation coupled with low or even negative growth-which has become a pervasive faltor iri, Wester ni countries.
This new phenomenon of stag flation seems to defy conventional economic remcdics and has given rise to doubts regarding the ability of the dicycloped market economy countrics to assure long-term stability and balanced growth. These doubts are sharcd by the developing courttrics, Inflation always hits Hardest the economically weakest members of a system, those who have no power to push up the price of their contribución.
Inflation has a deteriorating cffect on the prices of the commodities they have to offer. One of the reasons for this is that the output if continodities, especially agricultural como modities, cannot be easily adjusted to changes in prices and demand. Tri contras E-to, 11-a 1 Li faciLLi res, who 52 supply can be Timore readily adjus tcd to changes in demand, commodity prices show sharp up - and downturns. In the upswing, the increased prices of commodities are incorporated in prices of manufactured goods. During the downs wing of the business cycle, however, commodity prices fall sharply, while prices of manufactures continue to rise, due to the above-mentioned institutional pressures. The ಙ್ is that when the business cyclic has run its full course, primary commodity prices are often at levels prevailing Before the upswing, while the Prices of miniai nufactures show a net gain. In this way, inflation has had a longtern deteriorting efect on the terīns of tāde, But the impact of in Flation om developing countries is not only limited to the price relationship of their primary Commoditics with manufactures. It also affects their respective volume of sales. In times of a business upswing and strong demand, exporters find it difficult to export more as they cannot easily cxpand production. In a recession, collinolity processors drastically decrease their purchases of raw materials. The result is that, while the developing countries cannot fully enjoy the cffects of an upswing, they are fully hit by the effects of a recession.
Both inflation and recession in the developed countries therefore Pose grave problems for the developing countries."
S
THE BUDGE THE AGRIC SECTOR
The Budget of N proposed a solo su for paddy and thereby bringing : subsidy scherme. farmers and woul ages of fertilizer fr to non-subsidized farmicir it will be Rs. 134- to Rs. balance that will the government, extend to all other paddy, but also tea and even vegeta. soaring priccs of cultivators had giv izcr irich ir tur drop in their pr Weet Zolt: järel 5 affected in this rei Fertilizers should :
Control on tracL and the taking awan Lw wheel tractor5 reduce the cost some relief to thc for increased produ proposed through Lion. Arı idditiÜnı milion over alırlıd : Illillion that his wided for in Ehe respect of the de Budget would gi Fool drive.
LAND REFORM (AMENDIMENT No. 39 of 1975
The nationalizil сопрапу cstate5 the CIl:1gt Irlent Reform (Amend 39 of 1975 on 1975. The La Commission 4 155 water tea, rubber other tric crop la 232 public comp; and stıcır ling. Thı cState:S Thuilibered public companies, Companies owning I45 were Rupee ( zo 5 estates. The companies managi
 

T AND JLTURE
wellber 5th, 175 bsidy on fertilizer plantation crops, about an uniform This would assist d minimize lealom the sullgilized sector. To the it reduction from 5715. It is this be subsidised 黯 This subsidy will crops. Not only rubblicir, CCCCynult bles. With the fertilizег папу en up using fertiin led to a sharp oductivity. The were: thic II 1)SE gard. Subsidised reverse this rend.
or Hires to falt Lillers | of import duty On would undoubtedly f inputs and give heasantry. Rebates iction has also been
crop diversificalall sum of Rs. Io
love the Rs. 250 already been PTC1975 Estimates in certralised Capital we a fillip to the
M ) LAW
tion of all public took place with of the Land |ment) Law, No. October 17th, wested in the o8 acres OF Cultiand coconut and nds, belonging to a nies, both II Fee e total in II Tibet Of 3 gó. Of the 232 87 were Sterling 191" estates and Companies Owning re. El TC 20 0WIlling ng zo estates. The
total acreage wested in the Land
Reform Commission consists of 292,126 acres of tea, 1 Io,021 acres of rubber, 8,036 acres of coconut and 5,325 acres of minor crops like cinnamon, cardamom, etc. Nearly is 6,545 acres of tea of the 292,126 acres were owned by Sterling interests. 63, zo1 acres out of 110,021 acres of rubber and 2,433 acres of coconut out of 8,036 acres of coconut were also owned by Sterling companies. Thus a total of 201,979 acres out of 415,508 acres of the cultivated lands nationalized, belonged to Sterling Companies. Of the 396 estates, 376 estates were managed by 22 Agency Houscs, Six Agency Houses controlled 70% of the estates or 15 Agency Houses 86% of the com: pany estates.
Agency Houses controlled 62.1% of the total tea production, 27.3% of the rubber production and 3.9% of the total coconut production.
The total acreage wested was distributed in the following districts: Nuwara Eliya (82, I7I acres), Kandy (76,963 acres), Badulla (77,837 acres), Ratnapura (je, 352 acres), Kegalle (42,764 acres), Colombo (9,4 I E acres), Kalutara (27,756 acres), Galle (21,288 acres), Matara (4,81) acres), Puttalam (911 асте8), Kurunegali (6,az I a cres), Matale (I5, IGI acres), and Monetagala (2,031 acres). The former agents, managers will act as statutory trustees on behalf of the Land Reform Collmission for a period of one year. These lands, according to the law, can be alienatel to the State Plantations Corporation, any State Corporation established under the Agricultural Corporations Act, Usawasamas, Janavisīs, lie frīs, DDCs, elctorall level Land RefoTim CCP-operatives, the Coconut Cultivation Board, til Rubber Research Boir að alliemated for village expansion and for human settlements. Compensation will be paid and the mode, means and method will be decided on by the Minister of Agriculture and Lands. Powers have been given to the Minister of Agriculture and Lands to acquire any Agency House and change any director, if the riced
ises.
ECONOMIC REVIEW, NOVEMBER 975

Page 21
TEA
First Colombo Tel Auctions After
Nationalization of Estates
The First tei tuctions in Colombafter nationalization of public comparly-owned estates was hell on October 21, 1975. The average prices at this sale against those for the corresponding period in 1973 and 1974 reveal that all teas Fetched higher prices than in the earlier years. About 3,964,732 kilos of teas were offered at the auctions and Comparative Net average prices per kilo are as follows:-
(FrprrrlKila) Net
75פT97+ I 5דI b
High Gran ++7 T 6.55.6.40 Mediu III Grii ... I 5.64 5.42. w Grown ... ... 4.08 č. 52 5, čoםL
TL31 +3이 6-2 59.
Compired to the mild resurgence in the tea marketin the previous weeks tea auctions in Colombo, there was a dramatic revival in prices of all good liquoring teas in the auction of October 21. Widespread and enthusiastic competition prevailed at this first auction since the historic Lid momentous change in ownership of the estates in Sri Lanka. Spokesmen for the tea industry and trade were all of the view that there was no substance in the belief, held in some circles, that the take-over of publicly owned companies (both foreign and local) would adversely affect the prices of Ceylon tea. Quite the contrary appears to have happened. Alnilnost all Categories showcd substantial gains in price over the earlier week's rates, with even further inprovements being seen as the sale progressed. The emphasis was on teas with useful leaf appearance, South African buying was the feature in this auction. U.K. buyers werc far more active than they had been for much of this year whilst Japan afforded active support to the Bopp's grade. Sudan, who recently signed a contract for the supply of approximately to million pounds of Ceylon tea, were also participants at this auction after a period of 10 years.
FICOND NI ENI: BLEWILEW, NOWIE). Nid #EFF; 1975
THIRD QUẢ
Production
Tea productio January to Septe to 3, G4, 17; II, I o 5 lb 52995,595 lbs. period in 1974, figures for Sept. period January compared with in 1973 and 197.
High Grown Melium Grown Law Gr'un
FI
High
Flight Grown Metiunil Grown It Grw
Exports
The Wolume of the first ninc mr. higher by 73.8 m Corresponding pel may be ascribed it duction, derland : statistics for this Below:
JANUARYS
T g'
Exports
volutile (IES) 28,50
Exports
value (RS) 457
F.), B, u
per lb. (Rs. c.)
 

ARTER REWIEW
in during the period
Prices
Average inct prices of teas at the Colombo Auctions for the period Jan. Sept. 1975 as compared with the same periods in 1975 and 1974 are given below:
JANUARY SEPTEMBER
Imber 1975, āngunted (RырғалуКi/%) N: s, as compared with In thic corresponding 1973, 1974 I-75
The production
High Grow II ruber and the Mediun Grown1 3.88 5.33 1.90 Ptember 1975 is Low Grown ... ... 3.ஒ: 1.6 பிடிக the Samci periods TITELI 4. I7 s.64 6, at is given below:
SEPTEMBER
(Killas)
I973 Τ97.Η 1975 5,426.α.454 497 (58.2 -4 마- ,377, 62.5 3,827, 미- 4,578,36б,8 +„ნpg,g88,6
TTr:1* 13,794569,4 I후 9"|- 14,481. I
est crop for September 1952 – 7go,791 Kilos. est crop for September 1965 – 18,164387 Kilo5.
JANUARYSEPTEMBER
I973 1974
58,356,402. I ნ:„Eg7,661, + 2,337, 7. 52, 138, τα 6,4 57,304,919.3
++, )1,887
I 5s, ZzO,747.g
TITELI
4۔ 4,983,923+
65,86,508.
39, IT 3.5
15, 109,948.0
tea exports during nths of 1975 was illion lbs. over the iod in 1974. This O 11 Creases 1 n PrO und prices. Export
period are given
EPTEMBER
" 1975
SES
gت ژ,I +=#8T,rg8 364,ژ
3-莺斗 卓重重
H
Subsidy for Indian Tea Estatics
The Indian Tea Board has decided, with the approval of the Government of India, to introd ce a scheme for the renovation and consolidition of a reas under tea. Thi: scheine which canne into effect from October 3, 1975 provides for the grant of a subsidy up to Rs. 4.ooo Per hectare (I hectare = 2.47 acres) and is designed to help small growers of -tea as well as small tea estates espe
cially in the hill arcas like Darjeelin which cannot afford uprooting of 器 tea arcas. This scheme is intended to enable undertaking of heavy pruning of existing tea bushes and also replanting in old areas and to improve the per hectare productivity. It is cStimated that over one third of the Indian tea area is over 50 years old. (Črridar page 20)
19

