Overseas Dependent Development - Significance of Sri Lankan Community based Industries


Dr. SMM. Ismail
Senior Lecturer in Economics
Department of Social Sciences
South Eastern University of Sri Lanka
Oluvil. Sri Lanka


This paper first characterizes the economy of the Sri Lanka, a developing country in South Asia in the sense of overseas dependent development. Then, it goes on   to highlight the importance of alternative development strategies to overcome the country's economic predicament. Furthermore, the paper signifies the role of community-based industries (CBI) of the country to achieve the goals of community development. Combined it with the accomplishments of other reforms and development programmes, it is found, that the growth of CBIs will accelerate a fair, democratic and sustainable development of the country as an alternative to overseas dependence in economic development.


The present economic profile of the Sri Lanka could be perceived as "Overseas dependent development." To solve various predicament arising from such under dependent, it is necessary to pursue the path of alternative development. To establish which the county's ubiquitous community-based industries are likely to play a significant role if they are revitalized to meet the present needs and to solve economic problems. Thus, the paper focuses on the community-based industries from the grassroots level. Some proposals and recommendations will be made to promote the growth of the industries and implement other development plans and programs. Combined with other development programs, the development of CBIs are expected to contribute to building the country by means of a fair, democratic and sustainable development.

I. Overseas Dependent Development: The Sri Lankan Economic Profile

The present economic profile of the Sri Lankan, a developing country in South Asia, can be characterized as "Overseas dependent development." The economy of Sri Lanka heavily depends on  three factors.

One is its reliance on foreign investment. The country  mainly depends on foreign investments from  Korea, Japan, China, India,  Europe, and others countries. Its manufacturing sector is dominated by foreign corporations, which are often called multinational corporations (MNC). Those MNCs mostly import parts, raw materials and inputs, and export the products with low ratios of value added to total value of exports.

The second factor is the foreign assistance in the form of funds, aids, relief and loans that the country receives from international financial institutions such as World Bank, International Monetary Fund, Asian Development Bank and other private financial institutions. The country also receives foreign assistance in the form of official development assistance (ODA) from UK, Japan, Germany, Canada, U.S. Sweden,  ,France, Nederland, Australia, China, India and some other European governments. When the Sri Lankan government build some infrastructure such as airports, ports, roads, power stations, irrigation systems, water supply and drainage and other infrastructure, it usually turns to foreign assistance either from international financial institutions or foreign countries. The heavy reliance on foreign aid backfires to the Sri Lanka in the form of large amount of foreign debts and increasing large volume of expenditure leading to stringent budget cuts as a strategy for the payments for such aids. This significantly reduces the allocation of budget meant for the welfare of the underprivileged masses who are to undertake the task of developing CBI.

The third factor is the country's reliance on remittance from overseas migrant workers that numbers 600000 - 800000.   It is observed that 25 - 35 percent  of the total population depend on the remittance of Sri Lankan in the overseas countries such as Soudi Arabia, Kuwait, Dubai, Qatar and other countries. They go to other countries for employment because they are unskilled and semiskilled who do not have job opportunities in Sri Lanka as the country is on the jobless growth track, and also in unstable environment  which means that although it achieves a four to five percent gross domestic and national growth, it does not generate employment opportunities sufficient enough to put a stop on the exodus of Sri Lankan workers and to have the country with well trained human resources for promising future. 

II. Alternative Development

Based on sociological, economic, political, technological, and environmental approaches, the goals of alternative development theories are to satisfy the basic human needs of the people in clothing, food,  habitats,  medical care and education to guarantee a social condition of existence where one can achieve what he/she wishes to accomplish throughout his/her life. In order to achieve these goals, it is necessary to eradicate unemployment and poverty, to provide equal opportunity for education, and to fill the local as well as international economic gaps. Also, equal income distribution, liberation from dependence on foreign assistance , and establishment of industrial linkages among the local national capitals and urban areas are required. Alongside, in the development process, harmony with ecological system and initiatives of the people  and the community of the country are essential. Also the assertion of self-reliant movement to struggle against poverty and social  injustice, and over come structural violence on its own initiative are aspects to be noted. Further, human rights and distribution of income, as well as people's participation in the national economic developments programs should be guaranteed. The application of  technology should satisfy such criteria as protection of environment, elimination of economic disparity, equal and full participation, and creativity  of the people involved. Community-based industries be made capable of bringing about an alternative development in  Sri Lanka, by overcoming predicaments caused by its overseas dependent position.

III. The Significance of Community-based Industries

The definition of CBI

The Sri Lankan CBI refers to cottage and small-scale industries that depend on either/both domestic and/or imported raw materials and on the local labor forces, and caters to the local, domestic, and export market.   Industries of long tradition dating back to the precolonial period and those with short history, even those recently established ones fall with in this category.

