Analysis of Sector wise Contribution of GDP (1977 to up to date)

Introduction

Sri Lankan economy was liberalized in 1977and agriculture, industry, and services sectors

were affected by this situation. The services sector was the highest contributor to Gross

Domestic Product (GDP) and agriculture and industry sector get second and third place

respectively. The contributions of agriculture, industry, and services sector were

approximately 27, 23 and 50 percent respectively in 1977. But today agriculture sector

contribution was 7 percent and industry and services sector contributions were almost

27 and 56 percent, respectively (Appendix 01).

Agriculture Sector

Most of the Asian’s countries economy based on agriculture sector due to their location.

Before 1960 the agriculture sector was the dominant sector in the Sri Lankan economy. Sri

Lanka comprises rural societies and one-third of the population based on the agriculture

sector. But today Sri Lankan agriculture sector performance is gradually decreased

(Appendix 03). Our agriculture sector can be divided into two sectors called domestic and

plantation industry. The contribution from the agriculture sector to GDP get higher value due to

favorable weather condition, export-oriented policy, and dual exchange rate system during the

1977. Mahaweli Development Program contributed to develop the agriculture sector and

increase paddy production during this period. After 1988 this project was lost due to

political changes and decreased the paddy production as a whole (Appendix 07).The

Contribution of the agriculture sector has been shown a decreasing trend. When considering the

1977/87 period contribution from the agriculture sector to GDP decrease by 11 percent. The most

important reasons were lousy weather condition, civil war situation within the country, and our

agriculture export demand dropped due to the global recession and increased the international

competitors. Agricultural sector contribution to GDP gradually decreased by approximately

25 percent during 1987/97 period due to the reduction of agricultural exports (Appendix 08). In

1998, Russia financial crisis, Kenya tea production development, and prolonged drought

caused to reduce our tea production. The depreciation of East Asian county’s currencies

caused to cut the rubber prices, and its demand and coconut production decreased due to

prolonged drought. Our primary crop production contribution to GDP contracted due to the above

reasons, and it caused the reduction of agriculture sector contribution (Appendix 03).In 2004,

The agriculture sector was profoundly affected by the tsunami disaster, and fishery sector and paddy

cultivation land destroyed from that. It was approximately 2175 hectares of rice paddies and

other crop production. When we consider the agriculture sector, we should pay attention to

the fishery and forestry sector also. Although Sri Lanka is located around the Indian Ocean

fishery sector contribution to GDP was 1.8 percent in 2015 and even today Sri Lanka import

fish production Mt 46516 but only export Mt 7490. Therefore Sri Lankan economists and

policymakers should pay attention to utilize these natural resources effectively. Agriculture

sector generates more employment opportunities and contributes to reducing poverty.

The employment rate of agriculture was 29 percent in 2015, and it’s higher than the industry

sector employment (Appendix 06). But the agriculture sector contribution to GDP was 8

Percent in 2015. Therefore the agriculture sector shows low productivity. Central Province

provides the highest agriculture contribution to GDP province wise. Every government

implements agriculture policies to accelerate the agriculture sector development. In 1986, the

food and nutrition policy was performed to identify the challenges to growth in domestic

agriculture and make various solutions and focus on food availability and food nutrition.

Agriculture Insurance Board introduced a cultivation insurance scheme for paddy in 1996 and

pension and social security benefit for farmers. Ministry of agriculture, land, and forestry

implemented the “Waga Lanka” program to face the global food shortage

in 2005. The former government implemented the “Api Wawamu Rata Nagamu” program and

reintroduce the fertilizer subsidy scheme. Present government introduce the Food Production

National Program for the period 2016 to 2018 to make Sri Lanka self-sufficient

In traditional local food and reduce the importation of food. The government should introduce new technology to the agriculture sector and provide financial support to develop this sector.