Page 22
Commodities continued
COCONUT
Export Duties Removed
The Millister of Finlance ililo II licet in his Budget Speech, on November 5, that he proposed to remove the existing export duty Oil Corpora, CoCO3İnuit bili ğıldı. O, C. Actual Exports
Export carnings from the coconut products in September 1975 at Rs. 26.5 m. showed a substantial decrease of Rs, i.8.7 and Rs, 9.5 m, in comparison with the previous month and the corresponding month last year.
Earnings from the export of Coconut oil in September 1975 at Rs. 16, coo showed a sharp decrease of Rs. 23.6 m. or loc' when compared with the
previousппопth. " sharp drop in quantity exported was only joco kil
Earnings from 1 in September 197 showed ğını incre: when compared month.
Earnings from fibre and Fibre pro 1975 at Rs. 4.5 m. of Rs, т.7 m. с. previous month.
drop in the volum
Thc, tablic below
export volumes a nut products for ber 1974 and 1975
EXPORT OF COCONUT PRopucts
1974, Шапшағу - August
Terry | Fr Poli Critinut ri Rgs. T4D, τoooo8,572 , IlD.C. 35,871,576 I7,764,996ד ξέές: Cipril ,ே0ஒ,ே344 2g1, fif 68: Podrilc ... 2,941, 18. 7לTTL3 Freshirikut ... ILLE: g:8ໆ Bl Fibre products. , 84-329,250 78,759, 19 г. நி1 Shell products 2. II,Ĝ7477 II, 750, gĈ5 13ಛಿಜ್ಜೈ.
Total Wall Luc - 8
RUBBER
Export Performance "
Exports of Rubber during the first nine months of 1975 at 26.8 m. pounds were higher than that for the corresponding period in 1974 by 37.2 m, pounds. However, export carnings were lower by Rs. 182.5 m. Prices for RSS 1 comtinued to Ilaintain a steady level.
There w:Hs a nınır! exports of Bloc Crepe and Sheet paircd with the co in 1974. Prices ha mately Rs. I, 6; III Iliric II lonths of approximately Rs.
the same period details sec table b
RUBBER EXPORTS
7. January - September J
இry leave Т. т.
Solic Crepe 6,315,595 F-7 - Låter: (rap: . IցT-T Scrap Crepe 2,737 2. Sect REE T31-8; 16 II Black R.E.Eir 7:8 I. Läteix 4,141 Co
GrEd Total , 후 후, 후, II 618- :Ճ.
2O

This was due to the ill exports. The during this month
gral IIl 5.
the export of D.C. "5 at R.s. I8.7 m. se of Rs... 5.5 m. with the previous
the export of coir ducts in September Showed H decres) Dmpared with the This was due to the Le exported.
provides data on nd Values of CocaJanuary to Septem
Jaitli Luary-September
|¶ Pr
133,049,637 נ5776ל 9.25 GC 3,331 ,629 고구 3,614 ĞI,I77,143 ჭ,ნgI Tד34, #31.ם
37,2ೇಳಿ:
Ked increase in the k Rubber, Latex
Rubber is comTresponding period averaged approxier lb, il the First
I975 as against 2.75 Per lb. during
last year. For clyw.
75שT an illry - September
இry Ρτήτης
(br.) 置r,青。
2ם ב, 7,763
T). 2,168.21 T 28 4ே3 249 בד77,8ד,T 9-Hool I
םליכו, בדד; 2
New Copra Drying Process
Mr. Vicente GabrielofthcPhilippine Inventor's Society has invented a new Copra drying process. The Gabriel process produces Copra meat which is white and clean with Thoisture content reduced from 48% to 5% and with a protein content of 2.5%. This process produces charcoal that retains 85% of its carbon content and has a moisture content of only
5%.
SPICES
Cinnamon Exports Decline
Export earnings from spices during the first nine months of 1975 were lower by Rs. 4.7 million as coinpared with the corresponding period in 1974. The quantity of Cinnation exported during this period at 57,953 cwts, were lower by over 48,000 cwts. when compared with exports in the same period in 1974. Exports to Mexico, the main single market for Sri Lanka Cinnamon, during this period was 5924 cwts, as compared with 23,371 cwts, in 1974. Exports of Ca' damom hawe shown a marked increase during the period under review.
E55 ential (Oils
Export carnings from Essential Oils during the period under review continued to be lower when conpared with the corresponding period in 1974. With the cxception of Nutmeg Oil, all other oils has shown a substantial decline both in quantity and in value, Total carnings from exports of essential oils in the first nine months of I975 Was Rs. 5.2. million as compared with Rs. Io.7 million during the corresponding period in 1974.
EXPORTS Spices I97
JELI LI alry - September
(Try
{ru i'r. l'or, ry. I is is iiris irisl $7,5$5 후 구 Cardi. II1çim Co: நி1 Cluyt is 3.149 雪·王 Pepper I,888 INutirleg I. Egge:Titi:11 Dils Lillsiltiltil le: if till 688 Cirilii ITV1 Hark Hill 曹。喜 Citrella () I,503 1.fi Ginger til 1. 호 Po Cirilinmitti til 0.03 Clove oil - - Nutrieg oil, ... di
ECONOSIC REVIEW, NOWEMBER Ig75

Page 23
FEATURES
Can the Poor
Support the Rich 2
M. A. Hussei Millick
During the past twenty years, many developing countries have seen their growth rates soar. But they have
also seen unemployment increase LLLLLLLaaJSLLLLLL S SLLLSS LLLLLaLLS S S LLS S S L LLLLLL adequate job opportunities. They
have seen income inequalities widen and poverty spread more deeply into the lower depths of the population. This claboratic colonomic thcotics which, for the most part, were developed in western industrial countrics, have contributed to understanding several of the special problems facing emleriging 1:1 tills, but, Con the whole, the results have been disappointing.
Wester. Theories are Unsuitable
Many factors have led to the failure of past development efforts in the Third World, Fascinition with the growth rate of the GNP along with the concomitant extraordinary role assigned to non-human capital, have conspired, with inequality and the capitalist system, to produce failure on a grand scale. The importance of capital has been exaggerated out of all proportion. No one demics that capital plays one of the key roles in the creation of employment but it alone cannot trigger the whole pro
CSS
Concepts like the Illirginal rate of savings can also be Illisleading. Planners are tempted to choose those projects which ensure the highest marginal rate of savings on the basis of this concept. But the concept is dangerous. True, the ect)- non my does succeed in gcinerating maximum savings from amounts inwested, but in the process important social goals are by-passed and the
mobilization of various production
factors is neglected. Poor countries, where capital is scarce and whicre
ECONOMIC REVIEW HUWIH BER 1975
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what economists ments like labyl ridin.cntary skill. out in the long not winners. capital-oriented sized incomic ine Imitant to Ilder. El Practical resul ment models, st lopment are crea ilgricultural sect SILill-Scale inclis ignored. This in lopment leads to COI sequence - i. goods and serv tively privileged the population.
The lack F is cently powerful the Imajority of tries is allother of present develo Dor col II tries su Capitalist econo brought about by the inability of 1 alternative social lopment systems. Lusic of “leverage” tries to pronot powerful wested or exploiters in These groups al II lished and strong EcOIlomies of t their cyw'r terms Lwo morc decide
New Ways
The Third Wor Ile" Ways tij Tile. lenges of develop. on past developil cularly in the fie and social justice. Lleiht the ries. Ar Offet 50IIle basic for Third World

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call fictyr endow. , raw materials and are abundant, turnLi n to be nett losers, In the same way, leories have emphaquality as a concodevelopment. As of these developall islands of deveed, while the larger or and export or Tial sub-sectors alre: equality-based deveanothicir undesirable he production of ices for the relawell-off part of
ufficient and suffisocial stilluli in Third World coulimportant weakness ment policies. Most ifer from an 'early' nic order largely two factors, First, eadership to devise ly acceptable devicand second, the by capitalist counthe interests of groups of capitalists the poor countries. e now well-estabenough to run the heir countries on for at lcast Conc or
S.
d must now explore it the Warious chalment and not dwell ment failures, partilds of employment Western developld experience may truths and tools development, but
the realities of the recent past have demonstrated only too clearly that the emerging nations must develop their own designs for development to meet the aspirations of their broad II lassics.
It is unifortunate o find se many higher GNP-growth advocates among economists, when it is well known that these rates can so little for the masses of population in developing countries. Mere statistical growth does not indicate that high growth has had a positive role in the Economy. In the silme Way, mere increased steel production dogsn't indicate real economic development, especially if it is used mostly in military and Weapon construction.
Achieving real development means departing from long-established capital-oriented development models. This can be done by adding to the previous development recipes the element of 'raw lalour'. This is one resourcc which is very much available in many developing countries. There is no reason why development equations Carl not be formulated to illustrate new ways to substitute gradually human time and human capital. But this shift in development policy is impossible under the prevailing economic power constellations where 20 Per cent of the population dominates both production and distri bution. If and when the lusc of raw or unskilled labour increases, both production and distribution will have to be restructured and this will obviously involve de-monopolization and de-oligopolization of the present economy dominated by the "twenty pērcenters”.
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Page 24
One explanation for the failure of past development models could be that they are based on false premises als far als Third World economies are concerned. Having grown out of Western countries' development experiences, these models make Ilcither allowances for the fact that the developing countries' cconomies are quite different from those of developed countries, nor that they differ among themselves.
Industrial countries’ economies operate under quite different conditions, They possess well-developed market Illcchänis Tills Lind are endlowed with suitable socio-political discrimination against non-capitalist sectors, against imperfect market mechanisms, against external interferences and, last but not least, against the prevalence of sharp income inequalities with their negative impact on output and massCOISLIIIlption,
Sharp differences in income and opportunities have a direct and much more un favourable impact on production and employment in underdeveloped countries than they have in developed cconomics. The fact that the present constellation of socio-economic and political forces are both products of and defenders of Arı incquitable order Ilıcans that new resources injected into the economies of these countries, planned or unplanı ned, automatically begin to make things worse, The un fortunate consequence is that inequalities in incomic along with inequalities in opportunities have become the standard in most developing countries. The colonomic order, based as it is on the foundations of 'disequalizing forces' does not promote an efficient and Fair nationally-spread development. On the cortrary, it maximizes the wealth of the richer groups and strengthens their hold over the բOOr IIlasses,
In a nu t-shell, Lunder development is not merely the backwardness of some in relation to the growth and advancement of others, but also the condition under which the development of some is obtained and supported by the sacrifice of others. In this sense, what underdevelopment amounts to is essentially social and cconomic imbalance at the national, regional and international levels,
22
I 975 — 4 CRU George Bickers
Ti'r awajar re of Trade and Ifossic pro prof, se of there tzv. |Frafyra Verlyi விரி : ,
Two major re bleak light on the of those dely that arc Forced to and rclated produ: The annual rep General Agreement kırıd the World Banık point to 1975 as the il-importing devel
The boom in countries of 1972 demand for, and cominolitics scal
The oil-imp Wtorill H1:s setem earning potential imports, from the tries, have risen world in Fiation.
Tıc World Barıl: in 1975 the PLI Tchas: of primary commot I Pr Cent.
The Effect Dfthis developing countri the GATT report.
By indexing the connolities which Go per cent of the E: ing world (excludi against the prices factured goods, for report shows that dities fell in buyin the com III odlity b) tea, jute, iron Cre, t. Eleven developit do o Ille of these con za per cent and 5 c3 export earnings, wil more that til 5 o Per
Cİıcı: OII. Dı.
By April this y modities On the below their 196 out the beliefit Twenty-six coul! left oil one of per cent of their I6 countries foi cell.
The Wrld B: increased aid from and the opportLI r: ernings are esse feels that the real now hitting the de in II will the sit:

