Report No. 10079-CE Sri Lanka Strengthened Adjustment for Growth and Poverty Reduction January 8, 1992 Country Operations, Industry & Finance Division MICROFICHE COPY South Asia Country Department III Report No. 10079-CE Type: (ECO) FOR OFFICIAL USE ONLY SHISHIDO, / X80429 / D9091/ ASICO 6~ Document~ of the World Ban'k This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank Authorizati,n. 19>,9 ,, J . .. '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 CURRENCY AND EQUIVALENT UNITS (Annual Averages) Sri Lanka Rupee per US$1.00 1978 = Rs 15.61 1979 = Rs 15.57 1980 = Rs 16.53 1981 = Rs 19.25 1982 = Rs 20.81 1983 = Rs 23.53 1984 - Rs 25.44 1985 Rs 27.16 1986 = Rs 28.02 1987 - Rs 29.44 1988 = Rs 31.81 1989 = Rs 36.04 1990 Rs 40.06 1991 = Rs 41.84 FISCAL YEAR (FY) January 1 to December 31 This report was written based on findings of a mission that visited Sri Lanka during April 1991. The mission was led by Hisanobu Shishido and comprised of Zeynep Taymas, Marjorie Rose (IMF) and Dilesh Jayanntha. Terrence Abeysekera (Consultant) also made a contribution. The repert was further updated based on findings of a December 1991 mission by H. Shishido. FOR OFFICIAL USE ONLY List of Abbreviations and Acronyms Used ADB - Asian Development Bank AGA - Assistant Government Agent ARC - Administrative Reforms Commission BOC - Bank of Ceylon CBSL - Central Bank of Sri Lanka CCPI - Colombo Consumer Price Index CPC - Ceylon Petroleum Corporation CTB - Central Transport Board CWE - Cooperative Wholesale Establishment EEC - European Economic Community EPZ - Export Processing Zones FCD - Food Commissioner's Department FIAC - Foreign Investment Advisory C;mmittee FIAS - Foreign Investment Advisor:, Service FSP - Food Stamp Program GCEO - Greater Colombo Economic Commission GDP - Gross Domestic Product GNP - Gross National Product GOBUs - Government Owned Business Undertakings HYV - High Yielding Varieties IDA - International Development Association ILO - International Labor Organisation IMF - International Monetary Fund JEDB - Janatha Estates Development Board JSP - Jana Saviya Program JVP - Janatha Vimukthi Peramuna (Peoples' Liberation Front) MDMP - Mid-Day Meal Program MPA - Ministry of Public Administration MPCS - Multi-Purpose Cooperative Societies NGOs - Non-Governmental Organizations NIC - Newly Industrialized Countries NSB - National Savings Bank NTC - National Transportation Commission O&M - Operation & Maintenance PAC - Poverty Alleviation Credit PB - Peoples' Bank PEs - Public Enterprises This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - 2- PMB - Paddy Marketing Board PSC - Public Service Commission RACA - Restructuring and Collection Agency RTB - Regional Transport Board SLBFE - Sri Lanka Bureau of Foreign Employment SLSPC - Sri Lanka State Plantations Corporation / TITLE: STRENGTHENED ADJUSTMENT FOR GROWTH AND POVERTY REDUCTION COUNTRYs SRI LANKA REGION: COUNTRY DEPARTMENT III, SOUTH ASIA SECTOR: COUNTRY ECONOMIC REPORT TYPE CLASSIF MM1YX LANGUAGE 10079-CE CEM Restricted 01/92 English PUBDATE: 9201 ABSTRACT: The Government of Sri Lanka embarked on serious economic restructuring efforts in 1989. These efforts included measures to: (i) stabilize the ecoaomy; (ii) rationalize the public sector; (iii) encourage private investment; and (iv) improve the country's poverty programs. As a result of these efforts and together with good weather and improved security situation in most parts of the country, economic growth improved to 5-6 percent a year in 1990 and 1991 from the 2 percent average of the previous three years. Cautious optimism has, therefore, started to emerge as to the country's potential to sustain high growth and in the longer term to join the rank of newly industrialized countries. But, while tight macroeconomic management stance largely was maintained in 1990, it has become rather lax from the fourth quarter of 1991 and fiscal and credit targets have been exceeded. For the economy to enjoy sustainable growth, it is essential that the macroeconomic stance be tightened immediately, and, in addition, two worrisome signs in the economic adjustment patterns be removed. One of these signs is that public investment (which complements private productive investment) is plummeting while an increasing portion of private investment may be going into housing and real estate. The other sign is eroding external competitiveness; wages and domestic prices have been rising rapidly while adjustment in exchange rate in the recent past has been rather limited. The root cause of these problems lies in the larger government recurrent spending relative to its revenues--its current deficit has been 1-2 percent of GDP since 1989. This dissaving has increased consumption bias in the economy undermining the Government's efforts to encourage private investments in export sectors. The Government needs to rectify this and achieve positive recurrent surplus (about 2 percent of GDP) by implementing appropriate wage policies, restructuring the public sector pension scheme and improving further cost effectiveness of poverty programs. To improve the economy's overall efficiency, in addition, the government needs to continue privatizing commercial public enterprises, and allow market forces to play a significant role in management of public sector banks and tree crop plantations; privatization should be considered in the latter two subsectors as well. The government also needs to resort increasingly, in consultation with the IMF, to fle.ible foreign exchange rate management. These macroeconomic reforms need to be complemented by a wide range of reforms at the microeconomic and sectoral levels. The report briefly discusses four such reform areas which are seen as high priority. They are, improvement of: (i) financial institutions; (ii) the environment for foreign direct investment; (iii) labor legislation; and (iv) physical infrastructure. In addition, the Government needs to make further progress in resolving the civil conflict so as to improve the investment climate, encourage increased production in affected areas, and free up resources for development. SRI LANKA STRENGTHENED ADJUSTMENT FOR GROWTH AND POVERTY REDUCTION TABLE OF CONTENTS Page Country Data Executive Summary i I. REVIEW OF RECENT ECONOMIC PERFORMANCE ............................. 1 Economic Performance in 1990 and 1991 .......................... 1 Background ....... ...................... 1 National Accounts and Growth ................................ 2 Growth Performance in 1990 ..... ............. 4 Savings and Investment ................................ 7 Balance of Payments ......................................... 11 Fiscal Developments .................... ..................... 16 Inflation ......................... .......................... 18 Impact of the Gulf Crisis ................................... 22 The Agriculture Sector ..................... ....................... 26 The Paddy Sector ..................... ....................... 26 Alternative Food Crops: Crop Diversification ....... ......... 29 Impact of the Civil Conflict on Agriculture ........ ......... 32 Civil Conflicts Defense Expenditures and Refugee Issues ........... 36 The Evolution of Actual Defense Expenditure ........ ......... 36 Refugees ......................... ........................... 37 II. TOWARDS A GROWTH-ORIENTED POLICY PACK&GE .......................... 39 Introduction ........... 39 Macroeconomic Management for Enhanced Export Orientation ........ .. 41 Evolution of Investments and Savings ......... .. ............. 41 Evolution of External Competitiveness ......... .. ............ 46 Summary ..... 49 Reduction of the Government's Size and Influence .. ................ 50 Establishing Administrative Capacity ........... ............. 50 Promoting Privatization/Peoplization ...... .................. 53 Public Tree Crop Sector Restructuring ...... ................. 55 Summary ................................................. 61 Creation of a Competitive Business Environment Conducive to Private Ilvestment ................ ................. 61 Establishing an Efficient Financial Sector ........ .......... 63 Promoting Foreign Direct Investment .. ....................... 65 Improving Labor Relations ................. .................. 67 Providing Adequate Infrastructure Services .................. 69 Summary ............................... . 70 Restructuring Poverty Programs .. ............................ 71 Jana Saviya Program ............... ............... 72 The Food Stamp Program .............................. 74 The Mid-Day Meal Program .............................. 74 - ii - III. 1992 AID REQUIREMENTS . ..... ............................................ 76 Recent Trend of Foreign Aid ....... ................................ 76 Balance of Payments Projections and Aid Requirements .............. 80 ANNEXES ANNEX 1: List of Public Enterprises Privatized/to be Privatized ........ 86 ANNEX 2: A Survey of Sri Lankan Firms: An Interim Result ............... 87 ANNEX 3: Unit Labor Cost Calculation .................................. . 98 STATISTICAL APPENDIX ...................................... 101 MAP LIST OF TEXT TABLES Table No. PaRe Chater 1I 1.1 Key Economic Variab1-s 1984-1990 ........... 2 1.2 Value-added Growth Rates of Major Sectors ............... 3 1.3 Sectoral Composition and Increase in Gross National Product at Constant (1982) prices, 1989-90 .... 5 1.4 Macroeconomic Balances 1984-1990 .......... * .............. 7 1.5 Increase in Investment Goods Imports .................... . 8 1.6 Expenditure on Gross Domestic Product .. .................. 8 1.7 Sri Lanka: Commercial Bank Advances to the Private Sector and Public Corporations by Purpose .............. 10 1.8 Credit to Public Enterprises ............................. 11 1.9 Balance of Payments ...................................... 12 1.10 Merchandise Exports ................. 13 1.11 Summary of Central Government Fiscal . Operations, 1986-91 ........ ............................ 16 1.12 Monetary Developments ........ ............................ 21 1.13 Overall Balance of Payments Impact of the Gulf Crisis .22 1.14 Volume of Tea Exports, August to December, and Annual 1988-1990. 23 1.15 Estimated Breakdown by Skill Category of Sri Lankan Return Migrant Workers from The Middle East ..... 24 1.16 Summary Table of Paddy Production ........ ................ 27 1.17 Financial Returns - Other Field Crops Versus Paddy ....... 30 1.18(a) Paddy Sector - Gross Extent Sown (Hectares) During The Maha Season - 1980/81 to 1989/90 ................... 33 1.18(b) Paddy Sector - Gross Extent Sown (Hectares) During The Yala Season, 1981 to 1990 ............ 33 1.19 Paddy - Imputed Loss in Production in the North and East: Maha Season (1984/85 - 1989/90). 34 1.20 Paddy - Imputed Loss in Production in the North and East: Yala Season (1985-1990) ............... . 35 1.21 Evolution of Defense Expenditures ........................ 36 1.22 Number of Families Directly Affected by the Civil Conflict as of September 1, 1991 ................ . 37 1.23 Expenditures on Refugees (January 1 to July 31, 1991) ..... 38 Chapter It 2.1 Public and Private Investment, Selected Years ......., 42 2.2 Growth Rate of Real Investment ........................... 43 2.3 Composition of Private Fixed Investment, Selected Years......... . ...... 44 2- 2.4 Domestic Savings, Selected Years ................... .... 44 2.5 Percentage Wage and Price Changes ....... ......... 48 2.6 Evolution of Determinants of Unit Labor Cost ............. 49 2.7 Tea Production ................. .......................... 57 Chapter III 3.1 Project Aid Disbursements as a Share of Public Investment ...................................... 77 3.2 Aid Disbursements as Share of GDP ..... ................... 77 3.3 Sector Distribution of Total Project Aid ............... . . 78 3.4 Balance of Payments Projections--Base Case . .............. 80 3.5 External Financing Requirements .......................... 83 3.6 Overall Aid Pipeline, 1987-1992 ...... .................... 84 Pago 1 of 2 CONTRY DATA SRI LANKA AREA POPULATION ^/ DENSITY MU;OO sq. km X77rTTITon (mid-1990) 25W per sq. km. (l.i0) Rate of Growth: 1.1 (1990) 703 per sq. km. agricultural land (1977) POPULATION CHARACTERISTICS (1987) HEALTH (1988) Crude Birtn Rate (per '000) 21.9 Population per physician: ),168 Crud. Death Rat. (per '000) 6.9 Population per ho.pit.l bed: 6se Infant Mortality (per '000 live births) 80.0 b/ INCOME DISTR18UTION (1081/82) DISTRIBUTION OF LAND OWNERSHIP (1978) X of natlonal i come, highest quintilI: 58 X owned by top lox of owners - X of national income, lowest quintile: 4 X owned by smalloot 10 of owners: - ACCESS TO PIPED WATER (1980) ACCESS TO ELECTRICITY (1981) X-of population - urban: 47 X of population - urban: 26 X of populatlon - rural: 40 X of population - rural: 6 NUTRITION (1988) EDUCATION (1981) Calo;-reTntako: 2,400 Adult lteracy rate: 87X Per capita protein Intake (grams/day): 48 Primary school enrollmont 98x GNP PER CAPITA IN 1990: USU470 c/ OUTPUT IN 1990 BY SECTOR ANNUAL RATE OF GROWTH (X, constant prices) Value Added Mill. Us$ U 1970-77 1977-86 1987-89 1990 Agriculturo 1910 26 2.8 8.9 -1.8 8.6 Industry j/ 1791 26 1.7 6.2 4.7 7.6 Services a850 49 3.7 6.8 2.7 4.3 Total !/ m .T GROSS DOMESTIC PRODUCT IN 1990 f/ US$ Mill!,on U GDP at Market Prices 8,014 100 Investment 1,818 23 Gross National Savings 1,894 17 Current Account Deficit 420 5 Exports of Goods and NFS 2,48o 8o Imports of Goods and NFS 8,069 38 GOVERNMENT FINANCE Contral Government (Ru Million) X of GDP at MarketE Pricos 1990 1975 1984 1990 Revenue 67,984 17.2 22.1 21.2 Current Expenditure g/ 71,770 18.8 17.2 22.4 Current Surplus -3,806 -1.1 4.9 -1.2 Capltl Expenditure hl 28,04S 7.3 13.6 8.7 External Assist nco (not) 18,841 8.2 6.4 6.7 a Rogistrar General's Department. */ GDP at factor cost. /, 1961. / Includes capital revenue. cl World Bank Atlas estite. / Includes advance accounts. Manufacturlng, mlning and construction. f/ Includes not lending. Page 2 of 2 COUNTRY DATA SRI LANKA MONEY. CREDIT AND PRICES 1981 1982 1983 1984 1986 198a 1987 1988 1989 1990 (End of perioa) - …-- Rupsee Million…------ Money and Qusl Money 24,287 80,249 88,818 41,898 47,087 49,680 68,662 66,024 72,808 87,850 Bank Credit to Public Sector 12,889 17,288 17,889 18,847 25,423 27,684 a4,289 48,708 49,004 60,995 Dank Credit to Private Sector 20,768 24,934 81,346 80,881 34,108 8a,605 41,002 49,982 62,268 84,989 -Percentage* or Index Numbers----------------------- Money and Quasi-Money as % of GDP 28.6 80.5 80.3 27.3 29.0 27.7 88.8 29.8 28.6 27.8 Oeneral Price Index (1970-100) 164.8 182.6 208.2 242.9 246.4 256.8 288.1 328.1 863.8 442.0 Annual Pereantago Changes In: General Price Index .18.0 +10.8 +14.0 e18.7 +1.4 +7.8 +7.7 +14.0 +11.8 +21.5 Bank Credit to Public Sector e41.0 38.7 +2.8 -6.8 .84.9 .9.7 +22.8 +86.4 6.0 4.0 Bank Credit to Private Soctor +28.1 +20.1 +26.7 -1.8 10.8 7.8 12.0 21.8 4.7 24.3 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (19901 1988 1989 1990 USt Million U Exports of Goods, NFS 1,817 1,906 2,414 Toa 494 24.9 Import. of Goods, NFS 2,898 2,671 3,049 Rubber 77 3.9 Resource Gap (deficit m -) -597 -6e8 -685 Coconut Products 68 3.6 All Other Commodities 1.S42 67.7 Net Factor Income -164 -169 -1B6 Net Transfer* and Romittancos 819 881 386 Total 1,982 100.0 Balance of Current. Account -697 -494 -434 EXTERNAL DEBT (US$ Million) / Direct Foreign Invostment 43 18 65 December Decomber Not MALT Loan. 200 179 387 1989 1990 Disbursements 460 405 669 Amortization 269 225 202 Grants 207 188 176 Total Outstanding £ Disbursed 4,282 4,674 Other Capital (net) 16 98 89 Gross Official Resorves (end-year) 278 294 416 DEBT SERVICE RATIO ki (U) 24.8 14.2 IBRD/IDA LENDING. End 1989 QUS2 Million) IBRD IDA Outstanding and Diabursed 82 705 Outstanding Including Undisbursed 76 1,246 ki Repayable in foreign currencles and tith an original maturity over one year, Including private non-guarante debt. Excludes obligations to the IMF. b Ratio of debt tervice to exports of goods and services. Debt service lncludos service on MALT debt, Including IMF charges and repurchases, and Interest paymnts on short-term debt. EXECUTIVtI' SMARY The Setting 1. Sri Lanka is characterized by levels of literacy, infant mortality, and life expectancy that are comparable to those of more developed countries. But its success in generating economic growth has not been commensurate with its social progress. Economic growth during the early 1970s was limited by an inefficient public sector and by efforts to protect domestic industry from foreign competition. The celebrated 1977 reform that introduced market forces into the process of resource allocation resulted in only a one-time increase in efficiency gains, and growth startea to slow down by the mid-1980s. A large and inefficient public sector had been left intact and large public investment projects financed primarily by donors and foreign commercial lenders yielded low returns and unsustainable macroeconomic gaps. Together with the negative impact of the civil conflict in the North and East that started in 1983 and the JVP (leftist) terrorist insurgency in the South in 1988 and 1989, the growth rate in 1987-89 came down to a mere 2 percent a year, and the economy was on the verge of a balance of payments crisis by mid- 1989. 2. The new Government that came .o power in 1989 decided to stabilize the economy and to restructure it in the direction of private sector-led development. The Government's reform efforts addressed issues in four areas: stabilization; public sector rationalization; poverty program restructuring; and private sector development. A strong stabilization program was instituted to arrest the rapid economic deterioration. Economic performance began to improve rapidly by early 1990 in the wake of a significant devaluation, an across-the-board cut in budgetary outlays, and removal of major subsidies on wheat flour, rice, and fertilizers. This was aided throughout 1990 by good weather and the return of civil normalcy in most of the country. The fiscal burden !,as however been increased by about 2 percent of GDP with renewal of hostilicies since June 1990. The conflict in the North and East has not jeopardized implementation of the economic restructuring program in 1990. It has, however, not only reduced output in affected areas but has hurt Sri Lanka's efforts to attract more domestic and foreign investment and has diverted substantial public and private resources from development. 3. In the fourth quarter of 1991, however, the Government appears to have weakened its grip on the tight macroeconomic management of the previous year. While the economy is estimated to have grown by about 5 percent and thus continued to follow the trend of robust growth established in 1990, both fiscal and balance of payments deficits are expected to exceed targets by nearly one percentage point of GDP. This was partially caused by high defense expenditures, with inadequate countervailing expenditure cuts or revenue mobilization to maintain the overall macroeconomic tightness. If this trend were allowed to continue, it would nullify most of the progress so far of the recent economic stabilization efforts. Much tighter economic managen.ant in 1992 is thus called for to keep the economic restructuring on track and maintain the economy on a sustainable high growth path. - ii - Economic Performance in 1990 and 1991 4. A significant part of the improvement in economic growth to 6 percent in 1990 should be attributed to good weather, the improving civil conflict situation and a low 1989 base as a result of the low growth that averaged at 2 percent a year over the previous three years. Paddy and tea production increased, respectively, by 23 percent and 13 percent over the low 1989 base. While private manufacturing continued to grow, non-oil public manufacturing sector output declined. Investment stayed at around 22-23 percent of GDP, but its composition changed significantly: while public investment continued to decline from 10 percent of GDP in 1989 to 8.7 percent, private sector investment as a share of GDP is reported as having increased rapidly, a feature that is however, not fully consistent with che pattern of -redit allocation observed for 1990. The current account deficit of the balance of payments improved from 7.1 percent in 1989 to 5.2 percent of GDP in 1990. This was due to an 11 percent volume growth in merchandise exports. Furthermore, the impact of high price oE imported oil due to the Gulf crisis was moderated by two unexpected developments: (i) many migrant workers in the Middle East, panic-stricken, remitted their savings home thereby raising onetime private transfers; and (ii) notwithstanding the loss of Iraqi markets, which had accounted for 12-15 percent of Sri Lanka's total tea exports, the latter total improved both with respect to price and volume, in part due to good export perfoLnance prior to the start of the crisis as well as to temporary speculative purchases by non-Iraq Middle Eastern countries. These developments, together with increased disbursements of balance of payments aid, led to an overall balance surplus and increased gross official reserve coverage to two months of imports. The balance of payments performance in 1991 shows some weakening because of a drop in tea prices, (a delayed effect of the Gulf crisis), and an increase in imports, especially in consumer durable (cars and motor cycles), reflecting a liberalized import environment and, probably, worsening public transport conditions. Together with a purchase of an aircraft by Air Lanka, these factors increased the current account of the balance of payments to about 6.6 percent of GDP, as compared to the targeted 5.8 percent. 5. The Government's fiscal deficit improved from 16 percent of GDP in 1988 to 10 percent in 1990, despite increased security-related spending and the high cost of severance packages for workers retrenched as part of public sector rest:'ucturing. This improvement was hor.ever accomplished largely by suppressing public investment in, among other areas, infrastructure with potentially negative effects on private investment. Fiscal management appears to have deteriorated substantially in 1991 reflecting intensified fighting in the North and East, increasing cost to accommodate refugees, and labor retrenchment cost associated with public sector restructuring. Efforts to offset this increase in current expenditures (by cutting other expenditures or mobilizing additional resources) were inadequate, and the current deficit, which was 1.2 percent of GDP in 1990 worsened to 1.5 percent of GDP in 1991. Thus, despitd the continued suppression of public investment (8.7 percent of GDP), the overall deficit appears to have increased to 10.8 percent of GDP as opposed to the targeted 10.1 percent. iii - 6. Inflation, at 21.5 percent was high in 1990 and was caused mainly by: (i) removal of distortions in prices, such as devaluation and elimination of subsidies; (ii) higher import costs induced partly by the Gulf crisis-related oil price increase; and (iii) and localized sporadic problems in production and transportation of agricultural goods, in particular, vegetables. Inflation had come down to about 10 percent by October 1991 because these factors had worked themselves through the system. But, inflationary expectations remain strong reflecting the fact that net domestic bank borrowing by the Government was larger than projected and that an accommodating private credit policy has been followed; the demand for credit shows no sign of abatement despite the real interest rate increasing from a negative 4 percent in 1990 to a positive 4-6 percent in 1991. Developments in Agriculture 7. Agriculture, which provides income to 70 percent of the population in Sri Lanka, has not fared well in the 1980s, growing at 2.4 percent a year bet,reen 1982 and 1990--a period when GDP grew at 4 percent a year in real terms. Outputs of tea and paddy grew at 2.8 percent and 2.1 percent a year, while non-tea tree crops suffered a decline. This unsatisfactory performance can be explained by the following three factors. First, paddy production has not been expanding since the mid-1980s because (i) weather and civil conditions have been unfavorable; and (ii) high yielding varieties and adequate fertilizers are already used in most of the irrigated areas and, thus, increasing production further implies the need for additional investment and research to enhance productivity in areas with less favorable conditions-- which is costly. This has reinforced the Government's decision to de- emphasize paddy production. Second, inefficiency of the two public corporations managing the vast majority of tree crop plantations led to a fall in public sector production, which led to the Government's decision to restructure the subsector to increase the role of the private sector. Third, policies that have traditionally favored paddy production have militated against crop diversification. In addition, the ongoing civil conflict is estimated to have reduced paddy production in the North and East by as much as one million tons over the last seven years (or 3 percent of 1990 GDP valued at 1990 prices). A Growth-Oriented Policy Package 8. Sustaining growth based on exports requires that the Government continues to carry out the following: (i) t %vht macroeconomic management especially fiscal management through better control of recurrent expenditure; (ii) continued rationalization of the public sector; (iii) continued rationalization of the poverty programs; and (iv) provision of an enabling framework for the private sector. Revenue mobilization efforts should continue based on improved tax administration and tax reforms that broaden the tax base and increase the system's efficiency. (Any temporary loss of revenue resulting from the changes in the tax rate structure should be off-set by efforts to raise additional revenues through, for example, more excises.) It is also important that the Government consult closely with the IMF on exchange rate management to as,ure and maintain export competitiveness. - iv - Resumption of Tight Macroeconomic Management 9. The favorable economic outturn in 1990 and 1991 has allowed cautious optimism to emerge regarding the future of Sri Lanka's growth prospects. However, given, that most factors supporting this performance were external to economic management, viz., good weather, a relatively stable security situation and unexpected positive, albeit temporary, effects of the Gulf crisis, it is important that optimism not give way to complacency. Indeed the still good 1991 output performance has been accompanied by weakening efforts towards tight macroeconomic management as both fiscal deficit and balance-of- payments deficit are projected to be higher than targeted; a trend that needs to be reversed as soon as possible. Moreover, the pattern of growth is characterized by a number of undesirable features. First, real investment has stagnated. Public investment has fallen sharply. While private investment has been on the rise, there is some evidence to suggest that an increasing share of it is going towards residential buildings rather than into directly productive sectors of the economy. Second, the real effective exchange rate has appreciated by 20 percent from the fourth quarter of 1989 till July 1991. The erosion of competitiveness during this period reflects a rapid increase in productivity-adjusted unit labor costs and exchange rate depreciation that falls short of domestic inflation. This reinforces the need for coordinated action to contain these labor costs as well as, in close consultation with the IMF, on exchange rate management. 10. The low public investment and erosion of external competitiveness may be traced at least in part, to a shortfall of revenues over current expenditures amounving to 1-2 percent of GDP, a situation caused in part by introduction of additional welfare programs (which need better targeting) and of the substantial wage and salary component of security-related spending. These outlays increased demands for consumption goods, mostly food and some se-:ices. This set of circumstances has weakened incentives for investments in the production of exports goods and redirected resources towards consumption or investments in activities such as real estate. This phenomenon is borne out by the fact that private sector credits for residential buildings and consumption increased rapidly in 1990 at 37 percent and 42 percent, respectively. The situation needs to be redressed through changes in policy. To prevent such a tendency from gaining momentum, the Government should aim at attaining a current budget surplus of about 2 percent of GDP within two to three years through control of current expenditure items such as the public sector wage bill, transfers to public corporations, the government pension scheme and leakages from welfare programs to those not truly in need. Somewhat lax macroeconomic management in 2991 must be reversed in 1992 to put economic restructuring back on track. In addition, given the difficulty in achieving immediate and adequate fiscal retrenchment, an appropriate mix of wage policy, aggregate demand policy, and exchange rate policy, should be employed. At the same time, public resources should be shifted toward investment in efficient infrastructure (see para. 18 below). Public Sector Rationallation 11. The Government has taken various measures to rationalize public sector activities to make more room for the private sector and improve overall efficiency. First, the public sector bus company was converted into about 80 privatized companies through employee share ownership, (or "peoplization"). While this is a step in the right direction, experiences in other countries show that this method of privatization often ended up inhibiting the infusion into the ccmpanies of managerial, financial and technological resources they need to compete in the private market. More direct divestiture should be encouraged in the future. Second, an action plan has been prepared to increase the role of the private sector in managing the important (and currently loss-making) state-owned tree-crop plantations through private management contracts based on fees-for-services and profit sharing. To ensure the success of this measure, however, it is crucial that there be more incentive to maximize longer-run profits. Privatization is the preferable way to accomplish this. Third, the Government has also committed itself to privatizing all commercially oriented public enterprises and corporations, and so far has divested eleven firms. Fourth, in an effort to achieve the target of retrenching 25 percent or 80,000-90,000 staff over a four-to-five year period based on the recommendations made by the Administrative Reform Committee, the Government retrenched about 10 percent or about 40,000 of central and provincial staff in 1990. Lastly, the Government has made the process of recruitment and promotion purely merit-based. There are recent indications, however, that the Government's commitment to further rationalization of the civil service is weakening; they have difficulties in committing to further reduction in civil service size. Poverty Program Restructuring 12. The Government has made considerable efforts to improve the nation's three major poverty p.:ograms. They are: the Jana Saviya (poverty alleviation) program (JSP), the fo'd stamp program (FSP), and the Mid-Day Meal Program (HDMP) for school children. All three suffered from inadequate targeting; many more people than the truly poor or those at risk were receiving benefits, causing a drain on the budget and diluting the effectiveness of the programs. While the truly poor in Sri Lanka are estimated at about 20-25 percent of the population, the JSP was initially envisaged to provide substantial income transfers (close to semi-skilled labor wages) and, in the aggregate, amounting to 20 percent of GDP, to half of the nation's population for two years during which period recipients were supposed to learn skills for employment or self- employment. There was however no mechanism established to monitor whether those conditions were being met. The FSP provided food stamps to half the population as well. The MDMP is designed to provide additional food stamps to all school children in the country to supplement children's nutritional intake. 13. As part of rationalization, the JSP has been staggered over 11 rounds to lessen its fiscal cost, with the beneficiaries screened at the community level to ensure that only the truly needy get the benefits. In addition, it has been made mandatory that a person from each beneficiary household participate - vi - in rural civil works. There is, however, substantial difficulty in monitoring the progress. For the FSP, restructuring mainly consisted of improved targeting: about one million families currently receive stamps as compared to 1.9 million families until October 1991. The MDMP is being administered in a way that reduces program cost by 20 percent. Nutritional interventions would however be much more effective if they were targeted towards needy pre- schoolers who are truly nutritionally at risk as well as lactating mothers. While these measures discussed above represent significant improvements of the implementation design of the three programs, there continue to be strong political pressures in Sri Lanka for welfare programs comprising primarily consumption-oriented income transfers. An Enabling Framework for Privat Investment 14. The macroeconomic policy reforms and public sector restructuring discussed above provide a framework within which private investment may be promoted. They however need to be complemented by a wide range of reforms at the microeconomic and sectoral levels, four areas of high priority are mentioned here although the list is not meant to be exhaustive. 15. An efficiently functioning financial sector is a prerequisite for private sector-led growth. Among various policy measures to improve the financial sector, highest priority should be attached to addressing inefficiencies in the finiancial institutions, especially the state-owned entities. The two state-owned banks, Bank of Ceylon and People's Bank, which own more than 60 percent of the commercial bank assets, but are insolvent when internationally accepted provisioning for bad debts is taken, need to be restructured after appropriate provisioning and recapitalization is completed. In particular, the two state-owned banks need to be commercialized to improve the competitive environment of the sector. Furthermore, the Bank of Ceylon needs to be privatized in the future. In addition, major functions of the National Savings Bank, such as supply of funds to the Government, are less relevant with the expansion of treasury bill sales and investment by pension funds. It is thus recommended that its rural branch structure be rationalized, and that if it cannot break even by investing in treasury bills, consideration should be given to its phasing out. In addition, improved procedures for classifying and provisioning for bad debts should be effectively implemented. Debt recovery should be improved through amending and enforcing the country's debt recovery laws, and establishing a debt recovery agency. 16. Despite low wages and a strategic location, Sri Lanka remains a marginal recipient of foreign direct investment: the figure was about US$32 million in 1990. While part of this is clearly due to the unsettled civil situation in the country, uncoordinated policies and the discretionary nature of approval procedures have also played their part. The Government has therefore recently announced measures that will open up most of the economy to foreign investment and allow free remittances to be made even during balance-of-payments crises. At the same time, the institution that approves and assists foreign investors should be improved to handle efficiently all kinds of applications whether or not the investments take place in the Export Processing Zones. In addition, - vii - the list of activities that would not get "automatic approval" should eventually be limited to only those that relate to national security and health hazards. While this approach represents a significant step forward, it is important that the new policies be implemented expeditiously and that remaining obstacles to foreign investment--such as limited access to domestic credit--be removed. 17. The Termination of Workmen Act, which effectively takes away the employer's right to decide on lay-offs and firings of workers, by making it highly costly to do so is a controversial piece of labor legislation. This Act, originally established with the intention of protecting labor, is now damaging workers interests in general by giving incentives to employers to replace labor with capital. Its repeal or, transitionally, announcement of a procedure for receiving a waiver from its effects is recommended. The Industrial Dispute Act already offers an acceptable alternative to the Termination Act. The rest of the economy's complex labor legislation should be reviewed and streamlined. 18. Appropriate infrastructural services lower the cost of private business and induce private investment. To promote industrial development for exports, a further concentration of production activities in the Greater Colombo Metropolitan Area may be unavoidable, and an appropriate infrastructure strategy should be built on this assumption. For diversified agriculture with export orientation, the crucial factors, beyond incentives, will be access to markets and market information. Priority areas in this latter regard should be: establishing a well-maintained intercity road network; developing commercial refrigerated transportation and storage systems; and improving quality and coverage of the domestic and international telecommunications network. 1992 Aid Requirements 19. If the measures discussed above are substantially implemented in the near future including reversing the deteriorating macroeconomic management witnessed in the second half of 1991, and if the civil conflict situation gradually improves, the country is expected to grow at around 5-6 percent a year in the medium-term future, with a current account deficit of around 5.8- 5.9 percent of GDP. This current account deficit, together with amortization and other foreign exchange needs, would bring total foreign financing requirements to about US$1 billion a year. Taking into consideration net private flows and net purchases from the IMF, annual foreign aid flows would need to be about US$790 million in 1992. Project aid requirements in 1992 are expected to be about US$530 million, of which US$500 million is expected to be disbursed from the existing project pipeline. Furthermore, disbursements of non-project aid from the existing pipeline would be US$190 million. The remaining gap of US$100 million needs therefore to be filled by commitments of project aid amounting to about US$630 million and quick-disbursing balance-of- payment assistance of approximately US$170 million in 1992. Again, it is important to emphasize that if the momentum for policy reforms is not maintained, the rationale for this level of high donor assistance will be substantially weakened. In particular, without the re-establishment of - viii - disciplined and tight fiscal management within 1992, balance-of-payments support could allow maintenance of unsustainable external current account and fiscal deficits. CHAPTER IR REVIEW OF RECENT ECONOMIC PERFORMANCE 1. Economic Performance in 1990 and 1991 a) Background 1.1 Sri Lanka has had a long tradition of emphasizing social development and has enjoyed levels of literacy, infant mortality and life expectancy comparable to more developed economies. But its success in generating growth in income and employment has been limited by the inefficiencies in the public sector and the insulation of the domestic market from foreign competition. In 1977, therefore, the Government reversed its long-standing policy and started to encourage market forces to play an increased role in the allocation of resources. This resulted in a one time increase in efficiency gains--paddy production increased substantially as well as exports. Growth was further accelerated by a concurrent start of large public investment programs, most notably the Mahaweli River Irrigation and Hydropower Scheme. Thus growth, which averaged 3 percent per year in the 19709, increased to close to 7 percent in 1978-80 and remained at around 5 percent during the first half of the 19809. 1.2 This growth momentum, however, would not be sustained. By the mid- 1980s, slow growth and high unemployment emerged once again as serious problems. This was mainly because the 1977 reforms did not address the fundamental problem of a large and inefficient public sector which employed over 20 percent of the labor force. Furthermore, ambitious public investment programs (whose returns turned out to be disappointingly low) exacerbated the situation by increasing further the role of the public sector in the economy and creating excessive macroeconomic imbalances. The Government's reluctance in adjusting the exchange rate adequately after 1977 also aggravated macroeconomic imbalances and worsened export competitiveness. The continued civil conflict in the North and resurgence of leftist (JVP) terrorism in the South in 1987, put additional pressures on macroeconomic management. As a result growth slowed down to a mere 2 percent a year during 1987-89, and by mid-1989, the economy was on the verge of a balance of payments crisis. 1.3 The new Government formed in early 1989, therefore, initiated structural reforms to stabilize the economy and to get it on to a sustained high growth path. The reform process was broad-based, and focussed on (i) achieving macroeconomic stabilization; (ii) improving effectiveness of the country's welfare programs through better targeting; and (iii) creating an enabling environment for private sector and export-led development. Following the introduction of this reform process in mid-1989, overall economic management and performance improved markedly (see Table 1.1 for key indicators). -2- Table 1.1: KEY ECONOMIC VARIABES 1904-990 Incentive Indlcators 1984 1986 1988 1987 1988 1989 1990 1991 1 Exchance Rot; 1.1 NominI-A crig h Exchnge Rate (R/US$) 26.4 27.2 28.0 29.4 81.8 88.0 40.1 42 0 2/ 1.2 Real Effecive Exchange Rote h (1980=100) 124.8 118.7 108.9 93.0 90.9 88.1 87.7 92.6 R/ 1.3 Annual Change In 1.2 11.2 -8.5 -11.0 -10.6 -2.3 -5.2 1.8 6.6 2/ 2. Real Interest Rat. 2.1 12 month deposlt -3.9 12.9 6.2 2.6 -2.3 1.6 -3.0 4.0 9/ 2.2 Commercial lending 0.2 19.4 12.3 10.5 4.2 6.9 -4.0 6.0 3/ 2.3 Treasury Bills (3 months) -2.8 10.7 3.1 3.8 6.1 5.9 -8.6 e.o I/ 3. Index of Real Wage* (D*c. 1978=100) 3.1 Minimum Wages 99.5 105.9 104.5 102.6 108.7 112.8 108.4 109.5 3/ 3.2 Government Wage. 108.8 121.2 117.6 109.1 125.4 121.9 113.2 114.4 3/ 4. Incentive for Agricultural Production 4.1 Rice (Produc*r price/international price) 104.8 112.7 126.7 104.3 71.1 70.8 111.2 - 4.2 Tea Producers (Profit Rate [%]) 85.2 0.3 -18.9 -0.9 -6.8 4.7 17.5 - External Trade Indicators S. Volume Index of Major Exports (1980-100) 5.1 Tea 110.6 107.2 112.6 108.9 119.0 110.6 112.6 115.5 5.2 Rubber 104.3 99.3 90.9 87.6 82.1 71.1 80.8 72.6 5.3 Coconut 138.8 390.5 481.6 224.7 93.6 238.6 307.7 227.6 5.4 Gorments 807.1 396.2 413.6 459.8 480.8 513.6 613.4 784.4 6.5 Goms 743.8 976.7 1456.1 1960.4 e882.0 6178.1 7298.8 6177.2 8 Export Shares In World Trade 8.1 Tea 21.7 20.7 21.3 20.6 20.8 18.0 - - 7. Non-traditlonal ExDortt 7.1 RlF roWth (Xy-- - 7.6 -10.0 11.0 3.1 13.6 17.0 12.1 7.2 Share In total exports 44.8 63.1 60.4 68.5 64.0 66.7 68.9 73.4 8 Commodity Terms of Trad. 8.1 Index (I980=7100) 148.6 116.6 107.0 110.7 100.6 94.7 93.9 - 8.2 Annual Changes - -22.2 -7.4 3.4 -9.1 -5.9 -0.8 - 1/ Increase meane real appreclaElon. 2/ As of July 1991. 3/ Three quarters only. b) National Accounts and Growth 1.4 Sri Lanka's real GDP grew by 6.2 percent in 1990. This represents a marked improvement over the 2.3 percent in 1989 and the average annual growth during the previous five years of 2.7 percent (Table 1.2). However, as will be seen, a large part of this improvement was accounted for by favorable weather conditions that enhanced agricultural performance, coupled with an improved security situation. Nor, moreover, can all aspects of that growth be fully reconciled with available information (e.g. see para. 1.11). Considering also that growth performance in recent years has been poor, i.e., 1990 started with a relatively small base, there should not be undue complacency regarding the 1990 growth rate. Furthermore, with no major impediment to economic activities, growth in 1991 is now estimated at about 5 -3- percent although no detail is yet available. This growth, however, has been accompanied by increasing macroeconomic imbalances which, if continued, would jeopardize the country's future growth potential. For Sri Lanka to get on to a sustained growth path, a significantly improved macroeconomic stance in 1992 and beyond, as well as implementation and maintenance of referm efforts described in Chapter II are essential. Table 1.2: VALUE-ADDED GRO'WTH RATES OF MAJOR SECTORS 1970-77 1978-82 1983-86 1987 1988 1989 1990 GDP 3.1 6.2 4.9 1.5 2.7 2.3 6.2 Manufacturing 1.7 4.6 6.7 6.8 4.7 4.4 9.4 Public .. .. -1.2 -0.4 -1.5 (-21.0)9/ (14.0)?J Private .. .. 14.6 14.0 10.9 (15.0)v (14.0)2 Construction -0.3 11.0 0.8 1.8 1.5 0.6 2.0 Agriculture 2.3 4.0 4.0 -5.8 2.1 -1.1 8.8 Tea -0.1 -1.8 2.8 1.0 6.4 -8.8 12.6 Rubber -0.7 -2.9 -0.4 -10.6 0.7 -9.5 3.0 Coconuts -2.4 4.7 2.7 -24.6 -15.7 28.4 1.6 Paddy 2.1 5.3 4.0 -18.0 16.4 -16.7 23.0 Forestry/ Fisheries -0.51 8.2 -0.4 8.3 -4.2 3.2 -1.7 Other 6.211 4.1 4.9 1.7 1.4 2.0 7.8 Services 3.6 7.4 5.1 2.7 2.2 2.7 4.3 Utility 6.1 14.5 6.0 3.0 3.5 1.8 10.2 Transport 2.5 6.8 5.3 1.2 0.6 1.9 3.8 Commercial 2.5 7.4 4.6 2.8 2.7 1.7 3.6 Financial S.8 11.9 8.4 6.1 6.0 6.0 6.3 Housing 2.7 5.2 1.8 1.5 1.5 1.3 1.5 Public Admin.V 5.9 6.9 14.7 3.1 0.5 12.4 3.3 Others 5.2 7.2 -1.4 2.7 1.5 2.4 9.4 1/ 1973-77 2/ Includes defence 3/ Output Growth Source: Central Bank Annual Reports and Department of Census and Statistics -4- 1. Growth Performance in 1990 1.5 Agriculture. Agriculture accounts for a significant part of the accelerated growth in 1990. As Table 1.3 illustrates, over a third of the increase in GNP in 1990 could be accounted for by increased agricultural production, and about half of this can be attributed to the 23 percent growth in paddy output over a poor 1989 base. This high paddy growth was due to a substantial expansion in the area sown and harvested. The average yield, however, increased only marginally. Minor food crop production also contributed to the high sector growth by recording an increase of 8 percent over its 1989 level. In addition, tea production in 1990 reached its highest recorded level and its value added in real terms increased by 12.6 percent over its 1989 level. The other two tree crops, namely, rubber and coconut, grew marginally in 1990 (3.0 percent and 1.6 percent, respectively). able1-.3Ss SECTORAL COMPOSITION Am INCREASE IN GROSS NATIONAL PRODUCT AT EONSTANT (1OU) PRICES, 1999-bO Sector Percent Share of ONP Percent share of ____________ _________ Increse, 1989 1990 1989 1990 1. A riculture, Forestry and Fishing 23.8 28.7 -12.0 30.9 1.1 Agriculture 19.6 20.4 -17.0 84.4 1.1.1 Tea 2.2 2.4 -9.7 4.8 1.1.2 Rubber 0.6 0.6 -2.7 0.3 1.1.8 Coconut 2.7 2.8 28.7 0.6 1.1.4 Paddy 4.4 S 1 -39.8 16.4 1.1.6 Other 9.7 9.8 8.6 11.3 1.2 Forestry 1.7 1.6 1.6 0.6 1.8 Fishing 2.0 1.8 3.4 -1l5 2. Mining and Quarrying 8.0 8. 1 8.9 4.1 a. Manufacturing 17.2 17.7 82.6 24.6 3.1 Tre Crop Processlng 2.7 2.8 -0.6 3.6 8.2 Factory Industry 13.0 13.5 65.3 20.1 3.8 Small A Other Industry 1.5 1.4 -22.1 1.0 4. Construction 7.2 8.9 1.9 2.2 5 Services 5.1 Electricity, Gas, Water A Sanitary Serviceo 1.3 1.3 1.0 2.0 6.2 Transport, Storage A Communications 11.7 11.4 9.9 6.7 6.8 Wholesale and Retall Trade 21.5 20.9 16.9 11.5 6.4 Banking, Insurance and Real Estate 6.2 5.2 18.1 4.9 6.5 Ownership of Dwellings 3.1 2.9 1.8 0.7 5.8 Public Administrstlon A Defence 5.2 5.0 26.5 2.6 6.? Other Services 8.8 8.9 4.0 5.4 6. CDP 102.4 102.0 100.7 95.6 7. Ut Factor Income from Abroad -2.4 -2.0 -0.7 4.4 8. OMP 100.0 100.0 100.C 100.0 Soure: Central Bank 1.6 A close analysis shows that most of the increased tea production could be attributed to improved performance by the private sector (see Table 1.16). Whereas tea production in the public sector estates managed by the -6- Janatha Estates Development Board (JEDB) and the Sri Lanka State Plantations Corporation (SLSPC) grew by 4 percent and 5 percent respectively, tea production in the private sector rose by 27 percent. This was partly due to the fact that 1989 was a particularly bad year for private sector tea producers, many of whom are in the Southern Province and cultivate low grown varieties; the South was especially affected by the JVP insurgency in 1989 (paras. 1.52-1.53) and by adverse weather conditions that damaged mostly low- grown varieties in the same year. 1.7 The Manufacturing and Other Industrial Sectors. Another sector that contributed to enhanced 1990 growth was manufacturing which grew by 9.4 percent. As Table 1.3 illustrates, a quarter of the increase in GNP in 1990 could be accounted for by this sector. The industrial sub-categories which recorded the largest increases in value added during the year were chemicals, petroleum and plastic products (25 percent), fabricated metal products, machinery and transport equipment (12 percent), textiles, apparel and leather products (10 percent) and food, beverages and tobacco (8 percent). According to the Central Bank, both public and private sector industrial output grew by 14 percent. However, a large part of this was due to increased output of petroleum products (especially that of the Ceylon Petroleum Corporation due to the high output to build up oil reserves amidst the Gulf crisis and to a low base of 1989 when the refinery had to stop operation for five weeks for maintenance purposes). When the value of petroleum products output is excluded, overall industrial production increased by only 7 percent, and production in the public manufacturing sector declined by 21 percent in 1990. Part of this decline is due to the transfer if ownership of two large public sector textile mills to the private sector which resulted in a 45 percent reduction in the output of Textile Corporation. 