|
Sri Lanka Manufacturing
The share of manufacturing in the economy declined from 21 to
15 percent of GDP between 1977 and 1986. This fall is somewhat
misleading because it resulted in large part from the rapid
growth in the service sector and the decline in output of the
state-owned Ceylon Petroleum Corporation. The latter accounted
for as much as one-third of the value of manufactured goods in
some years and thus strongly affected aggregate manufacturing
statistics. These statistics fluctuated along with changes in the
value of the output of the oil refinery, which in turn varied
with oil price levels and the extent of plant closings for
maintenance. Some manufacturing sectors grew rapidly during this
period.
Manufacturing was dominated for most of the twentieth century
by the processing of agricultural produce for both the export and
domestic markets. The most important industries were engaged in
preparing and packaging for outside markets the principal export
commodities--tea, rubber, and coconuts--for which Sri Lanka is
noted. Such preparation generally involved low technology,
comparatively modest capital investment on machinery, and
uncomplicated, sequential procedures. Tea leaves, for example,
follow a four-part process of withering, rolling (to extract
bitter juices), fermentation, and heating (or roasting), before
being packed in chests for export.
The processing of coconut and of rubber also were important
industries, although their ratio in proportion to all
manufacturing fell in the 1970s and early 1980s. The processing
of the latter two commercial crops generally involved refining
the basic commodities into a range of semi-finished products to
be used in manufacturing finished goods at home or abroad.
Coconuts, for example, are transformed into copra, desiccated
coconut, coconut oil, fiber, poonac (a meal extract), and
toddy. Copra and desiccated coconut are used as oils or as
ingredients in food such as margarine; coconut oil is used to
make soap; coconut fibers such as coir are used to make yarn,
rope, or fishnets, while poonac is used as food for
livestock. The coconut palm flower is also used in the production
of alcoholic beverages.
Rubber is also processed in various ways, including latex or
scrap crepe and ribbed or smoked sheet, which together account
for much of Sri Lanka's export of this commodity. Processing
methods for rubber are outdated, however, and Western consumer
countries have protested against the hardness, high moisture
content, and inconsistent quality of the Sri Lankan product.
Manufacturing received a boost in the early 1960s when import
controls, which were the result of shortages in foreign exchange,
made it difficult for consumers to obtain or afford foreign
products. The result was a protected and profitable ready-made
home market. This situation led to an expansion of both privateand public-sector manufacturing, with the private sector
concentrating on consumer goods. These new enterprises, however,
depended heavily on imported raw materials, and when the
country's balance of payments difficulties became even more
serious in the early 1970s, industry suffered from the lack of
foreign exchange. In 1974 it was estimated that only 40 percent
of the capacity of the industrial sector was used. After the 1977
liberalization, raw materials were more freely available, and in
1986 capacity utilization was estimated at 78 percent.
In 1978 the government established the Greater Colombo
Economic Commission primarily to serve as the authority for the
free trade zones to be set up near the capital. The first
investment promotion zone consisted of a large tract that was
established in 1979 at Katunayaka, near the Bandaranaike
International Airport. A second zone was inaugurated in 1986 at
Biyagama, in Colombo District. Foreign companies that built
factories in the zones received generous tax concessions. The
commission succeeded in attracting some foreign investment,
especially from Hong Kong and other Asian countries. At the end
of 1985, a total of 119 enterprises had signed agreements with
the commission, but only 7 were signed in 1986, when there were
72 units in production. The total number of people employed was
nearly 42,000. Gross export earnings from the investment
promotion zones in 1986 were around Rs5.5 billion, up 43 percent
from 1985. Foreign investments outside the free trade zones were
coordinated by the Foreign Investment Advisory Committee.
The principal change in manufacturing in the 1980s was the
rapid growth of the textile sector, from 10.5 percent of output
in 1980 to 29.2 percent in 1986 (see
table 8, Appendix A). In the
mid-1980s, the government was attempting to diversify foreign
investment away from textiles. Most textile factories were
located in the investment promotion zones.
During the July 1983 riots, 152 factories were destroyed, but
there was little long-term effect. Some observers expressed the
view that the equipment destroyed was inefficient, and that
modernization was long overdue.
Data as of October 1988
|