CH' YEAR FOR THIRD WORLD
fel
rtir-fro yw The World Baik and the General Agree/wer/ ariffs (GATT)—have painted a bleak pielere of the erroif developing contries in the current world situation. Making report, Birkerstaff, the London correspondent of the World fortres of the plight of exporter of primary copyriadities firida wental changes are required in the “ecoloric order".
Orts have cast a iconomic position loping Countries import Petroleum tS. rt of GATT (the In Trade and Tariffs, s annual report both “cTLi nchi” year for the ping world. the industrialised 73 which sent the Le Price of, primary ing has collapsed. rting developing Its major export "W":ırıish, "Wrhile its ldustrialised colnin price through
report estimates that ing power of exports lities will decline by
cclinc Jindividi Lill es is emphasised in
prices of a list of 26. in 1972 represented ports of the developng the oil producers) of importel Imanud ; Arıqlı ferti lisers, the iye of these corinog power even during im. (The five were bacco, Il Tid bananas). g countries depended II nodities for het Ween per cent of their total ile Five contries had cent carning depen
at another IO coin
ist had declined -7 I value, wiping if the price boom. tries were depenhese for up to 5g xport earnings, and more than 5 o per
:eport comments that he developed world, y for greater export ial - (GATT-iT, hl ( Wevero, mnonic stornis Only sloping world. Only nation and decline in
income in the industrial areas exert their full adverse effect on the economies of developing countries', it says.
The reca sur for this is that the in circase in exports and the rise in prices during the commodity boom allowed many developing countrieso boost their economies, and expand their international reserves in somic cases, beca Lusc of tim ne lags, right up to the middle of last year.
Since Lhen the recession in the deveoped world has turned the terms of tra de Tagainst them, and many have had to finance large balance of payments deficits-made worse by the rise in oil prices.
These deficits have becil financed by large-scale commercial borrowing and the expenditure of international reserves-in the past six months these reserves have been reduced by US Sնio, occ.ooՃ.
The balance of payments situation in the developing world Could bccome so bid that import controls are introduced, aggraviting the recession in the in Listrialised Colitrics.
At the sametime, the cili rrentfalling off in the level of inflation in Thost devicloped countries-which benefits the developing world as well-is mainly due to the depress cd prices for primary com
Iodities.
The World Bank report calls for an increased flow of concessionary "no strings' development aid, and an expan5io al liberalisation of world trade a R the answer, though it has reservations
aboli botli.
World trade offers more positive potential, the bank report suggests. The liberalisation of import controls against primary commodities, it argues, could halve the amount of extra foreign exchange required to reach the 6 per cent growth target. It would also, though, involve the oil-importing developing countries in some US $18,000 million in westInent in additional productive capacity to meet the extra demand.
If the "crunch" year of 1975 is to be avoided and not to become a recurring phenomenon, international cooperation is certainly essential, and the adjustinents involved in establishing "a new economic Order" may have to be more funda
men tal thin any yet envisaged,
LC0x03, IC, I. F.VII."', - Ö"E"I Dr. F. 1975

Page 25
Sri Lanka and the Economic Commur
Јауапtha Kelegama
="فیفا
The Etropean Erarrowie Cape inity (the 'Cory rary
ofte of the largeff frading bloer in the Horld Recent, igned a general trade agree went lith the E. E.C. a. are For Heing finalited to efore the rawerciał agreenefit frary Dere her this year. Maff rea E. E. C. car fiftie generally that region third reiff of the world for after fire retirier, Sowe of the rere with the E.E.C. haye been with woys of its ex-color LCLTS LLL LTTGTL TLCLGG LS S LLLLL LHLHS TLuLLCCL S SS LCCTLGLG LC CuuJS uTGGLmLCCCS CCL LLJLLL LLGLGLG SLCTCCL LGS the history of the E. E.C. and if i neu'r relation ship, a'i Dr. Kellega raya ir fhe Secretary of the Misrirfry of Interrial. LLTLLLLLLL LLLTT LCLS LLTTLSCLCuCS CCCmLGGLTL LL LLLLLL CuLu LTLGGLGL S LTS
AeLMLMeLLMeLMeLeLMLMeLSSSeSLSLSSeeeSLAeSLeLSLSeSLSeeeSASLLALSLMSSSLSSSLS LSLSLSLSLSLLASLLALALeALALeAS eeSLSLSeSAMeASALeSALeALSLeSALSLeASLSALSeSASASeASASeAeLeLeALeSLALLSASALA
The European Community is an association of nine West European countries working together to improve their people's living and working conditions by eliminating as many national barriers as possible and welding into one economic unit their minic national economies. The founding members were Belgium, France, Germany, Italy, Luxembourg and The Netherlands-commonly known as “The Six” with a popullation of 18 million. The United Kingdom, Ireland and Denmark be came members on January 1, 1973, thereby increasing the six to "The Nine'. Legally there are three European Communities: (1) The European Coal and Steel Community (ECSC) created by the Paris Treaty of April 18, 1951, to pool the six nations coal, steel, irol orc and scrap resources in a single market; (2) The European Economic Community (EEC) commonly known as The Common Markct established by the Treaty of Rone of March 25, I 957 to create a custom 5 union and integrate the six nations' economic policies; and (3) The European Atomic Energy Community (Euratom or EAEC) establish cd under a Second Treaty of Rome of March 15, 1957 to provide for the development of a community-wide atomic energy industry and of other peaceful uses for nuclear energy. Since July 1,
ECONOMIC RDWIEW, NOVEM DIET 1975
1967, however,
or (CoIII Ilumitics . tered by the same three comminili Lu Inirie "The Communit
The suffering World War III am to prevent anothe prompted the mo nomic and polit ruinous global cConomic and so: the founding men OFILätional SC3 Weric Western Europea Cole it secondary affairs; шлited, th an economic por scale. They saw advantages of a c. by internal barr therefore, willing way of organis with each other pared to seek as The deeply felt operation gave thic Brussels TI (later known as Union), the Cou the Organisation nomic Co-operat immediately after European organis: means of consul

European
ity
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the three Treities have been adminisinstitutions and the
is are referred to as
甄量
.
and destruction of d the determination r European conflict Weilleft toward cotical unity. Two wars, followed by :inl Collapse, taught libers the limitations ignty. Individually, Il Powers had be: infllence in wurld cy Coluld constitute FCT of Continental the conomic disntinent fragmented ers. They were, to try a different ng their relations
they were РгСlution in common. ecd for closer coise successively to teaty Organisation Western European Icil of Europe and for European EcoOn, all established the War. These tions provided new ation and co-ope
ration but they did not meet fully the inced for greater security for prosperity. This, they decided, could come off from pooling of their economic resources.
The first of the three Communities, the European Coal and Steel Cor Ilmuinity, was successfully launched as a pilot plan for future integration of Europe on May 9, 1950. Inspired by the ideas of Jean Monnict, the man responsible for the French National Economic Plan, Robert Schuman, Foreign Minister of France, on that day appealed to the nations of Europe, and to Germany in particular, to pool their coal and steel under a common authority. Five nations-Belgium, Germany, Italy, Luxembourg and the Netherlandsresponded favourably, and this led to the signing of the Paris Treaty in I95 I creating the Community. The Coal and Steel Community began to create a single market for coal and steel for the six-member countries, enabling these products to be traded freely. Although similar efforts in the 1950s to set up European defence and political communitics failed, the coal and steel community succeeded and encouraged the Six to try to extend thic formula EO the whole field of economic activity. At a conference held in Italy in 1955, the Six produced a plan for two new collllllinities-EEC and Euratin.
Advantages of a Single Market
The Six had seen in the coal and stcc sector the advantages of a vast single market where goods could пnove freely. The creation of one multinational unit with 180 million people, instead of so million as in France or Germany, was expected to promote greater wealth and economic stability than a single nation of so
23