1.8 The construction sector expanded by a modest 2 percent in 1990, (compared to a growth of 0.6 percent in the preceding year) reflecting sluggish construction-intensive public investment (which declined in real terms by close to 30 percent) although the sector received some boost from increasing residential housing investment. Value added in the mining and quarrying sector rose by 9.1 percent in 1990 largely due to an expansion of gem mining. Some other mining activities, however, suffered a decline in output due to the renewed fighting in the North and East. 1.9 The Services Sector. Like the agriculture sector, the services sector accounted for one third of the total increase in GDP during 1990. Increased production in the agricultural and manufacturing sectors stimulated growth in the transport, trade, banking, insurance and real estate services. Underlying this was the improved security situation in the country, a major factor in the recovery in tourism (covered in the "other services" sub-category). Tourist arrivals in 1990 recorded an increase of 62 percent over those of 1989. -7- 2. Savings and Investment 1.10 Investment as a share of GDP was 22.6 percent in 1990, slightly higher than the 21.7 percent in 1989 (Table 1.4 and Diagram 1.1). This was because private sector investment (net of change in stocks) increased from 11.4 percent in 1989 to 13.6 percent, continuing its increasing trend since 1988. Public sector investment on the other hand continued its declining trend and, at 8.7 percent of GDP in 1990 (as against 10.0 percent in 1989), it was the lowest in the decade. Reflecting the decline in public investment, which is construction-intensive, the share of investment in structure and non- residential buildings has come down, and that in equipment and machinery, especially transport equipment, has increased--one reason imports of investinent goods have increased so rapidly in 1990 albeit from a low base in 1989 (Table 1.5). The implicit deflator of investments, however, rose by nearly 40 percent in 1990. Thus, even though the ratio of total investment to GDP in 1990 was higher than that in 1989, real investment appears to have increased only marginally (in fact real investment has stagnated since mid- 1980s, an issue discussed in Chapter II). The increased share of investment in GDP in the presence of lower foreign savings (lower current account deficit) and continued p.Ablic sector dissavings (negative current balance) was made possible by an increase in private sector savings from 15.8 percent in 1989 to 18.6 percent of GDP (4.6 percentage points of which came from net private transfers). This was caused by high GDP growth which also allowed an increase in private consumption (Table 1.6). Table 1.4s MACROENOMC 8ALANCOS 1864-1990 -- ( of GDP) 19o5 1986 1987 1988 1989 1990 1. Forgian Savings 9.9 9.5 7.8 8.6 7.1 6.2 2. Private Sector 2.1 Grove Doss tIc Investment 9.8 9.6 11.0 9.1 11.7 1.9 (o/w changes In stock) 0.1 0.1 0.1 0.8 0.2 0.8 2.2 National Savings 11.6 12.8 14.2 16.2 15. 8 18.6 2.8 Investment minus Saving. -1.8 -2.8 -3.8 -7.0 -4.1 -4.8 8. Central Government 8.1 Capital Expenditure (including not lending) 18.9 14.1 12.4 18.7 10.0 8.7 8.2 Current Savings 2.2 1.8 1.8 -2.0 -1.2 -1.2 8.8 Investment minus Savings 11.7 12.8 11.1 16.7 11.2 9.9 Memorandum Item Share of arose Doometic investment Financed by Foreign Savings 41.8 40.2 38.6 87.7 82.7 28.2 -8- Table 1.5S INCREASE IN DINESTMFI C00WS0 IPORTS (Percent Growth Ir R l Term) Year 1987 1988 1989 1990 Growth -17.2 -10.6 -7.2 28.8 Table 1.6: EXPENDZTURE ON OSS DCIESTIC PRODUCT ------------------------------------------------------------__---------------__- 1986 1987 1988 1989 1990 Prov. ------------------------------------------------------------------__---------__- (Current Re mlillon) Gross Invostment 42463 45900 50582 64722 72638 Gross Capital Formation 42826 4S762 49961 54249 71600 Public 25227 24384 80400 26280 28048 Government 9684 11174 18126 14391 13688 Public Corporations 16848 1816o 17276 10889 14406 Private 17099 21418 19681 28989 48657 Change In stocks 137 148 601 478 1038 Consumption 157860 171487 195306 221090 273840 Private 189370 161949 178457 194680 242928 Government 18480 19388 21849 26410 80717 Grosv Domestic Expenditure 200818 217387 245868 276812 346278 Exports CO4FS 42688 49569 67885 6886s 97884 Imports G1NFS 63407 70228 81771 92587 122565 GDP at market prices 179474 190728 221982 261891 821057 (in percent ot GDP) Gross Investment 28.7 28.8 22.e 21.7 22.6 Gross Capital Formation 28.6 28.8 22.5 21.S 22.8 Public 14.1 12.4 18.7 10.0 8.7 Governmnt 5.8 6.7 6.9 5.7 4.2 Public Corporatlons 8.7 6.7 7.8 4.8 4.6 Private 9.6 10.9 8.8 11.6 18.6 Change In stocks 0.1 0.1 0.8 0.2 0.8 Consumption 88.0 67.2 68.0 87.8 85.2 PrIvate 77.7 77.2 7v.1 77.8 76.7 Government 10.8 9.9 9.8 10.6 9.6 Gross Domstlc Expenditure 111.6 110.6 110.8 109.6 107.9 Exports QihFS 28.7 26.2 26.1 27.8 80.8 Imports GMNFS 86.8 86.7 #8.6 88.8 88.2 Natlonal Saving 14.2 1656 14.2 14.6 17.4 Domestl Saving 11.9 18.0 12.0 12.6 14.6 Public 1/ 1.6 1.8 -2.0 -1.2 -1.2 Privat 10.0 11.7 18.0 18.8 16.8 Net Factor Income -2.2 -2.2 -2.4 -2.8 -1.9 Not Private Transter* 4.4 4.7 4.6 4.8 4.6 Memo Iteo: Orowth Rates In X Consumption 10.8 8.6 18.9 18.2 28.8 Population 1.6 1.5 1.4 1.8 1.1 CCPI 2/ 6.0 7.7 14.0 11.6 21.6 Real For Capita Con**ition 0.8 -0.6 -1.6 0.8 1.2 1 Current surplus V Colombo ConsumerO Price Index Source: Central fank and Doparteent ot Census and Statistics, Sri Lanka -9- Diagram 1.1 I nvestments CM of GD3 S8_ 34 32 30 28 28 24 22 20 la 14 12 10 1980 1981 1982 1983 1984 1G9S 1986 1987 1988 1989 1W90 a Toteai tnvesetrert 1 Pubitc Investment o PrTvate Investment 1.11 The picture of buoyancy in private sector manufacturing, private investment and economic growth is, however, not fully borne out by an examination of commercial bank loans to the private sector and public corporations in 1990 (Table 1.7--data distinguishing private and public corporation credit by purpose are not available). The pattern of credit allocation can be characterized by strong growth in a few of the smaller subsectors (housing, consamption and agricultural advance), and declining shares of the total in the largest two subsectors, commercial and industrial advances. In particular, although the share of housing, consumption and agricultural advances represents only about one-quarter of total commercial bank advances, these subsectors contributed to more than half of the growth in commercial bank advances in 1990 reflecting partially the start of the "One- Point-Five-Million Houses Program" and Central Bank refinance facilities amounting to Re 500 million for agricultural purposes. In addition, a large increase in agricultural lending also reflects the Government policy to provide low interest credit to Jana Saviya (poverty alleviation) program beneficiaries through state-owned commercial banks. By contrast, advances for commercial purposes (i.e. for short-tenm export, import, retail, and wholesale trade) increased only marginally by 5 percent and the growth in advances for - 10 industrial purposes fell in 1990 to 10 percent, its lowest rate in recent years. Table 1.7s SRI LACA: COMMERCIAL BMI ADVANCES TOTHE PRIVATE SECTOR AND PUBLC CORPTXONS BY PURPOSE 1987 1988 1989 1990 Advances by purpose 48602 67687 68788 77408 Coomrcial 24859 28511 81924 33628 Financial 1022 1208 1874 2337 Agricultural 6207 5830 8s81 9839 Industrial 10227 13562 16980 17808 Tourism 807 890 737 804 Housing 3968 4782 6068 8298 Consumption 860 1186 1522 2166 Other 1625 1824 2251 3099 (annual percent change) Advanco by purpose 8.7 18.4 15.9 16.1 Commercial 21.9 14.7 12.0 6.0 Financial 25.9 18.2 88.6 39.6 Agricultural 23.6 12.0 12.9 46.5 Industrial 10.1 80.8 19.7 10.2 Tourism 1.2 10.8 -17.2 9.1 Housing 14.9 21.0 28.9 86.8 Consumption 83.4 37.2 30.6 41.6 Other 24.6 12.2 23.4 37.7 (percent of total advances) Advances by purpose Cowmrclal 61.1 49.6 47.8 43.8 Financial 2.1 2.1 2.5 3.0 Agricultural 10.7 10.1 9.9 12.4 Industrlsl 21.0 23.2 23.9 22.7 Tourism 1.7 1.5 1.1 1.0 Housing 8.1 8.8 9.1 10.7 Consumption 1.7 2.0 2.3 2.8 Other 8.8 8.2 3.4 4.0 Source: Central Bank 1.12 The overall expansion in public corporation credit at 13 percent (Table 1.8) was lees than targeted and less than a 29 percent in the previous year. But credit to a few of the larger public corporations increased significantly. The increase in credit was particularly concentrated in three of the largest public corporations, the Cooperative Wholesale Establishment (CWE), and the two state plantation corporations (the Janatha Estates Development Board (JEDBJ and the Sri Lanka State Plantations Corporation (SLSPC]). The CWE received over Re 1.2 billion in credit in 1990, which was financed in part by the Central Bank special refinance facility in support of - 11 - its current operations. Similarly, credit to the two state plantations increased by almost Rs 1 billion in 1990, largely to cover operating losses. Much of this found its way into consumption rather than investment. ZIkLt-.I: aRr2T TO PWUC 8lWRl_ (I n Rs. l I I ton) 1989 1090 1991 Dtec Oc Jan F b Mar Apr May Jun Jul Aug Ceylon Electricity Board 184 40 78 98 107 171 180 90 160 42 Ceylon Petroleum Corp. 2,447 1,580 1,306 2,265 8.049 2,821 9.227 2,481 2,S88 8,008 C.W.' 2,682 3,856 8,837 8,782 8.278 2,981 4,827 8,621 8,107 2,866 Veyangod Weaing ;1; 217 24S 227 224 229 280 269 128 121 108 st.et Plent,tion- Corp. 2,698 2,938 8,108 8,148 2,770 2,9S8 3,020 3S064 8,126 2,640 Janaweamas (JED8) 2,80 2,O90 8,127 3,479 8,430 3.821 3.101 a.340 S,17S 8,182 Ceylon Cemnt. Corp. 769 525 877 551 487 620 532 821 164 498 Ceylon Steel Corp. S31 289 240 217 334 856 181 246 262 204 Ceylon Shipping Corp. 121 188 198 97 98 202 19S 177 171 208 Bil& & Fats Corporation 166 108 108 100 104 106 99 10 185 108 Fertilizer Corporation 225 660) Pharamaceuticale Corporation 148 898) 2,668 2,6t0 2,628 2,228 2,472 2,581 2,441 8.260 Other Corporationa 1,596 1,927) Total 18,862 15,686 15,476 16,600 16,606 16,167 17,678 16,804 16,865 15,616 5ource: Central Bank c) Balance of Payments 1.13 Balance of payments performance was much better in 1990 than previously expected (Table 1.9) in spite of adverse developments in the world, most notably, the Gulf crisis (paras.1.30-1.36). Although part of credit goes to recent policy measures such as liberalization of sea and air freight (which reduced the costs of shipping substantially) as well as improved political stability in 1990, a large part can be explained by factors external to policy decisions of the Government as reviewed below. The current account deficit was reduced from 7.1 percent of GDP in 1989 to 5.4 percent in 1990 which, accompanied by an increase in program aid led to a surplus of US$180 millior. in the overall account for the first time since the tea boom of 1984. l/ The CWE is one of the largest public corporations and has a monopoly on the importation of wlheat, dried chilies, pulses and onions for which it maintains buffer stocks. - 12 - Tblei 1.9: WAKUCE OF PAYiS (US$ MllIIIon) mn 1980 1984 1985 1988 1987 1988 1989 1990 1991 Prol mn. do Balance -986.8 -464.8 -722.0 -761.8 -679.8 -7683.6 -687.0 -702.7 -843.9 Exports 1064.7 1462.6 1318.0 1208.6 1893.8 1478.0 1680.4 1976.9 2080.0 Imports 2061.R 1926.9 2038.0 1970.4 2078.4 2239.5 2227.4 2678.6 2923.9 (R*hab.) 0.0 0.0 0.0 0.0 0.0 18.7 21.4 30.0 (n.a.) vico, not 61.9 -67.8 -136.0 -128.8 -165.9 -168.0 -167.7 -97.2 -121.8 Recelpts 278.6 336.9 828.2 379.8 397.7 410.6 403.1 534.1 e60.4 Payments 226.8 404.7 468.1 607.8 563.6 683.6 680.7 631.3 762.2 (Rohab. Interest) 0.0 0.0 0.0 00 0.0 0.4 1.0 1.9 (n.e.) de and Servicoo,n.t -934.7 -632.1 -856.9 -890.1 -835.6 -916.5 -824.7 -799.8 -985.7 vet, Transfere, net 186.7 276.4 285.8 284.2 312.6 319.4 830.6 866.3 370.7 Receipts 152.3 800.8 292.0 316.0 849.8 367.0 367.9 402.4 414.7 Payments 16.8 24.4 28.2 31.8 37.8 37.6 27.8 36.1 44.0 rent Account -798.0 -256.7 -691.1 -605.9 -523.0 -597.1 -494.1 -433.6 -696.0 ercent of ODP) (.21.2) (4.2) (-9.9) (-9.5) (-7.8) (-8.6) (-7.1) (-5.4) (-8.6) icial Transfers,not 138.0 202.7 174.6 179.9 180.1 207.1 188.1 176.1 163.2 (Rehab.) 0°0 0.0 0.0 0.0 0.0 6.0 23.0 82.2 (n.o.) on-monetary Capital, not 390.3 344.8 388.2 828.9 804.6 259.7 289.8 468.0 650.9 (Reheb.) 0.0 0.0 0.0 0.0 0.0 14.1 25.9 36.8 (n.e.) Direct Investment 48.0 82.6 24.9 28.6 67.7 48.1 17.6 32.0 66.0 Private Long-term,not 19.6 -4.8 31.3 19.1 8.9 -44.0 -44.2 -43.2 -6.6 Inflows 81.2 42.5 89.7 78.9 101.2 51.1 19.1 32.4 76.6 Outflows 11.7 47.4 S8.4 t9.9 92.8 95.1 68.8 76.6 83.0 Short-term,not 178.3 -24.9 3.4 -13.1 89.6 16.1 92.9 64.6 29.1 Governmnt, Long-teru,net 167.6 841.4 273.7 294.4 198.5 244.4 223.6 409.8 643.4 Inflows 261.6 408.1 347.0 410.? 842.8 408.6 386.6 658.6 876.7 (Rehab.) 0.0 0.0 0.0 0.0 0.0 14.1 26.9 38.8 (n.a.) Outflows 104.1 o6.7 73.3 118.2 144.3 164.8 161.9 126.7 183.3 Government Short-term,not 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 29.9 Allocations 16.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 or and Omissions 46.7 18.1 -28.1 27.0 -41.7 44.3 -70.0 -26.1 24.4 roil Balance -216.1 804.4 -111.6 -70.2 -80.1 -88.0 -88.2 180.5 243.6 ource: Central Bank 1.14 Merchandise exports recorded an 11 percent growth in volume; of particular significance was the performance of manufactures (over 21 percent) consisting mainly of garments, various appliances, and rubber and leather goods (Table 1.10). Also, volume of tea exports increased by 6 percent, while tea prices were 16 percent higher as compared to 1989 (see para. 1.31 below). More than two-thirds of the increase in exports were for comiodities (tea and gems) which are relatively more sensitive to international market conditions such as quotas and technological change and commodities (garments and re- exported petroleum products) whose import content is high. However, chemical exports (glycerine, soap and activated carbon) that have high local input content declined in real terms. _ 13 - Table 1.10: MERCHANDISE EXPORTS (in USS million) 1986 1987 1988 1989 1990 Est. Total Exports 1207.60 1392.69 1475.04 1560.41 1975.93 Agricultural Exports 479.35 457.60 470.10 478.30 530.01 Tea 329.88 361.52 386.53 379.22 494.30 Price, $/per kg. 1.59 1.80 1.76 1.86 2.29 Volume. Mn kgs. 207.80 201.12 219.80 204.20 215.99 Rubber 93.49 99.43 116.52 86.41 76.81 Price, S/per kg. 0.85 0.94 1.17 1.00 0.88 Volume, Mn kgs. 110.04 106.02 99.30 86.00 86.80 Coconut 57.36 48.23 28.09 53.33 45.95 Price, $/per nut 0.05 0.09 0.13 0.09 0.09 Volume, Mn. nuts 1104.96 538.00 224.10 571.00 507.70 Other coconut products 27.80 24.31 20.16 27.43 23.46 Other agric. products 53.75 58.19 80.51 66.79 78.71 Price, $/per kg. 1.40 1.46 1.44 2.17 1.37 Volume, Mn kgs. 38.50 39.74 55.96 30.78 57.30 Industrial Products 564.13 678.83 712.72 790.19 1035.39 Garments 341.34 437.68 448.22 489.47 626.93 Price, $/per piece 2.05 2.36 2.42 2.37 2.54 Volume, Mn. pieces 166.60 185.20 185.60 206.88 247.06 Petroleum product 84.07 87.92 71.23 62.31 99.06 Price, $/per Mt. 117.94 136.86 103.69 106.76 156.62 Volume, '000 Mt. ton 712.81 642.42 686.95 583.60 632.50 Processed diamonds 37.35 39.57 51.21 90.34 91.87 Other industrial products 101.37 113.65 142.06 148.07 217.53 Gems 26.92 49.13 65.05 61.15 73.14 Price, S/per carat 6.70 9.08 4.16 3.59 3.63 Volume, '000 carats 4018.80 5410.60 15627.20 17051.66 20166.90 Other exports 54.27 73.05 65.45 95.89 148.18 Source: Staff estimates based on data provided by the authorities. - 14 - 1.15 These latter developments occurred in a situation where the nominal exchange rate had remained virtually fixed at around Rs 40 to the US dollar from September 1989 till the end of 1990 despite inflation in excess of 20 percent (Diagram 1.2)V. Real appreciation during 1990 was limited to 6-7 percent due to the substantial real depreciation of the US dollar (the intervention currency) vis-a-vis other major world currencies in the second half of 1990. But, in 1991, as the dollar started to appreciate, the rupee appreciated an additional 12 percent in real terms. Although the rate moved from about Rs 40 in early 1991 to Rs 42 to the US dollar in November 1991, this did not offset the real appreciation of the currency. The introduction of a more market-oriented system of exchange rate determination in August 1990 (based on weighted average of the previous day's interbank transaction rates) has not provided enough flexibility to encourage exports with substantial local input or value added content because the Central Bank is also a major player in the interbank market. Diagram 1.2 PRe&I Effective Exchange Pate 1989-1991 40 07 94 43 40 40 .011 0,~~~~W, (1980=100, an i ncrss means mal a pproci tlon) 1.16 The tourism industry which had been seriously affected by the civil disturbances showed a remarkable recovery in 1990, as arrivals increased by 62 percent. Contrary to expectations at the start of the Gulf crisis, ,v The real effective exchange rate is calibrated taking into consideration both trade-weightLed effective rate and movement of exchange rates of countries competing with Sri Lanka for export markets. - 15 - remittances of workers from Gulf countries showed a robust increase of 11 percer. in US dollar terms, as many panic-stricken workers remitted to Sri Lanka their savings (see paras.l.32-1.33). On the import side, favorable weather conditions and the resulting good paddy production allowed rice imports to be almost halved as compared to 1989. Imports of petroleum, however, increased reflecting higher prices and the felt need to hold strategic reserves. Terms of trade declined only marginally by about 1 percent. 1.17 In 1990 a new pattern of external assistance seems to be emerging whereby external resource transfers to Sri Lanka are achieved through a relatively high contribution of balance-of-payments support rather than project-related aid. Not only did official grants decline due to a large drop in commodity aid, but project-related disbursements in nominal US dollar terms stayed at the level of 1989. This was rather disappointing because disbursements in 1989 were already low on account of slow project implementation. These shortfalls, however, were more than offset by disbursements of program loans by IDA and ADB which amounted to about US$90 million in 1990 (as compared to US$29 million in 1989). The level of foreign direct investment grew rapidly form the small base in 1989 but still remained relatively low at about US$32 million in 1990, underscoring the difficulty of promoting Sri Lanka's image abroad as a "foreign investment haven" in the face of ongoing civil conflict. There was also a 20 percent reduction in amortization payments, as a result of the government paying off the bulk of short-term nonconcessional loans in 1989. The debt service ratio improved further and remained relatively low at 14 percent of exports and non factor services. Notwithstanding these favorable developments, gross official foreign exchange reserves still cover only about 2 months of merchandise imports. 1.18 Preliminary data for 1991 indicate an increase in current account deficit to 6.6 percent of GDP from the 5.4 percent achieved in 1990--primarily because of higher than projected imports of "non-grain food", "non-food consumer goods" and "textile as intermediate inputs". Most of the increase in "non-food consumer goods" imports was due to cars and motor cycles while high textile imports reflect adjustment of input stocks. The increased imports of consumer goods in general were probably a result of an increased degree of import liberalization in an environment where bias toward consumption was strong as discussed in Chapter II. The amount of nominal exports at slightly above US$2 billion (real growth of 4.8 percent over 1990) was largely as expected. There are, however, some worrisome signs. Real growth of exports of "other" agricultural and industrial goods (which are presumably the engine of export-led growth) has been much less than anticipated, with the former suffering negative growth implying that the Government could do much more to encourage non-traditional exports including in the areas of exchange rate management. Private transfers on the other hand recorded modest but positive nominal growth despite the expectation that this would decline due to an expected loss in remittances/transfers from migrant workers abroad as a result of the Gulf crisis-induced return of a substantial number in 1990. In fact, the expected decline in workers' remittances in 1991 appears to have occurred. But, as the economy has been doing rather well in 1990 and 1991, there appears - 16 to have been a reverse flow of earlier capital flight, probably amounting to at least about US$40 million. This latter helped realize the overall increase in private transfers. On the capital account, foreign investment increased substantially to US$55 million reflecting the relative stability in the economic and political environment. Most of the increase in foreign investment, however, was due to investment in existing shares rather than fixed capital formation. Finally aid disbursements increased by about US$80 million over the level in 1990. But, because disbursements of balance-of- payments support increased by almost US$ 200 million, nominal project aid disbursements appear to have been below the 1990 level. d) Fiscal Developments 1.19 Fiscal operations in 1990 also showed progress irn terms of adjustment of macroeconomic aggregates; the overall deficit was contained to 9.9 percent of GDP, (Table 1.11). This is because revenues were enhanced by receipts from domestic turn-over taxes (38 percent above the 1989 level) and income taxes (43 percent increase). These improvements derive from accelerated economic activity and increased efficiency in tax collection. Total expenditures on the other hand were contained to 31.1 percent of GDP compar,I with the budgeted 31.7 percent or the 1989 actual of 32.6 percent. This expenditure level was, however, achieved primarily because public investment (capital expenditures and net lending) was further reduced to 8.7 percent of GDP from 10 percent in 1989. Imbls..L1: 5.SItf OF CETARL CO^V844E FISCA OPERATIONS, 19691 (Percent of GP) ----------------------------------------------------------------------___-----__---------------------- Budget Preli. Budget 1986 1987 1988 1989 1Q90 1991 1991 1992 Total Revenue und Grant- 22.8 28.8 21.8 24.0 23.3 20.0 21.8 21.2 Total Revenue 20.7 21.4 18.8 21.4 21.2 18.7 19.7 19.2 Ta.r 17.4 17.9 16.2 18.9 19.1 17.0 17.8 17.3 Nontex 3.3 3.6 2.6 2.6 2.1 1.7 2.2 1.9 Grants 2.1 2.4 3.0 2.5 2.1 2.1 2.1 2.0 Toat; &ip. Not Lend;ng 3.0 32.6 34.8 82.6 S3.1 28.1 so.8 28.0 Current 18.9 20.1 20.8 22.6 22.4 19.1 21.2 19.0 Capital A Net Lending 14.1 12.4 13.7 10.0 8.7 9.0 9.2 1/ 10.1 Current Account Sur/Dof(-) 1.8 1.3 -2.0 -1.2 -1.2 -0.4 -1.5 0.2 Deficit (before grants) -12.2 -11.1 -15.7 -11.2 -9.9 -9.4 -10.8 -8.0 Deficit (after grants) -10.1 -8.7 -12.7 -8.6 -7.8 -7.3 -8.6 -6.8 Financing 10.1 8.7 12.7 8.6 7.8 7.3 8.6 6.8 Foreign iorrouine 8.0 2.9 3.2 2.4 3.6 6.2 5.0 4.9 Dlebureoment. 6.7 5.3 5.6 4.6 8.2 6.5 - Amortizatione 1.7 2.4 2.8 2.8 1.5 1.8 - Net Domestic 8.1 5.8 9.6 4.9 4.9 2.1 3.7 2.1 Bank financing 1.7 1.9 4.8 -1.8 0.1 -1.2 -0.8 0.0 Nonbank financing 8.4 4.0 4.9 6.2 4.7 3.8 4.0 2.1 Arrear 0.0 0.0 0.0 1.4 --.7 0.0 - - I/ 0.5 percentage pointo of this is due to privatization. Capital epPeiditure and traditional net lending sount to 8.7 percent of DP. Source: Central Bunk ond the Trenaury 1.20 The pressure for increased recurrent expenditures was strong during 1990 because of, among others: the civil conflict in the North and East (an - 17 additional Rs 4.5 billion was allocated for this purpose in a mid-year supplementary budget); severance payments for continued public sector labor retrenchment (Rs 2.3 billion); and the revived mid-day meal program (Rs 1.5 billion although Rs 1.1 billion was actually disbursed for this program). In addition, probably because of the tight control on fund releases in 1989 as part of the stabilization efforts started in mid-1989, many of the claims accrued to the Government during the second half of 1989 had not been paid within the same year; the authorities found that they had to pay in 1990 accumulated arrears amounting to Rs 3.5 billion. 1.21 In 1991, the strong pressure for increased recurrent expenditures remained due to the civil conflict in the North and East while the refugees from the affected areas needed to be taken care of. Supplementary expenditures for these two purposes have been at Rs 5 billion and Rs 1.9 billion, respectively. Together with the public sector restructuring cost (additional pension of Rs 2.2 billion, and unpaid transport staff severance payments of Rs 3.8 billion), expenditures for 1991 over and above the originally budgeted figures are currently expected to be Rs 13.5 billion (3.6 percent of projected 1991 GDP). Although increased savings and revenues attenuated the situation somewhat, more of these efforts could have been made, e.g., making the defense levy and additional excises effective as of November 1991 rather than a later date in 1992 announced in the budget. As a result, it is estimated that the current deficit was 1.5 percent of GDP in 1991 and the overall deficit 10.8 percent exceeding the Government's target of 10.1 percent by a significant margin. In addition to the insufficient efforts made to offset increased military and other expenditures, the Government more recently appears to be making ad hoc decisions that are intended to tackle different problems piecemeal rather than in a consistent policy framework. (A case in point is a government-sponsored training program for unemployed graduates with provision of substantial stipend so that they become employable by the private sector.) It is also noteworthy that, as stated above, the project disbursements in 1991 declined nominally in US dollar terms over 1990 disbursements implying further slow down of implementation of major projects. The increased disbursements of balance-of-payments aid has more than offset this decline in financing the budget deficit. 1.22 Given this background, the 1992 budget looks optimistic. It calls for current surplus amounting to 0.2 percent of GDP and the overall deficit of 8.8 percent of GDP, both of which are improvements of about 2 percentage points of GDP over the preliminary estimates for 1991. This, however, may be difficult to achieve for at least two reasons even if fiscal discipline is regained. First, the budget calls for no nominal increase in the total wage bill over the 1991 actual level, and an extremely tight allocation -as made for non-deZense "other goods and services" procurements. The former is inconsistent with the strong pressure for wage increases, and the fact that the Government has already committed a Rs 300/month cost of living adjustment for the majority of civil servants. Second, the budget may also be optimistic because the 1992 estimate of defense expenditures are nominally the same as the actual of 1991. Because of inflation, if the level of fighting remains the same, for additional resources may be required by the fourth quarter. The allocation for non-civil administration of the Ministry of Defense also - 18 - appears rather small compared with the historical level. If the recurvent expenditure allocations turns out to be insufficient, the overall deficit will be pushed to above 10 percent of GDP once again and also public investment will continue to be suppressed. In addition, tax revenues from tea exports may be over-estimated as the assumed export price is US$2.1/kg, as opposed to currently prevailing US$1.5-1.6/kg. 1.23 A bright side of the 1992 budget is the implementation of Tax Reform. It was announced that the corporate income tax rate would be reduced from 50 percent to 45 percent in 1992 and to a unified 35 percent from 1993, the same rate as the reduced maximum marginal rate for personal income tax. Wealth tax will be abolished, and withholding tax on letters of credit will be reduced. As regards indirect taxation, the four-band import tariff system was announced and its implementation started in November 1991, and surcharge on import duty (except on car imports) has been abolished. Ad valorem tax rates on tea and coconut oil exports have been reduced from 50 percent to 40 percent. Turnover taxes will be restructured into a value-added tax (VAT) system as of April 1993, and in the interim the turnover tax rates have been simplified into a four-rate structure. These are all welcome developments that increase efficiency in the medium-term and Government efforts to implement these expeditiously should be highly commended. In addition, the expected loss in revenues in the immediate future as a result of this tax reform is expected to be counter-balanced by (i) a defence levy on all imports (except for exporters' imported inputs) and domestically manufactured goods (except for exports) of 1 percent as of January 1, 1992; (ii) improvement in tax administration, an ongoing effort with IMF assistance; and (iii) efforts to reduce expenditures. The 1992 budget incorporates revenue implications of these measures. e) Inflation 1.24 Adjustment efforts in Sri Lanka have been accompanied by price increases (as measured by the GDP deflator) that averaged 10 percent annually during the 1982-89 period. These inflationary pressures became of particular concern in 1990 when both the GDP deflator and the Colombo consumer price index (CCPI) rose by over 20 percent. This inflation eroded Sri Lanka's external competitiveness and thus weakened the strategy of fostering private investment and exports as well as distorted consumption and saving patterns. 1.25 Increases in wage levels, terms of trade deterioration, and Luore generally "imported inflation" have historically played an important role in the inflationary processes of the 1980s. The average real wage (deflated by consumers' price index) increase in manufacturing was consistently positive and increased at 5.7 percent per annum in the 1983-88 period', whereas real output per worker rose by 4.1 percent. Second, the price index of all merchandise imports, which had risen moderately before 1986, went up annually by an average of 17.6 percent in the 1987-89 period. Apart from their primary impact on the CCPI, through food prices, external price increases had also S Official data (Industrial Surveys) are available for this period only. - 19 - indirect effects by: (i) increasing private sector's expenditure on current inputs (which are mostly imported) and the demand for bank credit related to working capital requirements, and (ii) increasing the cost of investment goods. 1.26 Similar cost push factors were at work in 1990 as well. The ongoing adjustment program aimed in part at correcting past distortions through price alignments. It included two series of measures which caused once and for all price increases in 1990: a devaluation of the rupee by 16 percent during the third quarter of 1989; and the lifting of controls of prices for fertilizers, wheat flour and rice. import prices in rupee terms soared by 33 percent in 1990, the highest price rise since the mid-1970s. However, the prices of imported consumer goods--which have the most direct impact on the CCPI--went up by about 24 percent. Since imported goods comprised about one quarter of total private consumption in 1990, the direct impact on the price level in that particular year was limited at about 6 percentage points. The impact of "imported" inflation was instead felt mainly through the domestic production process--imported inputs (intermediate inputs are 50 percent of merchandise imports, and investment goods imports are about 18 percent) recorded the highest price increase in 1990 in the last ten years mainly owing to a 40 percent rise in petroleum prices induced by the Gulf crisis. 1.27 The elimination of food subsidies also had a major impact. Food products have a 70 percent weight in the CCPI, and were responsible for almost three-quarters of the upward move of the index for at least four reasons. First and foremost, administered wheat flour and bread prices were revised upward (in order to eliminate subsidies) from a level fixed in 1985. This change alone (about 56 percent increase in the price index for wheat flour and bread) explains more than one quarter of the rise in the CCPI. Second, the price of rice also increased by 22 percent. As rice and wheat bread are natural substitutes in consumer's demand, the higher wheat price increased the demand for rice, causing price pressures in the latter market which were exacerbated by the poor rice harvest in 1989 and some domestic transport bottlenecks. A dearth of private rice importers also prevented the system from responding flexibly to the situation by importing more rice. The CWE, which had the monopoly of wheat and rice imports, was not responsive enough either. Wheat imports in 1990 stood at their lowest level since 1985, and when the CWE finally managed to import inexpensive rice in 1990, it had to be careful not to release it all at once in the domestic market because the imports preceded the paddy sowing period, and a sudden fall in the rice price might have jeopardized producer incentives especially at a time when the cost of rice production was sky rocketing reflecting higher oil import prices, elimination of fertilizer subsidies, and a substantial rise in wages. Third, sugar registered an import price increase of 26 percent. Fourth, there were large increases in vegetable prices owing mainly to security problems in the North and East, but also to import bottlenecks as in the case of rice. For example, the price of red onions, for which CWE had the import monopoly, alone rose by 141 percent during the year. - 20 - 1.28 Thus, the main cause of inflation in Sri Lanka appears to have been various "cost-push" factors which would amplify the demand for money, lead to "bankable" requests for credit which, in turn, would be met by increases either in the money stock (through accommodating credit policies) or, if unsatisfied, in the velocity of circulation. An accommodating credit policy which increased outstanding credit by 24 percent was pursued to sustain the increased level of economic activity in the face of the cost-push inflation, a policy that helped sustain that inflation. With the start of the stabilization efforts in 1989, the rate of growth in broad money was contained to 11 percent in 1989 (Table 1.12). While this restraint was continued through the first half of 1990, a dramatic improvement in net foreign assets and accommodating credit policy, augmented growth in monetary liabilities to 20 percent in 1990. This growth, however, fell short of the rate of inflation. 1.29 In 1991, because most of the effects of changes in administered prices have worked themselves through the system, inflation came down to about 10 percent by the third quarter. Provisional 1991 monetary figures, however, indicate a possible departure from the cost-push inflation pattern described above. The Government credit growth which had been minimal in 1989 and 1990 increased to about 16 percent, almost the same as the growth of the private sector credit, prGbably crowding out the latter's activities. Furthermore, while inflation has come down, monetary expansion accelerated to 22 percent (October 1990-October 1991, which is above the nominal income growth) pushed by the large fiscal deficit (with larger than envisaged bank financing) and the continued and non-sterilized increase in foreign assets; renewed inflation may be lurking ahead. Already, despite the high positive rate of real interest, private sector credit demand shows no sign of abatement implying that the private sector expects substantial inflation in the near future. Immediate and decisive reversal of the lax fiscal policies with the associated credit policy, therefore, is crucial in maintaining sound macroeconomic management. - 21 - Table 1.12: MONETARY DEVELOPMENTS 1987 1988 1989 1990 1991 1/ (in billions of Sri Lanka Rupees) Net Foreign Assets 3.2 0.3 -1.6 5.5 9.4 Monetary Authorities 0.6 -2.1 -3.4 0.8 7.2 Commercial Banks 2.7 2.3 1.8 4.8 2.2 Net Domestic Assets 54.7 67.3 76.8 84.7 94.2 Domestic Credit 74.8 96.3 101.2 116.0 129.9 Public Sector 33.8 46.4 49.0 51.0 55.5 Government (net) 26.4 35.6 35.1 35.4 38.8 Public corporations 7.4 10.8 13.9 15.6 16.7 Private Sector 41.0 49.9 52.3 65.0 74.4 Other Items (net) -20.1 -29.0 -24.4 -31.2 -35.7 Monetary Liabilities 57.9 67.5 75.2 90.3 103.6 Money 24.9 32.2 35.1 39.6 42.8 Currency 13.5 18.5 19.7 22.1 23.3 Demand Deposits 11.4 13.7 15.4 17.5 19.5 Quasi-money 33.0 35.4 40.1 50.7 60.9 Monetary Authorities Net foreign assets 0.6 -2.1 -3.4 0.8 7.2 Net domestic assets 18.7 27.6 30.2 30.8 28.4 Reserve Money 19.3 25.6 26.8 31.6 38.6 -------------------------------------------------------------------___________ (percent change of end-of-year values 2/) Total Domestic Credit 16.9 28.8 5.1 14.6 16.2 Credit to Public Sector 23.5 37.4 5.5 4.2 15.4 Government (Net) 16.8 34.8 -1.5 0.7 15.7 Public Enterprises 55.4 46.4 28.5 12.8 14.1 Credit to Private Sector 12.0 21.i 4.7 24.3 17.0 Broad Money 14.5 16.6 11.3 20.1 21.7 Narrow Money 18.3 29.1 9.1 12.8 17.2 Currency 16.6 37.0 6.3 12.6 13.5 Demand Deposits 20.3 19.9 13.0 13.2 22.0 Quasi-money 11.8 7.1 13.3 26.4 25.0 Monetary Authorities Net domestic assets 14.1 47.7 9.4 2.0 1.7 Reserve Money 6.9 32.6 4.8 17.9 21.4 Velocity-annuLal average 3.6 3.5 3.5 3.9 - 1/ As of October 1991, provisional 2/ Except for 1991 which is October 1990-October 1991 Sources Central Bank - 22 - f) Impact of the Gulf Crisis 1.30 Balance of Payments. The Gulf crisis that started on August 2, 1990, was initially expected to have a serious impact on Sri Lanka due to the consequent oil price increase, the partial loss of the tea export market, and the loss of remittances from Sri Lankan workers in the Middle East. As summarized in Table 1.13, at the time the crisis started, the negative impact was expected to be about US$86 million within 1990. But, the oil price increase was offset by unexpected developments in tea exports and labor remittances. First, regarding oil imports, the Ceylon Petroleum Corporation (CPC) imported 13.2 million barrels in 1990 at an average cost of US$23.5 per barrel (amounting to US$309 million) as compared with its oil imports in 1989 of 9 million barrels at US$17.5 per barrel (amounting to US$165 million). The Government, however, adjusted domestic sales prices of oil products and passed through all import cost increases to the retail level. At the same time, it severely curtailed the public sector use of oil. As a result of these actions, the fiscal impact of the oil price hike was minimal in 1990, but was more pronounced in 1991 (see para. 1.36). Table 1.13: OVERALL BALANCE OF PAYMENTS IMPACT OF THE GULF CRISIS (in US$ million) Pre Gulf Crisis Post Gulf Actual Estimate for Crisis For 1990 Estimate 1990 Tea Exports Volume (mill. kg.) 220 216 216 Price (US$ per kg.) 2.0 1.9 2.3 Value 451 431 494 Crude Oil Imports Volume (mill.brl.) 13.4 13.4 13.2 Price (US$ per brl.) 17.1 21.3 23.5 Value 229 286 309 Oil Products Imports Value 33 39 49 Oil Products Re-exports Value 68 80 99 Remittances 363 348 403 Difference from pre-Gulf crisis - -86 +18 estimates Source: Based on information provided by the authorities and staff estimates. - 23 - 1.31 The second major impact of the Gulf crisis on the balance of payments was expected to work through the receipts from tea exports. Iraq has been a key purchaser of Sri Lankan tea, importing 12-15 percent of Sri Lanka's tea exports, and the imposition of sanctions on that country initially raised considerable fears that Sri Lanka would suffer a significant and immediate loss of tea export revenues. However, as Table 1.14 shows, the last five months of 1990 saw only a marginal drop of 4 percent in volume terms over the relatively good tea exports during the same period of 1989. Table 1.14: VOLUME OF TEA EXPORTS, AUGUST TO DECEMBER, AND ANNUAL 1988-1990 (in millions of Kilograms) Percentage Percentage Change Change Month 1988 1989 1990 1988-89 1989-1990 Five months 92.75 100.11 96.09 +7.9 -4.0 (Aug-Dec) 12-month Total 219.80 204.20 216.00 -7.1 5.8 To Middle East 137.70 119.00 136.00 -13.6 14.3 To Iraq 34.00 24.20 18.90 -28.8 -21.9 Source: Central Bank The tea exports volume actually rose from 204 million kilograms in 1989 to 216 million kilograms in 1990, reflecting the good performance prior to the start of the crisis. Further, the volume of annual tea exports to the Middle East rose from 119 million kilograms in 1989 to 136 million kilograms in 1990. Strong tea exports to the Middle East in 1990 before the start of the crisis and an increase in speculative tea purchases by non-Iraq Middle Eastern countries after the crisis started explain this seemingly unexpected outcome. Tea exports were further strengthened by an improvement in export prices, which rose from an average of Rs 75.57 per kilogram free on board (over the last five months of 1989) to Rs 91.56 per kilogram (over the same period of 1990). Thus, as Table 1.13 shows, the value of tea exports rose from US$380 million in 1989 to US$494 million in 1990. However, with speculative tea purchases in the Middle Eastern countries having subsided in 1991, export prices plunged to around Rs 50lkg. As the diminished tea imports by [raq have become a semi-permanent feature for the time being, the impact of the Gulf crisis on Sri Lanka's tea exports may be felt seriously from 1991. - 24 - 1.32 The third major impact of the Gulf crisis was its effect on migrant remittances. At the outset of the Gulf crisis, there were an estimated 96,000 Sri Lankan migrants in Kuwait and 500 in Iraq according to the Sri Lankan embassies in these countries; 73,000 of them returned after the start of the crisis. Of those returning, over 70 percent were housemaids (Table 1.15). Table 1.15: ESTIMATED BREAKDOWN BY SKILL CATEGORY OF SRI LANRKAN RETURN MIGRANT WORKERS PROM THE MIDDLE EAST Composition Skill Category of Gulf crisis induced return migrants Z share (Actual numbers) High Level 1.0 (730) Middle Level 3.0 (2,190) Skilled 15.0 (10,950) Unskilled (other than housemaids) 9.7 (7,100) Housemaids 71.3 (52,030) TOTAL 100.0 (73,000) Source: Sri Lanka Bureau of Foreign Employment (SLBFE) 1.33 Ironically, because many migrants, panic-:tricken, transferred large sums of money to Sri Lanka, the initial impact resulted in a US$45 million increase of private transfers in 1990 over the level of 1989. But, in the longer run, the return of the 73,000 migrants in 1990 means that there will be a smaller stock of workers abroad remitting income. Assuming that each migrant earned the minimum wage of US$100 per month and that approximately 75 percent of the wage was remittedV, this would translate into a loss in remittances of about US$70 million per year. This estimate is V The average remittance ratio of 75 percent represents a weighted mean of the remittances of all skill categories. The remittance of each skill category was derived from the study 'ILO/ARTEPt Impact of Out and Return Migration on Domestic Employment in Sri Lankat A Preliminary Analysis, 1985' and then weighted by the proportions in each skill category given in Table 1.15, above. Each skill category (referred to in this Paper) is also defined in the ILO/ARTEP study. - 25 _ on the low side, for the average wage or salary of a Sri Lankan in the Middle East is estimated to be well above US$100 per month. 1.34 At present, it does not appear that the 73,000 returnee migrants will be able to return early to the Middle East in the near future. In particular. Kuwaiti immigration controls regarding the re-employment of expatriate labor have been tightened after the war. Thus, the Sri Lankan Ministry of Labor (in collaboration with the ILO) is helping to re-integrate the returnees into Sri Lanka through counselling, or providing training. A promotion campaign is also being mounted to assist returnees to secure overseas employment in other regions including Europe and Eastern Asia. The impact of this addition of approximately 73,000 workers (1.2 percent of the labor force) on the labor market is not well understood. However, given that the majority of the returnees are young housemaids and that many have tended to be re-absorbed in their family structure, the immediate impact appears to be not as severe as in other countries (e.g. Egypt) whose migrant workers in the affected areas went back home to join the visibly unemployed labor force. 1.35 The Impact on the Budget. The direct fiscal burden incurred due to the return of the Gulf migrants was small in 1990. The Government paid Air Lanka a sum of Rs 250 million to cover the costs of flying the migrants back, a service which was provided free of charge to the returnees. In addition, the International Organization of Migration (IOM) assisted the Government with a grant of US$15 million to repatriate Sri Lankans working abroad. The Sri Lanka Bureau of Foreign Employment (SLBFE) estimates that it incurred a cost of about Rs 7 million between August 1990 and January 1091 in assisting in the returnees. The total budgetary cost in FY90 to the Government was, therefore, no more than Rs 260 million. In addition, in FY91, a sum of Rs 1.0 billion (about US$24 million) has been requested in the form of supplementaries, to cover the costs of rehabilitating these returnee migrants. A large part, if not all, of this sum could probably be met from ADB assistance amounting to US$19 million which is specifically designed to compensate for the impact of the Gulf crisis. 1.36 In 1991, however, the loss that the Ceylon Petroleum Corporation (CPC) incurred became a major cost to the economy. CPC bought crude oil at the height of the crisis when the oil price was at its peak (especially early 1991) and sold it later, at much lower prices both in export and domestic markets. The total loss to t.he budget thus incurred, during approximately the first four months of 1991, s around Rs 500-600 million (and projected to be Rs 900 million for the full year), although the total loss to the CPC so far in 1991 appears to be of the order of Rs 2 billion with the difference borne by increased bank credit to CPC (see Table 1.8). It is worthwhile pointing out that more than a half of the loss was due to the sale of oil products in the domestic market--if further price increases had been made to absorb the cost of the high oil prices in early 1991, the loss to the CPC would have been much smaller. - 26 - 2. The Agriculture Sector 1.37 Agriculture contributes about 24 percent of the GDP of Sri Lanka, and some 36 percent of the merchandise exports (1990), of which latter figure 89 percent is accounted for by three main export crops: tea, rubber and coconut. The growth record of the agriculture sector in the 1980s is mixed; although the sector achieved 4 percent annual growth rate between 1978-1986, it recently suffered two years (1987 and 1989) of negative growth. Important factors contributing to the recent marked variations in the performance of the sector are the civil disturbances in most parts of the country and fluctuating weather conditions. Taxes from export crops have plummeted from about 25 percent of total revenues in 1981 to 2.4 percent in 1990. Agriculture! employs 2.2 million persons (43 percent of the labor force) and is an important source of income for nearly 70 percent of the country's population who live in rural areas. Yet, recently, the amount of attention agriculture, in particular the non-tree crop sector, has received from policy makers has been limitedl to fragmented and piecemeal discussions at the project level. This section reviews the recent performance of the non-tree crop agriculture sector and policies taken, focussing primarily on paddy, and export crops as a background for future sector-wide strategy discussions for increasing export orientation of the sector. a) The Paddy Sector 1.38 Throughout the past, all successive governments in Sri Lanka have emphasized the expansion of domestic paddy production in order to achieve a number of objectivea. These objectives broadly involve ensuring national food security (self-sufficiency), creation of more eLiployment opportunities, enhancing farm household incomes and social welfare, and import substitution. With these goals in view, a wide range of interventions have been made! by all levels of governments covering many activities such as the supply of inputs and services, procurement and distribution, research and extension, institutional development, trade and imports. As reviewed below, near self- sufficiency in paddy production has been achieved since the mid-1980s. Growth in labor absorption, however, has been rather limited. Employment creation directly in agriculture or directly and indirectly in settlement (about 60,000 families under Mahaweli), still represents a fairly modest contribution to resolving the overall unemployment problem. 