Document 2678134

Economic Analysis
and Survey Branch
E C A F E /L . 96
NATIONS
UNITED
ECONOMIC SURVEY
OF
ASIA AND THE FAR EAST
1955
A lso is s u e d as Vol. VI, N o. 4 of the
ECONOMIC BULLETIN FOR ASIA AN D THE FAR EAST,
BANGKOK
February, 1 9 5 6
UNITED NATIONS PUBLICATIONS
Sales N um ber:
Price:
1956.I I .F .l
$2.50 (U.S.)
(or equivalent in other currencies)
CONTENTS
Page
Letter of tr a n s m i t t a l ....................................................................................................................................................................................
.......................................................................................................................................
General explanatory n o t e .............................
Introduction
.............................................................................................................................................................................................
ix
x
xiii
Pa r t I
C h a p te r
1.
2.
THE REGIONAL SITUATION
P age
Post-war economic p r o g r e s s .........................................................................................................................................................
The ECAFE region in the post-war p e r i o d .....................................................................................................................
Measures of current production and consumption
...................................................................................................
Current provisions for larger future p r o d u c tio n ........................................................................................... . . . .
Qualitative im p ro v e m e n t.........................................................................................................................................................
C o n c lu sio n ...................................................................................................................................................................................
Current economic situation
.........................................................................................................................................................
Agricultural p r o d u c t i o n .........................................................................................................................................................
Industrial production
.........................................................................................................................................................
T r a n s p o r t ....................................................................................................................................................................................
Trade and payments
. . ..
.......................................................................................................................................
Monetary d e v e l o p m e n t s .........................................................................................................................................................
Development planning and im p le m e n ta tio n .....................................................................................................................
1
1
2
9
11
12
13
13
20
27
31
39
45
P a r t II
COUNTRY SURVEYS
3.
4.
5.
6.
7.
8.
Afghanistan
....................................................................... .. ......................................
.......................................................
Basic economic problems
................................................................................................................................................
P r o d u c tio n ....................................................................................................................................................................................
Trade and payments
.........................................................................................................................................................
Public f i n a n c e ...........................................................................................................................................................................
Money, banking and p r i c e s ..................................................................................................................... ....................
Burma
.................................................................................................................................................................. ....................
Production and d e v e lo p m e n t........................................................ ............................................ .. .............................
Trade and payments
.........................................................................................................................................................
Public f i n a n c e ...........................................................................................................................................................................
Money supply and prices
................................................................................................................................................
C a m b o d i a ............................................................................................................................................................................................
End of quadripartism
.........................................................................................................................................................
Production and d e v e lo p m e n t................................................................................................................................................
T r a d e .............................................................................................................................................................................................
Finance and p r i c e s ..................................................................................................................................................................
Ceylon
................................................................
......................................................................................................................
Development plans and p r o g r e s s ............................................................................................................. ....................
Production and e m p lo y m e n t................................................................................................................................................
Trade and payments
.........................................................................................................................................................
Monetary and fiscal d ev elo p m en ts.......................................................................................................................................
C h i n a ....................................................................................................................................................................................................
Taiwan
...................................................................................................................................................................................
Population growth, economic development and US a i d ..................................................................................
P ro d u c tio n ..........................................................................................................................................................................
Trade and payments
...................................................................................................................... ....................
Monetary and fiscal dev elo p m en ts..............................................................................................................................
M a i n l a n d ...................................................................................................................................................................................
The basic economic p r o b l e m .......................................................................................................................................
First Five-Year Plan
................................................................................................................................................
................................................................................................................................................
Agricultural situation
Industrial s i t u a t i o n .........................................................................................................................................................
Financing of development
.......................................................................................................................................
Price s i t u a t i o n ................................................................
...........................................................................................
Hong Kong
...........................................................................................................
................................................................
Population and related problems . .
.............................
........................................................................................... 10
P ro d u c tio n ........................................................................................ ..........................................................................................
51
51
53
54
55
56
57
57
59
61
62
63
63
64
65
65
67
67
68
70
71
73
73
73
74
78
79
80
81
82
86
90
93
98
100
101
iv
C h a p te r
Page
T r a d e ...............................................................................................................................................................................................
Money, prices and public finance
.................................................................................................................................
9. I n d i a .........................................................................................................................................................................................................
Outstanding economic p r o b l e m s ..........................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
Trade and payments
............................................................................................................................................................
Fiscal and monetary developments
.................................................................................................................................
Second Five-Year P l a n ...........................................................................................................................................................
10. I n d o n e s i a ................................................................................................................................................................................................
Payments and budgetary deficit
.........................................................................................................................................
Money supply and prices
..................................................................................................................................................
Production and trade
...........................................................................................................................................................
Economic development p l a n n i n g .........................................................................................................................................
11. J a p a n .......................................................................................................................................................................................................
Trade and payments
...........................................................................................................................................................
Production and e m p lo y m e n t..................................................................................................................................................
Monetary and price situation
.........................................................................................................................................
12. K o r e a .......................................................................................................................................................................................................
Background
.............................................................................................................................................................................
Plans and p r o g r a m m e s ...........................................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
Trade and payments
...........................................................................................................................................................
Finance and p r i c e s ....................................................................................................................................................................
13. L a o s .......................................................................................................................................................................................................
Rehabilitation and development
.........................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
T r a d e ...............................................................................................................................................................................................
Finance and p r i c e s ....................................................................................................................................................................
14. Malaya and British B o r n e o ...........................................................................................................................................................
Malaya
......................................................................................................................................................................................
Federation of Malaya
..................................................................................................................................................
S i n g a p o r e .............................................................................................................................................................................
British B o r n e o ...........................................................................................................................................................
.. ..
Brunei
.............................................................................................................................................................................
North B o r n e o ....................................................................................................................................................................
Sarawak
.............................................................................................................................................................................
15. N e p a l ......................................................................................................................................................................................................
Currency stabilization
.......................................................................................................................‘ ................................
Economic development
...........................................................................................................................................................
Public f i n a n c e .............................................................................................................................................................................
Land reform
.............................................................................................................................................................................
16. Pakistan
...............................................................................................................................................................................................
Development projects and progress
................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
Trade and payments
...........................................................................................................................................................
Money, finance and prices
........................................................................................ .........................................................
17. Philippines
.....................................................................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
Trade and payments
...........................................................................................................................................................
Money, finance and prices
..................................................................................................................................................
Economic development p r o g r a m m i n g .................................................................................................................................
Revision of the Bell Trade A c t ..........................................................................................................................................
18. Thailand
..............................................................................................................................................................................................
Development program m e and p r o g r e s s .................................................................................................................................
P ro d u c tio n ......................................................................................................................................................................................
Trade and payments
............................................................................................................................................................
Fiscal and monetary d ev e lo p m e n t..........................................................................................................................................
19. V i e t - N a m ..............................................................................................................................................................................................
M ajor problems after Geneva and Paris agreements
.............................................................................................
P r o d u c tio n ......................................................................................................................................................................................
Trade and payments
...........................................................................................................................................................
Finance and p r i c e s .....................................................................................................................................................................
102
103
104
104
105
108
109
112
114
114
116
117
122
125
125
132
135
140
140
141
142
143
145
149
149
149
150
150
151
152
154
156
157
158
159
159
161
161
162
162
163
164
164
165
167
168
171
171
172
174
177
178
180
180
181
183
185
187
187
188
189
190
APPENDIX
Asian Economic Statistics (For a list of special and general tables see page 193)
.........................................................
Trade agreements negotiated a n d /o r finalized during the second half of 1955 ........................... .. ..............................
193
234
v
LIST OF TABLES
Pa r t I
THE REGIONAL SITUATION
Table
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
Page
Gross real domestic product at market p r i c e .......................................................................................................................
Post-war changes in aggregate and per capita gross domestic product .....................................................................
Annual rate of increase of agricultural and industrial production in post-war y e a r s ..................................................
Indicators of per capita consumption ....................................................................................................................................
Annual rate of increase in selected indicators of industrial g r o w t h ...........................................................................
Changes in production of selected commodities
..............................................................................................................
Gross domestic capital formation, gross savings and development expenditure as a percentage of
gross
national p r o d u c t ...........................................................................................................................................................................
Cereals production and i m p o r t ..................................................................................................................................................
Natural rubber production and export
................................................................................................................................
Raw cotton supplies and consumption
................................................................................................................................
Industrial production i n d e x ...........................................................................................................................................................
Cement production, import and export ................................................................................................................................
Coal production
.............................................................................................................................................................................
Electricity capacity and p r o d u c t i o n .........................................................................................................................................
Pig iron production: comparison of cost of raw materials used per t o n ....................................................................
Cotton spindle capacity and cotton textile p r o d u c t i o n .................................................................................................
Cotton yarn:
Production cost in Japan, India and Pakistan
..............................................................................
E C A F E an d oth er countrie s:
P e r c a p i t a v o l u m e o f r a i l t ra f f i c a n d n u m b e r o f c o m m e r c i a l m o t o r v e h i c l e s
per 1,000 population ....................................................................................................
...............................................
Total export and gross domestic p r o d u c t ...........................................................................................................................
ECAFE region:
Exports of eight m ajor prim ary p r o d u c t s .......................................................................................
ECAFE countries: Percentage of exports of two m ajor products in total e x p o r t s ..........................................
Position of ECAFE countries in world t r a d e ...................................................................................................................
Value of capital goods i m p o r t s .............................................................................................................................................
Gold and foreign assets
......................................................................................................................................................
....................
Proportion of investment and defense expenditure in total central government expenditure
Total and per capita government development e x p e n d i t u r e ........................................................................................
3
3
4
6
7
8
10
13
16
18
20
21
22
22
24
25
25
27
31
32
32
33
34
35
42
49
P a r t II
COUNTRY SURVEYS
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
Afghanistan: Expenditures on the Helmand-Aghandab Valley project
.............................................................
Afghanistan: First census of manufactures, 1954/55 ................................................................................................
Afghanistan: Changes in money s u p p l y ...........................................................................................................................
Burm a: Government capital o u t l a y ....................................................................................................................................
Cambodia: Distribution of the assets and liabilities of the Institut d’Emission between Cambodia,
Laos
.............................
.......................................................................................
and Viet-Nam on 31 December 1954
Ceylon: Government development outlay in the two six-year p l a n s ......................................................................
Ceylon: Imports classified by types
...........................................................................................................................
Ceylon: Factors affecting changes in money supply
................................................................................................
China: Distribution of government development expenditure on the mainland under the First Five-Year Plan
China: Increases in industrial capacity on the mainland .......................................................................................
China: Industrial and agricultural production on the mainland in 1952 compared with 1957 target . . . .
China: Sown area and yield per hectare of agricultural crops on the mainland, 1952 as compared with
1957 target
.................................................................................................................................................................................
China: Agricultural production on the mainland, 1952-55 and 1957 ( t a r g e t ) ....................................................
52
54
56
61
63
67
71
72
82
83
84
85
87
vi
Table
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
Page
China: Structure of industrial ministries in the Central People’s Government, 1 9 5 5 .................................................
90
China: Index of industrial production on the m ainland ..............................................................................................
91
China: Distribution of government receipts and expenditures on the mainland
.................................................
94
.................................................
96
China: Distribution of government development expenditure on the m ainland
China: Trade on the mainland with countries other than USSR and Eastern Europe, 1938, 1950-55
..
97
China: Trade on the m ainland with countries other than USSR and Eastern Europe during the
first half
of
1954 and of 1955
..............................................................................................................
................................................
97
................................................
110
India: Capital budget of the Union G o v e rn m e n t..........................................................
India: Government development expenditure under the two five-year plans . .
................................................
113
Indonesia: Government development e x p e n d itu r e .........................................................
................................................
116
Indonesia: Composition of tax receipts and surcharges from foreign trade
..
................................................
116
Indonesia: Factors affecting changes in money supply
.......................................
................................................
116
Indonesia: Index numbers of food prices
..................................................................
................................................
117
Indonesia: Food crop production
....................................................................................
................................................
117
Indonesia: Harvested and planted area of m ajor food crops, 1955 ............................................................................
118
Indonesia:
Statistics on mam weaving m i l l s ...................................................................
................................................
119
Indonesia:
Index numbers of imports of industrial raw m a t e r i a l s ..............................................................................
120
Indonesia: Direction of t r a d e .............................................................................................
................................................
122
Japan: Trend of foreign exchange b a l a n c e s ..................................................................
................................................
126
Japan: Imports of m ajor items of food and raw materials
..............................
................................................
127
Japan: Exports by currency area ...................................................................................
. . . .....................................
128
Japan: M ajor exports and chief customer c o u n t r i e s ................................................
................................................
129
Japan: Comparison between the value of raw material im ports and the value of m anufactured product exports
130
Japan: Increases in selected exports
..................................................................................................................................
130
Japan: Indicators of changes in productivity for pig iron, cotton yarn, am m onium sulphate and cement
industries
......................................................................................................................................................................................
133
Japan:
Number of gainfully employed and their net contribution to national p r o d u c t ................................
134
Japan:
Changes in loans and d e p o s i t s ..................................................................................................................................
136
Republic of Korea: Comparison of economic investment and other requirements of economic plans and
.............................................................................................................................................................................
141
aid programmes
Republic of Korea: Abbreviated balances of trade and payments
.......................................................................
144
Republic of Korea: Selected exchange rates, June 1955
.............................................................................................
145
................................
147
Republic of Korea: Commercial bank relations with the public and the Bank of Korea
Republic of Korea: Factors affecting changes in money supply
.......................................................................
147
Republic of Korea: Inflationary gap, 1955
........................................................................................................................
147
149
Laos:
Government sales of forest p r o d u c t s ........................................................................................................................
Federation of Malaya:
Exports of prim ary p r o d u c t s ......................................................................................................
153
Brunei: Exports of prim ary products
....................................................................................................................................
158
North Borneo:
Exports of prim ary p r o d u c t s .................................................................
................................................
159
Sarawak: Exports of prim ary p r o d u c t s ...................................................................................................................................
160
Nepal:
Central government budget, 1952/53— 1954/55
..........................................................................................
162
Nepal:
Budget estimate, 1954/55
..........................................................................................................................................
163
166
Pakistan:
Index of industrial production
........................................................................................................................
Philippines:
Imports classified by economic groups
......................................................................................................
174
Philippines:
Magnitude and composition of public debt
..........................................................................................
175
Philippines:
Loans, advances and bills discounted by commercial banks and selected financial institutions
175
Philippines:
Gross national product and gross domestic in v e s tm e n t..............................................................................
177
Philippines:
Percentage of ordinary customs duties to be applied under the revised trade agreement with the
United States, 1956-74 ....................................................................................................................................................................
178
Thailand: M ajor factors in monetary expansion and contraction
...........................................................................
185
vii
LIST OF CHARTS
Pa
r t
I
THE REGIONAL SITUATION
Page
1.
2.
3.
4.
5.
Population and production t r e n d s ..............................................................................................................................................
Im ports of cereals into ECAFE food deficit countries
..................................................................................................
Export prices of rice and w h e a t ..............................................................................................................................................
Price indexes of export c o m m o d i t ie s .....................................................................................................................................
Index numbers of prices
.......................................................................................................................................................
Pa
r t
8
13
14
16
39
II
COUNTRY SURVEYS
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
Burma: Value of imports and exports and foreign exchange holdings
...................................................................
Ceylon: Value of imports and exports
...............................................................................................................................
Ceylon:
Index numbers of external trade
.....................................................................................................................
China: Value of imports and exports in
T a i w a n ...........................................................................................................
China: Government budget deficit and prices in Taiwan
............................................................................................
Hong Kong:
Value of imports and exports
.....................................................................................................................
India: Value of imports and exports
...................................................................................................................
India: Index numbers of external t r a d e ...............................................................................................................................
Indonesia: Value of imports and e x p o r t s ..............................................................................................................................
Japan: Value of imports and exports
...................................................................................................................
Japan: Index numbers of external t r a d e ..............................................................................................................................
Japan: Index numbers of industrial activity and producers’ inventory
...................................................................
Japan: Currency, deposits and bank loans
.....................................................................................................................
Japan: The structure of interest rates
...................................................................................................................
Japan: Index numbers of p r i c e s ..................................................................................................................................................
Japan: Relative changes of prices, wages and labour productivity in manufacturing in d u s t r i e s ......................
Malaya and British Borneo: Value of imports and e x p o r t s ...........................................................................................
Malaya and British Borneo: Index numbers of external trade
..................................................................................
Malaya and British Borneo: Money supply and cost of living index
................................................................
Pakistan:
Index numbers of unit value and terms of t r a d e ...........................................................................................
Pakistan: Value of imports and e x p o r t s ..............................................................................................................................
Pakistan: Monetary and financial indicators
.....................................................................................................................
Philippines: Value of imports and exports
.....................................................................................................................
Philippines: Index numbers of external t r a d e .....................................................................................................................
............................................................................................................
Philippines: Monetary and financial indicators
Thailand: Balance of trade, foreign assets and exchange rate
..................................................................................
Thailand: Monetary expansion and prices
.....................................................................................................................
Republic of Viet-Nam: Index numbers of external trade
...........................................................................................
60
70
70
78
79
102
108
108
122
126
126
132
136
137
138
138
153
153
153
167
167
169
173
173
176
183
185
189
ix
LETTER OF TRANSMITTAL
Bangkok, Thailand
20 December 1955
Sir,
In November 1947 during its second session the Economic Commission for Asia and
the Far East adopted a resolution E/CN. 11/63 which recommended that the Secretariat
publish a comprehensive annual survey of economic conditions and problems of the countries
within the scope of ECAFE.
In accordance with the above resolution, I have the honour to transmit to you the
ninth Survey prepared by the Secretariat on its own responsibility. The Commission is
aware that the views expressed in the Survey should not be attributed to the Commission or
to its member governments.
This Survey, following the pattern set in the 1953 Survey, gives in Part II an analysis
of recent economic developments in individual countries of the region. Part I on the regional
situation includes, in addition to the usual review of the current economic situation, a chapter
on post-war economic progress in countries of the region.
I have the honour to be, Sir,
Your obedient servant,
(Signed) P. S. L o k a n a t h a n
Executive Secretary
Economic Commission for Asia and the Far East
The Honourable Dag H am m arskjöld
Secretary-G eneral
U nited Nations, New York
X
GENERAL EXPLANATORY NOTES
F
is c a l
y e a r
a n d
c u r r e n c y
F isca l y e a r
A f g h a n i s t a n ...............................
B urm a
..
......................
...............................
C a m b o d ia
C e y lo n
.........................................
C h in a : T a i w a n ......................
M a in la n d
H ong Kong
...............................
I n d ia
.........................................
In d o n e sia
...............................
Japan
.........................................
K o r e a (R e p u b lic of)
Laos
.........................................
M a l a y a a n d B ritish B o rneo
N epal
.........................................
P a k i s t a n .........................................
P h ilip p in e s
...............................
T h a ila n d
...............................
V iet-N am (R ep u b lic of)
a.
St
21 M a r c h — 20 M a rc h
A p r — M a r (1935-41), O c t-S e p (from 1945)
J a n — D ec
O c t— S e p
J a n — D e c (up to 1953), J a n — Ju n (1954),
Jul— Ju n (from Ju ly 1954)
J a n — D ec
A pr— M ar
A pr— M ar
J a n — D ec
A pr— M a r
A p r— M a r (u p to 1 9 53/54), A p r 1954—
Ju n 1955, Jul— Ju n (from Ju ly 1955)
J a n — D ec
J a n — D ec
Jul— Jun
A pr— M a r
Jul— Jun
A p r — M a r (u p to 1939), A p r — D ec (1940),
J a n — D ec (from 1941)
J a n — D ec
C urrency
U.S. c e n t s p e r u n it
of c u r r e n c y a t e n d
of S e p t e m b e r 1955
A fghani
K yat
R iel
Rupee
N e w T a i w a n D o lla r
A fg.
K.
Ri
Rs.
NTS
5.882a
21.00
2.857
21.00
6 .43a
Y uan
H o n g K o n g D o lla r
Rupee
R u p ia h
Y en
H w an
Y uan
HK $
Rs.
Rp.
Y.
H.
2.355
17.50
21.00
8.772a
0.2778
0 .5 5 5 5 a
Kip
M a l a y a n D o llar
M ohur
Rupee
P eso
Baht
Kp
M$
M ohur
Rs.
P.
Baht
2.857
32.67
14.00a
21.00
50.00
4 .6 2 1 a
P ia stre
P r.
F o r f u r t h e r d e ta ils on t h e e x c h a n g e r a t e s a p p lic a b l e t o d i f f e r e n t t y p e s o f
In d o n e s ia , th e R e p u b lic o f K o re a , N e p a l, a n d T h a ila n d see i n f r a , c h a p t e r s
also I n t e r n a t i o n a l M o n e ta ry F u n d , I n te r n a tio n a l F in a n c ia l S ta tis tic s .
a t is t ic a l
S y m b o l of
cu rre n cy
2.857
tr a n s a c tio n s in A f g h a n i s t a n , th e R e p u b lic o f C h in a ,
on th e s e c o u n trie s . F o r I n d o n e s ia a n d T h a ila n d
see
t abl es
In order to avoid duplication, statistical tables on population, national income, production, transport,
t ra d e , b a l a n c e o f p a y m e n ts , pr ic e s , f in an c e a n d l a b o u r a r e
g e n e ra l l y n o t r e p r o d u c e d in t h e t e x t o f t h e 1955
Survey, since they are published in the section on “Asian Economic Statistics” in the appendix to the Survey.
Un
it s
and
s y mb o l s
Unless otherwise stated “tons” relate to metric tons, and “ dollars” to United States dollars.
The following symbols have been used throughout:
* = average of six to eleven months.
Mn = million.
† = 12 months beginning April of the year stated.
..
= not available,
† = 12 m o n t h s e n d i n g S e p t e m b e r o f t h e
y e a r s t at ed .
— = n i l o r n eg li g ib le .
r
= re v is e d fi gur es .
=
ø 12 m o n t h s e n d i n g J u n e o f t h e y e a r s t a t e d .
§ = end of period.
Figures in italics are provisional.
I, II, III and IV for quarters of years.
A stroke ( / ) indicates a single crop or fiscal year, e.g., 1954/55; a hyhen (-) between
e.g. 1950-55, indicates the period included in the two years shown.
two years,
The term Malaya includes the Federation of Malaya and Singapore.
Ro
u n d in g
Components in tables do not necessarily add up to totals, because of rounding.
So
ur c es
Unless otherwise stated, figures used in tables of the 1955 Survey are from the United Nations Statistical
Office, other international sources or official national sources.
ECONOM IC SU RVEY
OF
A SIA AND T H E FA R E A ST 1955
xiii
INTRODUCTION
Economic conditions in most countries of the ECAFE
region continued to be favourable in 1955 as a result of both
internal and external factors. Agricultural and food production m aintained approximately the level of the previous year
which was a post-war record. Industrial production continued
to increase though at a lower rate than in previous years. The
value of foreign trade was above the 1954 level for the region
as a whole and, although the trade deficit reversed its previous
downward trend, the foreign exchange reserves increased
in a num ber of countries. Countries attained a reasonable
degree of monetary stability, though inflationary pressures
continued in some of them which were faced with the difficult
problems of defence and rehabilitation. In most countries
development programmes were accelerated, and the developmental efforts of the governments were more vigorous and
resulted in clearer formulation of development policies and
goals.
I
The general food situation in the region remained
satisfactory in 1955. The 1954/55 cereals production in the
region, excluding mainland China,1 though lower by 1.5 per
cent than in 1953/54, was the second highest on record, while
in mainland China it rose by over two per cent. An important
development in connexion with trade in rice, the staple food
of the region, was the increased reliance by deficit countries
on the rice surpluses of the region. Rice imports from within
the region in the first seven months of 1955 accounted for
38 per cent of the total imports of cereals, against 28 per cent
in 1952. This change, brought about mainly by a reduction
of export prices of rice which in 1955 were nearly 30 per cent
lower than in 1953, came as a welcome relief to the ricesurplus countries whose export of rice is expected to attain a
post-war high and equally to the rice-deficit countries whose
foreign-exchange expenditure on rice im port is expected to
decline. The acute difficulties confronting the predominantly
rice-exporting countries in marketing their rice have, for the
moment at least, been eased; but the long-term and more
basic solution of trade in rice requires understanding and
adjustm ent of development policies in respect of food production on the p art of both the traditional rice exporters and
the rice im porters of the region.
Production of agricultural commodities other than food
items has continued to expand all through the post-war years,
and remains well above the pre-war average, the only exceptions being cotton and jute of which the 1954/55 production
was still lower than the pre-war average.
Nevertheless, in spite of the improvement in food and
agricultural production, it remains true that the region has
yet a long way to go before its food and raw material supplies
can be said to match the needs of domestic consumption and of
export to exchange for capitals goods or other essential
imports. As of 1954/55 per capita agricultural production
1.
S ta tis tic s o n m a in la n d C h in a q u o te d h e re a n d th r o u g h o u t th e S u r v e y a r e
b a se d on official s o u rc e s a n d a r e s u b je c t to th e q u a lific a tio n s r e f e r r e d to in
i n f r a , c h a p t e r 7, C h in a , o p e n in g fo o tn o te t o th e s e c tio n on th e m a in la n d ,
p. 80.
in the ECAFE region (excluding mainland China) was still
14 per cent below its pre-war (1934-38) level. The slow
recovery of agriculture might become a serious obstacle to
rapid economic development, and it is therefore encouraging
to note that the emphasis in many countries continues to be
on programmes of development in the agricultural sector.
Significant developments are taking place in the industrial
sphere and in the improvement of the infra-structure of the
economies in the ECAFE region. Industrial production has
increased at a rate varying from 5 to 8 per cent over 1954 in
China, India and Japan, the three countries where the region’s
industry is still largely concentrated, but the foundations for
industrial development have been laid in many other countries
in the region. The pattern of development naturally differs
from country to country, depending partly upon policies but
even more upon different resources endowment. The desire of
countries to process their own materials and become selfsufficient in certain commodities has led to the growth of
cotton-textile, paper, rubber re-milling, leather, sugar-refining,
oil-pressing and other food-processing industries.
Special
attention is being given to the expansion of production of
certain commodities basic to development, of which the outstanding example is cement. The accent on the development
of cottage and small-scale industries is the result of a development policy determined by social as well as economic
considerations.
The desire to increase employment, to concentrate scarce
capital resources on development of power, transport and heavy
industries which inevitably require large amounts of capital
and to rely as far as possible upon labour-intensive industries
for the supply of consumer goods has f u r n si hed economic
justification for those who on grounds of social policy would
favour the retention and modernization of handicrafts and
small industries. The many experiments now going on in
several countries of Asia to help foster and promote the
handicarfts and small business through the establishment of
technical institutions for cottage industries, training centres,
financial and marketing institutions and the investment of
considerable public funds in this field will, if successful, not
only quicken development but open a new chapter in the
process of economic development of under-developed countries.
An attempt is made to offset the region’s short supply of
coal and fuel resources by developing hydro-electric power.
It is planned to raise the present total electric power capacity
by 50 per cent during the next few years; excluding Japan,
the ca p acity is expected to be doubled to about 15 million
kW. It is not surprising that the countries of the region
should, in giving the highest priority to the expansion of
electric power, have manifested an intense interest in the
possible development for industrial purposes of atomic power
which in their view is likely to revolutionize the methods of
production and organization in industry and agriculture.
Not all countries are equally endowed for the development of capital goods industries, e.g. heavy metals and
engineering and heavy chemicals, in which China, India and
xiv
Japan have plans for further rapid expansion. Other countries too, however, have made a small beginning. Caustic
soda plants, fertilizer plants, iron and steel works, machine
shops have been set up or are to be set up in Ceylon, Indonesia,
Pakistan, the Philippines, etc.
In the field of transport, the vigorous and continuing
efforts on the part of governments to overcome shortages of
technical personnel and modernize plants and equipment with
a view to aiding the balanced growth of an efficient transport
system and meeting the increasing demand arising from progressive implementation of economic and social development
programmes, are slowly bearing fruit. Gaps still exist and the
demand for transportation is still very much in excess of
available facilities; nevertheless, significant additions to the
railway and highway networks and extension of navigation
on inland waterways have taken place. On the whole, the
inland transport economy of the region might be described as
steadily improving but technical and organizational difficulties,
even more than purely financial ones, seem to be the critically
limiting factors.
II
World economic conditions during the year have been
generally favourable to the growth of the region’s trade; the
demand for prim ary products has been strong with export
prices generally at a higher level than in recent years. Rubber,
tea and tin have shared in the general increase, and trade
deficits of the region as a whole, although slightly up in the
first half of 1955, have shown a generally declining trend.
While most countries, with the exception of Burma, India,
and the Philippines, found themselves with a larger volume
of foreign- exchange reserves at the end of June 1955 than
at the end of 1954, the increase in the foreign-exchange reserve
of Japan was most notable, being over $400 million. The
increase in the reserves in several countries has been mainly
due to a steady rise in their exports accompanied by a
decline in imports, while in others it has been attributed to a
higher rise in exports than imports. A steadily increasing
inflow of external aid and capital to some countries has also
helped to increase or to prevent a larger reduction than otherwise of their reserves in foreign assets.
The export trade of the region has, however, improved
much less than the international trade in general. The share
of the ECAFE region in world exports declined from 11 or 12
per cent during the Korean war boom years 1950 and 1951
to 9 per cent in the first half of 1955. While world exports
rose by 6 per cent between 1951 and the first half of 1955,
exports of ECAFE countries declined by 21 per cent. Many
causes, notably the end of the Korean war boom, have
contributed to the region’s smaller share in world exports, but
this trend tends to confirm the view that in recent years trade
among industrial countries has been relatively more active
than trade between industrial and non-industrial countries.
There has been no significant change in the commodity
pattern of export trade in which eight prim ary commodities
account for about 60 per cent of the value. The degree of
specialization is more pronounced when individual countries
are separately c o n s id ered, and this poses a problem of development policy over a long period which the countries alone can
solve, having regard to the comparative long-term advantages
of specialization and diversification. But some diversification
within the agricultural sector is already taking place or
planned.
While there has been an estimated increase of 4 per
cent in the value of im ports in 1955 over 1954, capital goods
imports have increased at a higher rate of 9 per cent during the
same period.1 The dem and for capital goods has been much
more steady and continuous than for other imports, showing
the influence of development program m es. Taking individual
countries and areas, the share of capital goods in total imports
during 1949-55 exceeded 20 p er cent in Burma, China: Taiwan,
India, Indonesia and the Philippines.
D uring the year there was general progress in liberalizing
trade and payments restrictions, in elim inating discrim inatory
features and thus in the direction of m ulutilateralism. While
quantitative im port restrictions were continued mostly for
balance-of-payments reasons, other purposes, namely, protection of industries and transferring of trade to national traders,
seemed to be gaining in importance. The use of quantitative
im port restrictions for protecting domestic industries was
particularly im portant in India, Pakistan and the Philippines,
and to a limited extent in Ceylon, Indonesia, and Thailand.
This was tempered by a recognition of the need for replacing,
where feasible, quantitative by cost restrictions.2 Measures in
this direction were taken in Indonesia and Thailand, and
to a limited extent in India.
While several ECAFE countries continued to negotiate
new or extend existing bilateral trade arrangements, the significant development appeared to be in the changing character
and purpose of such arrangements. With the easing of supply
of both capital goods and food and raw materials, the
emphasis has shifted to securing markets, for capital goods
on the p art of industrial countries and for food and raw
materials on the part of ECAFE countries. The bilateral
trade arrangements of Burma, Ceylon, Indonesia and Pakistan
aimed largely at securing markets for their export products,
which in turn involved an acceptance by them of a commitment to im port from trading partners. The problem, which
was acute in specific commodity markets (for example, rice
and cotton), derived largely from a high degree of export
specialization in the countries concerned. M ainland China
and ja p a n have continued to depend in a large m easure on
the system of bilateral trade agreements.
However, the
practical difficulties of, and objections to, bilateral trading are
increasingly recognized by Jap a n ; the steadily im proving
competitive position of Japan’s exports and the substantial
improvement in its foreign-exchange reserves may help to
reduce its dependence on bilateral trade.
I II
Countries of the ECAFE region have been subjected to
inflationary and sometimes to deflationary pressures caused
by the inter-play of external and internal factors, but are
increasingly facing up to the problem with some degree of
success.
Export-oriented economies like Burma, Ceylon,
Malaya and Thailand, and to a lesser extent Indonesia and
Pakistan, are liable to the im pact of fluctuations in the external
demand for their exports, and their money incomes and money
supply vary within wide limits from year to year. These
countries are seeking to control the inflationary pressures by
their flexible export duties, m arketing boards and flexible fiscal
and tax policies, but they have not successfully solved the
problem of safeguarding their payments position without
1.
2.
F o r 11 c o u n trie s o r a r e a s a s g iv e n in i n f r a , p . 34, ta b le 23.
F o r in s ta n c e , b y im p o s in g h ig h e r r a t e s o f t a r if f , s p e c ia l le v ie s a n d u n fa v o u ra b le d iff e r e n tia l e x c h a n g e r a t e s e tc . o n le ss e s s e n tia l im p o r ts .
XV
slowing down the rates of development when export incomes
decline. A policy of spreading the use of foreign-exchange
resources over a period within which fluctuations could be
taken into account, combined with borrowings of foreign
exchange from the International Monetary Fund when necessary, might afford a partial relief.
Development expenditures are in almost all countries of
the region a m ajor element of inflationary pressure, but as
yet their impact has not been severe or adverse, and this
notwithstanding the fact that a moderate degree of deficit
financing has been resorted to in several countries. Better
utilization of productive capacity, improved productivity and
increased food production, the running down of foreignexchange reserves and an expanding monetized economy
provide the explanation.
By and large the monetary conditions in the ECAFE
region have continued to be fairly stable, and available data
indicate that variations in prices and cost of living have
remained within fairly narrow limits. Only in south Korea,
China: Taiwan, south Viet-Nam, Nepal and Cambodia, where
owing to special circumstances defence and administrative
expenditures have been maintained at high levels, have
inflationary conditions continued during the year. The inflow
of external aid has somewhat improved the situation and
greater political stability will, of course, create more favourable conditions for economic development.
The case of
Indonesia is somewhat special; there the persistent deficit in
government budgets, combined with restriction of imports,
was the m ajor factor responsible for monetary expansion and
rising prices.
In all countries monetary and credit controls become
more effective as experience is acquired.
But the basic
solution lies in creating better economic conditions and in
adopting sound policies of finance and development.
Each year marks a further advance both in the formulation of development programmes and in the improvement of
the machinery for planning and development. Development
efforts have been intensified and become more effective. The
percentage of public development expenditure to total government expenditure has increased. Excluding mainland China
where this percentage is obviously the largest, India, Pakistan,
Japan, Ceylon and Burma show fairly high percentages of
development expenditure to total public expenditure. The
main problem is not merely to maintain but also to increase
substantially development expenditures.
Externally generated instability has had far-reaching
effects on development efforts, particularly in the prim ary
exporting countries; to a reduction of this instability, the
Working P arty on Economic Development and Planning, which
met in Bangkok in November 1955, gave high priority.1
One of the most encouraging developments in the ECAFE
region has been the organization and improvement of the
institutions for mobilizing domestic savings and accelerating
investment. All the ECAFE countries have shared in this
improvement. The role of the central banks in the ECAFE
region in savings and investment is becoming more and more
important. In a few countries, the central bank is extending
its conventional field of operation by assuming responsibilities
1.
R e p o r t o f th e W o r k in g P a r t y o n E c o n o m ic D e v e lo p m e n t a n d P la n n in g
( F i r s t M e e tin g ) to t h e E c o n o m ic C o m m issio n f o r A s ia a n d t h e F a r E a s t
( T w e lf th S e s s io n ) , in E c o n o m ic B u lle tin fo r A s ia a n d th e F a r E a s t,
N o v e m b er 1955, p . 5, p a r a . 24.
for encouraging or even undertaking the financing of economic
development, besides subscribing to and supporting government securities in the money market. Many countries have
also established special financial institutions for the development of agricuulture and industry. Industrial finance corporations in India and Pakistan, the Rehabilitation Finance
Corporation in the Philippines, the Industrial Credit and
Investment Corporation in India, the proposed Industrial Bank
in Pakistan and the proposed Development Finance Corporation in Ceylon, and other similar institutions elsewhere, are
State-private corporations or privately-owned corporations with
the right to borrow from the government and the central
bank as well as from the International Bank for Reconstruction
and Development. The National Small Industries Corporation
of India has been set up to provide financial assistance to
small industries. The financing of the agricultural sector
has also received much attention in most countries of the
region. The Agricultural and Cottage Industry Bank of
Afghanistan, the State Agricultural Bank of Burma, the
Agricultural Credit and Co-operative Financing Administration
of the Philippines are examples of institutions set up specially
In addition, savings
to finance agricultural development.
institutions have been developed and strengthened everywhere.
Efforts to promote a capital market have continued. On the
whole it is fair to say, as discussion by the Working Party
on Economic Development and Planning brought out, that
no mere improvement in financing institutions is likely to
yield further substantial results in promoting savings. This
conclusion should not cause surprise, as savings come largely
from profits of public and private enterprises rather than
from personal savings.
Some idea of the extent to which government development
expenditure is financed out of current surpluses and of savings
and domestic borrowings can be had from table 26 in chapter
2,2 but it will be seen that external finance contributes a fairly
significant share of the total development expenditure. The
value of external financing lies in its versatility. It can be
used not only to finance capital imports but also to support
consumption and strengthen the general economy of the
receiving country.
Obstacles to utilizing foreign governmental capital can
be removed to a certain extent by better organization. It is
often the case that while foreign governments or other public
organizations prefer to lend in large amounts, private business
men in under-developed countries require individually only
small loans. The lending partner would not like to bother
with the details of administering small loans, and the small
private business men might not have negotiating ability. To
remedy these defects, an intermediate organization may be
found useful, which can on the one hand be trusted by the
lending partner with a larger “package” loan, and on the other
hand determine the use of such loans in small amounts. This
is one of the practices followed by the Philippine government
and the United States International Co-operation Administration, where the intermediate organization in question, the
Industrial Development Centre, is a national organization
attached to the National Economic Council.
A review of the development expenditures in countries
of the ECAFE region affords ground for the hope that much
preparatory work has been achieved during the last few years.
There have been significant improvements in the infra-structure
of the economy; skills have been developed; the institutional
structure, especially in respect of financing, has been built up;
2.
I n f r a , p. 49.
xvi
the organizational and administrative machinery has been
refined and strengthened. All this points to a much surer rate
of progress in the coming years.
IV
For the first time an attempt has been made in the
present Survey to review the economic progress of the countries
in the ECAFE region in the post-war period with such data
as are available. Notwithstanding the limitations of data and
reservations as to their value, the trend of progress is too
significant to be missed. All available evidence points to a
rate of economic growth which in many cases surpasses the
rate of population growth.
Some post-war progress is
obviously of a rehabilitation and recovery type; b u t in more
recent years, e.g. since 1948, it is the result of successful
development efforts and capital formation. Both agricultural
and industrial production have expanded, the latter more
significantly than the former. However, as in the case of
Pakistan, even when a high rate of industrial production has
been achieved, the heavy predominance of agricultural production tends to reduce the rate of progress of domestic product
as a whole.
Other more detailed indicators also reinforce the broad
conclusion that some real economic progress has been achieved
in the ECAFE region. Production of electricity, cement and
steel has shown substantial increases during the period. Other
indicators, e.g. transport, also pointed to the same trend.
Figures of private consumption expenditure available for some
countries show that they have risen markedly in Japan, the
Philippines and to some extent in Ceylon, Burma and a few
other countries. Per capita availability of cereals and cotton
textiles shows an upward trend.
Evidence of some industrialization and economic development is afforded by trends in capital formation, as well as
by the proportion of capital imports to total imports. While
the rate of savings has been fluctuating on account of changes
in real income caused by variations both in output and in
terms of trade, it has been steadily increasing in some countries, particularly in Burma and India. Development expenditures have also been increasing in proportion to total national
output in most countries and all of these evidences add up to
a trend of progress.
That all this affords no ground for excessive optimism
may be true; indeed, as has been pointed out so often in
practically all reports on Asian economic conditions, the prewar level of per capita agricultural production has yet to be
reached. P er capita cereal consumption would have been
below safety levels but for foreign aid and supplies at critical
junctures. Progress has been neither adequate nor substantial .
Neither is there assurance of sustained growth, nor a definate
trend. For example, per capita income in some countries ceased
to increase in some postwar years. Only four countries with
a combined population of less than 140 million show a rate
of progress during 1948-541 of more than 3 per cent a year
on a per capita basis for gross domestic product.
But the really significant thing is perhaps that Asia seems
to have emerged at last from a long period of economic
1.
1948-54 f o r C eylon, J a p a n a n d th e P h ilip p in e s b u t 1948-1953 f o r T h a ila n d .
stagnation and i s r e a d y for a decisive forw ard m arch towards
economic development. The turning point apparently was the
Korean war-boom; after 1952 countries have adjusted them selves to a lower level of export prices and economic conditions
seem to have taken a definite upward turn. The improvement
in fiscal and m onetary controls and public adm inistration, the
progress in institutional arrangem ents for mobilizing domestic
capital and financing agriculture and industry, the development expenditures which in some ways stimulated private
investment, the increasing flow of external aid in the form of
grants and loans, and above all the urge to bring about an
accelerated rate of development have all helped in the process.
But the m argins of advance are still narrow and insecure.
The scarcity of foreign-exchange resources continues to be a
threat and drag to the implementation of development programmes. There is unanim ity among Asian countries that
of all shortages to be removed, priority should be given to
that of foreign exchange and that efforts should be concentrated on the prom otion of export industries or of those whose
products can replace, partly or wholly, im ported essential
consumer goods. But those countries will continue for a long
time to depend on the m ore industrially advanced countries
outside the region for capital equipment, technical knowledge,
etc., and it would be impossible for them to pay through
exports from their current production for all the im ports of
capital equipment, etc. needed for their development p ro grammes. The extent to which adequate external assistance
will come will determine the trend of progress in the ensuing
years.
Population pressures in the region make progress more
difficult, but what should encourage all those who are involved
in development program m es is the fact that production has in
a num ber of countries outpaced population during the last
few years. This should give hope and strength for further
effort. Countries are generally developing a population policy
designed to reduce the pressure to the extent possible. In
view of the divergent emotional attitudes which the subject
evokes, it may be helpful to remember that while the population problem is very serious, it is economic growth which
ultimately is likely to bring about a better balance between
birth and death rates, and that in any case it is not so much
population growth in itself that checks levels of living as low
rates of savings and investment. An eclectic approach and a
comprehensive social and economic policy seem to be called
for.
Finally, the establishment of effective planning machinery
in m any countries of the region and the am ount of careful
and detailed thinking that has been done to pave the way
for the adoption of development program m es with their
flexible approaches and policies augur well for the future.
Techniques of “ resources budgeting” and “commodity
balances” in program m ing and planning help the countries
increase their rates of development by distributing scarce
resources in the most favourable manner, while concentrating
efforts on expanding the supply of “bottle-neck” commodities.
Patterns of production, e.g. the choice between labourintensive and capital-intensive projects, thus are conditioned
by the distribution of scarce factors of production. With
attention to these and other aspects of the technique of
economic development, countries are steadily im proving the
prospects of successful implementation of their plans.
Part.
I.
THE REGIONAL SITUATION
Chapter I.
POST-WAR ECONOMIC PROGRESS
THE ECAFE REGION IN THE POST-WAR PERIOD
An enquiry into the economic progress of the countries
of the ECAFE region since the second world war encounters
substantial difficulties. Forem ost among these are the scarcity
of statistical data and the uneven quality of such data as do
exist.
A full analysis is beyond the scope of the present chapter.
This is at best a note on the economic progress of the countries
of the region in the decade since the war ended, and it claims
no more than that the various readily available statistical series
have been examined with a view to finding out what broad
conclusions appear to be immediately warranted. Thus it
provides at most a starting point for m ore detailed studies to
be undertaken hereafter.
The great diversity of the region should be borne in mind
in connexion with any such review. Most of the countries
have a tropical climate— with the exception of China, Japan,
Korea and the high mountain area of Nepal, and the n o rth ern
fringes of India, Pakistan and Afghanistan. The countries
vary tremendously, however, in both size and numbers of
inhabitants. In area they range from China (9.7 million
square kilom etres), India (3.3 million square kilometres) and
Indonesia (1.5 million square kilometres, on both sides of the
equator) down to the small territories of Hong Kong and
Singapore (about 1,000 and 750 square kilometres respectively)— the combined land area being roughly 19.2 million
square kilometres, more than equal to the United States and
western Europe com bined.1
Along with the heterogeneity of size and number, certain
other points should be especially remembered in assessing—
especially on a comparative basis— the economic progress of
the countries of the region since the second world war.
First is the fact that 10 of the 15 sovereign nations of
the region have only achieved their independence since or
after the war, and that for many of them the tasks of statehood
have had to be tackled with few trained and experienced
adm inistrators on hand.
1.
I n te r m s o f p o p u la tio n ( to t a l, a b o u t 1,350 m illio n ), C h in a (590 m illio n )
a n d I n d ia (377 m illio n ) , th e tw o m o s t p o p u lo u s c o u n trie s in th e w orld ,
follow ed b y J a p a n (88 m ill io n ) , I n d o n e s ia (81 m illio n ) a n d P a k is ta n
(76 m illio n ) m a y b e c o n tr a s t e d w ith th e th r e e d e p e n d e n c ie s o f S a ra w a k ,
N o r th B o rn e o a n d B r u n e i a t th e o th e r e n d o f th e sca le (less t h a n 1 m illio n
c o m b in e d ). F o r d e ta ils , s e e i n f r a , A s ia n E c o n o m ic S ta tis tic s , ta b le A.
Second is the heavy damage suffered by some of the
countries in the course of the second world war— Burma,
China, the Philippines and Japan; also Indonesia and others
— as well as the subsequent destruction followed by national
partition in Korea and Viet-Nam, and civil disturbance in
some other countries. This means that, for a num ber of the
countries of the ECAFE region, economic progress has thus
fa r had to be very largely a matter of rehabilitation and
reconstruction rather than of development.
T hird is the high degree of dependence of certain of
these economies (although not by any means the largest of
them) on their export earnings from a few key industrial
raw m aterials or m ajor food items. This dependence makes
them extremely vulnerable to fluctuations in world markets,
as was notably shown in the Korean-war boom and succeeding
recession, and it makes them vulnerable too to the invention
of synthetic substitutes— rayon and nylon for silk, artificial
for natural rubber, chemical detergents for fats and oils, also
chemically treated paper for jute, etc.
Fourth is the fact that the countries of this region—like
others in other parts of the world— have been receiving
external aid. The noteworthy point for the present purpose
is that this aid has come to them in widely differing amounts,
the bilateral aid in particular being on a highly selective basis
and tending, generally speaking, to be concentrated most
where emergency conditions have existed, strategic factors
are involved and economies have been under great strain.
Fifth is the dual nature of many of these economies, with
the older or more traditional part existing as from time
immemorial on a self-sustaining basis. This subsistence sector
(roughly corresponding to the “non-monetized sector” ) is now
gradually melting away, however, as modern- life comes to
the villages. This creates certain problems for the measurement of growth, since in some instances what appears from
the statistics to be absolute growth of the economy as a whole
may be in part only a change of proportions, i.e. a transfer
to the exchange economy (for which the better statistical
measure exist) of parts of the subsistence economy.
Finally it is necessary to bear in m ind that large
percentage rates of increase do not mean very much in cases
w here the base figure is small. Thus, at the early stage of
industrial development at which most of the countries of the
ECAFE region stand, caution needs to be exercised in interpreting percentage rates of growth of individual industries, or
even of industry— contrasted with agriculture— as a whole.
ECONOMIC SURVEY OF ASIA AND THE FAR EAST, 1955
2
MEASURES OF CURRENT PRODUCTION AND
CONSUMPTION1
trends in real term s.5 The second section of the table expresses
the same data in index-num ber form , with the year 1948
shown as 100. The third section gives the per capita products.
Domestic product statistics
Of the direct measures of current production, the most
comprehensive are the gross and net product series belonging
to the general category of national income statistics which
constitute the basic elements of a system of national accounts.2
If soundly constructed series of this kind were available
for all the countries of the ECAFE region for the post-war
decade, the task of assessing the economic progress that has
occurred during these years would be greatly facilitated. W hat
we have is a part of the picture— series of varying quality for
some countries covering varying fractions of the period. Since
many of these series omit either the immediate post-war years
or the most recent years or both, accurate appraisal of the
trend for the whole decade is difficult; also pre-war com parisons are sometimes not possible.
Table 1 sets forth the available data on trends in aggregate
output in 9 ECAFE countries during this period. Wherever
figures for gross domestic product at m arket prices3 are
available, these are used in the table rather than other possible
measures of aggregate output (e.g. net domestic product or
gross national product or national incom e). The available
figures in current prices4 have here been roughly converted to
constant (1948) prices to obtain an approxim ation of output
1.
T h e c o n c e p t o f eco n o m ic p ro g r e s s h a s th e g ro w th o f r e a l o u t p u t o r in c o m e
p e r c a p i ta a s its m a in c o m p o n e n t; w ith o u t s u c h g r o w th th e r e w o u ld be, a t
b e st, s t a g n a tio n , w h ile i f s u c h g r o w th is t a k i n g p la c e , t h e r e is a s t r o n g
p re s u m p tio n o f p ro g r e s s . Y e t in d iv id u a ls a n d s o c ie tie s te n d t o d e m a n d
q u a lita tiv e im p r o v e m e n t also . Q u a lita tiv e im p r o v e m e n t is m o re s u b je c tiv e
t h a n g ro w th a n d m o re difficult to m e a s u r e b u t i t is p a r t o f th e id e a o f
m o v in g fo r w a rd . I n s h o r t, eco n o m ic p ro g r e s s a p p e a r s t o m e a n ev o lu tio n
to w a r d s o m e th in g t h a t is b ig g e r a n d b e tte r .
A s to th e fo r m e r — in a d d itio n to th e a c tu a l o r o v e r t g r o w th o f c u r r e n t
p r o d u c tio n a n d c o n s u m p tio n , th e r e is a lso to b e c o n sid e re d th e l a t e n t o r
im p lie d g r o w th o f a n eco n o m ic s y s te m w h ic h d e p e n d s o n th e e x t e n t to
w h ic h p ro v is io n is c u r r e n tly b e in g m a d e f o r l a r g e r f u t u r e p ro d u c tio n a n d
c o n s u m p tio n . T h is h a p p e n s m o s t o b v iou sly b y m e a n s o f c a p i ta l f o r m a tio n
b u t a lso in m a n y r a t h e r s u b tle w a y s so m e o f w h ic h c a n n o t b e s h o w n
s ta tis tic a lly .
Taking the figures in this table at face value, the countries
concerned have all, except South Korea, increased their
production since 1948. According to the latest available
estimates (which in some cases unfortunately are only for
1953), the total percentage increases above 1948 (o r 1949)
run from 3 per cent to 64 per cent. Very substantial
gains were registered before 1948 in countries that have
published data for those early post-war years. It will be seen
that Japan did not surpass its pre-war aggregate production
until 1953, and did not recover its pre-w ar per capita output
within the period under review; and th at Burm a, heavily
dam aged by war and then retarded by insurrections, is still
some distance short of regaining even its aggregate pre-war
level of output. Production in some countries rose and fell
again strikingly with the onset and cessation of the Korean-w ar
boom.
For exam ining the rates of growth in production achieved
by the different countries, according to these estimates, on the
average over the varying periods recorded, table 2 provides
a better basis.
Here the data from table 1 have been
rearranged to show the production increases in term s of
average annual rates of increase of both aggregate and per
capita output. Secondly, table 2 distinguishes between rates
of increase for the entire post-war periods covered by the
estimates and rates of increase from 1948 on, thus allowing
the very rapid gains that sometimes occurred in the im mediate
post-war rehabilitation period to be m ore or less excluded for
purposes of identifying rates of developmental growth as such.
Annual rates of increase (or decrease) from the pre-war year
1938 also are shown where availability of com parable data
permits.
5.
W h e n i t com es to q u a lita tiv e im p r o v e m e n t— on w h ic h th e r e is som e
ev id en ce , to b e m e n tio n e d la te r — th e a n a l y s t’s h a z a r d s n a t u r a l l y loom
l a r g e r . A re d u c tio n o f e c o n o m ic in s ta b ility p e r h a p s r e p r e s e n ts q u a lita tiv e im p r o v e m e n t r a t h e r t h a n q u a n tita tiv e g r o w th o f th e e c o n o m ic s y ste m .
( J u d g m e n t o n th is w o u ld la r g e ly d e p e n d o n ju d g m e n t a s t o w h e th e r in s ta b i lity te n d s t o re d u c e o r t o in c re a s e th e q u a n t i t y o f o u tp u t a v e r a g e d
o v e r th e y e a r s .) A sid e f r o m t h is a n d o th e r p o s sib ilitie s, th e r e is th e
d is trib u tiv e o r s o cia l-j u stic e a s p e c t o f q u a lita tiv e im p r o v e m e n t, w h ic h c a n
b e see n t o b e a v ita l p a r t o f eco n o m ic a s w ell so cia l p r o g r e s s . H o w e v e r,
c a r e m u s t b e ta k e n , in th is field, t o av o id ju d g in g o n e c o u n tr y b y a n o th e r ’s s ta n d a r d s . A lso, th e v a lu e o f a n y ty p e o f q u a lita tiv e im p r o v e m e n t
w ill b e less c le a r i f i t re s u lts in s lo w e r g r o w th o f p e r c a p i ta r e a l o u t p u t
o r incom e.
2.
See “ M eth o d s o f n a tio n a l in c o m e s ta t is ti c s in E C A F E c o u n tr ie s ” ( E / C N .
11/ S T A T / C o n f . 3 / 4 ) ; se e a lso th e e v a lu a tio n in E c o n o m ic S u r v e y o f A s ia
a n d th e F a r E a s t, 1950, c h a p t e r o n n a t i o n a l in c o m e , p p . 105- 107 e sp e c ia lly .
3.
T o ta l p ro d u c tio n o f g oo ds a n d s e rv ic e s w ith in th e g e o g ra p h ic b o u n d a rie s
o f th e c o u n tr y c o n c e rn e d , w ith o u t d e d u c tio n f o r d e p re c ia tio n a n d in d ir e c t
ta x e s.
4.
F o r th e n a tio n a l e s tim a te s in c u r r e n t p ric e s , see i n f r a , A s ia n E c o n o m ic
S ta tis tic s , ta b le M.
E x c e p t f o r B u rm a , I n d i a a n d J a p a n w h e re n a tio n a l- in c o m e s ta t is ti c s in
re a l te r m s a r e p r e p a r e d b y th e g o v e r n m e n ts , a n d f o r K o re a ( S o u th )
w h e re th e s ta t is ti c s a r e g iv e n in c u r r e n t U S d o lla rs , d o m e stic p ro d u c ts
in r e a l te r m s a s h e r e p r e s e n te d a r e r o u g h e s ti m a t e s o b ta in e d b y d e fla tin g
t h e d a t a e x p re s s e d in c u r r e n t p ric e s b y t h e c o s t- o f-liv in g in d e x . A p a r t
f r o m th e f a c t t h a t t h i s in d e x , e v e n i f w e ll c o n s tr u c te d , is n o t closely
a d a p te d to d e fla tin g c a p i ta l f o r m a t io n , m a n y o f th e s e c o s t- o f-liv in g in d e x
n u m b e rs d o n o t h a v e su ffic ie n t c o v e r a g e f o r p r o p e r ly d e fla tin g e v e n
p r i v a t e c o n s u m p tio n e x p e n d itu r e s . F o r th e s e r e a s o n s , in a d d itio n to
w e a k n e s se s in th e p o p u la tio n e s ti m a t e s , th e re s u lts g iv e n h e r e m u s t be
t r e a te d a s r o u g h a p p r o x im a tio n s only.
I t is im p o r t a n t to n o te t h a t m e a s u re s o f d o m e stic p r o d u c t i n r e a l
te r m s d o n o t t a k e in to a c c o u n t th e q u a n tu m o f e x p o r t s a s s u c h b u t r a t h e r
th e q u a n tu m o f im p o r ts o b ta in e d w ith e x p o r ts ; in o th e r w o rd s , v a ria tio n s
in th e te r m s o f t r a d e , w h ic h d o n o t a f f e c t p ro d u c tio n in d e x e s , d o a ffe c t
th e s iz e o f r e a l d o m e stic p r o d u c t.
F u r t h e r a n a ly s is w o u ld t h e r e f o r e be
d e s ir a b le i n o r d e r to s e p a r a t e o u t t h e t e r m s-o f-t r a d e e ffe c t i n t h e tr e n d s
o f r e a l d o m e stic p r o d u c t o f th e c o u n tr ie s o f th e r e g io n f o r t h i s w h ole
p e rio d f r o m t h e p r o d u c tio n e ffe c t a s s u c h , e sp e c ia lly s in c e th e f o r m e r is
less u n d e r c o n tr o l t h a n th e l a t t e r , a n d is lik e ly to p r o v e f a r m o r e v a ria b le
o v e r tim e .
S e e “ G a in s f r o m t r a d e in E C A F E c o u n tr ie s , J u l y 1950 to
f o r A s i a an d t h e F a r E a s t , vol. V , N o . 1,
J u n e 1953” , E c o n o m i c B u l l e t i n
M ay 1954, p p . 21-28.
CHAPTER 1.
3
POST-WAR ECONOMIC PROGRESS
TABLE 1
GROSS REAL DOMESTIC PRODUCT AT MARKET PRICEa
B u rm a
C e y lo n
K oreab
(South)
Japan
In d ia
M a la y a
P a k ista n c
P h ilip p in e s
T h a ila n d
Rupee
P eso
Baht
IN M ILLIO N U N ITS OF CURRENCIES
K yat
1938
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955d
...............................
................................
................................
................................
................................
................................
...............................
................................
................................
................................
................................
4,945
3,022
3,557
3,200
3,038
3,431
3,651
4,012
4,142
4,354
Rupee
1,758
2,587
2,817
3,108
3,901
4,344
4,194
4,219
4,622
US$
Y '000
R s '000
..
M$
4,091
••
2,061
2,269
2,667
2,790
3,178
3,647
4,021
4 ,409
4,345
94.2
96.6
96.6
100.9
103.9
107.9
3 ,777
5,292
5,654
4,601
4,346
1,770
1,384
1,721
1,641
1,752
16,814
17,988
18,532
17,902
17,239
11,975
3,357
5,815
6,423
6,845
7 , 154
7 ,402
8 ,064
8,814
9,182
12,015
15,839
18,457
23,124
25,854
25,084
2 3 ,605
25,078
52
91
100
107
111
115
126
137
143
65
86
100
125
140
136
128
136
B A SE : 1948 = 100e
1938
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955d
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
139
85
100
90
85
96
103
113
116
122
92
100
110
138
154
149
150
164
..
153
62
77
85
100
105
119
137
151
165
163
100
103
103
107
110
114
65
..
100
78
97
93
99
100
100
140
150
122
115
107
110
106
103
PER C APITA PRODUCT
1938
..............................
313
303
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955d
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
..............................