Industry Sector

Since 1977, the UNP government introduced the open economic policy, and it has encouraged

industrial sector growth. The contribution of the industry sector to GDP overtakes the agriculture

sector contribution after 1987 due to manufacturing sub-sector rapidly growth with market-oriented policies. Textiles, food and beverage, wood products, rubber, and plastic industries

have shown fast growth after 1977. The contribution of industry sector shows an increasing

trend during 1977/2016 period, and it shows many fluctuations (Appendix 04). When

Consider the 1977/87 period contribution from the industrial sector to GDP increased

approximately 17 percent due to manufacturing sector growth with the reasons of favorable

export-oriented policies, higher prices for manufacturing export production and suitable

environment for factory industry and small industries (Appendix 08).Mahaweli Development

Project construction caused to increase the contribution of the construction sector to GDP. But

the participation of the industry sector to GDP contracted 8 percent due to some reasons such as

power cut, inclement weather, lesser availability, and price increases of construction of

building materials. The contribution from the industrial sector to GDP rose from 27 to 32

percent from 1987 to 1997 due to a 27 percent growth rate of the manufacturing sub-sector

(Appendix 09). Reasons behind this growth were free availability of imported inputs and

capital goods, increase foreign direct investment, and favorable export-oriented policies. Food,

beverage and tobacco, textiles and chemical petroleum, rubber, and plastic products

contributed 83 percent of the growth of industrial output during this period. After 1997 the

contribution of the industry sector shows decreasing trend and grew lower rate due to these

reasons such as financial market and currency crisis in East Asia, decrease the export demand

and insecurity with war situation in Sri Lanka. Therefore foreign direct investment fell

and reduce the doing business confidence in Sri Lanka. The industrial sector contribution

decreased due to these reasons, such as the global economic crisis, increases commodity prices

and energy prices and tsunami disaster during the period 1997/2008. Industry sector grew

again with the end of civil war in Sri Lanka. But industry sector contribution to GDP was 27

percent in 2016 (Appendix 01).

Industry sector creates many job opportunities and reduces the unemployment rate in Sri

Lanka. Employments of the industry sector gradually increased relative to the agriculture sector

due to people unwilling to work in the agriculture sector. Therefore industry sector employment

increased (Appendix 06).

After 1977, the industrialization policy and privatization policy were implemented to develop the

industrial sector. In 1978, Export Development Board and export processing zone were

established. In 1995 industrial system was implemented. The former government introduced the

ten-year horizon development program (2006-2016), and one objective was industrial

development. Present government implements an export-oriented industrialization strategy to

develop the industrial sector.

Service Sector

The service sector has been a significant partner of economic growth over the last decades, and the

contribution from the services sector to GDP was nearly 60 percent. When a country is

developing, the economic structure may change from agriculture to industry and the service

sector. The contribution of the service sector to GDP rose from 50 to 56 percent from 1977 to

2016 (Appendix 01).Since 1977, the services sector has been shown an increasing trend (Appendix

05 ). Wholesale and retail trade sub-sector was the highest contributor since 1977 to up to

now. Transport and telecommunication sector proliferating with new technologies and get

a second place within the services sector according to GDP contribution. The services sector provides

the 45 percent employment out of total labor force and creates many job opportunities for

skilled workers (Appendix 06). Today the services sector is a dominant sector in many Asian

countries such as India, Singapore, and China. When we consider the 1977/80 period, services

sector contribution to GDP rose due to these reasons such as increase import trade, expansion

of transport service, development of banking and other financial services and hotel and

restaurant services. Sri Lankan civil war situation, bad weather condition, tsunami disaster, and global recession were the reasons for the lower level growth of service sector from

1987/2005 period. The services sector grew after 2005 due to expansion of infrastructure

facilities such as telecommunication, road and transport, and electricity, etc. Other service

activities also have been shown an increasing trend (Appendix 05). Today Sri Lanka promote

many services related events with developing infrastructure facilities, human development,

and providing a favorable regulatory environment. Since 1977, every government developed

infrastructure facilities such as expressway, airport, and harbors. Sri Lanka can improve the

service sector by providing better education service and introducing new technologies and

innovations.

Structural Change of Sri Lankan Economy

When a country experiences economic development, its commercial structures tend to change. The distribution of the country’s economic output shifts from agriculture to industry and

then to services sector with this structure change. Sri Lanka also facing this structure changes

in the economy due to the development of industry and services sector (Appendix 02). There is a

significant relationship between agriculture, industry, and services sector. As an example, the

performance of the processing industries such as tea, rubber, and coconut performance depends

on the production of plantation crop. When a manufacturing sector is developing services

related activities such as wholesale and retail trade, transport services and telecommunication

and banking and financial services are expanding.

