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Experts offer their solutions
How to fix Globalization
By E. Guthrie McTigueA great international debate is underway over ways to redesign the world’s financial system.
An eerie calm has settled over financial markets. But the world’s financial community is in ferment—the most intense intellectual ferment in half a century. Finance ministers and central bankers, commercial and investment bankers, a slew of smart technocrats at multilateral organizations, plus increasing numbers of brains from think tanks and academia, are frenetically giving speeches, publishing papers, and all arguing with one another. Their topic: how to redesign the global financial system.
Finance is supposed to facilitate growth. But some 40% of the world’s economic machinery is in recession or on the brink of it. The global financial system isn’t working the way it was supposed to. "It’s clearly time for a rethink," says a fund manager who has some money (just a little, mind you) trapped in Malaysia.
Should capital flows be constrained in transition economies? Should currencies be pegged, or float freely? How should commercial banks be regulated? Are computerized risk management models misleading everyone? Does the world need an information cop, who makes sure governments and banks disclose their financial statistics and risk exposures? How about a global debt-restructuring agency with an international version of the US bankruptcy code’s Chapter 11? Should the International Monetary Fund be replaced with a global central bank? The ideas bear watching because they could shape how the new global financial system will function in the new millennium.
At the center of the debate is the Washington Consensus, a loose body of free-market assumptions held by many top officials and staffers at the US Treasury, the IMF, and the US Federal Reserve, in addition to leading economics professors at most of the top universities in the United States and the United Kingdom.
They include Alan Greenspan at the US Federal Reserve, Robert Rubin, Lawrence Summers, and their aides at the US Treasury, Michel Camdessus and Stanley Fischer at the IMF, and dames Wolfensohn end Joseph Stiglitz at the World Bank, along with such academic luminaries as MI
T’s Rudiger Dornbusch.
Oversimplified, their view is that free trade, open markets, and unfettered capital flows will discipline governments (cut back the state) and produce the best economic results. Basic to this orthodoxy, in its purest form, is the notion that markets are efficient— a serious flaw. Markets are certainly more efficient than government bureaucrats at allocating capital. But one of the lessons of the Asia crisis is that capital does not always flow to the most productive investments. And as any professional speculator can tell you, information flows are imperfect, markets can sometimes be rigged, and investors don’t always behave knowledgeably, or even rationally. In the real world, prices get out of line—markets overshoot, investors panic— and it is by exploiting imperfect pricing that speculators make money.
With this in mind, the World Bank’s chief economist Joseph Stiglitz broke ranks last spring to argue in favour of capital controls in instances where volatile hot money flows can destabilize a developing economy. Stiglitz spoke out in opposition to a plan by the IMF, the World Bank’s sister organization, to make capital account convertibility a condition of IMF membership and IMF assistance.
Stiglitz carries immense clout: He is bruited as a possible candidate for the Nobel economics prize for his work on the inefficiencies of financial markets. About the same time, Malaysia—which eschewed any IMF help (or interference)—suddenly forbade foreign investors to take any more money out of the country. That brought the issue into the open and encouraged many other experts to leap into the debate.
The debate is not about capitalism versus socialism but about fine points among different notions of capitalism. And as discussions develop, they are beginning to highlight differing regional styles. Pure free market thinking, when carried to extremes, smacks of rigid ideology. It is that tendency that Europeans label "Anglo-Saxon capitalism," a laissez-faire style associated with Britain’s Thatcherism and US supply siders of the Reagan era, and often described as "savage" or "Darwinian."
Europeans favour a style that brings government, labour, and business together in a pact to soften the brutal side of competition and supply safety nets. Sometimes called "The Third Way" (because it tries to melt capitalism and socialism), this grittiest approach has been getting a lot of press in Europe because so many leftist governments have come to power, most recently in Germany and Italy. But the costs of this approach are enormous and tend to render companies uncompetitive. As most of Western Europe embarks on its single-currency experiment next year, increasing competitive pressures may force European-style capitalism to adopt more Anglo-Saxon characteristics.