169
196
175
164
184
194
211
215
376
398
426
517
561
528
517
..
812
58.00
27.19
29.05
33.33
34.12
38.34
43.26
47.02
50.85
5 1 .5 3
269
273
270
279
283
290
551
S o u rce s a n d tim e r e fe r e n c e : se e i n f r a , A s ia n eco n o m ic s ta tis tic s , ta b le K.
b.
a.
c.
d.
e.
R o u g h e s tim a te s b y d e fla tin g th e d a ta a t c u r r e n t p ric e s b y c o st-o f-liv in g
o r c o n s u m e r p r ic e in d e x f o r C eylon, In d o n e s ia , M a la y a , P a k is ta n a n d th e
P h ilip p in e s . F ig u r e s in re a l te r m s a r e a t p ric e s o f 1948.
.
622
847
886
699
87
64
78
73
76
636
225
238
242
231
220
182
310
336
351
360
365
391
419
428
705
906
1,036
1,274
1,398
1,331
1,230
1,282
G ro ss n a tio n a l p ro d u c t a t c u r r e n t p ric e s . C a le n d a r y e a r f o r 1949-1953,
fis cal y e a r e n d in g J u n e o f th e y e a r g iv e n f o r 1954 a n d 1955.
N e t d o m e stic p ro d u c t.
P ro je c te d .
1 9 4 9 = 1 0 0 f o r K o re a ( S o u t h ) , M a la y a a n d P a k is ta n .
TABLE 2
POST-WAR CHANGES IN AGGREGATE AND PER CAPITA GROSS DOMESTIC PRODUCTa
C o u n tr ie s
B u r m a ...............................
C e y l o n ................................
In d ia
...............................
J a p a n ...............................
K o r e a (South)
M a l a y a ...............................
P ak istan
......................
P h i l i p p i n e s ......................
T h a ila n d
......................
a.
b.
C u rren cy
K yat
Rupee
Rupee
Y en
US$
M$
Rupee
P eso
B aht
A t p r ic e
of
1948
1949
1948
1948
C urrent y e a r
1948
1949
1948
1948
P o s t- w a r
p erio d
covered
A n n u a l r a t e of i n c r e a s e
in G .D .P. ( % )
F ro m 1938
1947— 1954
1947— 1954
1948— 1953
1946— 1954
1949— 1954
1949— 1953
1949— 1953
1946— 1954
1946— 1953
N e t d o m e stic p r o d u c t f o r P a k is ta n ; g ro s s n a tio n a l p ro d u c t f o r K o re a
F r o m 1949.
— 1.1
6.2
0.4
5.1
( S o u th ) .
A n n u a l r a t e of i n c r e a s e
in p e r c a p i t a G .D .P. ( % )
F ro m in itia l
po st-w ar
year
F ro m 1948
F ro m 1938
4.6
8.6
2.8
9.8
— 1.3
3.6
0.6
13.4
11.1
2.6
8.6
2.8
8.5
—1.3b
3.6b
0.6b
6.1
6.3
— 2.4
3.8
— 1.0
3.1
F ro m in itia l
p o s t- w a r
year
F ro m 1948
3.6
5.6
1.5
7.7
— 3.6
0.6
— 0.6
11.3
8.9
1.6
5.6
1.5
6.8
—3.6b
0.6b
0.6b
4.1
4.4
4
E C O N O M IC S U R V E Y O F A S I A A N D T H E F A R E A S T , 1955
F o r p ro d u ctio n aggregates, th e tab le indicates th a t, fro m
1948 to the latest y e a r av ailab le in each case: (1 ) a n average
a n n u a l ra te of g row th above 8 p e r cen t was m a in ta in e d by
Ceylon a n d Ja p a n , a n d a ra te above 6 p e r cent b y T h a ila n d
an d the P h ilip p in e s; (2 ) M alaya (d a ta fro m 1 9 4 9 ), In d ia
a n d B urm a h ad an n u a l rates of gro w th of a b o u t 3 o r 4 p e r
c e n t;1 (3 ) P a k ista n ’s to tal o u tp u t increased only slightly in
these estim ates fo r th e p e rio d sh o w n ;2 a n d (4 ) S o u th K o re a ’s
output, m easured over the p erio d 1949-1954, h a d a slight net
decline. (B ehind this, how ever, lies the fact, b ro u g h t o ut by
table 1, th a t a b ig decrease to 1952 w as follow ed b y ra p id
recovery a fte r the K o rean w ar e n d e d ).
As m ig h t b e expected, th e a n n u a l rates of in crease ten d
to be h ig h e r w hen m easured fro m a n early post-w ar y ea r
instead of from 1948. T he difference is p a rtic u la rly strik in g
fo r the P h ilip p in es an d fo r T h ailan d . M easured fro m 1946,
the Philippines h a d the highest an n u a l ra te of g row th of any
co u n try in the region— a ra te above 13 p e r cent. T he m ain
basis fo r the steep in itia l clim b in th is case u n d o u b ted ly w as
the p ro strate cond ition of m uch of the P h ilip p in e econom y
im m ediately a fte r the w ar, w hich it was possible to begin to
rehabilitate ra th e r prom ptly. In the case of T h ailan d , the
m ain explanation appears to b e the h ig h e r ra te of increase
in the export p rice an d q u an tity of rice up to 1948.
P e r capita grow th, of course, is a b etter index of progress
th a n aggregate grow th. Indeed, the la tte r w ithout the fo rm er
would h ard ly be progress a t all, and m ig h t ra th e r be considered
to be retrogression. It is instructive to see, b y co m p arin g the
1.
2.
I n In d ia , ju d g in g f r o m o th e r r e c e n t d a ta , i t see m s p ro b a b le t h a t th e
a n n u a l r a t e o f g r o w th fr o m th e s t a r t o f th e f ir s t fiv e -y e a r p la n in 1950
d o w n to 1954 in c lu siv e h a s b e en s lig h tly h ig h e r t h a n s h o w n in t h is ta b le
f o r 1948- 53— a b o u t 3.5 p e r c e n t in th e a g g r e g a t e a n d 2 p e r c e n t o n a p e r
c a p i ta b a sis. S im ila rly , th e I n d ia n a g r ic u ltu r a l p ro d u c tio n in d e x a p p e a r s
to h a v e ris e n in 1950-54 a t a n a n n u a l r a t e o f n e a r ly 5 p e r c e n t, a n d th e
in d u s tr ia l p ro d u c tio n in d e x a t a n a n n u a l r a t e o f a b o u t 8.5 p e r c e n t— b o th
h ig h e r t h a n th e c o rre s p o n d in g a v e r a g e r a te s o f in c re a s e s in c e 1948 s h o w n
in ta b le 3. I n B u rm a , a s c a n b e see n fr o m ta b le 1, th e a v e r a g e a n n u a l
r a te o f in c re a s e is re d u c e d b y in c lu s io n o f th e 1948-50 p e rio d , w h e n in s u rre c tio n s w e re w id e sp re a d ; th e r a t e i f m e a s u re d f r o m 1950 w o u ld be
m u c h h ig h e r.
A d v e rse te r m s o f t r a d e a ss o c ia te d w ith a d e c lin in g p r ic e o f j u t e u n do u b te d ly p la y e d a p a r t .
(S e e ta b le 3, w h e re th e d o m e stic p r o d u c t fig u re ,
fr o m 1948, m ig h t o th e rw is e h a v e b e e n e x p e c te d to be s lig h tly la r g e r t h a n
th e c o rre s p o n d in g a g r ic u ltu r a l in d e x fig u re — c o n sid e rin g th e in d u s tr ia l
g a in s — in s te a d o f s lig h tly s m a lle r .)
final columns of table 2 with those already referred to, the
extent to which population increase reduces the annual rates
of per capita product growth below the annual rates of
aggregate product growth discussed above. W hile the rates
are lowered somewhat in all cases, the effect is naturally most
striking fo r countries or areas with unusually high rates of
population increase.
Thus fo r Ceylon and Malaya, in
particular, the rate of per capita increase is m uch below the
rate of aggregate increase.3
On a per capita output basis, from 1948, annual rates of
growth of 5.5 to 6.8 per cent are shown fo r Japan and Ceylon.
The rate then drops to 4.4 per cent fo r T hailand and 4.1 per
cent fo r the Philippines, and the other countries are ranged
below 2 per cent. Such com paratively small gains— if these
figures even approxim ately reflect the true facts— afford no
basis for satisfaction.
Production indexes
After m easures of output as a whole m ay be considered
the m ajor partial measures of real output provided by agricultural and industrial production indexes. A gricultural production indexes compiled by FAO4 are available fo r most countries
for the period from crop year 1946/47 to crop year 1954/55;
for reasons already given, however, the period from 1948/49
is of greater interest here. Industrial indexes, available for a
smaller num ber of countries, usually cover the years 1948-54.
From both these indexes the annual rates of increase have
been computed and are presented in table 3, with the annual
rate of change in aggregate gross domestic product repeated,
in the final columns to facilitate com parison.
3.
4.
See “ A c c e le ra tio n o f p o p u la tio n g r o w th in E C A F E c o u n tr ie s s in c e th e
s e c o n d w o rld w a r ” , E c o n o m ic B u lle tin f o r A s ia a n d th e F a r E a s t , V ol. V I ,
N o . 1, M a y 1955, p . 5, ta b le 3, w h e r e r a t e s o f n a t u r a l in c r e a s e f o r th e
p o s t- w a r p e rio d f o r M a la y a a n d C eylon a r e s h o w n a s 30 a n d 28 p e r th o u s a n d re s p e c tiv e ly . M e n tio n m a y a lso be m a d e o f H o n g K o n g w h e re ,
la rg e ly b e c a u s e o f h e a v y im m i g r a tio n , th e a n n u a l r a t e o f p o p u la tio n
g r o w th in 1948-52 is e s ti m a t e d o n th e b a s is o f official p o p u la tio n s t a t i s t i c s
a t close t o 60 p e r th o u s a n d . T h e a n n u a l r a t e o f in c r e a s e o f g ro s s do m e st ic p r o d u c t f o r H o n g K o n g is ro u g h ly e s tim a te d a t 4.3 p e r c e n t f o r 194852, a n d in th is p e rio d t h e e s tim a te d p r o d u c t o n a p e r c a p i t a b a s is a c t u a ll y
d e crea sed .
B ec a u se o f d iffe re n c e s in c o m p ila tio n m e th o d s th e F A O in d e x e s m a y m o v e
s o m e w h a t d iffe re n tly f r o m in d e x e s c o n s tr u c t e d b y g o v e rn m e n ts .
TA B L E 3
ANNUAL RA TE O F IN C R EA SE O F A G R IC U LTU R A L A N D IN D U S T R IA L P R O D U C T IO N IN PO ST -W A R Y EA RS
(per cent)
A g r ic u ltu r a l p r o d u c tio n i n d e x
(1946/4719 54 /55 )
B urm a
...............................
C e y l o n ...............................
C h in a :
T a iw a n
......................
M a i n l a n d ......................
In d ia
................................
In d o n e sia
......................
Japan
...............................
K o re a , S o u t h ......................
M a l a y a ...............................
P a k i s t a n ................................
P h ilip p in e s
......................
T h a i l a n d ...............................
a.
b.
(1948/491 9 5 4/55)
3.7
3.5
1.6
6.8
3 .4a
3.2
7.3
4.6
0.2
8.2
0.6
6.1
4.5
(1948-1954)
3.9
10.9
4 .9 a
2.1
5.5
4.6
4.9
In d u stria l
p ro d u c tio n in d e x
—
22.0
18.4b
5.2
F o o d g r a i n s o n ly (se e d e fin itio n in fo o tn o te to t e x t ) ; a v e r a g e a n n u a l r a t e
o f in c re a s e in f ir s t c o lu m n f o r 1951-1955, in se c o n d c o lu m n f o r 1952-1955;
1955 e s tim a te d .
1952-1955; 1955 e s tim a te d .
P e r io d
R a t e of i n c r e a s e
d u rin g p e rio d
R a t e of i n c r e a s e
fro m 1948 to
fin a l y e a r
1947-54
1947-53
4.6
8.6
2.6
8.6
1946-54
13.4
12.0
1948-53
2.8
2.8
1946-54
1949-54
1949-53
1949-53
1946-54
1946-53
9.8
— 1.3
3.6
0.6
14.5
..
1 0 .3 C
18.6
1.2
0.8
6.7
1.4
G r o s s d o m e s tic p r o d u c t
29.9e
12.7f
c.
d.
e.
f.
1949- 1954, m in in g o nly.
F r o m 1949.
1950- 1954.
T w o y e a r s o n ly : 1952-1954.
11.1
8.5
— 1.3d
3 .6d
0.6d
7.6
6.3
CHAPTER 1.
POST-WAR ECONOMIC PROGRESS
The chief contribution of table 3 is that it provides
information about China and Indonesia. It alo serves to
some extent as commentary on the aggregate output data
already reviewed. In addition, it brings out the fact that
industry, from a much lower base, has come up much faster
than agriculture. Even in per capita terms it is obvious that
industrial production has risen markedly.
5
a whole and are of considerable interest in themselves, since
increase in per capita consumption may be regarded as the
final objective of economic growth. Certain such data are
presented in table 4.
The figures showing per capita private consumption
expenditure expressed in real terms cannot reflect that part of
consumption which is collectively provided or enjoyed—
In China, fighting on the mainland ceased only toward generally speaking, the part included under government
the end of 1949, so that 1952, just before the initial year of expenditure.5 However, they have some advantages over per
the Central People’s Government’s first five-year plan, m a y , capita real income figures as measures of the average standard
perhaps be considered as a base roughly equivalent to 1948 of living, in that they omit capital formation and thus come
for most other countries. As will be seen from the table, a closer to reflecting the benefits that are received and felt by
very substantial average annual rate of increase is reported individuals at the time. The conclusion from the table, which
in the industrial-production index for mainland China.1 No from the nature of the data must be regarded as having a
over-all index of agricultural production is available, but the considerable margin of error,6 is that private consumption
official index for “food grains”,2 which occupy over 90 per expenditure in real terms has been rising rapidly in Japan
cent o f the total sown area, shows a moderate rate of increase. and the Philippines, has also risen in Ceylon and probably to
Because of the heavy predominance of the agricultural sector some extent in Burma, and has remained more or less constant
on m ainland China, the gross domestic product, if computed in other countries for which these data are available.
for this period, would be expected to show a rise a little
but not much greater than that of the index of production
The other two series presented in table 4 show trends in
of food grains. For Taiwan also it will be noted that the per capita availability of cereals and of cotton piece-goods.
indexes have made large advances, in particular the industrial- Their usefulness for the present purpose is somewhat impaired
production index.3
by the fact that, for want of information on fluctuations in
stocks, the figures have to be given in terms of per capita
In the case of Indonesia, the agricultural-production ... shares of national availabilities rather than in terms of the
index shows a considerable rate of i ncrease a f t e r t he war. amounts actually coming into consumers’ hands for their use.
No industrial-production index is available, but the rate of Nevertheless, such data relating at least approximately to
growth shown by the mining index (available from 1949), the staple food and chief clothing material used by the people
which includes petroleum production, is quite high.4
will serve to supplement the more abstract consumption expenFor most of the other countries, it may be said that, diture totals already discussed.
broadly speaking, the information provided by the agricultural
and industrial-production indexes appears to be consistent with
the information given in the aggregate output series. T his
is not the case, however, for Ceylon, Malaya and Thailand
where the indicated rates of increase in gross domestic product
are strikingly above those of the index of agricultural production. The main cause of the discrepancy probably is the fact
that the agricultural-production index, being based on physical
quantities, does not reflect the terms-of-trade gains in gross
domestic product caused by increases in export prices of such
commodities as coconut products, tea, rubber, tin and rice.
Special mention should also be made of Pakistan’s high rate
of increase in industrial production— an annual rate of 30
per cent during 1950-1954. Here as in the case of mainland
China, referred to above, and of a number of other countries of
the ECAFE region today, the heavy preponderance of agricultural production tends to diminish the rate of increase of
domestic product as a whole when industry is growing much
faster than agriculture.
No country for which data are available shows a downward trend for either series. S ig n fi icant gains in per capita
cereal availability in the post-war years h a v e been r e g i s t e r e d
by Burma, Indonesia, Japan, the Philippines and Thailand7
In per capita availability of cotton piece-goods, much the
largest percentage gain is recorded for Japan, with Ceylon,
the Philippines and Pakistan also showing marked increases,
and apparently South Korea as Well. The availability series
for these two specific items appear to be generally consistent
with the consumption expenditure series, except in South
Korea. In addition, they provide some amplification of
information on Indonesia, for which the consumption expenditure statistics are very incomplete, and insights into trends
in two other countries (Pakistan and Thailand) for which
consumption expenditure statistics are lacking altogether.
Other indicators
Aggregate and average consumption data furnish an
additional very rough indicator of growth in the economy as
Indirect indicators of economic growth can also be used,
within limits, to fill in gaps in the direct measures, especially
of production, or to help confirm (or, it might be, cast some
doubt on) what the direct measures show.
1.
R e g a rd in g d a ta p re s e n te d in th is c h a p te r on m a in la n d C h in a , a tte n tio n is
called to in fr a , fo o tn o te a t th e b e g in n in g o f th e s ec tio n o n th e m a in la n d
in th e c h a p t e r on C h in a.
5.
2.
F ood g r a in s a r e defined in m a in la n d C h in a a s in c lu d in g cerea ls, pu lses
a n d p o ta to e s.
A n e t d o m e stic p ro d u c t s e rie s is a v a ila b le f o r T a iw a n w h ic h in d ic a te s a n
a v e r a g e a n n u a l r a t e o f g ro w th in re a l te rm s o f 12 p e r c e n t in th e p e rio d
1948-54, o r a b o u t 7 p e r c e n t on a p e r c a p i ta b a sis. R e c e n t n a tio n a l in com e a n d p ro d u c t s e rie s a r e n o t a v a ila b le f o r th e m a in la n d .
N a tio n a l in c o m e a n d p ro d u c t e s tim a te s a r e a v a ila b le f o r In d o n e s ia fo r
1951 a n d 1952 (a s w ell a s p r e - w a r e s ti m a t e s ) , b u t th e p e rio d covered is
to o s h o r t to e sta b lis h a n y tre n d .
Consumption
3.
4.
6.
7.
T h u s f o r c o u n trie s w h e re g o v e rn m e n t e x p e n d itu re s on services a r e in c re a s in g m o re ra p id ly th a n p r iv a te c o n su m p tio n e x p e n d itu re s, th e r a te of
in c re a se o f th e l a tte r u n d e rs ta te s th e in c re a se in th e b enefits actu ally
enjoyed.
A co st-o f-liv in g -in d e x d eflator, if well c o n stru c te d , is in th is case s a tis fa c to ry in p rin c ip le , b u t th e o rig in a l fig u res a t c u r r e n t p ric e s a re som etim e s o b ta in e d a s resid u als. W h ere c o n su m p tio n e stim a te s a re m o re o r
less de riv e d by s u b tra c tio n o f ro u g h e s tim a te s o f c a p ita l fo rm a tio n fro m
d om estic p ro d u c t, th e y a r e likely to be so m e w h a t less reliable th a n the
d o m e stic -p ro d u c t e s tim a te s them selves.
In v o lu n ta r y in c re a se in sto ck s m a y h a v e co n sid erab ly affected th e tre n d in
T h a ila n d p a rtic u la rly .
6
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
TA BLE
4
IN D IC A T O R S O F P E R C A P IT A C O N SU M PT IO N
B urm a
C e y lo n
In d ia
In donesia
Japan
K o r e a , S o u th
M a la y a
P ak istan
P hilip p in es
T h ailan d
P R IV A T E C O N SUM PTION E X P E N D IT U R E I N R E A L T E R M S a
(national currency)
1946
1947
1948
1949
1950
1951
1952
1953
1954
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
145
163
131
122
134
136
147
154
329
351
321
379
432
432
418
395
238
235
237
243
232
472
498
18,425
19,558
2 1,784
23,652
25,768
28,244
32,732
35,252
70.8
49.5
60.2
63.5
63.1
160
272
282
316
318
339
352
384
395
489
539
578
506
481
••
A V A I L A B I L I T Y OF C E R E A L Sb
(kilogrammes per annum )
1947-48
1949-50
1951-52
1953-54
.
.
.
.
.
.
.
.
128
139
140
154
146
139
140
146
135
136
130
147
154
179
186
188
104
116
127
134
144
160
155
151
149
167
164
152
170
182
168
173
125
140
150
151
170
188
183
200
A V A I L A B I L I T Y OF COTTON PIECE-GOODSb
( metres)
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
a.
b.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5.1
8.5
11.6
9.8
9.7
10.6
10.8
13.0
12.3
10.3
9.3
6.5
8.5
10.0
10.0
10.0
10.4
9.2
..
5.7
2.7
4.8
11.7
15.8
20.0
19.8
4.1
..
3.6
5.9
6.3
..
4.5
6.3
3.8
6.3
5.5
4.8
5.1
6.8
. .
F o r c o n v e rsio n o f e x p e n d i tu r e to re a l te r m s , s e e fo o tn o te (a ) o f ta b le 1.
P r o d u c tio n p lu s im p o r ts less e x p o rts . F o r c e re a ls , a n n u a l a v e r a g e f o r 2 y e a rs.
subsoil wealth (of which Pakistan’s Sui natural gas deposit
provides a notable recent instance), o r of hydro-power
possibilities, norm ally imply subsequent increases in output,
(1)
Data on the magnitude of available productive
other things being equal.3 Because of the im portance of
resources or factors of production— land, labour, and capital increases in capital, separate treatm ent will be given to that
(including data on availability of entrepreneurs, whether subject in a later section. As fa r as the labour factor is
conceived of as belonging with capital or with lab o u r). M ajor concerned, the data referred to would not be limited to
increases in, for example, land brought under cultivation or num ber of workers but would also include im portant evidence
under irrigation,2 or the exploitation of m ajor discoveries of regarding the level of training and health of the working
population.
These indicators m ight be of a wide variety of types,
but three general classes only will be discussed h e re :1
1. D a ta o n f r e i g h t tra ffic m oved b y v a rio u s m e a n s o f t r a n s p o r t w o u ld co n F o r e x a m p le , r a ilw a y f r e i g h t tra ffic , in to n -k m ,
s t i t u t e a f o u r t h class .
u s u a lly p a ra lle ls o u t p u t a s a w hole r a t h e r closely. Q u a n tu m
in d e x e s o f
e x p o r t a n d im p o r t tr a d e m a y s o m e tim es be m a d e u s e o f in th is s a m e c o n n e x io n , i f p r o p e r a llo w a n c e is m a d e , sele c tiv e ly , on a c o u n try -b y - c o u n try
b a s is , f o r g r e a t e r v a ria b ility o f e x te r n a l tr a d e ; th e u s e fu ln e s s o f s u c h in de x es f o r th is p u r p o s e w ill, h o w e v e r, b e im p a ire d i f m a jo r c h a n g e s o c c u r
in th e n a t u r e a n d e x t e n t o f tr a d e re s tr ic tio n s . D a ta on p r o d u c tiv ity
m ig h t b e c o n sid e re d a f if th c la ss, c o n c e p tu a lly , b u t s in c e p r o d u c tiv it y in de x es ( a v a ila b le in th e E C A F E re g io n o n ly f o r J a p a n e s e m a n u f a c t u r i n g
a n d m in in g ) a r e d e riv e d b y d iv id in g o u t p u t b y n u m b e r o f w o rk e rs , th e y
a d d n o th in g to k n o w le d g e o f o u t p u t its e lf. O th e r d a t a o n p r o d u c tiv ity
a r e f o r sele c te d in d iv id u a l in d u s trie s only.
2 . F o r e x a m p l e , t h e a r e a i r r i g a t e d i n T h a i l a n d w a s 34 p e r c e n t l a r g e r i n
1952 t h a n in 1946, w h ile in B u r m a th e r e w a s a c o r re s p o n d in g in c re a s e of
19 p e r c e n t. B y 1 9 5 6/57 i t w a s e x p e c te d t h a t a f u r t h e r in c re a s e o f 49
p e r c e n t in ir r i g a t e d a r e a o v e r 1951/52 w o u ld o c c u r in T h a ila n d a n d a n
in c re a s e o f 93 p e r c e n t in M a la y a . ( F A O P r o s p e c ts fo r A g r ic u ltu r a l
D e v e lo p m e n t in th e F a r E a s t, 1958, p . 8 1 ) . I n m a in la n d C h in a th e a r e a
i r r ig a te d , a lr e a d y la rg e , ro s e b y 12 p e r c e n t f r o m 1949 to 1952 a n d is
e x p e c te d , u n d e r th e f i r s t fiv e -y e a r p la n , t o b e 13 p e r c e n t g r e a t e r in 1957
t h a n in 1952.
(2)
Data on the production of selected items th at may
be considered as key indicator of growth and development—
for example, output of electric power, steel and cement.
While these are direct measures of a certain p art of production,4
their special value as indicators derives not from their own
representativeness or quantitative im portance in production
but from what they imply concerning the grow th of other
3.
4.
O f c o u rs e , th i s im p lic a tio n w ill n o t b e p r e s e n t i f t h e g r o w t h o f re s o u rc e s
is w a s te d th r o u g h e q u a l g r o w th o f u n e m p lo y m e n t o r o f idle c a p a c ity .
R e g a r d i n g su b so il w e a lth , i t m a y b e o b serv ed t h a t s y s te m a tic geo lo g ic al
s u rv e y a n d m in e r a l e x p lo r a tio n h a v e r e c e n tly b e e n in te n s ifie d th r o u g h o u t
t h e re g io n .
E x c e p t w h e re , e .g ., p o w e r c a p a c ity is u s e d a s i n d ic a to r in s te a d o f p o w e r
o u tp u t.
C H A PT E R 1.
7
PO ST-W A R ECONOM IC PRO G RESS
and tin that will yield the highest quick returns). In any
event, to establish a trend in the statistics for distribution of
employment, two or more censuses will usually be needed,
which means that we cannot use this indicator for the countries
of the ECAFE region in the post-war period.2
(3)
Data on changes in proportions within the producAbsolute figures on the num ber of persons employed in
tion system. Over reasonably long periods at least, a greater
diversification of production, and a growth of secondary industry can also be compared with total population, or
a n d /o r tertiary industry relative to prim ary industry (agricul- preferably with total labour force, to throw light on the
ture, etc.), will indicate, generally speaking and subject to question of proportions. Available data show that, in the
proper qualifications, that economic development and growth period 1948-1954, employment in mining and m anufacturing,
resuming its trend of the 1930’s which was reversed in the
are taking place.
1940’s, grew more rapidly than population in Japan, 2.8 per
Table 5 brings together for a num ber of countries some cent a year a against 1.6 per cent, whereas in India population
data on production of electricity, cement and steel. In each is estimated to have grown by 1.3 per cent annually during this
case what is shown is the annual rate of growth of the item period, and employment in mining and m anufacturing by only
in question, calculated from the available data for the period 1.1 per cent.3
and sub-periods stated. From inspection of these partial
and indirect indicators of production trends, it may be said The region
that for the most p art they appear generally consistent with
Generalizations about a whole region as large and as
the industrial indexes shown in table 3.1 The upward trends
naturally tend to be considerably steeper than those for diverse as the one with which we are here concerned run the
outp u t o f the entire economy. Steel and cement are in fact risk of being very misleading. F or this reason and also
better indicators of capital form ation than of total domestic because of the difficulty of constructing appropriate statistical
products; electricity is perhaps best conceived of as a key measures to show the growth of the economy of the ECAFE
pre-requisite of the infra-structure type; and all three tell more region in the aggregate, this analysis is, in the main, limited
about the transform ation or development going on than about to individual countries taken separately. However, it should
be noted that the post-war rise of agricultural production,
the size of the product at the moment.
which has been calculated for the ECAFE region excluding
Changes in proportions within the production system are mainland China as an average annual rate of increase of 2.1
of general interest as indicators of growth because ordinarily per cent for the period 1948/49-1954/55,4 has not yet
and at most stages of development an increase in the weight succeeded in restoring pre-war per capita production.
of industry relative to that of agriculture, and also, closely Secondly, attention is directed to the absolute and percentage
related to that, a diversification of industry, will be increases in production of selected m ajor products of the
positively correlated with growth of production as a whole. region during the post-war period, and in relation to pre-war
Such changes in proportions can often be seen by examining years, as shown in table 6.
the distribution of gainfully employed by industries, or by
m ajor industrial groups. However, there are dangers in the 2. J a p a n , h o w e v er, h a s ta k e n s e v e ra l cen su ses sin c e th e e n d o f h e w a r.
r e n d s in th e p e rc e n ta g e d is trib u tio n o f d o m e stic p ro d u c t b y in d u s tria l
use of this generalization; in the short run, while diversifica- 3. oTrig
in c a n s im ila rly b e used, o v e r p e rio d s lo n g e n o u g h to e lim in a te
th
e te m p o r a r y effects o f w e a th e r o n a g r ic u ltu r a l o u tp u t, t o d e m o n s tra te
tion will tend to promote balance and stability, it may even
d iv e rs ific a tio n ; d u e a llo w a n c e m u s t in th is c a se b e m a d e f o r re la tiv e p ric e
c h a n g e s . T r e n d s in th e co m m o d ity d is trib u tio n o f e x p o r ts c a n a lso be
correlate negatively with current output ( i.e., it m ay instead
u sed , a lth o u g h th e y m a y be g r e a tly affe c te d , e sp e c ia lly in s h o r t p e rio d s , by
be an intensification of specialization on such things as rubber
f f u c tu a tio n s o f w o rld d e m a n d a n d p ric e s. (S e e “ N o te o n th e d iv e rsific a industries for which they supply services or materials, or
concerning the process of substituting domestic production for
imports in order to save foreign exchange, a process that is
frequently itself a symptom of an active development policy.
1.
4.
T h e y a lso p a r tly fill g a p s l e f t b y a b s e n c e o f a n in d u s tria l-p r o d u c tio n in d e x ,
in th e c a se o f S o u th K o re a , M a la y a a n d T h a ila n d .
expecially
TABLE
t io n o f p ro d u c tio n a n d t r a d e in th e E C A F E r e g io n ” , in E c o n o m ic B u lle tin
fo r A s ia a n d th e F a r E a s t, vol. I V , N o. 1, M ay 19 5 3 ).
T h e a n n u a l r a t e o f g ro w th is 3.6 p e r c e n t w h e n t h e s h o r te r p e rio d ,
1948/49-1953/54, is ta k e n .
5
ANNUAL RATE OF INCREASE IN SELECTED INDICATORS OF INDUSTRIAL GROWTH
(per cent)
C e m e n t p r o d u c tio n
E le c tric ity p r o d u c tio n
1948-51
C e y l o n ...............................
C h in a : T a i w a n
M a i n la n d
In d ia
...............................
J a p a n ...............................
K o re a , S o u th
M a l a y a ...............................
P a k ista n
......................
P h i l i p p i n e s ......................
T h a il a n d
......................
V ie t-N a m
......................
a. 1951-55,
b. 1952-55,
19.0
15.2
8.6
10.3
— 13.6
15.6c
20.3
11.2
12.4
26.5
c. F r o m 1950,
1951-54
14.3
11.9
20 .5a
8.7
7.7
38.9
9.4
29.4
12.2
31.9
10.6
d. 1953-54.
1948-54
16.6
13.5
8.7
9.0
10.6
11.1c
24.7
11.7
21.8
18.2
1948-51
8.2
27.4
52.1
— 56.1
—
15.5
28.0
40.4
29.2
S te e l in g o ts a n d m e t a l for c a s tin g
1948-54
1948-51
11.3
22.9a
14.7
18.6
11.1
18.1
33.8
17.9
6.1
56.0
1951-54
17.7
116.9
166.7d
10.2
0.5
18.5
6.2
1951-54
1948-54
57.4
26.0b
4.1
6.0
36.6
5.1
28.6
58.7
26.0
—
12.8
17.8
29.0
17.1
0.0
8
E C O N O M IC S U R V E Y O F A S I A A N D T H E F A R E A S T , 1 9 5 5
Some of the m ain trends are indicated in ch art 1.
Concerning the post-war agricultural increase in p articular it
should be emphasized again that translation to a per capita
basis is necessary fo r a true appraisal of how m uch progress
has been made. Since population has been grow ing at an
estimated annual rate of 1.4 per cent in the ECAFE region,
excluding m ainland China, in the post-war period, the per
capita gain in agricultural production fo r the period 1948/49
— 1954/55 was not 2.1 per cent but about 0.8 per cent only.
At no time since the second world w ar has the pre-war per
capita agricultural-production level been reached.1 As of
1954/55 the per capita agricultural-production index for the
ECAFE region, excluding m ainland China, was still 14 per cent
below its pre-war (1934-1938) level. Only better distribution,
and sometimes foreign aid at critical junctures, has reduced
the incidence of this on food consumption.
Of the individual items shown in table 6 only ju te
declined absolutely in the period 1948-1954; production of
this fibre rose by about 40 per cent in the first three years
but was cut in half thereafter. Rice production failed t o gain
until after 1951; fo r the whole period it grew less rapidly
than population (which increased by about 10 per ce n t).
Production of cereals in the aggregate, however, and of rubber
(which declined in 1951-54), grew somewhat faster than
population. P roduction of cotton, although still less in 1954
than before the war, topped the agricultural commodities in
percentage increase for 1948-54 by rising 85 per cent. Most
of the 1948 bench-marks for agricultural commodities were
somewhat below pre-war m arks, although ru b b er production in
that year already exceeded its 1934-38 average substantially
and rice and tea production were slightly up.
F or industrial items the production increases between 1948
and 1954 were, as a rule, considerably greater, ranging up to
116 per cent for crude petroleum, 165 per cent fo r iron ore,
1.
I t see m s c le a r t h a t th is g e n e r a l
p a r a b le d a ta w e re a v a ila b le f o r
th e a n n u a l r a t e o f p o p u la tio n
e s ti m a t e d f r o m a s a m p le s u r v e y
c h a p t e r o n C h in a .)
c o n c lu sio n w o u ld n o t b e a ffe c te d i f c o m m a in la n d C h in a . I t m a y b e n o te d t h a t
in c r e a s e in m a in la n d C h in a is r e c e n tly
o f 30 m illio n a t 2 p e r c e n t. (S e e in f r a ,
TABLE 6
CHANGES IN PRODUCTION OF SELECTED COMMODITIES IN TH E ECAFE REGIONa
( ’000 tons)
E x clu d in g m a in la n d C h in a
In c lu d in g m a in la n d C h in a b
P e rc e n ta g e in c re a se
1938c
1948
1951
1954
T o ta l c e r e a l s
......................
R ice
.........................................
W h e a t .........................................
T ea
.........................................
S u g a r .........................................
V e g e t a b l e o i l ......................
C o t t o n .........................................
Ju te
.........................................
...............................
Rubber
102,595
64,080
454
6,583
4,400
1,090
1,526
983
98,838
64,965
10,453
468
4,984
3,840
553
1,392
1,477
101,658
64,376
12,138
569
6,470
4,760
875
2,023
1,812
117,606
70,100
13,440
600
6,972
5 , 100
1,025
1,090
1,720
C o a l .........................................
...............................
Iro n o r e
T in in c o n c e n t r a t e s (tons)
C ru d e p etro leu m
Cem ent
...............................
C o tto n f a b r i c s e
(m illion m e tre s)
E le ctricity (m illion k W h ) . .
77,459
3,819
106,860
10,000
7,843
70,949
1,785
87,141
7,583
4,374
84,164
4,110
106,283
13,102
11,526
87,212
5,089
117,459
16,375
17,569
7,141
36,246
4,926
4 2 ,472
5,938
57,582
a.
b.
12,111
1954 o v e r
1938
1954 o v e r
1948
15
9
19
11
29
28
40
33
85
8
32
6
16
—
6
— 29
75
—
22
16
1954 o v e r
1951
16
9
11
5
8
7
17
— 46
— 5
4
24
1951
1954
%
in c re a s e
1954 o v e r
1951
12
103,8 9 6 d
28,928
116,860d
36,610
6,658
7,286
9
1,971
2,093
6
135,864
172,012
27
..
27
13
33
10
64
124
23
165
35
116
302
25
52
13,405
13,986
17,169
22,169
28
59
8, 101
13
73,022
101
64
72
36
27
7,402
63,535
10,837
83,985
46
32
C ro p y e a r f o r a g r ic u ltu r a l p ro d u c ts e x c e p t r u b b e r ( c a le n d a r y e a r ) .
S o u rce s f o r m a in la n d C h in a d a t a : F i r s t F iv e - Y e a r P la n ; 1952, 1953 a n d
1954 C o m m u n iq u e s f r o m th e S ta te S ta tis tic a l B u re a u ; i n fr a , c h a p t e r o n
C h in a .
c.
d.
e.
11
1934-38 a v e r a g e f o r a g r i c u l t u r a l p r o d u c ts .
D a ta f o r m a in la n d C h in a c o n v e r te d a t th e r a t i o o f 1 p a d d y t o 0.67 rice.
F a c t o r y p r o d u c tio n only.
CHAPTER 1.
POST-WAR ECONOMIC PROGRESS
and 302 per cent for cement. Coal, at 23 per cent, registered
the smallest gain. But it is noteworthy that for all items
except electricity the gain over the pre-war period was very
much less than the gain over 1948; in the industrial field,
even more than in agriculture, substantial further gains were
required after 1948 to restore pre-war production. However,
industrial production did not then slow down but continued
a rather rapid climb, so that by 1954 the average percentage
increase over pre-war as well as over 1948 figures was greater
for industrial than for agricultural commodities.
Data for mainland China are reported, for some commodities, from 1951 only. As will be seen from the table,
inclusion of these data has the effect of lowering the 1951-54
percentage rate of increase in the case of cotton but of raising
the rate of increase for all the other items for which inform ation is available.
CURRENT PROVISIONS FOR LARGER FUTURE
PRODUCTION
Consistent with any given rate of growth of current
output, there are many possible rates at which the economy
may be currently preparing to deliver larger output in the
future. Partly this is a m atter of the rate of capital form ation:
as between two economies with equal aggregate current production, the one with the higher proportion of capital formation
will have the larger future production, other things being equal.
On the other hand, there are many other factors to be taken
into account.1 F or either or both types of reason a number
of countries of the ECAFE region that have shown only
moderate actual production growth since the end of the second
world war may later demonstrate that this has nonetheless
been a time of much latent growth, or preparation.
Capital formation
Some of the more readily measurable aspects only of
this broad question may be discussed here. P art A of table 7
shows gross domestic capital formation as a percentage of
gross national product, for countries of the region that have
published these two series. The percentages in question may
be referred to, for convenience, as rates of capital formation.
Without going into the problems connected with the estimation
of capital formation, certain observations may be made
regarding the size and, to some extent, the trends of these
rates.
connexion with the data for Burma and the Philippines.
Burma’s high, although formerly somewhat fluctuating, rate of
gross capital formation suggests the possibility of a higher
future rate of growth of output than has been recorded for
past years. But it has also already played a significant part,
judging by table 1, since Burma’s gross real domestic product
has continued to rise without interruption since 1950 in spite
of the decline in the price of rice. The comparatively low
rate of capital formation indicated for the Philippines since
1950
suggests that, unless the incremental capital/output ratio
in that country has recently been extremely low (meaning that
exceptional progress has been made through better utilization
of equipment and resources on the basis of relatively small
investm ent), a question may be involved as to the reliability
of the gross product series, or of the capital formation series.
A check may also be made against the data on private
consumption expenditure in table 4. Such a check suggests
that the rise in private consumption has not been at the
expense of capital formation in Japan but may have been in
the Philippines and, to an extent, in Ceylon. It will also
be seen that what the other countries have done with regard to
capital formation has, generally speaking, been about as much
as they could do without actually lowering real private consumption.
Any conclusions that the data of table 7, part A, may
warrant regarding future increase in output would be of
particular interest. Here it is the trends in capital formation,
and the final years, that obviously count the most, since it may
be assumed that much of the addition to output resulting from
capital formation in the earlier years of the series will have
already materialized and been reflected in figures for aggregate
domestic product taken into account in table 2.3 However,
there is not much that can be added to what has already
been said. The rising trend in Burm a’s rate of capital
formation is a favourable sign— always recognizing that the
outcome may actually hinge more on future foreign-exchange
availabilities than on prior capital formation. There is no
significant decline in the high rates of Japan. For Ceylon
there has been a generally rising trend in capital formation
to the lastest year shown, and for India a slowly but steadily
rising trend, with possible implications for future growth of
output in both cases.
No additional conclusions seem
warranted by the data on the other countries.4
3.
T h is, o f c o u rse, is o n ly a n a p p r o x im a te s ta te m e n t. T h e re s u lt, in f a c t,
d e p en d s on th e “ g e s ta tio n p e rio d s ” o f th e v a rio u s c a p ita l e x p e n d itu re s
involved, w h ic h , in a ro u g h w a y a t le a s t, w ill te n d to c o rre la te w ith th e
e c o n o m ist’s c o n c e p t o f th e “ d e g re e o f ro u n d a b o u tn e s s ” o f p ro d u c tio n a n d
— m o re p r a c tic a lly b u t s till s u b je c t to a good d e al o f q u a lific a tio n — w ith
th e d is tin c tio n b e tw e e n in v e s tm e n t in p ro d u c e r-g o o d s in d u s trie s on th e
o n e h a n d a n d in v e s tm e n t in c o n su m e r-g o o d s in d u s trie s o n th e o th e r. D a ta
a sse m b le d o n th e b a sis o f th e l a t t e r d is tin c tio n m ig h t, i f in te r p r e te d w ith
c a u tio n , p ro v e u s e fu l in v a rio u s w a y s. W h a t is k n o w n in g e n e ra l is t h a t
s e v e ra l c o u n trie s o f th e re g io n , in c lu d in g In d ia ( in th e d r a f t f r a m e o f
th e seco n d fiv e -y e a r p la n ) a n d m a in la n d C h in a , a r e g iv in g c o n sid e ra b le
e m p h a sis to in v e s tm e n t in h e av y in d u s try , w h ic h te n d s to h a v e a re la tiv e ly
lo n g “ g e s ta tio n p e rio d .”
4.
C a p ita l e x p e n d itu re s b y g o v e rn m e n t lik e w ise show a r is in g tr e n d in
B u rm a , C eylon a n d In d ia , a s w ell a s in m a in la n d C h in a , a s a p e rc e n ta g e
b o th o f g ro s s n a tio n a l p ro d u c t a n d o f to ta l g ro s s c a p ita l e x p e n d itu re ,
d u r in g th e y e a rs s h o w n in ta b le 7; a lso in M a la y a b u t n o t in J a p a n o r
th e P h ilip p in e s . G o v e rn m e n t c a p ita l fo r m a tio n a s a p e rc e n ta g e o f to ta l
c a p i ta l f o r m a tio n h a s, d u r in g th e y e a rs in d ic a te d , a v e ra g e d below 30 p e r
c e n t in th e P h ilip p in e s a n d In d ia , b e tw ee n 30 a n d 35 p e r c e n t in J a p a n ,
M a la y a a n d B u rm a , a n d a bove 40 p e r c e n t in C eylon, a s w ell a s In d o n e s ia
f o r th e tw o y e a rs sh o w n . (C ey lo n ’s fig u re s, ho w e v er, w h ic h g iv e ra te s
abov e 50 p e r c e n t in som e y e a r s , o m it th e la te s t p e rio d in w hich g o v e rn m e n t p olicies s tr e s s th e p ro m o tio n o f p r iv a te in v e s tm e n t.) I t is n e c e s sa ry
t o e x e rc ise c a u tio n in in te r p r e ti n g su ch p e rc e n ta g e s , especially f o r ind iv id u a l y e a r s , sin c e a s h a r p ris e , f o r e x a m p le , m a y m e re ly reflect a d ro p
in p r iv a te c a p ita l f o r m a tio n w ith o u t a n y a c tu a l in c re a se in g o v e rn m e n t
c a p i ta l fo r m a tio n .
Regarding the question of size, it will be seen from the
table that Japan and Burma definitely stand out as having
high rate of capital formation— rates considerably above those
of all the other counrties.2
Comparison may be made with the annual rates of growth
of total production shown in table 2. No refined analysis
would be warranted, but some comment is called for in
1.
C f. “ P ro b le m s a n d te c h n iq u e s o f e co n o m ic d e v e lo p m e n t p la n n in g a n d p r o g r a m m in g w ith s p e c ia l r e fe re n c e to E C A F E c o u n tr ie s " , in E c o n o m ic
B u lle tin f o r A s ia a n d th e F a r E a s t , vol. V I, N o. 3, N o v e m b e r 1955, w h e re
th e d e te r m in a n ts o f e co n o m ic g r o w th a r e c o n sid e re d u n d e r tw o m a jo r
h e a d in g s, th e r a t e o f c a p i ta l fo r m a tio n a n d a s e rie s o f “ o th e r m a jo r d e te rm in a n ts ” s u c h a s p ro d u c tio n te c h n iq u e s , d e g re e o f u tiliz a tio n o f m a n p o w e r
a n d o th e r re s o u rc e s , e tc .— th e l a t t e r a ll te n d in g to a ffe c t th e o v er-all
c a p i t a l / o u t p u t r a tio . S o m e o f th e less ta n g ib le b u t n e v e rth e le s s h ig h ly
r e le v a n t c h a n g e s a r e in th e re a lm s o f o r g a n iz a tio n , le g is la tio n , cu sto m s
a n d th e p sy c h o lo g ica l a ttitu d e s o f th e peo ple.
2.
D ifferen ces in r a te s o f c a p i ta l c o n su m p tio n w o u ld n o t a ffe c t th is g e n e r a l
co n clu sio n , b u t th e r e la tiv e p o s itio n s a m o n g c o u n trie s m ig h t be m odified
s o m e w h a t i f th e r a te s o f c a p i ta l fo r m a tio n w e re sh o w n o n a n e t, in s te a d
o f a g ro s s, b a sis.
9
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
10
Certain further evidence on capital form ation can, however, be obtained from the trade statistics, since in the case of
many countries of the ECAFE region a high proportion of all
capital equipment has, at present, to be im ported.1 W hen the
trade data for Indonesia are examined, for instance, we are
able to add to the limited inform ation on this country in table
7 the fact that the value of imports of capital goods,2 measured
as a percentage of total imports, has risen very markedly over
the period 1949-1955, the most recent proportion being about
30 per cent.3 We also find that, in Pakistan, for which
aggregate capital form ation data are not available, imports
of capital goods as a percentage of total imports have risen
from about 14 per cent in 1949 to the high level of 40 per
cent (preliminary estimate) in 1955. In m ainland China, 88.5
per cent of imports consisted, in 1954, of the broader category
of “means of production”, including both capital equipment
and raw materials.4
1.
F o r d e ta ils, see i n f r a , s e c tio n o n in te r n a tio n a l t r a d e a n d p a y m e n ts in
c h a p t e r 2.
2. E x c lu d in g r a w m a te ria ls .
8. I t sh o u ld b e n o te d t h a t th e c o rre s p o n d in g r a t e w a s o n ly 15-16 p e r c e n t in
1951 a n d 1952, th e y e a r s o f th e re c o rd e d low r a te s o f c a p i ta l f o r m a tio n
s h o w n in ta b le 7.
4. I n fr a , c h a p t e r o n C h in a.
Savings
In p art B of table 7 are presented rates of savings.5
Attention here shifts to how capital form ation has been
financed. P a rt B of the table differs from p art A in that it
depicts, not the capital form ation going on within the country
itself (some of which may be m ade possible only by drawing
on foreign savings)6 but rather the resources currently made
available within the country itself for capital form ation
purposes (some of which may be finding use abroad instead
of at home) ; p art B thus indicates, in a very rough way, the
rates of capital form ation that the countries themselves have
been able to afford.
Comparison of the rates shown in p art B with those in
part A serves to divide the countries into 3 groups: (1)
countries whose current capital form ation has consistently
exceeded their current savings: South Korea and the
Philippines (although the Philippines was in the opposite
group 1 year out of 8) ; (2) those whose current savings have
consistently exceeded their current capital form ation: Malaya
5.
6.
TABLE
H e r e de fin e d a s g ro s s c a p i ta l f o r m a t io n p lu s n e t s u r p lu s o f th e n a tio n o n
c u r r e n t a c c o u n t.
F o r e ig n lo a n s a n d g r a n t s , p lu s a lso a n y d r a w in g d o w n o f th e c o u n tr y ’s
o w n fo r e ig n - e x c h a n g e h o ld in g s.
7
GROSS DOMESTIC CAPITAL FORMATION, GROSS SAVINGS AND DEVELOPMENT EX PEN D ITU R E AS A
PERCENTAGE OF GROSS NATIONAL PRODUCT
B urm a
C e y lo n
In d ia
A.
1938
1947
1948
1949
1950
1951
1952
1953
1954
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
13.0
16.2
17.0
12.9
18.2
19.0
5.9
5.3
6.3
9.1
10.7
11.9
13.6
12.1
21.8
10.0
8.1
10.2
...............................
...............................
...............................
...............................
...............................
...............................
...............................
................................
................................
8.3
9.1
9.3
9.8
6.2
10.6
16.0
15.2
18.9
23.5
25.2
19.5
—
9.8
7.0
7.3
14.6
15.2
6.4
7.7
16.3
a.
b.
................................
...............................
...............................
................................
................................
................................
11.7
14.7
20.3
21.4
25.0
17.7
18.9
21.7
20.0
17.3
K orea, S o u th
M a la y a
P h ilip p in es
25.9
26.4
28.2
24.6
24.9
30.3
26.8
27.5
23.0
11.4
12.1
9.6
5.4
11.4
7.9
5.1
6.7
12.3
10.5
10.5
8.3
7.3
7.5
8.2
8.4
..
12.1
4.9
9.0
1.5
9.0
11.1
SAVINGSa
0.2
C.
1949
1950
1951
1952
1953
1954
4.7
5.3
10.0
9.0
25.1
Japan
CAPITAL FORMATION
B.
1938
1947
1948
1949
1950
1951
1952
1953
1954
Indonesia
5.7
8.5
9.7
8.2
10.9
10.2
..
6.0
0.4
..
23.3
22.3
24.1
21.4
27.6
34.2
28.3
27.5
25.2
3.4
6.1
— 14.8
— 5.8
—
33.1
29.9
17.1
11.2
6.0
6.0
7.0
6.5
DEVELOPMENT EX PEN D ITU REb
11.3
11.5
11.8
G ross d o m e stic c a p i ta l f o r m a tio n p lu s n e t s u rp lu s o f th e n a tio n o n
c u r r e n t a c c o u n t.
G ross c a p i ta l f o r m a tio n p lu s c u r r e n t e x p e n d itu r e f o r e co n o m ic a n d so cia l
s e rv ic e s o f g o v e rn m e n t, e x c e p t f o r th e P h ilip p in e s w h e re e co n o m ic s e rv ic e
6.6
8.3
6.1
7.8
15.7
14.6
13.3
10.9
9.6
9.8
11.0
11.4
e x p e n d i tu r e o f g o v e r n m e n t f o r 1949-1952 is n o t in c lu d e d . F o r C ey lon a n d
t h e P h ilip p in e s e c o n o m ic a n d s o c ia l s e r v ic e e x p e n d itu r e s a r e in te r p o la te d
t o c o n fo rm to th e tim e p e rio d f o r c a p i ta l f o r m a t io n a n d n a tio n a l inc o m e
d a ta .
CHAPTER 1.
POST-WAR ECONOMIC PROGRESS
only; and (3) those that have shifted back and forth: Burma,
Ceylon, India, Indonesia (2 years only available) and Japan.
Such shifting back and forth could be due to various factors
including variations in the size of foreign-exchange reserves.
Generally speaking, however, the normal expectation would be
that most under-developed countries, because of their need
for foreign capital, would be fairly consistently in group (1)
over a substantial period of time hereafter.
It will be noted that an upward trend of savings is shown
for Burma and India, matching the upward trend of their
capital formation. F or savings in other countries it is difficult
to establish any trend over the relatively short period covered
by the data. The case of Malaya calls for special mention
b e c a u es i t i s c l e a r f r o m a c o m p a r i s o n o f p a r t s B a n d A of
table 7 how far the recent savings of that country have exceeded
the amounts concurrently devoted to forming capital in, and
assuring the future growth of, Malaya itself; the savings have
in part gone abroad.
Development expenditures
Im portant as the concept of capital formation is, it must
be conceded that data on the subject yield at best a far from
perfect index of the provision currently being made for the
sake of larger future output and income. Some forms of
capital formation— for example, monumental public buildings
— do not enlarge future output at all,1 whereas some forms of
current expenditure— for example, on training and public
health— definitely do.2 As was recognized in the report of
the recent Budget Workshop, “ development” is not necessarily
restricted to “capital expenditure” , nor can it, for that matter,
be identified under particular functional headings.3
In part C of table 7 a rough approximation of developmental expenditures, as a percentage of gross national product,
is presented by making them simply equal to gross capital
formation, private and public combined, plus the government’s
current expenditures for economic and social services. Data
unfortunately are not available for several countries. The
most striking additions shown, on account of economic and
social services of government, are those for Ceylon.4
In China (not shown in table 7 ), estimates for Taiwan
are available for 1951 and 1952 only, yielding rates of 22 and
20 per cent respectively for gross capital formation, very
slightly higher rates for developmental expenditure and rates
of about 17 and 15 per cent respectively for gross savings.
The outlay on development on the mainland, taken as the sum
of expenditures on national economic construction and social,
cultural and educational projects in the government’s budget,
almost doubled between 1952 and 1955. Data on capital
formation and savings are not available.
QUALITATIVE IMPROVEMENT
In speaking of qualitative improvement one is on somewhat treacherous ground, since not only are good data
particularly scarce but in addition there may be difference
of opinion as to whether a certain qualitative change in the
economy is a change for the better or not. The problem of
subjective evaluation is fully recognized here but it will simply
be postulated that (a) a reduction of econom ic instability and
( b ) changes that especially promote, in a manner harmonizing
with the traditions and aspirations of the country concerned,
the welfare of the common people of that country, both
represent qualitative improvement and clearly contribute to
progress if added to, rather than gained at the expense of,
growth in real per capita output or income.
Over a sufficiently long period a reduction in instability
may be indicated, ex post, by an examination of the amplitude
and periodicity of fluctuations that have actually taken place.
A priori, countries with strong and flexible fiscal and monetary
system clearly are in a better position than other countries to
avoid, or minimize, instability in future. Diversification of
production tends to promote stability by lessening the degree
of dependence on the vagaries of the world market for one or
two traditional exports. There have been some improvement
in fiscal and monetary systems in the ECAFE region since
the second world war, and some diversification. Also the
growing weight of the public sector in many of the countries
of the region provides a kind of “ built-in stabilizer” for
the economy, and the increasingly active part that governments are playing in economic affairs strengthens the chances
of additional compensatory devices being brought into play
when needed. This is not to say that optimism is warranted
with regard to avoiding instability in future; the pressure of
fluctuations in world markets for the products of ECAFE
countries, and the risks connected with the natural desire to
push development expenditures just up to the point beyond
which inflation becomes a real danger, are too great for that.
But the ability to resist or minimize instability once it is seen
to exist does, in general, appear to have improved during the
period under review.
The social-justice aspect of qualitative improvement
involves, generally speaking, some direct or indirect redistribution of resources in favour of low-income groups. Data on
trends in income distribution by size-of-income classes would
be the best indicator, but such data are not generally available.5
Brief reference may, however, be made to certain other types
of inform ation bearing on this subject.
The crude death rate has everywhere been going down
since the end of the second world war.6 In several
countries, for example Ceylon and Japan, it has been
halved; in at least Japan and probably elsewhere it has
5.
1.
2.
3.
4.
T h u s th e r e p o r t o f th e W o r k in g P a r t y o n E c o n o m ic D e v e lo p m e n t a n d
P la n n in g ( f ir s t m e e tin g ) t o th e E c o n o m ic C o m m issio n f o r A s ia a n d th e
F a r E a s t ( tw e lf t h s e s sio n ) r e f e r s t o “ n o n -e s s e n tia l e x p e n d itu re s e ith e r on
n o n -p r o d u c tiv e c o n s u m p tio n o r o n u n n e c e s s a rily lu x u rio u s c a p i ta l cons tr u c tio n .” See E c o n o m ic B u lle tin fo r A s ia an d th e F a r E a s t, vol. V I,
N o. 3, N o v e m b e r 1955, p . 4.
See d iscu ssio n o f “ c a p ita l-lik e ” e x p e n d itu re s , in “ P ro b le m s a n d te c h n iq u e s
o f eco n o m ic d e v e lo p m e n t p la n n in g a n d p r o g r a m m in g w ith sp e c ia l re fe re n c e
to E C A F E c o u n tr ie s ,” ib id , p p . 29.
R e p o r t o f th e W o rk s h o p o n P ro b le m s o f B u d g e t R ec la s sific a tio n in th e
E C A F E r e g io n ( E C A F E /L .9 5 , 21 S e p te m b e r 1 9 5 5 ), p a r a 68.
T h is c o rre la te s w ith a lm o s t c o m p le te a b se n c e o f e x p e n d itu re s o n d e fe n ce
in C eylon. A s a p e r c e n ta g e o f to ta l g o v e rn m e n t e x p e n d itu re s , g o v e rn m e n t e x p e n d itu r e s o n so cia l s e rv ic e s a p p e a r to b e e q u a lly h ig h in th e
P h ilip p in e s ; d a t a o n e c o n o m ic s e rv ic e s a r e n o t a v a ila b le .
11
6.
S o m e p a r t i a l s ta t is ti c a l in d ic a to rs a r e a v a ila b le , b u t n o
v e ry c le a r-c u t
c o n clu sio n s c a n b e d ra w n . (1 ) I n C eylon, In d ia , J a p a n a n d th e P h ilip p in e s, th e f o u r c o u n trie s f o r w h ic h i t is po ssib le to re la te a w a g e in d e x
to p e r c a p i ta n a tio n a l incom e, th e r a t i o o f th e fo r m e r to th e l a t t e r h as
a p p a r e n t ly ris e n in th e p o s t-w a r p e rio d . W a g e s a r e a d m itte d ly a f a r
less i m p o r t a n t in d ic a to r in A s ia t h a n in th e W est, a n d ev id e n ce fr o m
s h o r t p e rio d s c a n also b e m isle ad in g . (2 ) T a x e s on incom e a n d w e a lth
( m a in ly in c o m e a n d in h e r ita n c e ta x e s ) h a v e b e en g iv e n slig h tly g r e a te r
e m p h a s is b y th e m a jo r it y o f c o u n trie s o f th e re g io n d u r in g th is p e rio d ,
a lth o u g h th e y a r e o f re la tiv e ly sm all im p o r ta n c e , b e in g a lm o s t ev ery w h ere
b e low 5 p e r c e n t a n d s o m etim e s below 1 p e r c e n t o f n a tio n a l incom e.
T h e e x c e p tio n is J a p a n ; h e re , h o w e v er, th e r a tio d eclin ed fr o m 12.5 p e r
c e n t in 1948 to below 8 p e r c e n t in 1954. (3 ) T h e tr e n d in social services
p a id f o r b y th e g o v e rn m e n t (e d u c a tio n , h e a lth , social w e lfa re , re lie f,
h o u s in g p ro g r a m m e s , e t c .) , fig u re d a s a p e rc e n ta g e o f to ta l g o v e rn m e n t
e x p e n d itu re , h a s b e en m ixed.
