{"id":113212,"date":"2021-04-03T16:02:33","date_gmt":"2021-04-03T23:02:33","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=113212"},"modified":"2021-04-03T16:02:33","modified_gmt":"2021-04-03T23:02:33","slug":"the-general-election-of-1956-part-10c","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/04\/03\/the-general-election-of-1956-part-10c\/","title":{"rendered":"THE GENERAL ELECTION OF 1956 Part 10C"},"content":{"rendered":"

KAMALIKA PIERIS<\/em><\/span><\/h2>\n\n\n

The 1956 government attempted to radically reform the economy. It\nwas the first Sri Lanka government to try to do so.   It was also the first government, and the\nonly government to date, to see the need for a modern policy of\nIndustrialization for Sri Lanka. <\/p>\n\n\n\n

There were no local industries\nwhen MEP came to power in 1956, everything was\nimported. The country was importing everything, from a pin, comb, pencil, and\nbiscuit to mammoties, water pumps, agriculture and industrial machinery,\nreported economists. <\/p>\n\n\n\n

MEP\nhad a long term plan for industrialization. The state would lead with a\nfew basic industries whilst the rest were left to the private sector. There\nwere three lists. The first list consisted of items\nreserved for the state. They included iron and steel, cement, chemicals,\nfertilizer, salt, mineral sands, sugar, power alcohol and rayon.  <\/p>\n\n\n\n

The\nsecond list had industries which were open to both state and private sectors.\nThey included textiles, tyres and  tubes,\ntiles, asbestos products, bicycles, industrial alcohol, acetic acid,   sugar, vegetable oil, ceramic ware, glass\nware, leather products, plywood, paper, electric bubs, dry cell batteries,\naccumulators, barbed wire, lumber, agricultural implements, wood working,\nfurniture and cabinetry,  and concrete\nproducts.  <\/p>\n\n\n\n

There\nwas a third list of 82 industries ranging from motor car assembly to activated\ncharcoal, reserved exclusively for the private sector.  Persons embarking on these industries would\nreceive tax concessions and tariff protection.\nMeegama observed that this period therefore saw the beginning of a\nprivate sector in industry with government encouragement. Industrialists\npromptly asked the government to stop imports in the goods they are producing.\nThe first industrial estate was established at Ekala in 1960.  <\/p>\n\n\n\n

MEP planned to\ndiversify its overseas trade and build up new markets. Under Bandaranaike\nforeign policy was linked to trade policy. Bandaranaike entered into   agreements, mainly trade,  with \nUS, Hungary,  Bulgaria,  Germany, \nCzech,  India,  Canada,  \nUK, Italy,      china,  USSR, \nSweden,   Australia,       Burma, <\/p>\n\n\n\n

When MEP took\nover, external trade was confined to 25 countries,   mostly the white dominions of the British\nCommonwealth.  And that   trade was dependant on the goodwill of those\ncountries.  <\/p>\n\n\n\n

But the MEP\ngovernment was never able to break this monopoly. The only new addition was\ntrade with Russia.  Imports from\nnon-Commonwealth countries went up to 51.9% in 1959. But exports continued to\ngo to Commonwealth countries. <\/p>\n\n\n\n

 Sri Lanka\u2019s import and export\ntrade was dominated by expatriates. They came during British rule, and stayed\non. The\ntraders\nwere all non- Ceylonese, mainly British but also Indian. Non Ceylonese were\nallowed to free transfer of their entire holdings.  The trading\nhouses   were all foreign owned.  Their profits were   sent abroad. <\/p>\n\n\n\n

The MEP\ngovernment restricted this outflow. In 1956, profits and dividends\nsent out was  52.4% for foreign capital\nand   83.3.% for profit and dividends. In\n1957 Central Bank restricted the repatriation of money and in 1959, the figures\nwere13.6% and 58.4%.<\/p>\n\n\n\n

MEP\ngovernment encouraged locals to engage in external trade. The number\nof registered Ceylonese traders \nincreased from 772 in 1955 to 1179 in 1960. Import of certain goods,\nsuch as textiles, motor cars, watches and export of certain commodities like\ntimber were  reserved for Ceylonese\ntraders.<\/p>\n\n\n\n

 Trade with certain countries was also  reserved for Ceylonese traders. The countries\nwere  Austria,. Bulgaria, China, Czechoslovakia,\nWest Germany, Hungary, Japan, Poland , Rumania, \nUSSR and Yugoslavia . (HSS Nissanka. The foreign policy of Sri\nLanka  under SWRD Bandaranaike .  p  106 )<\/p>\n\n\n\n

Bandaranaike’s  foreign policies  angered the British who controlled most of\nSri Lanka external trade. His Non-aligned\npolicy also worked against western trade. This led to a sharp decline in export\ntrade. There was a huge drop in export to Commonwealth countries, such as\nAustralia, Canada, Britain,  but\nfortunately, trade with other countries such as Germany continued\nsatisfactorily. <\/p>\n\n\n\n

 Sri Lanka\u2019s balance of trade fell drastically  in the period 1957-1959. In 1956 there was a\nsurplus of 102 million rupees, but by 1959 there was a record deficit of 252\nmillion culminating three years of deficits in foreign trade. <\/p>\n\n\n\n

In 1955\nexternal assets were Rs 80 million in 1959 it was Rs 15.2 million. This means\nthat Sri Lanka was in great financial difficulties during MEP rule. But this\nwas common to all newly independent countries in Asia and Africa, at the time,\nobserved Nissanka.<\/p>\n\n\n\n

It was the\nsame with foreign investment. During Bandaranaike\u2019s rule,  Ceylon attracted only Rs 141 million in\ninvestments.  Assets worth  Rs 427 million were taken away by private\ninvestors. <\/p>\n\n\n\n

