A Thesis Submitted to the United Graduate School JAPAN

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1 (-el?~ \v / ~. 5000r ~00? /.'\?>. ~ SMALL INDUSTRIES AND RURAL DEVELOPMENT IN SRI LANKA AN INQUIRY INTO THE ALLEVIATION OF POVERTY A Thesis Submitted to the United Graduate School ofkagoshima National University JAPAN by Sampath AMARA TUNGE B.A. Honours (Sri Jayewardenepura); M.A. (Colombo); M.Sc. (Saga) Department of Resource Management and Social Sciences In Partial Fulfilment of the Requirements for the Degree of Doctor of Philosophy

2 --- TABLE OF CONTENTS PAGE LIST OF TABLES. LIST OF FIGURES. LIST OF APPENDICES. MAP OF SRI LANKA. ABBREVIATIONS AND ACRONYMS. S~Y IN JAPANESE. ABSTRACT. ACKNOWLEDGEMENTS. VI IX XI.. Xli X111 XVI XV111 xx Chapter 1: Introduction. 1.1 Background and Thesis Problem. 1.2 Objectives and Scope of the Study. 1.3 Methodology of the Study Measurement of Poverty. 1.4 Definition of Small Industry. 1.5 Importance of the Study. 1.6 Structure of the Study, Chapter 2: Small Sector Suitability for Poverty Alleviation. 2.1 Introduction Part I: Empirical Evidence of Small Scale Industries in the Third World: An Overview of Literature. 2.].1 Small Industries and Development Economics The Importance of Promoting Small Scale Industries. Small Industries are Normally Labour Intensive. Employment for Women. Agriculture and Small Industry ]

3 Theoretical Framework Part II: Overview of the Economy Introduction : Background of the Economy Income Distribution and Growth Rates Employment and Unemployment Rates in Sri Lanka Agriculture in Real Sense Contribution to Output and Income Contribution to Employment Contribution to Balance of Payments Industrial Contribution to the Economy Small Industries in Private and Total Manufacturing Sector The Situation of the Balance of Payments in Sri Lanka Concluding Remarks Chapter 3: Role of Small Industries in the Economic Development of Sri Lanka: Quantitative Evaluation Introduction Small Industrial Policies and Issues in Sri Lanka First Phase (before 1965): Small Industries as an Integral Part of the Culture of Sri Lanka... 9] Second Phase ( ): Small Industries as an Integral Part of the Socio-Economic Structure of Sri Lanka Third Phase (1977 to date): Small Industries as an Integral Part of the Economic Structure of Sri Lanka Future Aspects of the Small Industrial and Related Policy Issues:.. 11

4 Background for Future Changes Targeted Areas at Present and Past Weaknesses Structure and Growth Changes : Development Strategy in the New Industrial Policy Restructuring of Institutions Review of Overall Performance in the Small Industrial Sector Industrial Structure in Sri Lanka,., Relative Size of Small Industrial Sector in the Total Manufacturing Sector Composition of Small Industries Agro Based Small Industrial Sector in Terms of Composition Location of Small Industries Raw Material and Skilled Labour Based Historical Approach Market Based Traditional Approach Infrastructure and Harbour Based Modem Approach Concluding Remarks Chapter 4: The Role of Small Scale Milk Processing Industries as a Method of Rural Development: Case Study in the Kurunegala District in Sri Lanka Introduction to the Small Industry Structure of the Small Industry Membership and Milk Collection Financial Growth Market Growth '" Other Services Rendered to Fanners by the Small Industry

5 4.2 General Information The Nature of Employment Level of Education Land Availability : Availability of Labour at Family Level Market for Raw Milk Income Analysis Poverty and Income Distribution Financial Assistance '" Monthly Expenditure and Profit Analysis of Milk Production Cattle Population and Milk Supply. 4.4 Living Conditions of Members. 4.5 Sustainable Development Concluding Remarks Chapter 5: The Role of Small Scale Tea Industries as a Method of Rural Development: Case Study in the Kalutara District in Sri Lanka. 5.1 Introduction. 5.2 Background of the Organization of the Raigam Korale Small-Scale Tea Factory Membership and Collection of Tea Leaves Financial Growth Development Mechanism. 5.3 General Situation of the Raw-Material Suppliers to the Industry Level of Education Availability of Labour Availability of Land Fanner Age IV

6 5.4 Income Analysis Poverty and Income Distribution Formal and Informal Financial Liabilities Social Development Concluding Remarks Chapter 6: Summary and Conclusions Introduction Macro Analysis Micro Analysis APPENDICES BIBLIOGRAPHY... '" v