See in fr a , A s ia n E c o n o m ic S ta tis tic s , ta b le B.
12
ECONOMIC SURVEY OF A SIA A N D THE FAR EAST, 1955
At the same time, of the 9 countries whose aggregative
estimates fo r their domestic product have been reviewed, only
4, with a combined population of less than 140 million, appear
to show an upw ard trend of m ore than 3 per cent a year on
a per capita basis. W estern economies likewise are growing
at varying rates, but any Asian country with an annual per
capita rate of growth of output of less than 3 per cent may
be said to be dropping farther behind the advanced economies,
The land reform movements that either have taken place rather than starting to close the gap. In fact, this underalready or are
now in progress are playing an im portant s ta te s the m atter, since the percentage rate of increase has
part in what is really a revolutionary change for the better to be not merely equal but m uch greater at the low levels of
output prevailing in the under-developed regions of the world
in the status of tenant cultivators in much of Asia.
to keep the absolute m argin from widening.
Governments are also now giving attention, in their
The differences in the rates of advances of the different
planning, to the solution of problems of both rural and urban
unemployment and under-employment, treating this more and countries, as shown by their statistics, are due to a large
more as a value in itself and not merely as a by-product of num ber of factors, variously combined, some of which have
expansion of production. The enormous benefits to be gained been touched on in the preceding analysis. It should be
in this difficult area of progress lie, however, it m ust be recognized that most of the countries that have gone ahead
most rapidly have not only the energy and skill of their own
admitted, almost entirely in the future.
people to thank for this but also large-scale foreign aid.
External aid— and, in particular, United States aid— has been
CONCLUSION
a m ajor factor in several instances in enabling rehabilitation
and reconstruction to be accomplished quickly and developDespite the reservations expressed in this chapter as to ment to be initiated in a prom ising way.
the adequacy and accuracy of our knowledge, there can be no
real doubt that there has been a general pattern of economic
This fact serves to bring into focus what is certainly a
progress in the ECAFE region since the end of the second key problem fo r growth and progress in the ECAFE region—
world war. P a rt of this progress is recorded in statistics the shortage of m aterial resources that can be mobilized for
depicting the growth of current production and consumption, • production. Poverty in this sense (not in the sense of lack
or pointing to prospects of such growth in the future. Another of m anpower or natural resources, the most fundam ental
part is recorded at least in fragm entary statistics that suggest elements) is the basic factor lim iting development in Asia.
in one way or another that the economies of the countries International co-operation, to provide m ore foreign capital and
of Asia are “better” now than they were, as well as “bigger” . other assistance, undoubtedly is needed in order to meet this
Still another part could hardly be reduced to statistical form problem successfully.
— the imponderable aspects of qualitative improvement; the
organizational, psychological, and other advances leading to
A second m ajor problem is presented by population
quantitative growth that will not actually register until later. factors, especially population growth. When a point is reached
Increased experience in adm inistration, efforts to organize in the com bination of elements— the relationship of land and
planning, popular support, widespread public participation all people and capital equipm ent— where gains in production can
have a vital contribution to make, and the conclusion from with difficulty keep adequately ahead of increases in the
a broad evaluation of factors such as these is that the progress num ber of persons to be fed and clothed and housed, it may
that has been made in the region over the post-war decade is be time to take stock of population policy as well as of the
greater than any purely quantitative measures will show.
need to revise age-old production techniques.
fallen below a rate of 10 per thousand. W hat these reductions
in death rates, when coupled with continuing high birth rates,
imply for future standards of living is, of course, a m ajor
question. But it is a noteworthy favourable fact that hum an
life itself— sheer survival— has become somewhat less insecure
in the countries of the ECAFE region during the post-war
period.
Yet the things that have been or that can be quantified
must, after all, be given the leading p art in a study of economic
progress. And here the analysis set forth in the preceding
pages leaves little room for complacency.
Quantitative
gr owth has been slow. Production has risen everywhere,
following the cessation of hostilities, but, on a per capita
basis, the comparison still is generally unfavourable both in
relatio n to pre-war conditions in Asia itself and in relation
to present trends in the West.
As to the former, it is true that industrial production has
begun to develop promisingly in some countries, and that
export-geared economies have enjoyed boom conditions in
certain years; however, agricultural production, the mainstay
of life, is still substantially below pre-war levels, on a per
capita basis, for the ECAFE region in general— whether this
calculation be made with or without counting mainland China.
The problem, of course, is not ju st one of num ber. P a rt
of the reason for the poverty of mobilized resources in Asia is
the double wastage of hum an resources that frequently takes
place. Capacities are not properly developed through training
and experience, so that there results a shortage of needed skills,
including skills of management, and production suffers
accordingly. Meanwhile existing skills are under-utilized in
some countries because it has not yet been possible to overcome
the organizational difficulties preventing achievement of anything like an approxim ation of full employment.
Change is a fourth great problem. If the economies of
the ECAFE region are to experience such growth as will carry
them out of their present state of under-development in decades
rather than centuries, great structural changes in production
and trade, in methods and techniques and approach, will have
to be made along the way.
Chapter 2.
CURRENT ECONOMIC SITUATION1
AGRICULTURAL PRODUCTION
Cereals
In 1954/552 the production of cereals in the ECAFE
region remained moderately above the pre-war (1934-38)
average for the third successive post-war year, despite relatively
unfavourable weather conditions in some countries. Excluding m ainland China, total cereals production in the region,
at 117.6 million tons, was about 1.5 per cent lower than the
record production of 1953/54, but was, nevedtheless, higher
than that of any other post-war year.3 Production of rice,
the m ain staple food in the region, at around 70.1 million
tons, though 6.6 per cent lower than the record production of
1953/54, was still the second higest on record. The fall in
rice production of about 4.9 million tons compared to 1953/54
production was shared almost equally between the deficit and
surplus countries as a whole. However, changes in rice
production varied a great deal among deficit countries. Thus,
in India, rice production was 12 per cent less than the previous
bumper harvest, while in the Philippines it was 2.5 per cent
lower. On the other hand, Japan harvested a rice crop 10.5
per cent better than the previous poor crop and production in
other deficit countries like Ceylon and the Federation of
Malaya was also better. On m ainland China, production of
food grain crops, which embrace cereals, pulses, and potatoes,
is officially estimated to have risen by 3 per cent in 1954/55.4
Table 8 summarizes the trends in production and imports of
cereals in the ECAFE region excluding mainland China.
1.
2.
3.
4.
During earlier post-war years, the limited export supplies
and transport difficulties, the recurring shortage of foreign
exchange (particularly dollars) and the restrictions on
consumption through controlled distribution had all contributed
in varying degrees to keeping down the import demand for
cereals in deficit countries, despite the low level of cereal
production in these countries. After 1952, owing partly to
improved domestic supplies, the imports of cereals in the deficit
countries had generally been going down and, in 1954, were 34
per cent lower than the post-war (1951) peak of over 11
million tons. Reduced imports of cereals, coupled with lower
prices, had afforded some relief5 to the governments of deficit
countries, several of which were able to abolish or reduce
drastically consumer subsidies. In 1955, owing to some fall
in production, cereal imports of deficit countries were expected
to increase, although such increase might not be significant.
One development that deserves special notice in this context
is that, in marked contrast with earlier years, food-importing
countries are now relying to an increasing extent on the rice
supplies available within the region. Thus, in the first seven
months of 1955, rice imports from within the region accounted
for 38 per cent of total imports of cereals as compared to 28
per cent in 1952.
T h e s ta t is ti c s fr o m official s o u rc e s o n m a in la n d C h in a o n a g r ic u ltu r a l a n d
I n d u s tr ia l p r o d u c tio n , t r a n s p o r t , tr a d e , p ric e s a n d fin a n c e a re s u b je c t to
q u a lific a tio n s g iv e n in i n f r a , p . 80, o p e n in g fo o tn o te to th e s e c tio n o n th e
m a in la n d in c h a p t e r 7 on C h in a ; a n d fo o tn o te 8 on p . 86, th e y a r e th u s
n o t s tr ic tly c o m p a ra b le to th e v e rifiab le d a ta fr o m o th e r co u n trie s.
T h e c r o p y e a r f o r c e r e a l s is f r o m J u l y t o J u n e .
I n c lu d in g m a in la n d C h in a , th e to ta l 1954/55 p ro d u c tio n o f c erea ls in th e
re g io n , th o u g h 1 p e r c e n t lo w e r t h a n in 1 953/54, w a s e s tim a te d b y F A O
to b e s till 5 p e r c e n t a b o v e th e p r e - w a r a v e r a g e , d e sp ite h e a v y flood
d a m a g e in c e r ta in c o u n trie s .
S ee i n f r a , c h a p t e r o n C h in a .
TABLE 8
CEREALS PRODUCTION AND IMPORT, 1950-55
(’000 tons)
ECAFE region:a
P r o d u c t io n
A ll c e r e a l s
of w h i c h , r i c e .
Deficit c o u n t r i e s of
E C A FE r e g i o n b
P ro d u c tio n
I m p o rt .
.
.
1951
1952
1953
1954
101,658
64,376
107,565
68,025
119,426
75,033
117,606
70,100
67,050
11,038
73,056
10,265
82,512
8,209
82,404
7,291
1955
7,282c
S o u r c e : F o r tr a d e : P r i o r to 1955, E c o n o m ic A n a ly sis B ra n c h , F A O , R om e, a s
p e r E C A F E d o c u m e n t D P W P .1 /1 1 o f 12 O c to b e r 1955. 1955 figu res
a r e o b ta in e d f r o m n a tio n a l t r a d e r e t u r n s a n d e s tim a te d f r o m figures
f o r th e f ir s t s ix to e ig h t m o n th s . F ig u r e s o n C h in a : T a iw a n a r e
ta k e n fr o m n a tio n a l so u rc es.
F o r p r o d u c tio n : F A O a n d n a tio n a l s o u rc es; c ro p y e a rs f o r p ro d u c tio n .
a . E x c lu d in g m a in la n d C h in a .
b. C eylon, H o n g K o n g , In d ia , In d o n e s ia , J a p a n , M a la y a , P h ilip p in e s .
c. E s tim a te d .
The recent increase in im port demand for rice available
in the region, chiefly a result of reduction in export prices,
came as a welcome relief to the rice-surplus countries of the
region, particularly Burma and Thailand, whose combined
exportable surplus in 1955 was over 50 per cent higher than
their combined actual exports in 1954 and over 20 per cent
higher than their combined maximum exports in the post-war
period.
5.
T h e a v a ila b ility o f c erea ls fr o m c e r ta in s u rp lu s c o u n trie s o u tsid e th is
re g io n in th e fo r m o f o u tr i g h t g r a n t s o r a g a i n s t p a y m e n ts in local c u r re n c ie s is a lso believed to h a v e c o n trib u te d to th is.
14
ECONOMIC SUR V EY OF A SIA A N D THE FA R EAST, 1955
The combined output of millets, wheat and barley3 exceeded
that of the previous year by over 800,000 tons. Moreover,
the existence of large stock with the government, placing of
additional supplies of cereals on the m arket through direct sales.
to trade, and extension of fair-price shops in areas affected by
adverse weather conditions were additional factors favouring
the downward movement of prices. W ith a view to preventing
prices from declining to unduly low levels, the central government announced in December 1954 that it would buy coarse
grains at specified floor prices. Subsequently, the price-support
operations were extended to wheat and gram harvested in
the spring of 1955 and rice and millet crops due to be
harvested towards the close of 1955. Prices showed some
seasonal rise in the rainy season, particularly in September,
an additional factor contributing to firmness at that time being
reports of flood damage to 1955/56 autum n crops.
Export prices of rice, which were tending to rise until
1953, had fallen since the close of that year and, in the
case of Burma, the 1955 price for “ S.M.S. 42 per cent broken”
was 16 per cent lower than the 1954 price. The average unit
value of exports in the first quarter of 1955 showed a steeper
decline from 1954 than did the price for “ S.M.S. 42 per cent
broken,” probably because low-priced varieties figured m ore
prominently in the 1955 exports. These price reductions
appear to have improved the competitive position of rice
vis-a-vis wheat, particularly since wheat prices on international
markets had generally remained unchanged during 1955.
Thus, in 1955 for the first time in post-war years, the index
showing the ratio of rice price to wheat price turned distinctly
downwards.
Problems of food deficit countries
D uring the earlier post-war years, two common problems
faced the food deficit countries of the region. One was the
keeping down of domestic prices of cereals so as to avoid any
sharp increase in the cost of living and this generally entailed
imposition of controls on prices, procurem ent and distribution.
The second was the stepping up of domestic cereals production and involved large outlays on food production schemes.
With increases in domestic production, secured particularly during the last two seasons, restrictions on consumption
have been mostly removed except in Ceylon and Japan. Also,
in 1955, the price problem that assumed im portance was one
of assuring certain minimum prices to producers. Thus,
in Ceylon, where the government had guaranteed a minimum
purchase price of Rs 12 per bushel of paddy (about £66 per
ton of milled ric e )1 large quantities (over 59,100 tons of
paddy) were purchased during January-M ay 1955 as against
less than 33,000 tons in January-M ay 1954. The increase in
the volume of paddy sold to the government has resulted
partly from improved domestic production and partly from the
government’s decision to supply rationed rice to partial p ro ducers who stand to gain by selling almost all their produce
to the government at the guaranteed price and buying the
relatively cheaper rice available on ration.2 In India, the
1954/55 rice crop, though 3.4 million tons shorter than the
previous crop, was, nevertheless, the second highest on record.
In the Philippines, the National Rice & Corn Corporation
purchased domestic paddy in the early p art of 1955 at fixed
prices with the two-fold objective of assuring reasonable prices
to producers and stabilizing rice prices in cities. This scheme
was being continued in the latter p art of the year when the
1955/56 crop was expected to come in. Japan, the only
country in the region which has adopted a rigid price-support
scheme, has been continually raising the price actually paid by
the government to producers (including bonuses) in the postwar years. Thus the price for the 1954 rice crop was estimated
at ¥9,860 per koku4 ($182 per ton) of brown rice or more
than twice the price for 1949 when the present rate of exchange
of the yen was fixed.5 F or 1955, the basic price is 10 per cent
higher and the complicated bonus scheme for advance com m itment and early delivery has been revised in favour of
producers. However, the expenditure on subsidized sales of
im ported rice has recently become very small because of
reductions in prices which Japan has to pay fo r imports.
The second problem, that of increasing domestic production, continues to face the food deficit countries to some
extent. However, owing to the im proved supply situation, it
has lost its edge in some cases, while some countries have
already attained virtual self-sufficiency. Thus, India hardly
needs any im ports for current consumption and the rice
imports in 1954 and 1955 facilitated the building up of reserve
stocks. Indoneia, too, has succeeded in raising the level of
domestic production, and but for the short-fall in domestic
procurem ent in 1955,6 im ports m ight not have been necessary.
The Philippines, which early in 1954 was experiencing difficulties in disposing of stocks of im ported rice, found it necessary
to im port rice towards the close of 1954 and early in 1955,
owing largely to a fall in the 1954/55 rice crop and a sharp
increase in domestic prices.
In spite of recent improvements in the supply situation
in the deficit countries and the increased supplies available
from surplus countries, there has not been any slackening of
effort on the p art of deficit countries to increase further
their domestic production.
The extreme dependence of
3.
4.
5.
6.
1.
2.
T h e p u r c h a s e p r ic e f.o .b . f o r S.M .S. 42 p e r c e n t ric e f r o m B u r m a w a s
£41.3 p e r to n a n d in th e c a s e o f m a in la n d C h in a th e p u r c h a s e p r ic e w a s
£39 p e r to n .
T h e p r e s e n t r a tio n p ric e is 25 C ey lo n ese c e n ts p e r lb o r a p p r o x im a te ly
£41.3 p e r to n .
T h e r e f e r e n c e is to th e w h e a t a n d b a rle y c ro p s h a r v e s te d in t h e sp rin g :
o f 1955.
1 k o k u = 1.804 h 1.
P a r t o f t h i s ris e , h o w e v e r,m a y h e lp t o c o r r e c t th e la g
in th e p ro d u c e rs '
p r ic e o f ric e d u r in g th e p e rio d o f in fla tio n b e f o r e 1949.
T h e a c tu a l p r o c u r e m e n t o f
p a d d y in J a v a in th e f i r s t s e v e n m o n th s o f
1955 w a s 18 p e r c e n t lo w e r t h a n th e c o r r e s p o n d in g fig u r e f o r 1954. T h is
s h o r t- f a ll w a s a ttr i b u t a b l e
p a r t l y to s p e c u la tiv e h o ld in g u p o f s u p p lie s
o w in g to e x p e c ta tio n o f a
d e clin e in p r o d u c tio n a n d c o n s e q u e n t in c re a s e
in m a r k e t p ric e s t o levels
a b o v e th e g o v e r n m e n t b u y in g p r ic e .
T h e re p o r te d d e clin e in m a iz e p r o d u c tio n w a s a lso a n i m p o r t a n t f a c t o r t h a t
te n d e d t o re d u c e th e m a r k e ta b le s u r p lu s o f ric e .
CHAPTER 2.
CURRENT ECONOMIC SITUATION
agricultural production in the countries of the region on the
vagaries of weather, the increasing consumption demands consequent on population growth, the difficulties experienced in
obtaining supplies in post-war years and the high prices that
have had to be paid for imported cereals are all factors
supporting the drive towards increased national self-sufficiency.
At the same time, in a num ber of countries, notably in India,
the attainment of self-sufficiency in food has been considered
essential for industrial development.
While increase of domestic production up to certain
limit might in many cases be a justifiable aim, yet the recent
changes in the over-all supply situation do suggest a reappraisal
of development efforts in terms of comparative economic
advantages.
Problems of food surplus countries
Unlike the earlier years, when rice was in short supply and
prices could be raised to “levels that the traffic would bear” ,
the problems which continue to face the rice-surplus countries
since 1954 have been those of declining export prices and, as
a result, declining government revenues and foreign-exchange
earnings. Reduction of export prices entails hardships to riceexporting countries, particularly since the recovery of production in other lines (minerals, oils, timber, etc.) has been slow
in post-war years and the dependence of these countries on
rice exports has increased. Naturally, therefore, the process
of downward adjustm ent of export prices was a hesitant one
in 1954.
D uring 1955 prices have declined further, but rice exports
have increased sharply and, as a consequence, the impact of
reductions on revenues and foreign-exchange earnings has
been softened. On the whole, the total 1955 exports from
rice-surplus countries are expected to be a post-war high.
In this context, two features of export trade deserve special
notice. One is that, owing to reductions in export prices
and adoption of more realistic export policies, the rice-surplus
countries have been able in 1955 to capture a larger share
of the demand for cereals from the deficit countries of the
region that have a normal preference for rice.1 Continuance
of this tendency could result in increased intra-regional trade
and reduced dependence of the region on imports of cereals
from other parts of the world. The second is that since
1954 a substantial p art of the rice exports from surplus countries, particularly Burma, has been covered by trade arrangements akin to barter agreements.2
Burma continues to handle the bulk of export trade in
rice on government account, though traders can now buy rice
from the State Agricultural Marketing Board for export.
During 1955 the total volume of its rice exports is expected to
be about 30 per cent higher than in 1954. Thailand, where
the government m aintained a virtual monopoly of export trade
in rice in the post-war years, has thrown open the trade to
private hands and total exports are estimated to cover almost
the entire surplus of 1.3 million tons. Pakistan and China:
1.
2.
A fa v o u ra b le f a c t o r w a s th e a b se n c e o f a n y s ig n ific a n t e x p o r t o f ric e
fr o m th e U n ite d S ta te s o n c o n ce ssio n a l te rm s . I n t h a t c o u n try , f a r m s u p p o r t p ric e s in 1955 h a v e b e en h ig h e r t h a n w o rld p ric e s a n d la r g e
s to c k s h a v e a c c u m u la te d w ith th e g o v e rn m e n t. H o w e v e r, in o rd e r n o t to
d is r u p t w o rld m a r k e ts u n d u ly , th e U n ite d S ta te s G o v e rn m e n t h a s n o t
offered ric e f o r e x p o r t f r o m g o v e r n m e n t s to c k s a t p ric e s lo w e r t h a n th e
s u p p o r t p ric e s p a id to f a r m e r s . ( F A O :C C P /R I /5 5 / 2 0 — 7 O c to b e r 195 5 ).
D u r in g 1955, B u r m a e x p o rte d a s u b s ta n tia l p a r t o f its ric e u n d e r s u c h
a g re e m e n ts to m a in la n d C h in a , In d o n e s ia , th e U S S R a n d s e v e ra l c o u n trie s
o f e a s te r n E u ro p e .
15
Taiwan have also increased their rice exports.3 Cambodia
and south Viet-Nam, which has harvested poor crops, exported
small quantities in the first half of the year. In the latter
part, Cambodia needed some imports while Viet-Nam stopped
exports because of a sharp increase in domestic prices following reports of damage to the 1955 rice ccrop and cornering
of supplies by speculators. In mainland China, despite flood
damage to the autumn crops, particularly rice, the total
1954/55 production of foodgrains was reported to have been
better than the 1953/54 production. At the same time, the
systems of State purchases and distribution were tightened.
Thus, early in 1955, the system of “fixed production, fixed
purchase and fixed marketing” was adopted and subsequently
the distribution system was converted into a rationing system.
The average monthly exports of rice from mainland China to
Ceylon and Japan in the first nine months of 19554 were 3
per cent lower than the average monthly exports in 1954 as
a whole.
Prospects
Precise estimates of the cereal crops likely to be available
for consumption in 1956 are not yet available. However,
present indications are that Japan, the biggest individual
im porter of cereals in the region, has harvested a record rice
crop estimated at 14.8 million tons of paddy or about 28 per
cent higher than the pre-war (1934-38) average. The 1955
production of wheat and barley crops has also been satisfactory.
Nevertheless, if in 1956 export prices of rice are not very
high in relation to wheat prices, rice imports of Japan from
the countries of the region might maintain the level of recent
years, thereby increasing the share supplied by these countries.
Although in India the autumn crops have suffered from
floods, the existence of a large reserve stock with the government might eliminate the need of imports for current consumption.
The export surplus of rice available with the countries
of the region is likely to show some increase oevr the 1955
level, owing largely to an increase in the rice crop of
Thailand. Cambodia and south Viet-Nam are, however, not
expected to figure as exporters, and the supplies available
from Pakistan may be lower, owing to flood damage to the
1955/56 crops. On mainland China paddy production in
1955/56 is officially estimated to have risen to 78.5 million
tons from 70.9 million tons in the previous year.5
Although the supplies of rice available for export,
particularly with Burma and Thailand, will be larger than in
1955, the m arketing outlook is hopeful in view of the realistic
and energetic manner in which exporting countries have been
tackling the problems of export prices and of securing
buyers. If the rice-surplus countries succeed in maintaining
or increasing rice exports to the deficit countries of the region
in 1956, imports of cereals from outside the region may
decline and perhaps also the total foreign-exchange expenditure by the region for food imports. Much will depend,
however, on the actual 1955/56 crops and on mainland China’s
rice export policy.
3.
4.
5.
E x p o r ts fr o m P a k is ta n w e re e s tim a te d a t o v e r 100,000
to n s in th e first
s e v e n m o n t h s o f 1955; i n t h e c a s e o f C h i n a ; T a i w a n , e x p o r t s
in t h e fir s t
n in e m o n th s o f 1955 a m o u n te d to 112,000 to n s a s a g a i n s t 36,000 to n s in
th e w hole o f 1954. A c c o rd in g to tr a d e so u rc es, In d ia e x p o rte d a b o u t 75,000
to n s of ric e in th e f ir s t sev e n m o n th s o f 1955.
S even m o n th s in th e case o f J a p a n .
T a K u n g P ao, H o n g K o n g , 8 O c to b er 1955.
16
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
Other commodities
Rubber
In m arked contrast to the slow recovery of cereals production in the post-war years, the production of other agricultural
commodities, except cotton and sugar, showed a relatively
quick recovery. Thus, pre-war production was exceeded by
1947 for rubber, by 1948 for tea and by 1950/51 for jute
and copra. The volume of exports also increased fairly
rapidly and in most cases the post-war peak was reached in
1951. The following four years witnessed sharp declines in
prices, volume of exports and foreign-exchange earnings,
followed however by equally sharp increases. The magnitude
of fluctuations in prices, volume of exports and foreignexchange earnings differed with the commodity and the
country. Two commodities, tea and rubber, have recently
experienced sharp increases in prices and value of foreignexchange earnings.1 In the case of ju te and cotton, prices
in 1954-55 were moderately above the low levels of 1953 but
exports declined. On the other hand, in the case of copra and
coconut oil, the first im portant down-trend2 in prices after
the Korean-war boom started in 1954 and continued through
the m ajor part of 1955. The position of the m ajor commodities
entering into export trade is examined below.
In m arked contrast to the decline in consum ption of
1951-52, world consum ption of natural ru b b er increased
sharply in 1953-54. Total consum ption in 1954 at 1,793,000
tons was at an all-time high. This im provem ent resulted from
a m ore favourable relationship between natural-rubber and
synthetic-rubber prices, relaxation of restrictions on use of
natural rubber in the United States, and a general increase
in industrial demand. W orld production declined in 1953,
although still slightly larger than world consum ption, and the
increase in production in 1954 was relatively smaller than that
of consumption. Consequently, the gap between production
and consumption narrow ed down further. In 1955, production
in the first nine m onths increased by 4.2 per cent over the
corresponding 1954 production and consum ption at 1,364,000
tons exceeded current world production.
In the ECAFE region, which accounts for about 95 per
cent of world output, 1954 production was 5 per cent higher
than that of 1953 but fell short of the 1951 peak by 5 per
cent. D uring 1955, production in the first nine m onths
showed an increase of m ore than 2 per cent over the
corresponding figure for 1954. Almost all the countries have
shared in the increase in production since 1953, but in
Indonesia the increase in 1954 was relatively larg er owing
to a sharp increase in small-holders’ output.
The volume of exports from the ECAFE region increased
in 1954 by 5 per cent over 1953 and was the second highest
on record. In 1955, exports are expected to be higher than
in the previous year.
TABLE
9
NATURAL RUBBER PRODUCTION AND EX PO R T
( ’000 tons)
P ro d u c tio n
1 9 5 1 .............................
1952 .............................
1953 .............................
1954 .............................
J a n -S e p
1955 Ja n -S e p
ECAFE
r e g io n a
W o r ld
1,808
1,707
1,637
1,714
1,241
1,269
1,915
1,819
1,755
1,831
1,324
1,379
W o rld
T o ta l
p ro d u cnet
tio n
W o rld
export
m in u s
consum pfro m
w o rld
tio n
ECAFE
conc o u n trie s a
su m p tio n
1,522
1,478
1,656
1,793
1,318
1,364
+ 393
+ 341
+ 99
+ 38
+
6
+ 15
1,772
1,662
1,584
1,664
1,218
1,273b
S o u r c e : I n t e r n a t i o n a l R u b b e r S tu d y G ro u p .
a.
b.
1.
2.
A lth o u g h t e a p ric e s s h o w e d a d e clin e e a r ly in 1955,
y e a r w ou ld p r o b a b ly b e w ell a b o v e t h a t f o r 1953.
T h e d o w n -tr e n d o f 1952 w a s sh o rt-liv ed .
th e a v e r a g e f o r th e
C o m p ris e s r e t u r n s f o r C a m b o d ia , C ey lo n , I n d ia , I n d o n e s ia , M a la y a ,
S a r a w a k a n d V ie t- N a m ( f o r s o u th V ie t- N a m o n ly in 1955) a n d e s tim a te s
f o r B ru n e i, B u rm a , N o r t h B o rn e o a n d T h a ila n d b a se d o n n e t e x p o r ts .
E s tim a te s b a se d o n J a n - J u n f o r C am b o d ia.
Owing to increased consum ption and the narrow ing of
the gap between production and consum ption, prices started
rising from the second half of 1954. The December 1954
price of R.S.S. No. 1 at Singapore was 54 per cent higher
than the price in January 1954. D uring 1955, with consumption in the first eight m onths exceeding production, prices
continued to rise. The August price of R.S.S. No. 1 at
Singapore was 45 per cent higher than in Jan u a ry 1955 and
nearly 84 per cent of the average price in the peak year 1951.
CHAPTER 2.
CURRENT ECONOMIC SITUATION
Higher prices since 1954 and larger volume of exports
have brought about sharp increases in foreign-exchange
earnings. While prices may remain firm for some time
because the present consumption of rubber (including
synthetic) is likely to be high in relation to production, the
long-run interests of the producing countries lie in securing
increases in output at lower unit costs.1
Tea
The continuing upward trend of tea production persisted
in 1954, when total production in the principal producing
countries of the region exceeded the pre-war (1934-38) average
by more than 30 per cent.2 Post-war increases in production
have been secured largely through adoption of improved
agricultural practices, use of higher yielding varieties and
intensive pluckings. In 1955, total production in the first
nine months was slightly higher than the corresponding figure
for 1954.
During recent years, consumption has also increased
appreciably, in both the exporting and the importing countries.
While substantial increases in domestic consumption in countries like India have tended to limit the supplies available
for export, the volume of exports has increased since 1949
in almost every case. In 1954, total exports from the four
major exporting countries3 at 415,000 tons, which almost
maintained the récord exports of 1953, exceeded the 1937
exports by 31 per cent. In 1955, exports in the first nine
months at 233,600 tons were 8 per cent lower than the
corresponding figure for 1954.
Almost all the m ajor
exporting countries shared in the decline.
During 1953-54, increases in world demand for tea
resulted in both larger volume of exports and higher prices
and, as a consequence, foreign exchange earnings were at
record levels. However, during 1955, both volume and prices
of exports declined. Thus, tea prices in London tended to
rise during 1953-54 and were, by early January 1955, nearly
twice the average price for 1951; thereafter, consumer resistance became apparent and traders reduced purchases. Despite
lower imports in January 1955, stocks in the United Kingdom
at the end of that month were large. Price started declining
in January and the downtrend continued almost throughout the
first half of 1955. In the third quarter of 1955, prices in
the London auctions started rising and by September the price
of North Indian tea was only 1 per cent lower than in
September 1954 and 15 per cent lower than the peak price
of January 1955.4 It is im portant to note, however, that
London prices do not always reflect fully the changes in
prices in exporting countries. Thus, the Calcutta export price
(including export duty) of leaf tea on 26 September 1955
was nearly 30 per cent5 lower than the price a year earlier
and 42 per cent lower than the average price in January
1955.6
1.
2.
3.
4.
5.
6.
In A u g u s t 1955, th e p ric e o f n a t u r a l r u b b e r w as n e a rly tw ic e th e p r ic e
o f “ g e n e r a l p u r p o s e ” s y n th e tic ru b b e r. M o reo v er, p ro d u c tio n o f s y n th e tic
r u b b e r in th e f ir s t h a lf o f 1955 w a s n e a r ly 36 p e r c e n t h ig h e r t h a n a y e a r
e a rlie r.
In m a in la n d C h in a , te a p ro d u c tio n in 1954 w as r e p o rte d to b e 30 p e r c e n t
h ig h e r t h a n in 1950, b u t s till o n ly 54 p e r c e n t o f n o rm a l p re-1937 p ro d u c tio n . ( P e o p le ’s D a ily , 20 M a r c h 1 9 5 5 ).
Ceylon, In d ia , In d o n e s ia a n d P a k is ta n .
U n ite d N a tio n s , M o n th ly B u lle tin o f S ta tis tic s .
I n te r n a tio n a l T e a C o m m itte e , M o n th ly S ta tis tic a l S u m m a r y .
T h e f a c to r s t h a t h a v e re c e n tly in flu en c e d th e p ric e s in th e L o n d o n
a u c tio n s a r e n o t p re c is e ly k n o w n . H o w e v e r, th e B o ard o f T r a d e in th e
U n ite d K in g d o m h a s r e f e r r e d f o r in v e s tig a tio n th e q u e stio n o f t e a s u p p lie s in th e U n ite d K in g d o m to th e M onop o lies a n d R e s tric tiv e P r a c tic e s
C om m ission.
17
The sharp price reductions that occurred in the earlier
part of the year focused attention on the problems of improvement of quality and the competitive position of the tea
industry. The Indian Planters’ Association requested its
members to improve the quality of their tea, while in Ceylon
similar action was taken by the Tea Controller. Export
duties were reduced during April7 both in Ceylon and in
India and, in the former country, the government also tried
in May to support the price of tea sold for export at Rs.1.5
per 1b. in the Colombo auctions. However, early in June,
export duty was reduced further in Ceylon and the exportprice support scheme was abandoned. Subsequently, when
tea prices increased in the second half of the year, export
duties were increased, both in Ceylon and in India. Although
tea prices showed some increase in the second half of the year,
the price spread between low and superior qualities also
widened. And this brought to the fore, once again, the
problem of improving the quality of tea.
Jute8
For the second season in succession, the 1954/55 jute
production in the region remained well below the pre-war
(1934-38) average. Following the sharp increase of supplies
over demand and steep fall in prices in the 1951/52 and
1952/53 seasons, the Government of Pakistan took steps to
restrict production. This action, coupled with less favourable
weather conditions and less favourable prices, helped to keep
down the total production in the region. Exports of raw jute
from Pakistan in these two seasons were generally stable, but
domestic consumption increased. Thus, reduced production
coupled with increased demand (exports plus domestic consumption) helped bring about a significant reduction in carryover stocks.
Total 1954/55 supplies in Pakistan were estimated at
around 1.17 million tons. Exports during this season, at
932,000 tons, though 72,600 tons more than in the previous
season, were 29,030 tons lower than in 1952/53. Domestic
consumption at 125,000 tons was nearly twice the consumption
in 1953/54.
Consequently, the carry-over stocks at the
beginning of the 1955/56 season were estimated at about onethird of the stocks a year before.
In India, the jute situation in the 1954/55 season was
characterized by sharp increases in production of jute m anufactures (more than 15 per cent over 1953/54) and a high
level of exports. Mill consumption of raw jute at around
1.07 million tons exceeded the consumption in 1953/54 and
1952/53 by 15 and 10 per cent respectively.9 Exports of
jute goods at 725,800 tons, though 1 per cent lower than the
exports of 1953/54, were nevertheless 16 per cent higher than
1951/52 exports. Exports of sackings have tended to increase
in the past two seasons and the 1954/55 exports were 19 per
cent higher than in 1952/53, whereas the 1954/55 exports of
hessian declined by 22 per cent from the previous season,
although they stood at 13 per cent above the 1952/53 figure.
These tendencies continued in the first two months of the
1955/56 season also. Total production of jute manufactures
7.
8.
9.
In In d ia , a s lid in g scale o f e x p o r t d u ty w as in tro d u c e d on 1 A p ril 1955
a n d e x p o r t d u ty fr o m t h a t d a te w o rk e d o u t to 8 a n n a s p e r lb a s a g a i n s t
10 a n n a s in M a rc h . T h is w as su b se q u e n tly red u ced to 6 a n n a s . H ow ever,
fr o m 1 O c to b e r th e e x p o r t d u ty w a s in c re a se d to 8 a n n a s . I n Ceylon, th e
e x p o r t d u ty w a s re d u c ed fr o m R s 1.3 p e r 1b to R s 1 p e r lb in A p ril a n d
w a s f u r t h e r re d u c e d to 50 c e n ts in J u n e . In S e p te m b e r, th e d u ty w as
ra is e d to 65 cen ts.
P r o d u c tio n a n d tr a d e s ta tis tic s re la te to th e c ro p y e a r fr o m J u ly to J u n e .
D u r in g 1954/55, d o m e stic s u p p lie s e s tim a te d a t a ro u n d 1.11 m illion tons
w e re s u p p le m e n te d by im p o r ts o f 226,800 tons.
ECONOMIC SURVEY OF ASIA AND TH E FAR EAST, 1955
18
In Japan, the biggest im porter of raw cotton in the region,
consumption gradually recovered towards the pre-war level
and in 1953/54 was more than one-third higher than in
1951/52. However, in 1954/55 consumption was deliberately
curtailed in order to reduce the accumulated stock of cotton
Prices of raw jute, which declined in 1952 and early textiles.8 Im ports tended to increase until 1953/54, but
1953, tended to firm up thereafter except for a tem porary declined by about 16 per cent in 1954/55 com pared to the
decline in the beginning of 1954/55, caused by expectations previous season.9 Of the total im ports of cotton in 1954/55
of large crops in both India and Pakistan. The latter estimates about 15 per cent came from the countries of the region as
of supplies were subsequently marked down owing to damage against 19 per cent in 1953/54.
to crops by floods, while demand was expected to be better
In Pakistan, consumption has increased rem arkably in
than in the previous season; prices started rising again from
September onwards and by January 1955 the price of white the last few seasons and am ounted in 1954/55 to nearly
jat bottom at Narayanganj (Pakistan) stood at Rs 26 per three times the consumption in 1952/53. Production, on the
m aund1 or nearly 24 per cent higher than in January 1954. other hand, has fallen during the last three years and, as a
From March 1955, however, prices started declining owing to consequence, the supplies of cotton (particularly mediumexpectations of a bum per 1955/56 crop, but showed some staple) available for export tended to go down (particularly
increase after the devaluation of the currency in Pakistan. in 1954/55).
In September, the price of middle quality jute at Narayanganj
TABLE 10
stood at Rs 2 4 /1 0 per maund.2
RAW COTTON SUPPLIES AND CONSUMPTION,
While production of raw jute is expected to show a
1952/53— 1955/56
substantial increase in the 1955/56 season,3 steps have also
(’000 b ale s)a
been taken to encourage exports of both raw jute and jute
manufactures. In Pakistan, the competitive position of raw
ConI n itia l
P roducI m p o rt s
E x p o rt s
jute, at least in the short run, has been improved following
sum p tion
s to c k
tion
devaluation of the currency, while in India the competitive
position of jute manufactures has improved as a result of the INDIA
563
3,875
1952/53 .
.
.
293
2,975
2 ,000
abolition of export duty on jute manufactures.4
during July-August 1955 was over 6 per cent higher than
the corresponding production for the previous season, while
total exports of hessian and sackings were about 8 per cent
higher.
Cotton5
During recent years, the over-all production and consumption of cotton in the region have tended to increase but the
increases registered and the consequent changes in im port
requirements or export availability have varied considerably
as among countries. Generally speaking, im port requirements
of im porting countries have tended to go down owing to
increases in domestic production a n d /o r limited changes—
sometimes reductions— in consumption. On the other hand,
the supplies available for export (particularly of mediumstaple variety) in the main surplus country, Pakistan, have
tended to go down mainly because of increased domestic
consumption.
Thus, in the case of India, production in the 1954/55
cotton season was over 30 per cent higher than in 1952/53,
while the corresponding increase in consumption was less
than 6 per cent. Imports in 1954/55 were well below those
in 1952/53 and were limited mainly to long-staple varieties
that were not available domestically.
In m ainland China, production in the 1954/55 season at
1,040.000 tons was 11 per cent lower than in 1953/54 and 20
per cent lower than in 1952/53.6 Imports in 1954/55 at
33,000 tons, though 25 per cent lower than in the previous
season, equalled the 1952/53 imports.7
1.
2.
3.
4.
5.
6.
7.
1 m a u n d = 37.34 k g .
T h e e x p o r t d u ty on r a w ju t e w a s in c re a s e d fr o m R s 3 to R s 4 p e r m a u n d
i n A u g u s t.
I n P a k is ta n , p r e lim i n a r y 1955/56 e s tim a te s o f a r e a u n d e r j u t e s h o w a n
in c re a s e o f 30 p e r c e n t o v e r th e c o r re s p o n d in g fig u r e f o r 1954/55.
P r i o r t o 1 A u g u s t 1955 t h e e x p o r t d u ty a m o u n te d t o R s 80 p e r t o n on
s a c k in g s a n d to R s 120 p e r to n o n h e s s ia n . I n a d d itio n to t h e a b o litio n
o f e x p o r t d u tie s , m o d e r n iz a tio n o f p l a n t is b e in g f a c ilita te d . T h e
N a tio n a l I n d u s t r i a l D e v e lo p m e n t C o rp o r a tio n w ill p ro v id e lo n g -te r m low i n t e r e s t lo a n s to th e j u t e m ill in d u s tr y f o r m o d e rn iz a tio n o f p la n t.
P r o d u c tio n a n d t r a d e s ta t is ti c s re la te t o th e c ro p y e a r f r o m A u g u s t to
J u ly .
T h e s h o r tf a ll w a s due to flood d a m a g e . See i n f r a , c h a p t e r o n C h in a .
I m p o r ts in th e p a s t t h r e e se a s o n s w e re w ell below th e im p o r ts in 1951/52.
1953/54 .
.
1954/55 .
.
1955/56 .
.
JA P A N
1952/53 .
.
1953/54 .
.
1954/55 .
.
PA K IST A N
1952/53 .
.
1 953/54 .
.
1954/55 .
.
1955/56 .
.
TOTAL
3 COU NTR IES
1952/53 .
.
1953/54 .
.
1954/55 .
.
.
.
.
3,770
4 ,420
.
.
.
-—
—
.
.
.
.
1,540
1,200
1.310
365
400
250
235
.
.
.
4,515
4,970
5.730
2,889
2,293
2,319
-
1,370
1,550
2 ,140
486
495
524
523
519
2,064
2,443
2.050
S o u r c e : I n t e r n a t i o n a l C o tto n A d v is o ry
a. 1 b a le = 478 lb = 216.8 k g .
91
220
_
—
-
3,985
4 .1 00
2 ,065
2,441
2,120
-—
1,275
898
650
230
450
675
2,627
2,929
2,545
1,568
989
870
6,170
6,876
6,895
—
—
C o m m itte e ,
Cotton prices at K arachi rose in the last quarter of 1954,
but started declining in 1955 in sympathy with the down-trend
in world m arkets.10 From June to August prices turned upward
and the rise was marked immediately after devalution of the
Pakistan rupee. However, in September, prices again showed
some decline. The price of 239F (P u n jab ) roller-ginned
cotton at Rs 9 0 /1 4 per m aund of 37.34 kg was about 20
per cent higher than a year before.11
8.
I n J a p a n , p ro d u c tio n a n d e x p o r t o f r a y o n p ie c e g o o d s a r e b e in g in c re a se d .
T h u s , d u r i n g 1951/54 p r o d u c tio n in c re a s e d b y o v e r 50 p e r c e n t a n d
e x p o r ts a lm o s t doubled. I n t h e f i r s t h a l f o f 1955, p ro d u c tio n a n d e x p o r ts
w e re h ig h e r t h a n in t h e f i r s t h a l f o f 1954. ( I n t e r n a t i o n a l C o tto n A d v iso ry
C o m m itte e , C o tto n : Q u a r te r ly S t a t is tic a l B u l l e t i n ) .
9. A lth o u g h c o tto n c o n s u m p t io n d e clin ed in J a p a n d u r i n g t h e 1954/55 season ,
in a n u m b e r o f o t h e r c o u n tr ie s o r a r e a s — S o u th K o re a , H o n g K o n g a n d
C h in a : T a i w a n — c o n s u m p t io n in 1 9 5 4 /5 5 e x ce e d e d a p p r e c i a b ly t h e co n s u m p tio n in 1952/53.
10. A c c o r d in g to th e I n t e r n a t i o n a l C o tto n A d v is o ry C o m m itte e in W a s h in g to n ,
“ C o n tr ib u ti n g to th i s ( d o w n - t r e n d in w o rld c o tto n m a r k e t s ) w e r e th e
e n h a n c e d p r o d u c tio n p r o s p e c ts w i t h i n t h e f r e e w o rld b u t m o r e i m p o r t a n t
w a s t h e d o w n - tu r n in d e m a n d a r i s i n g o u t o f s u r p l u s d is p o s a l d iscu ssio n s
in t h e U n ite d S t a t e s ” . ( C o t t o n : M o n th l y R e v ie w o f th e W o r ld S i tu a ti o n ,
J u n e - J u l y 1955, p. 1 8 ) .
11. P r ic e s o n w o rld m a r k e ts d e c lin e d i n S e p te m b e r b e c a u s e o f t h e d e s ir e to
d is p o se o f s to c k s b e fo re t h e b e g in n in g o f t h e s p e c ia l m illio n -b a le e x p o r t
p r o g r a m m e in th e U n ite d S ta te s . A n a d d itio n a l f a c t o r in t h e case o f
P a k i s t a n w a s p ro b a b ly t h e in c r e a s e in e x p o r t d u ty f r o m R s 90 t o R s 135
p e r b a le o n 22 A u g u s t 1955.
CHAPTER 2.
CURRENT ECONOMIC SITUATION
Precise estimates of the 1955/56 supply situation in the
region are not yet available,1 but the outlook for export prices
is weak in view of the expected increases in world production
as also of a number of other factors. In the United States,
despite a 14 per cent reduction in area, 1955/56 production
has shown a 2 per cent increase over the previous season and
total supplies will be at an all-time high. Elsewhere in the
world, also, production is expected to increase.
More
important, however, is the reported decision of the United
States Government to export one million bales of all grades of
cotton having a staple length of 15/16" or less on an opencompetitive-bid basis. This has special significance because
the export surplus of cotton available with the producing
countries of this region consists largely of medium- and shortstaple cottons. Another equally im portant factor is that
considerable amounts of dollar funds will be available in
1955/56 to a num ber of countries in the region, for buying
United States’ cotton.2
Copra3
During recent years copra production in the principal
producing countries of the ECAFE region has generally
remained well below the 1951 peak, owing to various factors
including typhoons, droughts and plant diseases. However,
over-all production in the region in 1954 was appreciably
better than in the previous year, and 1955 production was
not expected to be materially different from that of 1954.
Both in the Philippines and in Ceylon, production promised
to be larger than in 1954 and the increases in these countries
probably offset any short-falls in production elsewhere in the
region.
Owing to short-falls in production or increased domestic
consumption (as in Indonesia) the total volume of exports
from the surplus countries has tended to go down in recent
years. However, in 1954, total exports of copra and coconut
oil from the surplus countries in the region showed a sharp
increase over the previous two years, owing to increased
production of copra in the Philippines. In the first seven
months of 1955, total exports from the Philippines at 315,000
tons (oil equivalent) were 6 per cent higher than in the
corresponding period of 1954. The exports from Ceylon, also,
showed a sharp increase in 1955 and amounted in the first
nine months to 95,460 tons (oil equivalent) or about 33 per
cent more than in the corresponding period of 1954. Exports
from Malaya in the early part of the year were at nearly
the same level as in 1954. On the other hand, exports from
Indonesia maintained the down-trend noticeable since 1952
1.
On
m a in la n d C h in a r a w c o tto n p r o d u c tio n , a f t e r h a v in g fa lle n in 1954/55
by 20 p e r c e n t b elow th e 1952/53 level, is officially e s tim a te d to h a v e ris e n
b y o v e r o n e t h i r d in 1 9 5 5/56 a b o v e t h e p re c e d in g c ro p y e a r . (N C N A ,
P e k in g , 18 D e c e m b e r 1 9 55).
2.
A c c o r d in g t o C o t t o n :
M o n t h l y R e v i e w o f t h e W o r l d S i t u a t i o n (p u b lish e d
by t h e I n t e r n a t i o n a l C o tto n A d v is o ry C o m m itte e , W a s h i n g t o n ) , V ol. 9,
N o. 2 d a te d S e p te m b e r 1955, d o lla r fu n d s a v a ila b le f o r c o tto n e x p o rts
d u r in g 1 955/56 ( a s o f 25 A u g u s t 1955) to c ou n tr i e s o f ohe re g io n a r e as
fo llo w s :
C o u n try
IC A
C h in a : T a iw a n
In d ia
Japan
K o re a ( S o u th )
P a k is ta n
5.8
15.7
A g r ic u ltu r a l T r a d e
D e v e lo p m e n t a n d
A s s is ta n c e A c t
E x p o r t- I m p o r t
B ank
T o ta l
(m illio n d o lla rs )
T o ta l
3.
—
—
—
21.5
and in the first half of 1955, at 78,000 tons (oil equivalent),
were 25 per cent lower than the corresponding figure for
1954. However, stocks of copra were reported to have been
built up in East Indonesia in the first half of 1955 and
there was a possibility of exports increasing in the second
half of the year.
The down-trend in prices of copra and coconut oil, which
started early in 1954, continued in 1955. Thus, the price of
copra in the Philippines during September 1955 stood at
P248 per ton as against average prices of P308 for 1954
and P366 for 1953. This down-trend was in sympathy with
the general decline in international market prices of fats, oils
and oil-seed which started early in 1954.
Sugar
During recent years, the total production of sugar in the
surplus countries to the ECAFE region has tended to increase.
The increases registered from year to year have varied with
the country and there have also been some set-backs. Thus,
in 1954, production of sugar in the Philippines was at an
all-time high and was over 50 per cent greater than in 1951.
The estimated 1955 production, though 4 per cent lower than
in 1954, is, nevertheless, the second highest on record in the
post-war years. On the other hand, production in China:
Taiwan showed a sharp decline in 1954, but in the first half
of 1955 was 17 per cent higher than the corresponding production a year before.4 In Indonesia, the up-trend in production
during recent years is likely to be maintained in 1955.
Exports from surplus countries have also tended to
increase until recently. Thus, 1954 exports from the Philippines were over 50 per cent higher than 1951 exports and
exceeded 1938 exports by over 6 per cent. In 1955, exports
in the first half of the year were 18 per cent greater than
the corresponding figure for 1954. In the case of China:
Taiwan, 1954 exports, though about 35 per cent lower than
the record exports of 1953, were, nevertheless, up to the
permissible quota under the agreement. In the first half of
1955, exports were 13 per cent lower than the corresponding
figure for 1954. Exports from Indonesia in 1954 were at a
post-war high.5
Japan is the principal sugar-importing country of the
region. During recent years its imports have increased and
so, also, has the share of its imports from within the region.
Thus in 1954, its total imports at 1,012,000 tons were 28
per cent higher than its 1953 imports; 54 per cent of the
1954 imports came from the surplus countries of the region
as against 39 per cent in 1953.6 This sharp increase in the
share of imports from the countries of the region was
attributable to a large increase in imports from Indonesia.
In the first eight months of 1955, of total imports of 677,000
tons about 46 per cent came from the surplus countries of the
region.
The down-trend in sugar prices observable since 1952
slowed down in 1954 and 1955. Prices have tended to
stabilize around the minimum price fixed under the Inter4.
—
—
34.1
9.4
21.4
60.0
64.9
60.0
—
—
P r o d u c tio n fig u re s r e la te t o t h e c ro p y e a r fr o m J u ly to J u n e .
5.8
15.7
94.1
9.4
21.4
146.4
19
5.
6.
S ince 1954, p ro d u c tio n of s u g a r in th e R ep u b lic o f C h in a h a s been
in fluenced to a n in c re a s in g e x t e n t b y th e o b lig a tio n s , in r e s p e c t o f sto ck s
a n d e x p o r ts , u n d e r th e I n t e r n a t i o n a l S u g a r A g re e m e n t, fr o m w h ic h it
p ro p o s e d to w ith d r a w its m e m b e rs h ip a t th e e n d o f N o v e m b er 1955. T h e
case o f t h e P h ilip p in e s is, h o w e v er, d iff e r e n t sin ce its e x p o rts to th e
U n ite d S ta te s , w h ic h a c c o u n t f o r th e b u lk o f its e x p o rts , a r e o u tsid e th e
sco p e o f th e I n te r n a tio n a l S u g a r A g re e m e n t.
F o r 1955, p re c is e in f o r m a tio n is n o t y e t a v ailab le sin ce th e b u lk o f th e
e x p o rts ta k e p la c e in t h e seco n d h a l f of th e y e ar.
P e r c e n ta g e s ta k e n i n te r m s o f v alue.
20
ECONOMIC SURVEY OF ASIA AND THE FAR EAST, 1955
national Agreement. Although the over-all im port demand
has improved appreciably in 1955 owing to large imports
by the USSR,1 prices on international markets have not
increased significantly above the minimum.
of industrial production is being planned (54 per cent in
six years by 1960), with emphasis on heavy and chemical
industries.
Pakistan achieved remarkable progress in the development of cotton textile and jute industries.3 The Philippines
also has achieved a substantial expansion in certain lines of
industrial production in recent years. In most other countries
of the region, where industrial development is only in the
early stages, a steady and moderate progress was achieved
in several lines of production.
INDUSTRIAL PRODUCTION
Current developments
Industrial production continued to increase in most
countries of the region in 1955. Available indices of industrial
| production showed that among the leading industrial countries
in the region— China, India and above all Japan— the rate of
increase since 1952 appears to have been highest in China.
In China the first Five-Year Plan (1953-57) on the
mainland envisages an increase in industrial production of
98.3 per cent or an average annual growth rate of 14.7 per
cent during the five-year period. During 1953-55, the first
three years of the plan, the index of industrial production
increased at a rapid pace (17.5 per cent annually) to 162
(1 9 5 2 = 1 0 0 ) ; this increase is reported to have been secured
prim arily by making fuller use of the existing capacity of
industrial establishments.2 In Taiwan, after a marked increase
registered in 1953, industrial production rose less rapidly in
1954 and 1955.
TABLE
11
INDUSTRIAL PRODUCTION INDEX, 1953-1955
In d e x (1952 = 100 )
C hina:
T aiw an .
M a in la n d b
. . . .
. . . .
In d ia
Japan
P akistan
P hilippines .
W o rld
.
.
.
.
Percentage increase
o ver p rev io u s y e a r
1953
1954
1955a
1953
1954
1955a
130.6
131.4
104.9
122.0
146.8
113
136.7
153.7
113.7
128.6
178.1
127
146.3
162
123.5
137.2
4.7
16.7
8.3
5.4
21.3
12.3
7.0
5.4
134
30.6
31.4
4.9
22.0
46.8
13.0
5.5
107
107
116
7. 0
0
8. 4
8.0
6.6
N o te :
a.
b.
F ig u r e s f o r w o rld in d e x o f in d u s tr ia l p r o d u c tio n exclu d e th e U S S R ,
e a s te r n E u r o p e a n d m a in la n d C h in a .
A v e ra g e o f f ir s t s ix m o n th s f o r th e P h il ip p in e s a n d th e w orld. A v e ra g e
o f fir s t 8 m o n th s f o r I n d ia ; a v e r a g e o f fir s t 9 m o n th s f o r C h in a : T a iw a n
and Jap an .
L i F u - c h u n , ‘R e p o r t on th e F iv e - Y e a r P la n to Y o u n g A c tiv is ts ’ C onf e r e n c e ’, in N C N A (N e w C h in a N e w s A g e n c y o r H s i n h u a ) , P e k in g ,
28 S e p te m b e r 1955. F ig u r e f o r 1955 is t a r g e t . T h e in d e x r e f e r s to th e
g ro s s v a lu e o f in d u s tr ia l p r o d u c tio n w h ic h in c lu d e s som e double c o u n tin g .
In India, although the rate of increase in industrial
production between 1952 and 1955, achieved more by the full
utilization of capacity than by its expansion, was not as
fast as in China, it has lately gathered momentum. More
emphasis was laid, under the First Five-Year Plan, on agriculture and community development, irrigation, power, transport
and communications than on industry. However, under the
draft Second Five-Year Plan an ambitions expansion of
industrial production is being envisaged (67 per cent in five
years in mining and factory enterprise sectors), with emphasis
on heavy industry in the public sector.
In Japan, industrial production continued its upward
trend in 1955 owing largely to an increase in the export
demand. Under the draft Six-Year Plan, a further expansion
1.
2
E x p o r t s u p p lie s a v a ila b le f r o m c o u n trie s o f e a s te r n E u r o p e w e re lo w e r
i n 1955 t h a n in t h e p re v io u s y e a r.
L i F u - c h u n , ‘R e p o r t o n t h e F iv e - Y e a r P la n to Y o u n g A c tiv is ts ’ C onf e r e n c e ’, in N C N A , P e k in g , 28 S e p te m b e r 1955.
Lines of industry which have been growing recently or
whose development is being planned in countries of the region
may be classified into the following four categories:
Firstly, there is a group of industries which has been
extensively developed in the region m ainly with a view to
achieving self-sufficiency in the supply of essential consumer
goods.
As exemplified by the cotton-textile industry in
Pakistan, the development of this group of industries has,
in several cases, been related to the availability of domestic
raw materials.4 The establishment of sugar-refining and paper
industries in several countries may also be regarded as
examples in this category,5 as also leather, vegetable-oil and
other food-processing and pharmaceutical industries.
Secondly, a group of industries, mostly connected with
direct investment by foreign capital in the region, are engaged
in processing imported raw materials or assembling imported
components. Oil-refining in China: Taiwan, India and jap an ,
automobile assembling in India, Japan and the Philippines, a
refrigerator assembly plant and m anufactures of electric
appliances in the Philippines come under this category. Aside
from the factor of monopoly in the petroleum industry, development of this type of industry has often been induced by high
rates of im port duty on finished goods in countries of the
region.
Thirdly, there is a group of industries which aim at
meeting the needs of economic development. The cement
industry, which has been extensively developed recently, is an
example from this category. As shown in table 12, the production of cement in the region has increased considerably during
the last several years. Even excluding Japan, China and India,
countries of the region expanded their production two-fold
between 1948 and 1951 and again by 40 per cent between 1951
and 1954. But in order to meet the progressively increasing
demand, most of these countries continued to im port a substantial proportion of their needs, m ore from within the region
lately than from outside. Iron and steel, engineering, and
3.
J u t e m a n u f a c tu r e s in c r e a s e d f r o m 18,000 t o n s in 1951/52 to 54,000 to n s
i n 1954 a n d 85,000 to n s a t a n a n n u a l r a t e in t h e f i r s t five m o n th s o f 1955.
4. A c c o r d in g to th e c e n s u s o f m a n u f a c t u r i n g i n d u s tr ie s in P a k i s t a n (1 9 5 3 ),
o f th e to ta l v a lu e o f m a te r ia ls c o n su m e d 83 p e r c e n t w a s s u p p lie d f r o m
in d ig e n o u s s o u rc e s .
(S e e P a k is ta n T r a d e , A u g u s t 1955, p p . 15-18).