1.39 Production and Self-Sufficiency. Paddy production has increased markedly between 1960-90 rising from 0.62 million metric tons between 1960-62 to the average annual paddy output of 2.2 million metric tons between 1980-82, and to 2.4 million metric tons in 1988-90 (see Table 1.16 for summary since 1970). In contrast with a rapid increase in the early 1980s, production during the latter part of 1980s showed slower and highly variable annual growth. The highest level of paddy production was achieved in 1985 with 2.7 million metric tons. As a result, rice imports kept declining till 1984 when they reached the lowest level of 38 thousand metric tons (2 percent of domestic consumption). However, in subsequent years, output declined to a low point of 2.1 million metric tons in 1989 due mostly to the reduction in cultivated area because of the civil conflict and adverse weather conditions. _ 27 - Output again increased to 2.5 million metric tons in 1990, which is 5 percent lower than the peak production level in 1985. Table 1.16: SUYWAY TABLE OF PADDY PRODUCTION 1970-76 1977-86 1986 1987 1988 1989 1990 Output ('000 MT) 1378 2174 2688 2128 2477 2063 2638 Output growth (X) C.1 9.2 -2.7 -17.8 16.4 -16.7 28.0 Yield (Kg/he) 2628 8026 S60S 8564 8418 8374 3452 Yield growth (X) 1.1 6.4 1.0 1.8 -4.2 -1.1 2.3 Area gown ('000 h) 742 8s8 895 781 8s8 727 867 Area harvested ('000 he) 571 769 83S 679 816 690 828 Irrigated land ('000 ha) !/ 858 420 484 478 460 483 486 Farm gate price of paddy (Re/Bushel) k/ 27.0 69.9 82.3 86.7 88.8 118.3 168.2 Rice equiv. farm gate price (US$/MT) E/ 270.6 206.2 208.2 201.4 192.1 211.2 271.9 Rice Import c.i.f. pr7ce (USS/MT) d/ 184.1 22656 162.8 192.7 270.2 298.6 244.6 Ratio of formgato price to c.l.f. Import price 166.9 96.8 128.7 104.6 71.1 70.8 111.2 at official exchange rate The same as above at black market rate 79.1 80.2 113.0 NA NA NA NA Wage rate (Ru/day) !/ 7 27 S 60 es 73 80 Import of Rice ('000 MT) 886 198 281 118 210 818 172 Import of Wheat ('000 UT) 462 562 881 678 812 728 677 Labor Employed ('000) fl 795 882 957 988 1015 1044 1076 a/ Denotes asweddumized extsnt (rea bunded and leveled) under major and minor lrrigation. b/ Census and Statistics Department. c/ Bushel of paddy = 14 Kg of rice. a/ ARTI Data Bank. e/ Hmbantota District. f/ Estimates based on 1971 and 1981 Census data. Source: Department of Agriculture, Central Bank, Department of Census and Statistics, Staff estimates 1.40 Impressive output growth since 1976 refVects both area growth and yield growth. During the last three decades, area expansion contributed to about a third of output growth, and the remaining two-thirds has come from yield improvement. 1.41 Regarding sown area, government action to open up new land for settlement, and farmer decisions to undertake additional cultivation of their own land have both contributed to the increase in paddy land. The impetus for these actions has been the Government's preoccupation with rice self- sufficiency and higher labor absorption to reduce the country's unemployment rates. Sown area is also influenced greatly by the availability of irrigation. Between 1969-70 and now, the area levelled and bunded for paddy increased by 30 percent, from 564,000 ha to 738,000 ha. During the same period, the area under major and medium irrigation schemes increased by 69 percent (from 177,000 ha to 300,000 ha including 45,000 ha under the Mahaweli Program) and under minor schemes by 45 percent (from 161,000 ha to 235,000 ha). Reflecting primarily the improved irrigation facilities, the gross sown area under paddy shows a major increase from 759,000 ha in 1970 to 845,000 ha - 28 - in 1980. It reached a peak in 1984 with 990,000 ha and since then increased at a slower pace with wide annual fluctuations between years, due in part to the civil conflict situation. Cropping intensity remains low at 110-120 (gross sown area as a percent of bunded area--with two crops per year, the maximum potential intensity is 200) due primarily to insufficient irrigation water availability during the Yala season. 1.42 Growth in paddy ylields has been impressive. The first major increase occurred towards the end of the 1960s with the introduction of the green revolution technologies. From the mid-1970s, of about 2.3 tons/ha, there was a further substantial increase to 3.0 tons/ha in 1981 and a further increase to 3.4 tons/ha in 1988-90, with increased productivity being the dominant contributor to overall production growth. This reflects both technical progress and improved producer incentives. Technically, success in rice research and extension, and improved irrigation facilities and management have contributed to the increased yield. Adoption by farmers of high-yielding varieties (HYV) has not been a serious problem, consistent with the high level of education. By the mid-1980s, over 90 percent of the total sown area used HYVs. As discussed below, the liberalization of input and output markets since 1977, and the improved incentive and trading environment, including sharply increased availability of fertilizer to farmers, contributed even more significantly to the rapid expansion in the use of yield-increasing technologies. Since 1983, however, yields have been broadly stagnant. This is partly due to unfavorable weather and security conditions, but also in part because readily achievable increases associated with the accessible technological potential had been exploited. Further increase, therefore, would require heavy commitments of research and extension--a highly expensive proposition. 1.43 Another set of factors that contributed to the high paddy production is improved producer incentives. The 1977 liberalization of the domestic rice trade has had significantly positive effects on paddy production. Prior to 1977, rice marketing had technically been the monopoly of public sector agencies (though, in practice, they never controlled more than about a quarter of the trade). The Paddy Marketing Board (PMB) had sole responsibility for domestic procurement, and the Food Commissioner's Department (FCD) and Multi-Purpose Cooperative Societies (MPCS) were responsible for distribution at officially fixed prices which were determined in a highly politicized context. Furthermore, the farmgate prices were substantially below the import price evaluated at the blackmarket rates (Table 1.17). The market was then characterized by acute shortages, parallel pricing systems, and a general lack of responsiveness to market conditions. Liberalization led to a dramatic expansion of competitive private sector agents and institutions, some quite small; the efficiency and flexibility of market operations markedly increased, responding to shortages or surpluses as they occurred. Furthermore, marketing agents are now far more entrepreneurial, searching out opportunities for profitable innovation, production and intermediation. The liberalized and integrated markets have also allowed prices to reflect locational, seasonal and quality differences giving farmers added incentives to produce quality products. In addition, during the most of the mid-1980s, farmgate prices were above import prices, - 29 - giving increased incentives. The farmgate prices, however, fell below the import price in 1988 and 1989. This may have contributed partially to the recent poor performance (Diagram 1.3). Finally, it is still early to judge the impact of the fertilizer subsidy removal in January 1990 which doubled the end-user fertilizer prices. But, as small private operators dominate paddy production, the impact appears to be largest in this subsector--fertilizer use plummeted by 19 percent in 1990. Diagram 1.3 Paddy Output, YTeId, and RelatIve Price 2.6 2.7 2.8: 2.5- 2.4- 2.3- 2.23 2.1- I.9 I.E- 1.7_ Ile- 1.9 4.4 1.3 4.2 I.' 1373 73160 191D INI 1912 1983 1OM *186 096 *I67 1836 693 IND 0 R.lative priem + Yelld 0 Ou9&St j 11. KO) b) Alternative Food Crops: Crop Diversification 1.44 As Sri Lanka has reached near self sufficiency in rice production and cost of production of additional paddy is high, increasing emphasis is now being placed on the diversification of the mono-cropped system of paddy cultivation especially in irrigable lands in the dry zone. The crop diversification strategy largely involves the cultivation of: Ci) traditional field crops for domestic consumption; and (ii) non-traditional, high value crops for export. 1.45 Despite the high return to growing these crops relative to rice production especially during the Yala season (Table 1.17), the growth of these crop subsectors has been mixed at best due largely to the Government's long standing policy goal of attaining self-sufficiency in paddy production, often at the expense of other crops. The spice family, the largest sub group in the traditional export sector, fared badly over the 1982-89 period with the - 30 - exception of cinnamon whose export value skyrocketed in 1989. There has been little development of non-traditional agricultural exports with the exception of cut-flowers and foliage plants and a moderate success in growing gherkins. Table 1.17: FINANCIAL RETURNS - OTHER FIELD CROPS VERSUS PADDY a/ Net Return Per Ha Net Return Per Work-day Current Improved Current Improved Technology Technology Technology Technology (Rs) Maha Season (Rainfed) Chilies 15,900 20,400 63 77 Green Gram 7,700 10,100 SO 60 Cowpea 6,030 9,470 37 49 Groundnut 5,600 8,400 36 49 Haize 5,550 7,200 40 48 Black Gram 4,000 5,900 48 62 Soyabean 3,600 6,300 35 53 Sesame 3,500 4,600 44 51 Rice (Rainfed) 3,200 - 49 - Rice (Irrigated) 10,200 - 88 Yala Season (Irrigated) Red Onions 77,000 - 102 - Chilies 28,600 44,900 57 86 Groundnut 12,300 16,200 51 62 Green Gram 11,000 14,000 58 70 Black Gram 10,400 14,500 80 100 Rice 9,300 - 87 _ Soyabean 8,500 10,300 58 64 Cowpea 7,200 13,100 38 64 a/ Excluding labor costS, 1987 prices used. Source: Data from the Department of Agriculture, Peradeniya 1.46 Traditional Field Crops include a wide range of seasonal food crops which are grown in scattered, small holdings mostly as subsistence crops such as: pulses (green gram, black gram, cowpea); oil seeds (gingerly, groundnut and soyabean); condiments (chilies, onions, ginger and turmeric); roots and tubers (potato, sweet potato and manioc) and vegetables. The area under the cultivation of these food crops and their output show wide year to year fluctuation. This is because the local market is narrow and uncertain (consumers prefer rice and wheat bread, and only when the rice and bread supply is not adequate, the demand for other field crop increases) and prices - 31 - can, therefore, be highly variable--farmers thus tend to minimize their production. The more important causes for this poor situation is the high priority accorded to rice production--research, extension and marketing services for non-rice crops have been largely neglected. The effort to cultivate traditional field crops in irrigable paddy lands in the dry zone during Yala season has also failed as irrigation management prefers to favor paddy-growers and tend to ignore the need of other crop growers. Furthermore, policies to protect consumers, such as occasional export bans on coconut meals (which have hurt the oil seed growers) and CWE's monopoly importer position of chilies and onions discourage farmer's investment in these crops while the subsidized sugar industry in the past tended to give incentives to farmers to grow sugar cane even if, without subsidies, ither crops might provide higher returns. As a consequence, their yields have remained virtually static over the past 15-20 years. 1.47 Non-Traditional Export Crops. Expansion of high value perishable crops for exporting to high income markets is a relatively recent activity receiving growing attention in Sri Lanka. The commodities concerned are fresh fruits, vegetables, foliage plants and flowers, which are in high demand in the more affluent economies. The comparative advantage for producing these crops in Sri Lanka is mainly due to its geographic location, favorable climatic conditions and availability of good quality low cost labor. Export value of cut-flowers and foliage plants climbed to Rs 117 million (about US$4 million) in 1987, the latest year when separate data for these items is available, with an average annual growth rate of 13 percent over the 1982-87 period. The growth rate for fresh fruits and vegatables was a mere 1.3 percent a.id major effort has been centered around the marketing of fresh fruits to traditional markets, e.g., the Maldives and Middle East countries and the production and marketing of semi-processed gherkins for the Australian and EEC markets. The total value of fresh and processed fruit and vegetable exports in 1990 came to approximately Rs 418 million (about US$10 million), FOB, including Rs 224 million reported for gherkin exports. 1.48 Production of these non-traditional crops is associated with high managerial competence and production skills. It also requires highly specific processing and storage facilities including refrigerated storage and transport equipment and up-to-date information on and close integration with markets in the affluent economies. Although the potential for expanding this category of crops appear to be promising, many problems have acted as constraints for developing this activity in the recent past. These problems include: lack of research and development efforts; unavailability of unsecured finance for these new investments with some gestation periods; insufficient transfer of technology on post-harvest technology, which is critical but may come with only direct foreign equity participation. In addition, the restriction that no private Individual can own a piece of land larger than 50 acres has been a major impediment to the development of export crops which often requires large scale operations. Finally, as also discussed above on traditional crops, a dominating problem has been bias towards rice production--such as difficulty in converting paddy land into other crop cultivation. More even regulatory and incentive framework will be needed so that farmers will be free to choose crops aco.ording to their returns. - 32 - 1.49 Diversification in Perspective. Diversification in agriculture should essentially depend on private sector investment. The Government's policy in encouraging private investments in manufacturing should be applied in agriculture as well. Namely, the Government should be eliminating bureaucratic impediments (including official floor prices and paddy-biased policies) and creating a liberalized environment for investors. In this regard, as discussed above, the ban to convert paddy land to other use should be lifted. The ban on private land ownership exceeding 50 acres should also be lifted. Furthermore, insecurity and confusion in legal land tenure (many people claiming ownership of the same plot of land) for about 20 percent of the country's cultivated area has been a serious impediment in farm development and require urgent attention by the Government. In addition, irrigation management practices should be established to respond to the requirements of the diversified crops (rather than only for paddy farmers), preferably managed by farmer organizations. At the same time, considering that many of the non-paddy crops are exportable, the economy-wide biases against tradeable goods should continue to be removed primarily through flexible adjustment of exchange rate and encouraging open competition by all private agents including foreigners. Finally, as development of the export crops sector requires a large amount of foreign investment, discussion in Chapter II of the institutional framework for foreign investment promotion is highly relevant. c) Impact of the Civil Conflict on Agriculture 1.50 In this section some very broad estimates of the impact of the civil conflict on agricultural production are made. A brief look at defense expenditures and the refugee situation appears in paras. 1.57-1.61. 1.51 Paddy. Since 1983, the conflict with the Liberation Tigers of Tamil Eelam (LTTE) has hampered some paddy production, chiefly in the North and East. In making an estimate of its impact on production, however, we have to try to separate the role of the civil conflict and that of other factors, notably weather, for this purpose. As a first step, we have focussed on the gross extent sown in each district in the North and East, as this would be a good proxy for the investment decisions of farmers and most likely to be influenced by considerations of civil unrest. Table 1.18 shows the gross extent sown during the Maha and Yala seasonS1 from 1980/81 to 1989/90 in each of the (currently) five northernY and three eastern districts. Due to the simplifying assumptions employed, however, this estimate must be regarded as approximate. V The Maha season runs from September/October (when sowing occurs) to March/April (when the crop is harvested). The Yala season runs from April/May (when sowing occurs) to August/September (when the crop is harvested). V The Killinochchi District was carved out of the Jaffna District in the mid-1980s. Table 1.18(a): PADY SECTOR - GROSS EXTENT SOW (HECTARES) DURIN¢ TlE MMVI SEASON - 196/81 TO 16990 Year/District 1980J81 1981/82 1982/83 1983/84 1984/86 1985/88 1988/87 1987/88 1988/89 1989/90 NORTHERN Jaffna 31,944 s 31,716 * 81,877 * 31,768 * 11,054 10,877 10,567 11,032 10,504 11,189 Killinochchi .. .. 18,580 18,367 18,210 19,188 20,3e8 19,023 Vavuniya 16,642 13,594 14,513 14,988 11,761 8,487 4,894 7,090 3,119 3,274 Mullaitivu 13,713 13,934 13,642 13,709 9,453 8,324 8,031 6,728 4,551 7,133 Mannar 16,442 16,038 16,976 14,503 13,141 14,166 14,630 13,411 6,971 8,227 Sub-Total 76,841 75,280 77,007 74,958 63,979 60,210 54,322 67,425 45,513 48,848 EASTERN TrincoIalm 28,305 27,788 33,084 35,407 29,898 16,588 11,148 12,934 8,093 13,548 Batticalom 43,488 45,842 45,118 47,461 38,170 33,279 29,854 29,864 23,104 38,332 Asparai 48,873 47,624 49,358 50,239 45,223 46,617 47,974 61,333 60,410 53,308 Sub-Total 120,668 121,254 127,558 133,097 113,289 98,482 88,778 93,931 81,807 105,188 TOTAL 197,307 198,634 204,565 208,065 177,268 158,892 143,098 161,358 127,120 164,032 Table 1.18(b): PADDY SECTOR - GROSS EXTENT SON (HECTARES) DURING TIE YALA SEASMN, 1961 TO 1990 Year/District 1981 1982 1983 194 1985 1986 1987 1988 1989 1990 NORTHERN Jatfna 101 7,138 6,852 - - - - - - - Killinochchi - - - 7,721 6,895 7,768 182 2,079 176 176 Vavuniya 165 358 218 4,514 150 1,447 79 372 - - Mullaitivu 545 1,425 1,817 3,622 1,104- 3,O07 327- 819- 245- 246 Mannar 106 112 238 825 393 38e 72 861 12 12 Sub-Total 917 9,033 8,926 16,582 7,342 12,628 860 3,921 432 432 EASTERN Trincomalee 11,251 8,324 11,250 16,022 11,139 6,219 4,458 9,044 4,179 4,000 Batticaloa 10,246 8,899 11,066 12,097 11,053 14,267 14,774 8,414 15,124 14,400 Amparai 24,178 26,126 31,884 38,594 36,693 43,489 46,190 42,308 39,641 47,493 Sub-Total 45,676 42,349 63,979 88,713 68,786 82,985 86,420 69,784 68,844 65,893 TOTAL 48,692 51,382 62,904 83,295 68,127 75,693 68,080 83,688 69,276 66,326 --------------------------------------------------------------------__-------__--------------------------------- - tncitJdis Ki 11 *occhchi . - 34 - 1.52 To isolate the weather factors from the overall security context in influencing production, the Maha 1982/83 season can be taken as representative year unhampered by poc. weather. We also assume that both yield and ratio of harvested areas to sown areas are purely a function of weather. By multiplying the actual sown area in each Maha season with the 1982/83 Maha yield, and the harvested to sown area ratio of the same season, the potential production levels can be obtained. These are the levels which would have been reached with the same weather conditions as in Maha 1982/83 but which have been curtailed due to the poor security conditions, and therefore, lesser extent sown. The imputed Maha production thus derived during the period 1983/84 to 1989/90 comes to approximately 1.2 million metric tons for the northern districts, 2.6 million metric tons for the eastern districts. 1.53 The difference between these imputed levels of production and the potential maximum Maha production (with regular weather and no civil conflict, i.e., 1982/83 Maha production) represents the imputed loss in Maha production in the North and East during the period 1984/85 to 1989/90 due to the poor security situation. This comes to approximately 948 thousand metric tons altogether (Table 1.19). Table 1.19: PADDY - IMPUTED LOSS IN PRODUCTION IN THE NORTH AND EAST: MAHA SEASON (1984/85 - 1989/90) (in metric tons) Districts Potential Maximum Imputed Imputed Loss Production Production in Production Northern 1,395,753 996,351 399,402 Eastern 2,699,666 2,150,684 548,982 Total (Northern & Eastern) 4,095,419 3,147,036 948,384 Source: Staff Estimates. 1.54 A similar exercise was carried out for Yala production taking 1982 Yala yield and 1983-84 sown area as representative. The imputed loss in Yala production in the North and East during the period 1985 to 1990 due to the poor security position comes to approximately 375 thousand metric tons altogether (Table 1.20). By valuing the sum of Maha and Yala losses at a 1990 - 35 - average sarmgate price of paddy (Rs 7639/metric ton), the simple undiscounted sum of losses in paddy production due to poor security conditions over the period 1983/84 to 1990 comes to approximately Rs 3.2 billion (at 1990 prices) in the northern districts, and Rs 6.9 billion in the eastern districts. This represents a total of Rs 10.1 billion or just over 3 percent of 1990 GDP at current factor cost. Table 1.20: PADDY - IMPUTED LOSS IN PRODUCTION IN THE NORTH AND EAST: YALA SEASON (1985-1990) (in metric tons) Districts Potential Maximum Imputed Imputed Loss Production Production in Production Northern 132,448 111,196 21,252 Eastern 1,952,222 1,598,184 354,038 Total (Northern & Eastern) 2,084,670 1,709,380 375,290 Source: Staff Estimates. 1.55 Tea. As regards other agricultural crops, minor food crops rubber and coconut were largely unaffected by both the conflict in the North and East and the JVP insurgency of 1988/89. Thus, apart from paddy, the major crop that was affected was tea, and this was largely the result of the JVP insurgency of 1988/89. 1.56 Work stoppages due to the JVP insurgency chiefly in the Southern Province disrupted tea production during the last quarter of 1988. It is estimated that at least eleven million kilograms of made tea were lost during this period from low grown areas alone./ Although work was resumed in most estates, by early 1989, the effects of the work stoppages in late 1988 continued into 1989. This is because when tea bushes are left unharvested a large portion of output can be lost. This resulted in a low-grown crop loss of about additional five million kilograms. Work stoppages occurred again in late 1989 resulting in lost production of 1.8 to 2.3 million kilograms of made tea. It is also estimated that altogether about one million kilograms of made tea were burnt and destroyed in factories during 1989. The total loss, v Forbes & Walker Ltds 'Supplement to Weekly Tea Market Report, Sale No.1, 3rd January 1989", pages 1-3. - 36 - therefore, appears to bL around 19-20 million kilograms in 1990 prices yielding a total value of Re 1.5 billion (at Rs 77.3/kg). 3. Civil Conflict. Defense Expenditures and RefuRee Issues a) The Evolution of Actual Defense Expenditure 1.57 Table 1.21 shows the evolution of the defense expenditure as functionally (army, navy and air force) and economically classified (adjusted for non-defense expenditures of the Ministry of Defense and other defense related expenditures--mostly police) in relation to GDP at current market prices from 1984 to 1992. Table 1.21: EVOLUTION OF DEFENSE EXPENDITURES --------------------------------------------------------__-------------------__-------------------------. 1984 1985 1986 1987 1988 1989 1990 1991 19W. Budgot Army - - - - 2683 2463 4801 4429 7024 Navy - - - - 971 749 1070 1259 1674 Air Force - - - - 1367 905 1586 1390 1868 Total VJ 1274 4814 4351 6001 4891 4117 6907 7078 10466 o/w wages and salaries 334 498 767 1048 1034 2228 2407 3776 - Police - - - - 1805 1690 2406 3294 4643 ministry (non-civil) Administration - - - - 1694 2688 4644 1022 961 Supplomentary t/ 6000 Total O - - - - 8190 8446 18958 18394 16980 Percont of GVr Total V/ 0.8 2.8 2.4 8.1 2.2 1.8 2.2 1.9 2.4 Total V - . - - 8.7 8.4 4.8 4.8 8.6 Percent of Total Current Expenditure Total 1/ 1.2 14.1 12.8 16.2 10.6 7.2 7.8 2.7 12.4 o/W wages 1.4 1.6 2.2 2.6 2.2 8.9 3.4 4.7 - Total J - - - - 17.8 14.8 19.4 20.2 18.9 Defens woge as e porcent of total Government wagoo and salaries 8.0 6.8 9.4 18.0 10.8 16.4 16.8 19.6 - 1/ Functional classification of defense expenditures (Navy, Army and Air Forceo only) 2/ Economic classlfletion of defense oxpendituros (Navy, Army, Air Force, Polleo and Non-clvll Administration of the Deftneo MInltry) 3/ Allocation Into difforent Items of 1991 suppleontary ti not yet known. Soureo: Central Bank and the Treasury - 37 - 1.58 Defense expenditures increased after 1983 when the civil conflict erupted, and it started to decline marginally in 1988 and 1989. But, with the renewed hostility in 1990, after a 14-month truce with the Tamil separatists, defense expenditures started to increase again, and during the last two years they have reached 4.3 percent of GDP (about an average of the developing countries). Of particular concern is the rapid Increase in non-civilian recruitments implied by levels of wages and salaries: the wage and salary component of defense expenditures increased from 1.4 percent of current expenditures in 1984 to the level about 4 percent in the last two years, or more conspicuously the ratio of defense wages to the total Government wages went up from 6 percent to 20 percent during the same period. TogetLer with the fact that a large portion of the Ministry administration outlays is wages and salaries, this means that both the number of recruits in both the armed services and non-civil administration services is increasing rapidly, and in the event of peace being established in the country, substantial and immediate cutback in defense expenditure cannot easily be achieved as it would mean retrenching. b) Refugees 1.59 About 400,000 families have been directly affected by the civil conflict as of September 1, 1991 (Table 1.22). Details of the number of people affected as of this date are not available. However, assuming that the average family size is approximately four, the number of people affected would be of the order of 1.7 million. Table 1.22: tIMDER OF FAMILIES DIRECTLY AFFECTED BY THE CIVIL CONFLICT AS OF SEPTEMBER 1, 1991 Location and Status of Affliction No. of Families In Welfare Centers 58,718 Outside Welfare Centers (with friends and relatives) 94,224 Economically Affected 276,766 All Locations 429,708 Sourcet Office of the Commissioner General of Essential Services - 38 - 1.60 Table 1.23 gives the budgetary allocations on refugees during the first seven months of 1991. The total comes to approximately Rs 2 billion. Assuming that the same rate and pattern of expenditure is maintained during the remainder of this year, the cost should be about Rs 3.5 billion during fiscal year 1991, or about 1 percent of estimated 1991 GDP at current market prices. Table 1.23: EXPENDITURES ON REFUGEES (JANUARY 1 TO JULY 31, 1991) (in Rs. milliont) Actual Allocation to GAs: 1.358 Allocated to the Ministry of Reconstruction, Rehabilitation & Social Welfare 672 Total 2,030 Source: Office of the Commissioner General of Essential Services 1.61 It also appears that allocations for refugees are poorly targeted and there is some overlap between the distribution of food stamps and allocations to refugees. Although food assistance to displaced families living outside welfare centers was to have ceased by the end of July, this was continued due to humanitarian considerations. Thus, the Government needs to review continuously the process of allocating these outlays to minimize wastage and leakage. - 39 - CHAPTER II. TOWARDS A GROWTH-ORIENTED POLICY PACKAGE 1e Introduction 2.1 As discussed in Chapter I. the Government embarked on a major stabilization-cum-adjustment program in mid-1989, in the face of mounting economic and financial difficulties: slow economic growth, an unsustainable fiscal deficit, costly and inefficient welfare programs, an overextended public sector, eroded external competitiveness accompanying a depletion of foreign exchange reserves, and a private sector unwilling to invest. The task of putting the economy back on track was not easy. Well aware of the challenge, the Government outlined in the annual Policy Framework Papers reforms required in four areas: (i) macroeconomic stabilization, Cii) public sector rationalization, (iii) private sector development, and (iv) welfare program restructuring. 2.2 The Government is now in the midst of its medium term adjustment effort, with encouraging initial results. On the macroeconomic stabilization front, measures taken have led to an improvement in the financial situation in 1990/1991; foreign exchange reserves rebounded to over two months' worth of imports notwithstanding the Gulf crisis. In 1990, the Government met the fiscal targets of the program supported by the IMF, despite the difficulties associated with restructuring the economy and the military and refugee-related expenditures. In this process, major food and energy subsidies have been removed. Although the Government has been successful in addressing the most crucial stabilization issues, this has had a cost. The improvement in the overall budgetary deficit has been achieved at the expense of the investment program which bore the brunt of fiscal adjustment. At the same time, keeping a fixed nominal exchange rate throughout 1990 and most of 1991 has caused erosion in the country's external competitiveness. Although the Government should continue making every effort to reduce recurrent expenditures, there mzay not be much latitude for restraining public consumption in the short-term. This, therefore, underscores the importance of wage restraint and, in close consultation with IMP, using the exchange rate policy as a complementary means of macroeconomic adjustment as well as enhancing competitiveness. 2.3 Without a comprehensive public sector rationalization policy, stabilization efforts cannot be sustained in the medium-term. About 8 percent of the country's total population are employed by the public sector. The public sector controls a wide range of activities from manufacturing to trade, banking and Insurance. The Government has already started the process of public sector rationalization. First, it reduced the size of the civil service by about 10 percent (or 40,000) and the number of ministries. Nonetheless, Sri l.anksn public administration still remains large and inefficient. The Governmenit will need to continue addressing the issues of public sector employment and wage policy, with a view to reducing the civil service uize, while enhancing its quality. Second, the Government has so far - 40 - divested eleven public enterprises out of about 48 PEs--designated for immediate privatization--some of which, like Ceylon Fertilizer Corporation and Cooperative Wholesale Establishment, play a dominant role in their respective subsectors. Although the large public sector bus company was converted to 80 commercially-oriented "peoplized" companies, the Government has yet to severe its financial ties with the newly privatized bus companies. The Government also needs to accord greater autonomy to corporations remaining under its purview. Thus, private sector management and ownership have, still, to be introduced in the bulk of the pervasive public enterprise sector. Third, the Government has initiated a process to prepare and adopt an Action Plan to restructure and privatize the management of state-owned treecrops plantations which employ about half a million people. It has, however, yet to address the issues of ownership privatization, wage policy, and labor mobility. 2.4 In a country long dominated by socialist tradition, private sector development will not be easy. Yet, this would be the only way for Sri Lanka to achieve its goal in the longer run to join the rank of 'newly industrialized countries". Sri Lanka has undertaken trade policy reforms well ahead of many other developing countries. As a result, there are relatively few trade related distortions hurting the overall incentive framework. The Government has now to address more entrenched issues of bureaucratic procedures, a cumbersome legislation, and deterrent labor laws and regulations. Irn addition, the foreign investment regime needs to be reviewed in order to make it more transparent and non-discretionary. 2.5 When the new Government came to power in 1989, it proposed ambitious and financially unsustainable welfare programs to deal with perceived social needs. The Government has made considerable progress in restructuring welfare programs since then. It started to improve their effectiveness--both in terms of fiscal cost and coverage of the truly needy-- through improved targeting and/or design. In this process, the country's districts have been regrouped into 11 units, and the Jana Saviya (poverty alleviation) Program (JSP) has been implemented in one or two units at a time thereby spreading the cost over a longer time horizon. The number of second round beneficiaries has also been reduced by about 40 percent and its production orientation has been increased. Similarly, the number of food stamp recipient families has been nearly halved. While these measures represent significant improvements, there exists strong political pressures to increase the coverage and the consumption orientation of these welfare programs. Also, although the cost of the Mid-Day Meal Program (MDMP) has been reduced, it has not at all been an effective means of addressing the nutritional needs of those at risk. 2.6 This Chapter reviews the actions taken and their results in these four policy areas. In the light of the issues still outstanding, it outlines the measures that would be needed for Sri Lanka to sustain its reform program and maintain the economy on a high growth path. - 41 - 2. Macroecon mic Management for Enhanced Export Orientation 2.3 The Government achieved most of the PFP targets in 1990 through a pronounced tightening of both fiscal and monetary policies. The Government, however, relaxed its grip on tight macroeconomic management in 1991 because of high security-related expenditures and significant cost of public sector workers' severance packages. As a result, fiscal deficit appears to have exceeded the target by nearly one percentage point of GDP, a situation the Government is trying to reverse in 1992. In addition, there are at least two emerging worrisome signs in the pattern of macroeconomic development. one is the pattern of investment: overall investment in real terms has stagneted since the mid-1980s with public investment falling sharply; and within private investment an increasing proportion appears to have gone into housing in 1990. These are partially due to the bias in the economy towards consumption because of the Government's high recurrent expenditures. The other aspect is that, measured either by the trends in real effective exchange rate or by unit labor costs, the economy's external competitiveness has been eroding. a) Evolution of Investments and Savings 2.4 If Sri Lanka is to eventually join the ranks of newly industrialized countries (NIC), efficient capital accumulation needs to take place primarily driven by private investments. The key role of public investments is to provide infrastructure that complements private activities, and as such, a careful and continuous review is necessary as to the selection of public investments lest they crowd out private investors. Successful Asian countries, such as Malaysia, Thailand and Korea, invested 25-30 percent of their GDP during periods of sustained growth with the private sector investing a little less than 20 percent and the public sector somewhere close to 10 percent. Investment in Sri Lanka as a share of GDP compares unfavorably with them. First of all the share of investment in GDP has been on the decline throughout the decade (Table 2.1)L. The share of total investment in GDP stood at about 21 percent of GDP in 1988-90. Although Sri Lanka went through a period (1980-83) when it invested 30 percent of GDP, a significant portion of this was large public investment in the Mahaweli River Scheme, which unfortunately turned out to have very low returns. In addition, real investments have more or less stagnated since the mid-1980s and have in fact declined over the last two years (Table 2.2). This stagnating investment has been caused primarily by falling public investment, due in the mid-1980s, to completion of various large projects under the Mahaweli River Scheme. More pronounced decline in public investment occurred in 1989 and 1990 when the stabilization and restructuring program got under way; public investments were suppressed to achieve the goal of stabilization and infrastructural investments, which complements private investments, were also suppressed. Because the quality of infrastructural services affects the cost of doing business and therefore is an important consideration for private productive O Table 2.1 is in constant prices to emphasize the higher increase in the investment deflator than that of the GDP deflator. - 42 - investors, it can be conjectured that this reduced infrastructural investment as well as inadequate operation and maintenance (O&M) efforts for existing assets (although evidence in this regard is anecdotal it consistently indicates that expenditures on O&M have been far from adequate) has adversely affected the Government's efforts to promote private investment. 2.5 The past evolution of private investment also underscores the importance of political stability and credibility of announced policy intentions. The public investment spurt in 1978-83 was accompanied by high private investments of about 15 percent of GDP given the optimism that prevailed then. But the private investments declined from 1983 when the civil conflict started due to the Tamil separatists' move and stayed at the low level of around 10 percent of GDP, reaching its nadir in 1988 when the JVP insurgency engulfed the nation and political uncertainties prevailed due to the Presidential election. Throughout the middle of the 1980s a continued high level of political uncertainty was exacerbated by inconsistent and unsustainable macroeconomic management, as represented by the high fiscal and balance of payments deficits and appreciating real exchange rates. Many potential investors perceived that, even when there were signs of political stability, it was highly likely that political conditions would suddenly Table 2.1s PUBLIC AND PRIVATE INVESTMENT, SELECTED YEARS (As percent of GDP, 1982 prices) 1982 1984 1985 1986 1989 1990 Private Investment a/ 14.7 13.2 10.6 10.4 13.1 14.7 Public Investment a/ 16.0 14.5 13.1 14.2 7.8 5.7 Total Investment 30.7 27.7 23.8 24.6 20.9 20.4 a/ Budgetary capital transfers to public corporations were excluded from private investment and included in public investment. Source: Central Bank Annual Reports and Mission estimates. deteriorate or that the Government would reverse its policy commitment. They, therefore, refrained from making irreversible decisions to invest in physical assets. Only in 1989 with the start of the stabilization program supported by multilateral financial institutions, and improvement in the civil situation in most of the country, did private investment begin to bounce back to the level achieved during the early 1980s. If experiences of successful NICs are of any relevance, the private sector in the medium-term should invest several - 43 - percentage points more than the current level, i.e. a total of about 18 percent of GDP. 1-2 percent of GDP of this increase may be coming forth as foreign direct investment if appropriate policy to promote foreign investr,ents is successfully implemented and if political stability is maintained in the medium-term. There is, however, an immediate concern; even in an environment of increasing private investments, the increasing private investments appears to be tilted toward residential buildings--its share of the total private investment has increased from 25 percent in 1982 to 35 percent in the second half of the 1980s (Table 2.3) and also, as discussed in Chapter I, the share of housing credit in total commercial bank credit is increasing very rapidly .9' 2.6 As the Government's objectives are to sustain growth by increasing private investments in areas that produce exportable goods and efficient import substitutes, all of these three areas: low and stagnating real investment; plummeting public investments and, especially, resulting deterioration of quality of infrastructural services; and private investments that appear to be tilted in favor of real estate investment pose a significant concern as to whether structural adjustment of the economy is headed into the right direction. Table 2.2: GROWTH RATE OF REAL INVESTMENT Total 1989 1990 Change 1988-1990 Investment (in 1988 prices deflator = WPI of investment goods) -5.6 -4.6 -9.9 Investment (in 1988 prices deflator = Implicit Investment Deflator) -6.7 +2.1 -4.7 S In 1990, preliminary investment data indicates that residential construction is continuing its rapid growth. But as investmeent in transport equipment (cars and buses) almost doubled nominally, the share in private investment appears to have come down slightly. - 44 - Table 2.3: COMPOSITION OF PRIVATE FIXED INVESTMENT, SELECTED YEARS (As percent of investment, current prices) 1982 1985 1989 Residential Buildings 25.3 31.7 34.8 Other Construction 13.0 16.3 17.9 Machinery and Equipment 47.7 48.3 40.4 Land Development 14.0 3.7 6.9 Source: National Accounts of Sri Lanka, 1989, Department of Census and Statistics. 2.7 Part of the cause of these investment patterns lies in inadequate domestic savings. Limited domestic savings, when foreign financing is limited, would constrain investment, and at the same time higher consumption tends to push up prices of (and profits of producing) consumable goods and services (which are usually not exported). Thus, not only the total investments would be limited but also investments would be steered away from production of exportables or efficient import substitutes. During the 1982-89 period, the average domestic saving rate in Sri Lanka was less than 12 percent of GDP, whereas those of some East Asian countries in the seventies (the period during which some of these countries had income levels similar to that of Sri Lanka today) were well abo're 20 percent led by high private savings which alone averaged around 20 percent of GDP. In Sri Lanka, private domestic savings reached almost 16 percent of GDP in 1990 (Table 2.4). Although shy of the level attained in NICs, it is the highest ever for Sri Lanka and it may not be easy to increase this rate much more in the immediate future. Table 2.4, DOMESTIC SAVINGS, SELECTED YEARS (Percentage of GDP, current prices) 1982 1984 19&6 1989 1990 1991 Private Savings 10.4 16.1 10.2 13.3 15.8 n.a. Government Savings 11 1.4 3.8 1.8 -1.2 -1.2 -1.5 Domestic Savings 11.8 19.9 12.0 12.6 14.6 n.a. 1/ Defined as current surplus/deficit Source: Central Bank Annual Reports. - 45 - 2.8 The public savings (current surplus), on the other hand, have been negative since 1988 and have been a major cause of declining public investments and increased consumption-bias in the economy. The average dissavings by the Government during 1988-90 was 1.5 percent of GDP, and in 1991 it is expected to be 1.5 percent of GDP (comparable figures for Thailand and Korea were positive savings of about 3 percent and 6-10 percent for Malaysia). Government consumption was kept at over 10 percent of GDP (in 1982 prices), even in 1990 when the Government undertook its most credible stabilization measures. A primary reason the historically positive current surplus turned negative recently is the increase in welfare payments from 1 percent of GDP to above 3 percent from 1989. (In 1988, revenue shortfalls due to civil conflict, and additional expenditures due to Government wage increases also contributed to the negative savings.) Added to the cost of welfare programs in 1991 are security expenditures and pension payments--the latter of which is estimated to reach about 2 percent of GDP primarily due to the generous retirement package awarded under the special voluntary retirement scheme in 1990. It should be noted that because many of the retirees started receiving 90 percent of their 1990 wages in 1991, the net fiscal saving of the massive 1990 retrenchment of civil servants will materialize very slowly. It is also critical that the Government make sure that the positions vacated in 1990 be eliminated. If the positions were refilled, the retrenchment would end up costing the Government more in terms of the sum of wages and pension payments. 2.9 Considering the difficulties associated with controlling defense- related expendituresn1 and interest payments, and the fact that current transfers to public corporations are already at a relatively low level, adjustment on the budgetary front will have to come from a reduction in the wage bill through conservative wage policy and continued reduction in the Government size, a reduction in the future pension bill through reforming the pension scheme, and better targeting and rationalization of welfare expenditures. 2.10 Government wage and employment policy is an important instrument in macroeconomic management. On wages, there are at least two reasons. One is that wages and salaries comprise almost 40 percent of the Government's non- interest recurrent expenditures and, therefore, their level affects fiscal management significantly. In particular, as pointed out by the Administrative Reforms Committee (ARC), the public sector's emolument structure at the lower level is highly competitive with the organized private sector (while at higher levels, the salaries are not at all competitive), it is important that the policy on public sector wages, which largely consist of lower level workers' emolunments, be conservative. The other reason the public sector wage policy is important in Sri Lanka is because public sector wages comprise "wage ly Especially because wage data show that security related personnel appears to be increasing in size rapidly, (para. 1.55) even when peace comes, imnediate cut backs of a large portion of security expenditures will be difficult, because it involves retrenchment. - 46 - leadership" for about two-thirds of the wage earning population who are either under the Wages Board (a system of tripartite wage determination among employers, employees and the Labor Ministry) or a bi-partite collective bargaining arrangement. Thus, a policy of conservative wage increases in the public sector could also limit the growth of wages in a large segment of the private sector helping reduce the economy-wide consumption-bias provided tight macroeconomic management is maintained. At the same time, it is important that workers receive wages warranted by an increase in productivity. The Government should, therefore, use the existing institution of wage determination in the productive sectors to keep real wage increases at most commensurate with productivity growth as many East Asian industrialized countries succeeded in doing. At the same time, it is important thet the Government continues to adopt an employment policy to (i) reduce the overall size of the public sector employment; and (ii) make the recruttment and promotion purely based on merit, as discussed in paras. 2.19-2.27. 2.11 Regarding the pension scheme, its generous benefits in terms of retirement age, accrual rates and proportion of final salary being paid are causing its fiscal burden to snowball rapidly. A study based on an actuarial evaluation of future likely costs is underway to establish a detailed action plan to reduce its cost while maintaining essential benefits of the scheme. The direction in which ihe Government should be considering moving is to have a funded pension scheme with benefits partially protected against erosion by inflation. It is critical for fiscal soundness that the Government firmly comiits itself to reforming its pension scheme--the first urgently needed step is to repeal immediately the 1990 ordinance to increase arbitrarily the pension benefits to give civil servants a strong incentive to retire voluntarily. 2.12 Finally, restructuring of the poverty programs should continue. While the Government has succeeded in containing the cost of these programs, in particular those added as part of the 1988 election campaign, and prevented a fiscal disaster, it is now spending three times the earlier level in terms of GDP percentage points on income transfers. As discussed later (paras. 2.79-2.84), the major poverty programs need to be further targeted so leakage be minimized and the program effectiveness to reach the poor be maximized. In particular, the mid-day meal program suffers from fundamental targeting problems, and should be replaced by a targeted nutrition intervention program for pre-schoolers, who are nutritionally much more at risk than all the school age children that are current benefictaries. b) Evolution of External Competitiveness 2.13 As discussed in Chapter I, inflation exceeded 20 percent in 1990 at a time when the nominal exchange rate was fixed at Rs 40 per US dollar. The exchange rate thus appreciated about 20 percent in real terms between the third quarter of 1989 when the rupee was devalued by 16 percent and July 1991. When viewed against the fact that many competitors of Sri Lanka have been adjusting their exchange rates to maintain export competitiveness, Sri Lanka's real appreciation stands out conspicuously (Diagram 2.1). The recent devaluation in India in particular may have a signific.nt impact on Sri Lankan - 47 - exports if no major corrective action is taken. According to private entrepreneurs, the real appreciation of the Sri Lankan rupee has particularly hurt exporters of goods with high value added or high domestic input content (a large portion of Pother" agricultural and industrial exports which is about 15 percent of 1990 merchandise exports) because wages and local input prices have risen much faster than internationally given output prices. Indeed, results of a survey of representative exporters indicate that about 20 percent of them are affected seriously by the appreciating real exchange rate (Annex 2). Partly because the size of non-traditional exports relatively sonsitive to the movement of the real effective exchange rate is still small, the real appreciation was allowed to take place for a much longer period than justified for the reason of purely controlling inflation. It should be recognized that the cost of such an exchange rate policy is the exports that did not take place. Had the exchange rate been more competitive, non- traditional exports with high local input contents (and, therefore, a relatively high rate of job creation) could have grown much more--the chemical product exports (activated carbon, soap and glycerine) which suffered a negative growth in 1990 are a case in point. Diagram 2.1 Real Effective Exchange Pate 1989-1991 '130 120- *100 t~~~~~~~~~~~~~~~~~~~~O0 , sD.elh (.) PhilIippints 70 Indio Go I9' tO gjs. * 90.1 931.7 - 48 - 2.14 A measure of international competitiveness is also provided by movements in unit labor costs adjusted for productivity changes vis-a-vis export prices. This is because labor is usually a highly important input for production, so that variations in labor costs can explain a significant proportion of cross-country differences in costs of production. Increases in this measure arise due to (a) increase in productivity-adjusted real wages; and (b) the excess of domestic inflation over devaluation. 