Page 26
million for fewer inhabitants. Finally, it was hoped that colonomic integration would help lead to the longterm goal of political unity. Expcrience gained in the European coal and steel community helped in the establishment in 1958 of the European Economic Community and the ELTatri.
The EEC or the Common Market, with free movement of persons, goods, services and capital and the development of common agricultural and commercial policies, was to be created over a transition period of twelve years beginning on January 1, I958. Some of the objectives, howcvcr., were a Chievci a heal of Schedule, By July 1, 1968, one and a half years ahead of the original target date, LLu HLDD LLLLLL LLLLLLL DHuLLLLLL LLLL aaLLLLSSS munity both in industrial goods and in most farm produce. The Six had eliminated intra-community tariffs, and established a commoil tariff on goods imported from non-member CLI intrie5.
The European Community emerged as the world's third most powerful indistrialı nit after tlı e--U.S. A. :ırıldı the USSR. It had by 1970 the world's second largest output of cars, after the United States, and the third largest output of steel. It was also one of the world's leading agricultural producers-the second biggest producer of milk and Theiat. It’s Tate of economic growth was y cry impressive, Between 1957 and 1969 its gross product increased by Per cent Compil Ted With increases of GI Per cent, in U.S.A. and 4 z per cent, in the U.K. The Community's foreign trade increased in ore rapidly thin the others. From 1958 to go its exports and imports from other countrics increased in value by 183 Per cent. Colupared with 149 per Cent. in the U.S.A. and Io7 per cent. in the U.K., Tradc bcEweem, tlh: member states increased eyel more sharply—by 33 o per cent,—over the same period. The Community is the world's largest trader and the major importer from developing countries. In 1970, the Community's imports from thic rest of the World allounted to $45,622 million and its cxports $45,199 million compared with United States' imports worth $41,056 million and United States' exports worth Sazi, I 57 million.
24
The Communit tiint source oflid . tries. In 1969 rifficial ind Prisi developing countr aid agencies inclu Development Fu million compared fra I11 the U.S.A. i froIII Britiin.
החIIl the CoנFrt ii II liou inted to albot aid. The Clini fall i Lunder t. ment Tegotiated
1967. It is respo
thic food aid to de (U.S.A. 42%, and
ОПe of the mi reached by thic Co mentific: cfarlicr by the removal of other trade: Birr IIlembers sø thất . its in one large cou LI fnion also meant of a common ex imports from ther that the goods in Commitu LInuity Counti the same import member countries of the Six were all Tl exterriF last of which was most products the TTLÜ Il ex Letin tärif arithmetical averal applied on January members; for so however, it va: fi EEË Ween the six. W in the common about 55 - 4.3% Ca linder the Kenne lateral Tariff Cutti Community's tariff lowest of all indus The CCITıman exter trial goods avera compared to 7.6 Since completing t nal täris, the Cor laterally made sev asking for reciprog du ties on produc developing countr suspended entirely mate and trop reducell its til Lities; o by 40%, and on she and other tropical zoo.

is also an importo developing counthe total flow of "Atė: TSOLITICE5 til ies aridl fil ultilaterial ding the European lid totalled S5, 1997 with S4,645 million and SI.o69 million Nect disburgements munity Countries it o' of western unity also grants he food-aid agreewith GATT T1 insible for 2.3% of :veloping countries
U.K., 5%).
lain goals so far in munity of Six as IS I CILISTOI I S LIIIIIIII tariflis, quotais and iers bct Wiccm the goods move freely ntry. The Customs the establishment Ernil tilriff to II est of the world so ported from nonics are subject to duties in all the National tririts igned on the comin three steps, the in July 1968. For cyclf the corn| was fixed it the ge of the tiåriffs 1, 1957 by the six me ley products, ced by negotiation Eith the reductions cxternal tariff by rried out in 1971 Hy R J Lund Multing Agrcement, the Si havic boccoline the trialised countries. militäri Forl inclusges, 6 Per cent. % in the U.S.N. hic ConTim Com externmunity has unicral cuts without all concessions, in ts witil tri soille ies. Ilin - I gō 3, iL its duties on tea ical hardwoods, Il Coffee al Ill Cid Coa llac, vairious spices products by 15
MEMBERSHIP AND ASSOCIATION
The influence and impact of the Community-as the largest trading power in the world--is so decisive that many countries have sought membership, association or trade agreements with the Community. Full Imembership is open only to EuroTean states; some European countries have been allowed association with the Community as a step towards eventual membership, e.g. Greece, Turkey, Malta and Cyprus. The Community also allows certain devel'oping countries to bccome “assogiates'. The Rome Treaty provided for links between the European Conununity and thic colonies and other dependencies in Africa and and elsewhere of France, Belgium, Netherlands and Italy.
The Yaounde Convention
After 1958, however, incarly all thic French and Belgian colonies in Africa became independent, and all of them, except Guinea, accepted association with the Community under the famous Yaounde Convention signed in 1963 and renewed in 1969. The 8 signatories of the Yaounde Convention a TC: BLITLIndii, Caillero On, Central African Republic, Chad, Congo (Brazzaville), Zaire (then Congo-Kinshasa), Dahomey, Gabon, Ivory Coast, MadagasCair, Mali, Mauritania, Niger, Ruvanda. Senegal, Somalia, Togo and Upper Wolta. These countries constitilted the former French West Africa, Belgian Congo and Madagascar, and their total population is about 70 million. In 1975 they were joined by Mauritius making the associates 19 in 11 TIITılır.
The association provides for the gradual formation of a free trade area between the CorIIIIIIIIlity and the I9 associatics, liberial tid fronin thic Coillmunity to the 19 and co-operation through specially created political institutions. The cirdinal feature in the trade between the Community and the associates is that all cxports from the associates receive Preferential treatment in the Community over exports from non-associates. Most products of the associates actually enter the Community duty free. The associates in turn are cxpccted to give preferential treatment to their imports from the Community, they
LLLHLHGGGHHGGLLLLLL L LLLKLLLKLLSS OLLHHLLLS HHuHHHH

Page 27
have reduced the İmport duties and abolished quota restriction on these imports. The Community's imports from the associates rose by fo7% from $91.3 million in 1958 to $1,889 million in 1970, while its exports to the eighteen rose rather slowly by 75% from $71.3 million to $1,249 million in the same period.
The associates are also given financial assistance through the European Development Fund set up in 1958, in addition to direct biliteral aid from individual Community countries. Funds are provided on soft terms for economic and social development in the associates. Thus, under thefirst Younda Convention 58 or million was provided by the EDF: of this S6 zo million or 78% were grants. Of the S918 million granted to the eighteen under the Second Yaounde Convention 748 million Were grants. The relations between the Community and the associates, implementation and supervision of agreenents, frequent contact and arbitration are ensured by an elaborate institutional framework consisting of an Association Council of Ministers, Association Committee, Parliartientary Conference and Arbitration Court.
The Arusha Agreciment
Three other African countries which were not former Colonies of member countries, viz. Kenya, Uganda and Tanzania, were offeed a different typic of association in 1968 under thic Arusha Agreement. This agreement provides for mutial trade preferences on a wide variety of products, but Emore li imited in range than under the Yaounde Convention. Further, there is no provision for development aid from the Community as under Yaounde. In general terms it allows the three countries to export their products to the Community duty free except that quotas are applied to coffee, cloves and pincapples. In turn, they have agreed to grant tariff Concessions on Some Go EEC products. The agreement is implemented and supervised by a Joint Association Council while a Joint Parliaillentary Committee also meets
periodically,
Apart from membership and asso
ciation, the Community allows links with the Community to be maintained
LCDN ÇIXMAQ ELEYLEYEF, INCI WİKİ MEHEF. T975
and strengthened Agreements. T Inents generally reductions on i cultural products obliged the Com the special econoi between sole Countries irl. Ele Thus Trade Agri. with Morocco, T. поп, Egypt, Israt slavia. In the cas Com TImunity gran for its baby-beef In addition to CCLIII Erics, thic Co. ag Teements with l Taitir ATmctricilin them special con exports to the Six Europen Sociali Yugoslavia, were munity at the beg it as a 'capitali. softened their átti and some of ther Linofficial talks w relations. China, Supports the Co: to haw : Hircct clea
BRTAIN AND
Britain emerge World War Int economy suffering other European ci Big Three Power institutions were cated and strength il tha: decidic after to surrender any sovereignty to Euı; Western and Nort den, Switzerland Temailedil leali trial d were determined neutrality. Denn though both ha during thic War, h; BritiiTi di Switcl end of the 1950s. was realising the a cipating closely nomic integration economic problem ments difficulties, dence to colonies AI in world Councils changed the situat thought that the E which did not be the European C join with the Cor

by means of Trade hese Trade Agreevolve mutual tarifl ldustrial and agri
The Rome Treaty munity to take over nic links that existed f its members and Mediterranean area, ements were signed nisia, Algeria, Lebal, Spain and Yugo- of Yugoslavia, the is special treatinent exports to the Six. the Mediterranean In munity has signed ran, India and some countries granting Jessions for specific While the Eastern it countries, except hostile to thic Coinin ning and attack.cd it plot' they havc tude in recent years n have already had ith a view to closer on the other hand, mmunity and plans lings.
THE EEC
from the Second lefeated, with her g less da Ilhage than countries, one of thc is and het national regarded as vindiLenecil, Few BritoIls the War, saw a need clements of British tope, Elsewhere in herП Europe, Sweand Ireland had luring the war, and to Ilaintain their hark and Norway, ld been occupied ld strong links with cil. Towards the however, Britain dvantages of partiin European ecoThe worsening s, balance of paygrant of indepenind loss of influence were factors which ion. It was then European countries come nellbcr5 of ammunity should mmunity in cstab
lishing a wider European free trade area. This plan, however, lacked general agreement. Then Britain and somme other countries which had mot joined the Community-Sweden, Denmark, Norway, Switzerland, Austria, Portugal and Iceland—“The Eight' established the Europcan Free Trade Association (EFTA) with the objective of establishing industrial free trade between the members and renoval of trade barriers and the promotion of closer economic cooperation between all the Ilembers of the OEEC (succeeded in 1961 by the OECD) including members of the Community. It was also recognised that some members of EFTA might eventually wish to join and others to see closer trading arrangements with the Community.
The vigorous economic growth of the Community as compared to her Own lagging economy beset by rccurring balance of payments crises led Britain to investigate membership of thc Community in 1961. France, however, decided that Britain was not ready to assume full membership responsibility and ended the negotiations abruptly in 1963. Thereafter in 1967, Britain under Labour Government made its first formal application for membership but this failed to evoke a favourable response from the Community. After the retirement and subsequent death of Charles de Gaulle and the successful 1969 "Summit' meeting of political leaders of the Six in the Hague, negotiations began in earnestin June 1971 and the United Kingdom, Ireland and DenIIlark became IIlcinbers of the Collmunity on January 1, 1973.
Thic contrast between the ComInunity and Britain had become more marked over the years sin cc I 96 I. By 1969 the Community countries had rates of growth of gross national product per head of population or of private consumption per head, about twice as great as Britain's. In the period 1959-69 the Six devoted 24% of their GNP to investment cornpared to Britain's 17%. Further, in this period the Community earned a surplus in the current account and maintained a strong balance of payments position while Britain had a cumulative deficit and a weak position. In 1958 average earnings in Britain were similar to those in
25