East Asia’s style, known as alliance capitalism (and, since the Asia crisis, derided by Westerners as crony capitalism), is related to Japan’s "convoy" system of strong companies helping weak ones. Backstopped by government ministries and unusually high household savings rates, companies and banks build long-term relationships and look out for one another in mutual support networks.
Alliance capitalism produced a great deal of growth until the Asian crisis hit—and many Asians believe it can again. To Asian chagrin, the IMF began trying to dismantle this system as the price for its bailout loans. Moreover, when Japan last year proposed setting up an Asian Monetary Fund backed by $100 billion in pledges from itself and regional neighbours, the Washington crowd slapped Japan down. The idea of a regional support fund, however, resurfaced at the Asia Pacific Economic Cooperation summit in Kuala Lumpur last month.
The fund will help refinance Western loans, understand Asian ways of doing business—and be a competitor for the IMF Also on the summit agenda was a joint plan intended to stimulate regional economies, as opposed to the IMF’s austerity formula. C. Fred Bergsten, who heads the Institute for International Economics, a Washington think tank, and who also chairs an APEC advisory group, has gotten behind the plan. Taking a swipe at the IMF’s and World Bank’s inability to produce a coherent recovery program at their October meetings, Bergsten, in a recent Economist essay, called the APEC recovery program "the best prospect for restoring economic growth and thus human hope throughout this huge region."
In short, the Washington Consensus is breaking up. And nowhere are their differences more stark than over the issue of capital controls. Free capital flows are the ideal, and the main argument for them is that investors keep governments honest; capital controls allow politicians to go back to their irresponsible ways, spending more than they have and delaying reforms.
But countries need to have the financial infrastructure—liquid markets, stable banks—to handle the inflows. Subjecting small countries to today’s electronic capital is a bit like trying to blast water from a fire hose through a garden hose—something’s bound to break. It’s not hard to imagine a tiered system of IMF memberships—associate members, general members, etc — based on how well developed a country’s financial infrastructure is.
A much cited study by Dani Rodrik, a professor of international political economy at Harvard, shows no positive correlation between an open capital account and subsequent growth and investment. Countries with open capital accounts but not much growth include Yemen, Gambia, and Panama. Of course, other factors may have caused multinational corporations to pass up Yemen as a manufacturing base.
Not all capital flows are equal. Foreign direct investment is highly desirable: It helps build productive capacity and generates real economic activity. Portfolio capital is not so desirable. Investment in stocks and bonds deepens liquidity while it pushes down. Corporate costs of capital. But portfolio money can flee in a flash. Least desirable is short- term borrowings, including interbank loans, which tend to be relent to buddies and wind up in cockamamie speculations.
It might make sense for a small country to encourage FDI by permitting repatriation of profits and dividends but find ways to discourage short-term, foreign currency liabilities. Enjoying high savings rates and careful to protect their industries, Asian countries—South Korea is an obvious example—switched the priorities. They kept foreign direct investors at bay and restricted foreign purchases of shares—but permitted immense amounts of short-term foreign borrowings.
IMF studies of last year’s Asian currency battles show that it wasn’t hedge funds that started the currencies’ collapse but foreign commercial and investment banks. One of the main culprits was interbank loans. Pulling them back is not quite the same as an "attack" on a currency, which points up a characteristic of markets: When one bank pulls back at signs of trouble, it’s rational behaviour; when they all do it, it’s herd behaviour.
Chile has won much admiration for its capital controls. It has been gradually reducing them over the past decade. The one remaining requires foreign investors to deposit 30% of the capital inflow with the central bank for one year, a cost of entry to discourage speculation. Just when this last hurdle will fall is uncertain. Carols Massad, Chile’s central banker, points out that the requirement prevents foreigners from arbitraging Chile’s high interest rates. "By opening the capital account," he notes, "the central bank loses some of its autonomy in monetary policy." Chile’s economy is off this year. But that’s because of depressed copper prices, not a currency devaluation or too much foreign borrowing.