2.15 Regarding wages, the real wages rose by 2 percentage points faster than labor productivity according to the Industry Surveys (para. 1.25) between 1983 and 1988. Because, however, data for more recent years--focussed specifically on exporters--were not available, a survey of 40 firms in and around Colombo, most of whom were formal sector exporters, was carried out in June 1991. (The summary of this survey appears in Annex 2.) Table 2.5 compares the average wage of the surveyed firms with rates of increase in consumer price and manufacturing deflator. It is noted that the real wage of surveyed workers increased much in 1987 and 1988 when economic growth was slowest. This is because as the formal sector employers are always competing with foreign employers (many workers left the country in the second half of the 1980s to be employed abroad including the Middle East, Australia and South-East Asia), and, therefore, could not afford to lower their wages too mucn relative to attractiveness of working abroad. Table 2.5: PERCENTAGE WAGE AND PRICE CHANGES 1987 1988 1989 1990 Exporter Wages (Survey) 16.9 17.2 13.1 23.8 Consumer Price 7.7 14.0 11.6 21.5 Manufacturing Deflator 7.2 5.1 6.9 12.3 Sourcet Central Bank, Mission Estimates 2.16 Table 2.6 indicates the magnitude of changes in unit labor cost for the last five years decomposed into the two factors (i) productivity adjusted real wages; and (ii) an excess of domestic inflation over devaluation; based on the wage data from the survey (an average rate of increase of unskilled, skilled and managerial wages). Value added data are from the Central Bank. The table shows that labor cost adjusted for productivity increased substantially in 1987 and 198' reflecting the sustained wage increase in the export sector as discussed above during the slow-growth period. The resulting adverse effects on competitiveness were offset partially with the large - 49 - depreciation in 1989 (from Rs 31.8/US$ in 1988 to Rs 36.01US$ in 1989) but the high inflation and the inadequate exchange rate adjustment throughout 1990 quickly aggravated the competitiveness much further. In fact, from 1987 till 1990, the accumulated increase in the unit labor cost has been 22.4 percent. This development should be of serious concern to the Government because the resulting increase in unit labor cost implies that the country's international competitiveness has been eroded substantially in the last five years. This erosion, if uncorrected, may take its toll in 1991 and beyond by promoting consumption arising from real wage increases and by hurting the export sector more seriously. Moreover, this set of circu stances has weakened incentives for investments in the production of export goods and redirected resources towards consumption or investments in activities such as real estate. This phenomenon is borne out by the fact, noted earlier (see para. 1.11), that private sector credits for residential buildings and consumption have been increasing rapidly. The situation needs to be redressed through changes in policy. Table 2.6: EVOLUTION OF DETERMINANTS OF UNIT LABOR COST (X of changes) Year Roal Wago Real Value Labor Cost CCPI 1/ Exchange Excess of Change in Rate Added per adjusted Rate Domestic Unit Labor Employ" for pro- Inflation Cost for ductivity over Competi- Devaluation ti veness (1) (2) (8)=(1)-(2) (4) (6) (6)=(4)-(S) (7)=(8) . (3) 1987 9.2 8.8 6.4 7.7 6.1 2.7 8.1 1988 5.3 1.7 3.6 14.0 8.1 6.9 9.6 s989 0.8 1.4 -0.8 11.6 13.3 -1.7 -2.6 1990 2.3 6.5 -4.2 21.6 11.3 10.2 6.0 1/ Colombo Consumer Price Index Source: Central Bank; Mission estimates. c) Summary 2.17 While the Government succeeded in meeting fiscal and balance of payments targets in 1990, and achieved high growth, there are worrisome developments in the economy's structuiral adjustment pattern regarding investment patterns and external competitiveness. This situation has been caused primarily by the Government's dissavings (higher current expenditures than revenues) in an environment of limited exchange rate adjustment. One obvious solution as discussed above would be to decrease the Government dissaving through either increased revenues or decreased recurrent expenditure. To improve revenue mobilization, tax administration is being improved under technical assistance from the IMF and the most recent tax reform (para. 1.22) attempts to achieve higher revenue and increased efficiency through simplifying and lowering the rate structure (thereby - 50 - enlarging the tax base). In the immediate future, however, these efforts are expected to have a limited additional revenue mobilization effect over and above the already relatively high tax revenue of close to 20 percent of GDP, although the defense levy and additional excises will attenuate the problem. On expenditures, as discussed above, conservative wage policies would produce savings only in the medium-term. So does retrenchment because the terms of severance payments and pension are so generous. In addition, the security expenditures continue to put fiscal pressure on economic management. The only obvious candidate for immediate savings is further improving the cost effectiveness of the welfare programs. In particular, the mid-day meal program should be replaced by a more effectivle nutrition intervention program- -but this will save less than 0.5 percent of GDP. The Government needs to make serious efforts toward achieving positive public sector savings, even if a substantial reduction in recurrent expenditures in the short-run is difficult. This relative rigidity on the fiscal front implies that a flexible management of nominal exchange rate must play a more prominent and active role in economic management of Sri Lanka than it has done in the last two years. Exchange rate policy needs to be worked out in close collaboration with the IMF to assure closer control of demand management and wage (including pension) policy. Without these complementary policies, the exchange rate policy would not be effective. 3. Reduction of the Government's Size and Influence 2.18 The Government is also committed to establishing a lean and efficient public sector. Such a public sector is required to promot. the country's economic development--one which is too large will be tempted to interfere in areas better left to the market and the private sector while oTne which is not efficient will not play its appropriate part in policy formulations, in setting the "ground rules" for development, and in providing those services which it is sensible for the public sector to provide. Discussed below are three efforts the Government has made in this regard: 'i) an effort toward administrative reform to make the Government small and improve its servicee; (ii) an effort to privatize public commercial enterprises including the public bus industry; and (Mi) an effort to start restructuring public tree crop sector. a) Establishi¶-g Administrative Capacity 2.19 An efficiently functioning civil service is essential for implementation of the economic reform process. (Looking back at the history of success stories in Eastern Asia, economic development strategies are not simply packages of discrete policies but also involve establishment, as a prerequisite, of effective administrative capacity.) Sri Lanka's civil service was once highly respected for its independence and professional standards. These were eroded by increasing political influence in appointments, by excessive growth particularly at lower levels, and by a decline in morale (which was arguably due to a reduction in the real level of salaries and some loss in parts of the service of a disciplined work ethic). - 51 - 2.20 The Government is now committed to reversing the decline in the public service by implementing recommendations made in 1988 by the Presidential Administrative Reforms Committee (ARC). It recognizes the need for a smaller, more efficient, fairJy paid and highly motivated public service. The Governmient's strategy has four parts: (i) to reduce over- staffing and the fiscal cost; (ii) to ensure that recruitment and promotion are based on merit and transparent criteria; (iii) to develop the public aervice's management capability for contiruing self-sustaining reform, for example in career development, training, cadre review and management audit; and (iv; to improve reward and motivation policies including both financial rewards (salaries and benefits levels and pension provisions) as well as leadership and morale building measures. 2.21 Staffing Levels. One major recommendation of the ARC was to reduce the number of ministries and departments, and to reduce the number of public servants by about 25 percent, which translated into a Government target of 20,000 in each of the four years 1990 to 1993. 2.22 In March 1989 the number of ministries was reduced from 45 to 24. A recruitment freeze with only limited exceptions continues in operation. A comprehensive public service census is being carried out each quarter from September 1990. During 1990 nearly 31,000 staff retired early under the Government's retrenchment scheme, which operated with particularly favorable terms up to the end of the year. About 13,000 further staff retired during the year under normal retirement terms, The retrenchment package was a generous one to meet the political priority of an all-volur.teer program. Not only has this caused a large fiscal burden, but also a number of valuable staff left when management considerations would have favored retaining them. 2.23 During 1991 and part of 1992, the highest priority is to consolidate the civil service strength by completing the first round of cadre reviews to determine where the volu..tary retirement program in 1990 left shortage of staff and where overstaffing still exists, and appropriate transfers and redeployments that should take place based on efficient responsibility/function mapping across institutions so that duplication of functions should be avoided. It will also be important for the Government to tighten progressively thte budgeting, monitoring and control procedures for the staff of provinclal councils so as to maintain budget discipline while clarifying the functions and powers to be devolved. Given the high priority that should be accorded to this work, Governmnent is considering that they should be carried out by the Restructuring Management Uniit, recently established under UNDP assistance. 2.24 Appaintments. In early 1991 Cabinet delegated to the Public Service Commission (PSC) the powers given to it unlder the Constittion of appointment, dismissal and discipliniary control in the public service. The PSC needs to have this authority, but in the recenit past, has bieen asked to surrender powers of recruitment and promotion to Cabinet tMinisters. Th.ss was partly responsible for "politictzation of the bureaucracy' whereby appointments were ntade largely on political grounds rather than on omerit. ProvincLal ptlliic service commillssions hlve been established to staff the - 52 - provincial public service. To enhance this process of improving the civil service, competitive examinations are now again standard practice for recruitment at all levels but, in the particular circumstances of Sri Lanka, are being supplemented by ethnic ratios for the time being. Furthermore, in the future, as confidence in the objectivity of the PSC grows, it will be desirable to move toward selection decisions based on the full range of qualities required for development administration (such as management skills, leadership and practical performance on the job). 2.25 Management Capability. While the reduction of overstaffing is an important exercise, the quality of the remaining civil servants is more important. The Government is, therefore, concerned with: (i) strengthening human zesource development policies; and (ii) developing the service's management audit and efficiency improvement capability for cadre review, organization and methods studies, management reviews, and use of information technology. This is a welcome decision. To achieve these goals, a new Policy Division has been established within the Ministry of Public Administration, which is being staffed up to deal with: personnel policy; organization audit and cadre review; administrative systems and training and career development. The Salaries and Cadres Committee (successor to the ARC) is also reviewing progress on the ARC recommendations as a whole. 2.26 Motivation. The Government recognizes the importance for the public service of energy and commitment at all levels. It had been planned to carry out in the first half of 1991 a comprehensive study of public service remuneration (including basic salary, allowances, holidays, pensions, housing, transport, and other benefits) as compared with a range of comparable private- sector employers and corp"rations. This has been delayed but it is still important given that in general lower level public servants are well paid relative to the private sector while more senior staff are relatively under- paid. The Government has increased the pay level of civil servants but the largest itncreases hiave beern given for lower level staff while, in contrast, at higher levels where better rewards are really needed, the increase in salaries has been minimal. 2.27 While some progress has been made as noted above, in administrative reform, 'a are recent signs that the Government's commitment to the process is weakening. These include: (i) the Government's refusal to comniit to further retrenchment from 1992 onwards; and (ii) its emphasis on political difficulties in reforming, the Government's pension scheme. In addition, the pressure for new recruitment is strong. The Government needs to firmly adhere to the announced administrative reform measures and to maintaitn the process on course. - 53 - b) Promoting Privatization/Peoplizatioinw 2.28 To largely eliminate the public sector's participation in activities better performed by the private sector, the Government launched a privatization program which aimed at privatizing all commercially-oriented state-owned ventures by end-1991. Although, this objective was highly ambitious and its time frame unrealistic, it demonstrated the Government's commitment to the privatization process. The Government specified 48 public enterprises (PE) that should be privatized immediately (a complete list of these enterprises and their status in privatization is provided in Annex 1). This list covers a wide range of activities and is likely to expand as conditions warrant. The Goverrment has adopted a pragmatic and ad hoc approach as regards both the selection of the PEs to be privatized, and the modus _oerandi of their privatization--floating shares in the domestic capital market, negotiated sales to foreign investors, and management contracts. Although a comprehensive and well-programmed restructuring and divestiture plan under a clearly-defined institutional framework would have lifted some uncertainties invariably associated with such an ad hoc approach, the Government has adopted this case-by-case appreach given political sensitivities surrounding privatization issues, limited absorptive capacity of the domestic capital market,W' and difficulties it, attracting foreigners' portfolio investment in Sri Lankan equities becaus6e of the civil conflict in the country. 2.29 Out of the 48 PEs selected privatization of 11 has already been completed (including United Motors, three textile mi1ls:"/ Thulhiriya, Pugoda and Veyangoda, Hlotel de Buhari, Ceylon Oxygen Ltd. and Dankotuwa Porcelain), Most of the privatization episodes started with conversion of Government-Owled Business Undertakings (GOBUs) and Corporations into equity- share ptublic companies, (a step that has already been taken for most enterprises). Further actions will be determined on a case-by-case basis. United Motor's slhares were floatecd in the domestic carpital market while Thulhiriys was sold outriglht to a foreign firm, and Pugoda and mnany others were sold after a period of negotiations with foreig,n firms and/or employees. ;" rPeoplization' is the term used by the Government to describe the process of creating broad-based share ownership of former public sector entities. It usually implies privatization with su'bstantial employee share ownership. ;22 There ore 176 listed comp1anies with market capitalizationi less than 8 percent. f GDP in 1989. The last country economic memorandum quoted market observers saying that tlhe maximumn absorption by the capital market would be RG 150 million per year--whereas the value of enterpriscs in the pipeline for privatization easily exceeds R6, 3 billion. ' Onice the sale of thie remaininigl textile mi'l (Mattegama) is completed, the 1Notional Textile Corporation will be formally liqutidated. Thlis would require substantial restructuring, including closinig down of the Ministry Cf Textiler. - 54 - 2.30 As far as the regulatory framework is concerned several actions have been taken. These include: (i) legislation enacted in 1987 which provides for the establishment of legally-independent public companies to take over the operations of Government Owned Buisiness Undertakings (GOBU) or public corporations; (ii) the Mining and Minerals Development Act--with expected Parliamentary approval before end-1991--which will ensure the appropriate legal and regulatory framework for promoting private mining and mineral activities; (iii) the removal of import bans and some monopolies accorded to public enterprises, and the reduction of tariffs on textiles, paper, leather, plywood and tires; and (iv) the amendment of the Gratuities Act in such a way that gratuities to be paid to employees upon their departure from an establishment could be in the form of bonds, in order to prevent serious cash outlays at the time of the conversion of PEs into companiesa'. 2.31 The Government's most ambitious privatization/peoplization program has so far been that of the Central and Regional Transport Boards (CTB/RTB) which used to employ 50,500 people and operate a fleet of buses (6,500 in the early eighties, but only 3,500-4,000 buses currently). The Government has converted CTB/RTB into about 80 depot-based peoplized companies (except for the North and East where public bus services ceased to operate due to the civil conflict). At the start of CTB restructuring, the Government retrenched 13,500 workers to make the newly peoplized companies financially viable. Since the retrenchment was based on voluntary retirement, this resulted in over staffing in the category of clerical workers assuming that the size of the operative bus fleet is 3,500 and shortages in drivers and conductors. Considering that further voluntary retrenchment would aggravate the skill-mix of the remaining workers and that compulsory retrenchment of clerical workers was not only politically difficult but also technically unnecessary if more buses were functional, the Government embarked on a bus rehabilitation/ acquisition program. This bus repair program has been slower than anticipated for several reasons: (i) due to the past neglect of preventive maintenance, ntonthly breakdowns have been nearly as many as the Central Workshops can repair every month; (il) the repair program has been undertaken in a centralized marner in which orders for spare parts are placed by a central committee based on requests from ex-CTB depots. This is a cumbersome and slow process without the capacity to flexibly respond to changing spare part requirements of eachi depot in the course of day-to-day operations. It has beeni recomnended that this centralized system be replaced by the local sousrcing and stocking of spare parts and emphasis shifted to a systematic preventive maintenance. The Government also enacted the National Transportation Commisoion Act which: ensures fare deregulation; sets up a new regulatory authority (National Transportation Conunission (NTC)) which enforces safety standards; and provides the mechanism to ensture the servicing of uneconomic routes in the rural areas by auctioning for minimum subsidies to operate such routes. I"J Althouigh the lltiv has been amended, its implementation appears slow given the negative reactionis that this hals engendered from employees who prefer c*a0h paynwintu to botidu. - 55 - 2.32 Three valuable lessons regarding privatization have been learnt by the Government from this effort. The first lesson was that the deregulation of the sector should not lag behind the peoplization process. As many companies had already been peoplized before the passage of the NTC Act in August 1991, these companies were functioning without the capacity to adjust fares or changp bus routes and without subsidies even if their routes were uneconomical. This was a strain to many and could have engendered business failures among the companies peoplized earlier, seriously jeopardizing the rest of the peoplization program. Second, it has proven difficult to change the attitudes and skills of the managers of the newly peoplized companies rapidly so that they could compete with purely private operators in a non- regulated environment. The provision of technical assistance can teach specific skills but the change in attitudes can be speeded up by the injection of domestic or foreign private management skills early in the r'!structuring process. Finally, privatization should be far reaching, i.e., old ties should be severed with government-owned institutions as early as possible in the privatization process (see next para.). In the same vein, the shares of peoplized companies which the public sector currently de facto owns chrough "Asset Disposition Trust" (a group of bankers), need to be divested as quickly as possible. This process is about to start in early 1992. 2.33 These three lessons can be expanded to draw some preliminary conclusions regarding peoplization in general in Sri Lanka; the Government should be cautioned against an excessive dependence on peoplization through large transfers of shares to existing public enterprise employees. Infusion of competitive managerial skills, additional financial resources to improve physical assets, and new technologies is critical in making privatized/peoplized enterprises succeed. The significant share offering to employees in the case of the bus industry has so far worked to delay this infusion, and often maintained lackadaisical managers unable to compete with the real private sector bus companies. While it is understandable that this method was employed for bus peoplization to: (i) preempt labor concerns regarding the consequences of privatization; and (ii) quickly convert public assets into private hands when the enterprise was not attractive to general public, it is important that in the future a more direct privatization method should be employed for commercial public entities. In fact, experiences of other countries (e.g., worker self management in Yugoslavia, privatization of one commerciel bank in Jamaica) show that when employees were transferred adequate shares to enable decision making, they tended to refuse infusion of new managers and/or efficiency in management and ended up in failures. More generally, if required for political reasons, 5-20 percent employee share ownership tended to be successful in providing an added incentive for workers and promoting broad based capital ownership. (The Government's intention is to limit the share offering to employees to 10 percent of the total equity for all future privatization.) c) Public Tree Crop Sector Restructuring 2.34 The three major tree crops (tea, rubber and coconuts) have for many years played a predominant role in Sri Lankas' economy, and particularly in the case of tea, have traditionally been virtually synonymious wlth the - 56 country's exports (still accounting for about one third of the total). Although the estates that produced the tree crops were earlier generally efficient production units, operating with tight and increasingly skilled management in an intensely competitive arena, they were mostly foreign-owned and considered by many governments as a politically costless source of taxation and expropriation. This heavy taxation and disinvestment and neglect that followed the Government's decision to nationalize the estates (made in the 1950s but actually implemented in early 1970s) contributed to the recent precipitous decline. What began as an effort to transfer ownership and management to Sri Lankan nationals, instead led to the replacement of foreign ownership and management of commercially profitable estates by inefficient state ownership and centralized management. Recently the tree crops sub- sector, which accounted for 5.4 percent of GDP and employed over a million people in 1990 and contributed 34 percent of total export earnings, has not been a major contributor to growth. From 1983-90, while agriculture grew by 2.4 percent a year, GDP in the tree crops subsector increased by only 1.8 percent a year even with the record breaking tea production in 1990. 2.35 The two public corporations (JEDB and SLSPC) manage more than 250,000 ha of land (contributing 67 percent, 33 percent and 10 percent of all land under tea, rubber and coconut, respectively), account for 50-60 percent of tea production and employ 425,000 people. Available data indicate that virtually all the increase in tea production during 1983-1989 came from private estates and smallholders (Table 2.7). Overall export volume from the tree crops subsector has increased by 1 percent a year during the same period. While tea exports have remained flat, rubber exports have steadily declined since 1984 and coconut exports have fluctuated depending on weather conditions. In sharp contrast to the weak performance in Sri Lanka, its principal competitors have generally experienced more robust, sustained growth in tree crops resulting in an erosion of Sri Lanka's world market share. - 57 - Tblip 2.7: TEA PROUCTION Growth. Rate 1980 1981 1982 1983 1984 1986 1986 1987 1988 1989 1990 p.m. 1980-90 Too Exports (Mn. Kos) 184.70 183.3 181.0 157.9 204.1 197.9 207.8 201.1 219.8 204.2 216.4 1.1 Avg. Export Price (PX) (Re/Kg) I 83.41 35.14 35.03 52.62 77.20 60.62 44.62 82.97 65.95 66.91 91.78 Avg. Auction Price (Pa) (Rs/Kg) 18.83 18.10 23.44 43.27 62.78 89.01 30.68 39.30 42.77 54.61 70.97 Tea Output (Mn. Kg*): 191.40 210.1 187.8 179.3 206.8 213.2 210.6 212.8 226.3 206.4 233.2 2.0 JED8 69.10 78.6 68.2 62.6 72.6 71.4 69.4 67.0 68.6 63.3 65.2 -0.6 SLSPC 69.30 64.2 57.6 63.3 56.9 59.8 58.6 54.7 57.6 50.9 63.7 -1.0 Smaliholder pi 63.00 67.3 62.1 63.5 77.4 82.0 82.6 91.1 100.1 92.2 114.3 6.1 Yield (Kg/h.) JED8 1160 1304 1207 1131 1298 1288 1239 1349 1314 1247 1318 1.3 SLSPC 1034 1133 1061 962 1062 1125 1170 1144 1200 1117 1820 2.6 Smailholder 675 716 659 671 812 855 842 926 1012 928 1143 S.4 Avg. Net Sale Pric.a (NSA): JEDB (Ru/Kg) 16.63 16.88 22.76 38.43 43.78 82.27 30.26 36.99 41.20 65.64 60.S5 SLSPC (Re/Kg) 18.31 17.64 23.36 41.83 44.90 32.69 32.13 38.76 41.39 58.62 63.62 Smuliholder 17.73 17.71 22.32 36.96 46.45 35.39 30.28 38.06 41.69 54.91 67.60 Avg. Cost of Production (COP): JEDB (Re/Kg) 19.63 24.44 20.86 27.30 33.63 40.74 39.26 44.47 50.23 56.60 58.60 SLSPC (Re/Kg) 19.67 23.96 22.13 29.63 35.28 35.90 36.83 39.98 47.43 56.22 62.20 SmalIholder (Rs/Kg) 12.94 14.03 18.29 21.74 29.69 31.48 31.59 33.95 36.90 40.02 47.22 Avg. Trading Margin (TM): s/ JEDB -3.10 -7.56 1.90 11.13 10.15 -8.47 -9.00 -8.48 -9.03 -1.06 1.95 SLSPC -1.86 -6.32 1.23 12.30 9.62 -3.31 -4.75 -1.22 -6.04 2.40 1.42 Smaliholder 4.79 3.68 4.23 16.22 16.76 3.91 -1.31 4.11 4.69 14.89 20.28 Tax Levied on Tea Export Duty (Re/Kg) 10.00 10.20 8.00 8.10 8.70 6.00 4.50 4.40 2.80 1.30 1.30 Ad Valorem (Re/Kg) 0.05 0.50 0.90 6.30 16.30 3.60 0.40 1.20 1.20 2.50 5.30 Coxe (Re/Kg) 0.90 0.90 0.92 1.10 1.30 1.40 1.50 1.50 1.30 1.60 3.00 Labor Employed: jJ JEDB ('000) 271 227 228 224 232 238 236 227 223 218 21; -2.2 SLSPC ('000) 271 271 264 250 224 221 211 202 202 200 195 -3.2 SnAllholder .. .. .. .. .. .. .. .. f Includes a minor proportion of public *ector estates outside SLSPC end JEDB FOB Price NSA minus COP Denotes Total labor force .Estiates not ovi Ilablo Sorc: JED8. SWSPC, Tea Board and Tea Small Holdings Authority. 2.36 The two public corporations have been subject to political, bureaucratic and administrative interference regarding both the day-to-day operations and strategic and investment decisions. To offset the consequences of this interference, the Government has granted guaranteed credit, tax free salaries and the absence of penalty for poor performance. The combined effect of Government interference and preferential treatment, however, has been increasing inefficiency in the operations of the two corporations at almost every level. Recognizing this serious problem, the Government has prepared a program of structural, regu'atory and management reform aiming at increasing the efficiency and productivity of the public estates and centralized facilities in the short run. Over the medium-term, further efficiency improvement will be sought by deepening reforms and bringing the market discipline. 2.37 Past effort to reform the state plantations have been piecemeal at best and as a consequence, have been extremely costly to the country. It is therefore necessary to address the root causes of poor performance in a decisive and comprehensive manner. This will require a clear break with past policies of state controi of plantation enterprises, and state intervention in the business environument in which the plantations operate. To surmount the inefficiencies whlich have plagued this key export industry, it will be - 58 _ necessary to allow plantation enterprises to operate along strictly commercial lines free of government interference; these enterprises must be afforded the autonomy to manage the resources under their control to best advantage and must have the capacity to assume the risks inherent in profitably operating in an increasingly competitive international arena. As such capacity largely exists only in the private sector and as autonomy is best assured through private ownership and control, privatization of the industry should be a major element of the reform program. Moreover, privatization of ownership provides the strongest ircentives for such parties to devote substantial resources required and to assume the risks inherent in operating and investing in the plantation industries. 2.38 Corporate Restructuring. Given political sensitivities attached to the issues of private ownership in the tree crop subsector, the Government is prepared now to privatize only management. In the short run, the main action to be taken is changing the statutory framework under which the state plantations operate by converting the two state plantation corporations into 22 smaller public limited liability companies and leasing the land to these companies on a 99 year basis. This is to both create more manageable sized units and to provide those smaller units with the autonomy and accountability required to operate as efficient commercial enterprises. The Government will employ experienced, qualified, well-capitalized private firms through management contracts to run these 22 companies. These firms are expected to bring in the necessary company level skills, access to markets, technology and commercial finance to what will be large plantation companies. The Government intends to reward them based on the degree of risk they assume and the financial performance of the company. It is, however, unlikely to be feasible to devise realistic contracts that will provide the incentives for adequate investment and longer-run profit maximization that would come from private ownership. 2.39 There are two difficult problems associated with the restructuring. One is that of the approximately 500 estates managed by the JEDB and SLSPC, about 50-60 estates which have regularly generated losses, and are considered unviable in that the costs of improving productivity far outweigh any financial benefit that could be realized by the Government. It has, therefore, been decided that these estates will be excluded from the process of forming the 22 new companies, because to include them would seriously undermine the companies' financial viability. They will be retained temporarily by JEDBISLSPC, pending a study of the disposition options. 2.40 The other issue that needs to be addressed relates to labor. Key to the success of the restructuring is the removal of the inefficient use of the staff of the two corporations and of estate labor and bringing staffing and labor rewards into line with productivity, while ensuring fair treatment of the staff and labor of the two corporations. Past studies identified three key aspects of labor policy that have put undue pressure on labor costs: (i) wages are paid on a rigid six-day work week basis regardless of actual work load; (Li) wage rates are centrally negotiated and politically determined bearing little relation to changes either in productivity or the cost of living; and (iii) estate labor is imimobile. The GoveLuaient lios noted these - 59 - policies as constraints to improved efficiency and cost control, but concluded that autonomous public companies with private management would be able to productively utilize existing labor through improvements in operating and investment efficiency which the proposed structure i4 expected to foster. More specifically, it is expected that with better management, less political interference and greater flexibility in the use of non-labor resources, labor productivity would be significantly increased. Particularly important is that management contractors are indeed afforded the autonomy to effectively manage labor resources. While the above lines of reasoning are plausible, it would be unwise to proceed with the restructuring program in the absence of procedures and programs for dealing with estate or company specific labor redundancy problems. Such problems are bound to arise on at least some of the estates. If strategies are not developed for dealing with such problems, the Government may find itself in the midst of contract disputes and litigation which in turn may halt the entire program. Equally important is the need to formulate strategies for maintaining and enhancing worker welfare. Over the past decade, the Government has devoted substantial resources to improving housing, health and education of the public estate work force, particularly the resident work force. The recurrent costs of such programs have riien to approximately 10 percent of the total costs of production. With autonomous companies under private management, the levels, modalities, and responsibilities for providing such services will doubtless require modification. To enhance both living conditions and mobility of the present labor force, both in the private and public estates, provision of such services will have to be shared jointly among plantation companies, line agencies, aud NGOs rather than being placed solely on the backs of what are to be autonomous plantation companies. A careful study on how best to deal with this human resource aspect of restructuring is, therefore, urgently needed. Such a study would lead to a preparation of an action plan to minimize political and financial costs of the restructuring. 2.41 De-monopolization of Marketing Arrangements. All public estates are currently required to sell tea and rubber products through the JEDB and SLSPC marketing and warehousing facilities. These monopsonistic practices have resulted in delays in payments, lower prices and lack of access to timely and relevant market information, and have generally discouraged shifts in product and process diversification consistent with c'.anging international markets. The Government is therefore eliminating obligatory monopsony power of the marketing/warehousing functions of JEDB and SLSPC and the fertilizer marketing function of JEDB by converting them into independent private companies whX'n will have to compete with others. Their ownership will be divested in the near term. 2.42 Sectorwide Policy and Institutional Reform. Since the overriding objective of the restructuring program is to increase the efficiency of the tree crop sub-sector as a whole, it is important that deficiencies in the sectorwide policy and institutional framework be dealt with from the outset. For the sub-sector including the 22 new companies to realize the anticipated gains in efficiency distortions emanating from the tax/subsidy/pricing regime, and regulatory restrictions on operational nnd invootment e?nd marketing practices must be rectified. The issues of weak technology development should - 60 - also be dealt with. Failure to address these sectorwide constraints to productive and allocative efficiency will substantially limit the productivity gains which can be realized from corporate restructuring by itself. Moreover, such reforms will significantly improve the prospects and performance of the private producers and marketing agents who have demonstrated a remarkable responsiveness to recent policy reforms in the sector. 2.43 On the fiscal area, marginal rates of export and ad valorem taxes on tea and rubber in Sri Lanka are the highest in the world, and significantly reduce producer incentives to invest or to improve product quality (although these taxes account for less than 3 per..ent of total tax revenues). Moreover, since part of the revenue mobilized through the tax system is for the purpose of the state realizing returns on the substantial assets managed by the state plantations corporations, there is an implicit tax on private producers in the levying of uniform rates of taxation of public and private producers. The Government's strategy therefore is to phase out export taxes to bring financial costs and returns ins line with their economic values, and to provide a simple, transparent means for the state to realize a return on its assets in the plantation sector. In order to raise fiscal resources for use in publicly administered tree crops development programs, Government has levied cesses on tree crops producers. Other than the high administrative cost, cesses combined with Government subsidies have altered price relationships and distorted investment decision making. The Government intends to reduce both taxes and subsidies/cess in favor oC reliance on market based price incentives to encourage efficient investment in the production of tree crops products. 2.44 On the regulatory side, investments, trading, marketing and shipping of tree ,;rop products are subject to a number of regulations which limit market entry and inhibits competition. A number of these regulations have been geared to the present state-dominated structure of production or have imply been held over from the pre-independence days others are, themselves a direct outgrowth of the cess funded subsidy schemes. The relevance and appropriateness of many of these regulations are open to serious question since the structure of world tea and rubber markets has changed and the domestic industry has been evolving and will change quite dramatically with the break up of the two corporations. A commercial environment which will encouvage competition needs to be established by eliminating restrictive regulations. The out-dated regulations governing private sector investment, operations and marketing practices, and the ineffective, unresponsive research system needs to be addressed. Equally inmportant, is the lack of mechanism for ensuring public estates face the same resource costs (particularly land/asset costs) as private producers. Regarding the latter, the inclusion of a payment mechanism in the financial structure of the newly formed companies which would reflect their use of the State's assets as a cost of doing business should be carefully considered. As land is to be leased to the plantation companies, the most transparent and administratively simple mechanism for this purpose would be an annual land lease paymenit. Such a mechanism would enable the Government to reduce expeditiously distortionary export taxes while moderating the decline in fiscal reveniue mobilizaition. - 61 - 2.45 Technology development and adaptation, key elements in increasing productivity and maintaining international competitiveness, have progressed more slowly in Sri Lanka than in other countries. The three producer financed research institutes for tea, rubber and coconut have not been sufficiently instrumental in enhancing productivity and improving output quality to the degree realized in competing countries. The responsiveness of these research institutes need to be increased by augmenting the role of industry participants in defining objectives and approving and evaluating research programs. d) SummarX 2.46 A large and inefficient public sector has been one of the major problems facing Sri Lanka. This problem should be addressed through: (i) continued administrative reform that reduces the civil service size, and efforts to make recruitment and promotion based purely on merit; (ii) continued privatization/peoplization of commercial public enterprises including divesting the shares of "peoplized' bus companies that are currently held by the public sector: and (iii) tree crop sector restructuring that increases the role of the market in the subsector. On the last issue, while the Government is willing to privatize only management of publicly owned estates through management contracts, it is preferable that the reform includes privatization so that managers should have incentives to invest their own resources in the assets and to maximize profits in the long run. 4. Creation of a Competitive Business Environment Conducive to Private Investment 2.47 For more than two decades prior to 1977, Sri Lanka followed an import substitution policy emphasizing the public sector as the major force toward industrialization. With the ethos of socialism that prevailed during most of the two decades, private entrepreneurs were not only mistrusted and marginalized but also their activities were limited by strict controls on prices they could charge and foreign exchange they could utilize. In addition, after the enactment of the Business Undertaking (Acquisition) Act of 1970, private firms, whenever they became large or otherwise conspicuous (through, for example, labor problems), became targets of nationalization. All this discouraged new investments by the private sector, either domestic or foreign, and prevented existing private firms from expanding. 2.48 In 1977, having realized the limit of what inward-looking policy could achieve, the Government otarted to dismantle administrative controls over allocation of resources and to promote market- and export-oriented economic policies. This policy change encouraged significant private sector growth. But, it is hard to eliminate the legacy of the interventionist system engraved in the economy over decades, and mutual mistrusts between the Government and the private entrepreneurs are still lingering on. Such mistrust was aggravated by the Government's recent decision to nationalize a soft drink company under the Emergency Act after the Government had committed to no more nationalization and the Business Acquisition act of 1970 had been repealed. - 62 - 2.49 Current Business Environment for the Private Sector. Today, even after a decade of double-digit growth of the private manufacturing sector, the private sector in Sri Lanka remains diffuse and anonymous. Part of the reason is the higlh corporate income tax rate (50 percent until April i992) with limited tax enforcement capability of the Government. Because unregistered small companies can effectively evade the entirety of tax burden, it is highly costly to grow into a larger firm that receives scrutiny from the tax authorities. The current tax reform efforts to lower the corporate tax uniformly to 35 percent by 1993 (the same rate as the highest individual income tax bracket), and to improve tax administration should change this picture substantially. Another reason many firms decide to remain small and anonymous is to avoid the effects of labor legislation; if a firm employs 15 workmen or more, it becomes subject to the Termination Act (paras. 2.68-2.71) which practically takes away the right of employers to lay off workers for non-disciplinary reasons increasing the cost of business operations substantially. 2.50 The private sector's access to financial resources for investment has also been inadequate due to the Government deficit that pre-empts 60-70 percent of the national savings. Reflecting this, the cost of capital has been high in terms of real rate of borrowing which often exceeded 10 percent (Table 1.1--except for 1990 when high inflation and managed interest rates created a situation of largely negative real rates), and in terms of rationing. Recently, this crowding out of the private sector has been occurring more through quantity rationing because the level of interest rates has been managed by the Central Bank through its treasury bill auctions. In 1990, for example, the central government issued Rs 16.3 billion in new domestic debt (5 percent of GDP excluding repayments). Commercial banks increased treasury bill holdings by Rs 4.2 billion in 1990. Because commercial banks are the principal source of financial resources to the productive sectors in the economy, the increase in the net government credit as a proportion of total assets tends to dampen credit in other areas. A greater amount, i.e., the remainder of the additional gross debt issued in 1990 was held in the form of treasury bills (and low interest national defense bonds) by nonbank captive sources in the public sector (such as provident funds) at rates and amounts determined by the Central Bank. Because these institutions are the principal domestic sources of medium- and long-term loanable funds in Sri Lanka, the dominance of Government securities in their portfolios leaves little scope for investing in alternative opportunities including private capital. 2.51 Additionally, a major weakness of the financial sector in Sri Lanka is that, for relatively lar:ger borrowers (including public enterprises), debt collection has been poorly enforced resulting in insolvent commercial banks if internationally acceptuble loan classification and provisioning requirements are applied. A corollary of this weakness has been that, since debt repayment has not been enforced, cost of bank debts has become artificially lower than the true financial intermediation cost, or cost of equity financing through the capital market. As discussed below, the development of capital market has thus been significantly deterred. _ 63 - 2.52 Regarding the regulatory framework, Sri Lanka has relatively few formal and conspicuous obstacles. In particular, the Government has recently taken important steps to improve private sector environment by implementing a series of policy measures which include: eliminating all quotas and bans on import of non-agricultural comn,odities; removing some import licensing requirements; rationalizing tariffs through a gradual reduction of maximum nominal rates to 50 percent within a four band tariff structure; reducing foreign exchange controls; and liberalizing shipping and air freight. As part of this process, the Government disbanded the Local Investment Advisory Committee which approved all new domestic investments, and eliminated the 100 percent tax on transfer of equity shares between Sri Lankan nationals and foreigners first up to 40 percent foreign ownership and more recently, announced dismantling this tax altogether. To publicize and implement the Government's policy toward increased market-orientation, the Industrialization Strategy was issued in December 1989 and the Industrial Promotion Act enacted in 1990. Based on the Act, most price controls through the Fair Trading Commission were removed and the Industrialization Commission was established. The Commission's tasks are to review policies critical to foreign investment including investment incentives, industrial relstions, and infrastructural development. 2.53 In spite of these measures, operations of the private .