Page 28
France, Germany, Belgium and the Netherlands and over half as high as those in Italy. By 1969 average carnings in Italy had caught up with British earnings while those in other Community countries were between a quarter and a half higher on the average than Britain's. Britain had thus fallen behind the Community countrics. The attraction of the Community to Britain in this context as the British application for nembership in 1967 cmphasized was "the long-term potential for Europe and therefore For Britain of the creation of a single market approaching 300 million people, with all the scope and incentive which this will provide for British industry and of the enormous possibilities which an integrated strategy for technology on a frcely continental scale can create".
The Commonwealth, in Britain's view, could not ofter comparable
opportunities. The White Paper "The United Kingdom and the European Communities' refers to
this subject as follows:-
SSSLLLLLL LLLLLGGGLLLLLL CLLLLLLL T LLL LLSCLCCHHTTTTL ா:ற்: ரிசா : y : பர சாதி வீரர் பக்கி : திச் : ideiar a riad frøprørsyrir deressprowerf, Eith the attainsterir find-pendelice, 'Brir þolitir1/grid LLLCLL LLLLCCCCCCLL CHuCT TLt LCCTCGGLL LTTTLGL fr #ž # Tசார சங்g: சரி க்ரig Tது : சா I fildepeloping IFirst offer Fosenrrier’ fra de and inter" worry. W marraggerer for die arrard Irif Αδr rεγπίτεκαεη, ο Εύrir θα εί ξεσηrπόθίται KTT LLTTS L HLOL LGGCLuCCSLSLT LL TGGT Kingdor rare of the trad, fie Cografiшуға.../// Мал «Rez/fуға! Мағр/у, кiper für II.JP LLLLLLLLSLSSS LG GGGGGLGLSL LLCCu S LKCGGTS LTCTGuGu exports so fög. Lex göng'Easil hape grows; ris flary I'hiiri oir expari F Fa tie s: EC hade ext:fyrdd Fy Mrs. Periore rapidly, artid firi 1970 exteffafrif gitar fix pori'r for the whole (sgw. LL SLLSCCuCCCLLCCCCGGGLCCLS LC S LLLCC LL CCLCLS reat că "Ifrier, fă, fie Hripeții Cioroiார்ரரசாங்g apper ராச ராசசர்கள் LCLTLCCLy CCHCCCL LCCTT LLL L S LSCCCT LLTTLLLLSSS F ir Tigrificarif ffaf fler Eli Ft Africa Čør. Ayrshire'r rørfor frier kape frø girer fler Carryiri fraide freferences oper ra'.
The decision to join the Community was, therefore, logical. The White Paper statics:—
“Оғугgғаgrphfrтї, міїїїагу, pg/їfѓа, ғrgудутїLCTTS GlCCTTS LLuGGLuGLLu YCLLLCLL LLLL TTCCLCL S JLL LTL T TL LGS TTT GLL GCCTCCCLLL S L LC LTL L LLLLLLLCCGGCS LTT L L LGTL TCCCLLLLL LL ji for tர் ஜே i rear g
uider Errefratr, Čarry KYNHYRFF y gyffel raffig Tyr, : i righ r Tr r : Hợrld ar 4 MAJ YAYIN grifer far figf ggfiff indirila Freibers. If I's trafrird girlfrie LLL LSTCLCGGGLTSH S TTGTGL CGLLH LT CTTCTT
26
af. F F Kalifiseriff Ferre J''For For F 1F :" Fr:TF"Toul καμία εία Fir, έή ές
ispre progregire arid Friarrheid berowe prigg Far Europa, follfir. þrreeded Irishort frri тілдіру ғұрғra" fiмrг
The European C. "Nile' is thic World “power”. In I 97 I ti goods to the value 2.4.5 per ccnt. of wo imports of USA. E. S. 6 billion or I imports. The expo. that year were $65 of world exports; th S44 billion or 17% It is also relevant to share in world trade
The membership enjoins, Britain to ac External Tariff of And to eliminate al betweerı her incl ho"We'ver, gire Eo b four stages to be cor 1977 as shown belo
Adoption of CET by UK
FM-7 : Apr. 1, 1975 ...- JIn F. 17+ .43 JÄm. I, 1975 ... 20 1:11, 1, 1ர73 .10 םב, Itil I I977
The implication oft
CET by Britain is th wealth countries W. ciates and which e. the British Ilarket applied to their To those countri preferential positio British tarif it will
tage as the CET i thall the British to: out adoption of it years, however, Foi for adjustment for
Coillimonwealth co
The other imp Britain's entry to is the offer of asso British dependent than Gibraltar and allindependent Co loping countries )
those in Asia.
dent CoFilmonweal

direkh (fr. filiară
· iii. Na dib ng ik di digira yald aurier Brifyrriderir for prif, traffrey, wyraire difficiuff,
frrí ergifossir fyriry :ார்g Crir re'.
mmunity of the 's largest trading le Nine imported f{64 billion or ild imports. The y Contrast Were .5% of world ts of the Nine in әіШіоп ог 27,6% ose of USA vete if world exports. note that Japan's is only 8%.
if the Community opt the ComTI1on
the Community tariffs on trade he Six. These, it carried out in npleted by July 1, "ኳኳ't=–
CLITTI LILtiw: in Whittors adoption of CET
I E: گئی۔
- - - - - - o
I LIII
he adoption of the it those Common1ichi re Otassojoy free entry to will hye thic CET xports gradually. is not having a 1 and paying the Ilicial in som lic Advanli
general is lower riff. The phased le CET over 4: vides sometic he nor-associable intrics,
rtant aspect of the Community ation status to all territories other Hong Kong and monwealth deveith the exception Thus z I indepencountries, main
ly in Africa, the Caribbean and the Pacific, were offered three options: association a la Yaaffyde, limited association a la Arrha or Commercial Agreement; and they were required to make a decision by January 1975. These countries are:-
Bahamas, Barbados, Botswana, Fiji, Gambia, Ghainn, Grenedla, Gullyana, Jarılıaica, Kenya, Lesotho, Malawi, Nigeria, Sierra Leone, Swaziland, Tanzania, Trinidad and Tobago, Tonga, Uganda, Western Saloa and Zambia.
Britain also securicid from the Comimunity special concessions for New Zealand's exports of dairy products which constitute I5% of her export carnings and of which Britain alonic buys 80%. New Zealand is assured of a guaranteed export quantity at a guaranteed pricc for her exports of dairy products to the Community for five years. The Community has also undertaken to safeguard the interests of sugar exporting countries who are members of the Commonwealth sugat agreement. Nearly all these countries, except India, will also be associates of the Community.
The associables joined forces with the existing associates to form the African, Caribbcian and Pacific countries (or ACP); this group consisted of 46 members-I) associates, I associables II1cntion cd earlier plus 6 others who were subscquently offered association: Ethiopia, Guinea, Eastern Guinea, Guinea (Bissau), Liberia and Sudan. (Angola and Mozambique could join when their independence was completed). The Yaoul de Convention was duc for re-negotiation by January 1975 and hence it was agreed that both associables and associates must join forces to negotiate for the best possible terms and conditions with the Community in the new Association Agreement. These negotiations took 18 months and were concluded in February 1975; a new Convention fir wider in scope than the Yaounde was signed at Lome in Togo, and is called the Lollie Convention,
The LOIIle Convention
Under the Lomic Convention, the ACP countries enjoy duty free entry for all industrial exports (local origin
ECONOMLC REWEW, NOWEM HET I975

Page 29
or value-added content being 5 o' of the total value) to the EEC, lin the case of agricultural exports, they enjoy duty free access for about 96 per cent of their products while the remainder enjoys a margin of preference over third countries. The ACP countries had right from the beginning made it clear that they were not prepared to accord any reciprocity for the Erade concessions granted by the EEC. Thus, under the new Convention, they will only apply equal treatment to imports from and exports to the EEC not less favourable than applied to Imports from and exports to third LL i LIIl TIC5. that there will be no discrimination by the ACP countries against imports from the EEC but #130, that the EIEC would not suffer from discrimination with regard to access to raw materials from the ACP countries.
The European Development Fund under which the associates of the former Yaounde Convention received financial assistance from the Community has been substantially increased. The Yaounde Convention had provided a fund of 93.5 million units of account (one unit of account equals USS I.35) for a period of 5 years ending December 1974. The new EDF amounts to 3.39 billion units of account for 6 years, The EDF consists of 2,ó:5 million units of account: 2, Ico million in non-repayable subsidies, 430 million lorris on special Conditions (4c years at 1%) änd 95 million risk capital; in addition there is 37. Inillion for the Stabex Fund and 390 million in loans from the European Investment Bank,
Stabilisation of Export Earnings
Perhaps the most important feature of the Loric Convention is the establishment by the EEC of a Stabex. Fund, initially of 375 million units of account to compensate losses in export carnings by ACP countries resulting from a fall in prices of their commodity exports to the Community. This scheme covers cocoa, coffee, cotton, copra, coconut, oil -akes, ground nut, ground nut oil, palm oil, hides and skins, wood products, bananas, tea, raw sisal and iron ore; the list is subject to revision after I2 months. The principle is that a country will receive compensation if its export earnings
ECONOMIC REWIEW, NOVE MILHER 1975
This not only ensures
The forty-six ci court RIES :
Lorra Convert
-
止コM0mDC
SecAMERY Islat اتيتيتيتيتيتيك تحت
Mör:
European C.
from any commod 6.4% below the a vious 4 years and the export earning: are at least 7.5% earnings. The cul 24 least develope inland Clintries i. These financial ra free repayable by most deprived coi the Staljes. Fundi: agreement in the thic word, it is sir commodity agreer
El UNCT). agreements, the St. lity in export earni it coversialist countries of thit w
Special reciproc: Sugar exports of have been writte protocol. The E purchase a minin
 

ountries of the
Lome Convention at a glance
ASSOCATED WITH THE EEC
(ACP) E్చ
=Eస్తో
二、二
1mmunity
ity falls II i fore thair verage of the prealso provided that 5 of the commodity of the total export t-off point for the ki, lai Ild-locked Jr. 5, however, 2.5%. Ilsfeer 5 Te interestall except the 24 Intrics. Although 5 not a commodity TOT II il serisë of Tilar to thic Iultiment proposed by Like commodity albeix els Lures stabings. Furthermore, alf the developing forld.
larrangements for the NCP countries n into a separate EC guarantees to um of 1.4 million
- TEMTBAT FFHEAH BEo.
- FEE). GLIE.
இந்:இ —-
Esassis
WESTER
இ
పpoF_f} SõÜTÄotš
AFRICA
tons of sugar per year and thic ACP countries agree to supply this quantity. The EEC also guarantees a Tminimum Price which is subject to annual review. The minimum price is the intervention price for sugar for the Community producers under the Common Agricultural Policy. Under normal conditions the intervention price in the U.K. should now be a roll nd I 5 o Per ton. Under the special circunstances prevailing in the sugar market in 1974 and early 1975, the U.K. has agreed to buy from Commonwealth sugar produlcers at 260 per tom c. i, f. during the first year. The advantage to the ACP countries under the sugar agreement is that it is for a period of 5 - 7 years, and the Community hals Lundertaken tio p:1y a minimum guiara ntccd price which the Community pays its own sugar producers. This means that there is an indexed minimum price as long as the Protocol is in force.
27