Columbia University economics professor Jagdish Bhagwati advises countries whose currency is not yet convertible, such as China, to forego liberalizing their capital account until they’ve achieved political stability and completed internal economic reforms. Once a country opens its capital account, Bhagwati feels, it can’t reimpose controls (as Malaysia did) without undermining confidence. Malaysia, by using the respite to relate its economy, is determined to prove that belief wrong.
MIT’s Rudiger Dornbusch, who calls capital controls "an idea whose time has passed," feels that information can do the job. Using mandatory value-at-risk (VAR) analysis, for example, would alert markets to overly large foreign short-term borrowings for countries as well as for individual banks.
Dornbusch also favors such market solutions as credit insurance. The most successful is the $7.3 billion contingent repo for Argentina’s commercial banks that the country’s central bank negotiated with 13 private international lenders after the 1994/95 Mexican peso crisis.
Argentina uses a currency board: Its peso supply is governed by the US dollars held in reserve. The repo provides a backup for its banks, however. A bank can draw on the loan by putting up assets, usually dollar denominated Argentine government bonds, as collateral with the central bank. The price: 205 basis points over LIBOR. If Argentina doesn’t use the credit (and so far it hasn’t), it pays only 36 basis points. Another market-based solution might be credit insurance options on borrowings that would protect lenders from a cut in a sovereign credit rating.
The issue of capital controls is directly related to the question of whether countries should peg their exchange rate to another currency. Under the postwar Bretton Woods system, currencies were pegged to the US dollar, and the US Treasury agreed to redeem dollars for gold, a modified version of the 19th century gold standard. The system collapsed when the United States, which abused its position by issuing too many dollars, had to shut its gold window when the Bank of England tried to redeem in 1971.
Since then a kind of global non-system has prevailed as countries try every conceivable strategy. Some countries peg their currency to a basket of currencies from their major trading partners. Some let their currency oscillate in a trading bond, which can be tight end or expanded. Some devalue the peg, as Brazil does, by a small, specified amount at intervals to adjust for inflation. All such approaches seem to break down at some point or other.
The Asian currencies that collapsed were all pegged to the US dollar. Thus, when the dollar rose some 50% against the yen and Deutschemark, the Asian currencies did likewise. Yet none of these countries had the strong, diversified US economy and capital market underpinning them. Their currencies became tremendously overvalued.
When the crunch came, only the Philippines had the wit not to waste foreign reserves defending its peg. The Philippine economy and banking system are now in far better shape than those of its neighbours. Had all of these countries abandoned their pegs in 1996, or contrived to devalue gradually as the dollar rose, they might not be in the mess they are in today.
The virtue of a currency peg is that it helps stanch inflation and allows manufacturers to plan and price exports. The virtue of a floating currency is that, like a valve, the exchange rate lets off steam.
It’s ironic that in a free market world, the price of so many currencies is not determined by market forces.
That conundrum is central to the $41.5 billion rescue package for Brazil. The IMF’s first effort at providing support before rather than after a currrency collapse, the package requires Brazil to achieve some unlikely fiscal benchmarks. The government is supposed to cut spending and hike taxes by a combined $84 billion, and its budget is supposed to show surpluses ranging from 2.6% of GDP next year to 3% in 2001. Moreover, unlike the 1995 Mexican bailout loans, which were backed by oil revenues deposited with the US Federal Reserve, Brazil’s loans aren’t collateralized.
To top it off, Brazil’s rescue package is intended to restore credibility to the real— which is pegged to the US dollar and by some estimates is at least 30% overvalued. To some eyes, the IMF rescue is simply postponing the inevitable.
If countries are going to cling so desperately to their dollar pegs, why don’t they just use dollars? The answer is twofold: national pride, and the sovereign right to keep the printing presses rolling. In fact, some Latin countries are discussing whether to try a single regional currency, along the lines of the European Union’s new Euro.
The biggest issue under discussion is whether the world needs new governing institutions. That is stimulating countless ideas. A quick sampling might include: hedge fund manager George Soros’s call for an international credit insurance corporation to supply loan guarantees; Yale professor Jeffrey Garten’s proposal for a global central bank, whose job of managing global money supply seems vague in the absence of a global currency; and UCLA professor Sebastian Edwards’s idea of breaking the IMF into three bodies, a global information agency, a contingent global financial facility to provide credit lines, and a global restructuring agency to work out bum debts.