5. A s u g a r f a c to r y in A f g h a n i s t a n a n d tw o s u g a r m ills ( w i t h a d a ily c r u s h in g c a p a c ity o f 2,500 to n s o f s u g a r - c a n e ) in B u r m a a r e u n d e r c o n s tr u c tio n . I n C ey lo n th e e s ta b lis h m e n t o f a s u g a r f a c t o r y w i t h a c a p a c ity of
25,000 to n s o f s u g a r a n n u a l ly is b e in g c o n te m p la te d . T h e P a k is ta n I n d u s tr ia l D e v e lo p m e n t C o r p o r a tio n ( P I D C ) is p l a n n i n g t e n s u g a r f a c to rie s
o f 10,000 - 12,000 t o n s c a p a c ity e a c h , o f w h ic h o n e w e n t i n t o o p e r a tio n in
1955 a n d tw o m o r e a r e c u r r e n t l y u n d e r c o n s tr u c t io n . I n T h a ila n d , a s u g a r
f a c to r y w ith a d a ily c r u s h i n g c a p a c i t y o f 1,100-1,500 t o n s o f s u g a r - c a n e is
b e in g e sta b lis h e d . I n C e y lo n , a p a p e r f a c t o r y w ith a n a n n u a l r a te d
c a p a c ity o f 3,750 t o n s is e x p e c te d t o b e c o m p le te d in 1956. P r o d u c ti o n of
p a p e r in C h i n a : T a iw a n in c r e a s e d s u b s t a n t i a l l y f r o m 15,000 to n s in 1950
to 29,600 to n s in 1954 a n d 30,900 to n s a t a n a n n u a l r a t e in t h e f i r s t nin e
m o n th s o f 1955. A s t a r t h a s b e e n m a d e o n t h e c o n s tr u c t io n o f a c a r d b o a rd f a c to r y w ith a n a n n u a l c a p a c i t y o f 1,500 t o n s in In d o n e s ia . I n so u th
K o re a , p a p e r p ro d u c tio n ro se f r o m 34,500 t o n s in 1 953/54 t o 64,400 tons
in 1954/55. I n P a k is ta n , th e o u t p u t o f d if f e r e n t v a r ie tie s o f p a p e r in c re a s e d s u b s ta n tia lly d u r i n g 1 954/55, a s a r e s u l t o f fu ll o p e r a t i o n o f the
K a r n a p h u l i p a p e r m ills ( u s i n g b a m b o o a s r a w m a t e r i a l ) a n d o f tw o
p a p e r a n d b o a rd m ills; th e e s ta b lis h m e n t o f a p ilo t n e w s p r i n t p l a n t is
a lso b e in g u n d e r ta k e n b y th e P ID C .
C H A P T E R 2.
C U R R E N T ECONOMIC S IT U A T IO N
TABLE
21
12
CEMENT PRODUCTION, IMPORT AND EXPORT, 1948, 1951 AND 1954
(’000 tons)
E x p o rts
Im p o rts
P ro d u c tio n
T o ta l
1948
C h in a:
T aiw an . . . .
M a in la n d a
I n d i a b ...........................................
J a p a n a ....................................
O th e r ECAFE co u n triesc
T o t a l ...........................................
1951
C h in a: T a iw a n . . . .
M a in la n d
I n d i a b ...........................................
J a p a n ...........................................
O th e r ECAFE c o u n triesc
T o ta l
. . . . . . .
1954
C h in a: T a iw a n . . . .
M a in la n d
I n d i a b ...........................................
J a p a n ...........................................
O th er ECAFE co untriesc
T o t a l ...........................................
a.
b.
c.
236
817
1,578
3,277
705
6,613
389
2,602
3,247
6,547
1,407
14,192
536
4,605
4,469
10,675
1,975
22,260
1949 fig u res.
Y e a r s b e g in n in g A p ril.
C o m p ris in g B u rm a , C am b o d ia, Ceylon, H o n g
( S o u t h ) , L a o s , M a la y a , P a k is ta n , P h ilip p in e s ,
F ro m c o u n tr ie s
of t h e r e g io n
F ro m c o u n trie s
o u ts id e
t h e re g io n
T otal
To c o u n trie s
of th e r e g io n
To c o u n tr ie s
o u ts id e
t h e re g io n
32
149
71
—
—
657
6
—
209
5
—
831
429
30
30
8
—
1,308
4
—
694
Fourthly, there are industries producing mostly for
export, especially in Japan and Hong Kong, where the proportion of manufactured goods exports in total export is higher
than in other countries like India, Pakistan and China. The
case of jute manufacturing in Pakistan exemplifies a trend,
lately observable in the region, of development of the processing
of those raw materials which have been the special export
commodities of the region. Other examples of this kind are
rubber re-milling plants and tyre manufacture which are
being planned in Indonesia.
In the sections that follow, m ajor developments in fuel
and power, iron and steel and cotton textiles are reviewed.
Fuel and power
The known coal resources of the region are rather meagre.
All countries of the region have some, though the quality and
quantity vary, with low-grade coals predominating. Only
China, India, Japan, Korea and Viet-Nam have substantial
reserves of high-grade coals. Crude-oil resources are also
limited, though in m ainland China, India and Pakistan, large-
—
488
1
—
402
4
—
614
455
77
431
100
24
9
51
22
29
60
834
72
38
511
67
22
323
5
24
23
1
102
905
53
86
753
46
16
152
7
B u rm a — 1948: O c t 1947-S ept 1948; 1951: O c t 1950-Sept 1951. C am bodia,
L aos, V ie t- N a m : 1954 fig u res f o r im p o r ts re la te to J a n - N o v . P a k is ta n f o r 1951, sea -b o rn e, y e a r b e g in n in g A p ril; o v e rla n d , y e a r b e g in n in g J u ly ;
f o r 1954, sea -b o rn e only. P h ilip p in e s -f o r im p o r ts , d e rived fig u res re la tin g
to im p o r t fr o m C h in a : T a iw a n a n d J a p a n only.
K o n g , In d o n e s ia , K o re a
T h a ila n d a n d V ie t-N a m .
basic chemicals (such as fertilizer and caustic soda) industries
are growing up in China, India, Pakistan and the Philippines,
and may be regarded as falling under this category. In
mainland China and India, the development of this type of
industry is receiving the greatest attention in the economic
development plans; in most other countries, however, it is
generally limited.
78
scale prospecting is currently being undertaken. On the other
hand, the region has an enormous potential in hydro-electric
power, the development of which has been receiving priority
in almost all countries of the region.
Coal: Production of coal in countries of the region has
been more or less stable in the last few years, except in
mainland China (see table 13). Output of coal in the region
in 1954 was about 171 million tons, or about 12 per cent of
world production.1 In China, the expansion of coal output
appears to have been fairly rapid. Under the First Five-Year
Plan, annual output on the mainland is scheduled to rise by
80 per cent from 63.6 million tons in 1952 to 113 million tons
in 1957. Emphasis is being laid on mechanization of coal
mines to raise productivity through wider use of coal combines,
mechanical cutters, pneumatic picks, etc. In India, production
of coal showed a moderate increase of 5 per cent between
1952 and 1955, as compared to an increase of 23 per cent
in the general index of industrial production during the same
period. However, with new emphasis on heavy industries in
the draft Second Five-Year Plan, increased coal production
is receiving larger attention. An ambitious programme to
expand coal output by 60 per cent, to 60 million tons by
1960, is included in the draft second plan. At the same time,
a committee of enquiry into the coal industry has recommended
immediate nationalization of all private collieries mining
metallurgical or high-grade coal. In Afghanistan, the government has plans to increase coal production. Production of
lignite started in 1955 in Thailand. In south Korea, coal
1.
E x c lu d in g th e U SSR .
ECONOMIC SURVEY OF ASIA AND TH E FAR EAST, 1955
22
production increased substantially from 890,000 tons in 1954
to 1,188,000 tons in 1955 (annual rate based on returns fr o m
January to J u ly ). In other countries of the region, there have
been no substantial increases in coal output in recent years.
In Japan, although the rehabilitation of the coal industry after
the war was fairly rapid, the output since 1953 declined from
48 million tons in that year to 44.2 million tons in 1954
and 42.6 million tons at an annual rate in the first half of
1955. The decline has been mainly due to the increased
competition of other industrial fuels, such as heavy oil and
electricity. Under the law for rationalization of the coal
industry, the government has been authorized to restrict the
output of coal and the opening of new pits and to control
prices, while the closing down of inefficient mines is facilitated
by the recently established Coal Mines Liquidation Board.
Owing mainly to natural deterioration in the condition of
mines, labour productivity has fallen below the pre-war level.
In order to reduce production cost to a point competitive
with that of other fuels, the draft Six-Year Plan envisages the
raising of labour productivity per worker per month from
12.5 tons in 1954 to 18.4 tons in 1960.
TABLE
13
COAL PRODUCTION, 1952-55
(million tons)
C h in a
T aiw an
1952
1953
1954
1955c
a.
b.
c.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2.3
2. 4
2.1
2. 3
M ainland b
63.5
69.3
83.3
92.9
Japan
In d ia
44.9
4 8 .0
44.2
42.6
36.9
36.6
37.4
39.0
O ther
ECAFE
countr i e s a
3.5
3.7
3.7
4.0
T o ta l
151.1
160.0
170.7
180.7
In c lu d in g C eylon, In d o n e s ia , K o re a ( s o u t h ) , M a la y a , P a k i s t a n , P h i l i p p in e s a n d V ie t-N a m .
C rude coal p ro d u c tio n .
A n n u a l r a t e b a se d o n J a n - J u n 1955 e x c e p t f o r m a in la n d C h in a , f o r w h ic h
th e a n n u a l t a r g e t is used.
Petroleum and gas: Production of crude petroleum in the
region is concentrated largely in Indonesia and British Borneo
(Brunei and S araw ak). In 1954, 16.4 million tons— or about
95 per cent of the crude oil production in the region excluding
mainland China— were produced in Indonesia and British
Borneo. In Indonesia, production continued to increase from
10.2 million tons in 1953 to 10.8 million tons in 1954 and
11.6 million tons at an annual rate in the first half of 1955.
Crude oil in Indonesia is produced and refined mainly by
foreign firms, and under the agreements1 on taxes and
company retention of exchange earnings between the governm ent and foreign oil companies, foreign firms have continued
to invest in expanding production. In British Borneo, output
of crude oil in 1954 was 4.8 million tons and remained at
the same level in early 1955. In Burma, production increased
substantially from 115,000 tons in 1951 to 176,000 tons in
1954. However, it is still fa r below the pre-war level of one
million tons. An additional refinery at Syriam with a daily
capacity of 682 kl at the initial stage, to be raised to 1,136
kl at the full operating level, is under construction and expected
to be completed in m id-1956.
the level of output itself is still quite low. Large-scale oil
prospecting, however, has been started in 1955 in Sinkiang
province (the Turfan and Dzungaria b asin s), Chinghai
province (Tsaidam basin) and Szechwan province.
In Japan, crude oil from domestic sources can meet only
a small fraction of the domestic demand. Stimulated by the
increasing dem and for petroleum as industrial fuel, the
expansion in refining capacity has been rapid in recent years.
Output of petroleum products continued to increase from 6
million kl in 1953 to 7.4 million kl in 1954 and 7.9 million
kl at an annual rate in the first half of 1955. The d raft SixYear Plan envisages the expansion of domestic production of
crude oil, and economy in the consumption of petroleum.
In India, under agreements between the government and
foreign firms, significant progress has been made in the
establishment of an oil-refining industry. The first two of
three refineries, with a combined capacity in full operation of
3.3 million kl of liquid petroleum products, have been built
and arrangements to build the third one, with a capacity of
refining 500,000 tons of crude oil, have been completed. A
project to establish a fourth is now under consideration.
Large-scale oil prospecting has also started in Assam under
the agreements concluded between the government and two
American firms. The USSR has also proposed to supply
equipment and expert assistance to the Government of India.
In Pakistan, output of crude oil at an annual rate of
264,000 tons in the first half of 1955 was virtually at the
same level as in 1954. Large-scale oil prospecting was also
started. The government signed oil-concession agreements with
foreign firms, providing for jo in t exploration in the Ganges
delta, the Indus valley and the area from K arachi along the
coast to the Iranian frontier. A substantial im provement in
fuel supply is expected from the completion of the initial
stages of the Sui gas project in September 1955.2
Electricity: The generation of electricity in the region has
increased considerably in recent years, owing to the progress in
the implementation of new projects in nearly all countries. As
seen in table 14, total output of electricity in the region
TABLE 14
ELECTRICITY CAPACITY AND PRODUCTION, 1952-55
C a p acity ,
1955a
('OOO
Ja p a n . . . .
C h in a: T a iw a n .
M a in la n d
In d ia . . . .
O th er ECAFE
co u n tries c .
T o ta l . . . .
T o tal, e x c l u d i n g
Japan
W orld total d .
kW )
13,390
560
1,900
3,500
1,660
21,010
7,620
Source:
P ro d u c tio n
( m o n th ly a v e r a g e in m illio n k W h )
1952
4,304
118
605
510
1954
4,986
150
914
627
1955b
5,156
158
1,047
683
335
5,872
467
7,124
447
7,491
1,561
85,771
2,132
100,753
2,335
118,800
In China, production of crude oil on the m ainland is
scheduled to increase to 2 million tons or by 360 per cent by
1957 under the F irst Five-Year Plan. As the production of
crude oil on any significant scale is of rather recent origin,
d.
N a tio n a l s t a t i s t i c a l p u b lic a tio n s a n d U n ite d N a tio n s , M o n h tl y B u lle tin
o f S ta tis tic s ; C h in a ( m a in la n d ) : L i F u - c h u n , 'R e p o r t o n th e FiveY e a r P la n to th e Y o u n g A c tiv is ts ’ C o n fe re n c e ’, in N C N A , P e k in g ,
28 S e p te m b e r 1955.
1954/55 f o r J a p a n , end-1955 t a r g e t f o r I n d i a a n d C h in a , a n d 1955
e s ti m a t e s f o r m o s t o t h e r c o u n trie s .
A n n u a l r a t e b a s e d o n J a n - J u n fig u r e s , e x c e p t f o r m a in la n d C h in a f o r
w h ic h t h e m o n th ly a v e r a g e o f t h e p la n n e d t a r g e t is t a k e n .
B u r m a ( c o n s u m p tio n in R a n g o o n a r e a ) , C a m b o d ia , C eylon, H o n g K ong,
In d o n e s ia , K o re a
( S o u t h ) , M a la y a , P a k i s t a n ,
P h il ip p in e s
( M a n ila ) ,
S in g a p o r e , T h a ila n d ( B a n g k o k ) a n d V ie t- N a m .
E x c lu d in g t h e U S S R .
1.
2.
See i n f r a , c h a p t e r o n P a k i s t a n .
a.
See, i n f r a , c h a p t e r o n In d o n e s ia .
b.
c.
CHAPTER 2.
CURRENT ECONOMIC SITUATION
increased by 21 per cent between 1952 and 1954, as compared
to an increase of 17 per cent in world output. If Japan is
excluded, however, the output of electricity in the region
(including mainland China) constituted only 2 per cent of
world output in 1954. Although the region has an enormous
hydro-electric power potential and considerable progress has
been achieved in recent years, the ratio of development to
potential resources is still extremely low. For example, in
India 2 per cent of the hydro-electric power potential of 40
million kW has been developed.1 The development of
electricity, however, is receiving highest attention as one of
the pre-requisite of economic development in almost all
countries of the region and a large number of projects to
expand generating capacity are being undertaken.
Various developmental projects of the region at present
envisage a total new generating capacity of roughly 10 million
kW, as against 21 million kW of existing capacity. If Japan
is excluded, the planned increase for other countries, 7.3
million, is nearly the same as their present capacity. Of
this, China, with an expansion programme on the mainland
under the First Five-Year Plan (1953-57) of 2.05 million kW
capacity and doubling in Taiwan of the 1952 capacity of
330,000 kW by 1957, and India, with a projected expansion
under the draft Second Five-Year Plan (1956/57— 1960/61)
of 2.5 million kW, take up the m ajor portion. Other countries,
however, also have relatively ambitious programmes of their
own. Pakistan, which had increased its installed capacity
from 72,000 kW in 1947 to 260,000 kW in March 1955, now
has various projects in progress which, when completed, will
add some 540,000 kW to the country’s capacity. In Malaya,
Singapore expects to complete by 1956 the Pasir Panjang
power station with a capacity of 150,000 kW and the Central
Electricity Board in the Federation has under construction
a steam power station with a capacity of 40,000 kW and is
planning two other stations with total capacity of 22,000 kW.2
Afghanistan is expected to increase its present capacity of
14,000 kW to 350,000 kW when the Kajakai and Arghandab
projects, the Sarobi hydro-electric scheme and other projects
are completed. The Philippines, which has recently completed
a second unit at the Maria Cristina hydro-electric station
(25,000 k W ), has now under construction the Ambuklao
hydro-electric scheme (75,000 kW ), and has just started the
construction of Unit No. 4 of the Rockwell station (32,000
k W ). In Burma, where the present generating capacity is
estimated at 30,000 kW in the Rangoon area and 14,000 kW
in 146 localities outside Rangoon, the government has an
extensive development programme including the Balu
Chaung hydro-electric plant with a capacity of 84,000 kW,
the diesel scheme for supply of electricity in 30 towns, and
the Rangoon power development projects (35,000 kW ).
Ceylon, where the government has long-run schemes to expand
generating capacity from 45,000 kW to 236,000 kW, expects
to complete by 1959, under the Programme of Investment, the
“Hydro-electric Scheme Stage IIA ” with a capacity of 25,000
kW, and is planning to start in 1956/57 the initial work on
Stage IIB with a capacity of 50,000 kW. Indonesia, which
had an installed capacity of 227,000 kW in 1954, will
1.
E c o n o m ic S u r v e y o f A s ia a n d th e F a r E a s t , 1954, P . 115.
2.
I n t e r n a t i o n a l B a n k f o r R e c o n s tru c tio n
D e v e lo p m e n t o f M a la y a , 1955.
and
D e v elo p m en t, T h e
E c o n o m ic
23
augment it by 150,000 through the implementation of the
Djatiluhur project in west Java. South Korea, whose capacity
was restored to about 120,000 kW by 1954 after suffering
serious damage in the Korean war, expects to complete by
September 1956 the construction of a thermal plant with a
capacity of 100,000 kW. Thailand has now under examination the Yan Hee hydro-electric project with an eventual
capacity of 560,000 kW (initially two sets of 70,000 kW ).
On the other hand, Japan s programme of expansion is
of a different order. The increase in generating capacity
achieved during 1954-55 alone is estimated at 2.4 million k W ;
and by the end of the Five-Year Development Programme
(1954-58) the total increase in the maximum capacity should
have reached 4.6 million kW.
Although expansion plans are as outlined above, many
countries of the region face difficulties in financing these
projects, and the execution of some of those which have been
planned may have to be postponed.
Iron and steel
Production of iron and steel is concentrated in China,
India and Japan, while in some other countries projects to
establish an iron and steel industry are being undertaken
or studied. In 1954, production of pig iron in the region
constituted about 7.5 per cent of world production, while
output of crude steel was 6.5 per cent of world production.
Imports of iron and steel products into countries of the region,
excluding Japan and mainland China, amounted to 1.8 million
tons in 1954.
Among the three major producing countries of the region,
China and India are self-sufficient in the supply of raw
material,3 whereas the Japanese steel industry is largely dependent upon imports for the supply of m ajor raw materials. Thus,
for example, 82 per cent of the iron ore, more than 50 per cent
of the coking coal, 40 per cent of the manganese ore and 20
per cent of the scrap consumed by Japan in 1954 had to be
imported. In view of such heavy dependence on imports for
the supply of raw materials, it is of special significance to
examine the competitive position of Japan’s steel industry.
Table 15, which is compiled from Japanese source, compares,
for 1954, the raw material cost situation in a leading steel
mill in Japan with average conditions in several western countries. Although some of the figures in the table might be
disputable and unit prices of raw materials depend a great
deal on the vagaries of occean freight charges,4 it appears
from the table that the distinct disadvantages in the price of
coke and some disadvantage in that of iron ore for Japan
are both counter-balanced to a large extent by relatively lower
standard requirements in Japan than in other countries.
3.
T h e m e a su re d , in d ic a te d a n d in f e r r e d re serv es o f iro n o re in th e E C A F E
re g io n a r e e s tim a te d a t a b o u t 27,000 m illion to n s , m ostly in In d ia (21,000
m illio n to n s ) , C h in a (4,180 m illio n t o n s ) , K o re a (424 m illion t o n s ) ,
M a la y a (65 m illion t o n s ) , J a p a n (64 m illio n to n s ) a n d P a k is ta n (60
m illion t o n s ) .
( U n ite d N a tio n s , S u r v e y o f W o rld Ir o n O re R esources,
N e w Y o rk , 1955, p. 3 1 ).
4.
B e tw e e n 1950 a n d 1955, th e p r o p o r tio n o f ocean f r e ig h t c ha rg e s in th e
c .i.f. p r ic e o f coal im p o r te d fr o m th e U n ite d S ta te s in to J a p a n flu c tu a te d
b e tw e e n 44 a n d 74 p e r c e n t, w h ile th e s im ila r p ro p o r tio n f o r iro n ore
im p o r te d f r om G oa in to J a p a n flu c tu a te d b e tw ee n 45 a n d 63 p e r c ent.
[M in is try o f I n te r n a t i o n a l T r a d e a n d I n d u s try , F o r e ig n T ra d e o f J a p a n ,
1955 ( in J a p a n e s e ) , p . 390].
ECONOMIC SURVEY OF ASIA AND THE FA R EAST, 1955
24
TABLE
15
PIG-IRON PRODUCTION: COMPARISON OF COST OF
MAJOR MATERIALS USED PER TON, 1954
Coke
S t a n d a r d r e q u ir e m e n t (kg)
U n it p r ic e a ($ p e r ton)
C ost of p i g iro n ($ p e r ton)
Iro n o re
S t a n d a r d r e q u ir e m e n t (kg)
U n it p r i c e a ($ p e r to n) .
C ost of p i g iro n ($ p e r ton)
S crap
S t a n d a r d r e q u i r e m e n t (kg)
U nit p r i c e a ($ p e r to n) .
C ost of p i g ir o n ($ p e r ton)
T otal c o s t of a b o v e m a t e r i a l s
.
.
.
.
.
.
($ )
W est
G erm any
Japan
USA
UK
699
27.00
18.87
873
14.37
12.55
1,000
1,476
11.57
17.08
1,656
12.92
21.40
2,201
7.09
15.61
1,791
10.06
18.02
63
31.50
1.98
37.93
50
27.32
1.37
35.32
73
17.50
1.28
33.97
93
32.86
3.06
35.79
17.08
17.08
951
15.47
14.71
Source:
a.
“ I n te r n a tio n a l c o m p e titiv e p o w e r o f th e J a p a n e s e ste e l in d u s tr y a s
view ed fr o m c o s t o f r a w m a te r ia ls ” , T e k k o k a i ( I r o n a n d S t e e l
W o r ld ), O c to b e r 1955, p . 58.
U n i t p ric e s a r e a v e r a g e s w e ig h te d f o r e a c h c o u n tr y a c c o rd in g t o th e
re s p e c tiv e c o m p o sitio n o f r a w m a te r ia ls u sed in 1954.
Improvement in such standard requirements in Japan has
been the result of the recent modernization programme, as is
evidenced, for example, by the decline in coke consumption
per ton of blast-furnace pig iron from 900 kg in 1951 to
699 kg in 1954. However, as Japan expands its steel production. the problem of securing necessary raw materials is
bound to become acute. Already in the fall of 1955 the
industry faced the shortage in particular of scrap, with a
sharp rise in its prices; and the government had to stop
temporarily the validation of exports of m ajor steel products,
while the industry agreed to curtail the production of steel
ingot in the fourth quarter of the year by about 10 per
cent in comparison with the previous quarter.
to construct a third one-million-ton plant at D urgapur in
Bengal. Expansion of existing capacity is also planned in the
private sector, such as by the Tata Iron and Steel Company.
In Burma, a steel rolling mill with a capacity of 16,500
tons per year is under construction and scheduled for completion by the end of 1955/56.
In Pakistan, the Pakistan
Industrial Development Corporation has concluded an agreement with K rupp of Germany for construction of an iron and
steel plant with an initial capacity of 50,000 tons of crude
steel.3 In the Philippines, start has been made on a project
to establish an electric steel plant by the government-owned
National Shipyards and Steel Corporation.
Cotton textiles
Cotton spinning and weaving is the most extensively
developed m anufacturing industry in the ECAFE region. Total
num ber of installed spindles in the region was estimated at
28 million, or 21 per cent of the total world spinning capacity
in 1954. China, India and Pakistan are producers of raw
cotton, while Japan, Korea and Hong Kong depend entirely
on imports for the supply of raw cotton. As a result of
expanding production of cotton textiles, India and China also
depend to some extent on im ported raw cotton.
There was expansion in capacity and production of cotton
textiles in most countries of the region between 1951 and 1954.
Progress achieved in Pakistan was especially striking. As a
result of rapid expansion in both capacity and production,
Pakistan has almost attained self-sufficiency in supply of
course and medium-grade cotton cloth; at the same time, a
marked decrease in the exportable surplus of raw cotton
brought about a significant decline in export earnings. China:
Taiwan has also achieved more than self-sufliciency in cotton
piece-goods through a three-fold increase in production between
1951 and 1954.
India's resources for a steel industry are abundant, and
production of iron and steel products has been on the increase
in the last several years,2 although aggregate demand for them
has exceeded domestic output, and imports have filled the
gap to some extent. A large-scale expansion of the iron and
steel industry is now on the horizon, with foreign technical
and financial aid. Work on the Hindustan Steel Company’s
(an Indo-German company) one-million-ton plant has been
started. Under an agreement between the Government of India
and the USSR, a start has been made in the construction of
another one-million-ton plant at Bilhai in Madhya Pradesh.
In August 1955, the government accepted a British proposal
In 1955, the trend of production in countries of the region
was rather diverse. China, India and Pakistan continued to
increase their output of cotton fabrics, while in Japan, south
Korea and the Philippines production decreased in 1955 as
compared to the proceeding year. Exports in 1955 from the
m ajor exporting countries in the region— Japan, India and Hong
Kong— declined from the level of 1954, which was the postwar
peak for the three countries combined. In Japan, during the
first nine months of 1955 exports of cotton yarn and fabrics
were lower by 13.1 and 15.9 per cent respectively than the
level a year before. The decrease in exports was aggravated
by continued weakness in the domestic market, caused by the
keen competition of other textiles, such as spun rayon and
synthetic products.
To cope with the threat of overproduction and increasing stocks, the operation rate of the
industry has been reduced to 84-88 per cent since May 1955.
The rate of decline in exports of cotton piece-goods from
Hong Kong and India was 13.5 and 6.1 per cent respectively
for the first half of 1955 com pared with the corresponding
period of 1954.4 In m ainland China, although the cotton
textile industry is not given a high priority under the first
Five-Year Plan, production continued to increase through fuller
utilization of existing capacity and a m oderate increase in
capacity.5 A p art of the increased production is reported to
have been exported through Hong Kong.
1.
2.
3.
4.
In mainland China, the development of the iron and
steel industry is given one of the top priorities under the
First Five-Year Plan. The total increase in steel capacity
proposed in the Plan is 6.1 million tons,1 of which 2.53
million tons are to be completed by 1957. In addition to the
rehabilitation and expansion of existing plants such as Anshan,
Shihchinshan, Lungyen, Penki, etc., two new iron and steel
combines are to be constructed in W uhan and Paotow, the
latter being planned to utilize recently discovered large
deposits of iron ore near Paotow. The etimate for 1955 of
crude steel production is 2.7 million tons, or about twice the
output of 1952.
T h is t a r g e t is p ro p o s e d t o b e re a c h e d b e y o n d 1957.
T h e r a t e o f in c re a s e , h o w e v e r, is n o t v e ry r a p i d : in th e f ir s t h a l f o f 1955,
p ro d u c tio n o f p ig ir o n w a s r u n n i n g a t a r a t e 4 p e r c e n t h ig h e r t h a n in
1952 a n d p r o d u c tio n o f c ru d e s teel a t a r a t e 9 p e r c e n t h ig h e r t h a n in
1952.
5.
See in fr a , c h a p te r on P a k is ta n .
T h e r e w a s a n in c r e a s e in e x p o r ts o f c o tto n p ie c e-g o o d s f r o m som e
E u r o p e a n c o u n tr ie s a n d t h e U n ite d S ta te s in 1955.
D u r i n g 19 53 /5 5, th e p la n n e d in c r e a s e in c a p a c ity is 750,000 s p in d le s a n d
22,000 loom s.
C H A P T E R 2.
C U R R E N T E C ON OM IC S I T U A T I O N
TABLE
25
16
COTTON SPINDLE CAPACITY AND COTTON TEXTILE PRODUCTION, 1954-55
P ro d u c tio n of cotton y a r n
('000 tons)
N u m b e r of
s p i n d l e s ('000)a
1954
A fg h an istan
............................................................
B u r m a ...............................................................................
C e y l o n ...............................................................................
C h in a
T a i w a n ............................................................
M a in la n d
..................................................
H o n g K o n g ......................................................................
In d ia
...............................................................................
J a p a n ...............................................................................
K o re a , S o u th
............................................................
P ak istan
......................................................................
P h i l i p p i n e s ......................................................................
1.8
0.6
23.0
836.0
39.4
706.8
464.4
20.9
87.1
0.6
179
6 ,4 10d
225
11,721
7,853
266
1,316
37
P ro d u c tio n
fig u r e s : F o r H o n g K o n g : C o tto n T e x tile P r o m o tio n
C o u n cil ( I n d i a ) , T e x p r o c il B u lle tin , 25 A u g u s t 1955, p. 10 a n d f o r
m a in la n d C h in a : i n fr a , c h a p t e r on C h in a.
17
(in dollars per 400-lb bale of 20 count yarn)
Japan
.........................................
.........................................
India
P a k i s t a n .........................................
S o u rce :
N o te :
P rocessing
cost
T o tal
200
136
178
30
33
60
170
103
118
in
local
c u rre n c ie s
w e re
c o n v e rte d
in to
d o lla rs
at
Some idea regarding the comparative position of Japan,
India and Pakistan in the production of 20 count cotton yarn
may be gained from table 17 compiled from a Japanese
source. It reveals that Japan is unable to offset its competitive
disadvantage in the cost of raw cotton by economy in processing cost, and that India’s position is distinctly better than
Pakistan’s.1 In terms, however, of labour productivity as
measured by the average num ber of spindles handled by a
worker, India’s figure of 380 in 1953 stands far below Japan’s
(1,600— 2,400) in the same year.2 The deterioration and
obsolescence of machinery3 are considered to be the major
1.
2.
3.
41.0
723.6
429.2
26.1
113.5
0.5
4.8d
164.4
2,900.0
4 ,584.0
2,661.6c
117.6
316.8
18.0
5.64d
155.6
340.0
4,632.0
2,527.2c
85.1
379.0
10.6
a.
b.
c.
d.
A s of J u ly 1954 fo r c o u n trie s e x c e p t m a in la n d C h in a (an d -1 9 5 5 ) a n d
P a k is ta n (M a rc h 1955).
P r o d u c tio n fig u res f o r 1955 a r e ba se d on fir s t 3-9 m o n th s. N u m b e r of
s p in d e s f o r c o u n trie s n o t listed w as a s follows in 1954: In d o n e s ia 98,000,
S in g a p o re 10,000, N o r th V ie t-N a m 142,000, a n d T h a ila n d 35,000.
F is c a l y e a r 1954/55.
M illion s q u a r e m e tre s .
Industrial policies
A ll - J a p a n C o tto n S p in n e r s ’ A ss o c ia tio n , M o n th ly R e p o r t o f J a p a n e s e
C o tto n S p in n i n g I n d u s tr y , N o . 100, A p r il 1955, p . 17.
O r ig in a l fig u re s
official r a te s .
1.3
0.8
24.0
factor for the low productivity in India. The question of
rationalization, with special reference to the use of highspeed machines generally and of automatic looms in particular,
has been in public discussion in recent years. In view of
the unemployment which is likely to arise from rapid rationalization, however, the Textile Enquiry Committee appointed by
the Indian government recommended a gradual pace of
rationalization.4
COTTON YARN: PRODUCTION COST IN JAPAN,
INDIA AND PAKISTAN, 1953
R a w cotto n
1955b
40,000
131,700
N u m b e r o f s p in d le s : I n t e r n a t i o n a l F e d e r a tio n o f C o tto n a n d A llied
T e x tile I n d u s trie s , In te r n a tio n a l C o tto n S ta tis tic s , J u ly 1954.
TABLE
1954
17.3c
30
W o r l d ............................... ...............................................
Source:
1955b
P ro d u c tio n of co tto n f a b ric s
(million m etres)
S im ila r fig u re s f o r th e U n ite d S ta te s a n d th e U n ite d K in g d o m a r e n o t
a v ailab le. B u t a c o m p a ris o n a s o f F e b r u a r y 1950 f o r 20 c o u n t c o tto n
y a r n sh o w s t h a t w h e re a s t h e c o st o f r a w c o tto n p e r lb o f y a r n w a s 45-57
c e n ts in J a p a n i t w a s 33 c e n ts in th e U n ite d S ta te s a n d t h a t w h e re a s th e
m ill-m a rg in f o r J a p a n w a s 11.5-13.5 c e n ts i t w a s 31.0 c e n ts in th e U n ite d
S ta te s . ( A l l - J a p a n C o tto n S p in n e r s A ss o c ia tio n , M o n th ly R e p o r t o f
J a p a n e s e C o tto n S p i n n i n g I n d u s tr y , A p r il 1955, p. 1 5 ).
A ll- J a p a n C o tto n S p in n e r s ’ A ss o c ia tio n , M o n th ly R e p o r t o f J a p a n e s e C o tt o n S p i n n i n g I n d u s tr y , J u l y 1955, p . 35.
A c c o rd in g to t h e R e p o r t o f th e W o r k in g P a r t y ( u n d e r th e G o v e rn m e n t of
In d ia , M in is t r y o f I n d u s tr y a n d S u p p ly ) f o r th e c o tto n te x tile in d u s tr y
p u b lis h e d in 1952, m o re t h a n 65 p e r c e n t o f th e m a c h in e r y in th e s p in n in g s e c tio n , e x c e p t so m e ite m s , w a s in s ta lle d b e fo re 1925.
Government policies as regards patterns of industrial
development, involving such issues as private versus public
sector, heavy versus light industries, small-scale versus largescale industries, are rather divergent among countries of the
region. Apart from mainland China, where the private sector
is rapidly disappearing as a factor in the economy, the role
of the public sector in the process of industrialization is
prominent in India and Burma, while in Ceylon, China:
Taiwan and South Korea, and to some extent Thailand there
has recently been a shift of emphasis from public to private
enterprise. In Japan, Hong Kong, Malaya and British Borneo
and the Philippines private enterprises are generally more
important.
4.
F o r f u r t h e r d e ta il, see R e p o r t o f th e T e x tile E n q u ir y C o m m itte e , S e p te m b e r 1954.
5.
A c c o rd in g to th e F iv e -Y e a r P la n , by 1957, 87.7 p e r c e n t of to ta l in d u s tria l
o u tp u t is t o com e f r o m s ta t e , c o -o p e ra tiv e a n d s ta t e c a p i ta l is t sec to rs, as
c o m p a re d w ith 59 p e r c e n t in 1952. (S ee L i F u -c h u n , R e p o r t o n th e F ir s t
F iv e - Y e a r P la n f o r th e D e v e lo p m e n t o f N a tio n a l E c o n o m y , p p . 15, 3 1 ).
L a t e r r e p o r ts in d ic a te t h a t th is p ro c e ss o f so c ia liz in g p r iv a te in d u s try
h a s b e en f u r t h e r sp eed ed u p . ( P eop le's D aily, 25 D ecem b er 1 9 55).
26
ECONOMIC SURVEY OF ASIA AND THE FAR EAST, 1955
In India, under the Second Five-Year Plan, the public
sector is to be expanded rapidly and relatively faster than
the private sector.1 In Burma, the im portant industrial plants
and mines are mostly State-owned and operated. In Indonesia,
all large-scale projects included in the draft Five-Year
Economic Development Plan (1956-60), now being finalized,
are to be undertaken by the central government, while small
projects are recommended to provincial governments and
private enterprises.
In sharp contract to the trend in these countries, a start
has been made in the transfer of government industrial enterprises to private ownership or operation in China: Taiwan
(under the 1953 regulations governing the transfer of public
enterprises) and in Ceylon (under the government-sponsored
corporations act of 1955). In both countries, postwar industial development was undertaken largely by government enterprises. In South Korea also, government policy to encourage
private enterprise and to eliminate government control
and ownership of large industries is being implemented.
In most other countries, there appears to be no definite
declared policy as regards the scope of public enterprises.
However, basic facilities such as transport, communication and
electricity are state-owned and operated in many countries of
the region, and the government’s role in industrialization
through financial, technical and other assistances is increasing in importance.
As mentioned in the 1954 Survey,3 the im portant role of
small-scale and cottage industries is emphasized in most
countries of the region, especially in view of the general
shortage of capital and skills on the one hand and the
pressure of population increases on the other. In India and
Japan, the problem has attracted attention particularly in
connection with that of employment, inasmuch as it has
become quite evident in those countries that the substantial
increase in industrial production along m odern factory lines
achieved in recent years has not been accompanied by any
increase in the volume of employment. In India’s draft frame
for the Second Five-Year Plan, extensive development of smallscale industries is contemplated to provide for increased p ro duction of various consumer goods.4
In Afghanistan, a research centre to train students for
cottage industries was established in 1954 in Kabul, and
similar centres are to be established in other m ajo r towns.
In Burma, pilot plants for sugar, a hand paper making plant
and a textile weaving training centre were completed in 1954,
and several other pilot plants are being developed. In Ceylon,
certain industries have been especially slelected for development and Rs 10 million have been allocated for their
financing by the government under the Program m e of Investment. Establishment of a Cottage Industries Institute, three
coir workshops, a handloom industry and other schemes to
develop cottage industry have been included in the Programm e.
In India, a Small Industries Corporation, with the prim ary
purpose of organizaing production by small industries for
government order, was organized in the middle of 1955. In
Indonesia, an organization (JADO) for financing induk
(central production and processing units) and the m arketing
of their products was established in 1955.
The development of capital-goods industries is limited to
a few countries, while consumer-goods industries are being
extensively developed throughout the region. In China, India
and Japan, capital-goods industries are given a high priority.
Under the First Five-Year Plan on m ainland China, 88.8
per cent of the total investment in industry is allocated to
Various governmental measures for prom oting industrial
industries manufacturing ‘the means of production’, while development such as protective tariffs, special tax allowances
investment in consumer-goods industries accounts for only for depreciation, reduction of income taxes and im port duties
11.2
per cent. A somewhat similar pattern of industrial on plant, m achinery and raw materials, and financial assistance,
investment is also envisaged in India’s draft frame for the were intensified in most countries in 1954-55. T raining of
Second Five-Year Plan: 78.6 per cent in heavy industries and technical personnel has also been receiving special attention.
21.4
per cent in consummer-goods industries.2
Shortage of technical skill is one of the serious obstacles in
the course of industrialization in the region.
Technical
In other countries, although development of heavy assistance from advanced countries and international organiindustries is generally receiving much less attention, it is zations and training of local people are im portant measures
significant to note beginnings that are being made in the in this respect. Apart from technical aid by the government
spheres of ship-building, basic chemicals and fertilizers. Thus, for small-scale and cottage industries, recent trends in the
in Ceylon, a caustic-soda-DDT factory (with an annual technical training of local people at various levels may be
capacity of 1,650 tons of caustic soda and 200 tons of DDT)
exemplified as follows.
is expected to be completed by 1956, and the establishment of
In Burma, the Union of Burm a Applied Research Institute
a fertilizer factory (with an annual capacity of 125,000 tons)
is being contemplated. In Indonesia, a caustic soda factory started training of local personnel in early 1955. In Ceylon,
in East Java was expected to be in operation in 1955. In the Institute of Industrial Research has been established in
Pakistan, a ship-repair and ship-building yard at Karachi is 1955. In m ainland China, the training of personnel is being
expected to be completed by the end of 1956. A sulphuric conducted along two lines: (a) expanding institutions of
acid-super phosphate plant at Lyallpur started production in higher education and secondary vocational schools, and (b)
November 1954 and a caustic soda factory at Nowshera opening various kinds of spare-time schools and training
commenced operation in early 1955.
The Dand Khel classes.5 In India, rapid expansion of training facilities has
In
Ammonium Sulphate Plant (with an annual capacity of 50,000 been proposed in the draft Second Five-Year Plan.
tons) is now under construction and is expected to go into Indonesia, several institutes of industrial research and training
have been established. In Pakistan, the Pakistan Industrial
production by the middle of 1956.
Development Corporation newly started a TW I (trainingwithin-industry) scheme in early 1955.
1.
U n d e r th e P la n , o f th e to ta l in v e s t m e n t in in d u s tr y ( in c lu d in g e le c tr ic ity )
a m o u n tin g to R s 19,000 m illion, R s 14,500 m illio n o r 77 p e r c e n t is
a llo c a te d to th e p u b lic s e c to r.
2.
A llo c a tio n o f in d u s tr ia l in v e s t m e n t h a s been m a d e as fo llo w s: ir o n a n d
stee l— 30.3 p e r c e n t, h e a v y m a c h in e r y — 17.3 p e r c e n t, c h e m ic a ls ( in c lu d in g
c e m e n t ) — 14.3 p e r c e n t, s y n th e t ic p e tro l— 5.7 p e r c e n t, m in e r a ls a n d
p r o s p e c ti n g — 5.4 p e r c e n t, e x is t in g s t a t e e n te r p r is e s — 3.6 p e r c e n t,
a lu m in iu m — 2.1 p e r c e n t, f a c to r y c o n s u m e r g o o d s— 7.1 p e r c e n t a n d h o u se hold a n d “ h a n d ” in d u s trie s — 14.3 p e r c e n t.
3.
4.
5.
S ee E c o n o m ic S u r v e y o f A s i a a n d th e F a r E a s t , 1954, P .
19.
P e r c e n ta g e in c re a s e s in p ro d u c tio n o f h a n d - m a d e c o n s u m e r goods b e tw ee n
1955/56 a n d 1960/61, a s e n v isa g e d u n d e r t h e P la n , a r e : h a n d -lo o m c lo th —
103 p e r c e n t, s o a p — 40 p e r c e n t., fo o tw e a r — 25 p e r c e n t, food in d u s trie s —
20 p e r c e n t a n d m e ta l- w a r e s — 33 p e r c e n t.
L i F u - c h u n , R e p o r t o n th e F i r s t F i v e - Y e a r P la n
f o r th e D e v e lo p m e n t o f
th e N a tio n a l E c o n o m y .
CHAPTER 2.
27
CURRENT ECONOMIC SITUATION
(2) the relative position of the countries of the region vis-a-vis
ECLA countries is best in the rail passenger traffic (obviously
a reflection of population density) and worst in the number
of commercial motor vehicles; the absolute position is generally
inferior; (3) broadly speaking, Japan has the highest per
capita figures in the region, followed by China, India and
South Korea.
TRANSPORT
The implementation of national economic development
plans which, in many countries, made marked progress during
the year under review, continues to generate increasing
demands for transportation facilities. The main problem
facing most of the countries of the region, aside from the
increase of capacities, is the modernization of plant and
equipment for more efficient handling. There is also, to some
extent, the problem of maintaining a balanced development
of the various forms of transport.
To a certain extent, different modes of transportation
are substitutable. Thus the Philippines’ and Malaya’s low
volume of rail traffic must be partly due to the relatively more
widespread use of trucks which is clearly evidenced in their
per capita number of commercial motor-vehicles. With the
development of the economies of the region the distribution
of freight traffic for domestic trade among the various modes
of transport is likely to shift. Such statistics are at present
available only for Japan. Of the total tonnage of 734 million
tons recorded in the fiscal year 1954/55,1 trucks carried 67.2
per cent, railways 25.7 per cent, and coastal steamers and
wooden vessels the remainder.2 The increase of the total
tonnage over the previous year (34.5 million tons) was almost
entirely accounted for by the increase in carriage of miscellaneous goods by small motor vehicles, indicating a rather
sudden rise, in recent years, in the use of such vehicles in
Japan.
An idea of the situation in regard to the volume of traffic
carried in the ECAFE region, as compared with that in the
ECLA region and certain economically advanced countries
of Europe and North America, can be obtained from table 18
which gives against the background of population density, the
per capita volume of rail traffic and the number of commercial motor vehicles per 1,000 population in 1951 and 1954.
Because of the difference in population density and the
different patterns of geographical distribution of centres of
economic activities, it is hazardous to draw any precise
inferences from the table. But the following observations
might be made: (1) most countries of the ECAFE region made
good progress on a per capita basis with respect to rail traffic
and the use of commercial motor vehicles between 1951 and
1954, especially Burma, Japan and Thailand, although India
and Pakistan appear to have remained more or less stationary;
1.
F r o m 1 A p ril 1954 to 31 M a rc h 1955.
2.
E c o n o m ic P la n n in g B o ard , E c o n o m ic S u r v e y o f J a p a n , 1954-1955, p. 217.
TABLE
18
ECAFE AND OTHER COUNTRIES: PER CAPITA VOLUME OF RAIL TRAFFIC AND NUMBER OF COMMERCIAL
MOTOR-VEHICLES PER 1,000 POPULATION, 1951 AND 1954
P e r c a p i t a r a i l traffic
( p a s s e n g e r -k m )
(net ton-km)
ECAFE r e g i o n
B u r m a .........................................
C e y l o n .........................................
C h i n a : a T a i w a n ......................
India
.........................................
In d o n esia
...............................
J a p a n .........................................
K o re a , S o u th
......................
...............................
M a lay a
...............................
P ak istan
P h i l i p p i n e s ...............................
...............................
T h ailan d
ECLA r e g i o n
A rg en tin a
...............................
B o l i v i a .........................................
Brazil
.........................................
C h ile
.........................................
C o lo m b ia
...............................
M e x i c o .........................................
Peru
.........................................
O thers
USA
.........................................
UK
.........................................
F r a n c e .........................................
Italy
.........................................
a.
No. c o m m e r c i a l m o to r v e h i c l e s
P e r 1,000 p o p u l a t i o n
1951
1954
1951
1854
1951
11.1
25.7
18.1
35.4
0.64
2.03
0.66
0.34
0.38
2.07
121.8
157.4
128.0
126.1
10.7
428.6
130.9
62.3
62.4
6.6
28.5
455.0
91.9
53.7
61.5
6.7
34.1
1 , 0 0 2 .6
883.2
101.5
170.8
386.9b
50.9
356.5
53.5
5,844.7
744.5
1,074.7
238.6
385.9b
53.5
278.2
4,937.4
711.2
969.7
269.9
A c c o rd in g t o T e n g T a i- Y u a n ( M in is te r o f R a ilw a y s ) , th e a v e r a g e a n n u a l
v o lu m e o f f r e i g h t c a r r ie d p e r k m o f r a ilw a y s in 1952 w a s 3,540,000 to n s
(P e o p le 's D a ily , 23 J u ly , 1955). F o r a n e s tim a te d to ta l le n g th o f 23,500
k m of ra ilw a y s in 1952, th e to ta l volu m e o f f r e i g h t c a r r ie d in 1952 m a y be
258.0
173.0
45.0
911.4
71.2
239.1
156.6
..
983.9
179.9
131.5
18.3
96.8
106.3
19.6
117.9
792.5
63.9
198.9
295.4
65.2
126.7
28.3
782.5
188.0
269.7
54.8
361.3
665.2
665.2
442.9
290.6
656.3
611.5
451.7
b.
4.06
0.18
2.51
0.37
13.78
3.01
4.25
5.78
2.75
5.73
3.38
56.79
20 .0 2
22.89
5.31
1954
2.33
0.77
0.36
2.77
0.49
4.27
2.69
6.16
7.38
58.81
21.78
28.52
7.11
D e n s ity of
po p u latio n
p e r sq. km
1954
28
128
240
115
54
239
232
53
85
72
39
7
3
7
9
12
15
7
21
208
78
161
e s tim a te d a t 83, 190 m illion to n -k m , w h ic h i f divided by a to ta l p o p u la tio n
o f a b o u t 570 m illion in 1952, w ould g iv e a p e r c a p i ta r a il traffic of
145.95 to n -k m .
G ro ss to n -k m .
28
ECONOMIC SURVEY OF ASIA AND THE FAR EAST, 1955
Rail transport
Available statistics indicate little significant addition
during the year to the locomotive power on most railways of
the region, except in Japan, where notable additions have
been made. Broadly speaking, there has been little change
in the number of passenger and freight cars. Some additions
to passenger rolling-stock have been made in Hong Kong,
Japan and Thailand, with a slight decline in the Philippines.
As regards freight cars, there has been some decrease both in
Japan and in the Philippines, and a small increase in Thailand.
Available information is not sufficient to indicate any significant changes in the length of railway networks in the region,
except in mainland China where 2,640 km of railways were
added during 1953-55 (1,240 km in 1955).1
Although there has been improvement in efficiency of
operation and carrying capacities, certain basic problems
continue to face many of the railways of the region. For
example, lack of modern equipment, particularly signalling and
tele-communications, and inadequate workshop facilities, have
hampered efficient freight-train operation and distribution of
freight cars on the Thai State Railways. Shortages of motive
power and trained technical personnel have handicapped the
railways in the Philippines in improving efficiency of operation.
Paucity of vacuum-brake-fitted freight rolling-stock has, to a
certain extent, adversely affected the efficiency of freighttrain operation on the Pakistan railways. Insufficient storage
accommodation and unsuitable or inadequate yard and
terminal facilities have continued to affect the turn-round of
freight rolling-stock on the Malayan railway.
One of the developments in international rail communications during the year has been the announcement that on 1
January 1955 the railways on m ainland China started a joint
international rail transport service with several other nations.
Aside from the augmentation of through-rail service facilities
between India and Pakistan, which have been in operation for
some time, a further step in international co-operation was
taken when an agreement was reached between the two
governments for the supply of 28 board-gauge railway coaches
and 22 under-frames by the Government of India to the
Pakistan railways. In addition, 12 locomotives and 300 cars
have also been hired out to the Pakistan railways.
From the point of view of both the m agnitude of investment and the targets set, railway development plans of India;
and mainland China lead the rest of the region. In the
proposed programme of investment for the Second Five-Year
Plan, which will commence in 1956, the Indian Ministry of
Railways proposes an expenditure program m e of Rs 15,000
million, which will include, inter alia, the construction of
4,800 km of new lines, electrification of 2,900 km, in addition
to large sums for acquisition of new rolling stock, extension
of workshop facilities, etc. Railway development planning on
m ainland China is on an equally ambitious scale. Under the
current five-year plan, a sum of Yuan 5,671 million has been
allocated for the construction of railways, which envisages the
reconstruction of 6,000 km of existing lines and building of
4,000 kilometres of new lines. Among the other important
development projects in the countries of the region, mention
m ay be made of the extension of the Jacobabad-Kashmere
line in Pakistan to serve the area lying to the west of
the Indus river for economic development, and to provide
an alternative link between Karachi and the Punjab,
1.
I n f r a , c h a p t e r on C h in a .
Baluchistan and North-Western Frontier Province.
The
Ceylon Government Railway has also included in the p ro gramme of investment (1955-60) a proposal for the
re-laying of the railway linie to Battaticalea-Trincomalee with
heavier rails.
The present lighter rails have heretofore
prevented the running of heavy diesel locomotives on this
section, but they will under this plan be replacing steam
locomotives as the latter present special difficulties owing to
the shortage of water supply in the area. To aid in the
development of the rich agricultural Cagayan Valley, the
National Economic Council of the Philippines has approved a
proposal to construct a 21-km extension of the Baenotan line.
Under a loan agreement with the International Bank for
Reconstruction and Development, the State railways of
Thailand obtained in August 1955 a 15-year loan of $12
million for the purpose of im proving their operating efficiency.
It is understood that a p art of the funds will be utilized for
improving the tele-communications system on the Thai State
Railways.
An example of a project prom oting international
co-operation in the extension of the Thai State Railways from
Udorn to Nongkai on the Mekong River opposite Vientiane.
This will provide land-locked Laos with an access to the sea.
Other im portant measures adopted by the railways of the
region to encourage freer movement of freight traffic include
freight-rate adjustments, such as the reduction of freight rates
for long-distance movement of foodgrains and fertilizers by
the Indian Government Railways. The Thai State Railways
have also recently adjusted freight rates as a means of reducing
the cost of living and bringing down the export prices of
certain commodities.
Most countries of the ECAFE region continue to depend
to a very large extent on imported equipm ent for the operation
of their railways. However, India, like Japan, has for some
time been m anufacturing a fa ir proportion of its equipment
It is
including locomotives, passenger and freight cars.
understood that the rate of m anufacture of equipment,
particularly locomotives, has been stepped up and th at during
1954/55, 200 broad-gauge (5'6 ") locomotives, and 75 metregauge locomotives have been turned out by indigenous m anufacturing plants.
The Indian Government Railways have
launched a scheme of self-sufficiency to the maxim um extent
possible for railway equipm ent of all types and a committee
has been set up to make recommendations. F or the first time,
it is reported that Pakistan has commenced the m anufacture
of passenger rolling stock; the current schedule of production
includes 60 passenger cars. M ainland China is also meeting
part of its requirements in locomotives and freight cars from
domestic production.
H ighway transport
In spite of the vigorous efforts made to accelerate the
pace of highway development, and the large sums being
invested in highway development program m es, the gap between
demand and avaliability in the ECAFE region as a whole
still seems to be wide. Problem s relating both to finance
and to techniques continue to face governments of the region;
and in this region, as in many other parts of the world, the
improvement of the pavement standards of a large part of the
highway networks built b e fo re the days of fast and heavy
automobile traffic presents serious technical problems.
Inadequacy of finance, and procurem ent problems of cement,
steel, asphalt, etc. in some countries have retarded surface
upgradings, although the situation is gradually improving.
CHAPTER 2.
CURRENT ECONOMIC SITUATION
Throughout the region, highway development plans are
proceeding with varying combinations of objectives in view.
India, for example, finds the expansion of road building
desirable not only for augmenting communications, but also
for providing employment. Thus, its draft Second Five-Year
Plan envisages an expansion of the national system of highways
from about 20,000 km to 28,000 km and of State roads from
32,000 km to 56,000 km. The Government of Pakistan, under
its aid agreement with the United States, is undertaking the
construction of a special highway linking two m ajor cities,
Karachi and Quetta. It is expected that when the proposed
highway is completed, it will not only cut the travel time
in half by reducing the distance between the two cities, but
will also considerably reduce the cost of road transportation.
Another similar example is the construction of a new 25-km
road section extending the Davao-Agusan highway to 129
km in the Philippines. Abaca, one of the principal cash
crops in the Philippines, is reported to be transported to
Davao on the new highway at one-sixth the former cost. Both
Afghanistan1 and Nepal, which hitherto have been very poorly
served by roads because of physical and climatic conditions,
have in recent years been devoting considerable attention to
road development.
On mainland China, in line with other aspects of economic
development planning, highway development has also received
considerable attention. In the First Five-Year Plan (1953-57),
it is proposed that 10,000 km of roads be built, restored or
reconstructed as part of the programme for the modernization
of its transport system.
Through international co-operation in the form of
financial and technical aid, provided both by the United States
and other neighbouring countries, such as the USSR in the
case of Afghanistan and India in the case of Nepal, progress
is being made in highway construction and improvement.
During 1954-55, 225 km of roads were reported to have been
re-surfaced in Afghanistan. A new link to obviate delays in
land transportation, an all-weather motorable road, is being
built from Kathmandu across the mountains to Rhainse
Dhonban in Nepal, which will eventually link with the present
road system on the Indo-Napalese border. To facilitate the
transport of paddy and to speed up the development of the
Selangor rice-bowl area in Malaya, a dual road connecting
Temerloh-Maran was opened in June 1955. Under the United
States economic aid agreement, a key road providing Cambodia
with an alternative trade outlet is being planned to link up
with the Bay of Kampong Som. In Ceylon, a new road
running from Morawaka to Badureliya which will shorten
the route distance between Colombo and Morawaka by about
65 km to the benefit of the agricultural community is being
built by the rural development society of the area. Besides a
100 million baht appropriation made by the Government of
Thailand for the construction of highways during the year
additional funds are also being made available for the construction of 300 km of highways in the north-eastern part
of the country under the bi-lateral aid agreement with the
United States.
Some governments of the region, notably those of Ceylon,
India and Malaya, have been encouraging the development of
rural roads by village communities through “self-help schemes” .
The levying of tolls as a means of financing highway construc1.
T h e d ire c t b e n e fits t h a t w ould a c c ru e fr o m a m o re a d e q u a te s y ste m o f
h ig h w a y s is d e m o n s tr a te d in th e c a s e o f A f g h a n is ta n in th e p ric e s of
a g r ic u ltu r a l com m o d itie s. I t is e s tim a te d t h a t a so o r (7 k g ) o f w h e a t
in M a in o n a p ro v in c e c o sts 7 1 /2 a f g h a n is , a n d in K a b u l 21 a fg h a n is . T h e
p ric e d iffe re n tia l is chiefly a ttr ib u t a b le to lack o f t r a n s p o r t fa c ilitie s .
29
tion has received some attention, and recently both Japan
and Thailand have introduced toll highways. As a means of
financing rural road communications, the Indian Taxation
Enquiry Commission has recommended the creation of a rural
communication fund which, by making substantial and nonlapsible allocations, would assist in the development of rural
road communications. The Government of Afghanistan has
provided special financial aid and also made available foreign
exchange at a special rate for the purchase of commercial
motor vehicles; reductions in the price of petrol and exemptions from income tax in the case of private operators have
also been granted.
Inland waterways
On the whole, the economy of inland waterway transport
has continued to improve. An increasing number of diesel
engines is being employed; welding finds an ever wider
application and experiments with push-towing as well as the
use of tunnels and Kort nozzles2 for tugs have become
increasingly common.
In south Viet-Nam and Cambodia, pusher craft has continued to operate successfully in the oil trade. In paddy transport, this method is less suitable because small units are required
and they must be added to or cast off from the flotillas fairly
frequently. In view of this, pull-towing will continue to play
an important part and prototypes of vessels of improved
designs have already been constructed and will shortly be
tested in actual operations. At the same time, the possibility
of increased application of welded construction is being
investigated.
In Cambodia, dredging equipment supplied
through the United States aid has arrived and will be used to
increase the depth of the main channel of the Mekong river
to permit larger and deeper-loaded vessels to ply up to Kratié.
In Laos, the newly-built government-owned fleet is practically
completed. Several units have already been put in operation.
All powered vessels belonging to the fleet are fitted with
standard-type diesel engines. Plans for improving the navigability of the Kemmarat Falls, by construction of a dam that
will serve irrigation and power development as well, have been
discussed together with proposals for the building of a power
plant with a lateral canal and shiplock at the Khone Falls.
The latter plan is, however, still in a preliminary stage and
it will probably be considered further in conjunction with
other schemes to improve navigability of the Mekong river
between Kratié and the Khone Falls or with other methods
(by using road or rail transport) of linking the upper and
lower Mekong to give Laos the full benefit of access to a
seaport, while utilizing cheap inland waterway transport.
In Thailand, extensive dredging works are being undertaken to improve the depth of inland waterways and to extend
their length. Six regulators and navigation locks are under
construction. An eleven-year development programme has
been taken in hand, including improvement of 41 canals.
Under this programme, 1,200 km of canals will be constructed
or improved to a standard cross-section of 30 square metres.
During the first year, the length of perennially navigable
waterways will thus be increased by some 400 km.
In Burma, the government-owned Inland Water Transport
Board has ordered a substantial number of vessels from abroad,
and in addition, it is also engaged in a stepped-up building
programme of its own. A centre has been established for the
2.