Page 30
The new Convention also provides for industrial co-operation comprising exchanges of information, studies, promotion of contact between businesses under the auspices of an industrial co-operation committee and an industrial development centre, Each ACP State will cindeavour to give as clear an indication as possible of its priority areas for industrial operation. It will also take such steps as are necessary to provide effective co-operation with the EEG d Member States and their firms "who comply with the development Programmes and prioritics of the host ACF State“.
The Lome Convention has been hailed as one inaugurating a new type of relation between indistrialised and developing countries. Mr. C. Cheys son, responsible for co-operation on development in the European Commission declared that "this agreement
is unique in the world and in history;
for the first time, an agreement bet
ween industrialised countries and the
Third World is reached with perfect equality between the two parties, an equality made possible by the ft that it is an entire continent which negotia tcd.”
A European Commonwealth
The Lome Treaty inaugurates a new " European Commonwealth' mainly of Europe and Africa bound together by a network of trade concessions, economic assistance, cooperation and other facilitics which are not available to other developing countries. This special relationship between Europe and Africa has not been sympathetically viewed by the U.S.A. on the grounds of discrimination amongst developing couintries and special privileges to the EEC. It is U.S.A.'s view that the conccssions given to ACP countries should progressively be incorporated into the GSP (Generalised Scheme of Preferences). The special relationship with the ACP countries is in the view of the EEC a model for developed-developing country relationships which others should eventually
2S
adopt. The EEC is extend these conces: loping countries as inadequate to shoul
of the Third World
The Seven Outsid
The Comility countries which W associate status oil li to the EEC are of India, Pakistan, B. sia, Singapore, Sri Kong, called "Th. They were offered ciation at a Yagird ciation a la Afror originally not cve trade agreements Yugoslavia &c.
Britain, to these wealth countries, single market. frtill Crillillon Wei amounted to $916 S 32.7 million Cor cultural goods ( S 589 million or (BTN 25 - 99). H tcd for half of thes factures. Appro. of the total impot wealth Asia ($30 Britain duty free nation rates and, tariff preferences imports from an e.g. tea, rubber, jų: With the introdu Tallisel Schema: r Britain in 1972, C lost preferences . million or 2.8% Britain; they liv, Ferences with all d. Thus the Balancic. monwealth Asia. From the rcillaini Preferences after the British Gen. Preferenccs a II10lir or 5.9% of the to on these ProduLC wealth Asia was loss of preference the Common Ext EEC. The value has been estimat
--(Peter Tulloh - Overseas Developin Р. т3).

поt prepared to signs to all dicycits ricssource5 Te der the problems as a wholc.
alth developing were not offerc. Britain's accession Lly, those in Asia, Ingladesh, MalayLanka and Hong : Seven []utside”. meither full asso* nor Partial asso
ha. They were ni ofered spccial 7 at Iran, Egypt,
: Asian Commonis still the largest Britain's imports ilth Asil in 1973 million of which 3.6% were 'agriBTN 1 - 24) and 34% manufactures Cong Kong LCCOLI Te imports of manukimately one-third -ryr1ווןCom) וts FF011. 4 Lillion) entered at: 11ost-favouredtherefore, had Ilo Gwer Competing other countries, te andl hardwoods. tion of the GcIlef Preferences by ommonwealth Asia in a further S 255 sf their exports to shared these prelveloping countries. mports from Comwhich benefitted ng Commonwealth he introduction of raliscd Schemic of tcd to $ 557 million al imports. It was ts thit Commonexpected to suffer on Britain adopting e:TIl:ïl Tirit of the of these preferences d at S 5.4 million.
The Seven Outside, erit Institute, 1975
The effect of the Community's preferential trading arrangements with associates and other selected countries was trade discrimination against Com101 wczılth Asia, Peter Tulloch summarises this position in his book “The Seven Outside' als follows:-
“L-edi rari- Frairiet billie rrrrrrrrping railiwrrier, CorriLLLCCCCCLCL S SLTT LLL LCS LT TkHCCuT LL LCLLLLLLL TTS CGL CTCu TCCTTLCL HuGL தீர்தr rlசர்ே விசார் : ஒரி prefereлгial freаfryтелл окрғғ. тал-Саму жүргіugalth eggperiforf for fås Briri rå fagfor : சச் சத்து நீர் மிசசார் சிர்ரர்சர்ர, ir Fri, t_fr gfr EEC fører frier, EFTA-1 Prezwker (or iruditur trial goodriviri/fizding fғx filer, Marker gooda, гloflyig tri), :g CWiy :- it dry r Carl rarr; Éry the Yarker g' the Soix, in Jarroir of Freur KRYF ZYPY bèrf, EFTAH partier aard rieur drygr:riந்த EFT1'ர' h_ary fste gearbert of fås ensarged Fossilify".
The EEC considered the Generaised Scheine of Preferences as the main instrument for dealing with the Commonwealth Asian countrics. This was hardly a compensation as it was extended by the Nine to all developing countrics equally. The en larged Community, however, Was desirious of cxpanding its trade with Commonwealth Asia and expressed its willingless to examine with these countries such problems as may arise in the ficid of trade after the enlargement of thc EEC with a view to seeking appropriate solutions. This intent was incorporated in the Joint Declaration of Intent on the Development of Trade relations with Ceylon, India, Malaysia, Pakistan and Singapore in the Treaty of Accession by Britain as follows:-
'r y க்ரீ ரர் : : r: AFr Fr p:தது :- periderir Čyrarvsyrir gyfastly rarar frier fri fria (Er, iச சரசர் : : |Singapуғғ.), ғ!: Europeал Егоролуі: Солт#ர i rசதி, fra: A : ஒரி விட்சர், LL LLLLLLLLuHu CCT LLLLLL LL LOLLCuuLLL T TCTltGGCLLH L ar Pyray rire ir féle field's W" frarade foi a vien fo forg opstropriffe folitiago, faking into GLGGLLLLLLL LL T T TT k CLTTT TCCCDTSTLLLLSSS TLGCC yTTLL TT LLLT TLTL TT CSL TLLLLS : சW: ara'.
Thus the general approach was to defer the consideration of the problems of Commonwealth Asia until after the Act of en largement of the EEC.
ECONOMIC. F. EVIEW, NOWEMBER 1975

Page 31
SRI LANKA
Implications of UK's Entry to EEC
The United Kingdom was Sri Lanka's largest single trading partner and her decision to join the EEC was bound to have certain implications on Sri Lanka's international trade. In 1972, Sri Lanka's exports to the U.K. :LIIlounted to RS. 265 m. or 13.3% of her total exports and to the Six. Rs. 18 cm, or 9%. Thus exports to the U.K. exceeded those to the Six, Sri Lanka's exports to the Nine including Denmark and Ireland är indunted to Rs. 46Tim. cor23% of her total exports. Thc enlarged EEC accounting for about 25% of the country's exports is the largest market for Sri Lanka. The table below shows the latest Figures o Sri Lanças trilde with the enlarged Community:-
0L S LLLLLLaLLLLSLLL S LLLLL00 LLLLLL LKHLHLLS LLLLLLaLLLLLLL LLLLS
Proportion of : | II. En I
Čia gyrwyrộali yo Tsiected CCC in Llt Tea in Bull. 1 Elstariit TC-1 Perper - - - Cinnamon chips Clow: Coconut oil in hill; Glycerol lyes ... Coil
l'Ohicco Citronella oil ... Cinna Thor 1 bizirik soil (iiimnliit Iran leali fi qbil Essen Lill il-qothie Natural rubber Teither-lowing:
Cocci, ut shell lirici Coir f1 Er: Fiștiveir
In the casc of : supplier in the France: "Which irl, 1 of Sri Lanka’s im
-ir *%rf --lr % g/
Fхдогfг la fall fajfas IrwpGry
E:garfr r:Þörfi
fr før fg. EEẾT RF. Foy
(i.e. Ar yr Fry R: Lாங்
Belgium - 후 0. -- 55 T)enrk - - -- 2. Im 4 France - - - - - - 48 I. -7 346 Ciceriiiary, F.R. I97 -7 구-- TE}} Ireland TT 0.3 Italy - リ 후-7 II、cm Luxemburg "L 1. - IT1-고. Net Herlands gg ೩-9 II.T 2 LU, KI SH 1,43ם -후-3 ס7ד Total|| E. FOI I 8후 후과- lotu Biggs
Sri Lanka's domestic exports to
the enlarged Community were Rs.
842. Inillion in 1974 or 244 per cent
of the total exports of the country,
and Sri Lanka's imports from the enlarged Community in that yearamounted to Rs. 89.6 million or 19.7% of her total imports. The U.K. is the largest single country market taking 10.3 per cent of Sri Larıka’s total exports or 42 per cent of Sri Lanka's exports to the cnlarged EEC. The second largest customer in the Community is Germany with z 3.4 Per cent of the exports; Netherlandi and Italy are the next important Customers-II.7% and 11% of the exports to the Community. The importance of the Community market is further illustrated by the high proportion of certain exports of Sri Lanka sold to the enlarged Community:-
ECONOSIC IFVLEW. NOVEMBEL I, 75
munity, France w Federal Republic Z.z. z per cent. only 19 pict cer imports from th munity and 5.7 pel imports from all c U.K. is more imp 15 An expOrt Trlär of imports. The Sri Lanka FroIII shtyWim in the foll
SRI L.
Wheat Four ... Milk antil cream Mineral products, L. Chemical products, Iron and steel prod Machinery, equipril. Transport quipner Postage stamps