-ector are still constrained by cumbersome and time-consuming bureaucratic procedures as required by the Customs Act, the Exchange Control Act, and the Export and Import Control Act. Discretionary and often informal application of regulations/incentives to various private entities is also a serious problem. In addition, as pointed out in Chapter I, the limit on private land holding to 50 acres and the ban on converting paddy land to other uses are impeding, in particular, development of non-traditional export-oriented agriculture. To address these concerns, the Government has appointed a "Commission on Bureaucratic Control" chaired by a private sector representative, which aims at facilitating the dialogue between the Government and the private sector and at examining and proposing remedies for private sector grievances. The final report is expected at the end of 1991. The issues that will be addressed include simplifying customs procedures, removing all export controls except for those that should be protected from exploitation (e.g. ivory), streamlining foreign exchange controls and removing most of the remaining import licensing requirements (for more than 270 items). Finally, inadequacy of infrastructural services has emerged as a major concern of the private sector due to the low public investments and low provisions from O&M outlays. 2.54 Given the current situation described above, four major issues surrounding the private sector are reviewed in this section. They are: (i) creation of an efficient financial sector; (ii) promotion of foreign direct investment; (iii) improvement of labor legislation; and (iv) provision of adequate physical infrastructure. a) Establishing an Efficient Financial Sector 2.55 Sustained economic grow.th requires a financial sector that mobilizes and allocates financial resources to areas where returns are - 64 - highest. Sri Lanka's financial institutions are relatively diverse and sophisticated and are capable of reaching private borrowers with at least short-term working capital lending. Yet, there are a number of problems; the following four measures have been identified in the Bank's sector work as critical for establishing a broadly competitive and sound financial sector. 2.56 First, the two large state-owned banks, Bank of Ceylon (BOC) and People's Bank (PB) wbich dominate the commercial banking sector (with 66 percent of assets) are inefficient. They would have substantial negative net worth and incur large losses if proper accounting policies for bad debt provisions were applied. In addition to a number of weaknesses in the management culture and operations of the banks (e.g., very high employee- related costs) Government pressures to lend to public enterprises and for rural development have contributed substantially to the banks' financial problems. Private banks, while growing, have taken advantage of the state banks' need for unusually high margins to increase their own margins. Such policies impose high costs on Sri Lanka's productive sectors. 2.57 It is recommended that integrated restructuring programs for BOC and PB be implemented. Based on an international audit, the two banks should take large provisions for bad debt and receive a large inflow in new capital from government in the form of bonds. It is also proposed that government purchase selected large bad loans from the banks at written down values and transfer them to restructuring and collection agency (RACA) being established. The two state-owned banks should be commercialized so that they compete with other banks in the market on a strictly commercial basis. Moreover, BOC should be privatized in the near future and P3 should continue for the time being as a commercialized government-controlled bank with minority private ownership. In addition, the National Savings Bank (NSB) is an inefficient, loss-making institution whose role as a critical supplier of funds to government is rapidly diminishing with the expansion of treasury bill sales and investment by pension funds. It is recommended that NSB rationalize its rural branch structure and that, if it cannot break even by investing in treasury bills, consideration be given to phasing it out. 2.58 Second, Sri Lanka's financial institutions are also hurt by serious debt recovery problems, insufficiently rigorous central bank supervision, and inadequate accounting and auditing. Although 13 debt recovery laws have recently been enacted or amended, additional amendments are required to address significant flaws. The Central Bank of Sri Lanka (CBSL) should effectively enforce newly established loan classification requirements, accounting policy requirements relating to provisioning and suspension of interest, and capital adequacy requirements. The accounting profession should also enforce use of internationally accepted accounting standards and expanded disclosure requirements. 2.59 Third, Sri Lanka's pension funds and insurance companies have successfully raised large pools of long-term capital. However, government directives require that almost all of this money be invested short termn in government securities. The two development banks, while relatively sound and well managed, are unable to mobilize long-term local currency funds for - 65 - onlending. The State Mortgage and Investment Bank's new commitments are dropping sharply for the same reason. It is recommended that Government regulations be amended so that the pension funds and insurance companies pursue optimal portfolio management policies which provide maturity and subsector diversification. 2.60 Finally, Sri Lanka's capital market is relatively undeveloped and activity on the Colombo Stock Exchange is low. While some policy-related constraints impede the market's development, the most significant constraint is imposed by the relatively low cost of bank debt and benks' tolerant policies toward high debt to equity ratios and treatment of defaulters, which reduce borrowers' incentives to raise resourccs through issuing equity. While some proposed new investment vehicles, e.g., a well designed investment trust, may assist in expanding the capital market, priurity should be given to tackling the underlying problem of artificially inexpensive debt. (This issue was discussed extensively in the last Country Economic Memorandum.) b) Promoting Foreign Direct Investment 2.61 The small size of the domestic private sector, together with limited domestic savings implies that Sri Lanka will have to depend on foreign investment to provide a boost to private investment. During the last 12 years, Sri Lanka has received an annual average of US$40 million direct foreign investment. This amount, however, has been declining over the last four years reflecting the uncertainties perceived by potential investors due partially to the ongoing civil conflict; in 1990, the net investment was US$32 million (less than 2 percent of investment), among the lowest since the EPZ system. was establislhed in 3.978. This should be compared with the investment receipts of Indonesia, Thailand and Malaysia in 1989 of US$0.8 billion, US$1.7 billion and US$1.8 billion, respectively (World Development Report) showing the order of magnitude of what is potentially available for Sri Lanka. In particular, nmany potential investors from Japan, Korea, Taiwan and others are now searching for appropriate new investment sites because of the insufficient supply of infrastructure in Bangkok, political uncertainties in the Philippines and increased wage cost in Malaysia. Many investors are thus prompted to go into Indones .a. There is, therefore, a wir.dow of opportunity for Sri Lanka to attract a large number of foreign investors if it can move expeditiously (before Vietnam or a liberalized India become established foreign investment competitors) in improving the investment climate and infrastructure, and making progress in resolving the civil conflict. 2.62 The immediate goals of the Government, therefore, are: (i) to establish a unified regime for firms regardless of whether or not they locate in the established export processing zones (EPZ) thus in effect making the entire island an EPZ; (Mi) to make approval for entry to Sri Lanka automatic except for activities related to national security (e.g., weapons) or health hazards; (iii) to ensure the firms have foreign exchange available for imports and repatriation, even when Sri Lanka is suffering from balance of payments crisis; and (iv) to make sure the firms have access to 'ocal credit. - 66 - 2.63 Until 1989, foreign investment requests were approved and administered under two different institutional set-ups. On the one hand, the Greater Colombo Economic Commission (GCE'), established in 1978 as a legislative authority, has the power to approve foreign investment entry, grant special incentives, and exempt companies from national laws, including the Foreign Exchange Control Act and the Inland Revenue Act.Th Until 1989, GCEC's role and functions had been largely limited to the export processing zones (EPZ). It has been relatively successful in attracting foreign investment to Sri Lanka. On the other hand, the Foreign Investment Advisory Committee (FIAC) handled all foreign investments outside the GCEC's authority, which had to be joint ventures. As GCEC, FIAC approved foreign investors' entry to Sri Lanka, and granted incentives regarding foreign exchange and taxation. But FIAC incentives were less attractive than those of the GCEC in terms of both tax incentives and compliance with foreign exchange regulations. The FIAC process also involved approval by other government agencies and proved to be cumbersome and time consuming. Due to the high tax rates in the country, both GCEC and FIAC resorted to an intensive use of tax holidays and other fiscal incentives to be negotiated on a case by case basis. Also, rules and regulations were put in place to restrict the access by wholly foreign- owned ventures to domestic borrowing and by joint ventures to foreign exchange. 2.64 In order to encourage foreign investment nationwide under a unified regime, the Government merged the two institutions in 19d9 into the GCEC as a one-stop shop for foreign investors that provides unified package of incentives. This action, however, was not accompanied by necessary changes in policies and legal procesoes, and the 'new GCEC' was never adjusted to handle FIAC type of investments. As a result, two different regimes (in theory) continued to exist, but FIAC-type investment requests could no longer be processed. Rather than encouraging foreign investment, this action has thus formed a new obstacle to the majority of investors. 2.65 In response to these concerns the Government, with the assistance of the Foreign Investment Advisory Service (FIAS) of IFC/MIGA, issued an Investment Policy Statement in November 1990. The Statement recognizes the need for unifying the two investment regimes (GCEC and non-GCEC or ex-FIAC) while admitting that special incentives need to continue until a comprehensive tax reform is implemented in 1992-1993. The Statement, however, stressed that the rules and procedures for approving investments and granting these incentives should be made simple, transparent and automatic. To conform to these pritnciples, the Statement emphasized that in many policy areas, including entry, foreign exchange, local financing, and special incentives, changes were needed in current policies, laws and institutions. The Statement made a commitment to prompt development of detailed investment guidelines for a unified regime. w1' To qualify for GCEC incentives, an enterprise must be a new establishment in Sri Lanka that: exports a minimum 95 percent of production; has foreign sources of financing fixed and working capital; and has a minimum project financing of US$250,000. - 67 - 2.66 The draft Guidelineu were thus prepared in August 1991. According to the draft Guidelines, improvements have been made especially on entry; "preferred areasn have been eliminated and "automatic approval' will be granted for most foreign investment with clearly spelled out criteria and procedures. The "non-automatic list", a list of sectors for which foreign investments exceeding 40 percent share ownership need to be approved case by case, is to be relatively short and will be reViewed from time to time to make it shorter. When the draft Guidelines become official, therefore, most of the Sri Lankan economy will have been opened up for foreign investment. As for foreign exchange policy, major improvements were also proposed in the Guidelines: GCEC will replace the Central Bank as the approval authority for remittances and capital repatriations. In addition, by promulgating a new l'CEC regulation that allows all foreign investors free remittance abroad through commercial banks, the new system provides foreign investors an indirect guarantee of foreign exchange, even in times of balance of payments crisis. 2.67 The approach to direct foreign investment embodied in the new Guidelines represents an important step forward. There are certain areas, however, where timely action is necessary. First, regarding credit facilities, foreign-majority joint ventures are not allowed automatic access to local credit markets. They require Central Bank approval on a case-by-case basis--a restriction that is not necessary. Second, tho Government wiishes to bring in far-reaching ref.cm in foreign investors' tax incentives all at once w*hen the comprehensive tax reform is implemented. Given that major tax reform measures were already announced in the 1992 budget, the Government must be at an advanced stage of preparing for post-tax reform in-entive schemes at the present time. If not, preparation should be accelerated substantially. c) Iml roving Labor Relations 2.68 Sri Lanka has a relatively well-educated labor force but due to labor legislation, the objective of which is to protect labor, their mobility among firms and among sectors is limited. Of particular concern is the Termination of Employment of Workmen Act No.45 of 1971, which was introduced in the wake of the economic recession that followed the 1971 JVP insurgency. At that time, there were many allegations that employers were using scarcity of foreign exchange or raw material imports as an excuse to remove union leaders, and it was felt that the State should exercise control over the retrenchment and lay-off of employees in the private sector. Hence, the Act essentially took away the rights of most employers to terminate a contract of employment for non-disciplinary reasons stipulating that 'any employer employing 15 or more workmen shall not terminate the tservice of a workmian who has served for one year or more without the workman's prior written consent or the prior written approval of the Labor Commissioner." The Act gave the Commission power to intervene in any retrenchment or lay-off process (and to have consultations with the other departments and sector ministries in the event shortages of raw materials was given as a reason for labor redundancy). The Act wes amended in 1976 to include terminating employment of workmen arising from closures and was made effective retroactively from May 1971--as - 68 - there were allegations that many employers got around the Act by closing down their business entirely. 2.69 The net effect of this law, however, has been to raise the cost to employers of laying-off their employees--and as a result increase the overall cost of employing workers. This has served as an incentive to employers to minimize employment of labor and thus has worked against those that the Act was originally designed to protect. In fact, existing employers' job security is protected at the expense of potential employees that may be able to do the work better. The Act has also promoted inefficient resource allocation in at least three way. First, because labor has become expensive, capital has been substituted for labor in a country where labor should be relatively cheaper. Second. many employers felt incapable of investing in new and potentially promising activities if it involved retrenching part of the existing workers, and workers on the other hand felt it unnecessary to look for more remunerative jobs or obtain training for more promising positions thereby limiting labor mobility and smooth adjustment. Third, to avoid being covered by this Act, many employers have chosen to be below the threshold of 15 emplovees. Business growth, if any, has often taken place through adding new small establishments rather than expanding existing establishments--repeating administration functions in each establishment, and, most probably, losing scale economies. Indeed, empirical analysisL1 of Sri Lanka shows that labor regulation is cited as one of the two most serious obstacles to "growth" for limited liability companies hiring 16 or more employees (the other perceived obstacle being potential changes in tax status). Interviews with potential foreign investors also cite the Act as a serious deterrents to considering investment in Sri Lanka. 2.70 It is recomm-nded that the Terminations Act be repealed, and that only the Industrial Disputes Act--a piece of legislation which is more commonly found in the nest of the world for settling issues of labor relations--be utilized as a much ; tter alternative. If it is not politically feasible to take this action, the Government can establish a transparent mechanism which a firm can use to obtain a waiver from the force of the Terminations Act as in the "free enterprise" system in Mauritius. Currently, similar waivers are given by GCEC for establishments within the free trade zones; this waiver system should be expanded to the entire nation and its granting should be made more automatic. 2.71 While the above issue has been identified as important through interviews with foreign and domestic investors, there are other labor issues that need the attention of the Goveznment. It is recommended that the Government review the labor legislation comprehensively (involving 48 Acts) with a view to streamlining the entire system. Overprotection not only reduces the country's international competitiveness by raising effective labor cost but at the same time ends up undermining the very purpose by reducing the overall level of employment. Lv Brian Levy: Obstacles to Developing Small and Medium-Sized Enterprises, An Empirical Assessment, World Bank PRE Working Paper No.588, Feuruary 1991. - 69 - d) Providing Adequate Infrastructure Services 2.72 Public investment, especially in appropriate infrastructure facilities, enhances private investment by lowering the cost of--among others- -transport. communication and power and water supply. Indeed, a survey of primarily export-oriented firms indicate that inadequacy of infrastructure services is the most serious constraint to their business activities (Annex 2), a sign indicative of inadequate public capital and O&M expenditure on infrastructure. As a result, most export-oriented entrepreneurs have their own supply of infrastructure services (e.g. private power generation, well- water, cellular phones, and firm-specific supply of transportation for their employees) increasing production cost and weakening Sri Lankan export competitiveness. 2.73 Thus, the need to improve infrastructural services is strong. With the pressing need to contain fiscal deficit to a manageable level, however, the Government must be careful in choosing and phasing infrastructure investments; the medium-term infrastructure investment pattern needs to be consistent with the Government's strategy to promote industry and diversified agriculture both oriented toward exports as an engine of growth. In pursuing this strategy, from both experiences of other countries and observations of the current situation in Sri Lanka, it should be conjectured that continued concentration of industrial activities in the Greater Metropolitan area may not be avoidable. Agglomeration economies are important in increasing efficiency of firm operation, and therefore, the economy's international competitiveness. It should be borne in mind that, in discussing export- oriented strategies, Colombo is competing with Hong Kong, Bangkok, Jakarta, Singapore, Bombay, Madras, etc. Attempts to force export-oriented industries away from Colon.vo toward smaller cities such as Trincomalee, Jaffna or Galle now would jeopardize the economy's competitiveness and slow down growth of both income and employment in the medium-term future. Government's immediate policy priority should be to review the availability and quality of infrastructure services in Greater Colombo Metropolitan area and establish a strategy to build up required infrastructure. Colombo and surrounding areas (currently housing about 3.5 million population) should not repeat the history of Bangkok which, due to the Central Government's desire to cut back public investment starting in 1985, has such inadequate infrastructure services (roads, water, power, etc.) and related environmental pollution that the cost of doing business there has skyrocketed to the point that many potential investors are now choosing to invest in other cities in Asia. 2.74 The development of areas outside the Metropolitan Colombo area should be through: (i) improved rural-urban interdeE ndence based on better infrastructure (transport and communications which respectively lower shipping and information cost, between urban and rural areas) which would boost farm and non-farm rural income if rapid urbanization takes place; and (ii) efficient systems that make foreign markets accessible from rural areas through Colombo in terms of both physical transport and market information, What is critical for road transport at this stage is to increase efforts to maintain the existing road network and establish responsible and viable truck, bus, rail and sea transport subsectors based on commercial principles. At the - 70 - same time, telecommunication needs to be improved between all parts of the country, through Colombo and to foreign cities. Given the limited capacity of the Telecommunication Corporation it is recommended that foreign investment be brought in to establish selected electric data lines or fax-quality telephone connections. Foreign investment in other infrastructure facilities including the road transport system should also be encouraged to alleviate currently existing bottlenecks. Refrigerated storage and transport facilities are also good candidates for foreign participation which would encourage non- traditional and export-oriented agricultural activities outside the Metropolitan Colombo area. e) Summary 2.75 There are various areas whereby reforms are needed to promote private productive investment. This sectior. identifies four areas of importance, partially based on our sector work, interviews with businessmen and other observations. The first is the need to improve the efficiency of the financial institutions by, among others: (i) restructuring and recapitalizing the two state-owned commercial banks--restructuring includes commercialization of both banks (and privatization of one of them) to improve the competitive environment of the sector; (ii) rationalizing the National Savings Bank; (iii) improving the practice of classifying and provisioning for bad debts; (iv) improving debt recovery through amending legislation and establishing a debt recovery agency; and (v) allowing public sector financial institutions to freely adjust their portfolios. Second, foreign investment should play a crucial role in enhancing the economy's productive assets while domestic savings are limited. To achieve this goal, the institution that approves and supports foreign investments (GCEC) should be improved, and both approval procedures and fiscal incentives should be unified for all investors regardless of their investment sites. These incentives should also be simplified in view of the ongoing tax reforms (which reduce the need for special incentives as rates are being lowered) and the consideration that both domestic and foreign investors should be equally treated. Finally, automatic approval of foreign investment should be the norm for all activities except those related to national security and health hazards. Third, anecdotal evidences indicate consistently that the over-protection of Sri Lanka's labor through labor legislation is undermining the objective of increasing employment by raising the cost of labor. A good example is the Termination Act that practically takes away the employers' right to terminate employees on non-disciplinary grounds. A repeal of the Act or, waiving the effect of the law using, as an alternative, the Industrial Dispute Act should be recommended. The rest of the economy's complex labor legislation should also be reviewed and streamlined. Fourth, the economy's inadequate infrastructure forms a constraint to business activities according to existing entrepreneurs. A strategy of infrastructure development should be established with the objective of promoting industrial and diversified agriculture oriented towards exports. This would most probably include improvement of industrial infrastructure in and around Colombo and improvement of the road and communication network in the rest of the country. - 71 - 5. Restructuring Poverty Programs 2.76 In Sri Lanka, poverty and unemployment have traditionally been key factors in shaping economic policies. The Government has recognized importance of investments in health and education for improving the well-being of the disadvantaged. As a result, health and education services are much better than other countries at a comparable level of income. In addition, the Government has given priority to the provision of food subsidies to the population--initially subsidized ration-rice was given to nearly every Sri Lankan, and after 1979 food stamps were provided to about one half of the population. The food subsidy programs, however, have suffered from substantial leakages of resources to the non-poor because data based on various household surveys show that less than a half of food stamp recipients or about 20-25 percent of the population actually have inadequate calorie intake. As a result of this inadequate targeting, the really poor received only 40 percent of the total income transfers through the past food subsidy programs. Many governments in Sri Lanka have also been concerned with the issue of chronically high unemployment, especially the unemployed poor. However, the majority of the unemployed in Sri Lanka are young first-time job seekers, a significant proportion of whom are queuing up for potential public sector jobs while supported by their family members. Thus, less than 6 percent of poor household heads are unemployed--and incrtasing employment per se would have only limited effects on the poor. Lower productivity and low wages of the employed poor are more critical issues--issues that can most effectively be addressed by higher growth.OJ 2.77 With slow growth experienced in the second half of the 1980s and the civil unrese situation in both the North and East and the South, the Government perceived an increasingly urgent need to address the issues of poverty and unemployment with a higher emphasis on income transfers than in the past. This was partially because the Government saw an increased need to help the poor and unemployed due to slow growth or those dislocated due to the civil conflicts. But, more importantly, the Government realized that the perception of the poor and the unemployed that they had been inadequately and unfairly treated contributed to the aggravation of the civil conflict situation. Therefore, in its election campaign in 1988, the Government promised to launch two large programs, the Jana Sav.ya (poverty alleviation) Program (JSP) and the Mid-Day Meal Program (MDMP). The JSP was originally designed as significant income transfers to 50 percent of population for two years during which time beneficiaries are supposed to obtain necessary skills for employment or self-employment. This program would have cost above 20 percent of GDP a year if implemented in its original design. Concerned also with child malnutrition, the Government promised a program to provide a mid- day meal (or food stamps equivalent to it) to every school child in the country. Recognizing, however, the programs' fiscal implications and apparently limited effectiveness, the Government has recently started their W The issues of poverty and unemployment were discussed extensively in the last country economic memorandum. - 72 - restructuring to reduce leakages to non-intended beneficiaries and to increase their effectiveness. 2.78 It is important to note that a rational strategy to address the issue of social development must consist of three elements. The first, and the most important element is that the overall macroeconomic policy and the business environment be conducive to private productive investment, and thus, support efficient growth of income. These policy issues are discussed in the rest of this report. The second element is that investment programs in education and health, which the Sri Lankan Government traditionally emphasized, must be well-chosen and designed to increase their effectiveness. Giveh the importance of the quality of human capital that supports future growth, the Government should vigorously pursue implementation of high priority social projects. This issue of prioritizing investments will be discussed in the public expenditure review in the context of the ne:ct Country Economic Memorandum. Third, income transfer programs, as a safety net, must be managed effectively for those who remain in extreme poverty. It is understandable that the Government particularly stresses the need for safety- net programs during a period of major economic restructuring because some price hikes hurt the poor directly and because shifting resources from non- productive/non-competitive sectors to more promising areas inevitably involves temporary displacement of labor. This notwithstanding, the Government's focus so far on the income transfer programs has been excessive relative to the two other types of efforts that need to be made; even with the ongoing restructuring efforts, income transfers amount to above 3 percent of GDP as compared with 1 percent prior to 1989. Discussed below are ongoing efforts by the Government to rectify targeting and cost effectiveness problems of the three major poverty programs (the Food Stamp, Jana Saviya, and the Mid-Day Meal) which account for 70 percent of current transfers to households. a) Jana Saviya Program 2.79 The Jana Saviya Program (JSP) is the Government's main poverty alleviation program. The original proposal was to give substantial consumption assistance to one half of the population for two years. Realizing its high fiscal cost, the Government has reduced the program and staggered it over 11 rounds. The first round was initiated in October 1989. In this Round, 164,000 families had access to a monthly entitlement, consisting of Rs 1042 in JSP stamps to buy specified consumer goods from the cooperatives, and Rs 458 to be deposited in an individual's saving account. There were, however, two major shortcomings with Round I: First, it was not well targeted to the poor. Almost tnree quarters of the food stamp holders were included in the program. Second, the supposed production-orientation of the program was missing--JSP recipients were expected to engage in some sort of community related work (called Saragam), but this was never enforced, creating strong disincentives to work, ns JSP benefits are about equivalent to the wage level of a semi-skilled laborer. 2.80 Based on the experience of this first round, the second round has been restructured substantially in the following three respects. First, using the above-mentioned community-based screening process, the Government has - 73 - reduced the number of second round JSP beneficiaries from the initially intanded 164,000 to 100,000 households. The screening process was carried out in three phases. In the first phase. 20 poorest families were selected in each hamlet of the 22 Assistant Government Agent (AGA) divisions following a community based screeiiing process among food stamp recipients. This phase identified only one third of the food stamp recipients. Subsequently, following the same proceduire, another 10 families from each hamlet were selected, making a total of 70,000 JSP beneficiaries. In some hamlets where there is a large concentration of thP poor, more families were identified in a third phase. The number of beneficiaries so selected was 100,000 families, or 50 percent of food stamp recipients in these divisione. 2.81 Second, Round II is being made more production-oriented. To receive the entitlement, Round II beneficiaries have to enroll in production- oriented work which includes civil works, land development, skills and entrepreneurship training for self-employment and micro-enterprise development. This nexus between JSP payment and participation in a productive activity will be achieved with assistance from the newly created Jana Saviya rrust established in the context of IDA's Poverty Alleviation Credit (PAC) and in close cooperation with partner organizations which are mainly NGOs and relevant government agencies. The identification and management of rural civil works and the provision of training for the JSP participants are carried out by partner organizations under the supervision of the Trust/PAC. The PAC, in addition, has a credit component that assists the enterprising among the poor to start their own businesses. Third, in the JSP, the Government will put into place an exit mechanism so that: (i) those refusing to participate in a productive activity would be dropped from the program immediately and become eligible for food stamps only; and (ii) beneficiaries would graduate from the program within the two-year JSP entitlement period as soon as the family's income level reaches Rs 1,500 per month on a sustained basis. This exit mechanism is expected to furt.er reduce the number of beneficiaries below 100,000. 2.82 These principles have been translated into clear guidelines with respect to the modus operandi of the Jana Saviya Trust. More importantly, the public in general and JSP recipients in particular have been informed of the new rules governing Round II. It is hoped that Round II would be a transitional and somewhat experimental phase which will try to establish a clear link between JSP entitlement, productive activities and the Trust. It is, therefore, recommended that the next round of the JSP be started after the implementation of Round II is fully underway and that the Jana Saviya Trust's capacity to undertake actions on a larger scale be enhanced. Additionally, partly because the budgetary resources are limited, state-owned commercial banks have been asked to extend low-interest credit to JSP beneficiaries. This has not yet been done on an extensive scale, but the Government should be discouraged from taking such action lest the financial sector development be undermined by further weakened state-owned banks. Additional subsidies to JSP beneficiaries, if needed at all, should come through the transparent budgetary system. - 74 - b) The Food Stamp Program 2.83 No matter how much emphasis the Government puts on production orientation and on training and entrepreneurship in its Jana Saviya Program and other policy areas, it will not be possible to eradicate poverty altogether. The food stamp program (FSP), if managed properly, can pro-de a safety net"J particularly for the ultra poor (defined as those spending more than 80 percent of their income and obtaining less than 80 percent of nutrition requirement in terms of calories--about 3 percent of the population). The FSP, however, also suffered from inadequate targeting with limited benefits per capita. The Government has, therefore, undertaken to re- target the population of FSP beneficiaries to the truly needy and reduce their number to one million households, an estimated size of the truly needy. However, these one million households have been screened from outside the areas where JSP rounds I and II are being implemented, as no food stamp benefits are given in those regions. Therefore, the selection is being done based on 1.5 million families, rather than the originally planned population of 1.9 million covering the entire island (excluding the North and East where the program administration is impossible). Next, from the remaining 1.5 million households, about 600,000 families have been declared ineligible and so notified while 100,000 families, who had not been receiving food stamps, have been identified as eligible in the process and added to the beneficiary list. (The latter number may include families dislocated from the North and East, and affected by the return migration from the Gulf.) Food stamps which are good from October 1, 1991 have been issued to these eligible one million households. In this process, there are two considerations that the Government has to take into account. First, JSP is unlikely to eliminate poverty, as at the end of the program even the Government's optimistic projection states 60 percent to 80 percent of the beneficiaries will have a sustainable income, in the wet zone and in the dry zone about 20 to 40 percent. These figures are likely to be much lower. Therefore, some JSP areas will continue to need income transfers in the future. Second, food stamp entitlement per family should be increased for the ultra-poor. Budgetary saving should be achieved by further targeting of the beneficiaries to the poorest of the populat'on. c) The Mid-Day Meal Program 2.84 The mid-day meal program clearly suffers from highly limited effectiveness in reducing child malnutrition, and is a good candidate for resource savings through its elimination or fundamental redesigning. In this program, every school child in primary and secondary education receives a daily coupon for three rupees (on condition that he/she brings a homemade lunch to school) which can be used at the end of the month to buy candy, soft My It is, hoever, wrong to assume that every poor person Just be covered by this safety net. For some temporarily unemployed, for example, unemployment insurance should be much more efficient. Furthermore, in view of the potential work disincentives such income transfer could entail, the current eligibility criteria consisting mostly of income levels should be reviewed thoroughly. - 75 - drink, exercise book, or food for adult members of the family at designated stores. It is clear that in ad3ition to being costly (actual expenditures of around Rs 1.6 billion in 1990). this program is far from achieving its intended objectives, i.e. to satisfy the nutritional requirements of the school-age population. Rather, it merely causes leakages of enormous resources to non-poor children and their parents. There are certainly more effective ways to improve the nutritional status in the country by targeting children under three years of age who are nutritionally at risk, and lactating mothers. An innovative nutrition intervention approach being tested by the Government in one AGA divisioii will be extended to others under the IDA- assisted Poverty Alleviation Project. It is estimated that the cost of the nation-wide application of this targeted nutrition intervention is at most Rs 400 million. This should replace the mid-day meal program entirely. - 76 - CHAPTER III. 1992 AID REQUIREMENTS 1. Recent Trend of Foreign Aid 3.1 Overall Trend. Sri Lanka has received bilateral and multilateral aid averaging about US$580 million on a gross disbursement basisL' between 1985 and 1990. Aid disbursements have been 8 percent of GDP (vis-a-vis low income country average of about 6 percent in 1989)29 and have been about the size of the current account deficit of the balance of payments except for 1990 and 1991 when aid disbursements significantly exceeded the latter. On average, project disbursements have been about US$480 million a1 year and have financed 50-60 percent of public investment (Table 3.1). In 1$89 and 1990, this ratio increased to near 70 percent reflecting efforts by many donors to finance a portion of local costs. As a share of GDP, however, project aid disbursements have followed a declining trend during the second half of the 1980s (Table 3.2) reflecting, inter alia, (i) a slowdown in 1Mahaweli Development projects as some large projects were completed; (ii) difficulties in implementing some projects, including particularly in irrigation, due to the civil conflict; and (iii) a shortage of counterpart funds rei;ulting from a temporary but strict across-the-board cut in fiscal expenditures imposed to stabilize the economy towards the end of the decade. During the early 1980s when Mahaweli projects disbursements declined rapidly, the decline was offset by a similar increase in non-Mahaweli project aid. During the last five years of the 1980s, however, Mahaweli-related disbursements continued to decline, albeit slowly, while non-Mahaweli project disbursements stayed between 5.2-5.9 percent of GDP without any particular trend. 18 According to data base of the Department of External Resources. 2u According to the World Development Report (1991, World Bank), this figure excludes India and China. - 77 - Table 3.1a PROJECT AID DISBURSEMENTS AS A SHARE OF PUBLIC INVESTMENT (in percent) 1985 1986 1987 1988 1989 1990 54.4 59.7 54.1 54.2 68.6 66.8 Sources Department of External Resources Table 0.2: AID DISBURSEMENTS AS SHARE OF CDP (In percent) 1982-84 1985 _1986S 1987 198 1989 1987-89 Average Average Project Aid 6.4 6.8 6.9 6.0 6.4 5.7 6.1 o0w Mahawell Projects 1 1.6 1.0 0.5 0.5 0.6 0.6 o/w Non-Mahawll Projects 8.3 6.2 5.9 5.6 6.9 5.2 .68 Non-Project Aid 2.2 1.6 1.6 1.3 1.8 1.9 1.7 Total Aid 8.7 8.4 8.6 7.8 8.2 7.8 7.7 Source: Department of External Resources 3.2 Unlike project aid, non-project aid has been gradually increasing during the last four to five yearti. The advent of adjustment lending by ADB and IDA in 1989 has, however, chan .i its composition. In 1991, in particular, adjustment disbursements amounted to US$270 million to support the Government's economic restructuring efforts--close to three times as much as the average of annual non-project aid Sri Lanka received between 1985 and 1987. 3.3 Distribution of project aid by sector appears in Table 3.3 and Diagram 3.1. As noted above, disbursements for Mahaweli and other irrigation- related projects plummeted from 37 percent to 7 percent. While it is understandable that Mahaweli-related aid disbursements came down, there is a question whether aid for other irrigation facilities should come down to the extent it did given that investment in and rehabilitation of small- and medium-scale irrigation schemes should continue to have a high priority for developing diversified agriculture and sustaining efficient paddy production. This issue deserves closer examination in the planned public expenditure review in 1992. Turning to infrastructure, the share of transport in total - 78 - project aid has also been falling. This is potentially a cause for concern given the high priority that should be accorded to road transport for the economy to sustain high growth. On the other hand, the shares of energy and telecommunications in project aid have, as expected, been on an increasing trend. Larger increases in energy and telecommunications during the last three years are due to the Samanalawewa Hydro Power Project and the Greater Colombo Telecommunicetion Network Project. The share of social sector projects on the whole tncreased slightly although there were some fluctuations due to bulkiness associated with project disbursements. Table 3.3: SECTOR DISTRIBUTION OF TOTAL PROJECT AID (percent of total) 1985 1986 1987 1988 1989 1990 Agriculture & Irrig. 47.0 33.2 33.8 34.2 25.6 25.8 osw Agriculture 4.5 6.1 11.2 13.3 5.2 8.2 o/w Mahaweli Scheme 21,5 11.6 7.5 7.1 7.3 3.8 o/w Other Irrigation 15.7 10.1 8.3 7.1 7.0 3.3 Infrastructure 30.6 40.7 31.7 34.4 36.8 46.1 o/w Transport 11.3 17.9 8.4 8.7 10.8 6.4 olw Telecommunication 2.4 1.6 2.9 6.1 6.7 7.6 ojw Energy 12.1 13.4 16.4 16.7 16.2 27.6 Social Sectors 4.1 7.1 7.0 8.1 16.1 6.5 Others 18.3 19.0 27.5 23.3 21.5 21.6 Source: Mission estimates based on project-by-project data provided by the Department of External Resources - 79 - Project Aid Disbursements by Sector in 1985 Telecommunication 2 8% Others Infrastructure Arc.& Rural Devel. Soclal Sectors 4% Irrig. & Mahawell 37% Project Aid Disbursements by Sector in 1990 22% Others Agric. & Rural Devel. Toleeommun:catSon Irrig. & Mahawell 7% Social Sectors Infrastructure - 80 - 2. B0alance of Payments Proiections and Aid Requirements 3.4 Base Case. The 1992 projection of external balance of payments (Table 3.4) is based on the following medium.-term assumptions: first, the current civil conflict in the North and East will gradually subside and not disrupt economic activities further, and that specifically it will not pose a threat to business activities in the rest of the country; second, as a consequence of the first assumption, security expenditures as a share of GDP will decline gradually; third, general political stability will be maintained and implementation of economic restl.ucturing measures to encourage private investments will be sustained; and fourth, external competitiveness will be maintained through appropriate exchange rate, wage and aggregate demand policies. Table 8.4: BALAN4CE OF PAYMENTS PROJECTIONS--BASE CASE (in US$t ilion) _ItWm_ 1990 1992. 1992 Est. Pre ltm. Proi. Trads balance -703 -844 -798 Exports 1976 2080 2299 Imports 2679 2924 3096 of which: petroleum 368 816 321 Services, not -97 -122 -114 Receipts 634 630 624 Payments 631 762 738 of which: interest 194 199 183 Private transfers, net 388 371 332 Currant account (excluding -434 -595 -578 official transfers) Official transfers (not) 176 168 18S Medium- and long-term, not 399 593 411 Disbursements 569 764 648 Government 587 877 626 Program/commodity aid 198 842 240 Project 339 334 88S Irivat. 82 77 21 Ahmortization 202 k18 235 Government 127 133 165 Privato 76 8a 71 Direct lnvotmofnt, not 82 55 eo Private short-term, net 8S 29 -11 Government Short-term, not 0 3o 0 Errors and omissions 26 24 0 -----------------------------__---------------------------- Overall balance 178 244 67 3.5 If these assumptions hold, the economy is expected to maintain the growth momentum that appears to have been established in 1990 and 1991; growth in 1992 is expected to be 5 percent, and average real growth is expected to be - 81 - 5-6 percent a year during the next three years. It should be emphasized that this positive outlook is sensitive to progress--or lack of progress--in resolving the civil conflict. 3.6 To sustain this rate of growth within a tightly managed macroeconomic framework but reflecting the negative real import growth between 1987-1989, the overall 1991 and 1992 inport elasticity is assumed to be above 1.2 (1990 was 1.06). Particularly high in these years are elasticities of imports of investment goods and intermediate goods (including oil) reflecting the assumed high economic growth and limited initial stock availability. Consumer goods, on the other hand, are expected to have an increasing but low elasticity reflecting both the assumption that regular weather conditions prevail, which reduces the need for substantial rice imports, and that Government's measures to remove consumption bias in the economy will be implemented as discussed in Chapter II. It is, however, expected that there will be an initial increase in imports of non-food consumer goods because some pent-up demand for these goods exists. As this pent-up demand and demand for stock adjustment for investment and intermediate goods are eased in the medium-term future (by 1994/95), import elasticities for these goods are projected to fall to around unity. With these assumptions, the overall imports in real terms will be growing at 5-6 percent a year. This would translate to about 10 percent growth in nominal US dollar term imports from 1992 onwards. 3.7 From 1992, export volume is expected to grow at slightly above 7 percent a year. Export-oriented and liberalizing policy measures discussed in Chapter II are expected to create an environment conducive to non-traditional export growth. Non-tree crop agriculture and "other" industrial exports (excluding garments, processed diamonds and petroleum re-exports), as a result, are expected to continue to grow rapidly, at 9 percent and 19 percent in volume terms, respectively. These rates reflect actual performance as these exports have been growing at 10 percent and 18 percent, respectively, over the last four to five years. Garment exports are expected to grow at 8 percent in volume terms--this projected growth is a little slower than 11 percent average in the past five years reflecting expected changes in market conditions after 1992 and a gradual shift of Sri Lankan production to higher value-added products. Traditional treecrop exports on the other hand, are expected to have steady but rather low growth rates. In volume terns, tea and rubber exports are expected to be growing at 1-2.5 percent a year. Coconut exports are expected to be maintained at the 1990 level (when weather conditions for coconut were average). Gem exports, which have had large fluctuations, are projected to maintain the 1990 export level on average. These volume projections discussed above would translate into 9 percent growth in nominal US dollar terms in 1992 and 11-12 percent thereafter. 3.8 These exports and imports projections would give the current account deficit of around 5.7-5.9 percent of GDP during the next several ^1 r. - 82 ° years6.2 This includes a conservative projection on tourism (nominally growing at 10-11 perceat a year after doubling between 1989 and 1991), and gradual recovery of private transfers from the delayed negative impact of the Gulf crisis. Furthermore, debt service obligations declined from 25 percent of exports of goods and non-factor services in 1989 to 18-19 percent in 1990 and 1991 primarily because of amortization of the Government's short-term commercial debts. They are projected to further decline to 12.4 percent by 1994 because of buoyant export growth, and continued restraint from commercial borrowing. In this respect, the Government needs to proceed carefully regarding the purchase of a number cf airplanes planned by Air Lanka over the next few years. Already, the first purchase of an airbus raised the commercial borrowing by US$36 million in 1991. Future commercial borrowing for this purpose shnuld be minimized and, initially, leasing should be done until the market proves that purchases will have high returns. 