T h e K o r t nozzle is a s p e c ia l device fitted
efficiency.
over a p ro p e lle r to in c re a se
30
ECONOMIC SURVEY OF ASIA AND THE FAR EAST, 1955
training of diesel m argin mechanics; it is improving the
maintenance and repair standards of the diesel-powered craft
used in the country.
implifying frontier formalities and elim inating delays
connexion with m easurement and registration procedures.
in
Ocean and coastal shipping
In India, attention is being focused on the dem onstration/
pilot project on the upper Ganga river, but other waterways
including those in the southern part of the country will also
be improved. The craft for the dem onstration/pilot project
on the Ganga has already been designed and a tank test
completed. All tugs will be fitted with K ort nozzles. Rivertraining works on the Ganga have been carried out successfully and river surveys have been made. It is proposed that
these surveys be extended to other rivers, such as the Yamuna,
Godavari, Gandak, Krishna, N arbada and Papti. After the
successful completion of four navigation locks on the Damodar
Valley canal, designs of fifteen more locks out of the proposed
num ber of twenty-two have been completed. The work on
the T ungabhadra canal is proceeding gradually. The entire
canal is scheduled to be completed in 1958.
In Pakistan, the dredging fleet, consisting of 20 large
units which have been acquired recently, is being put into
operation for improvement of navigable channels in the
eastern wing of the country. Considerable progress has been
made in the provision of maintenance facilities for inland
water transport vessels, which until recently were almost
completely lacking. A large side-slipway has been built at
Narayanganj and more will be constructed in the near future.
In order to improve the turn-round of vessels, particular
attention is being paid to increasing facilities for night
navigation. More light buoys are being installed and experiments are being carried out with various types of reflective
material to improve the visibility of buoys and shore marks
by night and to make them easier to locate with the aid of
searchlights.
In mainland China, inland waterways open to navigation
have reached the 100,000 km mark, of which 30,000 km are
navigable by steam launches. This is estimated to be onethird more than in 1949. Night navigation on the longest
waterway in mainland China, the Yangtze river, has now been
extended to Chungking from Shanghai. Besides the addition
of new docks and warehouses at the m ajor ports on the river,
clearance and reconstruction of narrow channels in the upper
reaches of the river in Szechwan Province have also been
undertaken. Numerous improvements have been made to
facilitate navigation on other m ajor inland waterways such
as the Pearl River, the Grand Canal and the Sungari river.
Several tributaries of the Yangtze such as the Kialing and the
Minkiang have been dredged and cleared for navigation.
Improvements to river navigation have also been made in more
remote areas where highways and railways are lacking.1
From the point of view of international inland waterway
traffic, significant developments have taken place in the region,
which should have a lasting effect in facilitating international
traffic and in bringing the countries of the region closer
together.
The Inland Waterway Sub-Committee of the
Economic Commission for Asia and the F a r East, at its third
session held in October 1955, recommended to governments
the adoption of uniform systems of buoyage and shore m arks
for inland waterways in Asia and the F ar East. It furthermore reached agreement on the text of a Convention Regarding
the Measurement and Registration of Vessels Employed in
Inland Navigation which should go a long way towards
W ith the exception of Japan,2 the participation of the
countries of the region in ocean-going tonnage and traffic has
been limited. There are, however, signs that this picture will
change significantly in the not distant future. A num ber of
the countries of the region now have plans for the reconstruction, m odernization and expansion of port facilities, for the
acquisition and domestic construction of modern ocean-liners
and freighters, for the encouragement of nationals to
participate in ocean-going traffic through coastal reservation
and provision of incentives and for the setting up of training
facilities for m arine engineering personnel and labour force.
Thus the foundations of a long-term shipping policy are being
laid.
The immediate need, however, of the countries of the
region is port development. Certain ports, like Rangoon, were
destroyed during the last war.
Rangoon has now been
completely reconstructed. India has improved and expanded
port facilities at Bombay, Cochin, M adras and Calcutta and
a m ajor port is coming up at Kandla on the west coast. In
Pakistan, a new port at Chalna in East Bengal is making
satisfactory progress.
The annual handling capacity of
Chittagong port has increased from 0.6 million tons in 1947
to 1.8 million tons in 1949 and may well reach 4 million tons
in 3 to 4 years. There is a project for m odernizing and
expanding port facilities at K arachi with the help of a loan
of $14.8 million from the International Bank for Reconstruction and Development, sanctioned in early 1955. In mainland
China, the new Tangku H arbour in the North, open to
traffic on 17 October 1952, helped a raise the 1954
tonnage entered and cleared at the P o rt of Tientsin.
Tsamkong in Kwangtung province is being built as a
new harbour (across the H ainan Isla n d ),3 which is also the
terminus for the 314 km Litang-Tsamkong railway completed
in 1955. In Ceylon, the docking facilities at Colombo are
being developed. In Cambodia, the access to the port of
Phnom-Penh has been improved and a new p o rt is being
built at Kampong Som. T hroughout the region, the ports are
now handling a larger and increasing volume of traffic.
In the building up of a m erchant m arine, Jap a n ’s
perform ance has been especially noteworthy.
Its gross
tonnage, reduced from 5.6 million tons in 1939 to a little
over one million in 1948, increased to 3.6 million tons in
1954 when it attained the seventh position in the world
shipping list. The country is likely further to improve its
relative position in the world with the completion of its shipbuilding program m e now under way for the construction of
65 ships totalling 567,775 tons gross,4 followed by another
program m e to build ships totalling 220,000 tons gross between
April 1956 and M arch 1957.
India, with total tonnage now standing at less than 500,000
tons, has begun strenuous efforts to expand it. The Hindustan
Shipyard at V isakhapatam delivered, on 22 June 1955, its
2.
J a p a n h a n d le d 63 p e r c e n t o f its f o r e ig n t r a d e in 1938 w ith its o w n sh ip s.
T h e c o r r e s p o n d in g p r o p o r t i o n in 1954, a t 45 p e r c e n t, w a s h ig h e r t h a n in
e a r lie r p o s t - w a r y e a r s .
3.
T a K ung Pao,
1955.
T he o rd ers on
n e x t tw o y e a r s
t h e w o rld a f t e r
4.
1.
N C N A , P e k in g , 4 S e p te m b e r 1955.
Hong
K o n g , 28 F e b r u a r y
1955,
NCNA,
P e k in g , 4 J u ly
books a s s u r e fu ll w o rk a t t h e s h ip - b u ild in g y a r d s f o r th e
a n d p la c e J a p a n a s th e t h i r d s h ip - e x p o r t i n g c o u n tr y in
t h e U n ite d K in g d o m a n d G e rm a n y .
CHAPTER 2.
thirteenth ship (the 700-ton cargo ship Jalavihar) which was
the first modern diesel-engine ship built in India. This shipyard is being expanded and improved and there is a proposal
to set up another ship-building yard under the draft Second
Five-Year Plan. The government is encouraging private parties
to buy ships by advancing money to them at 4.5 per cent
interest for coastal shipping and at 2.5 per cent for overseas
lines. The First Five-Year Plan had such a loan provision of
Rs 220 million (which has been largely disbursed or sanctioned ) and the Second Five-Year Plan is likely to provide
Rs 600 million for raising tonnage by nearly half a million
to over a million tons by 1961. The present target of 0.6
million tons is likely to be reached in 1956. Thus, India’s,
share in the handling of its own foreign trade promises to
improve, but as yet it remains comparatively small.1
Pakistan’s merchant fleet, primarily engaged in coastal
traffic, has increased from 9,877 tons at the time of partition
to 140,502 tons by 1955. The government has under consideration the establishment of a national steamship corporation for operation in foreign trade in collaboration with
Pakistani shipping companies, but there are financial difficulties in the establishment of this corporation. Pakistan has a
project for building a ship-yard at Karachi, for which the
Pakistan Industrial Development Corporation signed an agreement with a German firm in 1952. Also it has been decided
to construct at Karachi a commercial dry dock, sufficient to
take in ocean-going vessels. In Ceylon, agreement has been
reached in principle regarding the establishment of a national
navigation company (with a five-year monopoly of govern-
ment freight) in association with a group of Norwegian shipowners, who will contribute a quarter of the capital. In
Indonesia, the government proposes to reserve inter-inland
traffic for the N.V. Pelajaran Nasional Indonesia (Pelni) and
coastal shipping for private national companies.
Ocean
shipping will be operated by government as well as by private
enterprise, with increasing participation of Indonesians. The
Philippines has passed legislation (Philippines Overseas
Shipping Act, 1955) for the development of its merchant
marine through government loans, tax exemptions and compulsory investment of profits. During the next five years, P20
million will be lent every year for the purchase of ships up
to 75 per cent of their value.
TRADE AND PAYMENTS
Commodity trade
Exports
From the standpoint of the proportion of export value to
gross domestic production of the country, the region can be
divided into three fairly distinct groups. Firstly, there are
Burma, Ceylon, Malaya and Thailand whose exports, in recent
years, have consistently occupied 20 per cent or more of their
respective gross domestic products.2 Secondly, there are those
countries, such as Indonesia, Japan, Pakistan and the Philippines, where the ratio has fluctuated around 10 per cent.
In the third group, including China (m ainland),3 India and
Korea (south), the ratio has been around 5 per cent [see
table 19].
T h e fo llo w in g ta b le sh o w s th e p ro p o r tio n of In d ia n s h ip p in g on th e basis
o f to n n a g e of s h ip s e n te r e d a n d c le ared a t th e In d ia n p o rts .
P e r c e n ta g e o f I n d ia n to n n a g e to to ta l to n n a g e o f s h ip s
T o ta l tra d e
C oastal tra d e
2.
Tonnage
Tonnage
Tonnage
Tonnage
e n te re d
cleared
e n te re d
cleared
. .
2.8
5.4
24.1
1949
23.5
. .
6.7
9.8
1953
49.0
51.9
. .
7.3
9.9
1954
48.8
50.2
8.1
11.0
1955 ( J a n - A u g ) . .
S o u r c e : A c c o u n ts R e la tin g to th e F o r e ig n T r a d e a n d N a v ig a tio n o f In d ia ,
A u g u s t 1955; M o n th ly A b s tr a c t o f S ta tis tic s ( o f I n d i a ) , M ay 1955.
3.
1.
31
CURRENT ECONOMIC SITUATION
TABLE
T h e r a t i o f o r M ala y a w ill be re d u c ed by a p p r o x im a te ly o n e -th ir d w h e n
r e -e x p o rts a r e e xcluded b u t will still s ta n d a t 43 a n d 35 p e r c e n t f o r 1952
a n d 1953 re s p ec tiv e ly . See F . B e n h a m , T h e N a tio n a l In c o m e o f M a la y a ,
194 7-49 (G o v e rn m e n t P u b lic a tio n s B u re a u , S in g a p o re , 1951) fo r e s tim a te s
o f th e p r o p o r tio n o f d om e stic p r o d u c t in th e to ta l e x p o rts of M ala ya ,
w hic h , a c c o rd in g to h im , stood a t 68.1 p e r c e n t as a v e r a g e of f o u r y e a rs,
1947-50.
O n th e b a sis o f th e e s tim a te s t h a t g ro ss n a tio n a l p r o d u c t in 1952 w a s in
th e n e ig h b o u rh o o d o f $30,000 m illion a n d t h a t e x p o rts in 1954 a m o u n te d
ro u g h ly to $1,800 m illion, th e r a tio in q u e stio n m a y be c a lc u la te d a s a p p ro x im a te ly 5 p e r c e n t, a s s u m in g t h a t th e re w as som e in c re a s e in g ro s s
n a tio n a l p ro d u c t b e tw ee n 1952 a n d 1954.
19
TOTAL EXPORT AND GROSS DOMESTIC PRODUCT, 1952-1954
(’000 million)
B urm a
(k)
Total ex p o rts
1952 ..................................................
1953 ..................................................
1954 ..................................................
G r o ss d o m e s tic p r o d u c t
1952 ..................................................
1953 ..................................................
1954 ..................................................
E x p o rts a s p e r c e n t a g e of g r o s s
d o m e s tic p r o d u c t
1952 ..................................................
1953 ..................................................
1954 ..................................................
C e y lo n
(Rs)
C hina
(T aiw an
only)
(NTS)
1.25
1.13
1.14
1.41
1.49
1.71
1.47
1.98
1.45
4.08
4.62
4.58
4.53
4.64
5.04
10.62d
15.06d
16.95d
30.6
24.5
25.1
31.1
32.1
33.9
13.8
13.1
In d ia
(Rs)
10.65a
9.58a
9.76a
6.2
5.3
5.6
93.42
108.1
115.4
5.7
4.6
11.4
8.6
T im e r e fe r e n c e : T o ta l e x p o r ts — C a le n d a r y e a rs. G ross d o m e stic p r o d u c t—see
i n fr a , A sia n eco n o m ic s ta tis tic s , s p e c ia l ta b le K , fo o tn o te.
a.
In donesia
(Rp)
F r o m 13 M a rc h 1950 t o 3 F e b r u a r y 1952 in clusive, e x c lu d in g va lu e o f e x c h a n g e c e rtific a te s. F o r 1 J a n u a r y t o 3 F e b r u a r y 1952, im p o r t a n d e x p o r t
values a r e base d on 3 tim e s o f official e x c h a n g e r a t e a n d f r o m 4 F e b r u a r y
b.
c.
d.
Japan
(Y)
569b
619b
672b
6,193
7,142
7,387
9.2
8.7
9.1
So u th
K orea
(H w an)
1.95
3.99
6.68
193.79
248.65
407.47
1.0
1.6
1.6
M a lay a
(M$ )
3.92c
3.02c
3.11c
6.35
5.78
61.7
52.2
P ak istan
(Rs)
1.76
1.45
1.19
18.08d
19.31d
9.7
7.5
P h ilip p ines
(P)
0.704
0.808
0.810
T h ailan d
(Baht)
5.84
5.90
5.75
7.89
8.34
8.57
29.03
8.9
9.7
9.4
20.1
1952 o n w a rd s th e y a r e base d on official e x c h a n g e r a t e of th e B a n k In d o nesia.
In c lu d in g p r o c u r e m e n t c o n tr a c ts a w a r d e d by U S a rm e d forces a n d civilian
a gencies.
In c lu d in g re -e x p o rts .
N e t d om e stic p ro d u c t.
32
E C O N O M I C S U R V E Y O F A S I A A N D T H E F A R E A S T , 1955
TABLE
ECAFE REGION:
20
EXPORTS OF EIGHT MAJOR PRIM ARY PRODUCTS, 1953-55
(million US$)
1 9 5 4
1 9 5 3
V a l u e of e x p o r ts
%
of to ta l
exports
1955 (first half)
%
V a l u e of e x p o r t s
of t o t a l
ex p o rts
V a l u e of e x p o r ts
°/o of t o t a l
e x p o rts
R u b b e r .............................
T e a ....................................
R i c e ....................................
O ils a n d o i l s e e d s
S u g a r ....................................
T i n ....................................
Jute, r a w .............................
C o tton , r a w . . . .
835.5
429.2
370.1
315.9
189.5
231.3
172.6
213.7
16.2
8.3
7.2
6.1
3.7
4.5
3.4
4.2
849.4
573.7
380.4
370.1
182.1
216.1
164.8
144.1
14.6
9.9
6.6
6.4
3.1
3.7
2.8
2.5
612.7
251.5
211.6
172.3
110.2
106.1
101.1
76.8
22.5
9.2
7.7
6.3
4.0
3.9
3.7
2.8
T o t a l ....................................
2,758.0
53.6
2,880.6
49.6
1,642.4
60.2
In view of the fact that in most of the Latin American
and western European countries the ratio in question is either
above or around 15 per cent,1 it appears that countries in the
second and third groups in the region stand relatively low
in the world as regards the degree of export orientation of
the economy. However, to the extent exports are the only
normal means for obtaining essential imports, such as food
and industrial raw materials for Japan and capital goods
and consumer essentials for many other countries of the
region, earnings from exports, even though small, often play
a critical role. Particularly when countries are on the way
to develop their economy, additional export earnings mean
more funds for the purchase of needed capital goods for
development purposes or of essential consumer goods to stave
off an inflationary situation. Therefore, the crude ratio of
exports to gross domestic product alone does not convey
sufficiently the degree of importance which attaches to foreign
trade in such a dynamic situation as is being witnessed in
m any countries of the region. The critical significance of
marginal value has to be properly taken into account.
Except in the case of Japan, the commodity list of the
exports of the region is somewhat limited. Eight commodities
accounts for 50-60 per cent of the total value of exports of
the region excluding Japan and m ainland China, and the order
of their importance, without any significant changes over the
last three years, has been rubber, tea, rice, oil and oilseeds,
tin, sugar, jute and cotton (see table 2 0 ). Owing to increased
cotton-textile manufacturing in the region, especially in
Pakistan, raw cotton is losing its importance as a significant
export commodity of the region. Furtherm ore, the degree of
specialization is severer when individual countries are
separately considered. As seen in table 21, generally two of
the prim ary commodities take up 70 to 80 per cent of the
total value of exports of the country; for example, in the
first half of 1955, 82 per cent (rubber and tin) in the
1.
F o r s e v e ra l o f th e c o u n trie s in L a t i n A m e ric a a n d w e s te r n E u r o p e , th e
r a t i o w a s a s follo w s:
L a t i n A m e r ic a
C olom bia (1952)
E c u a d o r (1953)
G u a te m a la (1953)
H o n d u r a s (1952)
P e r u (1952
V e n e z u e la (1952)
%
14.2
14.5
18.0
25.2
17.4
53.0
W e s te r n E u r o p e
D e n m a r k (1954)
F r a n c e (1954)
G e rm a n y ( F e d e r a l R e p u b lic ) (1954)
I ta ly (1954)
N e th e r la n d s (1954)
N o r w a y (1954)
S w e d e n (1954)
S w itz e rla n d (1954)
U n ite d K in g d o m (1954)
%
22.0
9.5
15.1
8.3
35.1
16.8
19.6
24.0
15.6
TABLE
21
ECAFE COUNTRIES: PERCENTAGE OF EXPORTS OF
TWO MAJOR PRIM ARY PRODUCTSa IN TOTAL EXPORTS
C o m m o d ity
Burm a
.
.
.
.
.
.
C a m b o d ia b .
C e y lo n
C h in a:
.
.
T aiw an
Indonesia
M a la y a f .
.
.
.
N o r th B o rn e o
P ak istan .
.
.
.
P h ilip p in es
T h ailan d
V ie t- N a m g
R ice
Rubber
R ice
Rubber
Te a
Rubber
Sugar
R ice
T ea
C o tto n
Rubber
O ils & o i l s e e d s
Rubber
Tin
Rubber
O ils & o i l s e e d s
Ju te
C otto n
O ils & o i l s e e d s
Sugar
Rice
Rubber
Rubber
R ic e
1953
1954
61.8
2.2
80.1
1.9
37.9
52.6
21.5
64.2
62.1
15.8
58.0
10.6
10.0c
19.3
15.2
1.6
2.1
2.1
32.2
30.9
9.7
42.7
13.3
31.1
34.4
45.9
29.4
42.9
26.1
49.4
16.1
41.8
39.1
11.1
40.8
13.0
41.4
12.8
39.3
43.4
33.1
24.2
55.4
11.6
31.9
31.8
1955b
(first h alf)
77.2
3.6
35.5
14.2
64.6
16.8
60.3
20.7
17.0
7.6d
41.1
7 .0 e
54.1
11.2
38.7
13.9
48.9
29.2
28.8
34.3
51.8
21.7
46.3
21.8
a.
T h e tw o m a j o r p r i m a r y p r o d u c ts f o r e a c h c o u n t r y in e a c h y e a r g iv e n
a r e sele c te d f r o m th e e i g h t c o m m o d itie s lis te d in T a b le 20, a c c o r d i n g to
t h e i r im p o r ta n c e in to t a l e x p o r ts o f e a c h c o u n tr y . F o r B r u n e i, e x p o r ts
o f c ru d e p e tr o le u m w h ic h a r e n o t in c lu d e d i n t h e e i g h t p r o d u c ts ,
a c c o u n te d f o r 93.4 p e r c e n t o f t o t a l e x p o r t s in 1953 a n d 95.9 p e r c e n t in
1954. F o r S a r a w a k , e x p o r t s o f p e p p e r a n d r u b b e r a c c o u n te d re s p e c tiv e ly
f o r 31 a n d 20 p e r c e n t o f t o t a l d o m e stic e x p o r t s in 1953, 27 a n d 19 p e r
c e n t in 1954, a n d 14 a n d 43 p e r c e n t d u r i n g t h e f i r s t h a l f o f 1955.
b.
c.
1953 fig u re s in c lu d e d u n d e r V ie t- N a m .
Tea.
d.
O ils & oilseeds.
e.
T in .
f.
I n c lu d in g r e -e x p o rts . F o r th e F e d e r a t i o n o f M a la y a a lo n e , th e r a t i o s of
r u b b e r a n d t i n to to t a l e x p o r t s a r e m u c h h ig h e r , a s in d ic a te d b e lo w :
R ubber
T in
g.
1953
55.3
22.1
1954
54.3
22.6
F o r 1953, in c lu d in g C a m b o d ia a n d L a o s.
1955 ( J a n - J u n )
64.4
17.2
C H A PT E R 2.
by 27.4 (35.7) per cent. This trend tends to confirm the
observation, made in a recent GATT study, to the effect that
trade among industrial countries has been relatively more
active in recent years.4
Federation
of Malaya, 81 per cent (tea and rubber) in
Ceylon, 81 per cent (sugar and rice) in China: Taiwan, 81
per cent (rice tnd rubber) in Burma, 78 per cent (jute and
cotton) in Pakistan and 74 per cent (rice and rubber) in
Thailand.
With the exception of rice, a large part of the prim ary
commodities of the region is exported to the industrialized
countries outside the region. Naturally, therefore, export
earnings of most countries of the region are likely to be
affected by conditions of business activity in the United
States of America and western European countries.1 However,
owing to the rather inelastic supply of such prim ary commodities, at least during the short period, the effects of fluctuations
in the m anufacturing activities of the industrialized countries
on the prim ary exports of the region are reflected more in
price than in quantity changes. The terms of trade and the
export earnings of the countries fluctuate accordingly. Such
changes in export earnings in the past have introduced fluctuations in money and income and therefore inflationary and
deflationary pressures.2
During the post-war years except 1951, the share of exports
of ECAFE countries3 (excluding Japan) in total world exports
was generally much lower than in pre-war (1938). Moreover,
such share has been declining since 1951; it was 6.5 per cent
in 1954, as compared wiith 10.3 per cent in 1938 and 1951.
(see Table 22) World exports in 1954, compared with 1950,
rose by 38.0 per cent, whereas those of ECAFE countries
including Japan increased by 5.9 per cent and those excluding
Japan declined by 8.1 per cent. Again, world exports in 1954
were 1.5 per cent higher than exports in 1951, whereas those
of ECAFE countries including (excluding) Japan were lower
1.
2.
3.
33
CU R R EN T ECONOM IC SIT U A T IO N
F o r in s ta n c e th e “ p ro d u c tio n e la s tic ity ” o f th e volum e o f im p o rts , t h a t
is, th e r a t i o o f c h a n g e s in im p o r ts o f m a te ria ls u sed in m a n u f a c tu r in g
to c h a n g e s in to ta l m a n u f a c tu r in g o u tp u t, in th e U n ite d S ta te s is fo u n d
to be 0.85 f o r th e p e rio d c o v e rin g th e l a s t t h i r ty y e a r s . I t is f u r t h e r
e sta b lis h e d t h a t th e n o n -fo o d r a w m a te ria ls , s u c h a s ru b b e r, w ood, b u rla p ,
tin , e tc ., m o stly im p o r te d fr o m ov e rsea s s te r lin g a r e a c o u n trie s , a r e q u ite
s e n s itiv e a n d re c eiv e a s u b s ta n tia l d o w n w a rd im p o r t q u a n tity effect d u r in g re c essio n s. See: Z a s se n h a u s, H .K .: “ D ire c t e ffe c t o f a U n ite d S ta te s
re c essio n on im p o r ts ” , R e v ie w o f E c o n o m ic s a n d S ta tis tic s , A u g u s t 1955.
See i n f r a , s ec tio n on “ M o n e ta ry d e v e lo p m e n ts ” .
E x c lu d e s A fg h a n is ta n , m a in la n d C h in a , B ritis h B o rn eo , K o re a , N e p a l a n d
T h a ila n d f o r w h ic h d a ta a r e n o t availab le.
In assessing the impact of global factors on the exports
of the region, it is significant to note a recent trend in the
countries of western Europe to increase their imports from
the dollar area, largely as a result of an improvement in their
payments position and the consequent liberalization of trade
restrictions with that area, and also to increase intra-European
trade. For example, in the first four months of 1955, while
western Europe’s imports from non-dollar areas increased by
6 per cent compared with the first four months in 1954,
imports from the dollar area and intra-European trade
increased by 50 to 15 per cent respectively.5 However, the
countries of the ECAFE region (excluding Japan) as a group
did not share even the smaller rise in the imports of western
Europe from the non-dollar area. During the first quarter of
1955, while exports of these countries to Japan and the
United States increased by 38 and 4 per cent respectively over
exports in the last quarter of 1954, exports to western Europe
declined by about 6 per cent. How far this trend is going
to be enduring, of coure, remains to be seen.
At any rate, the export earnings of the prim ary commodities in the region in 1955 are expected to witness a moderate
rise over those in 1954. During the first half of 1955 the total
export earnings of ECAFE countries excluding (including)
Japan were 8.3 (8.5) per cent higher, at an annual rate, than
those in 1954, and the export earnings of m ajor prim ary commodities6 were 13.5 per cent higher.7 The earnings of rubber
alone in the first half of 1955 were $613 million as compared
to $849 m illion in the whole year of 1954. The recent price
4.
G A T T , In te r n a tio n a l T r a d e , 1954.
5.
U n ite d N a tio n s , E c o n o m ic B u lle tin fo r E u r o p e , Vol. V II, N o. 2, A u g u s t,
1955, p. 11.
In c lu d in g ric e , te a , v e g etab le oil a n d oilseeds, r a w ju te , r a w c o tto n , r u b b e r, ti n a n d s u g a r .
I n 1954 f o r E C A F E c o u n trie s e x clu d in g J a p a n , th e p e rc e n ta g e o f e x p o r t
v a lu e o f th e p r im a r y co m m o d itie s e n u m e ra te d to to ta l e x p o rts w a s 49.6
p e r cen t.
6.
7.
TABLE
22
POSITION OF ECAFE COUNTRIESa IN WORLD TRADE
(million US$)
IMPORTS
EXPORTS
Y ear
W o r ld
(total)
1938
.............................
1949b
.............................
1950
.............................
1 9 5 1 .............................
1952
.............................
1953
.............................
1954
.............................
1955c
.............................
a.
20,650
53,900
55,300
75,000
72.250
73,400
76,000
79,500
E CA FE c o u n tr ie s a
E CA FE e x p o rts
a s p ercen tag e
of w o r l d to ta l
W o rld
E x clu d in g In c lu d in g E x clu d in g I n c lu d in g
Japan
Japan
Japan
Japan
2,127
4,272
5,401
7,718
5,795
5,051
4,962
5,369
3,236
4,782
6, 221
9,073
7,068
6,326
6,591
7,153
10.3
7.9
9.8
10.3
8.0
6.9
6.5
6.8
15.7
8.9
23,250
58,800
58,200
80,250
79,250
75,800
78,700
85,300
11.2
12.1
9.8
8.6
8.6
9.0
E C A F E c o u n trie s f o r w h ic h d a ta a r e a v a ila b le in clu d e B u rm a , C am bodia,
C eylon, C h in a : T a iw a n , H o n g K o n g , In d ia , In d o n e s ia , J a p a n , L aos,
M ala y a , P a k is ta n , P h ilip p in e s a n d V ie t-N a m .
(total)
b.
c.
ECAFE co u n triesa
E C A FE im p o rts
a s p e rc e n ta g e
of w o r l d to ta l
BALANCE
for
E C A FE c o u n trie s
E x c lu d in g In c lu d in g E x clu d in g In c lu d in g E x clu d in g In c lu d in g
Japan
Japan
Japan
Japan
Japan
Japan
1,808
5,671
4,641
6,940
6,772
5,513
4,900
5,518
2,878
6,576
5,615
8,984
8,800
7,923
7,299
7,962
E x c lu d in g C h in a : T a iw a n .
F i r s t h a lf y e a r a t a n n u a l ra te .
7.8
9.6
12.4
11.2
8.0
9.6
8.6
11.2
11.1
8.5
7.3
6.2
6.5
10.4
9.3
9.3
319
— 1,399
760
778
— 977
— 462
62
— 149
358
— 1,794
606
89
— 1,732
— 1,597
— 708
— 809
ECONOM IC SU R V E Y O F A SIA A N D T H E FA R E A ST , 1955
34
The im ports of capital goods1 from 1949 to 1955 in
eleven ECAFE countries (see table 23) constituted 19.3 per
cent of the total im ports of $35,377 million. The ratio
gradually increased over the seven years, from an average of
17.4 per cent in 1949-51 to one of 21.6 per cent in 1953-55.
Naturally, the ratio of im ports of capital goods to total imports
varied am ong individual countries of the region, ranging in
seven-year averages from 30.2 per cent in China: Taiwan to
10.4 per cent in Malaya.
rise1 in rubber, cotton and tin could be considered as a strong
factor contributing to the expectation of sustained rise in the
earnings of prim ary exports for the year 1955.
The trend of prim ary export prices is naturally reflected
in the terms of trade of most countries of the region. Among
the countries for which statistics are available, Ceylon and
India fared better in 1954 than in 1953, on account of higher
tea prices; so also Pakistan on account of higher jute prices.
On the other hand, the terms of trade for Burma and VietNam deteriorated in 1954 compared to 1953 owing mainly to
lower export prices of rice. The more recent trends are
quite diverse: In the first quarter of 1955, the terms of trade
were worsening for Burma and the Philippines and im proving
for Ceylon, Malaya and Pakistan as compared with the same
period in 1954. However, towards the second quarter of
1955, the terms of trade were improving for Burma and
Malaya, while they were generally deteriorating in Ceylon,
India, Japan and the Philippines.
The value of capital goods im ports in the ECAFE
countries enum erated in the table was running at the rate
of $1,133 million in 1955 or 12 per cent higher than in
1954. Of this, India accounted fo r more than one-third,
followed by Indonesia, the Philippines, Malaya, and Pakistan
which together accounted fo r about one-half of the total in
that year. Between 1951 and 1954, while total im ports of
these countries declined by about 24 per cent, capital goods
im ports increased by about 15 per cent, reflecting obviously
the efforts of ECAFE countries to prom ote economic development and the preference they give to im ports of capital goods
over consumer goods.
Taking individual countries, the
increased im portance of capital goods in total im ports is
clearly seen in the case of Burma, India, Indonesia and
Pakistan.2 Among capital goods the im ports of iron and steel
products, used for construction and other developmental p u rposes, have witnessed a sharp increase in India and Malaya
during 1955 as com pared with previous years.3
Imports
Owing to the Korean-war boom the total value of imports
of ECAFE countries in 1951, as included in Table 22,
increased more rapidly than the total value of world imports,
and reached 8.6 per cent (excluding Japan) of the latter.
Since 1951 both the total value of imports of these countries
and their share in world imports declined. In 1954, the total
value of such imports (excluding Japan) was $4,900 million 2.
or 6.2 per cent of the world total; it stood at 29 per cent below
1951
and 11 per cent below 1953. As a result of a larger 3.
reduction in imports than in exports, the aggregate trade
balance of these countries (excluding Japan) turned from a
deficit of $462 million in 1953 into a surplus of $62 million
in 1954. During the first half of 1955, the total value of
imports of these countries, at annual rate, was $5,518 million,
or 13 per cent above 1954. However, as exports increased
less rapidly than imports the aggregate trade balance turned
again into a relatively small defiict of $149 million, at annual
rate.
TABLE
C o m p ris in g b a s e m e ta ls , m e ta l m a n u f a c tu r e s , m a c h in e r y a n d t r a n s p o r t
e q u ip m e n t. C h in a : T a iw a n , P a k i s t a n a n d 1950/51 P h il ip p in e fig u r e s r e la te
to iro n a n d s te e l m a n u f a c tu r e s , m a c h in e r y a n d t r a n s p o r t e q u ip m e n t.
P e r c e n ta g e o f c a p i t a l goods im p o r ts t o t o ta l i m p o r t s :
1951
1954
1955a
B u rm a
. . . .
. . . . 13.0
27.0
28.3
In d ia
. . . .
. . . . 19.3
27.2
32.5
29.9
In d o n e s ia
.
. . . 15.5
31.7
P a k is ta n
. . . . 16.5
35.7
39.6
a. B ase d o n f ir s t f o u r to e ig h t m o n th s .
V o lu m e o f im p o r ts o f ir o n a n d s te e l p r o d u c ts :
( ’000 to n s )
1953
1955a
1954
. . . .
219
341
In d ia
. . . .
509
In d o n e s ia
. . . .
262
265
289
. . . .
147
161
239
P a k is ta n
. . . .
136
138
172
a . A n n u a l r a t e o n th e b a s is o f fir s t s ix m o n th s .
23
VALUE OF CAPITAL GOODSa IMPORTS, 1949-1955
(Million US$)
B urm a
1949
.............................
1950
.............................
1 9 5 1 .............................
1952
.............................
.............................
1953
1954
.............................
.............................
1955e
T o ta l 1949-55 C a p i t a l
g o o d s im p o rts .
T o ta l im p o r t s .
P e r c e n t a g e of c a p i t a l
goods
im p o rts
in
t o t a l im p o rts
20.3b
15.7b
17.8
32.0
35.5
50.8
56.0
Cam bodia,
Laos and
V iet-N am
C e y lo n
C hina:
T aiw an
India
Indonesia
M a lay a
P ak istan
P hilippin es
C a p ita l
goods
im p o r t s
T o ta l
im p o rts
P ercen ta g e of
cap ital
goods
im ports
in total
im ports
929.7
713.8
922.7
1, 172.3
960.5
1 , 010.8
1,133.1
4,857.0
3,976.0
6,084.0
6,109.0
4,835.0
4,648.0
4,868.1
19.1
18.0
15.2
19.2
19.9
21.7
23.3
6,842.3
19.8
33.1
35.5
40.7
42.4
479.7
340.0
346.1
357.6
313.0
342.4
438.9
95.6
76.7
123.7
203.5
140.0
125.0
106.3
74.6
75.4
148.5
167.5
120.8
105.4
124.1
128.9
61.4
116.5
107.6
116.2
52.9
78.6
92.7
111.3
117.8
135.1
279.3
2,155.0
184.1
609.0
2,617.7
10,392.0
870.4
4,782.0
816.3
7,871.0
631.0
2,924.0
704.6
3,278.0
13.0
30.2
25.2
18.2
10.4
21.6
21.5
50.8
50.3
57.5
106.0
97.1
77.5
71.5
30.5
23.8
42.9
51.2
45.9
33.9
51.1
228.1
1,080.0
510.7
2,258.0
21.1
22.6
2.6c
10.0c
a.
E x c e p tin g fig u r e s f o r B u r m a f r o m 1953 a n d f o r I n d o n e s ia f r o m 1950
o n w a rd s w h ic h a r e ta k e n f r o m n a tio n a l s t a t i s t i c a l p u b lic a tio n s fig u re s
a r e c o m p ile d b y th e E C A F E s e c r e t a r i a t a n d in c lu d e b a s e m e ta ls, m e ta l
m a n u f a c tu r e s a n d m a c h in e r y a n d t r a n s p o r t e q u ip m e n t.
1.
See su p ra , s e c tio n o n “ A g r ic u ltu r a l p r o d u c tio n ” .
b.
c.
d.
e.
59.4d
69.0
88.2
Y e a r e n d in g S e p te m b e r.
E x c lu d in g f o r e ig n a id.
Y e a r b e g in n in g 1 A p ril.
A n n u a l r a t e b a se d o n f i r s t 6-10 m o n th s .
35,377.1
19.3
C H A PT E R 2.
Glassifying total im ports into cereals, capital goods and
others, it seems th a t whereas the im ports of “ others” show a
high degree of sensitivity to changing conditions of trade,
im ports of capital goods, while responsive to favourable conditions, show a lesser degree of sensitivity to adverse
conditions.1 T hus, d u rin g the K orean-w ar boom , while total
im ports increased (in term s of value) b y 53 per cent in 1951
over 1950 and “ others” by 46 p er cent, im ports of capital
goods rose by 33 per cent.
In 1953 while total im ports
declined b y 21 p e r cent from th e ir 1952 level and “ others” by
23 p e r cent, im ports of capital goods declined b y only 10
p er cent. T his relative inelasticity of capital goods im ports
is principally attrib utab le to the com m itm ents of expenditures
by governm ents on developm ental projects and plans, which
they would not wish to reduce sharply except in the event
of serious balance of paym ents deficit.
Trade w ith the U SSR , eastern European countries and
m ainland China
The trade of E C A FE countries (excluding m ainland
C h in a )2 w ith the USSR an d eastern E urop ean countries has
continued to rem ain a very small fraction of th e ir total trad e
(aro u n d 1 per cent of both exports and im p o rts). However,
there are indications of efforts th a t m ay lead to some increase
in this trade.
A n u m ber of ECAFE countries— namely,
B urm a, India, Indonesia an d Pak istan — have entered into
bilateral trad e agreem ents w ith one or m ore eastern E uropean
countries. Some of these agreem ents reflect the efforts of
ECAFE co un tris to discover new m arkets fo r their com m odities, such as Burm ese rice and Pakistan cotton an d jute.
B urm a’s b a rte r deals w ith eastern E uropean countries involve
the exchange of rice fo r developmental and consum er goods.
But the conclusion of bilateral tra d e agreem ents in itself
does not necessarily prom ote increased trade. In d ia ’s bilateral
trade agreem ents with m any eastern E uropean countries have
not resulted in any significant increase in its tra d e w ith them
d u rin g the last fo u r to five years. On the other han d , the
extension of credit an d technical assistance by one or two of
the eastern E uropean countries to ECA FE countries in connexion w ith some of the la tter’s specific developm ental projects
appears to give scope fo r some increase in trade. T he USSR
assistance to A fghanistan in certain projects, to B urm a in
technical personnel an d to In d ia on a steel project, and
the cred it extended by Czechoslovakia to A fghanistan and
Indonesia a re examples. A fghanistan’s tra n sit trade agreem ent with the USSR is the m a jo r factor in the trade between
the two countries.
On the other hand , the tra d e of EC A FE countries with
m ainland China has continued to rem ain larger th a n th a t with
the USSR an d eastern E uropean countries. In the first half
of 1955, the exports of six ECAFE countries (Ceylon, India,
Indonesia, Jap an , H ong K ong an d M alaya) to m ainland China
am ounted to $56 m illion, while im ports totalled $154 million.
Hong Kong, Ceylon, Ja p a n and M alaya accounted fo r the
greater p ro p o rtio n of the region’s trad e with m ainland China.
The beginning of the export of certain light industry products
from m ainland China to other ECAFE countries was a new
feature of the trad e d u rin g the perio d ,3 which m ight affect
the established m ark etin g p attern s in certain countries of
the region.
1.
2.
3.
35
CURR EN T ECONOM IC SIT U A T IO N
Im p o r ts o f c e re a ls a r e n a tu r a lly a ffe c te d m o re b y s u p p ly c o n d itio n s o f
d eficit c o u n trie s a n d o fte n a r e lik ely to be m o re in d e p e n d e n t o f c o n d itio n s
o f tra d e .
A b o u t 80 p e r c e n t o f m a in la n d C h in a 's t r a d e is w ith th e U S S R a n d c o u n tr ie s o f e a s te r n E u r o p e ; see in fr a , c h a p t e r 7, se c tio n II.
I n fr a , c h a p t e r on C h in a.
The paym ents position and external finance
The sum of gold and foreign assets of nine ECAFE
countries after reaching a peak of $5,063 m illion at the
end of 1951 declined to $4,440 m illion a t the end of 1953
and then took a positive tu rn in 1954 and especially in the
first half of 1955 (see table 2 4 ). W hile the sum of these
reserves increased by only 2.3 per cent in 1954 over 1953, it
went up by 11.3 per cent in the first half of 1955 as com pared
w ith the corresponding period in 1954. Am ong the nine
countries, d u rin g the first half of 1955, Jap an gained highly
(52 per c e n t), followed by Indonesia (44 per c e n t), Ceylon
(31 p e r c e n t), T hailand (20 per c e n t), south K orea (14 per
cent) an d P ak istan (9 per c e n t). The countries th at suffered
losses were B urm a (46 p er cent) an d the Philippines (17
per ce n t).
TABLE
24
GOLD AND FO R E IG N ASSETS
(E n d o f period)
(m illion dollars)
1952
1953
1954
End of June
1954
Burm a . . . .
C eylon . . . .
India: R eserve
Bank of In d ia .
In d o n e sia .
Japan a . . . .
Korea, R epublic of
P a k istan : S tate
B ank of P a k ista n b
Philippines
T hailand: Bank of
T h ailan d .
G ra n d total .
1955
209
187
225
136
142
201
197
176
107
229
1,729
391
1,165
87
1,765
276
1,017
116
1,782
299
1,125
110
1,809
831
115
1,751
305
1,263
131
295
317
296
307
328
282
299
310
327
258
352
302
273
264
316
4,732
4,440
4,542
4,213
4,687
212
S o u r c e : R ep u b lic o f K o re a : B a n k of K o re a; o th e r c o u n trie s : I n te r n a tio n a l
M o n e ta ry F u n d , In te r n a tio n a l F in a n c ia l S ta tis tic s .
N o te s : 1. U n le ss o th e rw is e in d ic a te d fig u re s in c lu d e th o s e f o r official
a u th o ritie s a n d c o m m e rc ia l b a n k s.
2. S ta tis tic s in d o lla rs a r e d iffe re n t fr o m th o s e in n a tio n a l c u rre n c ie s
p u b lis h e d in in fr a , A sia E c o n o m ic S ta tis tic s , ta b le 13, m a in ly
b e ca u se o f d ifferen c e in th e r a t e o f e x c h a n g e a p p lie d f o r th e p u r pose o f coversion.
a . F o r B a n k o f J a p a n fo r e ig n e x c h a n g e only.
b. Is su e d e p a r tm e n t only.
In Japan, the rise of foreign exchange holdings, which
increased by 59 p e r cent from M ay 1954 to the end of
Septem ber 1955, was m ainly due to a substantial increase in
exports accom panied by a slight decline in im ports. The
export boom of Ja p a n could be explained partly by the recent
expansion in the w orld dem and fo r m anufactured goods and
partly by the relaxation of im port restrictions of sterling-area
countries.
The increase in the w orld dem and for and prices of
ru b b e r was an im p o rtan t facto r fo r the im provem ent in the
paym ents position of Ceylon and Indonesia.
D uring the
first nine m onths of 1955. Ceylon h a d a trade surplus of
Rs 329 million as com pared with Rs 302 million in the
corresponding period of 1944, and the term s of trade for
the first eight m onths of 1955 were m ore favourable than for
the corresponding period of 1954. In Indonesia, in the first
half of 1955 the trade surplus reached R p 1,589 m illion as
com pared with Rp 416 m illion in the corresponding period
36
ECONOM IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
Developm ent an d A ssistance A ct) fo r th e above-m entioned
co u n tries d u rin g the y e a r fro m Ju ly 1954 to Ju n e 1955 was
over $140 m illion.4
a year before, due chiefly to an increase in the export volume
of rubber, petroleum an d petroleum products, su g ar etc. and
also due to a reduction of consum er im ports.
A lthough the export p rice of rice continued to fall, total
export earnings of Thailand d u rin g the first half of 1955 were
h igh er than in the corresponding p erio d of 1954, owing
m ainly to large volum e of rice exports an d h ig h er ru b b e r
prices. In contrast to T hailand, the sh arp decline of gold
a n d foreign assets in B u rm a in 1954 was m ainly due to heavy
debt repaym ent of about $35 m illion accom panied by declining
export earnings a n d heavy governm ent im ports fo r developm ent projects. T he same causes accounted fo r the fu rth e r
d ro p of reserves in the first half of 1955.
Trade an d exchange policies
D u rin g th e y ear u n d e r review, although a few countries
of the region were faced w ith c o n tin u in g balance-of-paym ents
difficulties ow ing to red uced ex p o rt earn in g s o r h ig h er developm ental expenditures a n d dom etic inflationary pressures or
other factors, there was general p ro g ress in liberalizing tra d e
an d paym ents restrictions, in elim in a tin g discrim inatory
features an d thus in the d irection of m ultiliateralism . Exchange
restrictio ns on paym ents fo r invisible item s w ere continued
w ithout an y significant changes. S om e of the m o re im portant
developm ents, in d ica tin g a sh ift on em phasis in policies, are
reviewed here w ith reference to exchange policies, export
p ro m o tio n m easures, q u an titativ e im p o rt restrictions, tariffs,
a n d b ilate ral tra d e agreem ents.
In P akistan, a net inflow of investm ent an d overseas
borrow ings, com bined with c u rren t account surplus, was
reflected in an increase of gold an d foreign assets.1
In In d ia , the 1954 decline was due to h ig h er im ports
accom panied by a reduction in private and official donations,
w hich declined by about $47 million. In the P hilippines, the
continuous loss of gold and foreign assets since 1953,
particularly in 1954, was due to an expansion of im ports
through a relaxation of exchange control and a reduction of
US governm ent expenditures in the Philippines.
E xternal finance has become an im p o rta n t factor n o t only
in financing development expenditure b u t also in safegu ardin g
the balance of paym ents of countries in the region.
F or
instance, external financial aid to In d ia has kept its reserves
from falling in the face of tra d e deficits. T he aid from the
U nited States and the Colombo P lan donating countries and
the loans from the International Bank fo r R econstruction and
Development to m any countries of the region have steadily
increased in the last half of 1954 and the first half of 1955.2
The econom ic aid by the U nited States to the Colom bo P lan
countries d u rin g the US fiscal year 1955 (1 July 1954-30 Ju n e
1955) rose to $322 million, from $162 m illion in the previous
fiscal year. In addition to the funds allocated to individual
countries, the Congress of the U nited States a p p ro p ria te d a
sum of $100 m illion to prom ote grea te r econom ic strength
th ro u g h regional projects.3 Sim ilarly, the In te rn a tio n a l Bank
fo r R econstruction and D evelopm ent has advanced to five
countries of the region (Ceylon, In d ia, Ja p an , P ak ista n and
T h aila n d ) a sum of $33.6 m illion in the first eight m onths
of 1955, as com pared with $29.3 m illion in 1954 an d $16.6
m illion in 1953.
A n o th er form of external aid is the disposal of US
a g ric u ltu ral surplus com m odities such as wheat, cotton,
tobacco, rice etc. to some countries of the region, nam ely
Ja p a n , Nepal, Pakistan, south K orea, south V iet-N am and
T hailand. Such aid plans a re un d e r negotiation w ith B urm a
a n d Indonesia. P a r t of these surpluses is given as g ran ts
a n d the rest is sold fo r local currency. Som e p a rt of the
surp lu s is used to prom ote tria n g u la r trad e , as in the
case of P a k ista n w here com m odities received fro m a
th ird c o u n try a re p a id fo r in the fo rm of US a g ricu ltu ra l
surpluses.
The total agreed an d authorized value of US
a g ricu ltu ra l su rplu s disposal (u n d e r US A g ricu ltu ral T ra d e
1.
2.
3.
S ta te B a n k o f P a k i s t a n , R e p o r t o f th e C e n tr a l B o a r d o f D ir e c to r s f o r th e
Y e a r e n d e d 30 J u n e 1955, p . 28, K a r a c h i, 1955.
F o r a id a n d lo a n s re c e iv e d b y in d iv id u a l c o u n trie s , re f e r e n c e m a y b e m a d e
t o i n f r a , P a r t I I , c o u n tr y c h a p t e r s .
C o n s u lta tiv e C o m m itte e f o r C o -o p e ra tiv e E c o n o m ic D e v e lo p m e n t in S o u th
a n d S o u th - E a s t A s ia , F o u r th A n n u a l R e p o r t ( S in g a p o r e , 1 9 5 5 ), c h a p t e r
o n th e U n ite d S ta te s o f A m e ric a .
E xch an g e policies a n d e xp o rt p ro m o tio n measures:
A m ong efforts m ade to re a d ju s t a n d / o r stabilize exchange
rates at m ore healthy or realistic levels d u rin g the y ea r were
the revision of the rate fo r the K o re an hw an, the devaluation
of the P a k istan rupee a n d the m easures taken in C h in a :
T aiw an, Indonesia, So u th K o rea a n d T h a ila n d to m odify and
m itigate th e ir m ultiple-exchange-rate system s.5
Also of significance were the steps taken by som e countries
to elim inate o r m itigate some of the d isc rim in a to ry paym ents
devices em ployed m ainly fo r export-prom otion o r balance-ofpaym ents reasons, in some cases in c o n ju n c tio n w ith m ultiple
exchange rates.
J a p a n m odified som e of the featu res in its reten tio n q u o tas
a n d link system s: the facility given to the exporters of ships
to im p o rt su g ar was abolished in N ov em ber 1954, an d effective fro m M arch 1955 the facility given to ex p o rters to retain
10 p e r cent of th e ir total ex p o rt proceeds fo r ex p o rt p rom otion
or fo r im ports was reduced to 5 p e r cent. In S eptem ber 1955,
Indonesia announced its decision to abolish the system of
retention qu otas fo r “ w eak” ex p o rts; th e system of “ p arallel”
transactions u n d e r w hich im p o rts were linked to exports was
also m odified substantially to elim inate th e reten tio n quotas.
O n the other h a n d , som e coun tries co n tin u ed existing retention
q uota a rran g em e n ts or in tro d u c e d new elem ents. P a k ista n
extended its e x p o rt incentive schem e in 1955, p e rm ittin g
exporters of a la rg e r n u m b e r of item s to reta in a certain
p ro p o rtio n of th e ir ex p o rt proceeds fo r im ports. South K orea
fo u n d it necessary to re ta in the system even th o u g h it took
im p o rta n t steps in A u g u st 1955 to abolish m ultip le exchange
rates an d establish a unified exchange-rate system .
In
Cam bodia, Laos an d south V iet-N am , exporters were perm itted
in 1955 to retain a p ro p o rtio n of th e ir e x p o rt proceeds fo r
free disposal o r fo r im ports, the p ro p o rtio n fo r ex p o rters to
the do llar area being less th a n fo r others.
E x p o rt p ro m o tio n m easures include also re d u c tio n in
governm ent controls a n d red u ctio n o r elim in atio n of export
duties. M any of these m easures, w hich h a d m o re o r less
been c a rrie d out in e a rlie r years, w ere co ntin ued in the light
of recent p rice m ovem ents of in d iv id u al e x p o rt p ro d u c ts.6
However, it w ould a p p e a r th a t governm ents a re b eg in n in g to
4.
.
6.
5
U n ite d S ta te s , D e p a r tm e n t o f S t a t e B u l le t in , 1 A u g u s t 1955, p p . 199-202.
F o r d e ta ils , see i n f r a , p a r t I I .
F o r d e ta ils o f c h a n g e s in e x p o r t d u tie s , s e e i n f r a , P a r t II .
C H A PT E R 2.
C U RREN T ECONOM IC SIT U A T IO N
recognize the lim ited effects of these m easures in term s of
increased export earnings.
In d ia, fo r example, is placing
reliance upon the export prom otion councils established for
several com m odities, p a rticularly m anufactured goods. These
councils a re sponsored by the governm ent, b u t composed of,
and ru n by, representatives of the trad e an d industry co n cerned. As explained in a subsequent section, some countries
have tried to use bilateral trad e arrangem ents fo r prom oting
exports.
Quantitative im port restrictions:
Q uantitative im port
restrictions continued to be exercised in the countries
of the region fo r fo u r m a jo r purposes:
(a) protecting
gold an d foreign-exchange reserves, ( b ) allocating available foreign-exchange resources to im ports in accordance
with p riorities determ ined on the basis of dom estic developm ental plans and needs, (c) protecting dom estic industries,
and ( d ) en suring a g reater share of im port trad e to nationals.
Reasons other th an those related to balance of paym ents
appeared to be g aining in em phasis d u rin g 1954 and 1955.
M ost countries in the region have applied quantitative
im port restrictions fo r balance-of-paym ents reasons, although
it does not necessarily m ean th a t such restrictions are used
only when they a re faced with an actual or im m inent d rain
on their foreign-exchange reserves.
Countries which are
incurring steadily increasing developmental expenditures will
necessarily face increasing im p o rt dem and and consequently
employ im port restrictions in such a m an n er as to take account
of these requirem ents. This objective has been of cardinal
significance in the im p o rt controls of In d ia th rou g h o u t the
post-war years and of considerable im portance in Indonesia,
Pakistan and the Philippines in the last three to fo u r years.
A developm ent of some significance in this field during
1955 was the relaxation of these restrictions in m any countries,
which was not in all cases necessarily an indication of
im provem ent in their paym ents position. Such relaxations,
which were effected in India, Indonesia, Pakistan, the P hilippines and T hailand, derived partly from the increased im port
needs of econom ic developm ent an d consum ption, b u t partly
from the recognition th at continued reliance upon im port
restrictions fo r protecting the balance of paym ents m ight
aggravate the difficulties related to in tern al inflationary forces.
In two countries at least, namely, Indonesia and T hailand,
im port control was seriously telling on governm ent revenues.
Consequently, in Septem ber 1955 T hailand replaced im port
restrictions on m ost item s1 by tariff increases which are
expected to yield revenue to the governm ent. In Indonesia,
the changes introduced in Septem ber 1955 involved a liberalization in im ports, coupled w ith a change from reliance on
quantitative restrictions to restrictions th rou g h the price
m echanism .2 The im port surcharges have been substantially
increased, at varying rates on the different groups of im ports;
while im ports have been m ade freely licensable subject to
satisfactory evidence of correct prices an d quality. P akistan
has perm itted some liberalization in im ports in 1955 m ainly
to meet domestic shortages of consum er goods, a policy which
was helped by US aid. B urm a, on the other hand, followed
until recently a policy of easy im ports, an d in curred developmental expenditures w ithout inflationary pressures, m ainly by
allowing its foreign assets to decline. However, when the
decline became serious, it h a d in M arch 1955 to intensify
im port controls in order to protect exchange reserves and
to curtail developmental expenditures in order to prevent
inflation.3
Am ong the sterling-area countries of the region, larger
allocations of foreign exchange from dollar sources were
m ade, and in no case were restrictions on dollar im ports
intensified d u rin g the year. Of considerable significance in
principle, in this connexion, was the lim ination of discrim ination against dollar im ports by Pakistan in its im port-licensing
policy since Ja n u a ry 1955, representing a basic d eparture from
the over-all policy of the sterling area.
Some countries in the region employ quantitative im port
restrictions as a deliberate instrum ent fo r protecting domestic
industries. Even in these countries in which such restrictions
are used fo r balance-of-paym ents reasons, they have a protective effect on domestic industries. Available evidence suggests
that in several countries this effect has been intended in some
m easure: in India, P akistan and the Philippines, and to a
lim ited extent, in Ceylon, Indonesia an d T hailand. Since
these restrictions are often employed fo r protecting domestic
industries in the face of paym ents difficulties which recur
from time to time, it is difficult to foresee what will happen
when countries are, to a significant extent, able to replace
quantitative restrictions by tariff and other protective
m easures.4
In India the quotas fo r various im port items fo r each
half-yearly licensing period are determ ined regularly on the
basis of local industrial capacity and production, an d the
cou n try ’s requirem ents.
A large num ber of im ports are
prohibited, the dom estic production of which is considered
adequate. Aside from the im port control authorities, the
Indian Tariff Commission has also recom m ended the use of
quantitative im port restriction for protecting industries, thus
fa r for 33 industries.5
In Pakistan 70 per cent of the total available foreign
exchange is allocated to im ports of essential industrial m aterials
and capital goods, and all the consum er im ports are subject
to strict control, the quotas for m any of them being determ ined
in the light of the domestic production of various industries.
The P akistan T ariff Commission, however, has not recom m ended quantitative im port restriction for protecting domestic
industries except in one or two cases, b ut has relied m ainly
on tariff protection.
3.
4.
5.
1.
2.
C o n tro ls a r e s till e x e rc ise d o n im p o r ts o f specified item s.
F o r d e ta ils, see i n f r a , c h a p t e r 10 o n In d o n e s ia .
37
B asically , th e b a la n c e -o f-p a y m e n ts p re s s u re s a r e a ttr ib u t a b le to tw o sets
o f c irc u m s ta n c e s, n a m e ly , th e in c re a se d levels o f d e v e lo p m e n ta l a n d o th e r
e x p e n d itu re s on th e o n e h a n d , a n d th e in a d e q u a te levels o f e x p o r t e a r n in g s on th e o th e r. A sid e fr o m th e p ro b le m o f flu c tu a tio n s in e x p o r t
e a r n in g s , th e e ffo rts to s te p u p e x p o r t e a r n in g s c a n only a c h ie v e lim ited
re s u lts in th e s h o r t r u n . O n th e o th e r h a n d , i t m a y n o t be d e sira b le o r
fe a sib le to c u r ta il th e scale o f d e v e lo p m e n ta l e x p e n d itu re s , o r to a d o p t
a d e q u a te fiscal m e a su re s to r a is e g o v e rn m e n t re v e n u e a n d red u c e th e im p o r t d e m a n d . T h e in fla tio n a r y effects o f d o m estic e x p e n d itu re s c a n be
c o u n te re d a s lo n g a s e x c h a n g e re serv es a n d e x te r n a l a id c a n be utilized
to fin a n c e i m p o r t s u rp lu s e s . F a c e d by th is d ile m m a b e tw ee n in fla tio n a r y
p re s s u re s on th e one h a n d a n d th e b a la n c e -o f-p a y m e n ts p re s s u re s on th e
o th e r, s e v e ra l E C A F E c o u n trie s h a v e b e en r e s o r tin g to a lte r n a tin g re la x a tio n s a n d in te n s ific a tio n s o f im p o r t re s tric tio n s .
A tte n tio n m a y b e d r a w n in th is c o n n ex io n to a rtic le X V I I I o f th e revised
G e n e ra l A g re e m e n t on T a riffs a n d T r a d e w h ic h reco g n izes t h a t c o u n trie s
in th e e a rly s ta g e s o f e conom ic d e v e lo p m e n t should e n jo y a d d itio n a l
fa c ilitie s t o e n a b le th e m “ ( a ) to m a in ta in sufficient flex ib ility in th e ir
t a r if f s tr u c tu r e t o be ab le to g r a n t th e ta r if f p ro te c tio n re q u ire d f o r th e
e s ta b lis h m e n t of a p a r t i c u l a r in d u s tr y a n d (b ) to a p p ly q u a n tita tiv e
re s tric tio n s f o r b a la n c e -o f-p a y m e n ts p u rp o s e s in a m a n n e r w h ich ta k e s
fu ll a c c o u n t o f th e c o n tin u e d h ig h level o f d e m a n d f o r im p o rts likely to
be g e n e r a te d b y t h e i r p ro g r a m m e s o f econom ic d e v elo p m en t".