Selected Exports to arged EEC % čfff;" třigrtrét Ганглғf:rfcff My Casyуғтүтігу
бо.5 구 7.9ד 후8-과
:
58.8
ճ3: O. fo.. B TF-후 והבדוי gal. 고
- - - 고노
구로
imports, the largest
enlarged EEC is 974 supplicd}8.6 Jorts from the Com
EC-974
44%ref 42 % of
gr. Fಳ್ತಿ? Гураг/r iopgг уг
ಘ್ನ EEFT
D 『. :
彗。茎 I. i. s.
C. If 후 『 『 Tם.ם
I 구 I
Hmmmmmmmmmmmm
is followed by the of Germany with The U.K. supplied E COf Sri Lanka’s - Cn larged ComCēTilt of Sri Lanka's blir litries. Thus Ehe Ītālītt Sri Linki CE than a supplier major imports of hic Community is wing table:-
The main imports from the EEC, as the table below shows, are wheat flour, milk and cream. machinery and equipment, transport equipment, iron and steel products and chemical products. The largest supplier of wheat flour is France.
So long as the U.K. remained outside the EEC, Sri Lanla was not unduly perturbed regarding her trade with the EEC. The decision of the U.K. to join the EEC, however, changed the picture and required Sri Lanka to make a re-appraisal of her future relations with the EEC. As the enlarged EEC was the largest single export market, as shown above, it was imperative for Sri Lanka to ensure that the policies of the EEC Would not impair het PÖsition as an CSPorter to the EEC. In fact it was necessary that the EEC took appropriate steps not only to maintain but also to increase her impרוrts from Sri Lanka.
Dangers of EEC Import Tariffs
The main problem as far as Sri Laikā vais concernied vas import tariff on her exports to the EEC. Britain was a sheltered market. Most of Sri Lanka's exports entered the British market duty-free or at low tariff; in addition, they enjoyed a preferential tariff against her nonCommonwealth competitors although this preference, as shown elsewhere, was not considerably attenuated by he British GSP implemented in I972. This situation was now to change as follows:-
(i) The U.K. was adopting the Common External Tariff of the EEC in stages-1972-77. This meant that Sri Lanka's exports which were mainly duty-free Were to be subject to an import duty in the British market. For instance, coconut oil which entered Britain duty-free for merly would now have to pay a tariff of 5 to 15% according to usage in the EEC; cinna
INKAS IMPORTS FROM EN LARGED EEC-97
fertiliser g synthetic y Lrn .
-
and spare-part
"a fr -4 % g/logg'iro partir
T # a four
- -
- - - 75+
E.
Hت" +تا
ם. לת
#? .
89.

Page 32
mon, cloves, pepper, cardamoms, nutmeg, canned fruits, fruit juice, cut flowers, fish, crusta ceans, packeted tea and instant tea which all had dutyfree access to the British Illarket would low have to paty tariff varying from 6% to 32%, according to the commodity. (ii) With the adoption of the Common External Tariff, the U.K. was bound to extend preference to the EEC Associates. This ent thit nt only had Sri Lanka to pay tariff on her exports which were hitherto duty-free in the British market but also that her competing associated territories were to be given tariff preference against her. For instance, Coconut oil From Sri Lanka which entered the British market duty-free formerly had not only to pay now it tariff of 5 to 15%, but it had to compete with coconut oil from the non-Commonwealth Associates which had formerly paid 15% tariffin the U.K. but were now given duty-free access. Thus the loss of preference in the British market for Sri Lanka's coconut oil was in the region of zo to 30% as com pared to non-Commonwealth ilssocit COllil LTICS,
(iii) While all i Commonwealth countries had to compete on equal terms in the EEC (other than Britain) in the past, there "ol.3 now discrimination against those Commonwealth countries which were no E gra. Iltcd associate status-they had to pay the CET while the associates enjoyed concessionairy tarift, Thus the former Commonwealth countries who became associates had a Competitive edge on countrics like Sri Lanka in the European larket of the EEC and thereby would threaten Sri Lanka's share of the continental market.
Trading Problems with EEC
Sri Lanka”5 milim Fear Was the possible dimunition of the British market as a result of loss of prefercnce on her exports. For over Iso years, on account of close political
30
and cconomic relation Sri Lanka's exports hi completely geared to niments of the British III: therefore require cons ment of resources and change effectively the country's export prod direction of trade if SI pelled to reduce her
Britis illet.
noted the impressive lopment and expansio nal tradg of the EE the vast potential for the prosperous EEC therfor Sri Lankas to retälin the British IT S:Line Lilie increasc h: larger market of the F
It was the time tha cipal exports of Sri bulk) and natural continue to criter the duty-free, but there of other exports, sm. increasing from year t to above, against W. discriiliniltion as CC Associates. The sll where Sri Lanka enjo access was to give W. Ilmarket where se orile competitors had prel Apart from this, the provided the best Linki”5 rlew industri: non-traditional cxPOI eşsenitial that Sri Ları Lin restrictcod Eaccess - t This sin caint thit so II le ment for Lulderständlin to consolidate and e. rcliations with the El
Although those countrics in Africa, C. Pacific, heavily dep export of primary p. Lanka, were offered three alternatives to interests, viz. full as a renewed Yaound ciltio1 under article 2 of RoIII c; Cor an agreet and expand trade, in were offered by the E. Perhaps the underly was that Sri Lanka wealth countries in trially more develo Common Weillth Cour and that therefore th Fröll. FH- GSP writ

is with Britain,
leen litos the requireirket. It would id:crable invcstseveral years to
pattern of the uction and the i Lanlais condependence on Sri Lankä also Economic devein of internatioEC and realised her exports in Thirket. It was main objective arket and at the r exports to the EEC as a whole.
t the two prinLanka-tea (in rubber-would enlarged EEC werc a number LII il value but to year, referred hich there was impared to the eltered market yed preferential VAY LO al CPPC1 of Sri Lanka’s fcrcnltill acce55. enlarged EEC market for Sri all prodicts and its and it was kill should have this market. sort of arrangeg WAS IlcCeSSAT xpand the trade EC.
COITırlı orı"ciltlı ribbean and the endict on the ou dicts like Sri the choice of safeguard their sociation under ; limiticd asso38 of the Treaty incint to facilitate O such options FC từ Sri Lanka. ing assumption and Commonsia Were indusled than other tries in Africa, ity could benefit 1out additional
trade concessions. It has to be admitted that the other Colillonwealth countries in Asia have already had considerable expericnce in the export of manufactures and seminanufactures and are indeed in the forefront of the developing countries which export Illanufactures to the developed countries. For example, India exported, in 1969, manufactures (excluding petroleum and unworked non-ferrous illetals) to the value of $5.47 million of 30% of her total exports; Pakistan SI 97 m. Or 29%; Malaysia SI 3 om, or 8% and SingaDDTe:S 6cm, Or 4%. Sri Lankā, however, was not so well developed industrially; in 1969 her exports of manufactures were only 5,3 m. cor less than 1% of her total exports. Clearly she was not in a position to exploit the GSP in irs original form.
The Joint Declaration of Intent indicates that the situation of the other developing countries in the same geographical area will be taken into account by the EEC in the examination of problems that may arise for Sri Lanka and other Asian Commonwealth countries in the field of trade. Among these countries are a number which already export mantifactures and semi-manufactures to the developed countries and which together with other independent Commonwealth countries of Asia. will be in a more Favourable situation than Sri Lanka consequent on Britain's accession to the EEC and the introduction of the GSP. Some of thcsc countries which exportcd manufactures in excess of So m. in 1969 were: Hong Kong SI,484 m., Taiwan S57o III. South Korea S565 m., Philippines SI58 m, Irin SI 33 m. Thailand S 30 m., Indonesia S 22 Tl. and Burma SI 2 mm. Another intcresting feature was that six of the independent Commonwealth countries to which it choice of alternatives for future relationships of a preferential character had becil offered, exported manufactures, excccding $10 m. in 1969: Ghana S II 3 m., Nigeria $38, Trinidad and Tobago $56 m., Jamaica. S30 m., Kenya S 8 m. and Tanzania SI3 m.
In these circumstances, the assumption that the GSP would solve the problems of Commonwealth Asia was not valid in the case of Sri Lanka. Nearly all the Commonwealth countries in Asia, the majority of non
ECONOMIC REVIEW, NOVE BET. 1975

Page 33
Commonwealth countries in Asia and even some other developing countries who had been offered association, were in a better position to benefit from the GSP than Sri Lanka. which is still a primary producer. On the contrary, with the introduction of GSP by Britain and Canada, Sri Lanka lost valuable trade preferences in these markets for which she failed to receive adequate compensatory benefit from the EEC.
The impending situation was serious enough for, Sri Lanka to bring to the notice of the EEC her trading problems with a view to seeking appropriate solutions for them. Thus at the end of October 1972, the Government of Sri Lanka through a special envoy presented an Arde Meritaire to the European Commission outlining her trading problems (as indicatcd in the paragraphs above) and hoping that the community would "agree to profile Sri Langka special facilifier in /le ziyarket r of fДе Солугуfrničy by wcanл оfappropriate arrangeets in the tariff and far-fari. fieldr, as vélo di Other »eattirer le Figed ia prografë the dorëprën and direrjKasion of Sri Latifi&er’s trade l'ith the en larged Cozza MU JErity”. This was followed by the appointment of a resident anbassador to the Community in |шпс 1973.
Most Urgent Problem
The most urgent problem for Sri Lanka was thus the loss of trade preferences in the British market and the inced to mitigate the adverst impact of this on her trade with the EEC. The scoorld was the more general question of establishing suitable machinery for dealing with Sri Lanka's long-terin relations with the EEC. In regard to the former, the general approach of the Community was against any preferential trade arrangement, but was to look at each of the specific commodities that were of concern to Sri Lanka and to consider what solutions were possible in terms of the Generalised Schemic of Preferences (in accordance with the Joint Declaration of Intent). The EEC was of the view that the alignment of Britain's tarif vith the Contrını on External tariFT alıcıl thic harmonisation of Britain's GSP with that of the community in January 1974 should be made an opportunity to revise and liberalise the Commu
LSLHHLLLLLLLS LL LLLLLLLLSKHLHHLLGLLYK 0u 0 t
nity’s GSP so a relic to the trad associables like S. sentations made Wealth countries affirmed that th of Intent was an ment to bc rcview meant that the ( the relief to bc pr initial and not a
The benefits to liberalisation of GSP in 1974 and been fully di shown that with most of the prob would have enco of Britain's acces have been either gated, and 95 per exports to the enjoy duty-free therefore on the oFi Sri Linkil’s e action through th It is a fict that it. through the GSI preferential treat I associates and the it difficitilt to liber: creating oppositic ciates. The Pro matic approach to the GSP a5 der years, and the cof balanced develop system of gene. and the policy 0. ever, seem to ind munity will consis extend the GSP t Lanka’s requiren 11 The second qu to earlic, was t Sri Lanka's longthe enlarged EEC trading interests stand as a compl EEC; it was not receive benefits Community's GSI to make the Corin notice of Sri Lal for Titiallise the Illu through some inst Britain's member is shown above, Illicant a certain traditional trade The Community which excludis St. er hand, creaticdalf