3.9 Finally, foreign investment, which increased significantly in 1991 albeit from a low 1990 base, would be boosted further and projected to reach US$100 million in two or three years. To achieve these levels, the Government would have to create a liberalized investment climate with unified, simple and automatic procedures for fure.'gn investment approval (paras. 2.61-2.67) as quickly as possible as well as to make progress in resolving the civil conflict. 3.10 Aid Requirements for 1992. As argued in Chapter II, the Government has committed itself to reforms that, if sustained, will lead to export- oriented and sustained growth, although macroeconomic management in 1991 was not tight enough. If the Government can get the economy back on to the restructuring path by reversing the expansionary macroeconomic trend it started to establish in 1991, and maintain the earlier commitment to implementing export-oriented policy reforms, Sri Lanka should succeed in achieving such growth. In addition, growth would not only increase the income level but also reduce unemployment and most probably reduce the level of social tension u-derlying the civil conflict situation in the country. 3.11 To achieve this sustained growth, the reform efforts must continue. The current account deficit in 1992 that supports the reform efforts is expected to be around 5.8-5.9 percent of GDP. In addition, taking into consideration the need for debt amortization, restoration of gross reserves to a level equivalent to three months of merchandise imports (which was the average coverage during the early 1980s) and netting out private sector flows and the IMF's ESAF, the external aid financing requirement is projected to be about US$790 million a year for 1992 (Table 3.5). Project aid disbursements are expected to be about US$530 million which is consistent with the Government's public investment program. About US$ 500 million of this can be W The current account deficit of 5.4 percent ol GDP achieved in 1990 was due to some exceptional circumstances and was based on external factors that are unlikely to be repeated. A current account deficit of 5.8-5.9 percent of GDP, therefore, is assumed to be a more realistic starting deficit level for the near future. - 83 - disbursed from the existing project pipeline (Table 3.6) assuming a 23-24 percent disbursement ratio, which was about the level experienced in 1990. Should civil order be restored and the whole island become accessible to project personnel, project disbursements should improve to probably above a 25 porcent disbursement ratios in the near future. To obtain the remaining US$30 million of project aid disbursements in 1992 and to meet future investment needs with an improved disbursement ratio, new project aid commitments of about US$630 million will be required for 1992, provided that the actual 1991 project aid commitment is as estimated--about US$760 million. Table S.6: EXTERNAL FINAfCING REQUIREMENTS (in USS m1lI0on) Prelim. Projection Current account d.ficit, *xcluding official transfers 595 678 Amortization 218 285 Change In gross reserves 258 110 IMF repurchas*e 86 78 loes: ESAF 78 149 Privat, creditors 198 20 Foreign diroct investment 56 80 Change In liabilities of the banking system and errors and omissions 46 -24 Total Aid Financing Requirement 781 790 Aid Disbursements: 781 790 From Existing Commitments 781 690 Projects 427 go0 Program/SOP 854 190 From New Commitments - 100 Projects -- 80 Program/BOP -- 70 Financing Gap 0 0 3.12 This would leave about US$260 million of the financing gap to be filled by disbursements from the existing pipeline of non-project aid of about US$290 million as of December 31, 1991 (see Table 3.6), as well as new coumitments including multilateral balance-of-payments support. Given this large pipeline of non-project aid, US$190 million is expected to be disbursed from this category. The remaining amount of about US$70 million will have to be disbursed from new commitments. This will require about US$60 million of regular food/commodity aid commitments in addition to two multilateral policy- based operations, amounting to US$110 million, preparation for which is currently underway. - 84 - TkIsA.6; OV9tALL AID PI*'6M, 19?-1992 Non-Mahawell NahRavel Structural Commodity Al Foi Total of *h)ch (Accelerated) Adjuetwent Non-H.hwll Undl.buraed Balance 12/31/88 1180.8 879.2 - 142 2 - 2107.2 1728.0 Comitment. 237.3 11.3 80.0 12.9 55.0 898.6 88 82 Disburveemnto 889.2 60.9 29.3 62.6 44.0 88680 47.1i Cancellations 18.2 - - - - 18.2 18.2 2iQ Undlebured Balance 12/81/69 1465.7 829.6 S0.7 92.8 11.0 1949.5 1619.9 Coimtaitent 555.1 2.0 309.2 76.7 80.3 978.8 971.8 Dlbursements 428.4 26.9 89.2 47.2 88.6 625.6 898.4 CanceilatIon. 46.0 47.0 - - . 93.0 48.0 Undlabur ed Balance 12/81/90 1551.4 257.7 270.7 122.0 2.7 2204.S 1946.8 Commitment. 708.1 47.4 165.0 84.6 445 6 999.6 982.2 Disburseen.rts 869.7 57.7 272.8 88.0 45.8 781.0 7283. Cancellation, 7.6 4.0 - - - 11.8 7.8 Undiebura.d ealance 12/S1/91 1882. 34S.4 168.4 120.1 8 90 2411 j 3 18 7.9 Commitments 680.0 110.0 60.0 800.0 Disbursements 880.0 190.0 70.0 700.0 Ii Excludes non-conceoaional guaranteb by a bilateral Export-Import Bank for imports for oheat. Sourcs: Department of External Rescurce* and S.aff Estimates 3.13 In sum, in 1992, the country needs commitments in project aid amounting to about US$630 million and commodity/balance-of-payments aid commitments of US$170 million a year, totalling around US$800 million a year. This would be consistent with the amount of donor commitments in the recent past which included about 20 percent add-on components to help the economy cope with the negative impact of the Gulf crisis. It should be clearly noted, however, that if the reform efforts by the Government were to be delayed or reversed, the rational for this high level of aid, in particular balance-of- payment support, would be significantly weakened. Balance of payments support in the absence of adjustment would allow an unsustainable external current account deficit and would erode the economy's external competitiveness unless policy measures to protect it were implemented. In addition, this type of aid, through making local counterpart funds available to the Government, could increase public consumption. Balance of payments support of the magnitude discussed here, therefore, can be justified only if the Government takes appropriate measurea to enhance export competitiveness as discussed 1A Chapter II. In 1992, balance of payments support should also depend on the Government's reversing the relatively lax macroeconomic stance it took during the second half of 1991 and making adequate progress in establishing the policy framework conducive to private investment as discussed in the Policy Framework Paper. To assist the Government do this, the public expenditure review planned for 1992 in the context of the next Country Economic Memorandum should be implemented as quickly as possible to identify the areas of potential savings in the Government's recurrent expenditures in addition to those already discussed (wages, pension, welfare programs). Other important policy concerns and reforms include: continuing implementation of administrative reforms; restructuring the large but inefficient public sector tree crop plantations; restructuring and privatizing other large public sector - 85 - entities including CWE, and CPC; improving the efficiency of the financial sector and capital market; and other measures to promote private sector development by removing institutional, regulatory and legislative obstacles to private investment. 3.14 The Government has established a clear goal to achieve high and sustained growth through deveiopmant if industry and diversified agriculture oriented towards export, and this goal should be supported through investment aid. To lay the foundation for such growth, Sri Lanka needs to invest in additional infrastructural assets and to improve on operations and maintenance of existing assets. In the Greater Metropolitan Areas, improved industrial infrastructure facilities (power, industrial water, port, telecommunications and intra-urban and inter-city transport) are required while for diversified agriculture (which induces more broad-based growth) an efficient system of rural-urban transport, high-quality telecommunications, and irrigation facilities managed by farmers are essential. In addition, the economy needs to keep up social sector investments that facilitate future growth. Further work is needed on priorities among sectors. For example, an irrigation strategy after the Mahaweli has not been established. Neither has a clear investment priority within the transport sector been established despite recent efforts. Again, the public expenditure review planned for 1992 is expected to help fill these gaps and establish investment priorities for the medium-term future. Furthermore, in view of the recent economic disruptions in the North and East, public investment (and donor assistance) needs should be reviewed in detail once the civil situation improves substantially. The Government would then need to assess to what extent physical assets have been damaged by sector and by region, and prepare an investment plan within a framework of private sector-led growth. 3.15 There is, however, a risk that the civil conflict in the North and East might worsen, in which event macroeconomic management would be made more difficult. Donor support would then have to depend on how the Government deals with the situation. Donors would need to review, for example, the extent of physical damage and insecurity, and the Government's efforts to protect sound economic management and a positive investment climate. -86- ANNEX 1 List of Public Enterprises Privatized/to be Privatized 1. Acland Insurance 2. Asian Hotels Corporation * 3. Building Materials Corporation 4. Ceylon Ceramics Corporation 5. Ceylon Fertilizer Corporation 6. Ceylon Hardware Corporation * 7. Ceylon Leather Corporation * 8. Ceylon Manufacturers & Merchants Ltd 9. Ceylon Mineral Sands Corporation 10. Ceylon Oils and Fats Corporation 11. Ceylon Oxygen Ltd * 12. Ceylon Petroleum Corporation Nylon Plant 13. Ceylon Plywoods Corporation 14. Ceylon Steel Corporation 15. Cooperative Wholesale Establishment 16. Cey-Nor Foundation Ltd 17. Colombo Commercial Company (Engineering) Ltd 18. Colombo Commercial Company (Fertilizer) Ltd 19. Colombo Commercial Company (Teas) Ltd 20. Consolidated Exports & Trading Corporation 21. Dankotuwa Porcelain * 22. Distilleries Corporation of Sri Lanka 23. Hevyquip Ltd 24. Hotel de Buhari * 25. Hunas Falls Hotel * 26. Independent Television Network 27. Lanka Canneries 28. Lanka Milk Foods * 29. Mattegama Textile Mills + 30. Milk Industries of Lanka Company Ltd (MILCO) 31. National Paper Corporation 32. National Salt Corporation 33. Nylon 6 Plant of the Ceylon Petroleum Corporation + 34. Paranthan Chemicals Corporation 35. Pugoda Textile Mills * 36. Sathosa Computers Company 37. Sathosa Engineering 38. Sathosa Motors Company 39. Sathosa Printers Company 40. Sri Lanka Cement Corporation 41. Sri Lanka State Trading (General) Corporation 42. Sri Lanka State Trading (Tractor) Corporation 43. Sri Lanka Tyre Corporation 44. State Mining and Mineral Development Corporation 45. Thulhiriya Textile Mills * 46. Trans Asia Hotels Ltd. 47. United Motors * 48. Veyangoda Textile Mills * Privatization completed. * Privatization contracts signed. -87- ANNEX 2 Page 1 of 11 A Survey of Sri Lankan Firms: An Interim Result Background 1. A survey of forty Sri Lankan firmsU was conducted during mid-1991, primarily to assess the evolution of cost of production, output prices, and values of production in the last five years. Costs of production include (i) imported raw material inputs: (ii) local physical raw material inputs; (iii) other inputs (such as electricity, fuel, water and inward transport); and (iv) labor costs. Values of production are at ex-factory prices. From this data estimates of value added and labor productivity (or value added per employee) were also derived. Information on the financial perfcrmance of the firms over the last five years was also collected. 2. The questionnaire included a qualitative section covering a number of issues. These included major constreints to business activities, and exports in particular, difficulties involved in recruiting labor, wage increases anticipated and infrastructural problems faced (covering issues of power, water, telecommunications and transport). The survey returns are still being analyzed but given below are some interim observations on the wage movements and constraints to business/exports perceived by entrepreneurs. Methodology The Structure of the Survey Sample 3. Table 1 shows the distribution of the forty firms surveyed by the fourteen product categories employed, over the last fiscal year (1990/91). The proportion of firms in the sample exporting wearing apparel (at 10 percent) was significantly below the proportion of these firms in the country's total export sector. This was deliberately done as to give some extra weight to other sectors, where there might be potential for export growth. Of the forty firms surveyed, five firms in each year exported no output. " Ideally, a structured random sample should have been selected. However, considering the time constraint, it was decided to focus on a selection of established firms in the metropolitan Colombo area producing a fairly representative cross-section of products (primarily, but not wholly, oriented towards exports--some service and construction firms are included for comparison). These firms tended to be drawn from a group of larger firms. - 88 - ANNEX 2 Page 2 of 11 Table 1: DISTRIBUTION O FI1 MS SURVEYED BY PRODUCT CATEGORY IN FY 1990/91 Product Category Number of Firms in FY 1990/91 Agriculture and Fisheries 5 Food, Beverages and Tobacco 5 Wearing Apparel 4 Leather and Footwear 2 Wood and Wood Products 3 Paper and Paper Products 1 Chemicals and Chemical Products 2 Coconut and Coconut Products 4 Rubber Products 4 Pottery China and Glass 2 Gems and Jewellery 1 Machinery and Equipment 3 Construction 1 Services 3 All product Categories 40 4. Table 2 shows the distribution of the forty firms surveyed by the average number of employees in each of the last three fiscal year, 1990/91. As is apparent, the firms are relatively small by international standards. Table 3 shows the distribution of the forty firms surveyed by the percentage of output exported in each of the last three fiscal year 1990/91. Of this sample there were five firms which exported nothing in the fiscal year 1990/91, five in the fiscal year 1989/90 and five in the fiscal year 1988/89. These firms were largely from the construction or service sector and had been specifically included to provide a guide to movements in wages and other cost indices of the non-export sector. Barring these, half or more of the sample exported 80 percent or more of their entire output in each of the last three fiscal years, 1988/89, 1989/90 and 1990/91. Table 2: DISThIRIJON OF FIRMS BY AVERAGE N?UMR OF EMPLOYEES IN EACH FISCAL YEAR (FY19089 - FY1090/91) Fiscal Average 0-49 S0149 160 - S00 - 500 - 700 *nd Fliis not Total Year Number of 299 499 699 more accountod for Employeeu 1988/89 12 4 6 1 1 1 10 40 1989/90 10 9 4 11 1 - 5 40 1990/91 11 7 a 10 a 1 6 40 89 - ANNEX 2 Page 3 of 11 Lable l: DISIRITION OF FIM BY PERCENTAGE OF OTPIUT EXPORlTED IN EACH FISCAL YEAR (FY190/49 - FY 1990/91) Fiscal rcentage of OutDut Exported Firms not Total Year 0- 2- 40- 60_- 8 - Accountd tor 19.9 39.9 69.9 79.9 100 1988/89 7 1 2 a 20 7 40 1989/90 8 0 2 a 24 8 40 1990/91 8 2 1 2 24 a 40 5. Table 4 shows the distribution of the fcrty firms surveyed by pre-tax profit as a percentage of turnover in each of the three fiscal years. As is apparent the pre-tax profit of a half or more of the firms surveyed was positive but less than 20 percent of turnover. Indeed, in most cases it was positive but less than 10 percent of turnover. Table 4: DISTRIBTON OF FIRMS BY PRE-TAX PROFIT AS A PERCENTAGE OF - RER (FY1968 A) 1988/89 - FY19M ND 1990/91) Fiscal Year Pro-Tax Prof IS as a Porcentaed of Tu-rnover FPIrms Firma not 0 0-9.9 10-19.9 20 or more Incorporat*d Incorporated In the in the _______ analysis analysis 1988 and 4 19 6 6 34 a 1988/89 1989 and 6 1i 10 8 37 a 1989/90 1990 and 6 14 6 8 34 6 1990/91 6. Table 5 shows the distribution of the forty firms surveyed by pre-tax profit per employee in each of the fiscal years 1988/89 to 1990/91 inclusive. The pre-tax profits in each fiscal year were divided by the number of employees at the end of that fiscal year, namely, March 31, as in the course of the survey it was found that this figure was more reliable than the "average number of employees" given. From Table 6 it is clear that in each year, a substantial number (representing over a third of the firms surveyed) had pre-tax profits per employee which were positive but less than Rs 50,000. A8 90 - ANNEX 2 Page 4 of 11 Table 6: DISTRIBUTION OF FIRMS BY PRE-Tt.X PROFIT PER EMPLOYEE IN RUPEES - THSANDS IN EACH FISCAL YEAR (198/9 - 1990/91) F 66i Te-x r e ysen n g ourm Flrma not. (0 0-49 60 160 or more Incorporated Incorporatod In the Analysis In the Analysis 1989/90 8 17 e 2 9 1990/91 6 14 C 4 28 12 7. TaDle 6 shows the distribution of the forty firms surveyed classified by proportion of output exported and labor productivity (or value added per employee) in the fiscal year t990/91. From this it is clear that almost half the sample (or 19 firms altogether) had a labor productivity ranging from zero to Rs 74,000 during this fiscal year. Of the 22 firms exporting 80 percent or moze of their output fcr which labor productivity could be calculated as many as 12 had a labor productivity level of between zero and Rs 74,000 in fiscal year 1990/91 and another eight between Rs 75,000 and Rs 224,000. Table St DISTRIBUTION OF SRI LANtAN FIRMS SURVEYED CLASSIFIED BY (PERCENTAGE) PROPORTION OF WTPUT EXPORTED AND LASR PROUCTIVITY (VALUE ADED PER EIFLOYEE) IN FY190/91 =~~~~~~~~~ao Prdctvt = nRe ME rms ) b f ir-mo Sli-o Percentage T rrou v neouan More rin Proportion of L0- 75- 150- 225- than Incorporated Incorporsted Output Exported than 0 74 149 224 Bo0 B00 In the Analysis In tho Analysis 0- 19.9 0 8 0 0 0 2 5 4 20- 9.9 0 2 1 0 0 0 a 0 40- 69-9 0 1 1 0 0 0 2 0 0- 79.9 0 1 0 0 0 0 1 1 80- 100.0 1 12 5 a 0 1 22 2 Total 1 19 7 8 0 a as 7 Analysis of the Survey Data 8. Table 7 shows the mean percentage wage increases in the firms surveyed between March 1987 and March 1991 and selected standard deviations by skill category based on 23 firms who gave complete data and a partial coverage of some of the other firms. Table P compares these with wage increases in unorganized construction workers and CCPI inflation rates. Overall, these wage increases seem to be above the price increases reflected in the CCPI. - 91 - ANNEX 2 Page 5 of 11 Table 7: WAGE INCREASES (Z) 1, Mar.87-Mar.88 Mar.88-Mar.89 Mar.89-Mar.90 Mar.90-Mar.91 Managerial 18.0 12.5 12.5 18.3 (19.7) Skilled 18.e 22.1 15.9 26.0 (22.0) Unskilled __, 13.2 17.8 10.8 22.7 (19.6) Average 16.9 17.2 13.1 23.8 (20.2) Standard 15.8 19.3 16.3 23.8 (19.4) Deviations of Average I_I_I_I_I 1/ Unweighted averages except for March 90-March 91 column which is weighted. Unweighted figures 1i the column apear in parenthesis. This Table is being updated to make all figures weighted. Source: Mission Survey Table 8: UNORGANIZED CARPENTER'S WAGE AND CONSUMER PRICE INFLATION 1987 1988 1989 1990 LMaster 7.6 11.2 15.0 17.5 Skilled 8.4 13.3 14.8 19.2 Unakilled 7.4 12.4 16.4 22.3 CCPI 1/ 8.2 13.4 11.6 22.5 1/ Colombo Consumers' Price Index Sources Central Bank 9. Several observatons can be made. First, the standard deviations show that the variations across firms regarding wage movements have been significant. The fact even at unskilled levels wage increases can vary so much means that in the formal labor market (which is where most of the surveyed firms belong to) labor mobility is limited at all three levels (wage - 92 - ANNEX 2 Page 6 of 11 differentials across firms are not reduced by labor moving betwwen firms). The second observation is that in each year skilled workers tend to have highest wage increase implying that problems of labor shortage or mobility may be more serious at this level than the other two. 10. Third, the formal market wage moved up much faster than the informal market wages (Table 8) in 1987 and 1988, but in 1989 and 1990 the wages in two markets are comparable. The first impression is that in the years when the economy was growing slowly, informal sector wages barely kept up with the inflation. But formal sector employers are always competing with foreign employers (many workers left the country in the sicond half of the 1980s to be employed abroad including the Middle East, Australia and South-East Asia), and, therefore, could not afford to lower their wages too much relative to attractiveness of working abroad. These wage raises are for preventing them from leaving as there was probably costs (company-specific skill) associated with losing even unskilled workers. Informal sector workers also left the country; but their wages are dependent on pure market forcesV__with very slow growth the wage increases were slow in 1987 and 1988 but as the economy started to pick up from the second half of 1989 (and as many construction workers had already left the country causing labor supply to be on the shortage side) their wages started to increase rapidly. 11. Table 9 shows the mean percentage wage increases between March 31, 1990 and March 31, 1991 in the Sri Lankan firms surveyed by skill category and product category. The most notable features of this table are, first, the relatively high wage increases across all skill categories in the agriculture and fisheries sector. These increases were fairly evenly spread out across the firms. Second, there were very marked increases, especially in the manageriel and skilled categories, of the pottery, china and glass subsector. In this case, however, the increase was due to one firm which introduced a special incentive scheme in 1990. 2) There is an interesting point here that all unorganized sector worker wages move very closely with the Colombo Consumer Price Index. An inquiry into the mechanism of wage determination may be worthwhile. - 93 - ANNEX 2 Page 7 of 11 IbJks-i: lAN PIC9IA WWE IKrGASM BETWE eNsK% 81 1990 AND MAR0l &l 1099 IN TME SUt LNW FIR4 WWbEI by PFUCT CtSW NO OULL CA1I1WR Product Cat -gory- - - anag-rial Skilla- Unstkilled Firm- s Inorporated Firma no Skill Category In the Analyais Incorporated In the An.lysis Agriculture and Fisheries 80.2 42.1 28.6 4 1 Food Bvervages and Tobacco 11.7 11.2 16.8 a 2 Wvaring Appc rel 19.0 18.7 12.4 4 0 Leather and Footwear 17.6 8.8 5.4 2 0 Wood and Wood Products 9.4 18.0 16.7 8 0 Paper and Pnper Products - - - 0 1 Ch acale, and Chsaical Products 7.7 41.6 32.3 2 0 Coconut and Coconut Products 19.6 33.8 29.7 3 1 Rubber Products 16.6 23.8 28.0 4 0 Pottery, China and Closs 80.0 60.9 18.4 2 0 ae s *nd Jwellery - 16.7 16.7 1 0 Machinnry and Egupepent 16.7 14.6 18.0 2 1 Construction 11.0 - 11.0 1 0 Services 18.0 6.9 - 1 I 12. Constraints to Business. Table 10 shows the distribution of the firms surveyed by the percentage proportion of output exported and the most serious constraint to business cited. The most serious constraint to business cited comprised various infrastructural impediments such as the lack of raw materials or inadequate water, power or telecommunications. Over a quarter of the firms surveyed cited this as the most serious constraint businesses faced. Of the twelve firms citing this as the most serious constraint to business faced, seven (or over a half) were largely exporters (exporting 80 percent or more of their total output). Another serious constraint to business cited was an overvalued exchange rate. Nearly a quarter of the firms surveyed cited this as the most serious constraint the business faced. Of these nine firms, eight were largely exporters (exporting 80 percent or more of their total output). Ironically, however, as Table 11 shows, only two firms (both of which exported 80 percent or more of their total output), cited an overvalued exchange rate as the most serious constraints to exports. 94 - ANNEX 2 Page 8 of 11 Table 10: DISTRIBUTION OF THE FIRMS SURVEYED BY THE PERCENTAGE OF OUTPUT EXPORTED AND THE MOST SERIOUS CONSTRAINT TO BUSINESS CITED s~ F sorovau~stritPretg fOt Exporte lo Business CIt.3d -1. iS.9 40-59.9 50-79.9 80W-100 All Firms Lack of raw materiels, lnadoquate water, power, telocommunicati one tpoor Infrastructure) 8 0 1 1 7 12 An ovor-valuod exchange rate 0 1 0 0 8 9 Lack of suitable Labor 2 1 0 0 1 4 High Bank Intorest Rates/ Refinance Policies 1 1 0 0 2 4 Other 1 0 0 1 6 8 Explicit Statemnt of no Constraints 2 0 1 0 0 8 Firms Incorporated In the Analysis 9 3 2 2 24 40 Table 11: DISTRIBUTION OF THE FIRMS SURVEYED BY THE PERCENTAGE OF OUTPUT EXPORTED AND THE MOST IMPORTANT CONSTRAINT TO EXPORTS CITED goat important conPercentaog of OutRut Ex2or toExports Cited 0-019. 20-39.9 40-59.9 60-79.9 8-0--100 All Firms Lack of/Cost of raw materla ./ transportation 0 1 0 2 4 7 Bureaucracy 1 0 1 0 4 a An Oveovalued Exchange Rate 0 0 0 0 2 2 High Bank Interest Rates/ High Cost of Refinance lol1cles I 1 0 0 2 4 Othor 1 0 0 0 a 4 Explicit Statment of No Constraints 2 1 1 0 4 8 Not Applicable/No Constraints 4 0 0 0 6 9 Firms Incorporated In the Analysis 9 8 2 2 24 40 Firms Not Incorporated In the Analysis 0 0 0 0 0 0 - 95- ANNEX 2 Page 9 of 11 13. Table 12(a) and (b) shows the distribution of three most serious constraints to business and exports respectively. The pattern seems to be consistent with the distribution of the most serious constraints. !Table12(at DISTRIBUTION OF RESPONSES BY THE THREE MOST SERIOUS CONSTRAI.TS TO BUSINESS CITED Constraint No. of Responses (Percentage of Total Responses in Parentheses) Lack of Raw Materials/Inadequate Water/ Power/Telecommunications/Poor Infrastructure 22 (24.2) An Overvalued Exchange Rate 13 (14.3) High Bank Interest Rates/Cost of Finance/ Withdrawal of Refinance Facilities 12 (13.2) Lack of Suitable Labor/Labor Legislation 10 (11.0) Bureaucracy 8 (8.8) Tax Policies of the Government/Lack of Official Infrastructural Support in 'enetrating Overseas Markets 7 (7.7) High Overseas Import Duties/Quotas 3 (3.3) High Local Import Duties 3 (3.3) Explicit Statement of No Constraint 3 (3.3) Other 10 (11-0) Total Responses Analyzed 91 (100.0) - 96 - ANNEX 2 Page 10 of 11 Table ILb_t) DISTRIBUTION OF RESPONSES BY THE THREE MOST SERIOUS CONSTRAINTS TO EXPORTS CITED Constraint No. of Responses (Percentages of Total Responses in Parentheses) Bureaucracy 10 (15.9) Lack of/Cost of Raw Materials/Transport/Poor Infrastructure 9 (3.4.3) High Bank Interest Rates/High Cost of Finance/Refinance Policies 7 (11.1) Overvalued Exchange Rate 6 (9.5) Tax Policies of the Government/Lack of Official Infrastructural Support in Penetrating Overses Markets 3 (4.8) Lack of Suitable Labor/Labor Legislation 2 (3.2) High Overseas Import Duties/Quotas 2 (3.2) High Local Import Duties 2 (3.2) Explicit Statement of No Constraint 8 (12.7) Not Applicable/No Comment 8 (12.7) Other 6 (9.5) Total Responses Analyzed 63 (100.0) 14. Table 13 shows the distribution of the firms surveyed by the number of employees employed and the most serious constraint to business cited. There are two interesting features of this table. First, the firms citing poor infrastructure as the most serious constraint to their business tend to be small (in terms of the number of employees employed). Of the eleven firms makinig this assertion, eight were very small, with less than 150 employees. Second, the firms citing an overvalued exchange rate as the most serious - 97 - ANNEX 2 Page 11 of 11 Table 13: DISTRIBUTION OF THE FIRMS SURVEYED BY THE NUMBER OF EMPLOYEES EMPLOYED AND THE MOST SERIOUS CONSTRAINT TO BUSINESS CITED Most S rious Constraint Numbe- -- E-ployes. _ All to Business Cited 0-49 60-149 150-2P9 800-499 600-689 700 or Firms More Lack of Raw Materials Inndequate Water/Power, Telecommunications/ Poor Infrastructure 6 a 0 2 0 1 11 An Overvalued Exchange Rate 1 1 0 4 2 1 9 Lack of Suitable Labor 1 a 0 0 0 0 4 High Bank Interest Rntes and Cost of Flnance/ Withdrawal of Refinance Facilities 1 0 0 a 0 0 4 Other 1 0 1 4 1 0 7 Explielt Statement of No Constraints 2 0 0 0 0 1 8 Firms Incorporated in the Analysis 11 7 1 18 3 a 88 Firms Not Incorporated in tho Analysis 2 0 0 0 0 0 2 Interim Conclusions 15. Due to the biases in sampling, the relatively small number of firms surveyed and the wide variance in results (especially as regards wage increases), great caution should be attached to the results derived. It would appear that wage increases between end March 1990 and end March 1991 were of the approximate order of 20 percent or so across each skill category and over the use in the CCPI during the corresponding period. Some attempt has been made to look at the problems perceived by firms. Poor infrastructure and bureaucracy appear to be perceived as the major impediments to both business in general and exports in particular. Over-valuation of the exchange rase was a major concern for 20-25 percent of the firms surveyed. - 98 - ANNEX 3 Page 1 of 3 Unit Labor Cost Calculation Unit labor cost (c) is cost of a unit of labor in the international market adjusted for labor productivity. Therefore, it is defined as C = w I (1) v e where W = nominal wages per worker v * real value added per worker e = nominal exchange rate (Rs/US$) This equation can be re-written as C PC W Pt (2) pf v e where additional variables are Pc = consumers price Pt = producers price w = real wage per worker Taking the percentage difference of c =+ (-) + (.f) Pf v e - 99 ANNEX 3 Page 2 of 3 =- (c - Pf) + ( - 0) + (3.- e) (3) By cancelling Pf from Equation (3), we get = (k - P) + (13c- ) (4) where a dot above a variable means that it is a percentage change of the variable (i.e., P = AV/v) -; is a relative price between consumers price (inclusive of Pf non-tradeable prices) and manufacturing producer's prices (tradeable prices). This ratio influences excess demand for these two kinds of goods. When tradeable prices are relatively higher than non-tradeable prices or consumable's prices, incentive (profit) to produce tradeables is enhanced but domestic demand for them goes down. As a result, supply of tradeables increases and demand decreases. This decreases excess demand for general tradeable goods within the country and increases net exports. -w is an index of real wage adjusted for labor productivity. v Higher real wage will translate into a higher cost to the economy unless workers productivity increases commensurately. -f is the dollar price of Sri Lankan tradeable goods. This e determines the demand by foreign importers for Sri Lankan exports. Equation (4) is a simplified version and consists of only w/v and PI/e. The latter represents the domestic price level in foreign currency, or the extent to which domestic price movements are offset by devaluation. Elements of Equation (4) appear in the Table 2.7. - 100 - ANNEX 3 Page 3 of 3 Elements of Equation (3) are also of interest and is expressed below: EVOLUTION OF DETERMINANTS OF UNIT LABOR COST (Z changes) Year Labor Cost Changes in Changes in Change in adjusted real exchange US dollar Unit Labor for pro- rate price of Cost for ductivity Sri Lankan Competi- Exports tiveness 1987 5.4 -0.5 3.1 8.1 1988 3.6 9.0 -3.0 9.6 1989 -0.8 4.6 -6.4 -2.5 1990 -4.2 8.7 1.5 6.0 ---------------------------------------------------------------------__-- 1! Colombo Consumer Price Index Source: Central Bank; Mission estimates. It should be noted here that because consistent manufacturing employment data are not available, it is assumed to grow at 3 percent per year in the Table, slightly higher than the overall labor force growth rate of 2.5 percent.v U Regarding the lack of consistent manufacturing employment data, Industrial Surveys until 1989 reported the size of manufacturing employment of sampled firms who responded to the Surveys. The coverage of firms, especially those employing 24 or less employees, thus varied every year. What is worse, the latest 1990 Survey, reports only the estimated sector-wide employment based on the survey responses. The 1990 Industrial Survey figures consistent with the earlier series have not been derived by the Government. For information, the earlier industrial survey series implied 1.7 percent growth per year in manufacturing employment between 1984 and 1989, and the 1990 figure is 45 percent higher than the 1989 figure. This 1990 figure, however, is less than 50 percent of the manufacturing employment according to the labor force survey. - 101 - STATISTICAL APPENDIX Standard Tables Table 1: Sri Lanka - National Accounts Summary (Millions of Rupees at Current Prices) Table 2: Sri Lanka - National Accounts Summary (Millions of US$ at Constant 1982 prices) Table 3: Sri Lanka - Balance of Payments (Millions of US$ at Current Prices) Table No. 1.01 Population and Vital Statistics, 1963-90 1.02 Employment in the Public Sector, 1986-90 2.01 Gross Domestic Product: Composition and Sectoral Deflators, 1975-90 2.02 Growth Rates of GDP and its Components, 1975-90 2.03 National Product and Expenditure, 1970-90 3.01 Balance of Payments, 1970-90 3.02 Composition of Exports, 1970-90 3.03 Selected Non-Traditional Exports, 1975-90 3.04 Composition of Imports, 1971-90 3.05 Aid Commitments, 1970-91 3.06 Aid Disbursements, 1970-91 3.07 Overall Aid Pipeline, 1987-92 4.01 External Debt Outstanding, by Type of Debtor, 1980-90 4.02 External Debt Outstanding, by Type of Creditor, 1980-90 5.01 Economic Classification of Government Revenue, 1981-90 5.02 Fiscal Outturn - Derivation Table, 1981-90 5.03 Summary of Budgetary Operations, 1981-90 5.04 Economic Classification of Expenditure, 1981-90 5.05 Operational Surplus/Deficits of Trading Enterprises, 1981-90 6.01 Interest Rates of Major Credit and Savings Institutions, 1975-90 6.02 Monetary Survey, 1978-90 7.01 Volume of Agricultural Production, 1975-90 7.02 Paddy Cultivated Area and Production: Rice Availability, Procurement and Distribution, 1975-90 7.03 Cultivated Area and Production of Subsidiary Food Crops, 1975-90 7.04 Tree Crops Production Statistics, 1975-90 7.05 Tea Producer Margin, 1975-90 7.06 Fertilizer Issues by Crops, 1975-90 8.01 Growth of Industrial Output, 1980-90 -o-le. 8.02 Industrial Investments Approved and Contracted by Greater Colombo Economic Commission, 1980-91 8.03 Industrial Investment Approvals by Foreign and Local Investment Advisory Committees, 1980-91 - 102 - Table No. 9.01 Petroleum Imports, 1975-91 9.02 Imports of Crude Oil by Country of Origin, 1975-91 9.03 Petroleum Product Exports, 1975-91 9.04 Domestic Production of Petroleum Products, 1975-91 9.05 Local Sales Volume of Petroleum Products, 1975-91 9.06 Production, Trade, and Apparent Consumption of Energy Petroleum Products, 1975-91 9.07 Petroleum Product Price Changes Since 1975 9.08 CEB Electricity Generation, 1970-90 9.09 CEB Electricity Sales, 1970-90 10.01 Minimum Wage Rate, 1977-90 10.02 Colombo Consumer Price Index Numbers, 1977-91 10.03 Wholesale Price Index, 1978-90 10.04 Cost Indices for Selected Building Materials and Different Construction Activities, 1977-88 10.05 Administered Prices of Basic Consumer Goods, 1977-91 11.01 Selected Social Indicators, 1946-90 11.02 Health Statistics, 1975-90 11.03 Education Statistics, 1975-90 11.04 Tourism: Arrivals by Region, 1975-91 SRI LANKA Table 1: NATIONAL ACCOUNTS SUMMARY (Millions of Rupees at Current Prices) 1982 1983 1984 1985 1986 1987 1988 1989 1990 1. Grow Domestc Product 99.238 121.601 153.746 102,375r 179.474 196,723 221.982 251,891 321.057 2. Resource Gao (M-7Q 18,757 18.365 9.132 19.409 20.839 20.664 23,886 23.921 25.221 3. lmponts(G+NFS) 45,905 50.381 53.417 61.645 83.407 70223 81.771 92587 122.555 4. Export (G+NFS) 27.148 32.016 44.285 42.237 42,568 49,559 57,885 68.686 97,334 S. Toda Expenditures 117,995 139.96B 162.784 181.7s4 200,313 217.S87 245.,ss 275.812 346,278 6. Consumption 87.468 104.834 123.170 143.102 157987 171.487 195s306 221.090 273.640 7. Central Govemment 8,242 9,889 11,935 16.599 18,480 19.538 21.849 26.410 30.717 8. Private 79,226 I 9495 11123 126,503 139.507 151.94 173.457 194.680 242,923 9. Investment 30.279 35.342 39,558 38.457 42,326 45.900 50.562 54,722 72.638 o 10. Fixed Investment 30.031 35,552 39,408 38232 42.189 45.762 49.961 54.249 71.600 11. Changes in Stocke 248 -210 150 225 137 14S 601 473 1.033 12. DomesUc Saving 11.770 16.767 30,76 19273 21.624 25,236 26.676 30.801 47.417 13. Net Factor Income -1.959 -3.214 -3.401 -3.400 3.861 -4.336 -5.2e6 -5.739 -5.42 14. Current Translers 5.494 6.441 7.031 7.212 7,983 9226 10.17 11,840 14.813 15. National Saving 15.305 19.994 34,206 23.085 25.746 30.128 31.597 35.902 56,288 Average Exchange Rates: 16. Rupees per USS 20.81 23.53 25.44 27.16 28.02 29.44 31.81 36.05 40.06 17. Rupees per SDR 228 2 26.19 27.58 32.90 38.10 42.76 46.19 54.42 Note: The exchange rates in line 1Bwere sed in convertinr fom US dolars to national cunency. ftems 3.4.13 and 14. tiken from fte balance of payments. - 104 - SRI LANKA Table 2: NATIONAL ACCOUNTS SUMMARY (Millions of US$ at Constant 1982 Prices) 1982 1983 1984 1985 1986 1987 1988 1989 1990 Gross Domestic Product 4,769 5,007 5,263 5,526 5,763 5,849 6,006 6,144 6,524 . Terms of Trade Effect 0 265 531 180 129 176 11 -13 -187 , Gross Domestic Income 4,769 5,273 5,794 5,705 5,893 6,025 6,017 6,131 6,337 . Resource Gap (5-6) 901 759 323 579 642 556 716 619 610 Imports (G+NFS) 2,206 2,083 1,888 1,840 1,953 1,914 1,952 1,914 1,876 Capacity to Import 1,305 1,324 1,565 1,261 1,311 1,358 1,236 1,295 1,266 Exports (G+NFS) 1,305 1,058 1,034 1,081 1,182 1,182 1,225 1,308 1,453 X, Total Expenditures 5,670 5,766 5,585 6,105 6,405 6,405 6,733 6,750 6,947 . Consumption 4,203 4,418 4,449 5,096 5,207 5,249 5,406 5,505 5,645 0. Central Government 396 417 431 591 610 627 622 692 702 1. Private 3,807 4,001 4,018 4,505 4,597 4,651 4,784 4,813 4,943 2. Investment 1,455 1,508 1,464 1,308 1,418 1,412 1,391 1,285 1,306 3. Fixed Investment 1,443 1,517 1,458 1,300 1,414 1,407 1,380 1,278 1,297 4. Changes in Stocks 12 -9 6 8 4 5 11 7 9 5. Domestic Saving 566 509 615 430 668 600 600 639 879 6. Net Factor Income -94 -141 -144 -136 -126 -126 -136 -137 -120 7. Current Transfers 264 282 297 288 266 266 262 258 320 8. National Saving 735 730 967 580 696 740 726 760 1,079 .upee Deflators (1982 = 100) 9. Gross Domestic Product 100.0 116.7 140.4 141.2 149.6 162.1 179.3 197.7 237.3 0. Imports (G+NFS) 100.0 116.2 136.0 161.0 156.0 176.3 201.2 232.5 314.0 1. Exports (G+NFS) 100.0 145.4 205.8 187.8 173.1 201.4 226.8 243.3 356.3 2. Total Expenditures 100.0 118.7 140.1 143.1 150.3 191.9 175.5 196.0 239.1 3. Government Consumption 100.0 114.0 133.0 134.9 145.7 150.5 168.8 177.2 203.2 4. Private Consumption 100.0 114.0 133.0 134.9 145.7 157.0 174.2 195.7 237.8 5. Fixed Investment 100.0 112.8 129.9 141.3 143.4 156.2 174.0 203.8 265.0 6. Changes in Stocks 100.0 112.8 129.9 141.3 143.4 143.2 264.4 254.3 434.1 7. Exchange Rate Index 100.0 88.4 81.8 78.8 74.3 70.7 65.4 57.7 51.9 SRI LANKA - 105 - Table 3: BALANCE OF PAYMENTS (Millions of US$ at Current Prices) 1982 193 1984 1986 198e 1987 1988 1980 190 1. EXPORTS(G+NFS) 1.306 130M 1,763 1.565 1,621 1,726 1,819 1.9006 2,424 2. Merohandise (fob) 1,014 1,064 1,472 1,316 1,210 1,390 1,477 1,U68 1964 3, Non-factor Services 201 290 281 240 311 329 342 348 440 4. IMPORTS(G+NFS) 2,206 2,141 2,122 2,290 2,275 2,400 2,671 2,566 3,067 5. Merohandieo(aOf) 1,990 1,920 1,912 2,044 1,973 2,076 2,240 2,226 2660 S. Non-faotor Services 216 221 210 262 302 326 331 344 371 7. RESOURCE BALANCE -900 -781 -369 -741 -764 -076 -762 -66 -033 8. Not Faotor Income -94 -130 -132 -127 -138 -100 -105 -100 -100 9. Factor Receipts 44 46 58 83 6a 70 e6 68 93 10. Faetor Payments 138 181 190 210 200 229 236 218 260 11. (M&L- Interest Paid) (69) (92) (103) '110) (113) (115) (137) (127) (194) 12. Net Current Transfers 264 274 277 206 286 314 320 329 363 13. Transfer Recelpts 289 294 302 292 317 361 368 366 401 14. Transfer Payments 25 20 26 2e ;2 37 38 27 3s 15. CURRENT BALANCE -730 -043 -224 -02 -607 -620 -597 -494 -434 M< Capital Inflow 10. Net Direot Investment 03 37 36 26 28 o0 48 18 31 17. Official Grant Ald 162 171 163 178 182 180 207 187 178 18. Net M< Loans (DRS) 394 312 295 262 337 207 200 177 335 19. Olibursements 467 887 394 301 601 447 4065 39 638 20. Repayments 73 75 99 119 104 240 206 219 203 21. Other M< (net) 0 0 0 0 0 0 0 0 0 22. Net Short-Term Capital 7 38 26 -4 -13 41 16 97 07 23. Capital Flows NEI and errors and omisorons 77 se 19 28 149 -5 32 -32 2 24. Change In Net Reserves (- Indlcates Increase) 27 -1 -30S 113 -76 -38 -97 -47 +179 Msmo Items: 25. Net Credit from IMF -0 -11 9 -3-9 -49 140 89 6 26 Disbursements 43 38 32 _ 67 - 230 96 28 27. Repaymants 49 49 23 36 _ e 49 84 66 23 Note: Underlying data from Centroi Bank of Ceylon except for lines 18-20 which are from Worid Bank's Debt Reporting System, and lines 25-27 frorn the IMF. Un. 24 for year 1987-1989 Includes errors and omissions. - 106 - SRI LANKA Table 1.01: POPULATION AND VITAL STATISTICS, 1963-90 . _ . ._ Net Annual Growth Population Birth Death Migration Natural Rate Year Mid-Year Rate Rate _ Rate Growth Rate ('000) (per'000) (5) ('00) 1963 10,651 34.1 8.6 -1.0 2.55 2.5 1964 10,889 33.2 8.8 -1.0 2.44 2.3 1965 11,133 33.2 8.2 -0.5 2.50 2.5 1966 11,439 32.3 8.3 -0.5 2.40 2.4 1967 11,703 31.6 7.5 -0.6 2.41 2.4 1968 11,992 32.0 7.9 -0.7 2.41 2.3 1969 12,252 30.4 8.1 -0.9 2.23 2.1 1970 12,516 29.4 7.5 -0.8 2.19 2.1 1971 12,608 30.4 7.7 -2.7 2.27 2.0 1972 12,861 30.0 8.1 -3.2 2.19 1.9 1973 13,091 28.0 7.7 -3.8 2.03 1.7 1974 13,284 27.5 9.0 -4.0 1.85 1.5 1975 13,496 27.8 8.5 -2.3 1.93 1.7 1976 13,717 27.8 7.8 -3.8 2.00 1.6 1977 13,942 27.9 7.4 -3.7 2.05 1.7 1978 14,184 28.5 6.6 -2.8 2.19 1.9 1979 14,471 28.9 6.5 -3.0 2.24 1.9 1980 14,747 28.4 6.2 -4.6 2.22 1.8 1981 14,988 28.0 6.0 -3.4 2.20 1.9 1982 15,189 26.8 6.1 -6.0 2.07 1.5 1983 15,417 26.3 6.2 -6.8 2.01 1.3 1984 15,599 24.8 6.5 -4.9 1.83 1.4 1985 15,837 24.3 6.2 -0.6 1.81 1.8 1986 16,117 22.3 6.0 -0.1 1.64 1.6 1987 16,3r1 21.9 5.9 -2.7 1.40 1.3 1988 16,586 20.7 5.8 -3.1 1.40 1.2 1989 16,806 .. .. .. .. 1.3 1990 16,993 .. .. .. .. 1.1 not available * Excluding North and East Provinces. Note: Figures for 1984-89 are provisional. Source: Registrar General's Department. - 107 - SRI LANKA Ta'Ie 1.02: EMPLOYMENT IN THE PUBLIC SECTOR, 1986-90 a/ 1986 1987 1988 1989 1990 a/ Government Departments: Professional & Technical 203,"00 205,100 205,800 238,900 233,700 of which: Teachers (142,600) (140,100) (140,300) (166,100) (163,000) Administrative & Managerlal 10,800 10,800 10,900 11,000 10,500 Clerical 98,100 99,100 99,700 101,700 100,700 Sales and Service 80,800 109,600 130,900 150,900 180,850 Agriculture 9,900 9,000 8,000 6,000 5,500 ProduCtion and Related Workers 22,300 20,900 21,000 20,000 20,000 Other 58,300 58,800 59,200 60,000 58,500 Sub-total 483,400 513,300 535,500 588,500 609,750 Semi-Government Institutions: b/ Professlonal & Technical 15,100 17,100 17,800 18,000 15,800 Administrative & Managerial 18,600 19,100 19,600 19,600 21,300 Clerical 128,300 132,500 135,500 135,800 120,000 Sales and Service 16,300 16,900 17,600 18,200 21,150 Agriculture 3,100 3,200 3,400 3,500 3,700 Production and Related Workers 25,700 26,500 26,300 26,300 20,000 Other 561,000 537,400 532,700 528,300 506450 Sub-total 768,100 752,700 752,900 749,700 708,400 TOTAL 1,251,500 1,266,000 1,288,400 1,338,200 1,318,150 at Provisional Data b/ Includes Public Corporations, Universities, Boards and Banks, etc. Source: Central Bank of Sri Lanka Pog I of 2 pege SRI LAWC Table 2.01: GaOSS DOIESTIC PRODUCT: COWOSMON AM SECTORAL DEFLATORS, 1976-90 Current Factor Price 1976 1978 1979 1980 1981 1982 1983 Rs X of Rs S of Rs % of Rs % of Rs S of Rs S ot Rs S of Mn. GDP Un. GDP Mn. CDP Mn. CDP Un. CDP ln. GDP Mn. GDP Production Agriculture b/ 7,798 30.4 12,832 30.5 13,412 28.9 17,151 27.6 21,977 27.7 24,964 26.4 32,180 28.3 mining 450 1.8 732 1.8 947 1.9 1,249 2.0 1,614 2.0 2,239 2.4 2,799 2.5 Manufacturing 5,158 20.1 8,094 20.0 9,484 19.1 11,048 17.7 12,893 1A.2 18,801 14.4 16,968 14.0 Construction 1,018 4.0 1,966 4.8 3,218 6.5 5,552 8.9 7,001 8.8 7,959 8.4 9,807 8.6 Services 12,207 43.9 17,868 42.9 22,721 45.6 27,248 43.8 86,962 45.3 46,917 48.4 53,134 46.8 Utilities 184 0.6 289 0.6 398 0.8 601 1.0 808 1.0 1,089 1.1 1,428 1.2 Trsnsport/Communicstion, 2,079 8.1 2,994 7.4 4,744 9.5 6,293 8.6 7,307 9.2 10,686 11.3 12,S54 11.0 Commercial Services 4,976 19.4 7,6588 18.8 9,435 19.0 10.898 17.5 14,197 17.9 19,694 20.8 21,769 19.1 Financial Services 338 1.3 e45 2.1 1,243 2.6 1,785 2.9 2,463 8.1 3,716 3.9 4,183 8.7 Housing Services 639 2.5 969 2.4 1,293 2.6 1,457 2.3 1,768 2.2 3,260 8.4 3,696 3.2 Public Administration 798 3.1 1,616 3.7 1,664 3.3 1,965 3.2 2,350 3.0 2,899 3.0 4,100 3.6 Other Services 2,276 8.9 3,257 8.1 3,944 7.9 5,247 8.4 7,069 8.9 4,604 4.9 5,414 4.8 Cross Domestic Product 26,691 100.0 40,479 100.0 49,782 100.0 62,248 100.0 79,337 100.0 94,879 100.0 113,878 100.0 Prices (Implicit Deflators) Agriculture b/ 424.8 670.2 608.1 764.4 903.8 1000.0 1227.7 Mining 377.7 393.2 481.4 605.4 703.9 1000.0 1167.2 Manuftcturlng 495.1 691.9 774.9 896.3 m.4 1000.0 1163.8 wonstructlon 199.7 316.0 426.6 682.9 861.8 1000.0 1220.1 Services 370.0 601.0 608.8 875.5 838.1 1000.0 1084.1 Utilities 230.9 367.1 494.4 678.6 816.0 1000.0 1229.9 Transport/Co uBnications 270.8 368.2 639.0 561.2 727.9 1000.0 1112.3 Conercisl Services 374.2 500.8 678.7 614.5 763.8 1000.0 1049.1 Financial Services 169.4 389.8 494.1 617.9 741.9 1000.0 1012.4 Housing Services 2e68.6 77.9 485.7 616.4 694.3 1000.0 1154.6 Public Administration 416.2 674.7 699.0 778.8 895.9 1000.0 1082.9 Other Services 788.1 950.9 1071.7 1317.8 1643.4 1000.0 1179.6 Cross Domestic Product 393.8 654.6 818.3 730.7 880.5 1000.0 114b.5 a/ Provisional. b/ Include3 forestry and fishing. Source: The Central Bank of Sri Lanka. 0 Table 2.01: QRosS OMIESTIC PRODUCT: COMPOSITION AND SECTORAL DEFLATORS, 197S-90 (continued) Page 2 of 2 Current Factor Prices 198 1985 a/ 1988 a/ 1987 a/ 1988 a/ 1989 a/ 1990 a/ Re X of Re X Of Rs X of R X of Rs X of Ru X of Rs N of Mn. GDP Mn. CDP Mn. GDP Mn. GDP Mn. GDP ln. GDP Mn. GDP Production Agriculture b/ 40,138 28.7 41,069 27.8 44,355 27.1 47,923 27.0 53,600 28.3 58,462 25.8 78,504 28.3 Mining 3,163 2.6 3,328 2.2 4,156 2.6 4,927 2.8 6,587 2.7 6,980 2.6 7,098 2.4 UMnufacturing 20,890 14.9 21,849 14.7 24,889 16.2 28,470 16.0 31,298 15.4 34,941 15.3 43,128 14.9 Construction 11,180 8.0 11,640 7.8 12,272 7.5 13,020 7.3 14,943 7.3 17,332 7.8 21,541 7.4 Service. 64,878 48.1 70,435 52.6 78,062 47.7 83,391 48.9 98,108 48.2 111,423 48.8 142,224 47.9 Utiliti;s 1,633 1.2 2,042 1.4 2,252 1.4 2,348 1.3 2,492 1.2 2,788 1.2 3,652 1.3 Transport/Comunications 16,499 11.0 18,564 11.1 17,911 10.9 18,663 10.5 21,988 10.8 23,109 10.1 28,655 9.9 Comercial Services 27,192 19.4 29,281 19.7 31,808 19.4 34,620 19.4 40,678 19.9 48,626 20.4 81,812 21.3 Financial Services 4,731 3.4 5,393 3.8 6,840 4.2 7,465 4.2 9,002 4.4 10,498 4.6 13,225 4.6 Housing Services 3,958 2.8 4,182 2.8 4,578 2.8 4,904 2.8 5,250 2.8 5,860 2.6 7,138 2.4 Public Adininstration 6,322 3.8 8,376 4.4 7,945 2.9 8,601 4.8 11,050 5.4 13,800 6.0 15,840 6.4 Other Services 6,343 4.6 6,347 4.3 8,728 4.1 7,002 3.9 7,748 3.8 8,955 3.9 11,902 4.1 Gross Domestic Product 140,039 100.0 148,321 100.0 183,713 100.0 177,731 100.0 203,518 100.0 228,138 100.0 290,495 100.0 Prices (Implicit Deflators) Agriculture b/ 1537.5 1447.8 1623.9 1748.4 1915.4 2113.1 2641.7 Mining 1287.5 1338.7 1588.9 1583.2 1841.2 1872.3 1819.6 Manufacturing 1368.7 1349.3 1416.4 1618.8 1596.1 1705.4 1923.0 Construction 1392.3 1442.4 1498.2 1581.5 1765.7 2036.7 2480.5 Services 1241.4 1293.6 1374.6 1430.0 1e48.4 1812.2 2217.2 Utilities 1320.0 1555.2 1801.7 1820.2 1882.4 1827.0 2172.5 Transport/Communications 1246.4 1277.4 1338.9 1378.8 1814.6 1884.8 1988.8 Commercial Services 1234.6 1276.4 13S5.3 1409.2 1812.6 1822.1 2332.8 Financial Services 1044.6 1144.3 1322.0 1359.9 1650.4 1701.7 2017.2 Housing Services 1212.9 1212.7 1309.1 1381.4 1467.1 1602.7 1928.6 Public Administration 1277.8 1438.8 1508.5 1664.1 2023.1 2216.0 2492.6 Other Services 1368.2 1436.3 1588.0 1608.7 1751.8 1978.8 2409.3 Gross Domestic Product 1340.3 1363.7 1432.8 1633.2 1709.5 1874.1 2247.4 ---------------------- --------------------------------- ------------ at Provisional. b/ Includos forostry and fishing Source: Tho Central Sank of Sri Lanka. I- 0 SRI LANKA Table 2.02: GROWTH RATES OF GDP AND rrS COMPONENTS. 1975-90 af (Rs Million at onstam 82 Prces 1975 1980 1981 1982 1983 1984 | 1985 1986 1987 1988 1989 1990bI Agriculture c 18,357 22,735 24.321 24,984 26,212 26,106 28.368 29,106 27,410 27,984 27.666 30,100 Mining 1,191 2.063 2,t15 2.239 2,413 2.449 2,486 2,615 3.112 3,392 3.576 3,901 Manufacturing 10.418 12,340 12,982 13,601 13.712 15,398 16,193 17.558 18,748 19.621 20.4b8 22,427 Construction 5,097 8,375 8,124 7,959 8.038 8,030 8.070 8.191 8,338 8,463 8,514 8.68B Services 30,451 40,335 42,909 45,917 49,012 52,101 54,453 56,789 58.315 59,589 61,485 64,145 Utilites 710 886 991 1,089 1,161 1,237 1,313 1.406 1.448 1,499 1,526 1,681 TranspotlCommunications 7,677 9,432 10.038 10,666 11,287 12,435 12.959 13.377 13,538 13.619 13.883 14.410 Commercial Serices 13.295 17.734 18,587 19,694 20.741 22.025 22,925 23,821 24.496 25,165 25,588 26,497 Financial Services 1,983 2,889 3,319 3.715 4,132 4,529 4,975 5,174 5,482 5,806 6,168 6.556 Housing Services 2,380 2,821 2.975 3,250 3.315 3.263 3,432 3.497 3.550 3,603 3,650 3,705 Public Administration 1,917 2,523 2,623 2,899 3,786 4,165 4,432 5,274 5,435 5,462 6,140 6.355 Other Services 2,888 3,981 4,301 4,604 4,590 4.636 4,419 4.242 4.358 4.423 4,530 4,940 Gross Domestic Product 65.239 85,187 90,104 94,679 99,387 1,04483 109,567 114,261 115.922 119,050 121,729 129,256 Annual Growth Rate f) Agriculture cd -2.4 3.1 6.9 2.6 5.0 -0.4 8.6 2.6 -5.8 2.1 -1.1 8.8 Mining 33.9 4.9 4.2 4.1 7.8 1.5 1.5 5.2 19.0 9.0 5.4 9.1 Manufacturing 4.6 0.8 5.2 4.8 0.8 12.3 5.2 8.4 6.8 4.7 4.4 9.5 Construction -8.8 11.0 -3.0 -2.0 1.0 -0.1 0.5 1.5 1.8 1.5 0.6 2.0 Services 4.8 8.0 6.4 7.0 6.7 6.3 5.2 4.3 2.7 22 3.2 4.3 Utilities 8.3 10.0 12.0 9.8 6.6 6.5 6.0 7.1 S o 3.5 1.8 10.2 TransportlCommunications 2.4 7.1 6.5 6.2 5.8 10.2 4.2 3.2 1.2 0.6 1.9 | 38 Commercial Ser!ices 4.2 &4 4.8 6.0 5.3 6.2 4.1 3.9 28 2.7 1.7 3.6 Financial Services 29.6 14.9 14.9 11.9 11.2 9.6 9.9 4.0 6.1 6.0 6.0 6.3 Housing Services 1.8 6.0 5.5 5.5 2.0 2.0 1.5 1.9 1.5 1.5 1.3 1.5 Public Administration G.0 6.0 4.0 10.5 30.6 10.0 6.4 189 3. 