Som e of th e m a r e c o tto n -te x tile m a c h in e ry , m o to r-c a rs, p o w e r a n d distr ib u tio n tr a n s f o r m e r s , g r in d i n g w heels, plyw ood a n d te a -c h e s ts , fe rro silico n , a n tim o n y , e le c tric m o to rs, g la ss a n d g la ss-w a re , fine ch em icals,
s e r ic u ltu re , wood sc re w s, a n d m a c h in e screw s.
38
ECONOM IC SU R V EY O F A S IA A N D T H E F A R E A ST , 1955
In Ceylon protection th ro u g h im p o rt re striction is given
to certain industries (cotton sarongs, handloom towels, glass
tum blers an d chim neys, plywood, chests etc.) u n d e r the
In dustrial P roducts Act, which has been in operation fo r five
years.
In add itio n , the Im p o rt D uties A dvisory B oard
recom m ends in app ro p ria te cases either ta riff protection or
im port restriction. In d u stries w hich do n o t com e u n d e r the
In d u strial P ro du cts A ct a re protected u n d e r the C ontrol of
Im po rt and E xports Act, though the use of this device app ears
very limited.
In the P hilippines, the foreign-exchange allocations for
im ports were ad ju sted by the M onetary B oard of the C entral
Bank in 1954 an d 1955 accord in g partly to the local p ro d u c tion of several item s.1 U n d er the revised Bell T ra d e Act,
the P hilippines can apply reasonable qu an titative im p o rt
restrictions not only fo r safeguarding its balance of paym ents,
b u t also fo r protecting its dom estic industries.
In Indonesia, im ports of complete wireless sets an d sewing
m achines have been pro h ib ited d u rin g the y e a r in o rd e r to
prom ote the establishm ent of assem bling industries. T h ailan d
also regulates the im port of a lim ited n u m b e r of item s in
order to protect local industries.
At least three countries of the region, nam ely, B urm a,
Ceylon an d Indonesia, used im p o rt licensing to prom ote a
larger share of their im port tra d e fo r th e ir nationals.2 In
B urm a, about one-half of the total im p o rt licences by value
is issued to natio n al traders.
In Ceylon, licences fo r im ports fro m Ja p a n , W est
G erm any, m ainland C hina, the U SSR a n d countries of eastern
E urope continue fo r the m ost p a rt to be issued only to
registered Ceylonese tra d e rs; in issuing licences fo r im ports
from the E P U (E uropean P aym ents U nion) countries as well,
preference is accorded to Ceylonese nationals. T he total value
of im port trade reserved fo r registered Ceylonese im porters
is Rs 100 m illion, an d the policy has encouraged the tra n sfe r
of foreign agencies to Ceylonese hands.
In Indonesia, not only is preference given to registered
national trad ers in foreign-exchange allocations fo r im ports,
but also credit facilities fo r the im p o rt of cap ital goods
negotiated un d er tra d e agreem ents w ith fo reig n countries in
1954 have been largely restricted to those firm s in w hich
the m a jo rity holding of capital is ow ned b y Indonesian
nationals. In addition, foreign firm s a re re q u ire d to im p o rt
th e ir requirem ents th ro u gh the in term ed iary of n a tional trad ers.
Ow ing to lack of experience and ad eq u ate capital on the
p a r t of the nationals, such m easures have not alw ays w orked
sm oothly. In Indonesia, they have resulted in som e speculation, in an d sale of, im p o rt licences.
m aterials a t lower tariff rates. R evenue c o n sid eratio n was as
im p o rta n t in som e cases. T h ere w ere also m odifications of
the existing p referential tariff arran g em en ts.
A m ong m a jo r m odifications v/ere those in the Republic
of C hina, the P h ilipp in e s, C am bo d ia, L aos a n d V iet-N am .3
T he R epublic of C hina effected a m a jo r overhaul of its tariffs
(w ith m ost-favoured n a tio n clause) w hich resulted in increased
d uties on lu x u ry a n d non-esential item s, low er rates on industria l raw m aterials a n d p ro tectio n to newly established
in dustries. In the P hilippines, u n d e r the revised Bell Trade
Act, it w as ag re e d to replace th e p re se n t excess ta x on sale
of fo reign exchange by a special im p o rt levy a n d to commence
p a rtially the levy of o rd in a ry im p o rt duties on im p o rts from
the U nited States also, w ith effect fro m J a n u a ry 1956. In
C am bodia, Laos an d V iet-N am , the te rm in a tio n of com m on
custom s a n d tariff a rra n g e m e nts w ith F ra n c e was followed by
the in tro d u c tio n of sep arate custom s a n d tariff systems in
the th ree countries. W hile the tariff p referen ce to France
con tin u ed u n d e r the revised a rra n g e m e n ts of M arch-A pril
1955
in the R epublic of V iet-N am , tw o rates— the g eneral rate
a n d the m in im u m rate— w ere in tro d u c e d a n d the la tter (oneh alf of th e fo rm e r) was m ad e applicable to c ountries with
w hich a p refe re n tial a rra n g e m e n t w a s'c o n c lu d ed , e.g. F ran ce
a n d the U n ited States. T h a ila n d gave effect to very substantial
changes in im p o rt tariffs in Sep tem ber 1955, designed m ainly
fo r revenue an d in replacem ent of q u an titativ e im p o rt controls.
In In d ia an d P a k istan , the T ariff C om m issions continued
to review the applications of in d u strie s fo r p ro tectio n a n d on
the basis of th e ir recom m en d ation s several in d u strie s w ere
given tariff protection. In 1 9 5 4 /5 5 the In d ia n G overnm ent
thus g ra n te d p ro te c tio n to several new in d u strie s, c o n tin u ed
it to those a lre a d y receiving p ro tectio n , a n d disco n tin u ed
protection to som e in d u stries.4 T he P a k ista n T ariff C om m ission has since its estab lishm en t in 1950 investigated the
claim s of a b o u t 60 in d u strie s f o r p ro te c tio n , a n d so f a r the
governm ent h a s g ra n te d p ro tectio n to 30 in d u strie s.5 The
claim s of o th er in d u strie s are still u n d e r e x am in ation .
A m ong o th er countries w hich used tariff changes to
p rom o te dom estic in d u strie s w ere Ceylon w hich effected some
m in o r m odifications d u rin g the y e a r a n d J a p a n which
suspended im p o rt duties on m ost item s of m a c h in e ry early
in 1955.
Bilateral trade a n d p a y m e n ts arrangem en ts:
W hile
several E C A FE cou n tries c o n tin u e d to n eg o tiate new, or
to extend existing, b ila te ra l tra d e a rra n g e m e n ts d u rin g
the y e a r,6 the significant developm ent a p p e a rs to be in the
ch an g in g c h a ra c te r a n d p u rp o se of such arran g em en ts. D u rin g
a n d im m ediately a fte r the K o rean -w ar boom , b ila te ra l a rra n g e m ents w ere fo u n d useful to o b tain supplies of essential goods,
3.
Changes in im p o rt tariffs: D u rin g the year, som e co u n tries un d e rto o k a general revision an d re a d ju stm e n t of th e ir
im p o rt tariff systems, w hile others continued to m ake changes
in duties on specified items. As a rule, m any of these changes
aim ed a t p ro tectin g dom estic in d u stries ag ain st foreign com p etitio n an d facilitatin g the im p o rt of m achinery an d raw
1.
2.
Q u o ta s f o r sh o es, c o rn s ta r c h e s , to y s, lo w -g ra d e p e n c ils, fin ish e d c a r s a n d
a n u m b e r o f o th e r ite m s w e re e lim in a te d o r re d u c e d in 1954.
See f o r C ey lon , A d m i n i s t r a t i v e R e p o r t o f th e C o n tro lle r o f I m p o r t s a n d
E x p o r t s , 1954; a n d f o r In d o n e s ia , R e p o r t o f B a n k In d o n e s ia , 1954-55, p p .
102-103 a n d p p . 146-147.
4.
5.
6.
B u r m a to o k a m a j o r s t e p in O c to b e r 1953 w h e n i t a b o lis h e d p r e f e r e n tia l
ta r if f s a n d in tr o d u c e d a u n ifie d s y s te m in v o lv in g h ig h e r r a t e s o n lu x u rie s
a n d lo w e r r a t e s o n e s s e n tia l g oods a n d m a te r ia ls .
N e w in d u s tr ie s g r a n t e d p r o t e c t i o n : c o m p o n e n t p a r t s o f m o to r - c a r s , dyestu ffs, c a u s tic s o d a a n d b le a c h in g p o w d e r. C o n tin u a n c e o f p r o te c tio n :
c o tto n - te x tile m a c h in e r y , b ic y c les, s a g o a n d ta p io c a , s h e e t g la s s , b ic h ro m a te s , oil p r e s s u r e la m p s , c o a te d a b ra s iv e s , p r e s e r v e d f r u i t s , a n tim o n y .
D is c o n tin u a n c e o f p r o te c tio n : s e w in g m a c h in e s , p ic k e r s , h u r r i c a n e la n te rn s.
S o m e o f th e in d u s tr ie s re c e iv in g p r o te c tio n a r e : g r i n d i n g w h e e ls , la th e s ,
p a i n t s a n d v a r n is h e s , e le c tr ic f a n s , h u r r i c a n e la n te r n s , m o to r c a r a n d
cycle p u m p s , l e a t h e r fo o t- w e a r , s te e l r e -r o llin g , u m b re lla , f r u i t p r e s e r v in g , lo ck s, s te e l c a s tin g s , s o a p , cy cle ty r e s a n d tu b e s , m a tc h e s , d iesel-oil
e n g in e s , b a t t e r y a n d b a t t e r y p la te s , ir o n s a f e s , f o u n t a i n p e n s , e le c tr ic
la m p s , e tc .
M e n tio n m a y b e m a d e o f B u r m a ’s t r a d e a g r e e m e n ts w i t h t h e U S S R a n d
m a in la n d C h in a , a n d o f I n d o n e s ia ’s t r a d e a n d p a y m e n ts a r r a n g e m e n t s
w ith s e v e ra l c o u n tr ie s o f e a s t e r n E u r o p e a n d w ith m a in la n d C h in a .
C H A PT E R 2.
CU R R EN T ECONOM IC SITU A TIO N
including capital goods. W ith the easing of supply of both
capital goods an d food an d raw m aterials, the em phasis in
present arran gem ents has shifted to securing m arkets, fo r
capital goods b y in d u strial countries, and fo r food and raw
m aterials by E CA FE countries, both sides offering and seeking
trading advantages.
B u rm a’s b ilateral agreem ents w ith the USSR, m ainland
China, India, Ja p a n and eastern E uropean countries, negotiated
in 1954 o r 1955, aim at ob taining outlets fo r its rice exports
and result necessarily in some com m itm ent to im port from
those countries.
Ceylon’s rice-rubber deal w ith m ainland
C hina continued in operation in 1955, b u t in view of m ainland
C hina’s rice im ports fro m Burm a, this agreem ent was
tan tam o u n t to an in d irect tra n sfe r of Burm ese rice to
Ceylon. P ak istan ’s continued issue of single-country licences
fo r im ports fro m Ja p a n an d F ran ce is linked with its
export of raw cotton and ju te to these countries. Indonesia’s
bilateral arrang em ents also derive p artly from a desire to
prom ote “ weak” exports. The negotiation of special credit
facilities o r deferred-paym ent arrangem ents, mostly in connexion with recent tra d e agreem ents (fo r example, Pakistan
from Ja p a n a n d W est G erm any, Indonesia from Japan,
Germ any, France, Italy, the N etherlands and Sweden, and
B urm a from In d ia ) indicates the export difficulties of the
above E C A FE countries on the one hand, an d the desire of
the credit-extending countries to prom ote the sale of their
m anufactured goods on the other.
Since the c u rre n t necessity for bilateral arrangem ents
for ECAFE countries arises at least in p a rt fro m difficulties
in finding m arkets fo r some of th e ir products and since
these difficulties are closely related to the problem of instability
of m arkets and prices of p rim a ry comm odities, it can be
asked whether the general liberalization of tra d e in industrial
countries and the progress tow ards convertibility of currencies
will help altogether to elim inate the need fo r bilateral arra n g e ments. H igh levels of econom ic an d industrial activity in
the advanced countries an d high levels of im p o rt dem and from
them are generally favourable to the trad e of E CA FE c o u n trie s;
progress tow ards convertibility would also enable them to
expand th e ir export proceeds on im ports from the m ost
advantageous sources. Nevertheless, convertibility by itself
would not directly solve the problem of lack of stable export
earnings fo r these EC A FE countries which are exporters of
prim ary com modities.
Instability in export proceeds of
p rim ary products prevailed even when all the currencies were
convertible (before the second w orld w ar) ; an d the fact that
the dollar has always been a convertible currency has n ot
per se im proved the stability of dem and and prices of p rim ary
com m odity either in the U nited States o r elsewhere. F o r this
reason, bilateral contracts and tra d e arrangem ents m ay continue to be negotiated in p a rt to overcome difficulties in
m arketing p rim a ry exports.
Leaving aside m ain lan d China which conducts m ost of
its trade by m eans of bilateral trad e arrangem ents w ith the
USSR an d countries of eastern E urope, Jap an is the other
country in the reg io n 1 which has a com prehenive system of
bilateral trad e an d paym ents arrangem ents covering nearly
two-thirds of its total trade. W hile this system has proved
of substantial benefit to Japan, particularly in its trade on
dollar and open-account basis, the bilateral arrangem ents of
Japan have often n o t w orked smoothly. The fact th at the
flow of com m odities between the p artn ers to the bilateral
1.
W h ile In d ia c o n tin u e s to
c o u n trie s in w e s te rn a n d
is in c re a s iin g r e c o g n itio n
n ow a s in e a r ly p o s t- w a r
n e g o tia te b ila te ra l tr a d e a g re e m e n ts w ith sev e ra l
e a s te r n E u r o p e a n d in th e E C A F E re g io n , th e r e
t h a t th e y do n o t p la y th e s a m e im p o r ta n t ro le
y e a rs.
39
trad e agreem ent does no t take place in accordance with the
scheduled trade plans, owing to price, quality, availability and
other factors related to the goods, necessitaties frequent c a rry over of balances, switch and tria n g u la r transactions, the c a rry over of balance to a th ird country, special inducem ents on
both sides, etc. W ith the substantial im provem ent in Ja p a n ’s
foreign-exchange reserves, and the steadily im proving com petitive position of Japanese goods, Jap an m ay be expected to
reduce reliance upon bilateralism in trade and payments.
M ONETARY D EVELOPM ENTS
The m onetary situation
The m onetary situation in a country broadly reflects the
net changes in the flow of income and expenditure in the
different sectors of the econom y in relation to production. As
the relative im portance of different sectors in the economy
differs fo r countries or areas of the region and the forces
operating in each sector do not always move uniform ly in
each country or area, it is hardly possible to give any
generalization of the m onetary situation of the region as a
whole, at least fo r the period under review. However, some
sim ilarity prevailed am ong certain countries or areas.
In
countries where the foreign trade sector is im portant and
40
ECO NOM IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
economic developm ent has taken place m ainly in the public
sector (e.g. B urm a, Ceylon, Pakistan, T h a ila n d ), export
fluctuations and governm ent developm ent expenditures were
the m a jo r determ inants of the incom e-expenditure flow. In
m ainland China and In dia where the foreign tra d e sector
is relatively small an d econom ic developm ent plans have been
vigorously carrie d out, government developm ent expenditure
was a dynam ic factor in influencing the m onetary situation in
1955. In Cam bodia, C h ina: T aiw an, Indonesia, South K orea
and South Viet-Nam, large defence an d other governm ent n o n development expenditures were p rim a rily responsible fo r the
inflationary pressure, which would have been m ore severe h a d
there not been a large inflow of external aid.
Im pact of export fluctuations and developm ent expenditures
In those countries of the region whose exports consist
largely of p rim a ry products an d in value b e a r a hig h ratio to
gross dom estic product fluctuations in exp ort earnings usually
affect the level of incom e substantially. Such exp ort fluctuations have been com paratively wide and fre q u e n t and, m o re
or less, beyond the control of the exp o rtin g countries.
In
recent years, m ost of these export-oriented econom ies of the
region have, in various degrees, pursued deliberate policies
of econom ic development, including industrialization and
diversification. As it is difficult to change the tra d itio n al
pattern of private investm ent before adequate overhead capital
is provided an d entrepeneurship grows sufficiently, the governm ents of these countries have und ertaken investm ent in m any
different fields. W hile the pro p o rtio n of such developm ent
expenditures in the public sector1 to gross domestic p ro d u c t
may not be very large in several countries, their im pact on
other sectors of the econom y m ay not be insignificant because
they represent the m arginal new investm ent in new directions.
Moreover, in some countries when investm ent of public e n te rprises is added to investm ent outlay in the governm ent bu dget
proper, the total investm ent expenditure in the public sector
in relation to the gross domestic p ro duct m ay n ot be considered
small.
The pursuance of a deliberate econom ic developm ent
policy in export-oriented economies b rin g s out a new m onetary
problem , i.e., how to avoid inflation when expo rt incom e
increases and how to safeguard the paym ents position when
export income declines, in both cases w ithout slowing down the
rate of economic development. D u rin g 1954 an d the first
nine m onths of 1955, several countries of the region were
confronted with the problem in connexion with the low level
of export earnings from rice, raw cotton and ju te and the
recent export boom in tea an d rubber.
The severity of the effects of falling expo rt incom e from
rice since 1954 was keenly felt in the m a jo r rice-exporting
countries, i.e., B urm a and Thailand, an d th at from raw cotton
an d ju te since 1952 in P akistian, especially when the fall in
export incom e synchronized with the im plem entation of
developm ent program m es.
In B urm a, the budget deficit
increased from K 155 m illion in 1 9 5 3 /5 4 to K 195 m illion
in 1 9 5 4 /5 5 .2 T h e b u d g et does n o t indicate the correct
m agnitude of the total governm ent developm ental outlay,
1.
D e v e lo p m e n t e x p e n d itu r e s in th e p u b lic s e c to r r e f e r r e d to in th is s e c tio n
c o n s is t o f in v e s t m e n t a n d lo a n s a n d a d v a n c e s in th e c e n t r a l g o v e r n m e n t’s
b u d g e t, w h ic h d o n o t ta lly w ith fig u re s g iv e n in s u p r a , ta b le 7 a n d i n f r a ,
ta b le 25.
2.
O w in g t o th e f a c t t h a t th e J a p a n e s e r e p a r a t i o n o f K 20 m illio n w a s n o t
re a liz e d , th e n e w ly re v is e d b u d g e t d e fic it f o r 1954/55 in c re a s e d f r o m K175
m illio n to K 195 m illion.
because of th e om ission of c ap ital outlay of State enterprises
in bu d g et estim ates.
D u rin g 1 9 5 4 /5 5 , governm ent capital
outlay, in clu d in g investm ents, loans a n d advances an d capital
outlay of State enterprises, show ed a la rg e increase of K 375
m illion over 1 9 5 3 /5 4 .
T he larg e g overnm ent development
expenditures w ere financed m ain ly b y the creatio n of new
m oney by the central b a n k ag ain st governm ent securities.
Such e xpen ditu re c o n trib u ted to the increase in im ports in
connexion directly w ith the developm ent pro jec ts a n d indirectly
th ro u g h the expansion of incom e in th e p riv a te sector. The
im p o rt increase, coupled with the decline in ex p o rt earnings,
resulted in a ra p id depletion of fo re ig n assets w hich helped to
w ithdraw a p a rt of th e m oney in circulation. M oney supply
between O ctober 1954 an d Ju n e 1955 increased b y only K 167
m illion. T he inflationary pressu re generated fro m the budgeta ry deficit w as chiefly on the balance of paym ents. W hen
the balance-of-paym ents difficulty becam e acute, the government h a d to tighten im p o rt controls in M arch 1955 a n d local
prices of im p o rte d com m odities b eg a n to rise a fte r mid-1955.
M eanwhile, governm ent developm ent ex p en d itu re was curtailed
fo r the rem ain in g m on th s of 1 9 5 4 /5 5 .
F o r 1 9 5 5 /5 6 the
budget figure of governm ent investm ent an d loans and
advances was also reduced to K 212 m illion fro m K 365
m illion fo r 1954/55.
Pakistan h a d a sim ilar experience in 1953.3 However,
since late 1954, the situation h a s som ew hat changed, chiefly
because of an increase in the supply of goods. G overnm ent
developm ent expenditures w ith heavy im p o rt content continued
to be m a in tain e d a t a h ig h level in 1 9 5 4 /5 5 (the revised
estim ate b ein g Rs 591 m illion as c o m p ared w ith actual expenditu re of Rs 582 m illion in 1 9 5 3 /5 4 an d of Rs 370 m illion in
1 9 5 2 /5 3 ), a n d tend to increase fu rth e r in 1 9 5 5 /5 6 when it is
budgeted at Rs 991 m illion. M eanw hile, several quick-yielding
projects, especially in the in d u strial sector, w hich were
em phasized in the developm ent p ro g ram m e, began to
m aterialize an d resulted in increased supply of goods to the
dom estic m arket, thus catch in g up with the incom e increase.
O n the other han d , the establishm ent of and p ro g ress in
textile industries w hich consum e indigenous raw m aterials
reduced the expo rt availability of raw cotton a n d raw jute.
The reduced ex p o rt q u a n tity of cotton an d ju te, co upled with
lower prices, c o n trib u te d substantially to the low level of
exp ort earnings. On the o ther h an d , the p ro g ress in textile
ind ustries reduced substantially im p o rts of textiles. D u rin g
the year en d in g J u n e 1955, m oney supply ex p an d ed by 8
per cent. T he inflation ary p ressu re of m o n e ta ry expansion
on prices was, how ever, offset by th e rise in dom estic p ro d u c tion, a n d the increased flow of im p o rts following a m o d erate
liberalization of im p o rt control. A la rg e inflow of aid-goods
from the U nited States also h a d a fa v o u ra b le influence on the
general p rice level an d the balance of paym ents. A lthough
prices of im p o rte d goods rose a fte r th e devaluation of the
P a k ista n i rupee, the price situ a tio n as a whole rem ained fairly
stable d u rin g the first n in e m o nths of 1955.
T he considerable fall in ex p o rt e a rn in g s in 1954 led
T hailand to m odify its exchange a n d e x p o rt policies, which
h ad significant effects on the m o n e ta ry situ a tio n a n d econom ic
developm ent. T he re sto ra tio n of rice ex p o rt to p riv a te trade,
tog ether w ith th e g ra d u a l a b o litio n of the o b lig atio n to s u rre n d e r fo reig n exchange a t the official ra te (alm o st entirely
3.
E c o n o m ic S u r v e y o f A s ia a n d th e F a r E a s t , 1953, c h a p t e r o n P a k i s t a n .
C H A PT E R 2.
C U RR EN T ECONOM IC SITU A T IO N
for rice b u t p artially fo r ru b b e r an d tin ) helped the rice
(rub b er an d tin ) tra d e rs to com pete w ith those of other
exporting countries on the w orld m arket. The quick dow nward adjustm ents of rice export prices enabled T hailand to
increase the quantity of rice export.1 W hile these m easures
prevented to some degree a fall in export earnings which
might otherwise have occurred, the p artial devaluation applied
to the three p rincip al export com m odities also tended to
inflate m oney income.
In o rder to m ain tain governm ent
revenue and keep prices from rising the governm ent increased
special export duties (the so-called prem ium on rice export,
the royalty on tin export an d the sliding-scale export duty on
ru b b e r export, the rates of which v ary m ore or less according
to w orld m ark et prices) concom ittantly with the partial
exchange depreciation.
W hile these special export duties
helped the governm ent to siphon off a p a rt of the gain to
exporters arisin g out of the p artial devaluation, it was still
profitable fo r exporters to obtain m ore rice fo r export. The
domestic price of rice, therefore, went up subtantially after
Ja n u a ry 1955. T he wholesale price of 35 per cent broken
white rice in Bangkok reached B aht 76.60 p er picul2 in
Septem ber 1955 as com pared w ith B aht 53.50 in Ja n u a ry
1955 an d B aht 50.67 in Septem ber 1954. The rise in local
rice prices helped to increase the income from rice production an d tra d e a n d tended to increase expenditures and im ports
of the private sector. D u rin g the first eight m onths of 1955,
wholesale prices rose b y 19 p er cent an d cost of living by 10
per cent, owing p artly to m ore stringent im po rt control.
Confronted w ith this situation, the governm ent decided to
reduce developm ent an d o th er expenditures, the form er from
a record hig h of B aht of 1,641 million in 1954 to B aht 1,328
million in 1955.3
E xport fluctuations in Ceylon have followed quite a clear
pattern in post-w ar years.
T he K orean-w ar boom raised
Ceylon’s export to a record high in 1951, but its abatem ent
reduced it substantially in 1952 and 1953.
In 1954 and
early 1955, owing to the tea an d ru b b e r boom , Ceylon’s exports
rose again ra th e r steeply. As exports increased or decreased
and m oney income expanded or contracted, the dem and for
im ports also changed accordingly, though with a tim e lag.
Thus total im ports (an d im po rts of prod u cer goods) rose to a
peak in 1952 an d w ere m aintained at a hig h level in 1953,
but fell substantially in 1954. T he tim e lag between export
and im port changes tends to generate inflation d u rin g the
period of export boom a n d b rin g about paym ents difficulties
during the period of ex po rt decline. The adjustm ents of
government developm ent expenditure to these conditions is
indeed a problem . F o r counterating the cyclical im pact on
the domestic econom y, Ceylon has resorted to sliding-scale
export duties on some of its m a jo r export commodities.
Recently, although the sliding-scale export duties on coconut
products and tea were abolished, the rates of export duties
on coconut products have been adjusted m ore or less according to the w orld m ark et situation.
Thus the increase
in export duties and other taxes associated with the Korean1.
T h e f.o.b. p ric e o f 20 p e r c e n t b ro k e n w h ite ric e w a s £43.10 p e r to n in
A p ril 1955 a s c o m p a re d w ith £50.11 p e r to n in th e c o rre s p o n d in g m o n th
in 1954
2. 1 p ic u l = 133 1 /3 1b = 60.5 k g.
3. C o n su ltativ e C o m m itte e f o r C o -o p e ra tiv e E c o n o m ic D e v elo p m en t in S o u th
a n d S o u th -E a s t A sia , F o u r th A n n u a l R e p o r t, .1955, p . 136.
41
w ar boom enabled the governm ent to finance two-thirds
of the total developm ent expenditure from curren t revenue,
and th at associatd with the m ore recent export boom contrib uted substantially to the governm ent surplus of Rs 212
m illion in 1954 and Rs 111 m illion d u rin g January-Septem ber
1955.
T his deflationary effect, which counter-acted the
inflationary effect arising from the paym ents surplus, together
with higher production bu t lower price of rice, prevented the
cost of living from rising and created a favourable condition
fo r governm ent investment.
Investm ent and loans and
advances of the governm ent increased from Rs 196 million in
1 9 5 3 /5 4 to Rs 302 m illion in 1 9 54/55 (revised estim ate), and
this com bined item is budgeted at Rs 312 m illion fo r 1955/56.
D uring the first half of 1955, in Malaya, the rise in
export income and the consequent favourable trade balance
induced some m onetary expansion w ithout price increases,
thanks also to the sliding-scale export duty on rubber. Money
supply increased from M $1,503 m illion at the end of the
first q u a rte r of 1954 to M $1,650 million at the corresponding
point in 1955, but throughout the last q u a rte r of 1954 and
the first q u a rte r of 1955, the cost-of-living index rem ained
rem arkably stable aro u n d 123 ( 1 9 4 8 = 1 0 0 ) , the trend actually
declining d urin g the second q u arter of 1955.
In contrast to other p rim ary exporting counrties, the
Philippine has experienced in recent year m ilder export
fluctuations b u t persistent trad e an d paym ents deficits. M eanwhile, the governm ent’s financial operations have resulted in
cash surpluses.
Actual development expenditure of the
governm ent did not increase m uch and capital form ation in
the public sector rem ained ra th e r stable d uring the last three
or fo u r years. In the private sector, however, investm ent
increased, associated with credit expansion and stim ulated by
tax exemption m easures an d liberal allocation of foreign
exchange fo r im port of producer goods. On the whole, a
m ild deflationary tendency h a d prevailed with falling price
level du rin g the last two or three years. Recently the governm ent decided to issue a large am ount of governm ent bonds
for financing development, and the holding of such bonds by
the central bank and other banks increased. Since August
1955, both m oney supply and prices have begun to rise.
Japan distinguishes itself from the above-mentioned
countries as an industrial exporter, with a predom inant private
sector. The recent export boom 4 in the country resulted in
m onetary expansion, despite the fall in governm ent expenditu re du rin g 1954/55. T he increased supply of money, however, instead of inducing higher investm ent or consum ption,
flowed into the banking system and was reflected in an
expansion of bank deposits an d the disappearance of the tight
m oney situation.
M oreover, the index of m anufacturing
production increased by 19 per cent du rin g January-July 1955,
which, together w ith the substantial increase in rice production, neutralized the inflationary effect of the rise in export
income. Between J a n u a ry and July 1955, the indexes of wholesale prices and cost of living even showed a m oderate decline.
T he rem arkable p rice stability was an outcome of a process
of adjustm en t between aggregate effective dem and and supply.
4.
D u rin g th e y e a r e n d in g S e p te m b e r 1955, th e to ta l v a lu e o f e x p o r t reach ed
a p o s t-w a r p e a k w h ic h re c o rd e d a 27 p e r c e n t in c re a se o v e r th e p re c e d in g
y e a r.
42
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
TA B L E
25
PR O P O R T IO N O F IN V E S T M E N T A N D D E F E N C E E X P E N D IT U R E IN T O T A L C E N T R A L
G O V E R N M E N T E X P E N D IT U R E
(p er cent)
Investm ent
a n d lo an s
and advances
AFGHANISTAN
1951/52 ................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
1955/56 ................................................
BURMA
1950/51 ................................................
1951/52 ................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
1955/56 ................................................
CEYLON
1950/51 ................................................
1951/52 ................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
1955/56 ................................................
CHINA, REPUBLIC OF
1951
................................................
1952
................................................
1953
................................................
1954 (Jan-June)
..............................
1954/55 ................................................
HONG KONG
1951/52 ................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
INDIA
1951/52 ................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
1955/56 ................................................
INDONESIA
1951
................................................
1952
................................................
1953
................................................
1954
................................................
N o te :
42.3
44.1
38.3
50.3
43.4
18.5
20.0
20.2
17.7
20.2
18.1
14.7
21.9
27.8
30.9
20.5
26.4
35.4
33.7
33.7
31.4
36.8
22.1
22.6
0.8
25.8
23.6
30.4
29.6
2.2
1.5
1.3
0.7
—
In v e stm e n t
a n d lo a n s
an d advances
D efence
e x p en d itu re
1.2
1.5
2.1
2.3
2.5
80.4
73.9
63.1
65.4
83.7
15.6
18.7
18.7
28.6
0.7
11.7
8.3
7.1
29.6
31.5
37.6
45.3
45.1
30.0
30.4
27.9
21.7
19.1
4.1
5.3
3.6
3.7
29.9
24.9
24.2
JAPAN
1951/52 .................................................
1952/53 .................................................
1953/54 .................................................
1954/55 .................................................
KOREA, REPUBLIC OF
1951/52 .................................................
1952/53 .................................................
1953/54 .................................................
MALAYA, FEDERATION OF
1951
.................................................
1952
.................................................
1953
.................................................
1954
.................................................
1955
.................................................
PAKISTAN
1951/52 ................................................
1952/53 .................................................
1953/54 ................................................
1954/55 .................................................
1955/56 .................................................
PHILIPPINES
1951/52 .................................................
1952/53 ................................................
1953/54 ................................................
1954/55 ................................................
1955/56 ................................................
SINGAPORE
1951
.................................................
1952
................................................
1953
.................................................
1954
.................................................
................................................
1955
THAILAND
1951
................................................
1952
................................................
1953
................................................
1954
.................................................
1955
................................................
40.1
45.6
51.5
36.4
Defence
expenditure
11.4
8.7
9.3
11.6
69.5
56.9
62.6
35.7
16.0
14.8
18.2
21.1
4.0
24.8
25.2
23.4
25.3
20.5
32.0
30.6
40.8
52.2
53.2
42.3
40.0
35.1
19.7
20.4
20.5
23.6
24.6
28.7
25.3
20.3
18.1
18.3
11.2
12.3
14.4
15.3
5.6
3.2
4.3
2.9
4.4
12.6
27.9
19.5
20.5
25.9
23.4
14.1
19.8
19.1
17.9
16.8
21.2
22.2
F o r tim e r e fe re n c e a n d ty p e o f a c c o u n t, see i n f r a , s p e c ia l ta b le J .
Im pa ct o f developm ent expenditures in countries w here
the foreign trade sector is small
The foreign tra d e sector is m uch less im p o rta n t in m a in land C hina and In d ia th a n in other coun tries or a re a s of the
region. M oreover, in m ain lan d C hina foreign tra d e is placed
u n d e r strict control of the governm ent, w hich tends to isolate
the influence on the dom estic econom y of external factors.
In b o th m ain lan d C hina an d In d ia , the recent large gov ern m ent developm ent expenditures constituted a significant
segm ent in the incom e-expenditure flow.
In In d ia , w here
the priv ate sector is m ore im p o rta n t th an in m ain lan d C hina,
such expenditures also tended to induce p riv ate investm ent.
D u rin g the y ear u n d er review, In d ia gave a n exam ple
of econom ic developm ent w ith stability, m ad e possible p artly
by a n increase in p ro d u c tio n th ro u g h utilization of form erly
unused resources. Between M arch 1954 an d M arch 1955,
the m oney supply w ith the p u blic in In d ia increased by
R s 1,243 m illion o r by 6.7 p e r cent. T he expansion of m oney
supply was m ain ly a ttrib u ta b le to the b u d g e t deficit an d cre d it
expansion b y the com m ercial banks. N et b o rro w in g s b y the
governm ent fro m the R eserve B ank a m o u n te d to R s 1,040
m illion w hich, togeth er w ith th e n et decline in cash b a la n c e of
Rs 60 m illion, rep resen ted the im p act of th e b u d g e t deficit on
the m oney supply.1
D u rin g 1 9 5 4 /5 5 , to ta l governm ent
e x p en d itu re in In d ia increased b y n e a rly 38 p e r cent, as
co m p ared w ith th e prev ious year, m ain ly reflecting th e rise
in developm ent ex p e n d itu re fro m R s 2 ,6 10 m illion in 1 9 5 3 /5 4
to R s 4,357 m illion in 1 9 5 4 /5 5 . M eantim e, defence expenditu re, th o u g h fa irly h ig h , c o n tin u e d a t a stable level of a ro u n d
R s 2,000 m illion.
P riv a te investm ent, as reflected in the
volum e of paid-up a n d a u th o rize d c ap ita l of joint-stock com panies, show ed an u p w a rd tre n d .2 T he m o n e ta ry expansion
th a t follow ed th is increased tem po of developm ent activity
1.
2.
S ee R e s e rv e B a n k o f I n d ia , R e p o r t o n C u r r e n c y a n d F i n a n c e , 1954 / 55,
P. 38.
S ee, i n f r a , c h a p t e r o n I n d ia .
C H A PT E R 2.
CU R R EN T ECONOM IC SITU A TIO N
did not, however, generate any inflationary pressure. Between
M arch 1954 an d M arch 1955, the index of wholesale prices
dropped by n early 12 per cent, a n d between A pril an d O ctober
1955 it rem ained fa irly stable. The cost of living followed
a sim ilar course d u rin g the sam e period. Aside from the
stabilizing influence of the co ncurren t rise in national product,
the h igher level of im ports d u rin g 1954/55 also reinforced the
tendency tow ards price stability.
In m ainland China, in d u strial developm ent was accelerated, w ith continued expansion of developm ent expenditure.
Defence expenditure declined as a p ro p o rtio n in total governm ent expenditure, b u t in absolute term s such expenditure
increased by ab o u t 150 p e r cent d u rin g 1950-55.
In
this period, developm ent expenditure rose m ore th a n seven
times, while its p ro p o rtion in total expenditure increased
from 37 p e r cent to 61 p er cent. In 1955, the allocation fo r
defence expenditure was 40 p e r cent of total estim ated
expenditure on econom ic and social development.
As in
other ex panding economies, the inflationary im pact of
heavy expenditure on developm ent was m oderated by the
sim ultaneous expansion of in d u stria l production.
As contrasted w ith other countries, however, the extension of State
tra d in g and State control over the disposal of cash curtailed,
to a great extent, the inflationary potential of excess p u rch asing pow er th a t was generated b y governm ent investment.
M oreover, essential consum ption goods were rationed.
A fghanistan enjoyed com parative price tability in spite
of a heavier governm ent expenditure in 1954/55 on developm ent an d defence an d a considerable increase in exports.
Estim ated developm ent expenditure in 195 4/55 , which
accounted fo r 50 p e r cent of the total expenditure, showed
an increase of 76 p e r cent over 1953/54. P riv a te investm ent
d u rin g the sam e p e rio d also showed an u pw ard trend, as
reflected in long-term loans advanced to the in dustrial c o rp o ra tions by the C entral Bank and the Bank-i-Milli. E xports in
1954/55 showed an increase of A fg 490 m illion over 1953/54.
The com bined effect of risin g governm ent expenditure and
higher export incom e on the m onetary situation was considerable. The m oney supply d u rin g this period expanded by 45
p er cent. T he cost of living in K abul an d other cities,
however, rem ained stable despite m onetary expansion, which
can be p artly explained by an extension of the m onetary
sector and an increase in output, especially in agriculture and
handicrafts.
Im pact o f defence expenditure and other factors
In contrast w ith the com parative m onetary stability
prevailing in m ost export-and developm ent-oriented economies
in the region, inflationary pressure persisted in varying
degrees in a n u m b er of economies, notably south K orea,
China: T aiw an, south Viet-Nam and Indonesia. The m a jo r
factor generating inflation in m ost of these countries was
budgetary deficits arising m ainly from heavy non-developm ental
governm ent expenditure, especially on security.
A m a jo r
offsetting factor in these countries, w ith the exception of
Indonesia, was a large inflow of external aid which no t only
narrow ed down considerably the budgetary and paym ents
deficits b u t also contributed to the m aintainance of production
through the inflow u n d e r the a id program m e of produ cer
goods. Econom ic developm ent was greatly handicapped in
these economies (w ith th e exception of C hina: T aiw an) w here
prices continued to rise a n d currencies continued to depreciate.
43
In south Korea, d u rin g 1954/55, total governm ent
expenditure increased by nearly 100 per cent over that
in 1953/54. O ut of a total expenditure of 72000 million
hw an in 1953/54, defence expenditure represented m ore than
62 per cent; du rin g 1954/55 defence expenditure showed an
increase of 95 per cent over the previous year. In 1 954/55
m oney supply increased by 42 per cent over 1 953/54. The
inflationary im pact of heavy governm ent expenditure and
consequent m onetary expansion was, to some extent, offset by
a large inflow of external aid and by the restriction of credit
expansion by com m ercial banks. D uring the year ending June
1955, $195 m illion w orth of (non-m ilitary) aid-goods flowed
into south K orea as against $164 million d u rin g the previous
year. The inflationary pressure, however, rem ained heavy as
evident from available index num bers fo r retail and wholesale
prices, both of which increased by approxim ately 110 per cent
between June 1954 an d Jun e 1955.
In C hina: T aiw an, south Viet-Nam, Nepal and Cam bodia
defence expenditure sim ilarly dom inated in varying degrees the
p attern of total governm ent expenditure, b u t the im pact of the
resulting budget deficits on the m onetary situation was less
severe than in south K orea. Defence expenditure in C hina:
T aiw an, risin g to over four-fifths of total expenditure in
1954/55, contributed to an increase of m oney supply by
nearly 37 p er cent between Ju n e 1954 and June 1955, with
a 60 per cent expansion in loans and discounts by the com m ercial banks. This inflationary tendency was to some extent held
in check by the rise in in dustrial production and the increasing
inflow of US a id which reached $138 m illion in 1954/55 as
com pared w ith $108 m illion in 1953/54. D uring the same
period, the wholesale-price index recorded a rise of 11 per
cent, while the cost-of-living index moved upw ard by 6 per
cent. South Viet-Nam went through a sim ilar process of
m onetary development, the large budgetary and paym ents
deficit being financed by external aid which conrtibuted to
com parative m onetary stability. Defence expenditure in the
fiscal year 1954 am ounted to 75 per cent of total governm ent
expenditure of P r 16,954 million. In Cambodia, the inflationa ry im pact of a large budget deficit in 1955 (arising from
heavy defence expenditure accounting fo r 62 per cent of total
governm ent expenditure) was reflected in the increase in
m oney supply from Ri 2,820 m illion on 31 M arch 1954 to
R i 3,691 m illion on 30 Septem ber 1955. The im pact of
m onetary expansion on the price situation was somewhat
m oderated by the large inflow of external aid, m ainly from
the U nited States (Ri 462 m illion) and France (R i 70 m illion).
D uring the first half of 1955, the cost of living fo r the
w orking class rose by 11 per cent an d the wholesale price
of white rice by 15 per cent.
In contrast with the development- and defence-oriented
econom ies in the region, the decline in revenue and a relatively
heavy cu rre n t expenditure accounted for an increase in budget
deficit in Indonesia, fro m R p 2,313 m illion in 1953 to
R p 2,541 m illion in 1954.1 Defence and development together
represented 27 per cent of total expenditure in 1954. The
persistent deficit in governm ent budgets, largely financed by
borrow ing from the Bank of Indonesia, was the m a jo r factor
responsible fo r m onetary expansion. M oney supply increased
from R p 7,640 m illion at the end of 1953 to Rp 11,080 million
a t the end of 1954 and Rp 12,690 m illion at the end of June
1955. This, com bined w ith restriction of im ports, generated
an inflationary pressure despite the m oderate increase in food
1.
T h e b a d g e t d eficit f o r 1954 q u o te d h e re , R p 2,541 m illion, w a s ra is e d to
R p 3,618 m illion in th e p ro v is io n a l re s u lts f o r t h a t y e ar. (S ee i n f r a ,
c h a p t e r 10 o n In d o n e s ia ) .
ECO NOM IC SU R V E Y O F A SIA A N D T H E F A R EA ST, 1955
44
p ro d u ctio n in 1954 an d in in d u stria l p ro d u ctio n in 1954 and
1955. T hus the cost-of-living index rose fro m 190 in the
last q u a rte r of 1953 ( 1 9 5 0 = 1 0 0 ) to 210 in th e last q u a rte r
of 1954, rising fu rth e r to 257 in Ju n e 1955.
S eptem ber 1955) a n d the P h ilip p in es (a t the end of D ecem ber
1 9 5 4 ), percentages of g o v ern m en t securities held by the
central b anks (in clu d in g tre a su ry bills) were 60, 39 an d 81
respectively. O ne im p o rta n t exception is Ceylon where, after
1953, the c e n tra l b a n k ’s h o ld in g of governm ent securities has
becom e insignificant.
M onetary and credit policies
The p rim a ry task of tra d itio n a l m onetary policy h a s been
to regulate the general level of econom ic activity thro ugh
control over the volum e of b an k c red it on the m oney m arket.
In m ost countries of the region, however, cu rren cy ra th e r than
b ank deposits, accounts fo r the bulk of total m oney supply.
Even if the central ban k is able to control the am o u n t of
credit of com m ercial banks, such control will affect alm ost
exclusively the relatively u n im p o rta n t deposit m oney.
In
fact, in m any countries of the region, the lack of prop erly
organized m oney an d capital m arkets, the usual accum ulation
of b an k cash reserves in excess of both legal a n d norm al
requirem ents, a n d the capacity of the foreign-exchange banks
(w hich occupy an im p o rta n t position w ithin the b ank ing
system of m any countries of the regio n) to b o rrow from
a b ro a d m ake the b ank rate generally ineffective a n d openm arket operations h ard ly capable of affecting even th e m in o r
deposit portion of total m oney supply.
M oreover, in under-developed countries, m onetary and
credit policies which aim m erely a t m a in tain in g m onetary
stability a re not sufficient; they have also to be designed fo r
stim ulating econom ic development. In m ost countries of the
region, there is a preference in the organized c red it sector
fo r investment in tra d e to th a t in agriculture an d in d u stry —
a tendency which has to be rectified by a p p ro p ria te m onetary
and credit policies of the governm ent. It is, therefore, n a tu ral
that m any countries of the region should have, in recent
years, taken certain steps to w ard this objective.
In some countries of the region, the central b a n k is
extending its conventional field of operation by assum ing
some responsibility fo r encouraging, o r even un dertaking, the
financing of economic development. In P akistan, a new State
Bank of Pakistan O rdinance prom ulgated on 6 July 1955 has,
am ong other m atters, em pow ered the b a n k to discount bills
with a m atu rity of up to 5 years to finance ag ric u ltu ral an d
industrial development projects. Previously, the b a n k was
precluded fro m prov iding finance fo r periods exceeding 90
days, except for financing seasonal ag ricu ltu ral operation s o r
the m ark etin g of crops, fo r w hich the m axim um p erio d p e r m itted has now been extended fro m 9 to 15 m onths. The
scope of ag ricu ltu ral operations, includ ing m ark etin g of crops,
has also been enlarged to include anim al h u sb an d ry and
processing of ag ricu ltu ral produce.
W hile the expanison of
type m ay be lim ited b y the
least a t the initial stage, the
by the central bank is w orth
new rediscount facilities of this
availability of suitable bills, at
assum ption of this new function
noting.
A t present the m ost im p o rtan t m ethod of developmentfinancing by the central b ank in several countries of the
region is to subscribe to governm ent securities an d su p p o rt
them in the m oney m arket. T he receipts from the sales of
such securities are invested by the governm ents alm ost entirely
in governm ent developm ent projects. Seventy-four p e r cent
of governm ent a n d governm ent-guaranteed securities outsta n d in g a t the end of Ju n e 1955 were held by the U n io n
B ank in B urm a, an d 59 p er cent of g overnm ent securities
o u tstan d in g a t the end of 1954 by the B ank of T h ailan d . In
In d ia (a t the end of Ju n e 1 9 5 5 ), P a k ista n (a t th e end of
In A fghanistan, the c e n tral b a n k invests directly in both
public a n d priv a te enterprises, by p ro m o tin g new enterprises
an d h o ld in g shares of com panies.
T he am o u n t of such
investm ent increased rap id ly fro m A fg 30 m illion in 1948/49
to A fg 431 m illion in 1 9 5 4 /5 5 , w hich included investm ent in
one electric com p any , one cem ent com pany, one textile
com pany, three banks, etc.
A n o th er m easure fo r en c o u ra g in g desirable types of
developm ent investm ent by b a n k s a n d o ther financial institutions is selective cre d it control. S uch c o n tro l has n o t been
w idely used in co u n tries of the region, except in the
Philippines, w here the R e h a b ilitatio n F in an c e C o rporation, in
close touch w ith the cen tral ban k , h a s recently c a rrie d out
a cred it policy fav o u rin g ag ric u ltu ra l a n d in d u stria l p ro d u c tion ra th e r th a n residential b u ild in g construction.
In a few countries of the reg io n where governm ent
deficits have generated inflation, b oth general a n d selective
cred it controls have been used to check secondary inflation.
Such controls re q u ire a d istinction betw een so u n d c red it
expansion (w hich is indispensable to m ain ten an ce an d
expansion of p ro d u c tio n ) a n d excessive cred it expansion— a
distinction w hich is n o t always clear-cut in all cases.
In
Indonesia an d south K orea, both q u an titativ e a n d qualitative
cred it controls were used, w hile in C h in a: T aiw an pre fere n tia l
interest rates were given to p u b lic enterprises. U n d e r the
“ loan ceiling” system of south K orea, the u p p e r lim it im posed
on the total volum e of com m ercial b an k loans w as fixed
an d revised q u a rte rly b y a d m in istra tiv e decision,1 w hile in
Indonesia it was fixed in p ro p o rtio n to th e assets o r dem and
liabilities of the ban k. In bo th countries, q ualitative c red it
control is applied to ensure th a t desirable p ro d u c tio n b e not
im peded by lack of finance. F o r instance, in south K orea,
loan ceilings do n o t apply to loans to governm ent-m anaged
vested com panies o r fo r the p u rch a se of aid-goods.
O rganized capital m ark ets fo r supplying in vestm ent funds
to in d u stry h a rd ly exist in the region except in J a p a n an d, to
some extent, in In d ia. In Ja p a n , in 1 9 5 4 /5 5 a b o u t 55 p e r cent
of in d u strial eq u ip m en t funds cam e fro m c o rp o ra te savings,
14 p e r cent fro m the c ap ital m arket, 16 p e r cent fro m loans
a n d advances of financial institutions, largely com m ercial
banks. These co m p ared w ith co rre sp o n d in g percentages of 45,
18 a n d 20 in 1 9 5 3 /5 4 .2 T he su b stan tial increase in c o rp o ra te
savings in 1 9 5 4 /5 5 helped them to re g ain th e ir pre-w ar
relative im portance. In J a p a n p riv ate in d u stries also o btained
a com paratively la rg e a m o u n t of long-term c re d it from
com m ercial banks, a n d in terest rates have constituted an
im p o rta n t elem ent in a rriv in g a t investm ent decisions.
In In d ia , available d ata show th at d u rin g 1945-51, 57
p e r cent of n et fixed assets fo rm a tio n of 492 com panies was
financed by re ta in ed profits.
H ow ever, c o rp o ra te savings
accounted fo r very m in o r p o rtio n in fin an cin g total capital
fo rm a tio n in th e p riv ate sector, b ein g Rs 600 m illion as
c om pared to R s 5,220 m illion of total savings in th e private
1.
2.
F o r d e ta ils , se e i n f r a , c h a p t e r 12 o n K o re a .
E c o n o m ic P l a n n i n g B o a rd , E c o n o m ic S u r v e y o f J a p a n , 1 9 54/55, p . 115.
CH A PTER 2.
CU RREN T ECONOM IC SITU A TIO N
sector in 1953/54. New subscription to the capital of com panies was even sm aller, being Rs 150 m illion in the same
year.1 In the Philippines, the total paid-in capital of newly
registered an d reorganized corporations, partnerships, and
co-operatives has shown a declining tren d since the end of
the w ar, on account chiefly of heavy reconstruction and reconstitution of private enterprises in early post-war years. Such
paid-in capital w hich totalled P307 m illion in 1946 fell
sharply to P72 m illiion in 1949 an d thereafter declined slowly
to P55 m illion in both 1953 an d 1954 and P23 million
for the first half of 1955. The issue of such new capital
accounted fo r only a small portion of total capital form ation
in the p riv ate sector, being ab o u t 10 per cent in 1954. In
other countries of the region, it is h ardly possible to paint a
general picture of sources of finance fo r industries and
agriculture from available statistics.
In m ainland China where the State sector has expanded
rapidly, a substantial p a rt of new investm ent funds fo r
development comes fro m the ploughing back of profits of
governm ent enterprises th ro ug h the central budget.
Such
profits contain elements of m onopoly an d taxation.
The
p ro p o rtio n of receipts fro m State enterprises on m ainland
C hina increased from 12.5 per cent of total governm ent
receipts in 1950 to 38 p er cent in 1954; in 1955 it was
planned to rise fu rth e r to about 40 per cent.
In o rd e r to rem edy the lack of an organized capital
m arket and to correct the bias in the existing credit structure,
m any countries of the region have established special institutions fo r the developm ent of agriculture an d industry. The
earliest w ere the In d u strial Finance C orporation of India
(1948) an d P ak istan (1949) an d the R ehabilitation Finance
C orporation of the P hilippines (1 9 4 7 ).2 Recently, several
other institutions of sim ilar type have been established or
proposed in several countries of the region. In 1955, Ceylon
completed legislation fo r the Development F inance C orporation
of Ceylon, which, w ith an authorized share capital of Rs 8
million, will p ro v id e long-term capital funds to productive
private investm ent.
W hile the capital of the Industrial
Finance C o rpo ration in In d ia an d P akistan is subscribed
partly by the governm ent an d p artly by the private sector,
and the repaym ent of principal and the paym ent of a m inim um
dividend a re guaranteed b y the governm ent, the Development
Finance C orporation of Ceylon will be completely private
in character, with, however, the rig h t to b orro w from the
governm ent a m axim um am o un t of Rs 16 million free of
interest for u p to 15 years. T he corporation will also be able
to obtain loans from the Intern atio n al Bank fo r R econstruction and Developm ent fo r which the governm ent is authorized
to g u arantee up to Rs 2 4 million. In addition to financial
assistance, it will also foster, initiate, direct and operate
enterprises to the extent necessary. Sim ilarly in P akistan, a
proposal fo r the organization of an In d u strial Bank was
form ulated d u rin g 1955. T his b an k will be wholly privateowned, b ut will get sizeable financial assistance in the form
of loans from the C entral G overnm ent a n d the State Bank of
Pakistan. A p a rt of the share capital of the b a n k is likely
to be taken up by fo reig n investors, while the International
Bank will also be approached fo r a loan in foreign exchange.
Beside giving loans fo r in d ustrial purposes the b ank will be
empowered to g u aran tee loans from other p rivate investment
sources, participate in all types of private industrial u n d ertakings, an d provide technical, m anagerial and adm inistrative
1.
2.
R e p o r t o f th e T a x a tio n I n q u ir y C o m m iss io n , p .
138.
T h e f e a tu r e s o f th e s e fin a n c ia l c o rp o ra tio n s h a v e b e en d e sc rib e d
in
M o b i l i z a t i o n o f D o m e s t i c C a p i t a l i n A s i a a n d t h e F a r E a s t (U n ite d
N a tio n s p u b lic a tio n , sale s No. 1951.I I F . 3 ) , p p . 134-6 a n d
p p . 171-3.
45
aid and advice to its clients. In India, the Industrial Credit
and Investm ent C orporation started operation in Ja n u a ry 1955
to finance private industrial development with governm ent and
p rivate foreign assistance.
In F eb ru ary 1955 a N ational
Small Industries C orporation was set up by the Governm ent
of In d ia with a capital of Rs 1 m illion fo r financial and
other assistance to small industries.
In south K orea, the
K orean R econstruction Bank was founded in April 1954 to
supply, through sale of its securities to the public, long-term
and interm ediate-term credit at relatively low interest rates
to industrial enterprises. Such sale has, however, not been
possible under the present inflationary situation and in the
absence of an organized security market. Consequently, alm ost
the entire am ount of its capital was subscribed by the
governm ent and the Bank of Korea.
In the field of agricultural finance, A fghanistan established
in 1954 the A griculture and Cottage Industry Bank (with a
subscribed capital of Afg 150 m illion) which is providing
credit at lower than m arket interest rate to farm ers and
co-operatives for agricultural equipm ent, land extension and
seed im provem ent. The policy of the bank has been to deal
w ith farm ers through credit co-operatives, which are being
prom oted gradually in various p arts of the country.
In
Burm a, the State A gricultural Bank, which commenced business
in June 1953, extended its operations from 4 to 16 districts in
June 1955. Consequent on this expansion, outstanding loans
of the bank to cultivators through village banks and
co-operative societies rose from K 3.25 m illion at the end
of June 1954 to K 5.22 m illion a t the end of June 1955,
which included usual seasonal as well as m edium -term loans.
T he bank plans to extend its coverage gradually to the whole
of the country, with a view to providing in full the seasonal
credit needs fo cultivators at a reasonable rate of interest. In
India, the Im perial Bank of India was nationalized in July
1955 and m ade the focal instrum ent fo r the supply of ru ral
credit. The N ational A gricultural C redit Funds were set up,
with contribution from the Reserve Bank of India fo r both
long-term an d short-term operations.3 In Pakistan, reports of
various experts on ag ricultural conditions are being studied
and a scheme fo r enhancing agricultural credit facilities in the
country is und er consideration.
In the Philippines, the
A gricultural C redit and Co-operative F inancing A dm inistration
was able, through its credit expansion, to organize 130 ad d itional F arm ers’ Co-operative M arketing Associations in 1954,
bringing the total to 232. Meanwhile, eight ru ra l banks started
operations in 1954, brin g in g the total to 28.
DEV ELO PM EN T PL A N N IN G AND IM PLEM EN TA TIO N
Developm ent P lanning
The year 1955 m arked fu rth e r advance in the form ulation of development program m es in several countries of the
ECAFE region, indicating a t once their state of readiness to
launch on a m ore intensive development of their economies.
In India where the first Five-Year P lan is draw ing to a close,
a d ra ft fram e of the second Five-Year P lan (1956-57—
1960/61) was released fo r public discussion in M arch 1955.
In m ainland China, the first Five-Year P lan (1953-57) was
finalized an d adopted in July 1955. In the same m onth, the
Governm en t of Ceylon announced its Program m e of Investment
(1 9 5 4 /5 5 — 1 9 5 9 /6 0 ). In the Philippines, pending revision of
the d ra ft Five-Year Plan prepared by the N ational Economic
Council, the P residen t’s C abinet Committee of Employm ent
and Production subm itted to the Congress “ a Program m e of
Em ploym ent and Production through P rivate Participation
3.
See in fr a , c h a p t e r o n In d ia .
46
ECO NOM IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
and G overnm ent Initiative.” In O ctober the G overnm ent of
Nepal announced its d ra ft Five-Y ear P la n (1 9 5 6 /5 7 —
1 9 6 0 /6 1 ). In early Decem ber 1955 a Six-Y ear P la n (1955-60)
fo r J a p a n p re p a red by the E conom ic A dvisory Council was
reported to the G overnm ent of J a p a n fo r final ex a m in a tio n .1
The G overnm ents of P ak istan and Indonesia were also expected
to announce developm ent plans fo r the ir countries tow ards the
end of the year. In B urm a w here the am bitious Eight-Y ear
Development P lan has been cut back considerably in the face
of declining foreign-exchange earning s fro m rice tra d e, a new
revolving Three-Y ear P lan m ore am enable to short-term a d ju s tments is in the process of form ulation. In A fghanistan also
the governm ent is engaged in the p re p a ra tio n of a second
Five-Y ear P lan. In the R epublic of K orea, w here there are
already three plans draw n up although none of them has been
officially adopted an d im plem ented, a fo u rth is now u n d e r
p rep a ratio n by the M inistry of R econstruction.
T he plans fo r developm ent m entioned above show g reat
diversity am ongst themselves as to th e ir nature, m agnitude and
scope. T hey range fro m full-fledged developm ent plans of
In d ia and m ain lan d C hina with detailed break-dow ns of th e ir
investm ent an d production targets to th e em ploym ent an d
production p rogram m e of the P hilippines w hich is reflected
m ainly in v arious bills in tro d u cin g econom ic m easures on
financing an d im p o rt control. M ost plans w ith th e exception
of those of India an d m ain lan d China, w hich em com pass
alm ost the entire economy, concern only the public sector,
while a few others, as in Ja p a n , relate m ainly to the private
sector.
In m agnitu de also they range fro m Y uan 76,640
m illion (U S$32,500 m illion) fo r the Five-Y ear P la n on m a in land China to Rs 210 m illion (U S$44 m illion) fo r the Nepalese
Five-Year Plan. But how ever divergent they m ay be in th e ir
nature, m agnitude a n d scope, the plans have one characteristic
in com m on, in th a t they have certain econom ic objectives
clearly laid down and, in m ost cases expressed in q uantitative
term s in the form of investm ent a n d / o r p ro d u ctio n targets.