s to provide some e problems of noni Lanka. On repreby Asian Common, the Community : Joint Declaration I on-going commitred constantly. This ommunity regardcd oydiedin 1974 as an
final step.
Sri Lanka from the the Community's 1975 have already 5 Cussed. It was these concessions, lems that Sri Lanka intered as a result ssion to the EEC rell Ovel or miticent of Sri Lanka's inlarged EEC now TTLTE It isä balance: 5 Per cent. xports that further Le GSP is required. ny tariff concession clashes with the thent given to the - Community finds | lisc further without Il from the assogressive and Pragof the Community lonistrated in recent 1Illinity's policy of It:1t between the 'alised preferences association, howCate that the Comcently improve and Illet Illus CF Sri Its.
estil, is referred LC One concerning term relations with
It was not in the of Sri Lanılka to Le Olitsider Lo the 2nough for her to Jnly through the
It was necessary illnity take serious ka and if possible Lial trade relations utional machinery. hip of the EEC, On the onc hand, Weakening in our inks with Britain. association policy, Lanka, on the othrther lacuna, There
was thus a compelling need on our part to scck to establish better machiincry than existed hitherto for dealin with Sri Lanka's trade relations the Community and for strengthening our long-term cconomic relations with it. This was the main task in the negotiations in 1973 between Sri Lanka and the Community.
The Commercial Co-operation Agreement
There was a new factor which strengthened Sri Lanka's case for special recognition: this was the Conclusion of a Commercial Co-operation Agreement between the Community and India at the end of 1973. This apreciment institutionalised the relationship between the Community and Iniad by setting up machinery in the form of a Joint Commission to neet at stipulated intervals for the purpose of reviewing their mutual trade problems. It was regarded as a “framework agreement” which cata provide For 體 strengthening of relationships between the two parties in the future. In addition to this agreement, India also signed special Ingrèements on jute and coir manufactures providing for a progressive relaxation of tariffs on these items.
The Community was, however, not ಸ್ಥ: at the beginning to prolieTate agreertments is 7 Trida. India was regarded as a special case; the Co-operation Agreement with her was justificd on the grounds of her large size and the diversifical nature of the economy. But once the door had been opened for special relationships, it was difficult to close it in the face of others knocking on the door. A precedent had been created. Apart from the active can Vassing by Sri Lanka, Pakistan was pressing for a commercial co-operation agreement similar to the one with India ind Malaysia and Singapore were negotiating in a bloc with ASEAN for a bilateral agreement. It was difficult, therefore, to refuse to Sri Lanka what had been offered to India and what was being considered to be offered to Pakistan. The Community also had by now realised that the Illiny developing countries were unable to utilise fully the Community's GSP to increase their exports, and dismantling of tariff barriers was not in itself a sufficient incentive for the development of trade. The producers and exporters of developing countries,
3.

Page 34
it was recognised, needed help both to find markets in Europe and to adjust their production to these IIlarkets. The decision to accede to India's request for a commercial cooperation agreement was based on the Community's commitment in the Joint Declaration of Intent, the declining volume of India's trade in spite of efforts to improve it through tariff concessions and the realisation that Timore positive assistance would be needed to reverse this trend. These arguments applied equally to the requests from Sri Lanka, Pakistan and Bangladesh. The Community thus callic round to the view that in order to make a substantial contribution to progress in these countries, trade cooperation going beyond merc tariff concessions was called for. Negetiations were held in NovemberDecember 1974 in Brussels between the Commissio II of the European Communities and Sri Lanka to finalise the Commercial Co-operation Agreement and it was formially sign.cd in May 1975.
The Sri Lanka EEC Agreement
The Commercial Co-opcration Ngeement between the European Econonic Community and Sri Lank: is very similar to that of the Community with India. The object of the agreement is to dicyclop, deepen and diversify their commercial a Tid eco= nomic relations of the basis of comparative advantage and mutual bene: it so as to contribute to their economic and social progress and to the improver ment of the balance of their mutual trade to as high a level as possible. The main features of the agreement are as follows:-
(i) The fity'r partier graiff for fast Ch differ of off-fagfræ-rafio II İTELT - мұғгул аудd" widerfakғ fo proxy/0/E the lege of yet and dirgriffraWiary of their rwyt trial fra de foi filie higheid passible level. Tiley grant to each other the higher துரத்த அரிசோtiர ஐ Wதர and exporff phief they apply fa. third corrifrief in general drid shall e da Por fa proide Maxiгундy firiїїіїғr róмураfiћ/* шілі. wheir respecifilire bailicies and obliஜrர துர் FTA : 2008 ீர் service artid är ferre Ff 'a faither party (in the Indian agreepert only products are ropered),
3
2
(ii) The EEC # து før ary ex graarr f the #ಙ್' ರ್ಪಣಾಳಿ! | fi | FIFA F' FAG,
refyd y fer,
further thai griefior. It'a, ffrifiad tir i'r far of the EJ"#F FFEF Fairfief ex : riryad g:Xoʻp.Eyr"I ғалуделілуан, και μέτρα. fa'aōjōryf is, frofior),
| ifWfتمW 4ې lirfield og FA, øs Estaffs,
Ffi' i FFFFF), y fợayar ciri /йіїї Садум Froper
fir'e y:=
(iii)
)ே : *禺 (b) :
ferrari ಕ್ಷೌಜ್ಜೈ; e di frilii area &#ffff;" gordiff ಬ್ಲೌಗ್ಹ್! The Agree fire years froy year! ,IFrוּ;!!
(r)
(iv)
The Commercial ment also include: First annexe is ; concerning the
This provides fo the Joint Comr their recominenc. pective authorit. emphasises tilt t should, when m tions, have due r development Pli grCSS OF economl environmental it

:ed it org: f சக்ig Sri Lசங் bficir голулууiллууёлд fg EEC *-萤rr芷 ta' Ma räffarira' FEJGarrer பி டாக்" ஏற்ia fld bg Confidered fo fryffiffari gri fyrir rghritorid sa Pereignty at сууг голл/ffнffол ал ", "Де согуу муifyrgif') // //d firдрју Дар'е голяfifer prefatitio Hall declaraproviriar already laial dig to figh the tige icharge the greate it |Fraliлаfrow for imporлы "F, diriad also la f the * Ford häFe (Een Prriா ஈ: fr "d roweria/ ra-ope
Camrywiriog i'r erth!-- frising represer far fir'e Thier 1774 ft l'i' FFef //y or yare frg//елѓ/y
agree Fayarat. If it file Fffffgfgf fáIFA: fra Frfiltre irretiring of the சாகிர்g it r
g ard கிரig ரது ஆரி Tirrg fra7de Èi,Irrifer,F; rig ) fid y y gig ல் :ேpWசர் órууѓе галіїесбітлуѓе гоா விரசத Verifify frade; rig : B - சீரா ( Fragi Tr ffig Ffraig faer ': 7.H.T. for erorowie zig
7.
well is for it period of in a le exferred a. year if r7eii:5er p,Irgy
*Wirra fed.
Co-operation AgrceS follir amflexiCs. Tha: | Joint Declaration Joint Commission. the two parties in ission to transmit ations to thcit reses for action and Lc Joint Commission aking recommendagard to Sri Lanka’s ns and to thic proc, industrial, social, di scientific policies
of the Community as well as to the level of economic development of the two partics.
In the second annexe the COITim uinity agrees to bind thic tariff reductions and suspensions already applicd autonomously in respect of the Products of particular interest to Sri Lanka As follows:
I, II) esiccarçal COCOTILLE 2%, 2, Tel-in bulk ... free
Text-in Packets ... 5% 3. Pepper firindustrial Lus: ... fre dחPTou נחל זוחiחחCi) -1.
Cinnamen Lithgr . 89, 3. Carl-ATTIJIiš: grCILII Id ... free s. Brivine etticle, Ehitur: Ez
India Kip. - - - - frce
In the case of four items: tea, pepper, cardamoms and East India Kip, the Community had given tariff bindings to India On the sane Basil. These tariff concessions will remain valid throughout the duration of the agreeITT I1 t,
The third Lind the fourth annexes are Declarations of the EEC and Sri Lanka respcctively concerning tari FF adjustments. The Community is prepared, in the course of its endeayours to improve the Generalised System of Preferences, to take into account the interests of Sri Lanka in the cxtension and strengthening of i Es tradi relations With the Community. The Corint munity is alsõ Prepared to examine in the Joint Commission the possibilitics for further tariff adjustments on Sri Lanka's exports to promote the development of trade between Sri Lanka and the Community. Sri Lanka is prepared on the other hand, to discuss the Community's proposals with regard to tariff adjustments by Sri Lanka bearing on the development of trade between the two parties taking into consideration Sri Lanka's developIlment 11ce ds. This section is an improvement over the Indian agreement in that whereas the Indian ag Icement providcs for a once-for-all exa Illination of tariff concessions sought from the EEC, the Sri Lanka agreement provides for a continuous review and a readiness on the part of the Community to examine Sri Lanka's tradic problems, from time to time, with a view to finding appropriate solutions.
ELLSDAILC. F.-VILW FIOW FM HLB. 175

Page 35


Page 36
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