0.5 124 3.5 Other Services 5.0 &1 8o 7.0 -0.3 1.0 -4.7 -4.0 2.7 1.5 2.4 9.1 Gross Domestic Procduct 2.8 5.8 5.8 5.1 5.0 5.1 4.9 4.3 1.5 2.7 2.3 6.2 a/ From 1978 to 1981 components do not add total because new constant price series for 1982-89 with base 1982 has been linked with old series which is In constant 1970 prices. b/ Provisional. cl Incluies forestry and ftishing. Source: The Central Bank of Sri Lanka. - 111 - SRI LANKA Table 2.03: NATIONAL PRODUCT AND EXPENDITURE, 1970-90 (Rs Million at Current Prices) .1_ X970 1971 1980 1981 1982 1983 1904 1985 1986 1987 1988 1989 19901 PRODUcr ODP1 Factor Com 13,187 25,691 62.246 79,337 94,679 113,878 140,039 148,321 163,713 177,731 203,516 228,138 290,495 itD#g Tuu I- SubWidi 477 886 4,281 5,668 7,538 10,315 12,719 16,773 18,872 22,488 23,185 27,661 35,490 ODP at Marko Picu bi 13,664 26,577 66,527 85,00S 102,217 124,193 1S2,758 165,094 182,585 200.219 226,701 255,799 32S,985 No F8 . t awomo fto. iAbromd (220) (213) (4301 (1,8671 (1,959) (3.214) (3,401) (3.400) (3,861) (4,336) (5,266) (5,739) (5,942) 3NP a MUaI P,cm 13,466 26,364 66,097 93,138 100,258 120,979 149,357 161,694 178,724 195,883 221.435 250,060 320.043 axpoND1truR C: emoptlom bi 11,505 24.422 59,084 73,061 87,468 104,834 123,170 143,102 157,850 171,487 195,306 221,090 273,640 Pvule 1,623 2,480 5,685 6.310 8,242 9,889 11,935 16,599 18,480 19,538 21,849 26,410 30,717 Pivais 9,882 21,942 3j,399 68,751 79,226 94,945 111,235 126,503 139,370 11,949 173,457 194,680 242,923 Oem F)Ad Cpula Fooa±la 2,359 3,699 20.845 23,279 30,299 M3.342 39,558 38.457 42,326 45.732 49,961 54,249 71,600 UovWAP & publio E'aprlm of 570 1,09S 4,709 4,126 4,886 5,963 7,075 7,767 9,834 11,216 12,803 14,306 13,480 PubliaCQorporLoe a 4531 426 7,553 8,360 Pulm 1,338 2,178 8,583 10,793 25,413 29,379 32,483 30.690 32.602 34,536 37,156 39,943 38,120 Changin DSoob 230 441 1,620 331 248 (210) 150 225 137 148 601 473 1,038 Export. of Good. & NFS 3,478 7,306 21.434 25,892 27,148 32,016 44,295 42.237 42,S68 49,539 57.885 68,666 97,334 lmptof U oods & NFS 3,908 9,291 36,456 39,538 45,905 S0,381 53,417 61,646 63,407 70,223 81,771 92,387 122,5S3 Mamrodwum IVA": 0o.N4adooSavilo e 1,930 1,974 9,272 11,994 (11,844) 20,204 34.0S6 22,861 23,787 31,034 32,192 37.347 53,462 E.umnl .uiAo¢m A 9h)cU s t (639) (2,1661 (13,193)1 (11.6161 (15,2231 (15,1381 (5,302) (1I,397) (16,449)1 (1,617) ()9.496) (l8,162) (17,603) (Poroni of ODP at Cu Out Muiut Pios) CDP ( awh4t prim) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ExI.mal Rawousra mgImpotu of ON FS) 3.1 7.3 22.6 16.1 18.4 14.8 6.0 11.8 11.4 10.3 10.5 9.4 7.7 Total Rorm Ava0ble('tomum) 103.1 107.5 122.6 116.1 118.4 114.8 106.0 111.8 111.4 110.3 110.5 109.4 107.7 Coopdom 84.2 91.9 89.8 88.3 85.6 84.4 80.6 86.7 86.5 85.6 96.2 86.4 83.9 Pubic 11.9 9.3 8.3 7.4 8.1 8.0 7.8 10.1 10.1 9.8 9.6 10.3 9.4 P*nt 72.3 82.6 80.3 80.9 77.5 76.4 72.8 76.6 76.3 75.9 76.5 76.1 74.5 Oro FlbAd C*pluIl Fonratlo 17.3 13.9 31.3 27.4 29.6 28.3 23.9 23.3 23.2 22.9 22.0 21.2 22.0 Gov clmm ¢ Public Eocurprl.o o 4.2 4.1 7.1 4.9 4.8 4.? 4.6 4.7 5.3 5.6 5.6 3.6 4.1 Publi Co.woral dl 3.3 1.6 11.4 9.8 I Privai. 9.8 8.2 12.9 12.7 24.9 23.7 21.3 18.6 17.9 17.2 16.4 15.6 17.8 cum*s InSloo) 1.7 1.7 2.4 0.4 0.2 -0.2 0.1 0.1 0.1 0.1 0.3 0.2 0.3 Hmml an6o ram: 7roa Nudoos SavlNts at 14.1 7.4 13.9 14.1 -11.6 16.3 22.3 13.8 14.1 15.5 14.2 14.6 16.4 Ext Mutarnt AmiJnBhImo ft -4.8 -8.1 -19.8 -13.7 -13.3 -12.2 -3.6 -9.5 -9. -7.8 -8.6 -7.1 _-.4 at Provlalud. S ind S u dicc. of 1udto Rds, Por IHutor, Wa/omo, Poats aod Telamounalowiou. Sl1 1979, Uth Port, Hubor, ad Wszubowu ba bem Publi Corpotosa mad u no lo lbdouda undor Pubib Eoawpdr. 41 Auwacuct PAWV9JU MipT,3. ot Eqa arm Fixed Cepial FonIo. plus Qag to Stoch pluc Extd Ouew Acotmt 81m. Ui & rul tnucoAo durang 1970-7 uvrerd to rup valu usIng FEEC ram. 8t No bportA of goods end no-factor tvlm.. S4ta The Cantral Smb of Sit Laka, SRI LSANK Table 3.01: BAWLACE OF PAYM1eS, 1970-90 Hi M I ion) 1970 1975 1980 1981 1982 1983 1984 1985 1988 1987 1988 1989 1990 COURRE ACCOtL Receipts 382 644 1,496 1,609 1,638 1,699 2,113 1,930 1,905 2,14S 2.247 2.320 2,920 Merchandise Exports, f.o.b. 339 5S 1.065 1,066 1,014 1,064 1,472 1,315 1,210 1,896 1,477 1,558 1,984 Port, Transportation, A Insurance 19 29 44 50 59 69 72 70 98 114 127 131 170 Foreign Travel 4 18 99 117 129 102 102 82 83 72 65 77 128 Covernment Expenditure 5 6 8 10 13 16 12 11 14 21 23 22 17 othe Services 10 20 81 103 90 109 95 77 lS 122 127 118 127 Investsent Incose 2 7 47 33 44 45 58 83 68 70 69 58 93 Private Remittances 3 9 152 230 289 294 302 292 317 351 358 356 401 Payments 453 831 2,294 2,212 2,568 2,342 2,337 2,532 2,512 2,666 2,844 2,814 3,354 Merchandise Imports, c.i.f. 392 757 2.051 1,877 1,990 1,920 1,912 2.044 1,973 2,075 2,240 2,225 2.686 Port, Transportation, A Insurance 5 12 34 35 47 60 57 80 101 113 121 140 157 Foreign Travel 3 2 34 36 40 59 48 46 54 63 68 69 74 Oovernasnt Expenditure 5 4 7 8 14 12 12 17 18 19 21 20 19 other Services 20 24 79 96 110 110 93 109 128 130 121 115 121 Non-Moetary Cold - 1 - - 4 - - - - - - - - Investent Incom 23 25 73 150 138 161 190 210 206 229 235 218 259 Private Remittances 5 6 16 27 25 20 25 26 32 37 38 27 38 Net Current Account -71 -187 -798 -603 -730 -643 -274 -602 -607 -520 -597 -494 434 CAPITAL ACCOWT Non-Monetary Capital (net) 70 140 536 530 680 584 515 534 520 447 453 382 S44 Medium and Long Term Capital Receipts 78 256 508 613 804 706 652 666 702 687 718 603 784 Direct Private Investment 1 1 46 52 66 39 37 26 29 60 46 20 32 Grants 13 77 138 162 162 171 153 178 182 (180 207 187 178 Loans 50 126 262 Suppl iera' Credits 14 52 60 J399 &76 (496 f462 J462 t491 (447 465 396 538 Repao,-;nta 34 100 127 8S 124 122 137 132 182 240 265 221 204 Direct Privato Investment 2 1 3 3 3 2 1 1 1 1 2 2 1 Loans 19 39 175 236 256 211 203 Suppliers' Credits 13 60 (124 0160 121 120 (136 131 6 3 7 8 - Short Term (not) +26 -16 +157 +31 + 7 .38 -26 - 4 -13 41 15 97 67 SOR Al locations .13 - .16 .13 - - - - - - - - - Capital, n.e.i. o/ * 2 -10 +26 -4 .16 +22 .40 -41 .24 -6 32 -32 2 Overall Balance bJ t14 -57 -220 -33 -27 t1 .305 -113 -76 -38 -97 -47 .179 Monetary Movements -14 .57 .220 .33 .27 -1 -305 .113 .76 .38 +97 .47 -179 Meorandus Items: IW Transactions c/ - 4 +28 - 4 .165 - 6 -11 + 9 -36 - 9 -49 146 39 05 Dramiwnga 23 52 39 229 43 38 32 - 57 38 230 95 28 Repurchases 27 24 43 64 49 49 23 36 66 87 84 58 23 a/ Includes errors and omissions. bJ Equals change in net international reserve. c/ IMF Trust Fund borroings are shown under toans in non-monetary capital; these amounted to $51 mill ion in 1978, S38 million in 1979, 833 million in 1960, and 30.4 in 1981. Note: This table is prepared by the Central Bank using unadjusted Customs data for merchandise irport and export estisate=. The trade numbers in this table, as wmll an those in tables 3.02, 3.03, adn 3.04 thus differ from those used elsewhere by the Central Bank. Source: Central Bank of Sri Lanka. SIU LMI Tab IJ a.O2: CWuPOSrr£T OF EXPIJIS 1970-90 (US Mt I I ion) 1970 19M7 1978 1979 1984 1981 1982 1988 1984 198S 198 1987 1988 1989 1990 g/ VA (S Ws II oion) Tes 188 274 4'1 367 373 335 305 35S 620 442 330 362 387 379 495 Rubber 74 93 180 160 157 iS0 112 121 230 94 94 99 117 86 77 Mejor Coconut Products 40 8S 62 S3 46 SS 48 60 61 88 57 48 28 Ss 46 Capral (4 ) (1) (43) (3) $ (3a Demicuted Cconut 016) 2 41 (425 ° 28 B540 49 37 (19 2 (35 Coconut Oi 133 200~I8 (2) ( (4)(7 Sub-total 302 422 603 610 576 538 465 534 8ll 624 481 509 832 518 618 Other Exports b/ 40 186 245 369 48 555 566 S33 641 709 735 888 943 1040 1366 of which: Pr precious *(5 1 ) (50> (59) (124) () (733 158) 114) (249 (213) (84) C (62)(99) Patrol s Proda stones (1) (28) (34) (124) (409) (33) (33) (140) (124) (21)a (27) 9 151 (67 (714 TOTAL EDa87PS 342 55W 848 979 1,064 1,093 1,031 1,067 1,452 1,333 1.216 1,397 1475 1388 1984 Ter 55.0 49.1 48.5 37.5 35.1 30.6 29.6 33.1 42.7 33.1 27.2 25.9 26.2 24.3 24.9 Rubber 21.6 16.7 15.3 16.3 14.8 13.7 10.9 11.4 8.9 7.1 7.7 7.1 7.9 5.5 3.9 Major Coconut Products 11.7 9.9 7.3 8.5 4.3 4.8 4.6 5.6 4.2 6.6 4.7 3.4 1.9 3.4 2.3 __… -…_ ____ ___ ___ ____ ____ --- ---- --- ____ ---- -_ ---- --- I Sub-total 88.3 75.6 71.2 62.3 54.2 49.1 45.1 50.1 55.8 46.8 39.6 56.4 36.0 33.2 31.1 Other Exports b/ 11.7 24.4 28.9 37.7 45.8 50.9 54.9 49.9 44.2 53.2 60.4 63.6 63.9 66.8 68.9 TOTAL EXPOTS 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 I00.0 100.0 100.0 VOIE Tea (mi ll ion kg) 208 213 193 188 185 183 181 158 204 198 208 201 220 204 216 Rubber (mi ll ion kg) 161 137 38 12 1221 133 131 125 12. 120 110 106 99 86 97 Major Coconut Products (million kg) c/ 123 1it 71 73 35 56 79 81 46 127 151 78 33 81 74 Coconut OilI (nw l I non kg) (88) (54) (13) (323 (3) (17) (34)3 (35) (1 8t 8213 (16) (5) (304 Cop re (m;Illion kgj (S16) (1) (01) 1 . (2 ) 3 (4) (22 ,(, lO59 6) (8 (7) Desiccated Coconut (Sill ien kg) (49) (59) (40) 40) (31) (37) (42) (42) M)5S ,60, (33) (22) (43) *1 Provisional b/ Other *xports include coconut by-product.. apices. minor agricultural crops, precious and semi-precious *tones, msnufactured goods, ainerals, and petroleum re-exports. c/ The approximte conversioun ratios for nuts into kilograms for major coconut products are as follows: 4.93 nuts = 1 kg of Copra; 13.33 nuts - 1 kg of coconut oil; and 6.80 nuts * 1 kg of desiccated coconut. Note: Due to rounding off, component. may not add up to totals. Data not necessarily consistent with exports data as complied on payments basis (Table 3.01). Soure: Adjusted Sri Lanka Custom data as reported by the Central Bank of Sri Lanka. SRI LANKA Table 3.03: SELECTED NON-TRADITIONAL EXPORTS, 1975-1990 (USS bSilic 1975 1978 1979 1980 1981 1982 1983 1984 1985 1936 1 1987 1988| 1989 1990 at Fod, Bvages and Tobacco 5.64 16.42 23.60 18.98 22.88 30.20 22.97 25.71 19.66 25.83 26.24 32.21 27.74 31.69 of which: Fab md Fish Poducts (3.13) (14.89) (19.75) (14.95) (17.99) (20.79) (17.89) (23.62) (17.25) (22.27 (2D.1) (26.09) (22.98) (2232) Tcdiea and Wcarg AW=paIt 3.49 30.66 71.18 11OA5 157.05 168.27 201.36 297AI 293.04 343.69 438.02 448.35 489.12 628.08 of whicb: Oimcnls (3.30) (30.39) (70.88) (109.38) (153.68) (165.49) (197.02) (289.26) (285.51) (330.70) (420.7) (427.93) (469.28) (606.21) EssitW Oia s 0.96 1.63 - - - - - - - - - - ;cMiCad PadWtS 1.5 1.43 3.1 4.25 3.54 10.80 4.89 7.52 ??.98 16.26 15.21 21.48 26.73 25.99 Petroeum Prod 50.03 59.38 123.72 188.86 175.39 157.62 113.99 129.25 142.71 84.15 88.04 71.22 62.19 99.19 of whidLNIphtbh (8.09) (9.72) (2801) (38.71) (29.30) (20.70) (14.61) (17.20) (29.55) (16.95) (16.92) (10.50) (8.74) (14.57) Bunkers and Aviation Fuel (41.74) (41.62) (37.56) (119.79) (104.41) (102.03) (79.11) (96.38) (86.02) (61.16) (67.43) (49.39) (48.50) (74.60) Fuel Oil (0.20) (8.04) (8.15) (30.36) (41.64) (34.89) (20.27) (15.66) (27.14) (6.04) (3.09) (11.33) (4.95) (10.02) Lesther, Rubbcr, Wood and Carmics 3.10 4.49 8A2 15.00 14.83 22.03 21.69 33.26 33.60 41.68 56.56 68.89 70.15 96.42 I-A Natal Graphit 1.76 3.8D 4.79 4.82 4.56 2.87 2.59 3.60 4.47 4.38 4.63 5.22 3.22 4.28 > Metallic Oms end Ir Pyites 0.96 0.76 3.36 2.89 1.57 2.45 3.01 1.75 3.05 4.59 1.60 5.95 2.44 8.31 Imcuite 1.04 1.52 0.53 0.39 0.82 0.78 0.54 1.70 3.05 5.53 5.00 4.85 6.37 - Psecious and Scmi-Pecious StouC4 25.56 34.02 31.48 40.17 32.95 32.91 39.97 24.24 20.64 26.95 49.15 65.09 61.15 73.22 Other 2.12 1.14 1.30 4.97 6.79 10.74 12.02 16.15 24.88 55.84 56.25 71.79 115.39 155.91 TOTAL 96.24 155.25 271.53 390.78 420.38 438.72 423.03 540.59 558.09 608.90 740.70 795.05 864.5 1123.09 af Prvisioa Soaw=: Central Bank of Sri -nk. SRI LANA Table 3.04: COMPOSMTION OF IMPORTS, 1971-90 al 1971 1975 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990bl CONSUMER GOODS 191.6 376.0 3sas 501.7 614.4 479.2 414.0 494.7 434.5 525.0 664.2 743.8 824.8 858.4 973.0 of which: Food and Drink 154.8 357.4 263.1 307.5 387.6 254.1 171.1 228.5 196.0 217.4 240.8 253A 321.1 364.4 413.5 Rice 32.9 150.6 44.1 57.2 53.3 51.6 44.4 32.5 7.7 40.1 37.5 23.3 56.8 94.2 43.9 Flour 34.7 142 1 145.8 107.0 110.4 1.5 3.0 4.6 1.1 7.6 3.2 3.3 9.5 4.9 34.6 Refined sugar 50.0 35.2 32.9 60.1 112.5 148.9 46.6 84.4 52.9 73.1 63.0 81.1 92.0 120.0 129.1 Milk and milk products 7.9 11.6 25.4 30.8 32.5 25.1 24.7 41.6 29.5 27.6 32.9 43.3 6D.7 63.8 61.2 Fish 12.1 6.2 2.1 12.2 17.8 5.3 15.6 14.9 24.5 27.8 30.1 32.6 35.8 36.6 43.4 TexCiles (including clothing) 17.4 2.8 34.0 93.7 104.1 121.3 104.1 115.8 116.9 139.9 226.8 224.6 276.5 276.9 274.0 Other Consumer Goods 13.7 5.9 49.8 78.9 107.1 93.8 121.7 133.0 121.6 167.7 196.7 215.7 227.2 217.1 285.5 Medicinal & Pharmaceutical Products 5.7 9.8 11.7 16.2 15.7 10.0 17.1 17.3 19.9 22.0 29.7 28.2 32.4 30.1 40.8 INTERMEDIATE GOODS 65.4 267.8 358.6 586.4 938.8 932.6 1039.8 923.2 933.6 940.0 796.4 901.1 991.3 978.6 1,190.5 of which: Wheat and meslin 5.9 19.3 8.7 19.0 34.8 98.2 85.9 99.5 97.1 101.8 84.6 65.3 880 137.7 94.6 Fertilizer 9.9 29.5 16.1 43.2 81.0 62.6 26.9 26A 43.4 58.1 45.8 44.1 77.8 48.7 73.8 Petroleum 4.4 123.7 154.1 251.2 489.4 448.4 589.7 468.5 419.9 404.5 224.6 296.0 246.5 232.4 358.6 Chemicals, elements and compounds 11.1 16.3 28.6 32.2 32.9 34.5 35.0 35.4 40.4 33.2 56.6 52.9 59.3 58.7 81.3 Dyeing, tanning and coloring materials 1.9 2.7 7.7 9.6 12.3 12.0 11.8 9.4 11.5 10.6 15.5 17.6 17.0 16.0 22.6 Paper and paperboard 8.1 9.9 15.3 25.6 27.6 38.1 32.4 29.2 25.0 37.1 41.4 53.0 60.4 50.3 73.6 INVESTMENTGOODS 70.7 92.6 215.9 350.5 492.5 413.5 556.9 513.3 478A 382.4 376.8 384.9 379.8 333.4 477.5 of which: Building materials 19.9 24.0 9.6 23.6 36.9 27.3 26.8 50.0 28.6 33.1 32.4 24.1 32.6 27.5 26.0 Transport equipment 12.8 16.4 63.3 103.7 146.5 115.9 265.7 162.6 119.2 92.0 52.0 48.2 44.3 50.8 89.3 Machinery and equipment 33.7 45.7 118.4 186.2 254.7 201.5 190.5 223.6 209.7 175.6 208.0 225.5 221.5 174.2 216.1 UNCLASSIFIED IMPORTS 7.2 8.4 7.6 8.6 7.1 6.9 4.8 4.9 22.4 142.4 111.7 25.9 37.3 55.2 48.0 TOTAL IMPORTS 334.9 744.8 940.9 1447. 2 ,0s2. 1,.32. 2.015. 1s961 1,868. 1,89. 1.949.1 2055.7 2.233. 1 2.225.6 2.689. -------------------------------- -PERCENT OF TOTAL IMPORTS- - - - --.-._______ -_._ -__ -___ Memorandum Items | A. Consumer Goods 57.2 50.5 38.1 34.7 29.9 26.2 20.5 25.6 23.2 26.4 34.1 36.2 36.9 38.5 36.2 B. Intermediate Goods 19.5 36.0 38.1 40.5 45.7 50.9 51.6 47.7 49.9 47.2 40.9 43.8 44.4 44.0 44.3 C. Investment Goods 21.1 12.4 22.9 24.2 24.2 22.6 27.6 26.5 25.6 19.2 19.3 18.7 17.0 15.0 17.7 D. Food and Drink 46.2 48.0 28.0 21.3 18.9 13.9 8.5 11.8 10.5 10.9 12.4 12.3 14.3 16.4 15.4 E. Food. Fertilizer and Petroleum 50.5 68.6 46.1 41.6 46.6 41.8 39.0 37.4 35.3 34.2 26.2 28.8 28.9 29.0 31.4 F. Imports other than E 49.5 31.4 53.9 584 53.4 58.2 61.0 62.6 64.7 65.8 73.8 71.2- 71.1 71.0 70.4 at Basea on cusioms data and, therore, not incessar iy consis snt nin ba ance of payments data In I ave 3.01. bI Provional Note: Due to rounding off, components may not add up to totals. Source: Adjusted Sri Lanka Customs data as reported by the Central Bank of Sri Lanka. SRI LANKA - 116 - Table 3.05: AID COMMITMENTS, 1970-91 (USS Million) _______________________ _1970 1975 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 AID GROUP Australia - 6.1 2.1 8.6 8.1 4.4 4.5 - 1.0 - 0.9 8.5 0.8 Belgium - - - 1.6 0.7 0.8 - - - - - - - 1.8 Canada 4.9 19.2 71.3 30.8 12.6 20.7 53.9 8.2 0.1 47.2 59.9 2.4 12.9 Denmark - 3.7 - 2.3 0.4 6.1 - - 6.7 2.8 9.2 12.9 _ EEC 1.2 6.5 10.2 27.8 6.7 - 28.0 6.5 4.0 36.3 - 6.5 5.0 _ Finland a/ - - 1.0 0.8 5.6 7.8 8.2 7.7 7.2 11.8 13.0 16.5 12.0 15.2 Franco 0.5 8.2 17.5 25.6 19.0 - 19.0 11.6 10.2 24.9 15.2 7.4 24.7 - Germany 0.9 29.7 17.8 186.6 6.0 10.1 3.8 3.3 102.9 11.2 22.5 2.7 15.1 - India - 11.0 - 12.7 - - - - - 19.2 - - - - Italy - - - - 1.1 - - - 3.0 - 1.2 3.0 - Japan 0.1 16.6 100.8 96.7 97.1 30.0 70.6 115.5 160.8 170.0 434.4 53.3 246.3 202.4 Netherlands - 9.5 41.3 16.4 11.9 14.3 9.3 11.7 15.3 21.2 38.7 14.6 22.5 13.5 Norway bl - - 9.1 8.7 10.2 9.4 10.1 10.3 11.5 8.8 10.4 24.8 9.9 8.6 Sweden - 12.6 24.1 22.7 25.8 26.7 33.2 34.0 23.9 25.0 8.4 11.9 11.5 - Switzerland - - 0.9 - - 0.9 - 6.4 - 1.6 - - 4.5 - United Kingdom 9.5 7.4 7.1 - - - 21.5 29.1 46.3 0.2 8.3 - 23.5 0.2 United States 15.3 37.4 66.5 70.3 83.2 d/ 88.6 107.0 37.4 46.8 68.6 57.2 75.1 41.4 52.2 of which: CARE (1.3) (4.9) (7.8) (6.1) (5.9) (5.4) (7.0) (5.6) (3.3) (6.2) (4.7) (10.3) (1.5) (-) Asian Developnment Bank 6.3 30.0 55.0 50.5 45.4 47.6 14.5 98.9 26.9 77.2 210.7 126.9 198.0 80.9 UN Group 0.3 22.3 13.4 14.2 10.7 16.7 11.8 24.1 21.7 27.1 17.8 12.4 10.0 10.0 of wbich: WFP (0.2) (12.4) (1.6) (1.5) (2.8) (4.0) (2.5) (8.7) (6.9) (12.0) (10.7) (1.2) (2.7) (0.6) PAO (-) (-) (-) ) (-) (-) (-) (I. 1) (1.0) (0.3) (I 5' (0 9) (-) (-) World Bank Oroup 29.0 29.5 151.5 161.0 126.9 56.7 42.4 141.9 143.4 19.6 215.6 19.5 325.3 202.7 Sub-total Aid Group 68.0 249.7 589.6 737.3 471.4 340.8 437.8 546.6 628.7 575.4 1122.2 396.6 966.4 587.5 NON-AID GROUP Centrally Planoed Economics 24.2 60.2 32.7 - - - - - 15.5 - - - 9.6 - IFAD - - - 14.5 13.6 14.1 - - 8.3 - 6.3 - - 13.2 Kuwait Fund - 25.5 2.1 - 45.0 - - - - - - - - - Iran - 32.0 - - - - - - - - - _ - OPEC Fund - - 6.0 14.0 11.0 - - - - - - - - - Saudi Fund - 6.7 50.0 - - 24.2 - - - - - - - UAE - - - - - - - - - - - -_ - - Libya - - - - - - - - - - - - - - Othera f/ - 2.7 6.6 g/ - - - - - - - - - 20.0 f/ Sub-total Non-Aid Group 24.2 127.1 47.4 78.5 69.6 14.1 24.2 0.0 23.8 - 6.3 - 9.6 33.2 TOTAL COMMITMENTS 92.2 376.8 637.0 815.8 541.0 354.9 hl 462.0 546.6 652.5 57j.4 1128.5 396.6 976.0 620.7 a/ Anual commitments of VIM 4,13,25,45,50,50,45,56.7,52.5,72.55,53 and 55 million respectively during 1980 through 1991. b/ Annual commitments of NOK 15,32,40,45,50,65,70,75,85,89.6,65,65,65,65, and 50 million respectively during 1977 through 1991. Additional commitments of NOK 45 million for the Rural Development Project, Hambantota and NOK 101.2 million as assistance to North and East Provinces were made during 1982 and 1989 respectively outside the country program. cl Excluding the Housing Guarantee Loan and FMS Loan of US$21 and US$2 million, respectively. dl Excluding the Euro CurrDeCy Loans, Swedisb Export Credit Manufacturers Hanover Trst Company (UK) Los, Lloyda Merchant Bank (UK) Credit Stand Chartered Merchant Bank (UK) Credit, Japanese Yen Bonds, OSM (USA) Credits for import of wheat, C Itoeb and Co. Japan Loan for Airport Runway Project and Railway Project, Mchano export import (MERO) Japan Credits for Railwtv Passenger Coaches and all other Commercial Borrowings. el Including the Iraq Oil subsidy loan of US$ 5.5 million. f/ Including Korean (EDCF) Loan of US$ 15 million and Palistan Loan of US$ 5 million. gS Excluding emegiency relief Assistance US$ 12.0 million. * January to September 1991. Source: Dopartment of Extemal Resources, Ministry of Finance. - 117 - SRI LANKA Tablo 3.06: AID DISBURSEMENTS, 1970-91 (USS Million) 1970 1975 1980 198I 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 * AID GROUP Australia 0.9 8.3 4.2 6.6 9.3 4.5 7.8 0.7 0.8 - 0.7 7.1 3.1 1.5 Bolgium _- - - - 0.2 0.9 0.9 0.1 - 1.0 0.4 1.1 - Canada 8.4 11.5 27.8 28.9 28.7 34.5 31.2 22.8 19.6 18.0 24.6 13.7 4.3 8.5 Denmark 1.2 0.2 3.5 2.5 2.9 1.1 0.2 0.4 0.8 4.1 6.4 3.6 1.0 0.1 EEC 1.2 13.1 0.3 16.0 11.4 11.3 14.4 12.1 5.6 6.5 - 7.8 - - Pinland _ - 0.6 2.4 4.4 5.5 5.3 5.9 13.4 15.3 14.7 20.0 14.2 6.4 France 4.6 7.1 5.3 18.5 10.7 13.9 8.6 12.4 9.4 16.3 17.5 3.1 19.6 0.8 Germany 3.3 12.3 13.4 5.8 18.5 49.0 44.0 47.3 63.5 30.3 27.1 32.1 15.3 18.2 India 4.8 2.4 9.1 1.5 3.1 6.6 0.4 0.1 0.2 1.4 3.3 5.3 - - Italy 1.7 1.3 - - - 1.1 - - - 3.0 - 1.2 0.3 - Japan 5.1 18.1 37.7 49.9 50.1 54.2 61.9 86.2 118.7 101.2 192.6 177.8 184.5 112.4 Netherlands - 3.3 11.3 42.4 15.5 13.9 23.9 15.7 10.3 14.8 17.7 14.2 23.2 2.9 Norway - - 12.3 16.7 11.8 4.7 11.2 8.7 10.3 12.6 14.5 11.9 20.8 2.5 Sweden / - 8.6 22.8 22.1 21.1 26.4 31.3 34.2 23.8 18.3 4.4 4.1 7.2 8.3 Switzorland _ - 0.1 0.6 - 6.9 4.2 4.6 6.2 0.1 3.8 2.4 1.5 - United Kingdom bl 10.3 4.7 63.0 43.6 52.6 36.5 28.7 6.3 15.3 8.6 16.8 15.9 9.1 1.7 United States 9.9 26.6 61.2 37.8 61.7 c/ 6.0 dl P O 95.7 61.7 44.2 57.6 50.6 62.9 13.3 of which: CARE (1.3) (4.9) (7.8) (6.1) (5.9) (3.4) (7.u) (5.6) (3.3) (6.2) (9.2) (9.7) (07) (-) Asia Dovelopment Bank 1.5 5.0 5.3 10.2 18.0 18.8 37.1 30.9 41.9 48.5 64.5 80.1 110.6 117.6 UN Group 0.3 19.1 13.4 12.2 12.8 16.7 11.8 24.1 21.8 27.1 24.5 i2.4 12.9 3.1 of which: WPP (0.2) (6.9) (1.6) (1.5) (2.8) (4.0) (2.5) (8.7) (6.9) (12.0) (10.6) (1.2) (2.7) (0.6) PAO (_) (- H_ (-) H_ (- (-) (I. .1) (l .0) (0.3) (I .5) (0.9) (-) (-) World Bank Group 1.9 18.7 20.2 28.0 59.9 74.7 107.3 73.3 88.9 87.6 62.7 58.1 128.1 126.9 Sub-total Aid Group 55.1 160.3 311.5 345.7 392.5 386.5 438.2 482.3 512.3 457.9 554.4 521.8 619.7 424.2 NON-AID GROUP Centrally Planned Economies 8.8 3.9 0.1 16.8 5.4 1.0 1.8 1.7 - 9.8 5.2 5.4 0.5 1.8 IPAD _ - 2.7 3.4 2.0 1.6 3.2 5.1 5.8 4.5 3.4 3.8 1.5 1.5 Kuwait Fund - - 4.7 3.1 1.2 - - 1.2 10.1 3.8 10.1 3.3 2.4 0.8 OPEC Fund - - 1.4 9.6 5.5 3.0 4.0 3.1 2.1 3.0 - - - - Saudi Fund - 6.7 - - - 3.0 7.7 7.9 15.5 2.6 1.3 1.5 1.1 1.6 Othore cl - 34.5 f/ 5.5 g/ 1.0 1.6 0.7 0.3 0.2 0.3 1.6 0.2 - - - Sub-total Non-Aid Group 8.8 45.1 14.4 33.9 15.7 9.3 17.0 19.2 33.8 25.3 20.2 14.0 5.5 5.7 TOTAL DISBURSEMENTS 63.9 205.4 325.9 379.6 408.2 395.8 455.2 501.5 546.1 483.2 574.6 535.8 625.2 429.9 a/ Excludes US$2.92, 11.8 and 11.2 million disbursed under Swedish Export Credit for Kotmale Project, respectively in 1982, 1983 and 1984. b/ Excludes US$10.1 million in 1983 and $15.0 million in 1984 disbursed under Manufacturer's Hanover Trust Company (UK) Loan for Victoria Project. c/ Excludes US$14.43 million disbursed under Salomon Brothers Incorporation (USA) loan for low cost Housing Programme. d/ Excludes US$6.18 million disbursed under Salomon Brothers Incorporation (USA) loan for low cost Housing Programme. e/ Excluding the Euro Currency Loans, Swedish Export Credii Manufacturers Hanover Trust Company (UK) Loans, Lloyds Merchant BJmk (UK) Credit, Stand Chartered Merchant Bank (UK) Credit, Japanese Yen Bonds, OSM (USA) Credits for import of wheat, C Itoch and Company (Japan) Loan for Airpost Runway Project sad Railway Project, Mechano export import (MERO) Japan Credits for Railway Passenger Coaches and all other Commercial Borrowings. f/ Includos Iran loan of US$32.0 million. g/ Reprosents the Iraq loan for oil *ubsidy. 4/ January to September for Loan disbursements (amounting to US$ 358 million) and Januasy to June for Crant disburements (amounting to US$ 71.9 million). Source: Depaent of External Resources Ministry of Finance. - 118 - SRI LANKA Table 3.07: OVERALL AID PIPELINE, 1987-1992 (US$ Million) -Wonn-mahawoli Mallawell ufuclura. 5 Foo Iou ot v n cn (Acoeheralad) Adjutrnent Non-Milhawell Project 198? Undl,bureed alancs* l231186 1117.6 284.0 - 91.4 12.7 1606.7 1221.7 Commitments 3729 70.6 - 84.6 47.0 676.3 604.7 Disburtements =23.o 78.1 - 39.7 47.5 4.88.9 410.6 Cancellations 39.2 l _ _ _ 1.4 bi 40.6 40.6 1988 Undsblijted Balance 12131187 1127.7 276.6 . 130.5 10.8 1651.5 1276.0 Commiliments 848.2 188.3 - 88.1 39.1 1139.7 973.4 Disbulrgmnient 3azo .0.8 - 80.4 48.0 6 74.8 611.0 Cancilallone t.1 cl i _ 1.3 dl 9.4 9.4 1989 Undlebu oCd Balance 12V31188 1686.8 379.2 142.2 - 2107.2 1728.0 Committctnle 237.3 11.3 80.0 12.9 66.0 396.6 385.2 Dlaburarontl 339.2 60.9 29.3 62.6 44.0 838.0 476.1 Canoellstone 18.2 51 _ _ _ _ 16.2 18.2 Undiebursed Balanc 12131189 1485.7 329.6 50.7 92.6 11.0 1949.5 1619.9 Comitmentse 568.1 ZO 3809.2 76.7 30.3 973.3 971.3 Dlebureements 423.4 26.9 89.2 47.2 38.8 826.3 5S9.4 Gtnollelatons 4.0 0U 47.0 gii - - 93.0 48.0 199-1 Undlebu,aed Balanes 12/31/90 1651.4 257.7 270.7 122.0 2.7 2204.6 1948.8 Commitments 708.1 47.4 165.0 34.8 44.6 96.6 952.2 Disbursement 389.7 67.7 272.3 3e 0 46.3 781.0 723.3 Cancellatlons 7.8 hi 4.0 VI - - 11.8 7.8 Undlsbursed B3aancs 12131/91 _ 18dZO 243.4 163.4 120.8 5 9 2411.3 2187.9 n/ Includes the following loan *munt- .1 Include. the following loan *mo.nto ADS Rural Credit. ProJect 1.82 ADO Rural Electrification 1.01 Ceneds Agricultural Sector Credit 2.02 ADO Coconut Dve,loee.nt 9.60 CDR SupPly of WV gon. for C.O K 10.0 ADO KWrindi-Oya Irrigation 0.53 1S5-AID Co-ordination Rice Research 0.55 ADS Trincomalee Thermal Power 0.14 US-AID Agricultural Bane Mapping 1.14 VSAID HMlaria Control 0.11 US-AID Water Management 0.21 MDA Seallholder Rubber Rehab. 0.86 US-AID Malaria Control 0. 05 IFAD Anuradhapura Dry Zone Aor;c. 2.93 IDA Kurunegala Rural Develoseant 2.87 IFAD Kirlndi-Oya Irrigation A 2.62 IDA Agricultural Ext. A Research 7.54 S6ttleuent IDA Conatruction Industry 1.00 UK Colovbo Airport Denelooment 0. SO IDA Tog Rehabilitetion A 7.04 ----- Diversificatlon 18.20 Ssudi Fund Power Trantaielon 4.93 ---- 4/ Includes tsh following loan emunt. 39.17 ADS 2nd Fiheries Developmnt 11.40 ADS 3rd Tea Develoestnt 0.90 b/ Rapreeents .he snount concel led under UEPL ADO Anuradhapura Dry Zone Agr;c. 1.66 480 Loan of 1986 ADO Secondry Towne Power Dist. 0.20 IDA 2nd Rural Development 38.3 c/ Includes the following loan amounts IDA Village Irrigation Rehab. 3.08 IDA Sixth Power 0.55 IDA Zrd Rural Development 2!.i18 IDA Second Small and Medius 0.26 ----- Industries 46.03 IDA Seventh Power 1.72 IFAD Coconut Development 8.66 g/ Includes the following lokn 11ountse .--- IDA 4th Mahewall (System 8 Right 36.0 8.08 Bank Iow a a a 12.0 d/ Represents the amount cancelled under USPL ---- Loan of 1938 47.0 Including the following estimated dlibursements. ADS Agriculture Sector Program Loan (1969) 40.1 h/ Includes the following loon amounts ADD Financial Sector Progrem Loan (1090) 6.7 AD8 sealth £ Population 1.64 IDA PHE Adjustment Credit (1990) 61.3 IDA Village Irrlg. Rehab. 6.12 IoA Econosie Restructuring Credit (1990) 61.2 ----- Japan a e (1991) 80.0 7.76 219.3 1/ Represents the amunt ca celled under the USAID Loon for Mahewal Ionstream Project. Source: Department oa Evternal Rcaources of Ministry ot Finance. Tak 4.01: EXTERNAL DEIrU SiM4DINo, BY TYPEOF DEBFOR, 190-90 a (Ussbftim - -ate-Y 190 1921 W 2 1923 1984 19S5 196 19S7 19S8 1929 1990 A. Ccalkowiena Diabuzed 1,286.1 1,497.1 1,674.2 1,905.6 2,025.0 2,549.2 3,111.0 3,642.3 3,S19.3 4,369.3 -4,S S Uni1irad 999.3 1,45&9 ,6569.0 1_366.8 1,241.5 1,312.6 1,442.2 1,04.8 1,922.2 1,90.4 2,072.6 Totl 2,285.4 2,956.0 3,343.2 3,2.3 3,326.5 3,261.S 4,553.2 5247.1 5,741.5 6,27.7 6,57.1 B. PtMbc Coption bt Di*vred 29.8 118.0 223.2 371.2 361.3 335.3 297.9 264.2 246.3 235.1 196.0 UaDlMred 31.4 122.0 64.5 50.5 32.3 9.2 46.9 48.0 20.0 14.4 15.0 TOtW 61.2 240.0 347.7 421.7 393.6 344.5 344.8 312.1 266.3 249.5 211.0 C. Pivalt Scor with Govesueni Gumoec Disbumd 6.6 6.2 4.1 2.0 9.7 33.6 78.8 135.6 132.0 167.4 157.6 U.disbuad 0.:, - - - 66.7 59.5 32.5 5.3 - 2.1 1.9 TOd C.9 6.2 4.1 2.0 76.5 93.1 111.3 141.0 132.0 169.5 159.5 Publi and Publicly Guaranteed Dcli (&+B.C Disbumwd 1,322.6 1,621.3 1,961.5 227.8 2.456.1 2,918.1 3,487.7 4,042.0 4,197.6 4,771.8 4,86. Uudiabu d 1,030.9 1,520.9 1,733.5 1,417.3 1,340.5 1,321.3 1,521.6 1,658.2 1,942.1 1,924.9 2,095.5 Tdal 2,353.5 3,202.2 3,695.0 3,6961 3,796.6 4,299.4 5,OD9.3 5,70.2 6,139.7 6,696.7 6,957.6 D. Ptivate Scctor wilbwo oCammiat GuanxS lr Dibuaed 4.7 4.1 2.5 44.0 70.3 111.3 114.6 121.6 174.6 1I0.7 162.4 Undiahuld 0.1 0.3 0.5 25.1 67.8 33.1 18.9 18.6 - 19.4 17.5 TOal 4.8 4.4 3.0 69.1 13S.0 144.4 133.6 140.2 174.6 200.1 179.9 T3TAL EXTERNAL DEBT (A+B*CeD) Diabued 1,327.3 1,625.4 1,964.0 2,322.S 2,S6.3 3,029.4 3,602.4 4,163.6 4,372.2 4,952.5 5,024.5 Undiabwacd 1,031.0 1,5S1.2 1,734.0 1,442.4 1,403.3 1,414.4 1,40.5 1,676.8 1,942.1 1,944.3 2,113.0 Toal 2,35J3 3,206.6 3,692.0 3,765.2 3,934.6 4,443.8 5.142.9 5,840.4 6,314.3 6,896.81 7.137.5 d Ezxml debt wit u oiinal mturty of am yer or more, including dbt vpayable in hel cuqcty. bt Figu for 1984-986 iclude IBRD loam saeiced by tdo Dcvelomcnl Fnac Ceorpoin of Ceylo and the Cyl Eblticit Bard. cd NowTuanratod pitvat setor foig borigs appWr by th Exdrne Cotrol Dqatent a ied isl tbc fi for 19S4, 39t5, and 19S6. Fr. forI 9 & 199 ilud publie corpoati owingswinlmugownrct dguazr,-e Note E s- ar )c rccaweuadforceveraoas Som:ee Dqaze of M&c Debt, Co"al B of Sri 1Ib. SRI LANKA Table 4.02: EXTERNAL DEBT OUTSTANDING BY TYPE OF CREDITOR, 1980-90 al (USS mlion) Category 1980 1981 19P2| 1983 [ 1984 1985 1986 1987 1988 1989 1990 A. Public and Publicly Guaranteed Debt I Disbursed 1,322.6 1,621.3 1,961.5 2,278.8 2,456.1 2,918.1 3,487.7 4,042.0 4,197.6 4,771.8 4862.1 Undisbursed 1,030.9 1.580.9 1.733.5 A17.3 1 .340.5 1.381.3 1,521.6 1,658.2 942.1 1,924.9 2095.5 Total 2,353.5 3,202.2 3,695.0 3,696.1 3,796.1 4,299.4 5,009.3 5,700.2 6,139.7 6,696.7 6,957.6 Loan from Commercial Banks: Disbursed 72.3 239.8 474.0 593.4 627.3 649.4 685.4 695.7 637.8 654.8 662.2 Undisbursed 31.1 207.2 196.2 117.7 150.1 118.5 168.4 159.6 95.0 121.0 85.2 Total 1034 447.0 670.5 711.1 777.4 768.0 853.8 855.3 732.8 775.8 747.4 Supplier's Credits: Disbursed 42.0 50.2 44.2 33.2 21.9 24.3 30.0 37.6 31.9 25.5 18.9 Undisbursed 0.5 8.6 - - 10.8 9.8 6.7 3.2 - Total 42.5 58.S 44.2 33.2 32.7 34.2 36.6 40.9 31.9 25.5 18.9 Loans from Multilaterd Donors: Disbursed 318.6 370.6 435.8 540.4 652.3 772.8 897.5 1,042.5 1,134.9 1,382.7 1511.5 Undisbursed 349.0 612.5 653.9 701.0 610.7 758.5 784.3 779.6 1,032.2 .131.4 1276.4 Total 667.6 983.1 1,039.7 1,241.3 1,263.0 1,531.3 1,681.7 1,822.1 2,167.1 2,514.1 2,787.9 Loans from Bilecral Donors: Disbursed 889.7 960.7 1,007.0 1,111.8 1,154.6 1,471.4 1,874.8 2,266.2 2,393.0 2,708.8 2669.6 Undisburscd 650.3 752.6 883.4 598.6 568.9 494.5 562.3 715.8 814.9 672.5 733.9 Tbotal 1,540.0 1,713.3 1,890.4 1,710.4 1,723.5 1,965.9 2,437.1 2,982.0 3,207.9 3,381.3 3,403.5 B. Private Non-Guaranteed Debt bl Disbursed 4.7 4.1 2.5 44.0 70.3 111.3 114.6 121.6 174.6 180.7 162./ Undisbursed 0.1 0.3 0.5 25.1 67.8 33.1 18.9 18.6 - 19.4 17.5 Total 4.8 4.4 3.0 69.1 138.0 144.4 133.6 140.2 174.6 200.1 179.9 TOTAL EXTERNAL DEBT (A+E) Disbursed 1,327.3 1,625.4 1,964.0 2,322.8 2,526.3 3,029.4 3,602.4 4,163.6 4,372.2 4,952.5 5024.5 Undisbursed 1,031.0 1,581.2 1730j 1.442.4 1403 1.4144 1.540.5 1,676.8 1,942.1 944.3 2113.0 Totl 2,358.3 3,206.6 3,698.0 3,765.2 3,934.6 4,443.8 5,142.9 5,840.4 6,314.3 6,896.8 7,137.5 at External debt with an origina! maurity of one year of more, including debt repayable in local currency. bW For 1988 & 1989 public non-guanteed borrowings by public corpor-tion are also included. Note: End-year exchangc ratcs were used for conversions from SDRs to USS. Source: Depbrmnt of Public Debt, Ccntr Bank of Sri iLana. Table 5.01: ECONONIC CLASSIFICATION OF GOViERNMET RCVNUJE, 1981-90 - 121 - ... .... ....... ... ---- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ------- 1981 1982 1983 1984 1986 1986 1987 1988 1989 1990 1990 8udgat Prov Total Aetenue 14775 16210 23317 34061 36249 87238 42146 41749 83979 81262 67964 1. Tat Revenue 13806 14737 19912 29939 30442 31272 35119 35948 47513 55920 61206 1.1 Taxe. en loraion Trade 6519 5172 7439 13062 10998 11050 12975 12501 16495 17372 19341 Sxport. 3771 2634 3392 6412 2905 1636 1024 l630 1572 2042 2549 Too (1965) (1594) (2222) (5004) (2214) (096) 1152 872 628 750 1601 (Specific) (1879) (1444) (1290) (1768) (1182) (934) 890 608 273 250 290 (Ad Valorgm) (86) (150) (932) (3236) (1032) (62) 262 264 355 00 1311 Rubber (1433) (753) (652) (1009) (254) (307) 830 842 766 lO0O 747 Coconut (241) (191) (241) (297) (342) (232) 148 67 126 1SO 151 Other Euporte (132) (96) (77) (102) (95) (lO1) 94 49 52 62 60 Imports 2725 2538 4047 6670 8093 9414 11051 10871 14923 15330 t6792 Treasury Foermt 3225 3222 4836 7945 8396 10014 11683 11599 15706 15830 17512 Less: Duty Robot* (-600) (-684) (-789) (-1278) (-303) (-600) (-632) (-928) (-785) (-600) (-720) R.ceipto from FEECe 23 0 0 0 0 0 0 0 0 0 0 1.2 TatuL on o etic Coods and Service. 4866 8320 8710 108I8 13359 14787 15667 17021 20828 26973 2t770 Turnover TsBaO 2829 4052 6224 8143 10189 10083 10611 12321 14658 17800 20291 Manufacturing (1728) (1506) (2718) (3045) (3768) (3270) 3875 3610 4496 5765 6798 Trade. Services and Profess6;onal (1101) (1524) (1891) (1928) (2590) (2415) 2426 3386 3004 4415 3725 Imports (0) (722) (1615) (3170) (3831) (4403) 4510 S325 7158 7620 9767 Selective Selso Taxte 1942 (2323) (2296) (2551) (2982) (4414) 4716 4420 5812 7760 9170 Liquor (749) (808) (867) (1013) (1104) (1485) 1644 1754 1955 2440 2657 Tobacco (1123) (1316) (1431) (1837) (1877) (2927) 3071 2665 3855 5340 481 Other (70) (0) (0) (1) (1) (2) 1 1 2 0 52 1.3 Licence Fe.c 95 146 18 194 188 285 340 280 358 393 309 Motor Vehicle. (66) (111) (140) (140) (149) (231) 279 218 309 326 254 1.4 Taxes on Not Income and Profit. 2029 2923 3366 8480 5806 4787 4909 4647 5148 6700 7337 Corporate (1459) (2115) (2475) (3720) (4162) (3274) 3329 3183 5286 7595 6998 Le" Taxea on TBS held by COk (-2345) (-3350) (-2518) Non-Corporate (570) (808) (891) (1760) (1424) (1513) 1580 1464 2207 2455 2957 1.5 Toate on Property 282 322 307 489 499 643 1568 1777 2Rv7 2526 3140 Property Transfer. 221 257 336 407 338 505 1467 1678 2365 2410 2960 1.6 Toee. c Capital Tranefore a1 65 61 82 111 143 101 99 332 109 16O Eetate Duty (24) (23) (17) (23) (41) (34) 25 19 11 8 17 Wealth Tat (24) (29) (32) (45) (48) (81) 61 74 94 90 188 Gift Tr (8) (8) (a) (11) (9) (9) 12 4 J 3 3 Other (5) (5) (4) (3) (13) (19) 3 2 224 8 22 2. Non-Tax Revenue 1079 1473 3405 4122 5807 5968 7026 5803 6466 5342 8758 Non-Tex Current Revenue 1065 1453 3396 4100 5792 5943 7013 8741 6439 5072 6429 2.1 Property Income 84 7m 2606 3085 3926 4731 4541 4080 4387 3383 4192 Surplus of Trading Enterprieas (262) (327) (356) (692) (666) (803) 1229 805 1041 1784 2235 Rent (51) (41) (164) (49) (123) (53) 65 78 67 119 238 Intereat (l83) (243) (492) (1076) (2230) (2210) 1888 1711 1512 1233 1277 Le": Public Oebt Interest (JIF) (0) (0) (0) (-708) (-1044) (-680) (-432) (-260) (-314) (.262) (-134) Profits and Dividends (85) (149) (181) (859) (665) (722) 922 168 220 a 76 Les Petroleum Special Levy (0) (0) (-103) (-249) (-231) (-193) (-SO5) (o137) (-159) 0 0 National Lottery (18) (17) (16) (17) (17) (7) 3 0 0 4 0 Central Bank Profit Trensfera (0) (0) (1500) (1650) (1500) (1779) 1723 1650 2000 800 SOO 2.2 Social Security Contribution. 60 71 71 84 89 108 127 193 422 350 381 2.3 Non-Induatrlel Sales 119 272 158 179 475 209 759 35s 621 480 768 2.4 Fees and Adainistrativ. Chargse 147 188 202 265 364 347 334 412 627 660 83S 2.5 Fines and Forfeitures 72 49 55 79 372 169 1oo 138 138 165 161 2.6 Other Current Transfers and Receipts 63 O8 304 417 586 3S1 1062 5W5 246 25 62 Other Current Transfer. (70) (98) 200 (159) (13) (143) 17 17 83 26 21 Net Profitsf *r Advance Account (13) (0) (1) (t) (322) (45) 240 411 4 0 31 Petroloum Special LAvy (1) (0) (103) (249) (231 (193) 8065 * 159 0 0 Total Cuprent Rce;ipts 14761 16190 23308 34048 36234 37215 42132 41607 83982 60992 87835 Non-tat Non-tae Capital Rovenue 14 20 0 13 15 23 13 62 27 270 320 Sales of Capitol Cooed 14 20 9 13 i5 23 13 82 27 270 329 Soarce: Central eank of Sri Lanka - 122 - o 8.02: PISC. 0U - D0IVATION TAL 1911-90 (Re. Million 198 1962 1083 196A 108 198 1047 19t 1969 1969 1990 budget P.ew..Ast.91 budol. A.n..s, (TCenen"r Cole) 16.226 17,8011 2 .210 87,731 39.010 1.644 "6,O0 434.75 59,020 66,761 6,0o5 L Aeca9 Recit Tr" W% .1065 1.14 1510 55 16o" 2061 .2.410 .2.0U6 -3.160 -2,S21 3.3.10 Adds oeo^s; n6 wSuplus of Trod 14b. 262 327 3ss 692 *66 603 1.229 65 .72 1.3,2 1.764 Rsm l.uy (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) pasto (62) (0) (0) (0) (0) (a) (0) (0) (0) (0) (0) Telecoe (196) (326 (3S3) (602) (668) (603) 1.229 6o 1.725 1.342 1,784 other (2) (1) (1) (1) (0) (0) (0) (0) (0) (0) (0) Le.: Lep,e* Duty Rebates .500 x 6 o79 -1.V * 40-27 0 00 2 92 .80 .75 -500 PubiIa Otis 2In% toId w JIs Rtn 0 0 0 -708 -1064 -65o 2 -250 .314 .316 -282 SInki.s F nnd ?,oteft'a 0 0 0 0 0 -1611 0 -1.= 0 o O Lash R.oaymonto 172 .97 -169 .526 -252 so6 .461 -303 .551 -578 -535 Biuemi A8.,go top 0ten Cl... 16.7"7 16.209 23.316 34.051 38.269 37,237 42. 44 41. 748 ".120 54.004 $1.262 Current expend (Tr.r.n. Os") 16.005 20.110 23.963 26.926 35.842 34,772 3s816 46,613 59.575 5.6 S65,584 3 14.. Ore" PI'gonso 4. Trod Ent -.75 -1.203 -1."?7 .1,62 .1.293 *1.852 .1.639 -1.639 .2,046 .1,.92 .2.156 Adds Operating L.... et ?re. d 11 194 3S7 493 "I 131 614 66 625 613 142 629 R84 fly* (194) (302) (45) (29) (72) (40) 36 399 60 626 677 fote 0 79 d0 52 56 I 110 22 153 257 152 Telecmmuications 0 0 0 0 0 0 0 0 0 0 0 Le1. Ca# 1Z. in CUPP V ot .230 -4.3 .a -3.. .1.965 -85 -626 .171 -250 -217 -232 A"d Cunr,nt tt4 In Cap V444. 153 16U *15 501 3,277 2.517 3.6" 2.0M2 1,327 1 1.776 Lae.6idU,.rownd PPrY 0 0 0 0 0 0 0 0 -..486 0 .656 teant Duty Re41W .5-0 664 .769 -1.275 -J30 .00 -62 *n26 .600 .7681 *5 Pwbl;. 06b. Zre PaId to JdI 0 0 0 -708 .1.044 6O5 42 -260 -364 .316 -262 ftiwal Cute 6s.. for gee. CIa";ificw%ben 6.9 14.361 22,0D2 24.60 32.6J3 33,988 3S.560 44 132 6,619 66,961 646.61 CS. lasend (Treasry Dowe) 13,373 16.618 2. 733 21,750 30.529 35.112 34,606 39,572 6.636 56.374 *0.720 1a44t Putllg hCob A_r s1.r08 -2,612 -3.023 -2,229 -. 097 -7,52 -5.692 9.640 U 9.,793 .9.358 .11,745 FPart i -607 .676 -1.15 -1 ,646 -1.769 -3.020 4,690 8.209 8.996 8.742 6.442 Oee.441 -1.001 -1.938 2. 160 -763 -5,106 .64.05 002 6.471 5,747 8,796 7.301 84, I". in Cap V.08. .135 -168 -41F -601 -3.27r 2,517 .5865J -2.092 1.,327 .019 .1.776 WdUe, Rag.4 Pe.n (Cap 0 0 0 0 0 0 0 0 -1,916 0 -1.450 Add: Ca# too" In Cup Vot" 230 453 655 1,63 1.963 GU 620 171 250 217 232 Loal rv *for Undepsaend (Cur,) 0 0 0 0 0 0 0 0 0 0 C emaPlse in T.aa*s17 Ooeeeit, by 00,4 Carn .19 -176 .262 143 207 0 0 0 0 0 0 r1 *Ia C.p lsann Pima L6nding 11.21 16,147 16,664 20,.18 22,527 26,905 2S,675 27.i97 SI88 28,h1l4 28,985 46ea: Pinmneoil t£nv,enb .3e9 .720 401 .901 .497 .2,669 .3,190 J.,093 -7.160 -86940 -4,J32 Reamim C*Pit*l 911t1d11Art 11,232 1,427 16,U64 19,916 21.530 23.238 22,616 22,678 26.694 19,64 21,055 Lending linve R8.ye.n9 Net Uding oh Adveco Aigeunte L.716 .679 1,120 2.917 316 -170 -1,10 2,732 -1.600 -64 250 Adds P1,4are;el LAn6,11t S89 720 601 *01 997 26690 3.159 5,093 7.160 ,490 4.932 Lame o n449 Ropoymwnte .172 -97 -149 -526 .252 -506 -461 -303 -531 .376 535 1vals LendIng *1s*. Repayment 2.113 -256 1,772 S.292 1.0539 1,9l 1.51O 7.522 8.009 64,66 4.667 FlasnalrOec r.,4169 eanta. are 6 ,67 S.415 7.477 7.s se 6.696 12,00 10,406 12,557 16,000 11,666 1S.000 Loans Petai6n R.Payment .607 ? -67 . 1.16 .1.646 -1.769 -3,020 .6.690 -5.209 -5,.99 -8,762 .4,662 &mole ftop P1i,49, Hls 4.60 6.764 8,312 6.492 7.109 9.061 5,716 7.126 12,006 t,924 10, 58 OG "oA-Mwbh6 bs, 400 1.712 2.365 o0 -2,000 -660 1.427 1.413 0 227 0 I.e. renmy"met .37 -69 -168 -98 .6 -9 -12 0 0 0 0 Cat In? T oa -19 *176 -242 163 207 0 0 0 0 0 0 hucis holl-.lore4 B1.440n. 54 1.67 1.977 *6l 1.901 .669 1.415 1.413 0 227 0 castoale marke4t b.pa.ing Hall.bn 2.370 S. 7,761 . S68U 10,520 e,846 7,213 12.2? 17,000 17.44 17,800 1440 a0807090 6, .933 -1.876 -S,679 -630 7.SSU -3,073 -463 -6.000 3,.707 -8.796 .7.301 swats NM.6mAb Uo.eolorg 1.666 4,020 60 6.138 6,689 6. u75 $.Oo 0.227 13.205 1,48 10,o19 gnb Saer"mIn 3,917 4.006 1.206 .264a 7. 51 2.209 5.306 11,269 , 339 1. 31 1,042 Lee. R.oyemnte .32 15 3 43 -.17 .233 *U2 .7 -231 0 0 0 &ss1a N4.4l Sent SenigoIns 8"8 3,911 1, 168 -2.781 7.212 2.207 S,299 11.038 5,595 1,131 1.062 Adds Cook b n c -S6 .315 -694 668 -2.801 780 262 .613 0 -2,2,0 0 O0,.:. gnk MpInce 5.647 8,676 676 .-2,09 4*711 8,07 35,16 10.25 8.68 -1.119 1,062 CDr St 0.4094 ltftko PI*^* * 4,.005 99,1s6 121.671 1887 4 162,375 179.410 1,96,700 223,000 266,62 280.200 263.500 .. . m/ Pen £964 flg,n. he bee m6j,ma 90, 0 *int.,, fun Inanfe of rW 1.411 * lien Spn, Ce1entImi 11. @9, lin k. SRI LANKA Table 5.03: SUMMARY OF BUDGETARY OPERATIONS, 1981 -90 (Rs Miflion) 1981 1982 18 1984 1 985 1986 1987 1988 1989 1990 Total Revenue and Grants 17,496 19.586 26,790 37.354 39,556 40,991 46,822 48.337 60,386 74.662 Total Rovenue 14.775 16.210 23.317 34.061 36.249 37.238 42.145 41.' .9 53,979 67.914 Tax Revenue 13.696 14.737 19.912 29.939 30.442 31,272 35,119 35,946 47,513 81,206 Non-tax Rwevnue 1.079 1,473 3.405 4,122 5.807 5,966 7,026 5.803 6,466 6,758 Grants 2,721 3,376 3.473 3,293 3.307 3.753 4.677 6.588 6,407 6,697 Expenditure and Lending minus Repayments 28.014 33.512 39,637 47.837 55234 59.193 63,894 76,532 82.164 99,814 Current 14.649 18.341 22,002 24.630 32,645 33,966 398560 46,132 56.884 71.771 Capital 11.252 15.427 16.863 19,915 21,530 23236 22.816 22.878 20.750 19,161 Lending minus Ropayments 2.113 (256) 1.772 3,292 1.059 1,991 1.518 7.522 4.530 8,882 Current Account Surplus/Deficit(-7 128 (2.1311 1.315 9,431 3,604 3.272 2,585 (4,383 (2,905 (3.807) Budget Deficit before grants) 13,239 17,302) (16320) 13 776) 18. 98 2195 (21,749) (34 78 (8.185 31850J Budget Deficit (aftTer grants) 10.518) 13 926) 12 847) 10,483) 15 678 18,20 17,07 128 19 t277E 25,153) Financing 10.517 13 .927 12.845 10 15.678 18,204 17.072 28.193 21.7 25152 Foreign Sorrowing 4.880 4,744 6,312 6,492 7.109 9,061 5,716 7.128 5.926 11,644 Domestic Borrowings 5.637 9.183 S.533 3,991 8.569 9.143 11,356 21.065 12373 16,987 Non-Market Borrowings 344 1.487 1.977 951 (1.801) (669) 1415 1.685 1.822 3,538 Market Borrowings 5.93 7,696 4,556 C,040 10,370 9.812 9.941 19,380 10.551 13.448 Non rrwnk 1,446 4,020 4.082 5.135 5,659 6.765 6.400 9,227 13.837 13,074 I Bank 3R847 3.676 474 (2.095) 4,711 3,047 3.541 10,153 (3,286) 374 Asa ofGDP Total Revenue and Grants 20.6 19.8 22.1 24.3 24.3 22.8 23.8 21.8 24.0 23.3 Total Revenue 17.4 16.4 19.2 22.2 22.3 20.7 21.4 18.8 21.4 21.2 Tax Revenue 16.1 14.9 16.4 19.5 18.7 17.4 17.9 16.2 18.8 19.1 Non-tax Revenue 1.3 1.5 2.8 2.7 3.6 3.3 3.6 2.6 2.6 2.1 Grants 3.2 3.4 2.9 2.1 2.0 2.1 2.4 3.0 2.5 2.1 Expenditure and Lending minus Repayments 32.9 33.8 32.6 31.1 34.1 33.0 32.5 34.3 32.6 31.2 Current 17.2 18.5 18.1 16.0 20.1 18.9 20.1 20.8 22.6 22.4 Capital 13.2 15.6 13.0 13.0 13.3 13.0 11.6 10.3 8.2 6.0 Lending minus Repayments 2.5 -0.3 1.5 2.1 0.7 1.1 0.8 3.4 1.8 2.8 Current Account SurpluslDeficit(-) 0.1 -2.1 1.1 6.1 2.2 1.8 1.3 -2.0 -1.2 -1.2 Budget Deficit (befbre grants) -15.6 -17.4 -13.4 -9.0 -11.7 -12.2 -11.1 -15.6 -11.1 -9.9 Budget Deficit (after grants) -12.4 -14.0 -10.6 -6.8 -9.7 -10.1 -8.7 -12.7 -8.6 -7.8 Financing 12.4 14.0 10.6 6.8 9.7 10.1 8.7 12.7 8.6 7.8 Foreign Borrowing 5.7 4.8 5.2 42 4A 5.1 2.9 3.2 2.4 3.6 Domestic orwings 6.6 9.3 5.4 2.6 5.3 5.1 5.8 9.5 4.9 5.3 Non-Market Borrowings 0.4 1.5 1.6 0.6 -1.1 -0.4 0.7 0.8 0.7 1.1 Market Borrowings 6.2 7.8 3.8 1.9 6.4 5.5 5.1 8.7 4.2 4.2 Non-Bank 1.7 4.1 3.4 3.3 3.5 3.8 3.3 4.2 5.5 4.1 Bank 4.5 3.7 0.4 -1.4 2.9 1.7t 1.8 4.6 -1.3 0.1 Sorce: Cntr Bank of St LankL SRI UNKA Table 5.04: ECONOIIC CLASSIFICATIOti OF EXPENDITURE, 1981-90 (Re Million) 1981 1982 1983 1984 1985 1988 1987 1988 1989 1990 1990 Budget Prov. Current Expenditure 14,649 18,341 22,002 24,831 32,844 33,967 39,580 46,132 56,8B4 63,582 71,771 Expenditure on Goods A Services 5,224 8,601 7,849 9,198 18,287 16,1S5 18,486 20,654 26,608 26,779 30,187 Salaries and Wages 3,679 4,561 4,811 5,554 8,878 8,028 8,008 10,018 14,446 14,129 15,749 Other Goods A Services 1,845 1,940 3,037 3,642 9,409 7,127 10,480 10,638 11,062 11,650 14,419 Interest 3,738 5,104 6,8e0 8,738 7,428 8,782 10,157 12,690 14,352 19,941 20,668 Fore;gn 713 916 1,270 1,823 1,970 2,209 2,584 2,898 3,337 3,481 3,878 Domstic 3,025 4,189 5,338 6,115 5,468 8,553 7,593 9,894 11,016 18,480 16,990 Transfer Payments S,887 8,73s 7,648 8,897 8,929 10,050 10,937 12,888 17,024 18,497 20,936 Public Enterprises 657 1,232 1,788 1,782 882 2,350 1,722 2,349 3,177 1,681 3,827 Other Levels of Covernmnt 182 317 388 444 501 0oo 809 918 902 1,027 1,237 Households 4,948 5,187 5,392 6,491 7,548 7,100 8,608 9,621 12,945 15,789 15,872 Under Expenditure 0 0 0 0 0 0 0 0 0 (856) 0 i Capital Expenditure 11,252 16,428 16,883 19,915 21,530 23,235 22,818 22,878 20,750 21,683 19,181 Acquisition, Construction and Maintenance of Real Assets 4,026 4,829 6,375 5,849 7,376 7,788 10,983 12,006 13,069 13,338 11,884 Capital Transfers 7,228 10,697 10,488 14,086 14,155 15,447 11,833- 10,872- 7,861 9,787 7,497 Public Corporations 7,073 10,692 10,422 13,881 13,441 14,874 11,185 9,884 8,330 7,792 5,815 Other Levols of Government 149 187 317 198 481 472 571 1,123 1,322 1,715 1,574 Other 23 15 11 44 26 101 77 es 29 280 109 Other (19) (178) (282) 143 207 0 0 0 0 0 0 Under Expenditure 0 0 0 0 0 0 0 0 0 (1,450) 0 Lending Minus Repayments 2,113 (258) 1,772 3,292 1,059 1,991 1,618 7,522 4,530 4,847 8,882 Advance Account 1,716 (879) 1,120 2,917 314 (170) (1,180) 2,732 (993) 250 1,699 Lending to Corporations 589 720 801 901 997 2,e89 3,159 5,093 5,901 7,922 7,687 Repayments of Loans (172) (97) (149) (528) (262) (608) (461) (303) (378) (633) (404) Total Expenditure and Lending Minus Repaymnts 28,014 33,511 39,837 47,838 55,233 59,193 83,894 78,532 82,184 89,882 99,814 Source: Central Bank of Sri Lanka. SRI LAHA Table 6.05: OPERATIONAL SURPLUS/DEFICITS OF TRADING ENTERPRISES, 1981-90 (Rs Million) 1981 1982 1983 1984 1986 1986 1987 1988 1989 1990 1990 Budget Prov. 1. RAILWAY 1.1 Revenue 408.8 427.3 434.6 603.0 464.5 482.0 487.0 464.0 458.0 580.0 582.7 1.2 Recurrent Expenditure 802.7 681.5 872.4 1083.6 522.9 857.3 834.9 883.0 883.0 10SB.7 858.7 Add: COLA - 53.8 14.7 48.0 14.0 33.0 0.0 0.0 0.0 0.0 0.0 Totai Recurrent Expenditure 602.7 736.3 887.1 1131.6 536.9 890.3 834.9 883.0 883.0 1056.7 858.7 1.3 Current Surplus (1.1-1.2) -193.9 -254.2 -437.8 -680.6 -58.4 -376.3 -347.9 -399.0 -426.0 -478.7 -276.0 1.4 Capital Expenditure 459.9 377.4 384.7 392.0 989.4 104f.0 10RI.6 1755.0 1431.0 1431.0 785S.4 2. POSTS 2.1 Revenue 288.5 245.3 342.7 388.4 436.2 481.2 404.1 432.0 457.0 555.0 672.7 2.2 Recurrent Expenditure 226.2 279.0 378.0 415.5 494.4 460.1 614.3 657.7 702.0 708.8 828.8 Add: COLA - 45.0 5.0 25.0 - 27.0 0.0 0.0 0.0 0.0 0.0 Total Recurrent Expenditure 226.2 324.0 383.0 440.5 494.4 487.1 514.3 867.7 702.0 708.8 828.8 2.3 Currert Surplus (2.1-2.2) 82.3 -33.7 -35.3 -27.1 -68.2 21.1 -110.2 -226.7 -246.0 -151.8 -156.1 2.4 Capital Expenditure 16.8 10.8 10.5 10.5 19.7 18.0 18.4 15.7 12.0 13.2 21.3 3. TELECOMMUNICATIONS 3.1 Revenue 344.2 471.8 631.4 961.2 927.6 1077.3 1518.6 1168.0 1417.0 2175.0 2506.0 3.2 Recurrent Expenditure 146.2 145.9 176.7 261.4 252.2 264.5 290.0 318.3 376.0 390.7 371.9 Add: COLA - - - 8.0 9.0 10.0 0.0 0.0 0.0 0.0 0.0 Total Recurrent Expenditure 14e.2 145.9 176.7 269.4 281.2 274.6 290.0 318.3 376.0 390.7 371.9 3.3 Current Surplus (3.1-3.2) 198.0 325.9 354.7 699.8 67S.4 812.8 1228.6 849.7 1041.0 1784.3 2234.7 3.4 Capital Expenditure 276.9 348.4 469.6 1074.7 444.0 896.1 1337.8 744.9 1166.0 1168.1 687.4 4. OTHER 4.1 Revenue 1.9 0.8 1.3 0.6 - - 0.0 0.0 0.0 0.0 0.0 4.2 Recurrent Expenditure - - - - - - 0.0 0.0 0.0 0.0 0.0 4.3 Current Surplus (4.1-4.2) 1.9 0.6 1.3 0.6 - - 0.0 0.0 0.0 0.0 0.0 4.4 Capital Expenditure - - - - - - 0.0 0.0 0.0 0.0 0.0 Revenue of Trading Enterprises 1043.4 1145.0 1310.0 1863.2 1828.3 2040.6 2409.6 2054.0 2332.0 3310.0 3862.0 Rec. Exp. of Trading Enterprises 976.1 1205.2 i446.8 1841.6 1292.5 1651.9 1639.2 1839.0 1981.0 2154.2 2059.4 (Salaries and Wages) (400.1) (577.2' 670.8 765.6 692.6 839.0 870.0 1122.9 1267.0 1314.0 1382.8 (Goods and Services) (575.0) (628'J) 776.0 1075.9 899.9 812.9 769.2 718.1 704.0 840.0 676.8 Source: Central Bank of Sri Lanka SRI LANKA Table 6.01: INTEREST RATES OF MAJOR CREDIT AND SAVINGS INSTTTONS, 1975-90 1975 10 1981 1t 1983 198 18 18 7 1 18 Cvmt3v m. TetTburry l 6.00 13.00 1300 13.O 12.00 14.00 11X2 11.00 1&0-11.00 15.5-19.2 16.2-19 119-17.6 Cent,al8lflankftatebl 80 1t0 14.00 14.00 18.00 1aoo 11.00 11.00 10.00 10.0 14.0 15.0 DEPO9 RATES 12 MorthD FRad Depost 7.00-7.60 2D.00 20.002Z00 16.00-2ZOO 1600-200 14.02200 12.00-1O.00 80-14.00 80-14.00) 9.00-16. 11.00-20.60 11.00-21.eo SavIngs Deposit. 