Many people, of course, would just as soon not see any more technocratic bureaucracies. There are already a slew of them, many not very active. For instance, the Bank for International Settlements, a private club in Switzerland for rich- world central bankers, monitors bank capital ratios but was asleep at the switch during the Asian crisis. It finally played a role in the Brazil rescue, coordinating individual countries’ contributions through their central banks.
Can the IMF be turned into a global policeman? As overseer of the Bretton Woods system, the IMF’s original role was to supply loans to help governments over balance-of-payments difficulties. It acted as a confidential adviser, not a cop. By the early 1990s, though, it was acting as gatekeeper to the new world economic order, assessing whether countries were ready to join. Not until the Mexican bailout of 1995 did the IMF begin to pony up huge loans in a lender-of-last resort role. With the Asian and Russian crises, it’s now up to its neck in bailouts.
Many people feel the IMF is not prepared for this job. Its funding is inadequate. Moreover, the Fund is staffed chiefly with macroeconomic brains; only recently has it begun to acquire an understanding of commercial banking and today’s capital markets. It has taken a tremendous lambasting for its secretive ways and for imposing austerity measures on governments that, in Asia at least, have likely worsened recessions. The IMF’s harshest critic, Harvard’s Jeffrey Sachs, calls it "the Typhoid Mary of emerging markets."
The IMF is guilty too of "moral hazard" with its bailout loans. Much of the money winds up in the hands of international banks, a practice that economists argue only encourages lenders to make other unwise loans—in the expectation that they’ll eventually be bailed out if the loans go bad. Any new institution acting as global lender of last resort must find a way to make commercial lenders responsible for their loans. Otherwise, a global debt restructuring agency may be a better bet.
The IMF has also been moving onto the World Bank’s turf, often proffering conflicting advice. Such figures as Walter Wriston, former chief of Citibank, and two Reagan cabinet members, former secretary of state George Shultz and former treasury secretary William Simon, argue that the IMF and World Bank should be combined. Henry Kaufman, a noted economist with a New York advisory firm, is one of many espousing a new global monetary meeting to redesign the IMF and World Bank.
Revamping the IMF and World Bank may prove politically easier than creating new institutions. Though Michel Camdessus and much of the IMF staff are French, the IMF is chiefly an instrument of US policy—especially since deputy US Treasury Secretary Lawrence Summers succeeded in getting Stanley Fischer, a close ally, installed as Camdessus’s deputy. In setting up any new institutions, Europe, Japan, and developing countries will no doubt fight for equal policymaking influence. Given US disillusionment with the United Nations, which it feels has been hijacked by the developing world, the United States isn’t likely to let that happen.
Socio-Economic Developments in Sri Lanka 1996/97
Dr. S. S Colombage, Director of Statistics, Central Bank of Sri LankaPaper presented at the Public Seminar at Rural Banking and Staff Training College, Central Bank of Sri Lanka December 17. 1998
The Consumer Finances and Socio Economic Survey conducted by the Central Bank of Sri Lanka in 1996/97 is the seventh survey of the series. The first survey was conducted in 1953 and it was followed by the surveys in 1963, 1973, 1978/79, 1981/82 and 1986/87. The three surveys conducted upto 1973 were known as Consumer Finance Surveys. As the scope and coverage of the surveys conducted since 1978/79 have been broadened to cover a wider spectrum of socio- economic aspects, they have been termed as Consumer Finances and Socio Economic Surveys.
The basic objective of conducting these surveys has been to collect comprehensive household data on demographic features, education, health, housing, amenities, labour force, employment, income, expenditure, consumption, savings and investments and borrowings. (Key socio-economic indicators derived from the survey series are presented in Annexure 1).