In 1957 there\nwere 12 banks in Sri Lanka of which 11 were   \nforeign owned. The exception was Bank of Ceylon (est. 1939) .\nThe foreign owned banks were  Chartered Bank of India,\nEastern bank, Hatton bank,   HSBC, State\nbank of India,  Indian Bank, Indian Overseas\nbank, Mercantile bank of  India,  National overseas and Grindlays bank, Oriental\nbank of Malaya, Habib bank. <\/p>\n\n\n\n

These banks did not bring\nin any capital. They did their business using rupee deposits and then  sent all the profits , around Rs 5 or 6\nlakhs, out of the country.  In\n1961,  the banking situation improved. Bank\nof Ceylon was nationalized and a second national  bank, the Peoples Bank was  started. <\/p>\n\n\n\n

Up to 1956 Sri\nLanka had profited greatly from ships that entered its  harbor. Sri Lanka had harbor facilities which\nother countries did not possess. But from  1956- 1959, there was a sharp decline in\nshipping revenue. The number of vessels dropped from 13,000 in 1955 to 8400 in\n1959. This was due\nto the crop of dock workers strikes set up by the Left. This non cooperation by\nthe Left to a fledgling  progressive\ngovernment must be placed on permanent record and condemned. <\/p>\n\n\n\n

Sri Lanka did\nnot have her own shipping lines, she depended heavily on British shipping. Bandaranaike\nwas considering  an independent shipping\nline for Sri Lanka, but  he  did not live long enough to pursue the matter. <\/p>\n\n\n\n

Bandaranaike\nseems to have juggled his foreign policy well. His  Non aligned  policy gave \nhim, leverage  and Bandaranaike\nwas able to get aid from western bloc as well. <\/p>\n\n\n\n

MEP  got  457.3 million in aid from 1957-1963  of which, Communist bloc gave 373.8  million. \n  Foreign aid from Commonwealth countries in\n1956-1960 had  declined sharply. But the   contribution\nfrom USA  trebled. The earlier  government was not able to secure such a\nquantity of   foreign aid. <\/p>\n\n\n\n

From\n1956-1959 Sri Lanka entered into 45 agreements, relating to  trade, aid, technology, economic cooperation\nand cultural relations with different power blocs. 19 with western bloc 15 with\ncommunist, 5 with non aligned countries. <\/p>\n\n\n\n

There was a\nloan from China of 75 million rupees for a period of five years. There were\nalso economic and technical cooperation agreements with Sweden and Italy. An agreement\nwith Germany.  provided , inter alia,\nsteel superstructures of ten bridges, and one substructure for one bridge,\nequipment for dismountable bridges, design and technical equipment for a\nroofing tile factory, and qualified German staff. <\/p>\n\n\n\n

UNP\ncomplained that in 1953, USA only  \nprovided a cook for Kundasale Girls\u2019 school when they asked for  USA\u2019s point four aid\u201d(1950)   in\n1955  Prime Minister Sir John  said \nwe received no aid from US.<\/p>\n\n\n\n

But USA  had a \u2018general agreement\u2019 with MEP government\n. It included,  in the form of grant, a\nlarge amount to wheat, the sales of which were to be converted to local\ncurrency. But USA put many condition for their wheat flour even  on a commercial basis,  said Sarath Amunugama.\nPL 480 which provided  subsidized flour\nshipments to Sri Lanka  was a highly\ncontentious issue with the Bandaranaikes, \nhe said. <\/p>\n\n\n\n

Bandaranaike  saw  that it was unwise for newly emerging states\nto rely only on foreign aid. He said it was not good  for third world countries to be too dependent\non foreign aid. Another\nmechanism was needed.  Bandaranaike\nthought that maybe, the solution lay in an Asian Economic Community. <\/p>\n\n\n\n

 He called for a meeting of African and Asian\nnations to discuss the idea. The first session of the Afro Asian Economic Conference\nwas held in Colombo in May 1959. Bandaranaike was the convener.  He \naddressed the Conference and spoke of the need for commodity trade in\nthe region, diversification of exports, and establishment of national regional\nbanks. <\/p>\n\n\n\n

Bandaranaike\nbrought in world renowned economists to advise on a new economy for Sri Lanka. HSS\nNissanka had quoted some recommendations given by Gunnar Myrdal in 1958, to the\nNational Planning Council. His recommendations are relevant even  today .Myrdal said  <\/p>\n\n\n\n

  • Immediate takeover of foreign owned  enterprises such as  plantations would not be wise. Sri Lanka\nshould instead work out a 15 or 20 year scheme through which foreign asset would\npass into Ceylonese hands.<\/li>
  • Sri Lanka needs both foreign capital and knowhow for industrialization.<\/li>
  • Sri Lanka should not rely on the inflow of foreign capital\n on government to government basis only.\nThat would restrict her capital imports to countries for whom government\nlending was good Cold War business<\/li>
  • Sri Lanka should have a system like a management\ncontract with which she could have agreements between her government and\nforeign firms<\/li>
  • The foreign policy should link with Sri Lanka\ndevelopment efforts. There must be measures to regulate the inflow of non\nessential imports and maximize the amount of foreign exchange available for the\nimport of capital goods . ( continued) <\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"

    KAMALIKA PIERIS The 1956 government attempted to radically reform the economy. It was the first Sri Lanka government to try to do so.   It was also the first government, and the only government to date, to see the need for a modern policy of Industrialization for Sri Lanka. There were no local industries when MEP […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[104],"tags":[],"class_list":["post-113212","post","type-post","status-publish","format-standard","hentry","category-kamalika-pieris"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/113212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=113212"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/113212\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=113212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=113212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=113212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}