5.60 10.00-14.00 10.00-14.00 10.00-14.50 10.00-15.00 10.00-1I.o 10.00-130 8.00-12.00 6.0,-11.00 5O00-11.00 .00-14.00 6.00-14.00 SuvnosnstIttIn Natia Savings Bank savbign Depo0It 720 12.00 12.00 12.00 12.00 lZO lZOO 12.00 12Z.O 12ZOO 14.0 1S2 12 Monts Fbksd Depsts 7.60 20.00 mo0 22.00 18.0 18.00 1100 13.o 1100 18.00 110 18.5 o-Yvw SavingsCsr rca 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.0 11.0 LEBNG RATES. ComereiW Banks S8crd 8.60-1.00 11.0000 11.00-l0.00 11.00-30.00 11.00-0.00 11.00-30.00 11.00-30.00 10.00-0.00 9.80 .00 9.00-28.00 9830.00 9A.0-.00 Unsecured 9.60-14.00 19-40.00 19.00-32G00 14.00-3.00 11.00-30.0 13.76-33.00 13OO-30.00 9.80-30.00 9.75-3300 100-33.00 1o0-35.00 1S 00-3600 Long-Term Credit Instutons Stat MYa Bank d c500-12.00 S00-20.00 6.00-20.00 1z00-24.00 1ZO-24.00 12.00-24.00 10.00-24.e 8.00-20.00 8.00-20.00 10.00-20.00 160-19.0 190-20.0 Agfcutura nd Industrl Cr.dftCorporatlons d 9.00-1200 d d d d d d d d Dornbpment Rnance Corporaon 9.60-16 10.0-17.00 10.50-17.00 12.00-17.00 11.00-14.00 11.00-14.00 14.00-21.00 100-100 14.00-19.00 14.00-19.00 14.00-19.00 14.00-19.00 Natonal Houing Depamnt &00-9.00 6.00.00 .00-9.00 1 00-9.00 e0o-9.00 3.00-10.00 3.00-10.00 3.00-10.00 3.00-10.00 3.00-10.00 .00-1000 6.00-12.00 Nionl Savings Bank 10.00-1Z.0 9.OD-17.00 12.O0-17.00 12.00-17.00 11ZOO-17.00 IzOo-17 00 1Z00-21.00 1Z00-21.00 13.00-20.00 14.00-20.00 14.00-2.00 18.00-2.00 af Mightedvrgerof bilklsuedon tnder. b t t which Cebat ?3nnt nk ponvidw dnc to mmral banks secured by ovnmment and Govrnmwnt guaanteed sud Refinance adlefor poducti purpoe ae currently avatble t ra rging B n llS 60-MO%, d On Januwy 1. t97, dthe Agrkuftuns and industrial Cted(tCorporaton were amalgamated Into th Stat Uortgage BanL S0urc Centrd Bank of d Lanka. SRI LANKA Table 6.02: MONETARY SURVEY, 1978-90 al (Rs Millon; end of period) I 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Net Foreign Assets 5,500 6,706 3 477 2,780 2.111 2,749 9 ss2 8,963 8.589 8,006 4,231 3,475 9,451 Central Bank 4.408 5,362 1,602 1,049 131 480 7,475 7,315 7,076 6,455 3,478 1.678 4,675 Commercial Banks 1,092 1,344 1,875 1,731 1,980 2,269 2,077 1,648 1,513 1,551 753 1,797 4.776 Net Domestic Assets 12,848 17,963 32,041 g9 1 48,33 §5660 57,59 68.7 752 86.727 110.349 1.2279 135.807 Net Credit to Government 1,889 2,962 bt 9.100 12,889 17,236 17,639 14,605 20,486 22,624 27,115 35,634 35,100 35,358 Credit to Private Sector 8,812 11,082 16.208 20,763 24,934 31,345 34,979 38,201 41.344 48,371 60,675 66,119 80,607 Other Credit (100) 142 (168) (142) 14 514 26 294 106 48 (400) 1,596 953 Other Assets 2,247 3,777 6,901 6,108 6,129 7,122 7,989 9,743 11,218 11,193 14,440 19,980 18,889 Central Bank (excluding Guarantees) (681) (1,462) (2,938) (1,857) (884) (948) (1,171) (2,529) (3,323) (4,356) (4,630) (9,374) (10,025) Commercial Banks 1,566 (2,315) (3,963) (4,251) (5.245) (6,174) (6,818) (7,214) (7,895) (6,837) (9,810) (10,606) (8,864) s Monetary Liabilities 10.803 14.957 19.70 42 30.249 36818 43,015 48.09 50591 57925 67.533 75.171 90,261 Money 5,895 7,643 9,333 9,950 11,673 14,589 16,647 18,662 21,051 24,901 32,158 35,093 39,596 Currency (3,015) (3,774) (4,181) (4,823) (5,988) (7,200) (8,561) (9,816) (11,570) (13,945) (18,487) (19,650) (22,120) Demand Deposits (2.879) (3,869) (5,152) (5,127) (5,685) (7,389) (8,086) (8,846) (9,481) (11,406) (13,671) (15.443) (17,476) Quasi-Money 4,908 7,314 10.376 14,337 18,576 22,229 26,368 29,437 29,540 33,024 35.575 40,078 50,665 Olher Liabilities 7.46 97t3 9.808 I1r1 20,17S 22,550 24,135 2987 3329 36,807 47,047 51,099 5499 Central Bank (excluding Guarantees) 3,970 5,329 9,124 9,572 10,352 10,471 11,204 15,864 18,733 19,704 18,892 21,532 21,224 Commercial Banks 3.576 | 4,384 684 | 8,539 9,823 12,079 12,931 13,723 14,557 17,1(Q3 28,155 29,567 33,773 al This table is not consistent with the Country Data sheet which uses as a source the monthly bulletin of the Central Bank of Sri Lanka. bl Adjusted for amounts in Suspense Account Paddy Marketing Board and/or Goods Receipts. Source: Central Bank of Sri Lanka SRI LNA Table 7.01: VOUME OF ACRICULTtRAL PRODUCTION, 1976-90 (Indices, 1968 = 100) 1975 1980 1931 1982 1983 1984 1985 1988 1987 198e 1989 b/ 1990 Too 95 8S 93 83 79 92 95 94 95 101 92 104 Rubber 104 89 a3 83 93 95 93 93 82 83 76 77 Coconut 92 81 90 100 92 75 114 116 88 76 96 98 Paddy 82 158 164 159 183 179 193 188 164 1GC) 1S0 184 Highland Crops 284 298 316 354 361 343 .. .. .. Livestock and Livestock Products 113 138 148 158 172 179 .. .. .. Minor Export Crops 88 212 293 288 326 293 .. .. .. TOTAL 109 135 144 147 165 158 not available Thovo Indics aro calculated on the basis of value added figure. R vised OD LI Provisional a Source: The Central Bank of Sri Lanka. SRI LAtA Tabl- 7.02: PADDY CULTIVATED AREA AND PRODUCTION: RICE AVAILABILI, PROCtIEMENT AND DISTRIBUTION, 1975-90 1975 1978 1979 1980 1981 1982 1983 1984 195S 1986 1987 1988 1989 / 1990 C41tiva"d Area ('0° hectares) EmUtnt Aeweddumi zd c 622 859 684 659 668 687 699 703 706 717 725 728 779 773 of which: Major Irrigation Schem (203) 217 (226) (243) (258 (258) (270) (284 (289) (298) (312) (318 (319) 321) Minor Irrigation Schem (173) (185) (184) (177) (177) (178) (180) (184) (187) (l85) (191) (190) (194) (18) Cross Area Sown 695 876 839 845 877 84S 825 990 s82 895 781 868 727 857 Net Area Hbrvested ('OOD ha) 09 724 697 728 740 661 689 787 768 740 597 725 612 735 a.Mh 302 471 494 496 501 424 49s 451 498 469 380 443 392 462 Yale 207 253 203 282 239 237 194 336 270 271 217 282 220 273 PNddy Production and Yields Paddy Production ('000 tone) 1,154 1,891 1,917 2.133 2,230 2.156 2.484 2,420 2,661 2.Ss 2. 12 2.477 2,063 2,s33 Mbah 719 1,288 1,393 1.453 1.523 1,3S 1,786 1,360 1.751 1,688 1,393 1,825 1,342 1.647 Yetl 435 605 524 680 707 793 698 1.060 910 900 735 952 721 891 Averag Yield (Kg per hcotre herveated) 2.270 2,518 2,780 2,927 3,014 3.260 3,606 3,076 3,464 3,500 3,564 3,413 3,374 3.452 Rice Availability ('000 tonn) Rice Production A/ 808 1.286 1.804 1,430 1.516 1,466 1.689 1.646 1.809 1.760 1,447 1.684 1,403 1,726 Net Domestic Supply _/ 711 1.132 1,148 21,276 1334 1,290 1486 1.4"8 1,592 1,549 1,273 1,482 1,23S 1,519 GOpening Stock of PC f/ 63 173 116 129 68 105 115 97 14 75 156 75 77 103os Opening Stock of PMO g/ 49 103 128 6S 38 32 34 98 43 29 58 6 33 0.5 6 Rice Importe V 457 160 212 190 157 160 123 26 182 220 99 184 285 140 '0 Total Consumption ij 1,134 1.320 1.420 1.394 1.521 1.487 1.560 1,611 1,722 1,653 1,506 1,637 1,504 1,700 Procure-ont and Oistribution Rice Procured by PM6 ('000 tons) 169 469 378 142 8s 57 220 115 69 105 43 71 3 21 Rico Distributed by FC (o000 tone) 629 671 447 327 159 161 140 168 1S0 174 245 215 276 206 nemorandum Ie (as a percentage) Imports/Ric. Consumption 40.3 12.1 14.9 13.6 10.3 10.8 8.0 1.6 10.6 13.3 6.6 11.2 18.9 8.2 Imports/Rice Distribution by FC 72.7 23.8 47.7 5s.1 98.7 99.4 87.9 1S.5 101.1 126.4 46.0 85.6 103.3 67.9 Procurement/Production 21.5 36.7 29.0 9.8 5.6 3.9 13.0 7.0 3.8 6.0 3.4 4.3 0.2 1.2 FC Distribution/Rice Consumption 55.5 50.8 31.5 23.4 10.4 10.8 9.0 10.4 10.4 10.5 16.3 13.1 18.4 12.1 Jl/ Revied. / Proviiocnal. S/ Leveled and bunded lend suitable for paddy cultivation. Based on conversion factor of 1 mtric ton of paddy * 0.68 metric tons of rice. Equol- rice production les seed and wastage. eatimated at 12 of total production. FC * Food Comissioner. FPM - Paddy Marketing Board. Total rice imports not adjusted for 2.6 Slalckage I0es. Apparent consumption. est,usted as not domestic rice supply plus isports, adjusted for slack, plu- change in tho stocks held by FC and PM. Change in stocks of private traders is ignored. Note: There had not been any rice imports in 1964, but a shipment of 26.000 Kr intended in 1983 arrived in 1984. Source: Food comiseioner; Agricultural lcplesntation Program; and the Central Bank of Sri Lenka. SRI LANKA Table 7.03: CULTIVATED AREA AND PRODUCTION OF SUBSIDIARY FOOD CROPS, 1975-90 1975 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Cultivated Area C°°0 hectares) Manioc (cassava) 79.2 74.3 53.5 51.0 56.1 59.1 55.3 56.8 52.9 49.3 46.8 50.0 45.8 43.2 Maize 40.1 24.7 19.4 19.4 24.0 26.6 26.2 32.8 33.1 31.2 34.7 36.8 29.1 32.1 Chilles 33.0 50.2 35.9 38.3 40.9 37.1 34.7 29.4 30.8 35.7 25.1 27.1 24.4 30.7 Red Onions 6.3 3.2 9.0 8.7 8.7 9.0 9.6 3.9 5.6 6.6 6.9 7.5 9.1 7.7 Groundnuts 7.8 3.8 9.9 120 14.2 14.8 14.1 10.6 10.2 10.1 7.8 10.6 11.2 10.1 Green Gram 9.3 12.1 12.8 13.4 15.5 17.9 19.8 22.3 23.6 25.0 25.6 28.5 27.1 33.2 Sorghum 3.8 2.0 0.7 0.5 0.5 0.3 0.4 0.5 0.5 0.3 0.1 0.1 0.0 0.1 Soyabean 1.1 - - - - - - 5.2 4.0 4.0 3.5 1.8 1.5 3.9 Potatoes 2.0 2.8 4.1 4.5 5.3 6.1 6.8 6.0 7.1 7.3 7.0 7.2 7.0 7.9 Sesame (gingelly) 12.7 - - 30.2 26.0 32.1 24.8 14.4 14.8 14.3 12.6 1Z6 8.3 9.2 Cowpea 8.7 13.4 13.9 22.6 26.7 31.6 32.6 28.0 29.6 27.7 27.6 24.2 22.8 26.2 Black Gram 2.0 - - - . - - 5.6 9.9 7.8 9.9 10.6 7.3 6.8 Dhal 0.3 0.7 1.4 0.6 0.5 0.5 0.3 0.3 0.1 0.0 0.1 0.2 0.0 0.1 Sweet Potatoes 21.2 20.6 16.3 14.3 16.6 16.2 14.4 16.4 14.8 13.1 12.6 12.7 12.3 11.8 Production (000 tons) Manioc (cassava) 767.0 585.8 534.5 499.5 526.1 572.8 722.1 682.5 597.7 485.9 427.5 491.7 420.8 383.7 Maize 34.6 19.6 22.2 22.6 23.6 23.9 30.7 37.7 43.6 40.7 41.7 38.6 30.6 33.2 Chilies 16.4 38.6 46.4 51.0 37.5 36.5 40.6 73.6 98.7 105.8 73.5 82.7 67.9 99.9 Red Onions 72.8 58.5 67.9 66.9 59.1 67.5 96.3 36.7 41.7 57.1 56.2 59.2 71.9 57.7 Groundnuts 7.6 4.0 6.1 7.1 7.4 5.6 6.8 6.3 5.9 6.6 4.6 6.1 7.4 6.1 Green Gram 6.0 7.6 8.5 9.2 10.0 11.5 16.8 16.1 18.8 18.7 17.5 19.5 20.4 26.9 Sorghum 6.3 2.3 1.1 0.5 0.6 0.3 G.4 0.6 0.4 0.2 0.1 0.0 0.0 0.1 Soyabean 1.2 - - - - - - 3.1 3.4 3.8 3.7 1.7 1.5 3.1 Potatoes 27.3 29.1 37.9 51.1 66.0 76.9 89.8 68.3 89.0 82.4 81.1 87.5 83.5 87.2 Sesame (gingelly) 6.4 - - - 10.3 13.2 15.0 7.7 8.7 8.4 6.2 6.7 4.6 4.8 Cowpea 7.6 12.4 11.0 16.5 19.4 21.7 30.8 21.8 23.9 24.6 22.2 19.9 19.0 22.8 Black Gram 1.0 - - - - - - 5.0 9.1 7.5 9.3 9.4 5.6 4.8 Dhal 0.2 0.7 1.9 0.5 0.3 0.4 0.2 0.1 0.1 0.0 0.1 0.2 0.0 0.0 Sweet Potatoes 142.2 133.2 148.7 127.5 15&6 172.6 117.6 147.0 117.5 93.7 80.5 87.2 86.0 76.5 Source: Department of Census and Statistics SRI LANKA Table 7.04: TREE CROPS PRODUCTION STATISTICS, 1975-90 1975 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 at 1990 bI TEA Production (million kgs) 214 191 210 188 179 208 214 211 213 227 207 233 of which: High grown 80 73 81 72 68 79 79 77 73 77 74 76 Medium grown 73 56 59 52 48 55 55 53 54 54 50 52 Low grown 2163 199 13 191 199 26 189 2u Au 228 2H Y Planted area ('000 hectares) 242 245 245 242 230 228 232 223 221 222 221 222 Average yield (kgs per harvested hectare) cr 1031 922 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Replanted Annuals (hectares) 1764 2156 2677 2004 1367 1145 1672 1618 1503 1592 1551 1586 Replanted Cumulative (hectares) 27504 36217 38894 40898 42265 43410 45082 46700 48203 49795 51346 52932 RUBBER Production (million kgs) di 149 133 124 125 140 142 138 138 122 122 11i 113 of which: Sheet rubber 87 72 62 62 57 66 66 62 56 63 54 59 Crepe rubber 59 50 47 49 73 64 52 55 49 44 38 38 Exports (million kgs) 16* 121 133 131 125 126 120 110 106 99 86 87 Planted area (000 hectares) 228 227 206 206 206 206 205 205 205 200 200 199 Average yield (kgs per harvested hectare) 774 718 705 729 818 840 894 919 826 841 752 779 Replanted Annuals (hectares) 3231 5434 6442 5866 4862 5530 6694 5911 5635 4167 6147 5203 Replanted Cumulative (hectares) 131952 149948 155795 161661 166523 172053 178747 184658 190293 194460 200607 205810 fl COCONUT Production(million nuts) 2398 2026 2258 2521 2312 1942 2958 3039 2291 1936 2484 2523 of which: Coconut oil ef 960 500 605 820 663 295 1038 1146 573 276 597 598 Desiccated coconut 354 217 276 286 295 221 362 428 350 155 319 374 Exports (million nuts equivalent) 845 239 401 569 582 327 935 1105 538 224 572 508 a/ Revised. bl Provisional. cd Harvested area excludes area under immature tea and, effective 1974, abandoned tea lands. Data for 1974 onwards are calculated on the basis of the new definition of harvested area and thus are not strictly comparable with those of earlier years. di Total includes "other' rubber not shown separately. el In nut equivalent converted at 1 mt. ton oil = 8,000 nuts. 1 mt. ton Desiccated Coconut = 6,800 nuts. ft Represents all the rubber extents replanted since 1953. Source The Central Bank of Sri Lanka. SU LANCA Tablo 7.05: TEA PROOICEP MARAIN. 1975-90 (Re. er kg) 1975 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 a/ A. Averag ExpCrt, Unit Value 9_0& 83.41 S5. 4 36.0 S 52 72Q 60.62 44.5 52.97 65.95 66,91 91.76 Lena: Export Duty 0.83 10.40 10.24k/ 7.98 8.17 8.66k/ 5.97b/ 4.49 4.43 2.76 1.34 1.35 Cease 0.23 0.90 0.90 0.90 1.00 1.50 1.00 1.50 1.50 1.50 1.55 3.05 FOB Chargeo, Exporters margins, *ec. S/ 8.02 22.11 2A 00 26.15 4a is 67.04 53.66 38.53 47.04 51.69 64.02 87.48 B. Coloabo Auction Crrm Price .9 3S 19. 23.44 42 679 39 01 30.68 39.30 42.77 6.61 70.97 C. Sales To m/ 0.86 0.59 1.84 0.92 5.90 15.85 6.21 0.30 1.24 1.18 2.45 5.25 D. Colombo Auction Net Price (B-C) 6LU 17.74 17.71 2 46.94 3 303 3 52.16 46572 I- E. Cost of Production 6.7S 13.46 18.66 23.05 27.15 34.3 SS61 36.00 38.39 52.2 7.38 57.65 of oh ich: Transportation/Fusl Oi l 0.54 1.82 2.25 2.30 2.65 3.39 3.51 3.55 3.80 3.90 4.48 n.a. Fortilizer 0.78 0.79 1.11 2.12 1.93 2.47 2.56 2.59 2.75 2.30 2.57 e.a. Teo Chant 0.65 1.19 1.45 1.62 1.93 2.47 2.52 2.58 2.75 2.20 2.51 n.a. Labor 3.06 7.59 8.40 11.51 15.26 16.97 17.59 17.80 19.00 30.20 32.10 n.a. Other Costs/Depreciation 1.70 4.06 5.45 5.50 7.38 9.05 9.43 9.50 10.10 13.60 15.72 n.a. F. Producer Margin (D-E) -0 2.9 2 -0.95 -0.53 12.6 -1.81 -5.6 -10.61 -5.22 8.07 a/ Provisionat. The specific export duty on tea was raised to Rs 15.50 per kg in November 1977 and then lowered in July 1979 to Re 10.50. Th- average specific duty shown for 1977 and 1979 is calculated by diving revenus from the specific duty by total exports. On November 13, 1981, the export ciuty was lowered to Re 8/kg. On November 14, 1984. the export duty wa Ier t. P. 7Jkg and again lowered to RF $/kg with effect from November 13, 1985. The figure shown above is the estimated averoge for the year. I5 Ad vlorem tan receipts divided by total *nunt of te sold at CoItAbo auctiens. Sourc: The Cntral Sank of Sri Lanka SRI LANKA Table 7.06: FERTILIZER ISSUES BY CROPS. 1975-90 (G000 metric tons) 1975 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Paddy 97.9 189.9 155.6 167.1 162.1 186.8 202.5 232.6 217.1 226.2 238.1 161.2 Tea 106.7 109.9 103.3 102.6 115.5 137.4 149.5 128.9 136.7 138.0 127.9 134.1 Rubber 20.3 22.0 16.8 16.5 18.5 23.4 24.2 26.3 23.2 25.1 22.6 22.2 Coconut 40.6 55.8 37.7 30.3 35.7 49.9 41.0 31.4 42.2 42.0 38.5 23.6 Others 50.8 62.0 52.9 62.9 73.4 73.3 75.8 77.9 86.1 93.9 95.2 96.0 TOTAL 316.3 439.6 366.3 379.4 405.2 470.8 493.0 497.1 505.3 525.2 522.3 437.1 Source: National Fertilizer Secretariat; Ceylon Fertilizer Corporation; A. Baur & Co. Ltd SRI LANKA Table 8.01: GROWTH OF INDUSTRIAL OUTPUT, 1980-90 al 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 b/ Gross Output at Current Prices Food, Beverages and Tobacco 3,899 4,496 5,246 6.998 8,623 10,497 12,129 12,962 14,675 18,458 21,955 Textiles, Clothing and Leather 1,923 3.040 3,863 5,136 7,565 9,505 12,088 15,428 18,166 22,073 27,930 Wood and Wood protucts, including Fumiture 289 315 361 522 640 705 632 677 640 667 721 Paper and Paper Products 476 626 725 901 907 1,187 1,289 1,372 1,492 1,456 1,880 Chemica's, Petroleum, Coal Rubber and Plastic Products 9,416 12,015 13,099 11,888 14,328 13,104 11,088 13,477 13,681 12,041 21,215 Non-metallic Mineral Products (except fuels) 1,156 1,250 1,370 1,468 1,829 1,854 2,053 2,156 2,267 6,007 7,554 Basic Metal Products 478 428 262 302 199 123 281 307 487 792 1,006 Fabricated Metal Products, Machinary and Equipment 620 782 904 1,129 1,456 1,592 1,757 2,006 2,477 3,182 4.199 w Other Manufactures 54 58 74 90 106 125 136 155 178 231 296 Total Manufacturing 18,311 23,010 25,904 28.434 35,653 38,692 41,453 48,540 54,063 64,907 86,756 All Manu.tacturinc Value Added. Current Prices 4.893 6,030 6,760 7,987 11,158 13,366 16,019 18,513 21,050 24,067 30,984 Value Added, 1970 prices cl 1,187 1,320 1,413 1,507 3,099 - - - - - - - not available aJ As covered in the Central Bank's Annual Survey under which questionnaires are sent to all firms believed to to have an output of Rs 500,000 or more. Around 5,000 questionnaires are sent out, but there have been around 1,500 responses only, employing in 1978,136,009 (almost half of these in the public sector), or approaching 40b of total manufacturing employment. bt Provisional cl fmplicit deflator for manufacturing, 94v70 - 100 Source. The Central Bank of Sri Lanka SRI LA?NKA Table 8.02: INDUSTRIAL INVESTMENTS APPROVED AND CON-TRACTED BY GREATER COLOMBO ECONOMIC COMMISSION, 1980-91 at GgARn aun co IJ%f I Fa,mw klnmwrnt (lh I) Tota l kv,lmsnl (1 U) EMplVWnI" Pot*nlia (NMcs) 1110 a 105 w38 Ij 0010 0118 0516 07 081819 0110 9516 0 1 1988 109V"6 1991i 190 98 198118I108 06 109 1091 API60VALS - - 1 Fmo.ftmg,vuwITom 3 1 ~ 3 - - - 128 14 - 17 - - - 2275 49 27 - 20 - - - 270172244 -07 - 2- 417 L.atpmS.,c 7 s I iO a 6 13 14 207 110 14 108 148 1002 723 388 252 178 25 239 233 1174 730 448 4172 38U 943 4723 4584 4275 4840 506 am,dbo ,FumIftn) I - - 0 7 2 - - IS - - 1 7 to - - 2 - - 4 11 27 - - 260 too10 140 672 - PMwatmd psp9t* -- --- - - --- - --- ----- - ---- -- - - -- - - - chmt, Pslrim Go Fkj0twordPSS9OPtMcS 4 1 I 2 4 4 4 3 117 i9 4 149 e= 80 363 71 160 27 5 494 98 106 375 102 83 812 460 407 053 855 1603 64a (mW6g1Fl~vbgMWIdC a - 3 2 2 4 7 1 158 - 1 7 48 71 233 3M8 17 2256 25 61 116 288 719 22 1898 - 334 650 810 1760 1416 186 FaStcuIU8 Mal It-dueM id TramupcwEqgwnuwi 7 - I I I 1 3 -125 - 38 69 129 3513D -1Its - 49 68151 50 142 - 1785 - 35605 076 101 252 - auv.itii,dPMtQ16*A.) 14 5 3 9 13 a 12 18 SW6 17 52 105 129 149 628 337 709 38 73 160 204 337 745 439 7463 03 816 2281 330 386 9404 585 S.wvtm 3 1 1 3 4 - 1 215WO 13 a 18 18 - 8 406 1643 18 8 20 42 - 8 406 2403 44 63 409 1364 - 30 604 TOTAL 45 1 1O 1 1 2 40 30 269 79 la8 53 1120 1e08 E2!3 3492 208 268 188 612 1725 1962 2719 4117 20=3 6078 296 897 12124 11122 17654 13702 Fbc. 8vu g. id Tabom - I - - - - 14 - 3 3 - - - - 28 - 13 4 - - - - 449 - 148 82 - - - 1edsv vaw1~ .Ipemkwi l Leamwpadom* 3 2 4 7 4 3 9 07 06 23 07 10008664 485 351139 46136 2331IO1 6 406 3880 2041483 24509OM84047 771 328 (IkidiOiFtili*fI) I… … … … … ……- - I…-- - - - - - 2 - - - -0--0 20 - - - - - - pmw aid PmwftwlucS - ---- ------ - - - --- ------ -- - - - - 9i88 W VWSO pm9mva 2 1 1 I 1 3 3 2 W 6 10134 5 2 32W 4094 6 29 183657607334 70 5778382103 625 M2 847 848 C.xwa,p,8idmwidc= 0 - 3 2 2 3 2 3 67 - 10 47 71 215 43 191 86 - 1a861 118 264 143 384 2306 - 240 550 810 1418 85 6"8 Fab,idMeUW Iwoducacl T,uuP-Eq*,Y.hI 2 1 1 1 - - 3 16016a386so - - 2D42 907 204088 - - 20633 804 063SW6 9 - - 1004 30 Iimuurgsd Pto&duc 614.0 7 1 - 3 1 3 4 6 14 d84 2 1 IS 124 82 223 488 604 6 2 24 204 238 30 6 54 6042 24 143 39 4014 M04 3456 524 swvbm I - - I 2 - - - 1S - - - 3 - - - 32 - - - 1 3 - - - 372 - - - III - - - TOTAL 25 7 j12 25 14 L6 29 943 136 91 356 02 358714 2620 134712 6818 53107475 j2740 3746 100 05 50 00 Eb~~~~~~~~~~' bpUn*wU ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 36 P 14216 2 4 If 147 837 51 WM D9 SRI LAINKA Tabis802 1INDUSThIL8NViVESSUE3TAPFROVALS BY FOR3504 ANDlLOCAL SNVESrUE?TADVSORYcommrFreES. 990-95 C-9-Y ~~~~~~~N-bc or unk. 8ortifn 5flavc5no (Rs M) Totul Eor.mu=u (Rs MS _ E.oloyuuk Pouotiil (No.5 ) _____________________ 980 V.983 . m1936 .TTii i9ss .990'Jm 6695' 5880 5985119865198798 19331989199011991 1980 1985 1986f 1988 . "98 .9890*1T 9 1980 5985 59961 1987 5986 989 599 5m991 FOR88CN VEIriV TnL ADVISORY I Foc &=m #nsTSE(HAC) '1 ' 3 2 476 7 93179 7 - 41 499 27 52129451805192980IS8 66 146 508 1037 40 88 202717 TaIS.. W--&p gc 1-7- re.4mm I~~~ 3 33 so 6 5 I5 5 I1I 8 36 46 27 50 66 520 27 19 265 66 149 40 187 913 1530 1674 2945 2452 1953 556712909 50 Wom1 .cd wad Frol" ) caduft FuZRu26u I 2 2 3 3 3 6 3 3 1 7 2 3 3 9 45150 6519 I5552 51 19 34229 52 192 429 1295130582 162594 cu5o.2s ?romia. CoaW. Robb" d pluw Pnd- .05t 6 5 95 551 1 2 252 63 25 15 42 55 133 22 5235Z66501 995186 239 655 33 2423 852 644 317 307 620515075131 C=.c6pt 6sle d Cod5) 6 3 2 5 6 6 S 5 203 79 251421 273 33 1 269 83 4 49 235 546 64 3 5072 406 90 348417512115449 21 Msnc d?Aa Pmru=. Ms T.uupoEqp- ~ 9 t016 8 12 3 3 4 21 44 29 P7 34 55 26 26 37 11914155265055129 77 5 645 555 8143 452 550, 65 295223 U=mctedpaSP b Co .9t.t 5 5 7 7 7 S 9 7 27 5 2 31 10 I59 6 54 23 47 43 66 7368 5 85505146 337 330 322 302 585 224546 410 =OAL. 55 30 48 41 45 39 55 29 991 220 130 568 225 373 356 791 5407 476 644 769 934 1050 5196 5483 6956 41551 567 5037 3542 3937 3890 2865 LOCAL INVES-ET62. ADVISORY 1C0M3CTT83 (UAC) 'Foo. fkrcuqad ~TvU 40 36 19 48 - - - - 34 64 49 107 587 1044 775 2925 ToaSRR Wcw5tApegA cs. 19j 19190 kradwo 1685516890 4 - - 55 9897 94 3796 8262 4272 6572 word adl Wadl PrlL (~OlgdcFwnka3 9 56 4589919 - - 8 10 33 23 543554353273 967 Faf me FM= Froolw RCMa.Ed RNIC ?M=b 16 73 7- 71- 1050 79 171 155 3165 1633 1941 2025 (cm" lwdm od cm"66512 7 13 - PA -' 55I0519 2005 276 247 369 uIllftma tato cma:,36 9 9 7 - - 33 325 400 530 1422 248 218 124 - - - - -.-I- -.-..---..-..-----.--0 0- I I ; .1757A3. 699344321364 0 0 0 0 2L2 J 656 640 793 3047 0 0 55595 58850 9659 54654 0 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6664 U" 9 41 *Ezdsin.Appo- V~23 598)5. AkdwdIS*Aozi8md r Fm S,byt E Affya"o.d 1 24 59532.ICi Aw Iqmg - & d )3Sp, wwi. 94. T~~a=wud& mew. SRI LANKA Table 9.01: PETROLEUM IMPORTS, 1975-91 1975 1976 1977 1978 19791 1930 1981 198t - 19835 1984 1985 1986 1987 1988 1989 1990 1991 Value CUSS million) Crude Oil 132.6 135.9 139.2 143.7 201.6 435.8 448.4 488.9 332.9 373.4 335.2 189.0 241.3 197.6 164.0 310.2 105.2 Gasoline - - 0.3 0.6 1.2 - - - 4.4 - - - - - 7.7 - - Avtur 0.5 - 3.3 8.2 22.3 22.5 16.4 1.8 3.2 - - - - - - 9.6 11.9 Kerosene - 1.3 4.9 3.6 12.1 - - 15.2 15.8 2.5 11.5 3.3 7.8 2.5 15.2 - 2.0 Automotive D:esel - 1.1 28 10.7 51.9 14.8 35.5 56.6 102.0 30.7 31.7 18.7 33.8 18.5 44.9 18.8 25.0 Other 8.6 58. 6.4 8.3 8.6 20.3 14.9 11.4 10.2 13.5 _- - 0.3 _ TOTAL 141.7 144.1 156.9 175.2 297.7 493.4 515.2 573.9 468.5 420.1 378.4 211.0 282.9 218.6 231.8 338.9 144.1 Volume (000 tons) Crudo Cil 1,464.6 1,447.1 1,529.6 1.443.9 1,444.0 1,861.1 1,710.5 1,940.5 1,492.0 1,733.3 1,657.5 1,638.5 1,778.9 1,848.1 1,283.5 1,791.3 712.7 Gasoline - - 2.2 3.7 6.5 - - - 15.0 - - - - - 35.5 - - Avtur 4.2 - 15.8 55.7 65.3 58.4 45.0 5.4 10.9 - - - - - - 31.4 34.6 Kerosene - 9.8 32.2 25.4 41.9 - - 43.4 55.8 8.8 44.6 15.4 44.0 15.4 80.9 - 5.1 Automotive Diesel - 9.2 26.7 82.7 198.6 4Z6 110.9 183.9 405.9 131.2 136.8 131.6 207.6 127.6 257.9 93.2 74.7 * Provisional (January-June) Source: Ceylon Petroluum Cotporation. SFU LAMKA Tak&o 9.02 fPAPORlS OF CRUDE OIL BY COUNTRFY OF ORIGIN, 1975-91 ('000 TOns) 1975 t5751 1977I 1978 1975 1980 1S81 1982 1s83 1984 1985 1986 1987 1988 1989 199s 1991- Sadi Arabt 1.145.3 796.6 849.0 939.1 787.0 950.0 1,248.8 866.3 346.0 1 .387.9 782.4 - - - 24E.8 _ _ Iran 3193 650.5 680.7 504.8 293.4 629.7 432.2 838.7 969.1 126.2 800.2 249.4 761.5 749.5 719.5 1.436.0 381.0 Iraq - - - - 304.7 281.5 - - - - - - - - - Libya - - - - 58.9 _ - - - - - - - - - - - Malaysia - - - - - _ 29.4 235.5 177.0 94.4 14.6 236.8 175.7 203.4 64.0 355.3 116.4 Oatar- - - - - - - - 124.7 - - - - - - - United Arab co Emiirates - - - - - - _ _ _ - 60.3 961.3 596.9 502.4 127.9 _ - EzypS - _ _- - - - - 157.8 214.7 258.6 125.3 _ 127.7 Oman _ - - - _ _ _ _ 33.3 - 134.2 _ - - Finland _ _ _ _- - - - - _ _ 87.7 * Prosional (January-June) Source: Ceylon PetieumrCOrpmafion. SRI LANKA Table 9.03: PETROLEUM PRODUCT EXPORTS. 1975-91 1975 ter7 197 17 1979 1980 1981 1982 193 198 1985 18 1987 1988 198 199 1991w AVTATI' AiqD MARINE SALES Value (USSiniliDon) Avtur 7.8 'J5 12.5 14.e 27.5 43.0 47.7 41.0 31.1 28.1 23.9 20.0 182 14.4 14.1 22.4 10.4 MarineGas 1.8 1.8 2.9 3.7 7.7 7.7 6.8 7.9 8.0 5.0 4.3 4.7 5.4 52 5.1 72 4.0 Majino Diesel 3.4 32 7.1 6.1 10.9 12.3 7.3 8.9 72 9.S 9.3 8.7 4.7 4.7 4.5 8.8 3.6 Fumnace Ci 12.6 12.3 27.2 20.9 42.9 55.8 42.1 39.4 35.0 50.3 48.0 28.7 38.2 25.1 24.7 38.2 12.8 Other 0.3 0.3 1.0 0.1 0.6 0.8 0.8 0.8 0.8 0.5 0.2 - - - - - - TOTAL 28.1 25.1 50.7 45.3 89.8 119. 104.7 98.9 80.1 93A 83.7 60.1 8BS. 49.4 48.4 74.8 30.8 Volume f080 tons) Avtur 84.7 83.2 68.1 81.1 73.8 193.0 104.0 91.7 74.1 72.3 83.9 65.3 64.9 55.7 50.1 58.4 20.9 Marini Gas 24.5 20.2 22.1 25.3 26.2 19.1 17.8 20.r 13.8 1.5 15.9 25.9 25.4 30.2 22.5 27.3 11.9 Marins Diesel 45.2 47.9 52.3 43.0 33.5 30.7 19.0 24.2 21.4 32.7 35.3 37.5 25.1 28.4 19.9 23.7 10.8 Furnace Oil 340.9 318.4 359.7 283.2 318.0 308.9 203.3 21e.0 194.8 2B3.7 293.0 357.4 386.5 333.9 269.5 339.4 134.5 DIRECT EXPORTS Value (USS million) NaphUa 7.2 7.s 10.6 92 28.1 38.2 28.4 20.7 14.2 18.9 29.4 15.3 18.9 12.8 10.0 14.8 10.1 Gasoline neg. 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0,3 0.4 0.4 0.3 0.1 0.1 0.1 - - Fumace Oil - 3.3 4.4 5.8 8.0 30.1 41.2 34.9 11.2 15.4 27.2 7.4 3. 8.2 7.9 9.3 42 Other 0.1 0.3 0.1 neg. neg. neg. 0.1 0.1 0.7 0.7 0.8 1.1 0.6 1.1 0.3 1.0 - TOTAL 7.3 11.2 15.2 15.1 38.3 88.5 69.9 55.9 26.4 33.4 57.e 24.1 212 22.2 18.3 24.9 14.3 Volume COO tons) Naphtha 127.7 103.8 101.0 75.0 99.3 130.3 91.2 75.6 54.8 71.8 124.7 133.4 115.8 103.2 73.3 75.0 43.8 Gaoline 0.1 0.3 0.3 0.4 0.3 0.3 0.4 0.& 0.7 1.0 1.0 0.9 0.2 0.2 0.1 - - FurnaceODl - 92.5 59.1 87.5 55.5 182.9 238.6 212.1 121.6 92.0 185.1 100.5 41.1 138.6 87.9 98.3 544A TOTAL EXPORTS (USS millon) 65.1 0.1 95.8 80.4 125.9 188.1 174.6 154.8 100.5 128.8 141.3 84.2 87.7 71.6 66.7 99.5 45.1 * Provisional (Janu,Jwwuno) N4ts 1. lndMdual clkmenmaynotadd up due to munding. I 2. Date may difer *m Cusom Eguew usd elewhere in this reatx Souvce: Ceylo P.tra(mmC .ma m. SRI LANKA Table 9.04: DOMESTIC PRODUCTION OF PErROLEUM PRODUCTS, 1975-91 (Tons) 1975 1978 1977 17 1979 1980 1981 1982 1983 1984 1985 1986 1967 198s 1989 190 1991- Gasorine 86788 99.448 103.348 120.623 97,843 109.371 99.553 113,627 94.800 115.865 118,181 123,089 131.29 158,861 118.466 179281 82.117 Diesel. Automotive 255.178 278.336 276,620 242,200 248.002 384,311 309,583 338.232 175,628 358,727 384.150 406,594 332.020 417,425 249.678 463,012 189.815 Diesel. Othler 87.2s 88,318 91.708 117,243 90.196 95,758 107,186 135.104 213,130 107,572 56.010 60.995 163,006 79.832 39.337 53,015 21.713 Fumaceo Oil 637.473 513,678 545.349 647,377 534,756 744,877 701,419 715,302 492,649 657,776 603.140 559.497 595,593 621,811 445.811 582.737 275,916 Keroseno 195,470 188,311 185.447 211.318 186.93 179.341 148.811 155,233 132.473 143,233 156.948 153.629 152.747 162,851 124.097 171.097 66231 Naphtha 107,391 103.484 102.197 82,372 90.237 150.850 137.653 157.616 119s838 144,337 124.423 133,756 119,894 98.094 57.673 73291 39.907 Bitumen 20,721 26.921 26,202 24.872 24,100 28.174 15.516 24,871 23,022 35.227 32.013 47,111 33.180 27.480 28,139 28.211 1528 LPG 1,030 2,130 3,101 5.355 6.199 7,477 6.425 8.197 7,074 8,631 73.933 18.430 18.133 20,013 15.195 18.692 7,713 Avtur 54.879 76584 71,482 34.485 31.325 62,171 83.772 114.985 65,450 116,717 2.191 98,510 71,149 85,716 48,555 100,589 37.640 Solvents 1.700 1,863 2.130 2.565 3,374 2,350 3,386 2,549 2,983 4,238 11.815 3.583 3,594 3,635 2294 4,319 875 Fuel Gas - - - - - - - - - 511 2.354 169 - - - - TotW 1.347.889 1.377.373 1,406,584 1.388,390 1,310,983 1.762.680 1,613,304 1,764.018 1,328,647 1,696,834 1,643.158 1,601.413 1,820.560 1,673,818 1,127,245 1.672,244 717.230 Memorandum Items Energy Products 1.218,077 1.245.105 1277,055 1,278,581 1,193287 1.583.306 1.457,067 1.600,443 1.199,779 1.513,032 1,382,183 1.416.483 1.463.912 1,546,559 1,041.139 1.563.423 661.150 Non-Energy Products 129,812 132268 129,529 109,809 117.681 179,374 169,498 1.859,036 145,643 183.802 160.981 184.450 156,648 127,259 86.106 103,821 56,080 Ught Distillates 198,051 205,968 209,782 209.629 195,954 268,9s6 258292 302,279 241,529 270,745 255,534 275,043 270.338 276.190 192,560 274.082 110.196 Middle Distitlates 593.644 630,806 626,251 606,512 556,158 722,643 651.338 743.027 588,322 733,0s6 652,477 719,762 721,468 748.337 462.635 789,214 315,820 Heavy Ends 558,194 540,599 570.51 572,249 55.856 771051 716,935 740,173 515,571 693,003 635.153 W60,608 828,758 W9,291 471.90 6D8948 291,214 * Provisional (January-June) Source: Ceylon Petroleum Corporation. I- 0 SRI LANKA Table 9.05: LOCAL SALES VOLUME OF PETROLEUM PRODUCTS, 1975-91 (Metric Tons) 1975 1978 1979 1980 1981 1982 1e 3 1984 1985 1986 1987 1988 1989 1990 1991' LPG 682 2.432 6,404 '.110 6,966 8,197 7.116 10.820 12,594 16,477 18.107 20.101 15.193 18,719 7.331 Gasdine 95,057 129.994 115.146 107.691 109.028 114.217 117,477 118.831 121,578 130.263 140.047 158,015 172,858 181.115 79.017 Kerosene 209.764 244.832 229.918 188.238 168.268 174.098 159.14S 150.926 153.655 154.532 155.910 164.258 160,484 167.241 85.968 Diesel. Automotive 245,515 308.792 349.404 397.710 420.912 464.594 463.906 481,174 488,519 487,431 495,739 498,993 487.377 511,120 265.542 Diesel. Marine 4,497 5,150 3.537 2.968 2.417 3.936 6,134 2.506 711 2.144 1,919 1,372 1.402 1.791 650 Diesel, Indusmai 37,314 62,015 64.188 63.953 105.000 143.121 278,618 64,188 23.568 20.099 131.750 52,076 22.736 20,084 10,082 FumaceOil.Domestic 143.664 183.556 183.539 259.731 240.326 247,138 253.098 218.913 142,783 129.012 167.356 167.411 153.356 157,774 78,129 Fumnace Oil. Marine 20.108 21,233 16,099 12.887 22.884 26.974 26.881 9.397 85 707 297 - 54 82 36 Avtur 13.571 6,749 8.169 22.843 30.967 31.415 34.058 43.827 54.093 45,557 38.562 44.108 49,138 61.917 34.950 Lubrican-s 16,247 17.518 20.460 21,459 20.432 20.615 21.140 21.039 20.285 20.932 20.942 21.308 20.822 21.541 9.726 Bitumen 22.444 26.190 24.265 10,259 16,477 21.116 25.802 33,099 32,380 44.472 35.238 24,583 29.903 27.849 14.585 Naphthia - - - 33,642 66,063 98.021 75.044 78.431 7.486 - - I - 1 - * Provisionat (January-June) Source: Coyon Petroleum Corporation. 1-A I SRI LANKA Tabbe 9.06: PRODUCTION, TRADE, AND APPARENT CONSUMPTON OF ENERGY PETROLEUM PRODUCTS. 1975-91 ('000 metric tons) 1975 1978 1977 1978 1979 1980 1961 1982 1963 1984 1965 1986 1987 1988 1969 1990 1991- Produdion 1.218 1245 1.277 1t279 1.193 1.t83 1,470 1.f00 1.200 1.513 1.382 1,417 1,464 1.,47 1,041 1 ,S8 051 Imnpor G 20i 78 168 312 102 1se 270 488 140 182 147 252 143 374 125 114 Expore 129 203 160 163 155 314 328 288 179 167 313 242 160 245 162 177 98 Bunker 412 385 435 332 377 357 241 264 233 343 344 421 437 393 312 390 157 Aviation 85 69 68 81 74 93 104 92 74 72 64 6S 65 56 50 56 21 Appaet conumption 5Q6 eos 692 871 899 921 953 1.226 1.202 1.071 843 836 1.054 996 891 1.070 499 Per Capita Conumption at 44.31 44.32 49.63 61.38 62.12 62.41 63.58 80.72 77.97 68.f6 53.23 51.67 64.42 60.05 53.t4 62.94 - 'Pomilora (January-June) at In ldogramn. Source: CeIon Poerleum Corporatkn. Tabte 9.07: 7EL.& FJCT MICE OWAME SD4lf 1975 a/ per Liter; Rr per t_erial Cation ir Parenthe"e) b/ Camoline Industrl Doeml d Furnace Oil / Autt tive Super Reglar c/ Kerosne oi.el Lt Sulphur f* High Sul Iur 50 Secd 8a0 s5owd 2.000 Second. 1I75 - Cctdoer 3 2.13 (13-30) 2.02 (12.80) 0.90 (4.08) 1.17 (5.3D) 1.19 (5.40) 1.12 (5.10) 0.99 (4.5D) 0.97 (4.40) 0.95 (4.30) 1977- rchS- - - - - 0.77 (3.48) - - - - - - - - - - - - tt78 - VIcaber 21 4.40 (20.00) 4.07 (18.50) - - - 1979 - .%ne 13 6.80 (30.00) - - - - 2.31 (10.50) 2.64 (12.00) 2.27 (10.30) 2.13 (9.70) 2.09 (9.50) 1.98 (9.00) - Septmsbr I - - - - 2.35 (10.68) - - - - - - - - - - - - I190 - Jnamry 26 6.2: (37.50) - - 3.01 (13.68) 2.97 (13.50) 3.41 (t5.50) 2.93 (13.3) 2.79 (12.70) 2.75 (12.50) 2.64 (12.0D) - Juno 20 8.80 (40.00) - - 3.54 (15.t8) 4.62 (21.00) 5.06 (23.0D) 4.58 (20.80) 4.44 (20.20) 4.40 (00.0O) 4.29 (19.50) 1961 - Janury 19 9.35 (42.50) - - 3.89 (17.68) 5.94 (27.OD) 6.60 (30.00) 5.68 (25.0) - - - - - April 10.00 (45.50) - - - _ _ _ _ _ _ _ _ _ _ _ _ _ IMl3 - lhrrh 2 12.00 (54.58) - - 5.20 (23.68) 6.75 (30.69) 7.90 (35.91) 6.45 29.32) - - - - - - - July 22 13.50 (61.40) - - 6.58 (29.97) 8.13 (356.98) 9.20 (42.20) 7.83 (35.61) 4.89 (21.22) 4.84 (22.00) 4.72 (21.45) - Oca_er t - - - - - - - - - 5.22 (23.73) 4.87 (21.35) - - 19t- - - - Aprl 4 .22 (19.18) 3.87 (17.59) 3.72 (16.91) 19Ot - April 19 16.00 (72.73) 8.55 (38.87) 9.70 (44.10) 80.2! (37.5) 4.55 (00.68) 4.20 (19.09) 4.05 (10.41) - Sapt*er 29 20.00 (90.92) - - - - 9.60 (43.64) 10.90 (49.55) 9.00 (41."2) 5.00 (22.75) 4.70 (21.37) 4.55 (20.68) la Prices pro Col-o spot prices, a mrgin to cover traneport coats is added to out-tatson prices for all product ascept gasoline, shicb as of April 1961. sel11 at a unifor price island-aid. Altough Sri lankis has officially one metric. prices for petrolaus product. continu-, for the tim eing, to be apeified in iporial gailon term. Liter prices have been obtained by dividing iaperiel when prices by 4.*U1. Ic Plrkoting of reular grade gd gl in. uee discentinued in oerly 979. /d Iniuat-rial diesel ie often referred to ma heavy diesl; the two term are ueed interchangebly in Sri Lank. Prior to 1972, law ,lplar induatrial diese w-I not mrk.eted. lo Oifferentiated furnace oil use moS mrbetad prior to 972. It Ae of JSaury 1961, for Iaiphur induetrial diesel s marlketad *a Super diesl. Smrces: Ceylon Pteolea Corporation; and Centrl Benk oa Sri Lanka. SRI LANKA Table 9.08: CEB ELECTRICITY GENERATiON, 1970-90 Generation Capacity Energy Generated (GWh) --Thermal Energy Components---- Kelanitissa Gas Year Installed Effective Hydro Thermal Total Steam Turbines Other la Sapugaskanda 1970 262.0 243.0 740.3 41.6 781.9 2.0 - 39.6 _ 1971 262.0 243.0 825.2 23.8 849.0 1T9 - 5.9 - 1972 262.0 243.0 848.3 93.7 942.0 87.5 - 10.2 1973 262.0 243.0 69&3 281.9 980.2 260.9 - 21.0 - 1974 362.0 339.0 997.9 14.3 1,012.2 12.5 - 1.8 - 1975 362.0 339.0 1,077.8 1.2 1,079.0 1.2 - 0.1 - 1976 402.0 377.0 1,108.5 24.3 1,132.8 23.9 - 0.4 - 1977 402.0 365.0 1,214.5 2.1 1,216.6 1.7 - 0.3 - 1978 402.0 365.0 1,365.7 19.3 1,385.0 14.0 - 5.2 - 1979 402.0 365.0 1,461.2 64.0 1,525.2 58.0 - 6.0 - 1980 422.0 399.0 1,479.4 188.8 1,668.2 140.1 18.4 30.3 - 1981 522.0 519.0 1,571.3 300.3 1,871.6 98.0 182.7 19.6 - 1982 562.0 539.0 1,608.; 457.6 2,065.7 89.1 352.6 16.0 1983 592.0 569.0 1,217.2 897.2 2,114.3 147.1 734.5 15.5 1984 812.0 799.0 2,090.7 170.0 2,260.5 11.1 116.9 2.8 39.2 1985 1,016.3 936.0 2,394.6 69.4 2,464.0 - 8.9 0.1 60.4 1986 1,010.3 1,005.0 2,645.3 6.5 2,651.8 - 0.6 0.1 5.8 1987 1,138.3 1,125.0 2,177.3 530.1 2,707.6 - 314.2 5.4 210.5 1988 1,208.5 1,195.2 2,597.7 201.8 2,799.5 - - - 1989 1,240.7 1,230.4 2,801.5 56.6 2,858.1 0.0 0.6 4.1 51.9 1990 1,289.7 1,279.4 3,145.0 5.0 3,150.0 1.1 0.2 1.2 2.5 la Primarily Chunnakam (14.0 MW) and Pettah (6.0 MW) diesel plant and Sapugaskanda diesel (80 MW) from May 1984. -- not available. Sources: Ceylon Electricity Board; and Central Bank of Sri Lanka. - 145 - SRI LANKA Table 9.09: CEB ELECTRICITY SALES, 1970-90 (Million kWh) Street Year Domestic Industrial Commercial Authorities Lighting Total 1970 62.5 343.0 88.0 167.5 10.5 671.5 1971 64.6 373.2 92.8 180.5 11.0 722.1 1972 72.5 436.4 96.8 193.1 11.5 810.3 1973 81.5 466.6 107.6 198.4 12.0 866.1 1974 82.6 477.2 118.1 201.9 12.5 892.3 1975 84.9 522.6 122.5 222.2 13.0 965.2 1976 95.2 516.3 137.4 237.3 13.5 999.7 1977 106.5 519.4 147.9 252.8 14.0 1,040.6 1978 119.2 592.0 158.9 275.9 15.0 1,161.0 1979 153.2 629.9 203.0 296.3 16.0 1,298.3 1980 190.8 625.6 223.2 335.5 16.5 1,391.6 1981 216.6 647.5 219.9 380.6 8.5 1,503.1 1982 258.3 739.2 262.5 417.5 8.6 1,686.1 1983 304.8 752.0 292.0 433.0 10.3 1,792.3 1984 316.9 790.9 299.6 457.7 11.4 1,876.5 1985 346.3 850.4 350.0 502.1 11.8 2,060.6 1986 369.2 925.3 381.4 543.3 13.1 2,232.3 1987 382.2 865.9 418.9 570.6 15.2 2,252.8 1988 404.8 905.4 443.4 600.8 16.5 2,370.9 1989 420.2 848.8 436.0 630.6 17.2 2,352.8 1990 514.3 909.6 508.9 657.3 17.9 2,608.0 Source: Coylon Electricity Board. - 146 - SRI LANKA Table 10.01: MINIMUM WAGE RATE, 1977-90 (December 1978 100) Year Private Public iMoney Real al Money Real a/ 1977 66 78 87 103 1978 95 99 100 105 1979 120 113 117 111 1980 147 111 129 97 1981 152 97 146 93 1982 176 101 188 108 1983 189 96 216 109 1984 229 98 247 107 1985 248 106 284 121 1986 261 103 297 117 1987 278 102 297 109 1988 336 108 390 125 1989 388 112 422 122 1990 454 108 477 113 a/ Money wage deflated by Colombo Consumer Price Index. Source: Labour Department and The Central Bank of Sri Lanka. Note: The indox for pubilic employees has been revised based on the number of employees and total salaries as at January 1, 1986. The Index numbers from January 1986 have been spliced. The wage rate used In the calculation of index numbers are the Initial salaries and wages in each respective scatle. - 147 - SRI LANKA Table 10.02: COLOMBO CONSUMER PRICE INDEX NUMBERS, 1977-91 (By Commodity Group) All Items Food Clothing Fuel Rent a/I Misc. Weights 100.0 61.9 9.4 4.3 5.7 18.7 Index (1978- 100) 1977 89.2 85.6 98.9 98.3 100.0 92.7 1978 100.1 100.0 100.0 100.0 100.0 100.0 1979 1ff d 153.0 102.2 125.3 100.0 112.3 1980 139.7 143.0 106.1 215.1 100.0 130.7 1981 164.8 168.3 114.0 293.0 100.0 153.8 1082 182.6 189.7 121.0 311.4 100.0 167.8 1983 208.2 213.2 128.7 414.9 100.0 192.9 1984 242.9 251.8 136.0 489.4 100.0 221.0 1985 246.4 252.0 143.3 508.2 100.0 233.3 1986 266.0 270.1 165.6 514.2 100.0 266.7 1987 286.6 293.5 177.2 518.4 100.0 289.5 1988 326.6 337.7 185.6 585.7 100.0 330.4 1989 364.4 372.5 216.6 655.8 100.0 382.7 1990 442.8 459.3 269.8 738.0 100.0 454.2 1989 January 345.2 358.5 191.0 612.8 100.0 348.7 February 342.7 352.6 191.0 634.7 100.0 351.1 March 346.1 352.6 203.0 652.5 100.0 360.0 April 350.0 356.3 203.4 652.5 100.0 369.1 May 354.1 361.4 203.7 652.9 100.0 372.8 June 361.6 372.3 206.4 652.9 100.0 372.2 July 361.9 365.9 224.2 661.8 100.0 388.6 August 370.6 377.1 224.2 661.8 100.0 396.2 September 373.8 379.3 228.9 667.7 100.0 402.3 October 378.2 385.6 233.2 667.7 100.0 400.3 November 387.1 395.0 239.3 671.5 100.0 412.4 December 401.9 413.5 251.2 680.8 100.0 417.3 1990 January 411.6 426.9 251.2 681.6 100.0 422.3 February 418.2 433.9 254.1 681.6 100.0 432.7 March 423.3 439.3 257.2 687.6 100.0 438.2 April 429.1 446.7 267.9 687.6 100.0 438.2 May 436.6 456.5 268.2 687.6 100.0 443.4 June 442.6 465.5 268.2 687.6 100.0 443.4 July 448.9 470.9 271.6 721.1 100.0 448.1 August 448.1 463.9 271.6 766.1 100.0 458.7 September 450.6 460.4 278.4 794.0 100.0 477.2 October 451.9 461.3 283.0 794.0 100.0 478.6 November 471.7 487.2 283.0 830.4 100.0 482.5 December 480.6 499.3 283.0 836.1 100.0 486.6 1991 January 475.0 489.9 285.0 841.5 100.0 487.8 February 475.5 489.1 287.5 841.5 100.0 492.3 March 483.9 499.7 295.4 841.5 100.0 496.4 April 489.1 506.9 295.6 841.5 100.0 498.7 May 495.8 516.3 295.6 841.5 100.0 501.2 June 503.2 524.2 300.3 852.8 100.0 506.4 July 501.4 519.8 302.3 863.9 100.0 611.2 August 502.1 518.7 303.6 877.4 100.0 616.3 September 496.2 508.0 307.9 877.4 100.0 520.8 a/ ThIs Index reflects controlled rents. Source: The Central Bank of Sri Lanka. SRI LANKA Table 10.03: WHOLESALE PRICE INDEX, 1978-90 (1978 = 100) 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Weights All Items 100.0 100.0 109.5 146.5 170.2 180.7 225.9 283.S 240.7 233.5 264.7 311.9 340.1 415.5 Bycommodity Food 67.8 100.0 103.8 137.8 160.7 169.6 220.5 293.2 223.1 208.4 248.0 303.4 317.2 385.3 Arcoholic drinks 2.9 100.0 114.8 148.4 185.7 196.5 206.5 227.7 246.3 289.9 323.8 369.2 420.7 491.1 Textile and footwear 4.0 100.0 10&0 104.7 117.1 129.6 121.9 124.1 127.3 129.9 135.6 13&1 144.1 169.8 Paper products 1.4 100.0 127.0 182.6 188.7 189.2 223.0 265.0 282.2 274.5 283.1 295.9 359.9 472.5 Chemicals and chemical products 5.1 100.0 113.7 134.8 215.1 227.6 256.8 305.8 306.9 290.5 282.3 322.2 362.6 527.0 Petroteum products 6.4 100.0 167.4 325.1 427.2 432.6 556.5 626.2 626.2 626.2 626.2 626.2 696.8 857.6 Non-metallic products 1.8 100.0 111.1 160.3 162.0 175.0 203.5 249.2 256.3 244.7 233.9 259.1 289.7 445.2 Metal products 0.9 100.0 129.6 148.9 176.2 1.96.7 210.5 265.3 277.9 272.1 276.0 306.7 401.6 486.4 Transpcrt equipment 0.8 100.0 104.6 120.8 136.9 141.7 177.2 208.3 216.5 217.6 221.7 227.0 279.7 356.9 Electrical appliances and suppiies 1.0 100.0 111.9 124.5 149.9 188.0 205.4 223.2 236.6 237.1 249.5 280.0 346.1 430.9 Machinery 1.3 100.0 113.7 127.5 148.1 153.5 169.2 180.9 182.7 199.2 215.7 242.2 261.7 343.5 Fuel a,id fight 1.8 100.0 125.9 153.2 158.6 161.2 168.6 201.6 247.3 272.9 285.0 297.2 395.1 486.1 Miscellaneous 4.8 100.0 117.0 147.5 151.6 161.3 197.5 202.7 222.4 244.7 291.1 371.0 471.5 523.7 By Xsctor I Domegic 50.3 | 100.0 107.9 132.2 12.1 178.9 189.5 210.9 226.4 244.2 254.3 286.3 348.1 440.0 Imports 27.2 100.0 11&8 171.2 217.2 212.7 234.4 249.2 256.8 255.7 261.1 290.4 330.2 417.0 Expcrs 22.5 100.0 105.0 146.6 149.7 160.4 267.5 404.4 247.6 205.3 283.8 364.1 340.0 381.6 Consuwror 75.3 100.0 107.6 144.5 160.9 170.6 220.0 288.5 229.2 219.7 258.6 311.5 330.5 401.6 Intermediate 20.5 100.0 120.8 163.6 2085 216.3 250.6 27L,8 283.5 285.0 295.2 325.0 386.1 468.6 ftiovXmemt 4.2 '0.0 1l15.4 156.4 160.31 192.1 217.0 235.8 242.0 237.4 234.4 259.6 297.6 413.9 Sours The Cmtra Balrk of Sri LanX;& Table 10.04: CCSuf VICES FOR SELECTED BUILDING IATERIALS AND DIFFERENT CONSTRUCTION ACTIVITIES, 1977-88 (1969 = 100) It.. 1977 1978 1979 1980 1931 1982 1983 1984 1986 1980 1987 1988 Cent 104 199 292 638 723 814 824 930 I,O1 S 983 1,000 1,068 stee (U.S. Bare) 266 274 458 604 672 573 032 S44 877 877 790 1,033 Bricks (Hank solded) 156 208 286 393 388 442 481 662 640 555 585 763 Asbestos Shet (Corrupted) 288 327 411 807 027 708 799 835 843 832 840 908 Timber (Sawn) 129 217 378 634 814 814 833 838 984 984 964 964 1 Metal (314') lZS 338 633 817 661 6?7 832 703 788 799 828 882 4 P.V.C. Pipes (3140) 214 382 459 520 520 520 562 618 820 813 493 762 Houing Construction 173 262 347 619 817 045 691 722 831 837 840 1,089 lion-Residenti.l Buildings 199 254 320 483 548 588 031 706 739 740 82 837 otser Construction Works 187 220 278 388 457 493 634 807 837 644 647 915 All Construction Activities 188 247 327 489 558 692 837 716 768 781 ?85 950 'ouwc: Ministry of Locl Govrnmwnt, Housing and Construction. SE1 IAI4TA TdSc 10.05: AJD NL;ERE IPRCSOF BASIC CONSUME GOODS. I977-91 T~ DG. D Ote. 5 Dcc. 3 Drc. 3ux Dcc. June Dcc. Ju Dec. Ucii 14:72 1:7 1999 1930 1981 1981 1982 1982 1983 1983 1984 1984 Uc: orfForzdmS 8 2.15. 2S15 3.48 4.41 6.15 6.15 6.15 6.15 6.16 6.25 6.72 6.72 R;= (O8S lNk) Is 3.70 4.24 5.13 6.72 6.07 8.60 7.69 7.87 7.74 8.94 &65 389 FAm 8 1.32 z47 3.00 5.23 5.50 6.65 6.65 5.95 6.82 6.82 7.75 7.75 Brad kg 1.32 2.21 2.76 4.52 5.06 5.95 5.95 5.S 6.17 6.17 6.78 6.78 gc:s litcw 0.76 0.76 2.35 3.4 3.89 3.99 3.89 3.89 5.20 6.53 6.58 6.S3 ccuiry omit 0.12 0.31 0.31 0.35 0.35 0.35 0.40 0.40 0.40 0.40 0.40 0.40 19 a Ft iwcY 050 0.6 0.60 L.60 1.60 1.6 1.60 1.60 2.00 2.50 2.50 2.5D Cbcau cac 1.42 1.05 3..2 2.48 2.02 2.58 2.41 Z47 2.54 4.13 3.39 3.93 ct= Oil beak 4.58 4.24 7.06 U3S 8.43 8.50 8.23 8.07 10.00 20.W 23.70 19.75 U,i1k 8 t I2.33 1Z23 18.74 26.28 32.50 31.2. 34.47 35.88 52.00 52.00 52.OD 53.2D Supr(OpcuMatti) U j.62 6.62 6.62 14.55 16.50 13.50 12.63 11.9D 12.50 13.00 12.38 12.50 *wz Dc:. ;WC Dcc. lzne Dec. Junc Dec. June Dcc. Jun Dcc. June O ___________ us3l 1935 19S5 E986 1986 1987 1987 1988 1988 1989 1989 1990 1990 1991 tRict f=or , 83 t 6.72 1.22 7.22 7.22 7.22 7.22 .70 S.79 11.15 13.09 11.90 12.09 12.25 Ri;CcOpMxItC? tg 8.60; 20.05 899 10.17 9.19 11.05 10.02 14.S9 13.10 19.67 16.16 22.17 16.06 Flm ts3 7.75 7.90 7.99 7.90 7.90 7.9D 7.90 7.90 7.9D 10.60 14.25 14.12 IZ25 [B=d tg 6.73 6.91 6.-9 6.19 6.89 6.89 6.89 6.89 6.89 8.39 11.73 11.67 10.00 |cmumc litc. 6.58 6.53 6.58 6.58 6.58 6.58 6.58 6.58 6.53 6.53 6.5S 8.8D 3.80 JBccieiZy Y.50 0.50 0.50 0.50 0.50 0.50 0.55 0.55 0.5S 0.55 0.55 0.5S 0.55 |>n Fwc |ji=n 250| 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 4.00 4.00 Cc1, I 2.50 ZOD 1.* 2.71 j253 4.75 4.50 5.10 3.50 4.50 3.69 4.31 4.50 CAewo0 bi Xc 15106 7.25 6.50 i0.o31 - 5.03 2000 27.50 24.00 17.30 16.00 16.13 19.13 2631 MUilk raicr itw 5S2D1 58.2D 582D 5.2D01 1 820 58.2D 62.20 70.00 70.0 99.00 100.00D IO.00 100.0 .pi(SUam 3) __t_ 12.501 14.00 14.5D 14.501 16.010 17.00 17.50, 2D.D0 23.001 34.00 30.00 25.00 23.00 3 1oc5zu a of C2 L t SR LANKA Tabe 11.1: SELECTED SCIAL moiCATORS 196-90 1946 ar 19S3 a? 3 at 1 1971 a 97 1980 1981 a| 192 1983 94 1985 196 198 1988 1989 1990 bl A" SL8UUc7 69.0 77.0 7s. .. 87.2 .. .. .. .. .. .. !M!h AND OgERAI, LifeEamy_ Ma__ 43-9 588 63.3 64.2 .. .. 67.8 .. .. .. .. .. .. F*g 41.6 57ZS 637 67.1 ...71.7 .. .. .. .. .. rfrira!m3tF"(WuG) 1147.0 71.0 56.0 45.0 45.0 34.0 30.0 30.5 28.3 23.1 23.5 22.6 24.0 19.4 .. 21.1 cl Cuf ( tpmwM 37.4 87 3C.1 30.4 271.8 28.4 2&2 26.9 26.3 24.8 24.3 22.3 21.9 20.7 21.3 20.2 d Ch Qt nthR Pp ur'0M 292 10.9 86 7.7 8.5 6.2 5.9 S.1 6.2 6 62 60 5.9 5.8 6.2 6.0 d RateIof Nga" ppuWJu Want%) 1.7 1 8 26 Z3 1.9 2.2 2.2 21 2.0 1.8 1.8 1.6 1.3 1.2 1.4 1.4 d N*t mWarm am 1000 5.2 5.2 -1.0 -0.9 -2.3 -4.7 -3.4 -6. -6.8 -49 -0.6 -0 -2.7 -3.1 -1.2 USs 27.0 27.2 27.9 28.0 27.6 27.8 27.9 27.8 27.7 .. .. .. .. Fifna* 2D.7 20.9 22.1 23.5 23.3 238 24.4 23.4 23.5 .. .. .. .. ?Nt3 N of MmP Famty Inn A£outsliXlt - _ .. .. _ 142 110 171 122 114 173 160 139 137 135 101 121 145 tFma C) La Famel (Pi *am %) .. | 14.1 19.1 .. 17.6 . .. .. _ 37.6 c - not wafN a, COrOsuinI Cl Pmxfdng af SdLtaCW FomQ=twP? pqow(2ndQuart 199( E Sourc; V1m_utoll Con1us1MaUsRwgisZiarGum?s Depattlrn and family Hsalthaureu. SRI LANKA Tabe 11.02 HEALh rSTATISTiCS. 1975-90 1975 1978 19739 19a0 | 1981 1552 1983 1984 1985 1986 1987 |198 1989 190d HKOSV (ra cing vJes:em mqd4ne) aI 458 484 483 48^ 488 492 493 494 491 497 497 498 502 422 Persopser H=m tal 29.467 29.306 29.961 30.704 30.713 30,972 31,270 31,862 32,255 32,429 32fl19 33.30S 33.478 34.367 Perscns r eed 3S31 341 341 340 340 350 349 350 353 350 356 365 360 345 &csrva dC.risares 335 379 359 347 34 338 353 334 338 341 34S 350 363 278 Pers=ns per Dcisensary 38,0:7 37.425 39.217 42.473 | 44.032 44.938 43,671 47,125 46,855 47,264 47.423 47A189 46,298 52,169 ?.'jm rr ck Doccs 2!138 2.258 2.263 2051 2233 2.036 1,939 1.951 2,150 2,217 2.354 2,316 2,456 2,383 Persos per DOtor 6.3121 6.282 6.394 7.186 6.712 7,460 7,950 7,995 7.366 7.270 6.950 7,160 6,843 6.086 Number cl Ass?. MeC=M Practi:1rers 1.075 1.178 931 1,008 925 884 933 984 957 1,047 1,026 1,110 1.193 968 Perscs per ARssL MedcrayPrac ?..Uner 2554 12041 12284 14.621 16.203 17 .182 16,523 15,653 16,549 15,393 15.946 15,078 14,087 14,982 Nurn eC c1Nursm 5.695 6,169 6.848 6.227 6,805 7.574 7,214 7.400 8.091 8.019 7.843 8.317 9.4B6 8.733 Pervnsps Nperse 2.Mm9Z 22S9 2113 2.367 2.182 2,005 2,137 2.127 1,957 2,010 2,086 1,994 1,772 1,661 NuYrr inga?iamisCCCG 2,145 2174 2.425 2.334 2283 2.445 2.502 2.524 2,4998 2,590 2,759 2,543 2,525 2,525 WNn4P-cM, OUTPOnti S C) 27.654 28.419 29.400 31.891 30,247 31.696 30.720 31.908 29.570 I32,561 34,139 31,378 31,781 28.401 rew Aca;t=s ct Famy Plarning Me>oMds 109.639 76.183 92.156 71.160 121.797 14.481 173.197 160.023 138.967 bW 114,791 b/ 15.406 100,913 121,288 144,895 LOWVs 32.755 23.085 20.187 19.232 14.833 16.115 16.328 16,140 13.877 10.069 12,337 10.035 10.929 12,020 Szevization 39.164 21,949 35.643 112.926 76.633 6'.924 11,777 101,328 71.772 42.856 41,017 19,524 19,342 30,332 O CXirMum' ds 37.720 31.146 31,325 39.002 30.331 36.442 45.092 42,555 53,318 61,856 82,052 71.354 91,017 102,543 rs=nw.1 EenwidureMRs mil,on) 324 518 6321 740 857 953 1.308 1.621 1.783 1.840 2.393 2,442 3,447 {CtsaolEw!urxre(t#Rmiiliorn) 86 179 381 602 141 174 716 130 248 659 1,317 1,394 1,592 To (RRsniiM l) 410 697 1.013 1.S42 999 1.127 2024 1.751 2.031 2.499 3,710 3,836 5,039 5,383 of EvwOnutg,swPw=sn(Rs)c 30.4 49.5 70.0 91.1 |669 74.2 112.6 92.7 124.1 155.1 226.8 231.3 299.8 316.8 |ToCJE=wMurmas d GOPGD 3.6 1.71 2.01 2.2 1.2 1.2 1 .5 I 1.1 J 1.3 1.S t | 1.9 2.21 1.7 ..Nw avait ai Exc hNesan d Eah'wn Penc of l M'"'' E Av Poviums Soax=u 3zp1t1 of HWapjft SN'; Dopj6-tm N C4 Stastj and Farrh? HWeafth Bureau. SMILAWCA Tiae 11.03: EDUCATiO STATisTcs. 1975-90 I7 lt-a 17 lto 10671 1062 13 1064 1M5 18 1987 106 710 100 at TCld N 4f t 9,1S75 9.728 9J7 . 9^7 90 1 9.W7 9pl 10.05100 10,207 10.21 10.26 10.373 7.C56 c.02a 3.73 7.9 3.914 4.62 3.93 4.000 3.908 3.9s 3.518 4.24 4,430 4. 1.730 5.444 5.519 1.718 S.607 4.921 5.52 5.55 5.63 6.751 0.191 5.407 5.375 5.S18 c0w1 219 256 234 077 358 57 372 358 417 443 498 490 401 517 mbsrg douw n a Sdeoce 9.35 P.72 9.052 9.117 9.21 9 9.544 9.5 0.556 9.0634 9.6 9.709 9.791 9.805 9.656 TCW WIP upit n dPi 2.3,5C1 3.0".32 .2 " . 3 . 7 3.48.t= 3,"40.e 374 3 5 3,7.8C 3S4,19a37 3.974.eos 4.058.83 4.179.52 4.29241 G sn so I 2toa.4613 3,125.715 - 272 2 ,5 2,s71.537 2875.979 .. .. .. ..9.. GQas01oZ 110.481 2475 - 651.50 6.406 613.124 384.3,5 .. .. .. .. Pfu $;hod TuoIm . _ 3.719 2.7 4213 4.592 4,S19 4.6 5.273 5.731 8.237 60273 6246 0.471 G _miS&IdTmchwv 0.067 125.4W 133.4AU $3714 131.65 129210 129.43 135.514 142.240 143.308 140.3B5 140.061 146,997 177.089 Pu8Ii'mF , o 25 25 24 24 26 26 27 26 25 26 27 28 27 23 NIUIdOuI*twyJUw8 13.200 16.164 18.3 16.384 1S.113 1S.;03 18.496 1B.496 18.217 18.913 19.066 29.781 - - HAbp oldUwft,Tvwl 2,0Q0 2 t79 1.63 .eo4 1t,39 .. 2.030 1.941 2.051 1.683 1.991 1.683 1.700 - N i _Atm,Ion 3.412 4.717 4.2 4.688 4.306 6.106 5.463 50630 6.707 6.044 6.201 0.143 8.463 - Num6w GratAdid 3.148 3.35 3.72 3.22 2893 3.560 3.63 4.468 4.528 4.179 645 614 4.67 - PdcwwRExp.df(Rut) so5 02 1.132 1.388 1.509 2,012 2324 2.572 3207 3.518 4.006 6.036 0.207 6.056 Cspf OWwwnJr(FbUn) 53 157 259 458 421 471 507 536 93 1t252 787 855 1.417 44 TOtd Ro w) 7a n1. 1,3;t 1.4 2.020 2.483 2.U31 3.108 4.137 4,770 4.73 65.91 7.624 90000 pTa E__w 8 *s g Gd P 2.7 2.7 2.7 2.8 Z4 2.5 2.6 2.2 2.6 2.9 Z7 2.9 3 3.1 I- _:m1bCdU *d1Laa U' SM LANK1 TaU 11.04: TOURISM: ARRWALS BY REGION, 1975-91 (Nuiter) 1975 1976 1977 | 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Western Eurcpe 60,187 72,624 103,807 125.664 160,664 213,482 245,785 176,310 91.070 153.004 143.022 21,112 111,426 101,910 69,294 133,329 Asia 24.604 25.417 27.447 38,560 58.975 74.676 88.744 135,088 24,620 89.736 79,056 66,150 43,462 53.712 65,428 00.004 70,125 North America 6,823 6.279 8.907 10,729 11,701 12.878 13,9486 15,528 14.686 15,020 10,358 9.232 7.166 6,534 5,844 8,084 6.876 Easeren Europe 4,957 5,825 4.480 6,102 5,496 4,906 5,311 4.160 4.488 3,270 3.080 2,764 3.160 3,386 4,544 7,562 3,600 Australia 3,683 4,199 5.415 6.629 7.374 8,724 9,584 12,834 10.554 11,970 8.090 5.788 4.448 3,992 4,020 8,914 6,447 Others 2,SSO 4.627 3.09 4.9Q 5,954 7,114 7,372 7330 6872 6.218 3.868 3.150 3 272 3.612 2,986 4,030 3.699 TOTAL 03,204 118,971 153,665 192.592 250,164 321,780 370,742 47,230 337,530 317,734 257,456 230.106 82.620 82,662 84,732 7,888 4,076 Memorandum ltems Tous NighIs (COC) 1,015 1,194 1,645 2,061 2,777 3,548 3.907 4,048 3.179 2,818 2,365 2,513 2,414 2,305 1,970 3.225 2,420 Guest Nights alfOO) 656 847 1,109 1,350 1,637 2,008 2,097 2,056 1.652 1,835 1,667 1,651 1,531 1,470 1,315 2.263 1,933 Rooms In Graded Accommodation 3,632 4,581 4,581 5.347 5,599 6,042 6.891 7539 8.852 9,627 9,826 9,794 9.921 9.977 9.459 9.556 9.575 Tourist Receips bI sS Million) 22.4 28.2 40.0 55.8 77.7 110.7 132.4 146.6 126.8 104.9 82.2 821 820 76.7 76.3 124.8 94.0 af TourLst nights in Graded Accommodation. bl Data not consistent with the foreign travel receipts data presented In Table 3.01 which are based on The Central Bank of Sr Lanka data. Source: Ceylon Tourist Board. 4'- MAP SECTION IBRD 2087 Kankesornturcl SRI LANKA - National rocido all no ~ ~ ~ ~ ~ ~ ~ ~ ~ - Railways o Selected iowns and vi110ges * National capital WO; bt,k , tonnda'.s P'O'ime bo,,dodlts j A F F |A , , , A,I U i Ti-i I U Manuililonm Tolatimoa,n -I I Y 4' ~~~Mocirro. - - -,- i, rP 60 Y tO°* a a , , .IY'.' -j p. t. t. W ' v '- ,o Ip ao p I ~ ~ ~~~~~~~~~~~~~'4 , VOvaniy Jr -> J - ) TRINCOMAtF,f | edowochcniya / * Anuasd',pura Pullk I . i P ONN V W A ~~'~ *h \'0 AM Off t'WPD ?AOWA/ 55,50'\ 'LOiO ; \ iS ~ ~ ~ ~ \ I<~'i i' it,hull tTTI . / 0.' 4'.5I '5. '/vOk'. I '..1- \iii' *,t.'d.s -F / Ci lJ ci, (, As / K PoltiAl Iui iui . .'wl i biiS\ iS0.Wp ft-40Oft. I 010 ~ ~ Po ,06044 r'1 . I -"- I A A / , A i,S,Chi rr t,thii t.'I S 3AS3S *._ )J7 r4rXw _- . Po "W got k 0" 11O .1"IMOP lre*i v_)Roinopvo -O f'0 I.9A.A.A isi k si SO m " f ori , i i"i% elEvW.v C' aviv-k'.,. iv ~ ~ ~ ~ ~ ~ ~ ~ ~ F' Ik PA *'b7b@ Cr a g /. I 1., ."4 4ikA , ~ ,. \\ | ' \ li A iM t1 A)N T 1i t A I 5 5.l1 i I A?.I A i~ C:-' ARI APRIL^ )D88