The ultim ate aim of econom ic developm ent m ay be said
t o be to increase per capita incom e a nd consu m p tio n in the
long run. However, this is specifically m entioned as a ta rg e t
in only a few plans such as those of B urm a, In d ia a n d the
Republic of K orea. In the Eight-Y ear P la n fo r B urm a the
restoration of pre-w ar p e r capita incom e was m entioned as the
p rim a ry target of the plan. Sim ilarly, in all the three plans
prepared fo r the Republic of K orea, the p rim a ry targ e t was to
secure and m aintain, despite fu rth e r population increases,
living standards at least equal to those in 1 9 4 9 /5 0 , the year
before the K orean war. F o r countries which suffered considerable dam age due to w ar, the resto ration of pre-w ar sta n d ard s
of living form s an ap p ro p riate ta rg e t fo r th e ir developm ent
efforts. In India the long-term target was to double per-capita
incom e in a period of 27 years. P h a sin g the developm ent p ro g ram m e over this period, the F irst Five-Y ear P lan aim ed a t
ra isin g the national income by 11 p e r cent. E n co u rag ed by
the rate of increase in national incom e achieved d u rin g the
first Five-Y ear P la n period, however, an d considering the
rates of increase in the n atio n al incom e in several other
countries ra n g in g from 3 p e r cent p e r an n u m in in dustrially
advanced countries w ithout any attem pt a t planning, to 12-16
per cent p er an n u m in eastern E u ro p ean countries w ith
pla n n in g efforts, the p lanners in In d ia have aim ed in the d ra ft
fram e of the Second P la n at an increase in n atio n al incom e
of 5 p e r cent p e r ann um , a rate of increase m o re th a n double
th a t of the F irst Plan.
1.
T h e r e p o r te d p la n w a s re m o d e lle d i n to a F iv e -Y e a r P la n , to b e s t a r t e d in
1956, w ith fe w m o d ific a tio n s on its t a r g e t fig u re s , b y th e G o v e rn m e n t a n d
a p p r o v e d b y th e C a b in e t o n 23 D e c e m b e r 1955.
O n account of th e diversity in econom ic conditions and
political beliefs, the m ethods a d o p ted b y th e countries of the
regio n to achieve the u ltim ate goal of ra isin g the stan d a rd of
living of the people a re also diverse. H ow ever, a nu m b er of
basic features a re com m on to m o st econom ies in the region,
such as excessive dependence on p rim a ry p ro d u ctio n , population pressure, lack of ad eq u ate social a n d econom ic overheads,
etc.
In o rd e r to rem edy these basic deficiencies in the
econom ies, th e p la n n in g a u th o ritie s in each co u n try have set
u p a n u m b e r of p la n n in g objectives a p p ro p ria te to its own
conditions.
Excessive dependence on p rim a ry p ro d u c tio n is undesirable fo r two reasons. O ne is th a t it gives rise to instability in
the external-paym ents position since p rim a ry pro d u cts are
subject to la rg e a n d freq u e n t fluctuations in p rice a n d volume
of sales in th e w orld m arket.
T h is e x tern al instability
generally h a s fa r-re a ch in g effects on the econom y an d in
p a rtic u la r ren d ers the p la n n in g process extrem ely difficult
because of the u n c erta in ty of availab ility of fo reig n exchange
so valuable to developm ent p ro g ra m m e s w ith a hig h im p o rt
content. T he other reason is th a t p e r capita p ro d u ctiv ity is
likely to be, a t least in general a n d in the long ru n , low er
in p rim a ry p ro d u c tio n th a n in m a n u fa c tu rin g ind u stry . Both
reasons strengthen the case fo r diversification, e ith e r w ithin
a g ricu ltu re o r w ithin the e n tire econom y o r p refe rab ly both,
although c u rre n t p ro d u c tio n d u rin g the tra n sitio n a l p erio d
m ay be adversely affected.
In m o n o cu lture econom ies like B u rm a a n d T h a ila n d
w here there is excessive dependence on the rice cro p ,2 there
a re attem pts to diversify a g ric u ltu re itself.
I n B urm a,
strenuous efforts a re being m ade to g ro w m o re of o ther
a g ricu ltu ral products, such as cotton, ju te , sugar-cane, etc.
b oth fo r expo rt an d fo r im p o rt substitution. Self-sufficiency
in ju te a n d sugar-cane is expected in B u rm a b y the e n d of
1956 while th e ex p o rt of raw cotton is b eing pushed. S im ilarly
in T h ailan d efforts a re being m ad e to increase the p ro d u c tio n
of o ther a g ric u ltu ra l crops, p a rtic u la rly sugar-cane, jute,
g ro u n d n u t a n d maize.
In o th er countries largely dependent on ag ricu ltu re such
as Indonesia, P a k ista n a n d th e P hilip p in es, ind u strializatio n
a t th e present stage aim s a t setting u p lig h t m a n u fa c tu rin g
industries to utilize available raw m a te rials to satisfy the
dom estic d em an d so fa r m et by im ports. In P ak istan , priv ate
investm ent in light m a n u fa c tu rin g in d u stries, enc o u ra g e d b y
the g overnm ent th ro u g h the P a k ista n In d u stria l D evelopm ent
C orp o ratio n , has resulted in notable increases in in d u stria l
p ro d u ctio n d u rin g recent years, p artic u la rly in cotton textiles,
ju te m an u fa c tu re s a n d p a p er. T he F o u r-Y e a r P la n of the
R epublic of C hina (1953-56) m akes pro v isio n fo r th e developm ent am ongst others of cotton textile, su g ar, cem ent, p aper
an d chem ical-fertilizer industries. In the d r a ft Five-Y ear Plan
of the P h ilip p in e s ,.30 p er cent of the to tal investm ent expenditu re s a re to be devoted to m a n u fa c tu rin g , sh a re d equally
between th e p riv ate a n d public sectors.
T he association of in d u stria l developm ent w ith higher
levels of living in o th e r p a rts of th e w o rld h as led to the
w idespread belief th a t in d u strializatio n is a n in te g ra l p a r t of
econom ic developm ent. C ertain c o u n trie s in the reg io n have
launched on large-scale in d ustria liza tio n w hich necessitates the
establishm ent o f basic h e a v y industries such as fuel a n d power,
2.
T h e e x p o r t e a r n i n g s f r o m r ic e in 1954 c o n s ti tu te d 80 p e r c e n t o f t h e to ta l
v a lu e o f e x p o r t s f o r B u r m a a n d 50 p e r c e n t f o r T h a ila n d .
C H A PT E R 2.
CU RR EN T ECONOM IC SITU A TIO N
iron a n d steel, basic chemicals and engineering. In India,
where it m ay b e said th a t the foundation fo r expansion has
been fu rth e r laid b y the achievem ent of self-sufficiency in food
and the im provem ent of social and economic overheads und er
the first Five-Y ear P lan , the d ra ft fram e of the second FiveY ear P la n has called fo r a distinct shift in em phasis to basic
heavy industries “ fo r the m an ufactu re of producer goods to
strengthen the foundations of econom ic independence” . The
allocation of investment, b oth public and private, in the
second plan d ra ft fram e gives 25 per cent of total investm ent
to indu stry (o u t of which alm ost 80 p er cent is fo r producing
m eans of pro d u ctio n ) an d 9 p e r cent to electricity. C om paring
the outlay in the public sector u n d er the two plans, the share
of agriculture, irrig a tio n and ru ra l developm ent plus electricity
declined from 44 p er cent in the first plan to 32.5 per cent
in the d ra ft second plan (out of which 10.5 p er cent is
earm ark ed fo r electricity) while the share of industry and
m inerals rose fro m 8 p er cent to 26 per cent. Expenditures
on tran sp o rt a n d com m unication m aintain m ore or less the
same proportion. In m ainland China, 41 p er cent of the total
state outlay u n d er the first Five-Year P lan is allocated to
industry, out of which about 80 p e r cent is fo r “ above-norm ”
projects.1 Of the total outlay on “ above-norm ” industrial
projects, nearly 90 per cent is fo r industries producing m eans
of production, w ith em phasis on coal an d power, iron and
steel an d engineering.
The outlay on tran sp o rtatio n and
com m unications, however, takes up only 11.7 percent of the
total state outlay, an d th at of agriculture, 8 per cent. This
direct em phasis on heavy industry w ithout a substantial
extension an d im provem ent of the tra n sp o rt an d com m unications system an d w ithout large-scale investm ent in agriculture,
is in co n trast to the case of India, where investm ent outlays
fo r consum ption goods an d the service industries relatively
have been fa r m ore substantial.
The ECA FE region contains countries showing the fastest
grow th of population in the w orld and also a num ber of
countries w ith a very high degree of population density. There
is thus the problem of em ploym ent of new entrants to the
labour force, in addition to the existing problem of unem ploym ent as well as under-em ploym ent. As a result, em ploym ent
has been listed as a m a jo r ta rg e t in a num ber of plans in the
region.
The d raft Six-Year P lan of Ja p a n aim s at full em ploym ent
as a p rim a ry target consistently with the other p rim a ry objective of achieving economic self-support, i.e. a viable economy
not dependent on sustained foreign aid. In Japan, where a
population increase of 5.5 p e r cent over 1954 is expected by
1960, the labou r force is expected to increase in the same
period at the rate of 12 per cent. In addition, the num ber
of under-em ployed persons w as estim ated in A pril 1953 to be
nearly 10 m illion2 while the num ber of completely unemployed
persons reached 720,000 in July 1955. W hile recognizing the
difficulties of achieving full em ploym ent in the plan period
com patible with the attainm ent of economic self-support, the
plan nevertheless aim s at giving as m any em ploym ent opportunities to the increasing labour force as possible and at the
same tim e solving the problem of entirely unem ployed persons.
D uring the plan p e riod, em ployment in p rim ary industry
(agriculture, forestry an d fishery) is expected to increase by
4.4 per cent, in secondary industry (m ining, m anufacturing
and construction) by 18 per cent and in tertiary industry
(wholesale and retail trade, finance and real estate; transport,
1.
2.
A n ‘in v e s tm e n t n o r m ’ (lim it) h a s been s e t f o r e very c a te g o ry o f c a p ita l
c o n s tr u c tio n a n d a n y p r o je c t c a llin g f o r a n in v e s tm e n t above th e lim it
s e t is r e f e r r e d to a s a n a b o v e-n o rm p ro je c t. See i n fr a , c h a p t e r on C hina.
E c o n o m ic S u r v e y , o f A si a a n d th e F a r E a s t, 1953, p . 82.
47
com m unications an d other public utilities; services; public
services) by 20 p e r cent. The num ber of persons rem aining
entirely unem ployed at the end of the Plan period is expected
to be about 450,000.
In d ia ’s d ra ft second Five-Lear P lan also has an employm ent target, th a t of providing 11 million additional jobs
during the plan period for a labour force which already
includes a substantial num ber of unem ployed in u rb an areas
and of under-em ployed in the villages and which is increasing
at the rate of a bo u t 1.8 m illion a year. This rate of increase
is calculated on the basis of a labour force com position of
40 per cent of a net average increase in population of 4.5
million.
D uring the period of the first Five-Year Plan,
although the planned target of increase in national income was
achieved, and in fact exceeded even after allowing fo r the
exceptionally good harvests, the unem ploym ent situation did
not ease but actually deteriorated. The d ra ft fram e of the
second plan therefore specifically makes provision fo r achieving
fuller em ploym ent instead of leaving em ploym ent as in the first
plan m erely to follow as a corollary of development. Out of
the ad ditional 11 million jobs, 3 million are expected to be
provided by household enterprises and construction, nearly
2.4 million by the professions an d services sector, 2 million
by wholesale an d retail tra d e an d tra n sp o rt (excluding ra ilways), etc. while the m ines an d factories absorb about 1.7
m illion and agriculture an d allied p ursuits another 1.5 million.
In order to encourage increased production of consum er goods
by household and “h a n d ” industries fo r th eir employment
effects, the increase in factory production of consum er goods
would be lim ited m ainly to better utilization of existing
capacity.
In m ainland China where ru ra l under-em ploym ent is also
a serious problem , the Five-Year P lan provides fo r an increase
of 4.2 m illion jobs d u rin g the P lan period. Of these, approxim a te ly 54 per cent is in industry, 9 per cent in agriculture,
18 per cent in construction an d the rem aining 19 percent in
commerce and other services.3 In com parison, population
during the Plan period m ay well increase b y a ro u n d 50
m illion.4
In the Philippines a n d Ceylon, where the unem ployed,
according to some estimates, num ber about one-sixth of the
economically active population, em ploym ent is listed in their
plans either as a m a jo r target as in the form er o r as an
im portant objective as in the latter. The d ra ft Five-Year
P lan for the Philippines subm itted in 1954 aim ed at the
reduction of unem ploym ent from 15 to 6 per cent of the
labour force. In Ceylon there were estim ated in 1953 to be
540,000 persons unem ployed an d 386,000 persons severely
under-em ployed, an d in addition, an annual increase in population of about 200,000 persons and in w orking population of
about 80,000 persons (of whom 16,000 perosns would be in
the u rb an areas) is expected. The program m es for construction, colonization and settlement contained in the P rogram m e
of Investm ent fo r Ceylon are expected to provide substantial
additional employment.
On account of balance-of-payments pressure arising from
excessive dependence on food im ports, efforts to attain selfsufficiency in foo d loom large in the plans of such countries
as In d ia (first Five-Year P la n ) , Ceylon an d to a m ore limited
extent, Japan. In the first Five-Year P lan of India, about
one-third of total governm ent expenditures was devoted to
3.
4.
T h e F i r s t F iv e - Y e a r P la n , p p . 128-29.
E s tim a te o f p o p u la tio n in c re a s e d eriv e d fr o m th e p e r c a p ita a v a ila b ility
fig u res s h o w n in th e a rtic le e n title d “ C o m p a ra tiv e a n a ly sis o f th e f ir s t
fiv e -y e a r p la n s o f C h in a a n d th e U S S R ’, b y Y a n g C h ie n -p a i, in S ta tis tic a l
W o r k N e w s , P e k in g , A u g u s t 1955.
48
ECO NOM IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
increased ag ricu ltu ral pro duction, directly o r indirectly. T he
em phasis was laid in the plan on increased food p ro d u ctio n
w ith a view to m eeting In d ia ’s deficit in fo o d g ra in s a n d in
add itio n satisfying increased dem and fo r food a risin g fro m
increases in population an d incomes. T argets of additional
production of foodgrains set by the plan were 4 m illion tons
of rice, 2 m illion tons of wheat, one m illion tons of g ram
a n d pulses an d 0.5 m illion tons of other cereals, altogether
am ounting to 7.6 m illion tons equivalent to an increase of
14 per cent. M ost of these targets have already been exceeded,
owing partly to favourable weather.
Sim ilarly, the Investm ent P ro g ra m m e of Ceylon allocates
36.5 per cent of its total expenditures to im provem ent of
agriculture (including com m ercial c ro p s ), irrig a tio n and
fisheries.
S ubstantial efforts a re re q u ire d to achieve selfsufficiency in food as 50 per cent of total requirem en ts of rice
of a bou t 800,000 tons are a t present im ported, aside from
the problem of population increase. In J a p a n only a lim ited
degree of self-sufficiency in food is attem pted in view of the
ra th e r full utilization of its lim ited agricultural resources.
Considerations of high cost of ad ditional p rodu ction as well
a s. the desirability of im porting from its export m arkets in the
region also lim it J a p a n ’s efforts a t achieving food selfsufficiency. In Ja p a n efforts a t su bstituting chem ical fibres
fo r im ports of raw cotton an d wool are being stepped up
u n d e r the d ra ft Six Y ear Plan.
The last but not least of the basic features of the econom ies
of the region is the lack of adequate social an d econom ic
overhead facilities. Since the early establishm ent of the infra structure of the economy is basic to its fu rth e r developm ent
an d since it falls w ithin the competence of the public
authorities, a significant pro p o rtio n of the capital outlay of
the plans in the region has been set aside fo r basic developm ent.
Defining social and econom ic overheads as including such basic
facilities as tran sp o rt, com m unication, power, irrig a tio n an d
also investm ent in hum an capital such as education an d health,
expenditures on such basic developm ent in the plans would be
of significant proportions. T he Eight-Y ear P lan fo r B urm a
allotted as m uch as 50 p er cent of its total investm ent to the
im provem ent of econom ic overheads.
If the public sector
allocation fo r social capital of a b o u t 10 per cent is added,
alm ost 60 per cent of the expenditures u n d e r the plan would
have been devoted to basic development. In view, however,
of the balance-of-paym ents pressure w hich developed in B urm a
recently, the pro p o rtio n of expenditures fo r basic development
is being reduced in fa vour of export-prom oting an d im portsubstituting industries. T he Investm ent P ro g ra m m e of Ceylon,
which is a pro gram m e of investm ent fo r the public sector,
sim ilarly devotes about 50 p e r cent of its expenditures to the
im provem ent of social an d econom ic overheads (over 33 per
cent to public utilities and a b o u t 16 p e r cent to social s e rv ic e s).
In the first Five-Year P lan of In d ia, expenditures on overheads (including irrig a tio n ) am ounted to m ore th an half of
the total plan expenditures. In the d ra ft fram e of the second
plan, 22 per cent of total investm ent is allotted to tra n sp o rt
an d com m unication, 17 p er cent to construction an d social
services.
In J a p a n an d C h in a : T aiw an, w here the basic
facilities a re m ore o r less already developed, the p ro p o rtio n
of expenditures on th e ir im provem ent is relatively smaller.
As can be seen fro m the above, the p la n n in g objectives
m entioned a re b y no m eans m utually exclusive. In so fa r as the
resources they claim a re lim ited, they m u st be assigned a p p ro p riate priorities. A n d in som e cases, as fo r exam ple in co u n tries beset with a su bstantial unem ploym ent problem , there
m ay be an elem ent of conflict betw een the objectives of full
em ploym ent an d ration alization. It is how ever often possible
fo r a c o u n try to a im a t tw o o r th re e p la n n in g objectives w ithout an y conflict betw een them , as fo r exam ple in the case of
In d ia, a im in g a t food self-sufficiency, fu ller em ploym ent and
basic developm ent albeit w ith a c e rtain a m o u n t of phasing of
em phasis. In gen eral it can be sa id th a t th e p la n n in g objectives
overlap in so f a r as the basic ch aracteristics of the economy
fo r w hich they a re laid dow n a re inter-related.
P ublic d evelopm ent expenditures a n d financing
Several countries of the re g ia n stepped u p th e ir im plem entatio n of developm ent p ro g ra m m es d u rin g the ye a r 1955. For
all countries of th e region detailed d ata on development
expenditures, including b o th public a n d priv a te sectors, are
not available. Table 26 gives developm ent expenditures in
1955 fo r th e public sector in a n u m b e r of co u n tries of th e
region.
E xtrem e c au tio n is, how ever, necessary in re a d in g the
table, b e a rin g in m in d the follow ing reservations.
Public
developm ent expen ditures are n o t strictly co m p arab le between
cou ntries as to th e ir scale because in th e first place they are
com piled on different bases. F o r exam ple, public developm ent
expenditures fo r Indonesia do n o t include those of State enterprises w hich in recent years were as m uch as half of the
general governm ent’s ex penditures on developm ent. Sim ilarly,
figures fo r T h ailan d exclude fo reig n aid, p a rtic u la rly US aid
w hich in the last few years averaged a b o u t a tenth of the
figures m entioned in the table. Secondly, cost a n d p rice levels
a re again different in different countries, thus affecting
variously the level of real efforts m ade in developm ent.
F u rth e rm o re, official exchange rates used fo r conversion into
US dollars m ay also d isto rt the m ag n itu d e of public developm ent exp enditures in so fa r as they deviate fro m th e true
p u rc h a sin g pow er of the n a tio n a l cu rren cie s.1 P a rtic u la r
attention should be p a id in this conn exion to the cases of
m a in la n d C hina an d P ak istan . F inally, som e of the figures in
the table a re b u d g et estim ates an d others a re revised estim ates
while bo th differ from the actuals in v ario u s countries.
In the allocation of developm ent e xpenditures b y field,
tran sp o rt an d com m unicatio ns a p p e a r to have taken u p about
a q u a rte r of th e total developm ent e x penditures in most
countries of the region. In T h a ila n d the sh are was larger,
ab o u t 45 per cent. T h e im p o rtan ce attach ed to th e developm ent of tra n sp o rt an d com m unications in the developm ent
pro g ram m e s of these countries is u n d e rsta n d a b le in view of
the present inad eq u acy of such overh ead facilities in their
econom ies. T he establishm ent of th e in fra -stru c tu re of the
econom y, one of the m ain objectives of developm ent, is
in v ariab ly the responsibility of the public sector. In m a in land C hina the share was a b o u t 12 p e r cent, a n d a p p a re n tly is
plan n ed deliberately so as to give p rio rity to heavy industries.
The large share of tra n s p o rt a n d com m u n icatio n s in the
expenditu res of the p ublic sector in J a p a n — as m u ch as oneth ird of total expenditu res— is explained b y the relatively small
size of th e public sector in w hich the im provem ent of public
utilities m u st necessarily d o m in ate its investm ent activities.
R ehabilitation, a n d in som e cases extension, of railw ays
took u p a su b stan tial p ro p o rtio n of th e e x p en d itu res on tra n sp o rt a n d com m unications— a th ir d o f th e total on th e average.
E xpenditures on ro ad s (m ostly fo r m a in te n a n c e in In d ia and
some a d d itio n s in P a k ista n , the P h ilip p in e s a n d T h a ila n d ) and
on p o rts (fo r re h a b ilita tio n in B u rm a a n d expansion in India,
T h a ila n d a n d P a k ista n ) also figured p ro m in e n tly .
1.
I n th e c a s e o f I n d o n e s ia w h e re t h e r e is c o n s id e ra b le d iv e rg e n c e b e tw e e n .
th e official r a t e o f e x c h a n g e a n d t h e p r e v a i l i n g m a r k e t r a t e , Classr I I
im p o r t r a te , a t w h ic h m o s t o f t h e c a p i ta l g o o d s a r e im p o r te d , is u s e d fo r
c o n v e rs io n in to U S d o lla rs .
C H A P T E R 2.
C U R R E N T E C O N O M IC S IT U A T IO N
TABLE
49
26
TO TA L AND P E R C A PITA L GOVERNM ENT DEV ELO PM EN T E X PE N D IT U R E , 1955
(m illion US$)
Total p u b lic sector e x p en d itu re ..
Total p u b lic d e v elo p m en t ex p en d i........................................................
ture
3. P e rc e n ta g e of to ta l p u b lic sector
e x p en d itu re
.......................................
4. P e r c a p ita p u b lic d e v elo p m en t exp e n d itu re ($) . .
.
.....................
5. A llocation of p u b lic developm ent
ex p en d itu re
.......................................
a . A griculture, com m unity d e v e lopm ent, re settlem en t
b. Irrigation, m ulti-purpose a n d
p o w e r ................................................
c. T ransport a n d com m unication
d. In d u stry a n d m ining
e. S ocial w e lfa re a n d a ll o th er . .
6. F in an cin g of p u b lic develo p m en t
ex p en d itu re
a . G overnm ent re v e n u e
i. C urrent s u r p l u s .....................
ii. M iscellaneous receip ts on
c a p ita l a c c o u n t .....................
b. Dom estic b o r r o w i n g ....................
i. From th e p u b lic
ii. From the C en tral B ank . .
c. G overnm ent c a s h b a la n c e
....................
d. Investm ent fu n d s
e. E xternal l o a n s ..............................
f. E xternal g r a n t s .............................
M a la y a &
British
Borneoa
(E)
B urm a
C eylon
C hina:
m a in lan d
In d ia
In d o n esia
Ja p a n
(RE)
(RE)
(E)
(E)
(E)
(E)
655
243
12,627
3,489
175
84
7,660
1,493
27
35
61
43
9
10
13
4
1
18
15
175
84
7,660
1,492
85
1,555
119
337
64
24
11
243
6
455
7
16
3
441
396
88
324
17
32
12
18
178
516
282
124
27
26
0.2
59
122
9
29
3
144
165
1,010
36b
35
21
573
425
747
422
1.
2.
{
34
35
43
39
159
117
40
29
1,765
32
20
2
19
911
2,712
2,272
57d
57
—
—
11
18 Į
13
12
—
—
22
-
2.3
6
6
S o u r c e s : F o r m a in la n d C h in a — 1954 a c c o u n t a n d 1955 S ta te b u d g e t; f o r o th e r
c o u n trie s ,
C o n su lta tiv e
C o m m itte e
fo r
C o -o p e ra tiv e
E conom ic
D e v e lo p m e n t in S o u th a n d S o u th E a s t A sia, F o u r th A n n u a l R e p o r t,
1955. F ig u r e s m a y n o t a g r e e w ith th o s e p u b lish e d in in fr a , A sia n
E c o n o m ic S ta tis tic s , s p e c ia l ta b le s E a n d J b e ca u se o f differences
in c o v e r a g e a n d cla ssific a tio n .
N o te s : 1. T o ta l p u b lic s e c to r e x p e n d itu r e s in c lu d e e x p e n d i tu re s on c u r r e n t
a n d c a p i ta l a c c o u n ts o f th e g o v e rn m e n t a n d th e S ta te e n te rp ris e s .
2. T o ta l p u b lic d e v e lo p m e n t e x p e n d itu r e s in c lu d e d e v e lo pm e n t e x p e n d itu r e s o f t h e g o v e r n m e n t a n d th e S ta te e n te r p r is e s . D e v elo p m en t
e x p e n d i tu r e is defined h e re a s e x p e n d itu re s f o r th e p u rp o s e o f
in c re a s in g th e e ffe c tiv e p h y s ic a l a n d h u m a n c a p a c itie s o f th e
e co n o m y to p ro d u c e goods a n d serv ice s. I t in clu d es (1 ) c a p ita l
e x p e n d itu r e s , i.e. e x p e n d itu r e s in c u r r e d in th e c re a tio n o f ta n g ib le
a s s e ts a n d (2 ) n e w s e rv ic e e x p e n d itu r e d e sig n e d to im p ro v e h e a lth
a n d k n o w le d g e a n d in c re a se th e p ro d u c tiv e c a p a c ity o f th e p o p u la tio n (so c ial c a p i t a l ) . A s s u c h th e y do n o t ta lly w ith in v e s tm e n t
In spite of the stringency of the financial situation in
m any countries, expenditures on social w elfare rem ained at
about a q u a rte r o r m ore of total expendituress in most
countries.
A griculture, com m unity developm ent and resettlem ent
expenditures (generally excluding irrig a tio n ) average only
about 10 p er cent of the total developm ent expenditures in
spite of the im portance of ag ricu ltu ral prod u ctio n either for
export o r fo r achieving self-sufficiency in m ost of the countries.
However, the scale of expenditures does n o t directly reflect
the m agnitude of efforts in this field because m ost of the
measures like ag ricu ltu ral extension work, the im provem ent of
seeds, etc. do n o t involve m uch capital outlay. Sim ilarly,
com m unity developm ent, by the very n atu re of its efforts,
requires little capital outlay. In Jap an the p ro p o rtio n (which
includes irrig a tio n ) is m uch larger, in view of the im portance
of increasing food self-sufficiency an d the necessity fo r reconstruction works after frequent typhoon dam ages.
However, expenditures connected with ag ricu lture such
as irrigation req u ire substantial capital outlay and these,
a.
b.
c.
d.
T hailand
(E)
(E)
886
85
1,555c
437
121
0.8
27
27
337
64
38
..
3
82
53
63
—
100
45
20
..
..
— 145
130
—
21
—
—
19
60
44
34
123
P a k ista n b
31 }
26
3
..
17
191
..
—
e x p e n d itu re s g iv e n in s u p ra , ta b le 25 a n d in f r a , sp ec ia l ta b le G
in th e sec tio n on A s ia n E c o n o m ic S ta tis tic s .
3. R E = R evised e s tim a te s ; E = E s tim a te s .
4. E x c h a n g e c o n v e rsio n r a te s p e r d o lla r: p a r value— (a ) B u rm a ,
Ceylon, I n d ia : R s 4.7619: P a k is ta n : R s 3.3025 (p re -d e v a lu a tio n
r a t e ) ; ( b ) official r a t e — C h in a ( m a i n l a n d ) : Y u a n 2.355; M a la y a :
M$3.06; (c ) m a r k e t sellin g r a te — T h a ila n d : B a h t 20.88; ( d ) Class
I I im p o r t r a te — I n d o n e s ia : R p 15.30.
C o m p ris in g M ala y a , S in g a p o re , N o r th B o rne o & S a ra w a k only. F o r ite m
no. 6, re v ised e stim a te .
B re a k -d o w n fig u res on “ fin a n c in g ” re la te to C e n tra l G o v e rn m e n t only; in cludes re s o u rc e s u sed f o r p a y m e n ts o f lo a n s a n d g r a n t s to p ro v in c e s.
E x c lu d e s local g o v e rn m e n t e x p e n d itu re s . “ I r r i g a t i o n ” included u n d e r
“ A g ric u ltu r e , c o m m u n ity d e v elo p m en t a n d re s e ttle m e n t” .
R evised e stim a te s .
together with the developm ent of power, account fo r another
q u a rte r of total developm ental expenditures in m ost countries.
The lower p roportion (excluding irrig a tio n ) in Ja p a n is
understandable in view of the already high levels of existing
facilities. M ulti-purpose projects figure prom inently under
this head of expenditures, especially in India and Pakistan.
E xpenditures on industry an d m ining, however, vary
widely from country to country.
In m ainland China the
percentage of total expenditure devoted to in dustry is as m uch
as 35 p er cent, out of w hich nearly nine-tenths are on heavy
industry. In M alaya, a predom inantly agricultural country,
public expenditures on in d u strial developm ent are alm ost nil
whilst those on m ining— already highly developed— are negligible. Besides m ainland C hina, Ind ia devotes a m a jo r portion
of public expenditures on in d u strial developm ent to large-scale
industries.
In other countries expenditures on small-scale
industries, especially consum er goods industries, took up the
m a jo r p o rtion of expenditures u nder this head, whilst in the
Philippines expenditures on m ining were m ore substantial.
50
ECO N O M IC S U R V E Y O F A S IA A N D T H E F A R E A ST , 1955
In J a p a n nearly a fifth of the go v ern m en t’s developm ental
expenditures was devoted to in d u stry an d m in in g , m ostly in
the fo rm of loan capital p ro vided to p riv a te in d u stry fo r
equipm ent. In 1 9 5 4 /5 5 , the g o v ern m en t’s sh a re in ex p en d itures on capital e qu ip m en t was a b ou t 90 p e r cent in shipbuilding, 40 p e r cent in electricity, 20 p e r cent in th e coal
industry , 20 p er cent in synthetic fibres a n d 22 p e r cent in
am m onium sulphate. On account of the im p o rtan ce of reviving
or developing these industries afte r the w ar, the govern m ent’s
co n tributio n was m uch h ig h e r in the years im m ediately after
the w ar, as m uch as alm ost 100 p er cent in coal, 8 8 p e r cent
in electricity, 61 p e r cent in ship-building, n early 50 p e r cent
in iro n a n d steel and alm ost 40 p e r cent in am m onium
sulphate. M ost of these in du stries have since m ade a re m a rk able recovery a n d some, like the iro n a n d steel ind u stry , have
even started to repay the governm ent loans.
E xam ination of the m ethods of financing public developm ent expenditures in some of the countries of the ECA FE
region p o in ts to a n um b er of differing patterns. In some
countries like B urm a an d Ceylon, the investm ent expenditures
were m ostly financed out of c u rre n t surpluses of th e public
authorities. Domestic borrow ings played a lim ited role while
the role of external assistance was even m ore lim ited if not
negative (repaym ent of loans in B u rm a ). In th e im m ediate
future, beset with balance-of-paym ents difficulties, the governm ent of B urm a intends to pursue its developm ent activities,
although a t a lower level, by reso rtin g to extern al loans. In
Ceylon, ru b b e r rehab ilitatio n funds financed o ut of profits
from rub b e r trad e m ay be considered fo r all practical purposes
as a p a rt of governm ent surpluses. It is the intention of the
governm ent, as m ade know n in its Investm ent P ro g ra m m e , to
continue its developm ent efforts a t the present level in the
absence of substantial aid fro m abroad.
On the other hand , a n u m b e r of countries relied heavily
on external assistance fo r financing th e ir developm ent. In
C hina: T aiw an the dependence on foreig n aid is p re po n d eran t. In d u stria l investm ent in 1955 is expected to be
financed 76 p e r cent by US a id an d its c o u n te rp a rt funds, 4
p e r cent by fo reig n an d overseas Chinese cap ital a n d only 20
per cent by dom estic capital. Sim ilarly in P ak istan , external
g ran ts of considerable m agnitude, supplem entted b y dom estic
borrow ings, m ade the financing of heavy investm ents possible
after offseting the deficit in g overnm ent revenues.
A com prom ise between the above two p a tte rn s of financing
is fo u n d in th e case of In d ia w here financial resources were
m o re evenly draw n from all sources as m entioned in the table.
W hile the public cap ital outlay of Rs 21,233 m illion u n d e r
the first Five-Y ear P lan was financed 50 p e r cent by b u d g e ta ry
resources (including public loans an d sm all savings— a b o u t
22 p e r c e n t), nearly 20 p e r cent by ex tern al assistance, an d
th e rem a in in g 24 p er cent b y C entral B ank b o rro w in g s a n d 6
p e r cent by w ith d raw al fro m cash balances, the p a te rn for
financing the la rg e r public outlay of Rs 43,000 m illion u n d e r
the d ra ft second plan is expected to un derg o som e changes. It
is estim ated th a t governm ent c u rre n t surpluses will co n trib u te
less th a n 2 0 p e r cent, v o luntary loan p ro g ram m es a b o u t 22
p e r cent a n d external assistance less th a n 9 p e r cent. A ssum ing th a t defificit financing can be reso rted to w ith o u t causing
inflation to cover an o th e r 22 p e r cent, th e re rem ains a sizeable
gap fo r ad d itio n a l tax atio n to cover.
T he p a tte rn of financing developm ent in m a in la n d C hina
stands in a class b y itself.1 Taxes an d revenue fro m S tate
en terprises co n trib u te a b o u t equally betw een them 90 p e r cent
1.
I n f r a , c h a p t e r o n C h in a -
of the to tal revenue w hile dom estic b o rro w in g s a n d loans from
the U SSR fu rn ish the re m a in in g one-tenth.
Factors p ro m o tin g or im p e d in g im p lem en ta tio n
F a c to rs p ro m o tin g o r im p ed in g im prem entation of
developm ent p ro g ra m m e s in th e re g io n m ay roughly be
divided into external a n d in te rn a l factors. A m ong the form er
the m ost im p o rta n t a re the term s of tra d e , fo re ig n assistance
a n d the re a d y a v ailability of eq u ip m en t a n d raw m aterials
from ab ro a d . F o r econom ies highly dependent on the export
of p rim a ry p ro d u c t, now la u n c h in g on developm ent, fluctuations in th e term s of tra d e have a two-fold significance.
F irstly, they can affect th e level of available foreign-exchange
resources w hich a re re q u ire d fo r the im p o rt of eq u ip m en t and
raw m aterials essential fo r developm ent as well as fo r the
im p o rt of consum er goods to a b so rb increases in incom e
g enerated by the developm ent expenditures. Secondly, adverse
term s of tra d e will n o t only re d u c e the foreign-exchange
resources of the countries b u t will alm ost c ertain ly lim it the
in te rn a l resources of th e ir governm ents w hich derive often a
su b stan tial am o u n t of th e ir revenues fro m ex te rn a l tra d e in
the fo rm of im p o rt a n d e x p o rt duties, especially since export
duties etc. are frequently levied a t ra te s v a ry in g w ith changes
in w orld m a rk e t prices.
D u rin g 1955, how ever, the im p ro v em ent in the term s of
tra d e a n d an e x p an d in g w orld d em an d fo r c e rta in raw
m aterials benefited ome countries of th e E C A F E region.
Indonesia an d M alaya enjoyed a conspicuous rise in the p rice
of ru b b e r while fo r Ceylon the g a in w as m o re lim ited. In d ia
and P a k istan gained fro m a sm all rise in th e p rice of ju te
a n d ju te m anu factu res. On the o th er h a n d th e rice-exporting
countries— B urm a an d T h aila n d , a n d to a lim ited extent south
V iet-N am an d C am bo d ia— suffered adverse term s of tra d e .
The decline in earn in g s fro m rice trade, to g eth er w ith m o u n tin g
exp en d itu re on developm ent, affected the external paym ents
an d financial position of the B urm ese G overnm ent adversely.
T he fall in rice price, of course, im proved the paym ents
position of heavy rice im p o rters like Ceylon a n d M alaya,
releasing some of th e ir fo reig n assets fo r developm ent use.
The P h h ilip p in es, w hich has been suffering fro m chronic
balance-of-paym ents difficulties, was also adversely affected by
the fall in prices of its coconut p ro d u c ts a n d h em p exports.
F o reig n assistance, b o th financial (lo an s o r g ra n ts) an d
technical, is clearly of im p o rtan ce to the c ountries of the region.
T he dependence of th e E C A FE co u n tries on outside financial
assistance varies w idely fro m c o u n try to c o u n try w hereas
technical assistance is received b y alm ost all countries either
u n d e r b ila te ra l (e.g. US an d C olom bo P la n a id ) o r m u ltilateral
(U n ited N atio n s) systems.
P ro m in e n t am o ng th e in te rn a l facto rs im peding p r o gram m e im plem entation in co u n trie s of the reg io n are
in ad eq u acy of basic facilities, lack of technical skills, an d
o rg an ization al defects. T he lack of ad e q u a te b asic facilities
is com m on to all co u n tries in th e re g io n except p e rh a p s Ja p a n .
T he lack of technical skills is also w idespread although the
degree in w hich th e lack is felt a t this stage differs from
c o u n try to cou n try , as w ith th e in ad eq u acy of basic facilities;
the lim ited technical skills fu rth e rm o re a re som etim es misallocated, th u s p re v e n tin g th e ir o p tim u m utilization. W ith
re g a rd to o rg an iz atio n , cum bersom e a d m in istra tiv e p ro ced u res
re la tin g to p ro c u re m e n t a n d finance have often given rise to
unnecessary delays, a n d suitable in stitu tio n s a n d procedures
f o r th e execution of developm ent p ro je c ts a re in m a n y cases
still in th e fo rm a tiv e process.
Chapter 3.
AFGHANISTAN
D uring the year 1 9 5 4 /5 5 1 the economy of Afghanistan
showed signs of im provement. T he crop was better than
average an d b ro u g h t about a slight decline in agricultural
prices. G overnment tax receipts increased through im proved
adm inistration, w ithout however changes in tax rates or
introduction of new taxation. The exports of the country
im proved sharply an d the foreign-exchange reserves of the
Central Bank (D a A fghanistan Bank) accumulated at a rapid
rate. T he rising export earnings and developing economic
activity were reflected in a sharp rise in the supply of money
while the cost of living rem ained stable. The com mercial
activities of governm ent enterprises increased and some credit
institutions and com m ercial corporations were established.
The year 1 95 5 /5 6 offered the same favourable outlook till
the end of the first q u a rte r when the dispute with Pakistan
resulted in the closing of the A fghan-Pakistan border. A
transit agreem ent was concluded with the Union of Soviet
Socialist R epublics in the second qu arter of 1955/56 to
alleviate the economic difficulties thus created. The 195 5 /5 6
crop appeared not unfavourable in spite of the relative lack
of snow d u rin g the w inter of 1954/55.
W hile cu rren t economic trends as a whole thus showed
improvement, there still rem ained some basic problem s which
Afghanistan must solve before it could prom ote a large-scale
expansion in production and trade and a substantial increase
in the stan d ard of living of its people. D u rin g the second
p a rt of 1 9 5 5 /5 6 , the prelim inary work was completed on a
Second Five-Year Plan to exploit m ore fully the resources
of the country.
BASIC ECONOMIC PROBLEMS
External transit
Recent developments b rin g to full light the special problem
which A fghanistan had faced, especially for the last eight
years, as a country without direct access to the sea and with
few means of com m unication with the outside world. Broadly
speaking there are three m ain routes of communication
available to the country. T he first is from Iran to H erat
in the western p a rt of A fghanistan; it is, however, of little
use, not only because of the distances between H erat and
the other parts of A fghanistan, but also because of the long
distance from the sea through the desert in southern Iran
where there are few roads. The second route, which is of
special im portance to north ern A fghanistan, goes through the
USSR; and is increasingly used recently, especially since the
second q u a rte r of 1955/56. The th ird route, which is the
most natural one, leads thro ug h P akistan to the po rt of
Karachi. Both the second and third routes imply transfer
of freight from trucks to railway cars a n d /o r ships. Since
Afghanistan has no other practical choice but to trad e through
two of its neig hb o uring countries, the continuity of the flow
of its exports and im ports and their cost depend on the
policy of its two neighbours.
For landlocked A fghanistan, for which the share of
m anufacturing in gross domestic product is very low, foreign
1.
T h e A fg h a n c a le n d a r y e a r a n d fiscal y e a r b o th s t a r t on 21 M arch .
trade is of vital importance. Development expenditures are
tightly linked to the earnings of its exports which are the
m ain source of capital for the country. Moreover, the greatest
p a rt of its exports is composed of fruits and karakul,
commodities which cannot be fully absorbed by the domestic
m arket when their exportation is stopped or ham pered. The
c l osing of the border with Pakistan since the second quarter
of 1955/56 m eant reduction of exports, especially fruits, and
delay in the supply of im ported consum er goods and of capital
goods required for development projects.
The seriousness of the difficulties experienced by A fghanistan as a result of this closing of the b order m ay be gauged
by the im portance of its trade through Pakistan in previous
years. In 1954/55 about 80 per cent of the exports and
79 per cent of the imports were carried through Pak istan
In o rder to overcome these difficulties a T ran sit Agreement
was signed in Moscow in the second qu arter of 1955/56
between Afghanistan and the USSR, entitling both countries
to transit facilities for the ensuing five years. This T ransit
Agreement was in conform ity with and as a consequence of
Article VI of the Afghan-USSR Friendship Treaty of February
1921.
Internal transport and domestic trade
A substantial improvement in the internal transport
system, which physical conditions make difficult, is required
in Afghanistan as a pre-requisite to economic development.
There are too few communications between the various
domestic markets, each of them too small to offer m uch scope
to prospective industries. The situation reflects itself in the
price differential of both agricultural and m anufactured p ro ducts between different localities, which is very high. For
example, a seer (7 kilos) of wheat in M aim ana Province
costs around Afg. 7.5 while in K abul the price rises to Afg. 2]
per seer. W hile other factors such as the lack of a standard
system of weight and m easures and the absence of m arketing
co-operatives and commercial enterprises contribute to the
under-development of domestic trade, the m ain factor is the
inadequacy of transport facilities.
Inland shipping is not practicable. The construction of
railway transport is being considered, especially to link the
eastern and southern parts of the country, where construction
is less difficult, with a line from H erat to K a n d a h a r and from
K a n d a h a r to Cham an and K abul. However, the structure of
the land and the relatively small am ount of potential freight
do not favour such projects.
A ir transport made a beginning in 1954/55, when the
first Afghan airline
(A riyana Airlines Lim ited)
was
established, offering services between the m ain towns in the
country and a service between K abul and Bahrein. The
com pany will extend in the n ear future its services to the
capitals of the neighbouring countries. At the end of the
first qu arter of 195 5 /5 6 a weekly service was opened between
K abul and Teheran by the Iran ian Airways and a bi-weekly
service between K abul and K arachi by the Royal Dutch Airlines
(K L M ). The construction of the international airport at
52
E CONOM IC SU R V E Y OF A S IA A N D T H E F A R E A ST , 1955
K a n d a h a r is u n d e r active consideration. Use of this a irp o rt
will shorten by a b out two flight hours the E u r o p e /F a r East
route an d will help the developm ent of a tourist in dustry in
A fghanistan.
Owing to physical and clim atic conditions ro a d extension
and m aintenance is costly. Considering the lim ited capital
resources of the country and its sparse population, the
developm ent of the road system represents an extrem ely heavy
burden.
The country has 5,111 kilom etres of gravel ro a d which
can be used in all weather. D u rin g 1 9 5 4 /5 5 the expenditures
on ro a d construction and m aintenance doubled as com pared
with those in 1953 /5 4 , a n d 225 kilom etres of roads were
re-surfaced. W ithin two m ore years 800 kilom etres of new
roads will be added. In 1 9 5 4 /5 5 w ork sta rte d on w idening
the T orkham -K abul highway. T he governm ent will t a r the
T orkham -K abul and K andahar-S pinboldak highw ays within the
com ing three fiscal years. W ith a $2.3 m illion loan fro m
the E xport-Im port Bank of W ashington a road-m aintenance
unit was established to tra in A fghans and provide heavy
equipm ent for road construction. The Governm ent of the
USSR advanced a cred it of $2.1 million in 1 9 5 3 /5 4 to finance
heavy equipm ent for road building, a ta r factory a n d ta rrin g
i equipment. T he factory is completed in K abul.
A survey of the Salang ropeway p roject is m ade by a
British firm and the work will start in late 1 9 5 5 /5 6 or early
1 956/57. T his ropeway will shorten the distance from the
northern country to K abul, avoid the lengthy and n a rro w
passes over the H indukush range and reduce the tran sp ort
cost, especially of bulky commodities. The cost of the project
is estimated at $3 million.1
In 1954 /5 5 a jo in t state-private tra n sp o rt com pany was
established at K abul to accelerate the developm ent of tra n sp o rt
facilities. A t present the com pany possesses 300 trucks and
this n u m ber is expected to increase to 1,000 by the end of
1 955/56. T he governm ent has provided financial aid to
private concerns in other m a jo r cities to organize sim ilar
tra n sp o rt com panies.2 The n u m b e r of passenger cars a n d
trucks im ported rose from 265 (155 passenger cars a n d 110
trucks) in 1 9 5 3 /5 4 to 981 in 1 9 5 4 /5 5 (106 passenger cars
a n d 875 t r u c k s ) . T he U nited States supplied the largest
num ber, 152 passenger cars and 110 trucks in 1 9 5 3 /5 4 and
84 passenger c a rs and 743 trucks in 1954/55. T he balance
cam e m ostly from the USSR.
In 1954/55, with assistance from the U SSR, large stock
tanks were built in K abul, M azar-i-Sherif and H erat, w ith a
total capacity of one-fifth of the co u n try ’s petrol requirem ents.
I n the next two years m o re petrol stock tanks will be
constructed.
the m ost m o d e ra te estim ates p u t this above one million and
some up to two m illion, w hich represents a significant p ro p o rtio n of the entire population of a b o u t 12 m illion. The
settlem ent of the n om ads on land will elim inate the shortage
of la b o u r force in the n o rth e rn a n d south-western parts of
the c o u n try a n d increase a g ric u ltu ra l p ro d u c tio n .
It will
also help the co u n try to ob ta in the full benefit of their trade
activities. T he H elm and Valley irrig a tio n schem e and other
land extension p ro g ra m m e s are m ainly u n d e rta k e n to meet
this problem . However, the settlem ent of the n om ads raises
m a n y social com plications, such as the lack of interest of the
nom ad s in accepting p e rm a n e n t residence on the fa rm land,
th e ir inexperience in fa rm in g a n d th e ir psychological resistance
to com m unity life in general; it h a s th e re fo re been rather
slow.
Irrigation and pow er
It is recognized th a t the developm ent of the country
requires a fuller use of its w ater resources, fo r w hich steps
are taken to im plem ent the H elm a n d -A rg h a n d a b Valley an d
the S a ro b i hydro-electric projects. B oth pro jects are partly
com pleted and their total com pletion, p ro v id e d no unforeseen
contingency arises, is now in sight. T he experience th a t will
be gained u n d e r the present schemes, a n d especially the
resulting skilled m anpow er and accum ulated equipm ent, will
facilitate fu rth e r progress.
T h e H elm and-A rghandab Valley P roject is the m ost vital
irrig a tio n p roject undertaken in the country. W hen com pleted
it will irrig a te 331,843 hectares of land in the H e lm a n d a n d
48,500 hectares in the A rg h a n d a b Valley. T he p ro je c t is
to be c a rrie d out in several stages. T he first stage, consisting
of soil and d ra in a g e survey and b u ild in g of the K a ja k a i and
A rg h a n d a b dam s and of the B o g h ra-M arja-S h am alan canal
system, has been completed. T he present capacity of the two
dam s is 2,325 m illion cubic m etres w hich will be increased
later to 3,700 m illion cubic m etres. Canals, distributive
laterals and m ain drains to serve 86,440 hectares a re ready
for use.
So fa r approxim ately 1,010 kilom etres of m a in highw ays,
inter-project and on-project roads are com pleted a n d several
m odern villages built.
In 1 9 5 4 /5 5 w ater control fo r the
installation of generators h a ving a capacity of 131,000 kW
was also completed.
TA B L E 27
A F G H A N IS T A N : E X P E N D IT U R E S ON T H E HELM ANDA R G H A N D A B V A L L E Y P R O JE C T
(in m illio n )
F isc a l y e a r
Nomads
F o r centuries, every late autum n a large n u m b e r of people
have been leaving the co untry to find grazing land for their
livestock in the vast plain of the Indus. In spring they retu rn
to A fghanistan and move tow ards the ranges of the H indu
K ush. T hough the exact n u m ber of the nom ads is n o t known,
1.
2.
P a p e r c irc u la te d b y th e d e le g a tio n o f A f g h a n is ta n d u r in g th e s e v e n th
sessio n o f th e C o m m itte e o n I n d u s t r y a n d T r a d e , E c o n o m ic C o m m issio n
f o r A s ia a n d th e F a r E a s t, h e ld in T o k y o (I & T /1 8 , 10 M a r c h 1 9 5 5 ).
B esid e s f in a n c ia l a id th e g o v e r n m e n t p ro v id e s th e fo llo w in g in c e n tiv e s to
th e d e v e lo p m e n t o f t r a n s p o r t : ( a ) f o r e ig n e x c h a n g e t o a n y in d iv id u a l o r
c o m p a n y f o r th e p u r c h a s e o f c o m m e rc ia l tr u c k s a t th e in d u s tr ia l r a t e o f
A fg . 3 0 .3 7 = U S $ 1 , w h ic h is 25 p e r c e n t lo w e r t h a n th e m a r k e t r a t e ; ( b )
fu ll e x e m p tio n f r o m im p o r t d u ty ; ( c ) e x e m p tio n f r o m in c o m e t a x f o r
p r i v a t e tru c k - o w n e r s ; a n d ( d ) r e d u c tio n o f o n e a f g h a n i p e r g a llo n in th e
p r ic e o f p e tr o l e ffe c tiv e s in c e th e m id d le o f 19 54 /55 .
B u d g e ta ry e x p e n d itu re
Total
e x p e n d itu re
P a k is ta n
(dollars) A fg h a n is
D o llarsa
rupees
1946/47-1949/50
1950/51
. .
1951/52
. .
1952/53
. .
1953/54
. .
1954/55
. .
1955/56b . .
T otal . . . .
S o urce:
a.
b.
.
.
.
.
.
.
.
24.9
6.4
9.7
9.2
8.7
8.8
17.4
85.1
97.6
28.6
52.5
48.2
68.7
56.8
12.4
2.6
3.2
2.9
2.1
200.0
552.4
16.6
0.1
0.3
0.1
0.5
3.1
—
23.2
L oan
from
ExportIm port
B ank
(dollars)
20.7
4.2
5.9
6.0
5.0
2.4
8.0
31.5
C o m p ile d f r o m d a t a p r o v id e d b y th e M in is t r y o f F in a n c e , G o v e rn m e n t o f A f g h a n is ta n .
E x c lu d e s a ll i n t e r e s t p a y m e n ts to E x p o r t - I m p o r t B a n k o f W a s h in g to n .
D r a f t e s ti m a t e s o f th e b u d g e t, in c lu d in g i n t e r e s t p a y m e n ts to E x p o r tI m p o r t B a n k o f W a s h in g to n .
C H A PT E R 3.
At p resent the annual yield of the project is small. The
policy of the governm ent aims at m aking the project selfsustaining by 1957/58. The adm inistrative system of the
Helm and Valley A uthority was reorganized in 1954/55 to
increase efficiency. P rogram m es for education and health
were introduced, and an agricultural train in g centre was opened
at Nadi-Ali. In 1954 /55 the Afghan Construction U nit was
established to work jo intly with M orrison-Knudsen (contractor
of the p roject) so as to be able to take over the work after
the expiration of the contract with the latter firm.
T he hydro-electric power potential of A fghanistan is
enormous. The governm ent started on a few hydro-electric
schemes and will undertake some m ore isolated projects. The
m a jo r scheme undertaken is the Sarobi hydro-electric project
which will be completed in three stages. The first stage o f
the S aro b i scheme, with capacity of 22,000 kW, is scheduled
for com pletion in early 1 956/57, to meet the growing
dem and of the city of Kabul. D uring the second and third
stages the capacity will increase respectively to 88,000 kW
and 200,000 kW. The prelim inary stages of the K a jak ai and
A rghandab hydro-electric plants in the H elm and-A rghandab
Valley are also completed, as noted above. The K ajakai and
A rghandab projects, with a capacity of 131,000 kW and
9,400 kW respectively, will furnish power to the city of
K andahar and other potential towns in the H elm and Valley.
A small plant of 2,500 kW is planned for the city of Girisk,
also in the H elm and Valley. One p roject of 2,500-5,000 kW
is planned for L aghm an in the eastern province to furnish
power to the textile factory that will be erected there. Two
hydro-electric schemes will be undertaken in the northern
province, one at P ulikhum ri and another at K hanabad. The
P ulikhum ri plant will generate about 3,000 kW required for
the textile factory and the K h a n a b a d plant, with 700 kW,
will supply power to the soap factory. W ith the completion
of these projects the c o u ntry’s existing annual capacity of
14,000 kW will increase to 365,000 kW.
Planning and financing economic development
The m agnitude of the problem s involved in transport,
power, irrigatio n , trad e and social development obviously calls
for an over-all development program m e. In the th ird quarter
of 1 9 5 5 /5 6 the governm ent was fully engaged in preparing
the Second Five-Year Plan, utilizing the experience g a in e d
under the F irst Plan ( 1 9 4 9 /5 0 -1 9 5 3 /5 4 ).1 Detailed program mes p rep ared by the m inistries or departm ents of Agriculture,
M ining and Industry, Finance, T rad e and T ran sport are carefully studied by the new P lan ning Commission established in
the M inistry of N ational Economy. The m a jo r expenditures
under the Plan will be devoted to irrig a tio n an d transport.2
T he Plan will be financed partly by taxation and partly
by domestic and foreign borrow ing. T axation is at present
limited to a few sectors and, in the p rep aratio n of the Second
Five-Year Plan, suggestions to extend sources of taxation are
being actively studied. The usual difficulties are m et in raising
and channelling private savings into productive activities. The
government has recently created the A griculture and Cottage
Industry Bank, the Construction and M ortgage Bank and the
Commercial Bank (P a sh ta n i T ija ra ti Bank) to fill the gaps
in the short- and long-term credit system. The rate of interest
1.
2.
P e te r G. F r a n k ’s r e p o r t on “ O b ta in in g fin a n c ia l a id f o r a d e v e lo p m e n t
p la n ” , in T h e E x p o r t- I m p o r t B a n k o f W a s h in g to n L o a n to A f g h a n is ta n ,
S e p te m b e r 1953, U S G o v e rn m e n t P r i n t i n g Office a n d th e a r tic le on
“ P ro b lem s o f e co n o m ic d e v e lo p m e n t in A f g h a n i s t a n ” , M iddle E a s t J o u rn a l,
J u ly 1949.
S o u r c e : P a p e r c irc u la te d b y th e d e le g atio n o f A f g h a n is ta n a t th e s e v e n th
session o f th e C o m m itte e on I n d u s tr y a n d T r a d e , E c o n o m ic C o m m issio n
fo r A sia a n d th e F a r E a s t, in T o k y o (I & T /1 8 , 10 M a r c h 1 9 55).
53
A FG H A N ISTA N
on loans granted by these banks is relatively low and should
exert a downward influence on the prevailing rates. The
Central Bank and other government corporations have
increasingly invested in new enterprises.
However, without an influx of foreign capital, Afghanistan
can hardly hope to realize, within a reasonable period, the
m a jo r steps tow ards economic progress so badly needed. T h e
Foreign Investment Law enacted in 1954/55 provides equal
treatm ent to foreign and hom e investors, perm itting the form er
to transfer profits accruing to his capital at the prevailing
official rate of exchange. Applications, mostly in the field
of m anufacturing, have been received from Japanese, Czechoslovak, German, Italian and A ustrian firms.3
PRO D U C TIO N
Agricultural production
In 1954/5 5 crop production slightly increased, the fall
in wheat output to 2.1 million tons from 2.32 million tons
in 1 9 5 3 /5 4 being offset by the rise in the output of rice,
maize, other staples and fruit. Though the am ount of snow
in the winter of 1954/55 was below norm al, the estimated
crop in 19 55/56 is considered to be norm al, with a 2 or 3
per cent decline in the output of cereals as com pared with
the previous year.4
T here had been a rem arkable improvem ent in the p ro duction of raw cotton from 26.400 tons in 1953/54 to about
55,000 tons in 1954/55, and to an estimated 60,000 tons in
1955/56, due mainly to new m ethods of farm ing such as
row planting, proper hoeing and the increase in acreage
allotment.
In 1954/55 the production of wool was estimated to be
9,100 tons. In previous years the price paid to producers
was low. In 1954/55, with governm ent’s inducement, a Wool
Company was organized to help the sheep-breeders through
higher prices and advance payments. Since then the company
has improved the grading, washing and m arketing of wool.
Karakul production in 1954/55 was a little over 2 million
skins. D uring 1954/55 the K arakul Co-operative increased
the stock of winter feed and dug wells to supply fresh water
to the flocks. The average price per skin received by
producers was about Afg. 100 in 1954/55, as com pared with
Afg. 70-75 in 1953/54. Owing to better sale of skins ab ro ad
and higher paym ents to producers, output in 1955/56 is
estimated to be 2.2 to 2.5 million skins.
Owing to lack of statistics it is very difficult to estimate
changes in livestock num bers or the output of livestock
products. The increase in dry farm ing is reducing the grazing
land and unless the grazing area is increased a shortage of
anim al feed might develop. Efforts to control diseases will
increase the num ber of livestock and the output of livestock
products. T he M inistry of Agriculture, with aid from FAO,
has opened a research centre in K abul to study common
livestock and plant diseases.
3.
T h e to ta l o f th e se a p p lic a tio n s a m o u n te d to $2 m illion a t th e e n d o f M arch
1955 ( I & T /1 8 ) .
4. I n 1954/55 e s tim a te d o u tp u t o f m a in a g r ic u ltu r a l p ro d u c ts w as as follows
( ’000 to n s ) :
Tobacco
17
W heat
2,090
C otton
55
M aize
664
B eet a n d c ane s u g a r
60
B arle y
279
676
F r u its
R ice
270
9
W ool
P u lse s
5
O th e rs
997
108
K a ra k u l ('000 sk in s) 2,032
P o ta to e s
S o u r c e : M in is try o f F in a n c e , G o v e rn m e n t o f A fg h a n is ta n .