As in the case of the previous survey, the survey for 1996/97 was not carried out in the North and East due to security problems. The survey was conducted in 4 rounds during the period October 1996 to December 1997 covering a sample of 8880 households. (Details are given in Annexure 2). A new feature of the present survey is that the data were processed on a round-wise basis so as to release the findings of the survey promptly. Accordingly, preliminary findings of this survey were published earlier in several publications of the Central Bank. The data of the present survey have been used to compute District-wise Consumer Price Indices and to upgrade the National Accounts compilation.
1. Demographic Transition
• Ageing Population: As a result of the deceleration of population growth since the 1970s, the population structure has shifted towards older age groups.- The share of population below 14 years fell *from 41 per cent in 1963 to 25 per cent in 1996/97.
- The share above 26 years rose from 37 per cent in 1963 to 52 per cent in 1996/97.
- Sri Lanka’s population growth rate is much lower compared to most of the other developing countries.
• The share of female population rose from 48 per cent in 1953 to 52 per cent in 1996/7 996197.
• The proportion of never married persons in total population fell from 58 per cent in 1986/87 to 51 per cent in 1996/97.
• The average household size declined from 5.75 persons in 1963 to 4.61 persons in 1996/97.
• The average number of income receivers per household increased in All Sectors.
• The average number of dependents declined from 3.48 persons in 1986/87 to 2.97 persons in 1996/97.
2. Socio-Economic Conditions and Human Development
Sri Lanka has an impressive record of human development and socio-economic conditions comparable with developed countries. This was an outcome of social welfare policies implemented by successive governments in the post-independence period.• Education
The literacy rate increased from 82 per cent in 1963 to 92 per cent in 1996/97.- Educational attainment improved in all sectors. The continuous expansion of the formal education network helped to upgrade the education level of the population.
- Incidence of school avoidance in the age group of 5-14 years declined from 13 per cent in 1986/87 to 8.8 per cent in 1996/97. The male/female gap in literacy and educational attainment has narrowed considerably.
- Since the liberalization of the economy, private sector education has expanded.
- The proportion of students attending tuition classes increased from 24 per cent in 1986/87 to 35 per cent in 1996/97. The increase in tuition attendance was significant in the rural and urban sectors.
• Housing
Housing conditions improved considerably.- In 1996/97 about 90 per cent of the houses were self-owned.
- Housing congestion declined over the years. Between 1981/82 and 1996/97 the average number of persons per room declined from 1.5 to 1.1 while the average floor area per person increased from 11.2 sq. meters to 14.7 sq. meters.
- An improvement in the quality of houses is reflected by the increased use of construction materials like cement, roof tiles and asbestos implying an increased proportion of ‘permanent type’ of dwelling structures.
- Sanitary conditions improved markedly. The number of houses without toilets declined from 41 per cent in 1973 to 7 per cent in 1996/97.
Availability of Amenities
The proportion of households having access to pipe borne water rose from 21 per cent in 1973 to 31 per cent in 1996/97. This could be attributed to the implementation of a number of large scale water supply projects in recent years particularly in urban areas.• The proportion of households served with electricity increased from 4 per cent in 1953 to 57 per cent in 1996/97. It is significant to note that this proportion more than doubled between the two survey periods, 1986/87 and 1996/97.
Taking into account the population growth during the same period, this implies that nearly 5 Mn. people in 1.08 million households were newly supplied with electricity from the national grid.
- Firewood remains as the main source of energy with 87 per cent of households using firewood for cooking. In the urban sector, however, increased use of modern fuel was observed - 46 per cent of households used LP gas in 1996/97 compared with 13 per cent a decade ago.
- A considerable increase in the use of household appliances (e.g. sewing machines, refrigerators, radios, TVs, telephones, computers) and vehicles was evident particularly in the post-liberalization period.
• Health Conditions
- With the expansion of the government hospital network and other health facilities, there has been an improvement in health conditions in the country.- But the proportion of the population reported ill health increased from 12 per cent in 1986/87 to 13 per cent in 1996/97.
- The number of working days lost to the economy due to illness declined.
- The reliance on western medicine increased.