Comparison with other countries

Singapore is a developed nation today, and their dominant economic sector is the services sector

which has not large natural resources endowment. Therefore they promote industrial and

services sector relative to the agriculture sector. In 1977, the agriculture sector was the dominant

sector in India, and it has changed to services sector today. Industry sector was the dominant

sector in China economy, and today the services sector is the dominant sector. Singapore is mostly

corruption-free government, and it has the skilled workforce and efficient infrastructure facilities.

Therefore this country could develop quickly (Appendix 10).

Advantages and Disadvantages of Colonial Economy in Sri Lanka

Introduction

Colonial Sri Lanka was known as Ceylon. Sri Lanka was colonized by Portuguese (1505), Dutch (1638) and British (1796) because of its Natural and Geographical Lactation and climate and soil were well suited to the plantation.[1] From the 16^th century, some coastal areas of the country were ruled by the Portuguese, Dutch and British. After 1815 the entire nation was ruled by the British colonialists until political independence was granted in 1948. (History of Sri Lanks Towards Independence, 2008)As colony economic, Sri Lanka was more affected by British colonialists than Portuguese and Dutch.[2] Most of the actions that taken by colonialists in the colonial period to Sri Lanka such as introduced plantation agriculture built railroads, reformed administration, changed the educational system, etc. affected to the country as favorable and unfavorable.

Plantation Agriculture

The British began experimenting with plantation agriculture in the 1830s. Under that, different crops such as Coffee, Cinchona, Tea, rubber was introduced into the highland time to time and was initially a tremendous success that revolutionized the Sri Lanka economy, which was hitherto based upon subsistence agriculture. Although, previously permission was granted for farming of royal land, Under the British crown were sold to private owners. Hence, land tenure also was changed. When introducing tea crops, Tamil people were brought from south India in large numbers because the cost of Sri Lankan Tamil peoples was high and there were not enough laborers in Sri Lanka. It was a reason to best tea was grown. (Watkins)

Advantages

·         Generated the new source of income by exporting plantation product.

·         Increased the foreign direct investment inflows to Sri Lanka by foreign investors invested their money in the plantation industry. (Bandarage, 1950) (Appendix A)

·         Expanded The opportunities for trading Sri Lankan products in different foreign countries. Especially Ceylon tea had become a staple of the British market bringing great wealth to a small number of white tea planters. Crops such as tea, rubber, etc. Still, bring wealth to Sri Lanka today. (History of Sri Lanks Towards Independence, 2008)

·         A network Of roads and railroads were built in the country to the success of the plantation. It is still useful for the convenience of transportation and traveling. (Appendix B)

·         Plantation agriculture continuously contribute to a considerable part of Sri Lanka Gross Domestic Production, because of increased additional export earning sources. (Appendix C)

Disadvantages

·         The the government sold lands at a prevailing minimum upset price which was 5 shilling an Acre until 1844 and 20 shillings after that. A large proportion of land in the Island bough from the crown and resold to other parties at a huge profit margin. Most of the foreign peoples who are owners of these land still earn huge profits from this land. (Appendix A)

·         Most Sri Lankan people had disentitled their lands which did not have documentary evidence and clear many cutting forests for Plantation.

·         The Domestic production of rice fell short of the domestic demand, and rice had to be imported. (Bandarage, 1950) (Appendix D & E)

·         Because of rice was produced primarily to the domestic market, most of the people who engaged in rice cultivation lost their source of income due to reducing cultivation. (Watkins)

System of government

The colonialists brought the new and alien system of government. It had changed each governor such as Cole brook-Cameroon, Soul bury, etc. in different periods,

Advantages

·         Well-structured system of government and new laws and regulation system which suitable with modern society was introduced to the country.

·         Peoples life was more complaisant by obeying to these laws.

·         Eliminated the ruthless punishments such as beheading, impale, etc. that used by kings

Disadvantages

·         Under this the system, compulsory labor (Rajakari Kramaya) inherited from the pre-colonial The governing system in Sri Lanka was abolished and introduced different taxes on a commodity such as Capitation, cinnamon, fish, etc. Those taxes made many difficulties in native people’s life. (Cameron)

·         This system Of government is alien to the natives. Hence people had to face more punishments by violating those rules.