CBIs, shares sufficient percent of enterprises and establishments among manufacturing sector in Sri Lanka. It also provides around 35 - 45 percent of employment opportunities in the same sector. CBIs surely contribute to the growth of national economy and much to the poverty alleviations. So its significant features are noteworthy.

Predicaments of CBIs

Although the CBIs has potentiality to promote cottage and medium and small scale industries it also has some impact on the benefit of the users from the point of price index, novelty, utility,and durability of the imported goods against the CBI products. For example Foot wearing from China, Thailand and other Asian countries are  found cheaper. Aluminum cooking pans, household items imported from India are identified as better than clay items made in Sri Lanka from the point of durability, utility and cheap price. Similarly the handloom products are cheaper than local products. In the case of policing and making gems and gold jewelry, the jewelers and merchants keep contact with Singapore, Thailand, India and Japan for making jewelries and getting those products down to this country, because of the attraction of workmanship. This system has come to effect the local industries. Fishing has been an important activity of making dry fish and relevant items have been affected by the ethnic disturbances. So dry fish and canned fish  have been imported from other countries while Sri Lanka has that resource in plenty. Beside in Sri Lanka there are some kind of cottage industries of the ancient people. They produced mats, jaggeries, sweets, paper bags, pickles and other items made out of local natural raw materials. Now in the face of imported toffee, chocolate, polythene bags and others these ancient cottage local industrial products are becoming les used and not attractive.    In this way practicing and  the opportunity of developing these cottage industries are effected in Sri Lanka. 

CBIs prospect

CBIs should be encouraged and developed further for the prospect of employment opportunities to attract local investments to increase utilizing more local raw materials and expanding market venues in Sri Lanka as well as in foreign countries by exporting Sri Lankan CBI industrial goods and products leading to the reduction of foreign goods importation probabilities, It will create an atmosphere of industries locally inter dependant and inter related to  CBI enterprises. It generates employment not only in the particular industry, but also in the related industries. Weaving and handloom industry, for instance, generates employment in dying, tailoring and dress making industry. By exporting the products, it also earns precious foreign currencies.

As it can be commenced with a relatively small capital, it helps the poor people to distribute income to the populous as it provides income and employment opportunities at a small cost.

Some proposals

The government should take necessary measure to make fundamental changes in macroeconomic orientation of local industries. Shifting from prioritizing large-scale industries and foreign investment to CBI is necessary. Priority should given to the CBI and should be clearly identified for its growth  in the national economic planning. And regarding the trade liberalization and globalization, the government is urged to regulate the market forces according to the principle of security, equity and democratic choice.

Coordination and integration of government programs with CBI are also necessary. Dispersal of related institutions and information dissemination are also required. 

Agro-industrial integrated growth can be made effective. Effective use of foreign fund and mobilization of local resources are prerequisite. Further, welfare of the work force be given due consideration  and managers roles should be improved.


In this paper various sorts of cottage industries practice in the past and their present position have been analyzed in the face of modern industrialization and urbanization and the changing pattern of industrial out puts. The findings were taken in to consideration for the improvements and revivals of the ancestral industries for the restoration of livelihoods of the villages or rural poor people lived with the sufficient income in the past have now become vulnerable groups of man kinds in this developing country in South Asia.The problem of poverty has become so acute and complex in Sri Lanka. It is intensified with the increasing the rural population and unemployment prevalence. In order to prevent hunger and sufferings the Sri Lankan government has adopted various strategies of economic development. It has also come to focus on the rural development especially by modernizing agriculture system and encouraging local industries. At this juncture it is necessary to attend to the development of cottage industries to revive the indigenous cottage industrial life to ensure the poverty alleviation in the rural area and to ensure self enterprise and reliance. It should reach the rural and poverty stricken people and on motivating those people who can carry on their ancestral cottage industries and they should not be allowed to leave their villages and to go to  urban towns for earnings and employments with the skills they posses. In this way oversees dependant development has to be considered with the view of promoting various aspect of CBI in Sri Lanka characterized by rural populations and cottage industries and of preventing the habits of importing products from other countries that leads to compete with the local products.

About the Author:
Dr. SMM. Ismail is a Senior Lecturer in Economics and Director, IRQUE ( Improving Relevance and Quality of Undergraduate Education) Project. Funded by the World Bank.  He had also served as Head - Department of Social Sciences and Dean Faculty of Management and Commerce at the South Eastern University of Sri Lanka. He has extensive list of publication in the field of Economics, Finance, Peace and Development Studies and HIV/AIDS. He obtained his PhD from the Kiev National University of Economics Ukrane. He was the winner of Commonwealth Academic Research Fellow Award in 2005/2006 at University of Bradford, UK. He has been  consultant for many projects and did numbers of research with the collaboration of many foreign universities.

Dr. SMM. Ismail
Senior Lecturer in Economics
Department of Social Sciences
South Eastern University of Sri Lanka
Oluvil. Sri Lanka

Source: E-mail November 27, 2007


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