3. Labour Force and Employment
• The labour force participation rate increased from 32 per cent in 1963 to 40 per cent in 1996/97. Between 1973 and 1996/97 male participation rate increased from 48 per cent to 53 per cent and female participation from 20 per cent to 27 per cent .• In the post liberalization period the bulk of employment opportunities were generated in manufacturing and services sectors. As a result, the share of employment in these two sectors rose from 47 per cent in 1963 to 61 per cent in 1996/97 whereas the share in agriculture declined from 53 per cent to 38 per cent.
• The employment structure has shifted from regular types of jobs to casual jobs and self-employment.
• The unemployment rate declined from 24 per cent in 1973 to 10 per cent in 1996/97. This trend was predominant in the rural and urban sectors where there was a faster growth of economic activities in the post-liberalization period. In the Estate sector the rate of unemployment remained low but has increased when compared to 1986/87 level.
• An alarming feature is the high rate of unemployment among the younger groups. The rate of unemployment is high as much as 36 per cent in the age group of 14 - 18 years and 30 per cent in the age group of 19-25 years. The aggravation of youth unemployment problem is displayed by the fact that 71 per cent of the unemployed in the country are youth. On the demand side, the economy needs to grow at a faster pace to absorb the growing labour force. On the supply side, vocational training and skill development are needed to fulfil the labour requirements in production and service oriented activities in the private sector.
• The incidence of unemployment is also high among the educated persons. In 1996/97 the rate of unemployment among persons with GCE (A.L) qualifications was 24 per cent whereas the rate pertaining to those who had only primary education was only 2.3 per cent.
• Although the overall unemployment rate declined sharply, the female unemployment rate (17.5 per cent) continued to remain much higher than the male unemployment rate (6.4 per cent) due to both supply and demand factors.
• A favourable trend is the decline in the underemployment rate. The reduction in under- employment was significant in the Rural sector. Under-employment usually reaches its peak levels during the seasonal slacks of the production cycle. With the reduction of overall employment share in Agriculture between these two survey periods as well as the increase in employment in off-farm activities were the contributory factors for the declining under-employment in the Rural sector.
• As regards the job aspirations of the unemployed, the majority prefer jobs in production, clerical, professional and technical occupations.
4. Income Levels and Distribution
• Between 1986/87 and 1996/97, the median income, in real terms, rose by 0.8 per cent per annum for income receivers and by 0.6 per cent for spending units.• The increase in real incomes was accompanied by a shift in income distribution among income receivers and spending units towards greater income equality for the first time after 1973. Greater equality is evident by the decline in the Gini Ratio, a shift in the Lorenz Curve towards the line of perfect equality and an increase in the share of incomes received by the bottom 40 per cent of the income receivers/spending units.
• Reflecting an improvement in income equality, the income share of the bottom 40 per cent of the income receivers increased from 11 per cent in 1986/87 to 13 per cent in 1996/97 at the expense of the share of the top 20 per cent of income receivers from 57 per cent to 53 per cent. Meanwhile, the income share of the middle 40 per cent increased from 32 per cent in 1986/87 to 34 per cent in 1996/97. The Gini Coefficient for income receivers declined from 0.52 in 1986/87 to 0.48 in 1996/97 displaying a shift towards greater income equality.
• Widespread availability of employment opportunities benefiting both the Urban as well as the Rural sector, narrowing down of the Urban-Rural income disparity, better targeting of government welfare schemes for the more deserving households and the trickling down of benefits to lower income groups emerging from outward oriented economic progress led to a more equal distribution of income among income receivers and spending units in 1996/97.
• The share of income from agriculture declined from 30 per cent in 1986/87 to 21 per cent in 1996/97 reflecting the diversification of the economy. The income share of manufacturing and construction increased from 18 per cent in 1986/87 to 21 per cent in 1996/97.
• In 1996/97, 38 per cent of the spending units received government welfare subsidies. The subsidies were received by 56 per cent of the spending units, which received an income of less than Rs. 3000 per month.