·         Some control Had been used to fill full their needs, such as to stop conflicts that done by people against them. Thus, some practices were unfair to native people of Sri Lanka.

·         Colonialism caused the death of a lot of indigenous leaders and other peoples who against colonialists to the Independence of Sri Lanka. (The British In Sri Lanka)

Education

They introduced a new education system to Sri Lanka. But their syllabus was taught only in English language and mainly before expanding their Christian religion and their habits among the student. And parent had to pay more money for their children’s’ education.

Advantages

·         Peoples were able to learn modern education methods and increase English knowledge and it helped peoples to spend a better life.

·         Opened doors to deal with the entire world and get opportunities to higher education in other countries as well as earn money by working in other foreign countries.

·         The Knowledge of the English language was more comfortable to communicate with each ethnic groups in the country. (Sri Lanka Traditional and Colonial Systems, 2004)

Disadvantages

·         British admitted Sri Lankans, both Sinhalese, and Tamil, into the lower ranks of the the administration created after being educated in the British school.

·         Most students who were in poor families were unable to get an education, and they lost better job opportunities. (Sri Lanka Traditional and Colonial Systems, 2004)

Modernization and Technology advancement

In this period, Colonialists introduced new advanced technology to development in transportation, modern education, the building of railroads, health care, and medical services, exploration of natural resources[3] and different industries. They brought modernization to underdevelopment area on the island. (The British In Sri Lanka)

Advantages

·         Increased effectiveness and efficiency of this area that was introduced advance technology.

·         Building transportation infrastructures, it was saved peoples’ time which travels to another area in the country and developed trade on the island.

·         Developed the indigenous industries and peoples got different job opportunities from these industries and also they were able to acquire knowledge and learned new skills about those industries.

Disadvantages

·         Some indigenous method of that industrial area had wiped out.

·         Colonialists earned more money by using our valuable resource and we lost those opportunities and destroyed the natural forests and other natural resources in the island. (Ghosh, 2016)

·         Simplicity and cultural values of the people life.

·         Lost peoples’ job who was unable to adapt to new technology advancement.

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[1] Economic and Expansion Religion was the main Purposes of Portuguese to arrive at Sri Lanka. The Dutch period, they're main purposes were gaining a monopoly on trade, introducing Roman-Dutch Law and Explanation of their religion on the island. However, British entities have anticipated acquiring the power of economic and political in the entire country

[2]. The British attempted to reform the administration of the island by introducing their methods to reduce the ethnic tensions between the Tamils and the Sinhalese as well as the lowland Sinhalese and the highland Kandyan Sinhalese

[3] The use of new technology made exploration of natural resources such as gems, mining, Porcelain etc. easier and more efficient. And they had a good market for those natural resources especial in the European market.

Appendix

Appendix (A).

Crown Land Surveyed and Sold: Central Province, 1844-1860

	Number of lots	Extent (Acres)	Sold £	Fees £
European	750	79,172	116,293	13,648
Natives	1,514	10,471	25,796	3,702

(Bandarage, 1950)

Ownership of Cultivated Plantation Coffee Lands

	1871-1872		1880-1881
	Acres	Percent	Acres	Percent
Total	195,627	100	256,500	100
Non-European	12,642	6.4	20,352	7.9
European	182,985	93.6	236,148	92.1

(Bandarage, 1950)

Appendix (B)

Sri Lanka Railway Map

(Sri lanka Railway Map, 2011)

Appendix (C)

Tea and Rubber Contribution to GDP (National output, Expenditure, and Income, Annual Report)

Crop	Contribution to GNP (Rs. Million)	As a % of GDP
Tea	83,321	0.7
Rubber	10,643	0.3

(Central Bank of Sri Lanka, 2016)

Appendix (D)

Government Revenue from Grain Tax

Tax on Home Grown paddy	1823	1876
	£ 36,716	£ 106,325

(Bandarage, 1950)

Appendix (E)

Rice Imports to Ceylon,1837-1872

           

Period	Amount (Cwts.)	Value £’000
1837-1839	798	167
1840-1849	1689	296
1850-1859	2728	323
1860-1862	4197	1186
1870-1872	4794	1558

            (Bandarage, 1950)

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