• A sharper rise in per capita income, in real terms, was observed in the Rural sector where approximately three fourth of the country’s population live. This was due to the emerging diversity in economic activities in the Rural sector, leading to greater income generating possibilities from off-farm employment. Strategies like rural infra-structure development, location of industries in the Rural sector and expansion of rural banking enabled to bring about the diversity into the rural economy. The income gap between the Urban and Rural sectors narrowed down in 1996/97 contributing to an overall improvement in income distribution.
Expenditure and Consumption
• Per capita consumption expenditure, in real terms, increased at a compound rate of 1.7 per cent per annum over the period 1986/87 to 1996/97. The expenditure on consumer durable goods rose by 4.2 per cent while other non-food items and services increased by 2.7 per cent per annum. The increase in the food expenditure was at a much lower rate of 0.2 per cent per annum.• Between 1953 and 1996/97 the share of food expenditure declined from 60 per cent to 48 per cent. Consumer non-durables increased from 36 per cent to 43 per cent and durables from 3 per cent to 7 per cent.
• Sectorally, the rate of increase of per capita consumption expenditure was highest in the Rural sector at 2.3 per cent per annum over the period 1986/87 to 1996/97 while the Urban sector expenditure increased by 1.1 per cent per annum. Meanwhile, the consumption expenditure in the Estate sector remained more or less unchanged during this period.
• Among the main food items, per capita monthly consumption of rice increased from 8638 grams in 1986/87 to 8845 grams in 1996/97. Per capita consumption of bread increased from 1877 grams in 1986/87 to 2661 grams in 1996/97 and per capita consumption of wheat flour, from 734 grams to 837 grams. The other notable feature is the increase in the consumption of fish, chicken, eggs, pulses and sugar.
• Average calorie consumption increased from 2204 calories per person per day in 1986/87 to 2337 calories in 1996/97. The calorie gain was comparatively higher for the lower 40 per cent of the spending units when compared to the rest. Overall, rice was the dominant source of energy intake accounting for 44 per cent of daily total calorie intake followed by coconut (12 per cent) and bread (10 per cent).
6. Savings, Investments and Borrowings
• The savings rate of spending units in 1996/97 is estimated to be 10.4 per cent. The savings rate was highest in the Urban sector (16 per cent). The Rural sector had a lower savings rate of 10 per cent and the Estate sector continued to have dis-savings (-22.9 per cent).• The financial sector reforms and the privatization programme implemented in the 1990s expanded the opportunities available for the general public to invest in different financial products like treasury bills, treasury bonds, debentures, fixed and savings deposits and stock market investments.
• In the 1996/97 survey, loans taken by households for business/trade emerged as the main purpose of borrowing (50.2 per cent) while housing was the second major purpose (16.4 per cent). These data indicate the expansion of various loan facilities provided by the formal sector institutions for purposes such as housing, investment and self employment.
• In 1986/87, non-institutional sources provided 60.2 per cent of the total value of loans obtained by the household sector. This trend reversed in 1996/97 with the institutional sources becoming the main source of lending. In 1996/97 institutional sources provided 67.3 per cent of the total value of loans. Of the institutional sources, commercial banks disbursed 50.7 per cent of the total in 1996/97 in comparison with only 23.4 per cent in 1986/87.
• It is observed that loans from the employer is more important in the Urban sector than in the Rural sector as there is a greater incidence of institutional employment in the Urban sector. However, this source is mostly important in the Estate sector where a very large proportion of the total work force is employed in the formal sector.
The mean size of loans by institutional sources is estimated to be Rs. 14,841.. It is considerably higher than the mean size of Rs. 5,475 with respect to non-institutional sources. Within the institutional sector, finance companies registered the highest average loan size followed by commercial banks.
• The debt repayment ratio (capital repayments and interest payments as a percentage of total loans outstanding) was 35.7 per cent in 1996/97, compared with 55.3 per cent in 1986/87. The declining trend in the repayment ratio could be partly an outcome of increased borrowings from institutional sources where repayments can be made in relatively smaller instalments,, over a longer period when compared to non-institutional sources.
7. Policy Implications
• Ageing of population
- Caring the old: income support, health care, accommodation & recreation facilities etc.- Since the child population grows at a lower rate, the need to expand the education system in the future will be less. - The resulting savings could be used to improve the quality of education.
- Labour force implications - High concentration of unemployment among the youth and the educated is a matter for concern - Need to expand vocational training and skill development to match with the labour demand in growing sectors. These measures would help to raise labour productivity.
• It is evident from the experience of Sri Lanka that economic growth contributes to human development through employment generation, poverty reduction and improved living conditions. Therefore, economic growth should be given high priority in the policy agenda continuously.
• Macroeconomic stability is a prerequisite to economic growth. High inflation erodes real incomes and weakens export competitiveness. Therefore, price stability needs to be a primary objective of macro-economic policies.
• Sri Lanka’s experience shows that the globalization and liberalization process has helped to accelerate economic growth and thereby to generate employment opportunities and to reduce poverty. But it should be noted that lower income segments may miss the emerging opportunities for a variety of reasons such as follows:
- Pockets in difficult/remote villages. Lack of natural resources and poor infrastructure facilities (e.g. access roads, hospitals, schools)
- Faster development of information technology resulting from the globalization process may widen the rural-urban gap in educational attainments and income levels.
• Developments of private sector health facilities would give better health care options to the rich marginalising the poor.
• In view of the above considerations, safety nets should be used appropriately to protect the poorest. In this regard, Sri Lanka has considerable experience. The survey revealed that present income support schemes (mainly Samurdhi) are better targeted.
Theatre in Sri Lanka
By E. M. G. EdirisingheSri Lanka brags not of any great tradition of theatre that lasted several centuries, if not thousands, of years. What she carries as history of theatre back to pre-Christian era, recounts only of these dance forms breathing theatrical life and frame into ritualistic performances of the people. There is hardly any Sri Lankan theatre literature, except for occasional nominal references, that could have either rejuvenated the present-day theatre or given credence to the existence of a strong theatre tradition in the past. However, poor our past in terms of true theatre forms and sense is, we have conserved a tradition in perpetuation that lasted over a millennium embodying the salient characteristics of theatre as it is understood today.
Ritualistic theatre that frames the core of our theatre tradition is performed in promotion of community welfare and to heal the sick afflicted, mostly with mysterious illnesses which are non-diagnosable by the professionally ill-equipped native physicians. Therefore, to trace the history of ritualistic and folk theatre in Sri Lanka is a journey to study her traditional theatre. On the other hand, in that regard, the Sri Lanka theatre can be modestly be proud of retaining, and persistently preserving a tradition capable of theatre environment for the growth and expansion of sustaining an adequate what could be called national or modern theatre in the years that followed.
Looking back, what comes first to mind is Kohomba Kankariya, that most famous and the most stately of all Lankan ritual theatre. A student of folk drama who begins with "thei" the first step in traditional dance form matures into a complete traditional theatre with the performance of Kohomba Kankariya the pinnacle of ritualistic and folk theatre in Sri Lanka. It gives precedence to dance element over all other components of folktheatre. Performed in honour of God Kohomba an animistic deity, Kohomba literately means margosa a herbal medicinal plant for all times with strong potential to kill germs and clean the physical environment.
Next to it is the much simpler forms of ritual performed by Gam Maduwa and Devol Maduwa instilled by the goddess Pattini whose cult considers her to be a powerful deity of influence with respect to contagious diseases and personal distress.
Another class of ritual theatre is known as bali and thovil. The communal nature evident in the ritual connected to the Pattini cult has given way, in this category, for individual illnesses. Bali denotes a ritual sanctified in the nine planetary deities while thovil is performed to charm and appease the demons who are supposed to bring evil and disaster upon the individual. In these forms of ritual theatre dance and mime recede to insignificance with incantation receiving heavier accentuation. There are different kinds of thovil like Sunni Yakuma, Rata Yakuma and Sanni Yakuma each of which are believed to bring in one or more demons to demonstrate.
All this ritual theatre, always performed in the night are never acted on elevated platforms, but on flat land with the spectators seated and standing in a circle round the performance area attaining a very intimate and participatory relationship be