54
ECO NOM IC SU R V E Y O F A S IA A N D T H E F A R EA ST , 1955
K a b u l city a n d vicinity increased slightly, fro m 9.6 million
kW h in 1 9 5 3 /5 4 to 9.9 m illion k W h in 1 9 5 4 /5 5 .
M in in g
Scattered geological surveys were c a rrie d out in th e past
but a complete geological m ap of the country is n o t yet
available. In 1 9 5 4 /5 5 the M inistry of M ines a n d In d u stry
established a Geological Survey D epartm ent to p roduce such
a m ap.
T he first cem ent p lan t a t Jabal-us-S iraj, to be constructed
by a Czechoslovak firm w ithin th e co m in g two years, will
have an a n n u a l capacity of 100,000 tons.
T he cotto n cloth p ro d u ctio n of Jabal-us-S iraj an d Pul-iK h u m ri mills increased fro m 14 m illion m etres in 1953/54
to 17.3 m illion m etres in 1 9 5 4 /5 5 . T he construction of the
textile facto ry a t G u lb u h a r is how ever b eh in d schedule. By
the end of 1 9 5 4 /5 5 the a m o u n t of fo reig n exchange p a id for
the cost of m ach in ery a n d eq u ip m en t of th is p ro je c t am ounted
to ab o u t $3.8 m illion.
Coal deposits at present are estim ated a t 66 m illion tons.
The only deposits exploited at present are the Ish p u sh ta a n d
K a rk a r mines. T he coal from K a rk a r can be used fo r
industrial purposes and the m ines are close to the su g ar an d
textile factories of Baghlan an d Pul-i-K hum ri. In 1 9 5 4 /5 5
coal output declined to 15,400 tons, as com pared with 16,800
tons in 195 3 /5 4 . T he governm ent has plans to step up
p roduction a t the K a rk a r coal m ines from 7,000 to 60,000
tons w ithin th e com ing two years to meet the g row ing dem and
of the industries.
T h e ou tp u t of sugar in 1 9 5 4 /5 5
the previous a n n u a l figure of 5,400
beet su g a r facto ry in the n o rth was
capacity. T he cane su g ar factory of
started production.
S a lt production increased to 26,000 tons in 1 9 5 4 /5 5 as
com pared with 16,300 tons in 1953/54 .
A m ong the cottage industries in 1 9 5 4 /5 5 th e o u tp u t of
carpets increased sharply, m ostly because of h ig h e r prices in
w estern E u ro p e .1 T o prom ote cottage industries a research
centre was established in K ab u l to tra in students in the m odern
techniques of spinning, dyeing, tan ning, c arp en try , ru g w eaving
an d leather work. Sim ilar centres will be established in other
m a jo r towns.
U ntil now, no drilling for oil is u ndertaken but, on the
basis of stron g geological evidence, drilling will sta rt in the
S arip u l region under a contract signed with a Swedish firm
an d ratified by the P arliam e n t in 1955/56.
Ind u stria l production
T R A D E A N D PA Y M E N T S
The first census of m anufactures for registered establishm ents was taken in 1 9 5 4 /5 5 (see table 2 8 ) . T he capital
invested in the 23 establishm ents covered in the census
am ounted to A fg 803 million.
In 1 9 5 4 /5 5 exports increased substantially in
in value owing to h ig h e r prices fo r k a ra k u l in
States a n d w estern E urope a n d to gre ate r dom estic
E xpo rts reached Afg. 1,403 m illion in 1 9 5 4 /5 5 ,
The output of electricity from the Jab al-us-S riraj an d
Chak-i-W ardak hydro-electric plants supplying electricity to
1.
TABLE
A FG H A N IST A N :
28
F IR S T C E N SU S O F M A N U FA C T U R E S, 1 9 5 4 /1 9 5 5
Unit
S u g a r, confectionery
..............................
M a n u fa c tu re d i c e .......................................
W ood b o a r d ................................................
S u g a r, re fin e d
.......................................
P a in ts, v a rn is h e s a n d la c q u e rs
L e a th e r f o o t w e a r .......................................
L e a th e r p r o d u c t s .......................................
H ides a n d sk in s (tanned) .....................
Cotton, g in n e d
.......................................
S o a p ..................................................................
Silk c l o t h .........................................................
M a t c h e s .........................................................
C otton textiles
.......................................
C l o t h .........................................................
T ow els
................................................
W oolen textiles
.......................................
F urniture, sto n e p ro d u c ts, m otor vehicle
r e p a irs a n d black-sm ithy
Printing a n d p u b lis h in g e
.....................
a.
volum e an d
the U nited
p ro d u ctio n .
an increase
V a is a ( Q u a r te r ly B u lle tin o f P a s h t a n i T i j a r a t i B a n k ) , vol. I, n o . 1, p . 52.
P roduction
Flour, w h e a t ................................................
C a n n in g a n d p re se rv in g of fruits
did n o t change from
tons a n d the Baghlan
still o p e ra tin g below
J a la la b a d has n o t yet
Tons
C ans
Bottles
Tons
Tons
1,000 sq. m etre
Tons
Litres of v a rn is h
P a irs
Boxes
P ieces
Tons
Tons
1,000 m etres
1,000 m etres
P ieces
1,000 m etres
A re g is te r e d e s ta b lis h m e n t is de fin e d a s h a v in g a m a c h in e w ith 1 h p o r
m o re a n d a t le a s t 3 e m p lo y ees, o r 10 o r m o re e m p lo y e es w ith o u t th e u se o f
a m a c h in e .
In c lu d e s o p e r a to r s , te c h n ic ia n s , a d m in is tr a to r s a n d c le rk s .
N u m b e r of
re g is te re d
e s ta b lish m e n tsa
Q u a n tity
406
4,857
9,62 2}
10.7
1,368
12
5,487
3,637
4,572
387
13,234
10,255
1,016
9
17,280
26,294
179
c.
d.
e.
1
lc
1
1
N u m b e r of
E m p lo y e e sb
T otal w a g e s a n d
S a la rie s
(1,000 Afg.)
56
257
11
1,120
8
214
3,457
66
}
3
103
}
2
450
2,977
1
27
23
3
3,596
14,555
2
522
2,298
4
1
294
1,726
49
}
11
A lso p r o d u c in g flo u r.
D a ta f o r o n e o f th e e s ta b lis h m e n t n o t a v a ila b le .
G o v e rn m e n t p r i n t i n g p re s s e s a r e n o t in c lu d e d .
411d
C H A PT E R 3.
55
A FG H A N ISTA N
of Afg. 453 million over 1953/54. In 1954/55 the com bined
value of karakul, cotton, wool an d fruits export was about 90
per cent of the total value of exports, as com pared with 80 per
cent in the previous year. E xports of fresh and dried fruits
(including edible nuts) were 71,160 tons, almost twice the
quantity in 1 9 5 3 /5 4 ; th eir share in total exports increased
from 31 per cent in 1 9 5 3 /5 4 to about 39 per cent in 1954/55.
Bank. The exchange earnings of these items surrendered to
the central bank come to about 25 to 30 per cent of the total
foreign-exchange earnings of the country.5 F o r other export
items the exporters are obliged to brin g im ports of equivalent
value into the country or sell their foreign-exchange proceeds
to other im porters who will guarantee to the bank th a t such
proceeds will be used for financing imports.
Exports of karakul and baghana skins rose to 2 million
skins, as com pared with 1.6 million skins in 1953/54, but
were still 40 per cent below the 194 5 /4 6 peak of 3.3 million
skins.1 In the last q u a rter of 1954/55 the average price per
skin in New Y ork rose to $8.40, as com pared with $6.58 for
the same period in 1953/54. Owing to better g radin g the
quality of exported skins has improved. The 1 95 3 /5 4 price
range of $1.40—$14.75 between low— and high-grade skins
was narrow ed to $2.50— $16.25 in 1954/55 and fu rther
narrow ed to $5.20-$15.00 in the first q u a rter of 1955/56.
Since the second quarter of 1954/55 the bank has bought
and sold foreign exchange according to three rates, so
calculated as to encourage im ports of industrial equipm ent
and vital consum er goods and stimulate exports while elim inating excessive profits. The average buying rate per dollar
for karakul earnings is Afg. 21.57 a n d that fo r wool and cotton
Afg. 26.40. The b a n k ’s selling rate per dollar for industrial
equipm ent is 30 per cent lower than the free-market rate of
Afg. 40-42. Sim ilary, for the purchase of petroleum, sugar
and essential textiles carried by government enterprises, the
bank offers foreign exchange at rates which are 25 to 30
per cent lower than the free m arket rate.
Cotton exports increased from 11,400 tons in 1953/54
to 12,500 tons in 19 54/55. The Cotton Association has
im proved standardization, pressing and m arketing of cotton
and exports are expected to rise to 21,000 tons by 1956/57.2
Exports of wool declined from 5,870 tons in 1 9 5 3 /5 4 to
5,260 tons in 1954/55. However, their value increased by
Afg. 2 million.
In 19 5 5 /5 6 a W ool Control B oard was
established in the M inistry of Finance to find new export
channels fo r wool.
W hile exports increased distinctly in 1954/55, im ports
rem ained at the same level as in 1953/54, slightly over Afg.
1,000 million. Owing to increased production a t home,
imports of cotton textiles declined from 6,550 tons in 1953/54
to 5,930 tons in 1954/55, though the im ports of rayon textiles
increased by 548 tons. T here was a drop in im ports of
sugar from 6,963 tons in 1 9 5 3 /5 4 to 5,844 tons in 1954/55.
Stability in im ports, com bined with increase in exports,
resulted in a substantial im provem ent in the balance of trade.
W hile trade in 1 9 5 3 /5 4 h a d left a deficit of Afg. 136 m illion,3
a surplus of a bout Afg. 500 million was reached in 1954/55.
In 1 9 5 3 /5 4 the foreign-exchange receipts of Da A fghanistan Bank am ounted to about $10.7 million while its foreign
exchange expenditures stood at $11.5 million. The deficit
was m et by draw ing from the reserves. In 1954/55 the
receipts of the bank rose to $23.0 million and its expenditures
to $20.2 million. In the first two m onths of 1955/56 the
foreign-exchange earnings of the central bank stood at $6.9
million and its expenditures at $3.5 million, enabling the bank
to add $3.4 million to its reserves.6
PUBLIC FIN A N C E
Estim ated revenue and expenditure in 1955/56 were Afg.
878 million and Afg. 1,301 million respectively, as com pared
w ith Afg. 746 and Afg. 1,141 million in 1954/55.
The
estim ated deficit in 195 5/56 thus increased by Afg. 28 million,
but the ratio of the estimated deficit to total expenditures
declined from 34.6 per cent in 1954/55 to 32.5 per cent in
1955/56.
The estimated deficit did not, in fact, occur in 1954/55.
Afghan trade w ith the U SS R an d the rest of the world
has not followed a uniform pattern in recent years. In In that year estimated tax receipts and estim ated total revenue
respectively represented only 74.1 and 76 per cent of actual
1953/54 the value of exports and im ports to and from the
tax receipts of Afg. 697 million and actaul revenue of Afg. 983
USSR was approxim ately 12 and 25 p er cent respectively of
million. T he am ount actually borrow ed from the central bank
total exports and im ports. In 1954/55 the proportion of
was only 44 per cent of the estim ated domestic borrow ing
exports increased to 19 per cent while that of im ports declined
of Afg. 200 million. Net borrow ing in 1954/55 am ounted to
to 21 per cent. In the same year about half of cotton, threefourths of wool, one-fourth of hides and m ore than nine-tenths
h e 1953/54 tr a d e de fic it o f A fg . 156 m illio n w ith th e U S S R w as c h an g e d
of oil seeds were exported to the USSR, which supplied 4. inT to
a s u rp lu s o f A fg . 57 m illio n in 1954/55.
5.
T
h e a v e r a g e s h a r e o f e x p o r t v a lu e o f k a ra k u l, c o tto n a n d
wool
four-fifths of im ported sugar, two-thirds of im ported iron and
e x p o r t v a lu e is a little o v e r 50 p e r c e n t. T h e d ifferen c e b e tw ee n
th is
steel products, m ore than one-third of im ported cotton piecep r o p o r tio n a n d th e p r o p o r tio n o f fo re ig n -e x c h a n g e e a r n in g s o f D a
A f g h a n is ta n B a n k a ris e s f r o m th e e ffe c t o f th e b a r t e r a g re e m e n t w ith th e
goods, one-fourth of im ported construction m aterials and oneU SSR.
6. F o r e ig n - e x c h a n g e re c e ip ts a n d e x p e n d itu re s o f D a A fg h a n is ta n B an k
tenth of the petroleum requirem ents of the country.4
(m illio n $) :
For several years the country has m aintained a p artial
exchange control. U ntil the second q u arter of 1954/55, 90
per cent of the foreign-exchange earnings of karakul an d 20
per cent of the exchange earnings of wool and cotton had
to be surrendered to Da A fghanistan Bank. In the second
quarter of 195 4 /5 5 it was decided th a t all earnings of the
above three items were to be surrendered to Da Afghanistan
1.
2.
3.
T h e r a tio o f k a r a k u l to to ta l e x p o rts fe ll in v a lu e fr o m 36 p e r c e n t in
1948/49 to 19 p e r c e n t in 1953/54 b u t in c re a s e d to 21 p e r c e n t in 1954/55.
R e p o r t o f th e T ra d e C o m m itte e to th e P l a n n in g C o m m iss io n , G o v e rn m e n t
o f A fg h a n is ta n .
T h e im p o r t fig u re s f o r 1953/54 a r e p ro v is io n a l. A ll tr a d e fig u re s a r e
ta k e n f r o m d a ta s u p p lie d by th e M in is try o f N a tio n a l E c o n o m y , G overnm e n t of A fg h a n is ta n .
R e c e ip ts
K a ra k u l
. .
C o t t o n ..................................
W o o l ..................................
M iscellaneous
T o ta l
.
.
.
E x p e n d itu r e s
G o v e rn m e n t b u d g e t .
G o v e rn m e n t e n te rp ris e s .
E c o n o m ic d e v elo p m en t .
P r iv a t e in d u s trie s
M iscellaneous . . . .
1954/55
8.2
1.1
0.4
12.3
3.8
4.6
1.0
2.2
0.9
10.7
22.9
10.6
5.0
2.1
4.4
3.5
Source:
T o ta l . .
D a A f g h a n is ta n B an k .
3-6
0 .8
10.7
0.8
1.6
0.5
1.4
3.8
0. 5
—
—
.
7.6
1.3
10.8
1.1
—
0.6
6.2
21.2
11.5
C h a n g e in re s e rv e s .
1955/56
( f ir s t s ix m o n th s )
1953/ 5 4
+
1.7
22.9
+
4.4
10.6
to to ta l
E CO N O M IC SU R V EY O F A S IA A N D T H E F A R E A ST , 1955
56
14.1 per cent of total actual revenue as com p ared w ith 34.6
p er cent shown in the estim ated budget. W hile governm ent
b o rrow in g fro m the central b an k am o u n ted to Afg. 89 m illion,
the governm ent at the end of the fiscal y ear h a d a cash surplus
of Afg. 204 million.
E stim ated expenditures in the 1 9 5 5 /5 6 budget increased
for m ost items. T he m ain increase was on n atio n al defence
whose share to total estim ated exp en diture rose fro m 17.7
per cent in 1 9 5 4 /5 5 to 20 p e r cent in 1 95 5 /5 6 . In 1 9 5 4 /5 5
capital expenditures were 50 p e r cent of th e total estim ated
expenditures of Afg. 1,141 m illion, b u t declined to 36 p er cent
of the estim ated expenditures of Afg. 1,301 m illion in 1 95 5 /5 6 .
As fa r as receipts were concerned, the a g ric u ltu ra l sector,
representing m ore th a n two-thirds of the gross n atio n al product,
p aid less th a n one p er cent in taxes in 1 9 5 4 /5 5 . In the same
year the sh are of a g ricu ltu ral taxes am o un ted to a b o u t 7 p er
cent while th a t of incom e tax an d custom duties com bined
am ounted to 51 p er cent of the actual total revenue of Afg. 983
million. In 1 9 5 4 /5 5 custom duties, w ithout an y changes in
rates, rose to Afg. 404 m illion as com pared w ith Afg. 302
million in 19 5 3 /5 4 . In 1 9 5 4 /5 5 indirect taxes, chiefly
custom s duties, am ounted to 51.4 p e r cent of the actual total
revenue and 75.6 p e r cent of the actual tax receipts. The
percentage of direct to indirect taxes h a d declined steadily
from 76.1 p e r cent in 1950/51 to 61.1 p er cent in 1 9 5 3 /5 4
an d took a fu rth e r sharp d ro p to 32.8 p er cent in 1954/55.
D uring the last two years tax m ach in ery h a s been
tightened. Im provem ent in tax a d m in istratio n and a close
check on tax evasion have increased governm ent tax receipts.
Better co-ordination and budgetary control are, however,
necessary and the M inistry of Finance is studying fu rth e r
reform s.1
M ONEY, B A N K IN G A N D P R IC E S
Since 1 9 5 3 /5 4 the n u m b er an d activities of the m on etary
institutions in A fghanistan have increased. In the sum m er
of 195 5 /5 6 A fghanistan becam e a m em ber of the In tern atio n al
Bank for R econstruction an d Developm ent a n d the In te rn a tional M onetary Fund.
A gricultural financing was stepped up by short-term
advances m ade by m a jo r export com panies such as the A fghan
K a ra k u l C orporation, the Cotton A ssociation a n d the W ool
Com pany.
The K arak u l C orporation a n d the recentlyestablished Cotton Association m ake short-term advances to
A F G H A N IS T A N :
S o u rce:
1.
C u rre n cy issu e d
..............................
..............................
..............................
..............................
..............................
..............................
..............................
C o m p ile d f r o m
B an k -i-M illi.
TA BLE 29
CHAN G ES IN M O N E Y S U P P L Y a
CURRENCY
Y ear
e n d e d 21 M arch
1949
1950
1951
1952
1953
1954
1955
k a ra k u l p ro d u c e rs a n d cotton grow ers, estim ated annually at
Afg. 120—150 m illion a n d Afg. 40 m illion respectively. The
A g ricu ltu re a n d Cottage In d u stry Bank, established in 1954/55,
provides c re d it to fa rm e rs a n d co-operatives fo r agricultural
equipm ent, la n d extension a n d seed im provem ent. D uring the
first half of 1 9 5 5 /5 6 the loans advanced by this b a n k am ounted
to Afg. 20.4 m illion. T he policy of the b a n k is to deal with
fa rm e rs th ro u g h c re d it co-operatives, w hich a re b eing prom oted
g rad u ally in v ario u s p a rts of the country.
In 1 9 5 4 /5 5 short-term loans to tra d e increased sharply.
In the first half of 1 9 5 5 /5 6 , D a A fg h a n ista n B ank advanced
Afg. 113 m illion to com m ercial enterprise. T h e outstanding
short-term loans of the P a sh ta n i T ija ra ti B ank a m o u n ted to
Afg. 44 m illion, alm ost eq u al to its p aid-u p capital.2
Long-term loans advanced to in d u stria l co rp o ra tio n s by
the c en tral b an k a n d Bank-i-Milli a m o u n ted to Afg. 95 million
in 1954 /5 5 . D u rin g the first h a lf of 1 9 5 5 /5 6 D a A fgh an istan
B ank advanced Afg. 80 m illion to in d u stria l enterprise. The
B ank fo r C onstruction a n d M ortgage, w hich is engaged in
financing long-term h o u sin g projects fo r civil servants, has
so fa r advanced Afg. 37 m illion to 500 in d iv id u als a t 3 per
cent interest p e r an n u m for 27 y ears.3
In 1 9 5 4 /5 5 the total supply of m oney in c re a se d to
Afg. 1,968 m illion as c om pared w ith Afg. 1,337 m illion at
the end of 1 9 5 3 /5 4 , a rise of 4 5 p e r ce n t; c u rre n c y in
circulation and dem and deposits increased by 47 p e r cent
a n d 52 p e r cent respectively. D u rin g the first h a lf of 1 9 5 5 /5 6
c u rren cy issued increased fu rth e r by Afg. 217 m illion. The
increase in the supply of m oney was due m ainly to risin g
ex p o rt earn in g s and increased econom ic activity on th e p a r t
of enterprises. A ny fu rth e r rise in ex p o rt e a rn in g s will lead
to fu rth e r increase in the supply of m oney unless exchange
controls are loosened.
T h o u g h the supply of m oney increased sharply in 1 9 5 4 /5 5
a n d early 19 5 5 /5 6 , little inflationary pressure w as felt. T he
cost of living in K ab u l rem ained stable d u rin g 1 9 5 4 /5 5 and
in the first half of 1 9 5 5 /5 6 .4 F ro m in fo rm a tio n available
the same situation existed in the o th er towns. T he m ost
im po rta n t factor c o n trib u tin g to p rice stability was the increase
in output, especially in a g ricu ltu re a n d h an d ic ra fts. T here
were, however, other factors th a t d iscouraged inflationary
tendencies, such as the g o vernm ent cash surplus a n d the price
control on some im po rted con su m er goods effective since the
second q u a rte r of 1 9 5 4 /5 5 .
755
845
968
1,098
1,173
1.219
1.668
C a s h in b a n k s
363
200
170
213
250
297
585
d a ta p ro v id e d b y th e M in is t r y o f F in a n c e a n d
I n e a r ly 1 9 55/5 6 a c o m m itte e o f e x p e r ts re c o m m e n d e d to th e M in is try o f
F in a n c e a 3- t o 4 -fo ld in c r e a s e in la n d a n d liv e s to c k ta x e s , g iv in g e x e m p tio n t o p e r s o n s w ith o n e j i r i b ( = 0.1952 h a ) o f la n d a n d tw o h e a d o f
liv e sto c k . T h e c o m m itte e a lso re c o m m e n d e d a ris e in in c o m e -ta x r a t e s on
t h e m id d le -in c o m e g r o u p w h ic h re c e iv e s th e m a j o r s h a r e o f to ta l tr a d e .
S im ila rly a p r o g r e s s iv e c o r p o r a te in c o m e t a x w a s re c o m m e n d e d w ith fu ll
e x e m p tio n f o r c o r p o r a te re s e r v e s u s e d f o r f u r t h e r c a p i t a l e x p a n s io n , a n d
C u rre n cy
circulation
392
645
798
885
923
922
1,083
(m i l l i o n a fg h a n is )
D e m an d d e p o sits
T otal c u rre n c y in
c ircu latio n a n d
d e m a n d d e p o sits
478
311
301
272
310
415
885
870
956
1,099
1,157
1,233
1,337
1,968
C h a n g e s in
m o n e y s u p p ly in
p re v io u s 12
m onths
86
143
58
76
104
631
a.
E x c lu d e s th e o p e r a tio n s o f P a s h t a n i T i j a r a t i B a n k , th e A g r ic u ltu r e a n d
C o tta g e I n d u s tr y B a n k a n d th e B a n k f o r C o n s tr u c tio n a n d M o rtg a g e .
2.
3.
a lib e ra l d e p r e c ia tio n a llo w a n c e . T h e c o m m itte a lso re c o m m e n d e d a sales
t a x o n lu x u r y g o o d s a t th e w h o le sa le level.
V a is a h ( q u a r t e r l y b u lle tin o f P a s h t a i n T i j a r a t i B a n k ) , vol. I , n o . 1, p . 39.
I n 1954 /55 i t b o rr o w e d A f g 24 m illio n f r o m th e g o v e r n m e n t a t 2 1/2 p e r
c e n t in te re s t p e r a n n n u m .
V a is a ( q u a r t e r l y b u lle tin o f P a s h t a n i T i j a r a t i B a n k ) vol. I , N o . 1, J u n e
1955.
4.
Chapter 4.
BURMA
T he emergence of a bu yer’s m arket for rice, B urm a’s
staple export and m ain foreign-exchange earner, coincided
with the beginning of the arduous im plem entation of its 8-year
economic and social development program m e. As the export
price of rice fell on the one hand, development expenditures
with a high im port content gained m om entum on the other.
As a result, the foreign-exchange reserves of the country
registered a steady and continuous decline from a peak level
of K 1,269 million at the end of June 1953 to a level of
K 544 million at the end of June 1955, when the m inim um
international reserves, required of the U nion Bank to hold
against the currency circulation plus deposit liabilities of the
bank stood at K 235 million.
Still another problem is the readjustm ent of the development program m e to the decline in foreign-exchange earnings.
The incorporation of Japanese reparations and b arter credits
into capital goods im ports to meet requirem ents of the p ro gram m e presents certain difficulties. W hile a shift from the
development of basic services to a speedier rehabilitation of
B urm a’s traditional export industries and establishment of new
import-saving industries— the chief means of restoring external
equilibrium — is called for, work in progress and existing
commitments in the form er field make such a shift difficult.
In M arch 1955 the governm ent took drastic steps to arrest
the continued d ra in on foreign-exchange balances. The value
of all existing im port licences was reduced by half and the
Open General Licences were tem porarily suspended. Exchange
control was tightened to effect economies in non-trade
payments, both private and public. Budget allotments for
current and capital expenditures for the rem aining half of
the fiscal year 1 9 5 4 /5 5 1 were revised downwards. In general,
only those development projects on which work had already
started or pre-paym ents for, or com mitm ents to, purchase
equipm ent had been m ade were allowed to be continued; the
rem aining projects were suspended until fu rth er notice. Some
of the orders for equipm ent were cancelled, while some others
were deferred an d re-phased over longer intervals.
Gross domestic product
At the same time the governm ent intensified its production
a n d /o r export drive for certain comm odities with a ready
foreign m arket or a ready domestic dem and so fa r met by
imports. Increased security m easures were accorded to the
tim ber and m inerals industries, whose production is still far
below pre-war levels. A gricultural and industrial production
of im port substitutes were stepped up. Efforts to push sales
of rice led to a num b er of b a rte r deals, mostly with m ainland
China, the USSR and eastern E uropean countries.
One of the m a jo r problem s in the process of readjusting
the economy to the w orsening term s of trade is the maintenance
of the stability of the kyat in the light of the dwindling
international reserves.
The governm ent has ruled out
devaluation as a means to halt the fall an d aims to increase
if possible its holdings of international reserves through prom otion of exports. In the m eantim e, the tightening of im port
restrictions has given rise to a speculative rise in prices.
Barring a liberalization of imports, the only alternative to
rising prices is the im port and ration ing of essential consum er
goods by the governm ent’s civil supplies agency, which
however create adm inistrative burdens. These problems will
now be alleviated to some extent by the receipt of a pound
sterling loan equal to K 200 million from India and an
extension of credits to purchase Ind ian consumer goods t o
the value of K 100 million.
1:
T h e fiscal y e a r in B u rm a is fr o m 1 O c to b er to 30 S e p te m b e r.
PRO D U C TIO N AND DEVELOPM ENT
Gross domestic product in 1954/55 is estimated at
K 4,836 at cu rrent prices, 6 per cent higher than in 195 3 /5 4
and 5 per cent higher than in 1952/53. Excluding the gross
output from the state m arketing of rice, which declined from
a peak level in 1952/53 of K 610 million to K 400 million
in 1953/54 and K 375 million in 1954/55, the total would
be about 7 per cent higher than in 1953/54 and 11 p er cent
higher than in 1952/53, indicating a steady progress in most
other sectors of the economy. A m ong these sectors, the
highest gain absolutely was registered in “ other industries and
services” , particularly construction. However, com pared to a
projected increase over 1953/54 of 13 per cent, output fell
short of expectations, particularly in rice m arketing, agriculture
and forestry. In real terms, the gross domestic product in
1 954/55 was 5 per cent higher than in 1953/54 and 8 per cent
higher than in 1952/53 but was still only 88 per cent of the
pre-war (1 9 3 8 /3 9 ) level.
Gross capital form ation in 1954/55 reached its target of
K 1,300 million,2 or 27 per cent of the gross domestic product,
while consumer and current expenditures also rem ained at
a high level, m ainly by draw ing on the accumulated foreignexchange resources of the country— a process which, in the
prevailing economic circumstances, does not adm it of repetition.
Agriculture and forestry
A gricultural production in 1954/55 registered a small
increase over 195 3 /5 4 on account of favourable weather conditions in Lower B urm a and in spite of a slight decline in the
total acreage sown in U pper Burm a. T he index of agricultural
production rose by 1 per cent to 85 per cent of the average
pre-war level.3
2.
P u b lic c a p ita l fo r m a tio n a c c o u n te d f o r 62 p e r c e n t of th e to ta l o r K 800
m illion, o f w h ic h K 675 m illion c o n siste d o f fixed c a p ita l. A d d itio n to
g o v e rn m e n t ric e sto ck a c c o u n te d f o r m o s t o f th e in c re a se in sto ck s. T h e
re m a in in g K 500 m illion w as a c c o u n te d f o r by p r iv a te c a p ita l fo r m a tio n —
a ll o f i t in fixed c a p ita l. T o ta l s a v in g s w e re on ly K970 m illio n , th e
d e fic it b e in g fin a n c e d b y u tiliz in g th e a cc u m u la te d fo re ig n -e x c h a n g e
re so u rc es.
3.
U n le ss o th e rw is e specified, th e p re -w a r a v e ra g e in th is c h a p te r re fe rs to
th e p e rio d 1936/37-1940/41.
58
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
P a d d y p rodu ction increased in 1 9 5 4 /5 5 by 3 p e r cent
to 5,804,000 tons, in spite of a 2 p er cent decline in sown
area to 4,112,000 hectares. Increased acreage an d out-turn
in Lower B urm a on account of favourable w eather conditions
m ore than offset a decline in acreage an d out-turn in U pper
B urm a caused by insufficient rain s. T he A g ric u ltu ra l a n d
R u ra l D evelopm ent C orpo ration (AR D C ) rep o rted con tinued
progress in the distrib u tio n of fertilizers an d im proved p ad d y
seed.
T h e area under g ro u n d n u t in U pper B urm a fell fro m
321,000 hectares in 1 9 5 3 /5 4 to 301,000 hectares in 195 4 /5 5 ,
owing m ainly to u n favourable rains. As a result, the out-turn
of g ro u n d n u t in 1 9 5 4 /5 5 is estim ated to be 154,000 tons
against 194,000 tons in 19 53 /5 4 . In ord er to achieve selfsufficiency in g ro u n d n u t oil, the A RDC plans to expand the
sown a re a in th e Shan States by at least 20,000 hectares in
1 9 5 5 /5 6 . I t will also encourage p la n tin g of g ro u n d n u ts after
p ad d y harvests by tim ely distrib u tio n of seeds an d by p roviding
m echanical ploughing.
O ther crops such as cotton, pulses, onion, sugar-cane and
m illet— but n o t sesame— showed a small increase both in
acreage sown and in out-turn. In the case of sesame, in
spite of a nearly 4 per cent increase in acreage, d ro u g h t an d
uneven rainfalls, especially in U pper B urm a, reduced the
com bined p rodu ction of early and late sesame to 36,882 tons,
a decline of 17 per cent from 195 3/54 . A lthough the increase
in cotton production was slight, the rise in the outp ut of
medium-staple cotton which will replace im ports for the
G overnm ent Spinning and W eaving Mill was proportionally
greater.
The area under ju te increased by n early 2 1/2 tim es in
195 4 /5 5 to 8,800 hectares. P ro d u ctio n is estim ated a t 6,096
tons of fibre and 5,000 baskets of seed as against 542 tons
of fibre and 3,660 baskets of seed in the precedin g year.
This rem arkable increase is due to the use of tra c to rs and
fertilizers and to co-operative farm ing. T he a rea u n d er jute
is expected to increase to 17,000 hectares in 1 95 5 /5 6 . A fter
the completion of the ju te m ill a t th e end of 1956, an an n u al
production of 24 million gunny bags should enable the country
to save about K 30 m illion per annum on th e im p o rt of bags.
Sown acreage of sugar-cane in 1 9 5 4 /5 5 was well in excess
of the pre-w ar average b u t the pro d u ctio n of w hite sugar
reached only half the pre-w ar figure, owing to w ar-tim e
destruction of capacity.1
The five-year V irg in ia tobacco plantation scheme, now in
its second y ea r of im plem entation, has been able to supply
10 p e r cent of cigarette tobacco requirem ents and will be
able to meet full requirem ents by 1958.
T he n u m b e r of plough cattle has continued to increase
to about 94 p e r cent of the pre-w ar average. Since the sown
acreage is only 86 p e r cent of w hat it was before the w ar,
plou gh cattle m ay be assum ed to be approxim ately adequate.
T he A RD C accelerated its activities in 1 9 5 4 /5 5 , spending
some K 25 m illion as against K 15 m illion in the preceding
year. It started the fisheries a n d the m echanized farm in g
p rojects and undertook other m easures such as distrib u tio n
of im proved seed an d fertilizer, supply of equipm ent, tr a in ing an d extension work, etc.
A L an d an d A g ricu ltu ral
1.
P a r t o f th e s u g a r c a n e p ro d u c e d is lo c a lly p ro c e ss e d in to b ro w n s u g a r .
P la n n in g C om m ission, established d u rin g th e year, is m aking
good p ro g re ss in the p re p a ra tio n of an in te g ra te d plan for
efficient use of all lan d resources, to b e com pleted by M arch
1956.
In the m eantim e la n d d istrib u tio n continued, and by
the end of M ay 1955, a to tal of 245,012 h ectares had been
n ationalized a n d d istrib u ted to 59,627 cultivators.
P a rtly as a result of these efforts a n d p a rtly on account
of fa vourable rains, ag ric u ltu ra l p ro d u c tio n is expected to
show an over-all increase in 1 9 5 5 /5 6 .
T he pro d u ctio n of m a jo r tim b ers was estim ated to register
a rise of 5 p e r cent in 1 9 5 4 /5 5 . P ro d u c tio n of teak, though
still only about one-third of the p re-w ar figure, has recovered
to the 1 9 5 2 /5 3 level afte r suffering a sizeable d ro p in 1953/54
on account of reduced backlog of g ird led trees in accessible
areas, while e xtraction of o ther tim b ers h a s exceeded the
p re-w ar figure.
D espite m easures fo r grea te r security an d stepping-up of
g ird lin g operations, the expansion of tim b e r p ro d u ctio n is
lim ited by th e excess of the n u m b e r of trees felled over the
n u m b e r of trees girdled so fa r, leading to a red u ctio n in the
n u m b e r of stan d in g girdled trees, and also b y the n u m b er
of years req u ired fo r logs to reach the m ill sites. T h e opening
in Ju n e 1955 of No. 3 State Sawmill, form erly the BBTCL
mill, has increased total m illing capacity to 97,000 tons a n d
the com pletion of No. 4 State Saw m ill in Septem ber will
b rin g the total m illing capacity to 132,000 tons. A fte r the
large log stocks already accum ulated a t the m ill sites have
been used up, this large m illing capacity is n o t likely to be
fully utilized in the absence of an e x p a n d e d p ro g ra m m e of
teak extraction.
M in in g a n d ind u stry
T he total p ro d u ctio n of crude oil in 1 9 5 4 /5 5 was expected
to exceed 191,000 tons, well above the ra te d capacity, as against
168,000 tons in 19 5 3 /5 4 . T he expected com pletion by July
1956 of an a d ditio n a l refinery at S yriam , with an initial daily
capacity of 573 tons risin g to about 955 tons at the full
operatin g level, will m ake B u rm a practically self-sufficient in
m o tor petro l (tw o-thirds of w hich was im p o rte d in 1954)
and also in kerosene (a th ird of w hich was im ported in the
sam e y e a r ) . O ther fuel oils, such as aviation sp irit and
lu b ric atin g oil w hich will continue to be im ported, will require
relatively little foreign exchange.
Paraffin w ax p roduction
was resum ed in 1954; half of it is exported.
O utput of o ther m inerals, a fractio n of pre-w ar production,
was expected to slum p fu rth e r in 1 9 5 4 /5 5 owing to declining
prices in the first half of the fiscal ye ar of tin an d tungsten,
contin ued insecurity, tra n sp o rta tio n difficulties a n d shortages
of equipm ent an d personnel. T he extraction of tin an d
tungsten declined in the first half of 1 9 5 4 /5 5 . E xpansion of
capacity of the B aw dw in m ine from 8,600 tons to 9,100 tons
of ore a m onth an d im proved m a rk e t prices c o n trib u ted to
the increased p ro d u c tio n of lead an d zin c in the sam e period.
T he p ro d u ctio n of b u ild in g an d ro a d m aterials rose slightly.
T he governm ent is now n e g o tiatin g jo in t p a rtic ip a tio n in the
M awchi M ines (tin and tu n g ste n ) a n d th e A nglo-B urm a Tin
M ines.
C onstruction of haulage w ays an d shafts to develop two
collieries w ith a com bined a n n u a l capacity of 300,000 tons
starte d at th e K alew a coaZ-fields. T he g o v ern m en t is also
tak in g o th er steps to im pro ve p ro d u c tio n of m in erals, which
C H A PTER 4.
were an im portant foreign-exchange earner before the war.
Such m easures include, am ongst others, the survey of iron
ore, copper ore and zinc deposits, the building of access roads
to wolfram and zinc mines, and the establishment of regional
chemical laboratories.
Cement production from the Thayetm yo plant in 1954/55
was expected to reach 61,000 tons as against 55,000 tons in
1953/54. On account of the construction boom, im ports of
cement in 1954/55 are estimated at 71,000 tons. Even when
the capacity of the Thayetm yo plant is doubled by the addition
scheduled for completion in 1956, im ports will still be
necessary.
The completion by end-1956 of two new sugar mills, one
at N am ti with a capacity of 15,266 tons and the other at
Pyinm ana with a capacity of 23,000 tons, will m ore than
meet B urm a’s domestic requirem ents of sugar, the annual
imports of which in recent years have been around 20,000
tons.
Output of cotton yarn at the Governm ent Spinning and
Weaving Mill fell slightly in 1954/55, prim arily because of
a diversion to the higher-quality y arn of 20-count type, whilst
imports rose to meet rising dem and from weaving and knitting
establishments.
M anufacture of cigarettes in 1954/55 was expected to rise
but much capacity in the four factories rem ains idle on account
of the shortage of suitable raw tobacco. Production of brinesalt, 81,000 tons in 1953/54, was expected to reach 90,000
tons in 1954/55, approaching self-sufficiency.
W ork is proceeding on a steel rolling mill, a jute mill,
a tea factory, a tile and brick factory, a pharmaceutical plant
and a silk-reeling factory; operations in most of these are
expected to start in 1956. P roduction from these plants is
expected to replace im ports and thus save a substantial am ount
of foreign exchange.
In order to encourage
the governm ent has set up a
training centre and a hand
pilot plants for condensed
completed soon.
cottage and small-scale industries
pilot sugar plant, a textile weaving
paper m aking plant. T hree more
milk, pottery and tiles will be
Governmental efforts at increasing the industrial capacity
of the country include the form ation of a construction equipment pool, the reclam ation of land on the east bank of the
Hlaing River on the outskirts of R angoon for an industrial
site, a grant of K 29.3 million in loans for tiles and brick
manufacture, power weaving, sugar m aking and soap m a n u facture, etc., and the exam ination of jo in t ventures for a paper
and chemical factory, a can-m aking factory and a tyre plant.
Government construction reached a very high level in 1954/55,
more than 400 buildings being completed during the year with
1,051 buildings under construction as of A pril 1955. The
heavy construction program m e includes housing, schools,
hospitals, office buildings, etc.
Transport and power
The governm ent’s capital outlay in recent years, which
has been heaviest on transportation, has resulted in the
expansion of rail and water traffic. The increases from the
previous year have been sharpest in the freight loadings of
59
BURMA
the Inland W ater T ransport Board (IW T B )— as m uch as 50
per cent— and in passenger traffic on the Burm a Railways—
as m uch as 25 per cent. Continued increases are expected
from 1955/56 onwards as a result of expected deliveries of
substantial amounts of new equipm ent for which orders have
been placed.
The rehabilitation of the railways, which had absorbed
approxim ately K 375 million of investment, took another K 60
million in 1954/55. The IW TB and the Union Shipping
Board, which are currently expanding their operating fleets,
spent between them a sum of K32 million in 1954/55. Civil
aviation expenditures on the construction of airfields and the
installation of air station equipm ent also increased in 1954/55.
W ork is proceeding on the electric power program m e
which aims at the development of a large 84,000 kW hyd ro electric plant at Balu Chaung, construction of num erous diesel
generating stations in towns, and large expansion in power
distribution lines. The Balu Chaung project is expected to
be completed in 1958. Town and ru ra l electrification has
been started in some localities. A power station is being
built to feed the new steel and jute mills near Rangoon.
Capital expenditures in 1954/55 on power, even after reduction
from original budget estimates, stand at K 168 million as
against K 36 million in 1953/54.
TRADE AND PAYMENTS
Continued fall in reserves
Foreign-exchange reserves had fallen from a peak level
of K 1,269 million at the end of June 1953 to K 760 million
at the end of September 1954 (as against an anticipated figure
of K 1,050 m illion). In the first three quarters of 1954/55
(October 1954 to June 1955) there was a further decline of
K 216 million, bringing the level of foreign-exchange reserves
down to K 544 million.
By com parison with the corresponding period of the
preceding year, both receipts and payments in the first half
of 1954/55 were lower. The low level of receipts is partly
accounted for by an unusual lag in collections by the State
A gricultural M arketing Board (SAMB) rather than by a fall
in export shipments.1
The implementation of the Japanese R eparations Agreements scheduled for A pril 1955, the beginning of the Japanese
fiscal year, was awaiting the finalization of procedural matters.
Consequently receipts under reparations, estimated at K 20
million for 1954/55, were not realized. The estimated am ount
for 1955/56 is K 130 million.
In the first half of 19 54/55 paym ents for im ports fell
from those a year earlier, particularly in expenditures for
m ilitary goods which were lagging behind orders placed.
Non-trade paym ents which rem ained at a high level in the first
half of 1954/55 were expected to rise further in the second
half, on account of governm ent’s obligations for contracts for
construction activities, factory operation, engineering and
design services, and consulting services.
1.
I n f a c t th e volum e of to n n a g e s h ip p e d o f e v ery im p o r ta n t e x p o rt com m o d ity w a s h ig h e r, a n d e v en a t lo w e r a v e r a g e p ric e s th e to ta l v alue of
e x p o r t s h ip m e n ts w a s K 112 m illion g r e a te r t h a n in th e c o rre s p o n d in g
h a lf o f 1953/54.
60
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
A loan from In d ia of K 200 million in p ou n d s sterling
bearing interest at 4 per cent and an extension of credits to
purchase In d ian consum er goods to the value of K 100 m illion
have now been approved. T he loan will be p a rtly used to
finance the im port of consum er goods from sources including
India. A bout 80 per cent of the consum er goods im ported
from India under the extended credits will be on governm ent’s
account. T he total am o u n t of In d ia ’s advances will be re pa id
in half yearly instalm ents over 4 years beginning 1 M arch
1959. F u rth e r, the balance of loan owed by B urm a to In d ia
(after the adjustm ent last year of £13 p e r long ton of rice)
has been treated as financial aid un d e r the Colombo Plan
a n d thus liquidated.
Im p o rts
P aym ents fo r p rivate im ports in the first half of 1954/55
were slightly h ig h e r th a n a ye a r previously. The stricter
im p o rt controls im posed since M a rc h 1955 should prevent
them from rising in the second half-year b u t the total for the
ye a r m ay be only slightly less th a n in 1 9 5 3 /5 4 .
On the other h a nd , governm ent im ports, paym ents for
w hich declined by K 40 m illion in the first half of 1954/55,
should show a large increase in the second half-year period,
as suggested by the com m itm ents re m a in in g after the budget
cuts on b oth c u rre n t a n d capital accounts, in alm ost all the
g overnm ent departm ents, b o a rd s a n d c o rp o ra tio n s at the
beginning of the second half-year.
By com parison with the first h a lf of 1 9 5 3 /5 4 , consum er
goods im ports in the first half of 1 9 5 4 /5 5 show ed a relatively
g reater increase th a n capital im ports. T he opposite tre n d was
expected for the second half of 1954 /5 5 .
On 7 M a rc h 1955, the governm ent reduced by 50 per
cent the value of all im p o rt licences fo r the p e rio d ending
S eptem ber 1955, except those covering goods for p ersonal use
or issued for indu strial raw m aterials. Only goods for which
irrevocable letters of credit were opened on or before 7 M arch
were re g a rd e d by the governm ent as a com m itm ent. This
was followd by an im m ediate suspension of all open general
licences until fu rth e r notice. All goods form erly covered by
an OGL would therefore require an individual licence unless
they were shipped before 11 M arch.
Exports
M erchandise exports in the first half of 1 9 5 4 /5 5 reached
K 600 million as against K 485 m illion in the corresponding
period of the preceding y e a r; of this total, rice exports
accounted for three-fourths and other a gricultural produce
c ontributed another one-sixth. T im ber a n d m inerals between
them accounted for K 30 m illion out of the rem aining K 50
million. At the end of June 1955 the loadings for shipm ent
by SAMB of rice and rice p roducts reached 1.38 million tons.
A ssum ing a m onthly shipping rate of over 100,000 tons d u rin g
the July-Septem ber period, the volume of shipm ents for the
year 1 9 5 4 /5 5 should reach 1.68 million tons. However, the
total value of rice exports m ay be slightly less than in 1 9 5 3 /5 4
when rice export volume was at a m uch lower level of 1.29
million tons. The reduced level of receipts1 is due to lower
average prices for stand a rd quality rice and a larger p roportion
of b ra n sold in 1 9 54/55. T he shipm ents fo r 1 9 5 4 /5 5 include
ab out 580,000 tons to In d ia which represent the balance of
the rice contract for 900,000 tons, a n d 173,000 tons to
m a in la n d China and eastern E uropean countries ( i.e. Czechoslovakia, E ast G erm any, H u n g a ry, and P o la n d ) u n d e r b a rte r
arrangem ents.
In the first half of 1 9 5 4 /5 5 there was an increased volum e
of shipm ents at h ig h e r prices of other a gricultural produce
such as cotton, pulses, oil-cakes and ru b b e r, with a sharp rise
in the value of their exports. T he shipm ent of m etal ores
re m ained at the sam e low level as in the previous year.
A lthough the average ex p o rt prices rem ained high, the volume
of tim b e r exported declined slightly.
1.
In c lu d in g e x p o r t r e c e ip ts f r o m b a r t e r t r a n s a c tio n s .
In spite of the governm ent’s assurances th a t such drastic
steps were taken to prevent w astage of foreign exchange by
speculators who were pilin g up stocks fa r in excess of the
dem and a n d th a t a re g u la r supply of essential com m odities
would be ensured, there was a sharp speculative rise in prices
of im ported goods. Follow ing the governm ent’s introduction
of Open G eneral Licences Nos. 1 a n d 3 on 21 M a rc h covering
35 essential non-dollar items and its announcem ent of the plan
to utilize the In d ia n loans to finance consum er im ports, how ever, som e of the prices drifted back to lower levels.
In o rd e r to scrutinize all foreign-exchange expenditures
by governm ent agencies, a F oreign-E xchange C ontrol A uth ority
has been set up u n d e r the E conom ic a n d Social B o a rd to give
p rio r approval to all foreign-exchange com m itm ents or
paym ents. T he a u th o rity will also review the im port-licensing
plans of the M inistry of T ra d e D evelopm ent (re-organized out
of the M inistry of Com m erce to extend its control over the
State A gricultural M arketing B oard (SA M B) and the M arketing D epartm en t of the M ineral Resources Development
C o r p o ra tio n ) .
Bilateral trade agreem ents
The em ergence of a b u y e r’s m a rk e t fo r rice, b ro u g h t about
by increased p ro d u c tio n in the im p o rtin g countries as well as
the exporting countries, has led to a decline in the im port
of B urm a rice by the tra d itio n a l b u y e r countries. In order
to stabilize its export earnings, the G overnm ent of B urm a has
entered into a n u m b e r of tra d e agreem ents, some of them on
a b a rte r basis, with both the tra d itio n a l buyers a n d the new
buyers in eastern E u ro p e a n d elsewhere.
N on-barter agreem ents are concluded with Ja p a n , Ceylon,
the R yukyus a n d M au ritiu s, a n d b a rte r agreem ents with
Indonesia (rice against sugar, coffee, pepper a n d ru b b e r, the
C H A PT E R 4.
last-mentioned item for re-export to m ainland C h in a ), m ainland China (rice against metals and steels, construction
materials, sanitary equipment, paper, cotton yarn, silk, etc.),
the USSR (rice and other agricultural produce, tim ber and
rubber against capital equipment, chemical goods, vehicles,
medicines, e tc .), the eastern E uropean countries (rice and
timber against engineering products and some varieties of
consum er goods) an d Israel. Accounts are to be kept in
sterling and the balances are to be settled in that currency.
It is estim ated that for the year 1955/56, almost half of
B urm a’s exports of rice will be on a b a rte r basis.
Some problem s arising out of these ba rte r arrangem ents
relate to the choice of goods, price adjustm ent and shipping.
The problem of selecting suitable consum er goods as well as
capital equipm ent from the new sources of supply is com plicated by the lack of acquaintance with such goods in the
case of the form er and by the uncertainty of continued
availability of spare parts, m aintenance facilities, etc., in the
case of the latter. H igher prices due to artificially-maintained
exchange rates in some of these source-countries present
another difficulty. Lack of regular sea com m unications with
m any of these countries and the high costs of chartering
foreign ships constitute another problem arising from the
barter agreements.
As a result of the export-prom otion and im port-control
measures taken to counteract the decline in the off-take of
rice by the traditional buyers and the consequent reduction
in foreign-exchange earnings of the country, and of the receipt
of reparations from ja p a n , the direction of B urm a’s trade is
expected to undergo a significant change in the immediate
future.
PU B L IC FINANCE
Following a small budget deficit (current and capital
accounts c o m b in e d )1 of K 51 million in 1952/53, the government incurred a sizeable deficit of K 155 million in 1953/54
on account of heavy defence and investment expenditures.
For similar reasons, the revised estimates for 1954/55 disclose
a deficit of K 175 million. A larger deficit of K 313 m illion2
is budgeted for 195 5 /5 6 in view of the sharply reduced income
from the State-m anaged boards and the cost of m aintaining
defence and social service expenditures.
61
BURMA
Revenue estimates for 1955/56 anticipate a decline by
28 per cent or K 286 million below 1954/55, m ainly on
account of reduced income from the State-managed boards.
The SAMB proposes to invest its profits after taxation in
capital facilities and other measures to improve the quality
of rice instead of m aking a rehabilitation contribution to the
governm ent as hitherto. Im port restrictions are also expected
to lead to a further reduction of customs duties by about
K 10 million.3 Increased rates of duty on cigarettes, sugar
and petrol, and a new excise duty on carbonated drinks and
syrups, which are the only changes in taxation this year, are
expected to realize an additional revenue of about K 10 million.
Expenditure
According to revised estimates for 1954/55, expenditures
for the year are m ore or less comparable to those of the
previous year, with the exception of a small rise in investment
and loans and advances, which contribute to capital formation.
However, when the capital expenditures of the State enterprises
are added, total public capital outlay is seen to have almost
doubled over the preceding year.
Compared to budget estimates a year before, however,
expenditures for 1954/55 according to revised estimates fell
short of expectations. In order to improve its paym ents and
financial position, the government took steps in the middle
of 1954/55 to reduce both current and capital expenditures.
As a result there was a downward revision of K 127 million
or one-third in the investment, and loans and advances items
of its budget. W hereas the budget deficit in 1953/54 was
largely financed by running down the government’s cash
balances, the deficit in 1954/55 was financed mainly by the
sale of securities, largely to the banking system.
M any projects in the development program m e have now
reached the construction stage and will soon begin to operate.
Development progress can be gauged from the government
capital outlay given in table 30.
BURMA:
TABLE 30
GOVERNMENT CAPITAL OUTLAY,a
1952/53 TO 1955/56
(M illion ky a t)
1952/53
Revenue
A ccording to revised estimates, revenues for 1954/55 will
fall short of expectations by K 73 million mainly on account
of reduced income from the State-managed boards, particularly
the SAMB. Beginning 195 3 /5 4 the profits of the Statem anaged boards were assessed to income tax, over and above
which rehabilitation contributions were to be m ade by some
boards according to their financial position. There was also
a decline in trade receipts such as customs duties, im port
licence fees and sales tax, as a result of the shortfall in both
exports and imports. Interest receipts am ounting to nearly
K 10 million due from the Burm a Railways have been
suspended in order to relieve its heavy financial burden.
1.
2.
T h e p u b lish e d b u d g e t sh o w s a sm a ll s u rp lu s o f K 23 m illion, b e cause of
th e d ifferen ces in c la ssific a tio n . I n th e c la ssific a tio n used in th e S u r v e y ,
r ev e n u e ex clu d es p ro c e ed s fr o m lo a n s a n d o th e r fo rm s o f b o rro w in g a n d
tr a n s f e r s fr o m re s e rv e fu n d s w h ile e x p e n d itu r e in clu d es c u r r e n t a s w ell
a s c a p ita l o u tla y s a n d lo a n s a n d a d v a n c e s g r a n te d b y th e g o v e rn m e n t, b u t
excludes d e b t re d e m p tio n , c o n trib u tio n to s in k in g fu n d s a n d t r a n s f e r s to
re s e rv e fu n d s . C o n se q u e n tly , th e re s u ltin g b u d g e t d e fic it is a lso d ifferen t.
T h e b u d g e t deficit is h e re defined a s th e differen c e b e tw ee n g o v e rn m e n t
p a y m e n ts a n d re c e ip ts e x clu d in g d e b t re d e m p tio n , b o rro w in g a n d c e r ta in
m o n e ta ry o p e ra tio n s ( “ e x tr a b u d g e t r e c e ip ts ” ) , a n d is e q u al to th e s u m
of n e t b o rro w in g by th e g o v e rn m e n t a n d th e d e crea se in g o v e rn m e n t c ash
h oldings.
T h e d e fic it w ill b e re d u c ed to th e e x te n t J a p a n e s e r e p a r a t i o n re c e ip ts
m a te ria liz e .
.............................
A gricultured
I r r i g a t i o n ......................................
Forests
......................................
Mining
......................................
T r a n s p o r t a t i o n .............................
C om m unications
....................
P o w e r ...............................................
Industry
......................................
.............................
Constructione
P y id a w th a D iscretionary G rants
M i s c e l l a n e o u s .............................
Total
.............................
13.9
3.3
9.7
78.1
4.8
1953/54 1954/55b 1955/56c
62.5
12.4
8.6
3.3
131.2
8.1
1.7
39.4
9.2
13.2
36.3
38.2
70.0
9.8
15.2
181.3
395.6
8.0
44.0
5.2
11.2
39.7
2.6
32.4
3.4
16.1
139.9
38.0
61.7
64.6
49.7
5.0
44.7
770.8
465.4
12.0
190.5
32.7
168.1
133.1
130.6
11.0
S o u r c e : E c o n o m ic S u r v e y o f B u r m a , 1955.
a . A c c o u n ts f o r 1952/53 a n d 1953/54; b u d g e t e s tim a te s f o r 1954/55 a n d
1955/56. E x c lu d e s th e fo llo w in g ite m s o f g o v e rn m e n ta l c a p ita l o u tla y :
de fe n ce , j o in t v e n tu re s , lo a n s to a g r ic u ltu r i s ts a n d w o rk in g c a p ita l f o r
th e S ta te A g ric u ltu r a l a n d S ta te C o m m ercial B an k s, e tc . T h e re fo re , th e se
fig u res a r e n o t d ire c tly c o m p a ra b le to th e p u b lish e d d a ta on c a p ita l
b u d g e ts.
b. A d ju s te d f o r c u ts a n d re v isio n s m a d e b y th e g o v e rn m e n t sin ce th e s t a r t
o f th e fiscal y e ar.
c. E s tim a te s by th e C e n tra l S ta tis tic a l a n d E conom ics D e p a rtm e n t.
d. In c lu d e s c a p ita l e x p e n d itu re s o f th e S ta te A g ric u ltu r a l M a r k e tin g B oard.
e. C o n sists p r im a r ily o f b u ild in g c o n stru c tio n .
3.
T h is declin e in c u sto m s re v e n u e m a y n o t, h o w ever, com e a b o u t, i f w ith
th e im p r o v e m e n t o f th e c o u n try ’s e x te r n a l p a y m e n ts p o sitio n th e im p o r t
co n tro ls a r e lib e ra liz e d d u r in g th e c o u rs e o f th e y e a r.
62
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
G overnm ent capital outlay has increased fourfold in the
past three years. T he fields in which investm ent has been
heaviest are transportation, power, industry and construction;
they accounted fo r three-fourths of the investm ent in the p a st
three years. T he investm ent figure fo r agricu lture would,
however, go up substantially if loans to agriculturists through
the State A gricultural Bank or otherwise were added.
Sim ilarly, investm ent by jo in t ventures would raise the capital
form ation figure in the field of m ining.
T he governm ent capital outlay in 1 9 5 5 /5 6 is expected to
be 40 p e r cent less than in 1 9 54/5 5. E xpenditures on m ining
will, however, be increased whilst those on agriculture will
be only slightly reduced. H eavy expenditures on tra n sp o rta tion and com m unications will continue as a follow-up of the
work in progress.
T he governm ent is now fra m in g a Three-Y ear Plan aim ing
at a m o re m odest level of investment consistent with the
available financial resources. A nnual investment targets will
be revised at the end of each year, p a rtic u la r attention being
paid to the foreign-exchange situation of the country. The
P lan will give prio rity to p rojects which will earn or save
foreign exchange; they will be mostly executed by the
governm ent’s industrial, m ineral an d agricultural developm ent
corporations.
In o rd e r to encourage private investment, the governm ent
issued in June 1955 a statem ent defining its policy tow ards
private capital, both domestic and foreign. It guaranteed new
enterprises against nationalization for an agreed period of
not less than ten years, a p a rt from offering incentives relating
to foreign-exchange allocation, tariff protection, credit and
rem ittance facilities.
MONEY S U P P L Y AND P R IC E S
The cash-consolidated budget of the governm ent contained
in the E conom ic S u rv e y o f Burm a, 1954 anticipated fo r the
fiscal year 1 9 5 4 /5 5 an increase of K 250 million in the private
m oney supply as a result of the governm ent’s cash deficit
with the private sector. T he actual increase tu rn ed out to be
only K 204 million, because of heavy draw in g on the
accum ulated foreign-exchange balances of the country. The
actual foreign receipts having fallen well below the estim ate
b y 30 p e r cent; a large p a rt of the excess of private foreign
paym ents over private foreign receipts was financed by ru n n in g
down the foreign-exchange reserves.
T otal m oney supply of K 1,272 m illion at the end of
June 1955 was about the same as that a year before. H ow ever, there was a shift in the com position, governm ent deposits
having fallen by K 97 m illion and private money supply
having risen by K 95 million.
D u rin g the perio d O ctober 1954 to Ju n e 1955 the total
m oney supply increased by K 168 m illion in contrast with a
decline of K 67 million in the corresponding perio d of the
preceding year. T his is due to the fact th at the decline in
foreign-exchange reserves— until recently the only cause of
fluctuations in the m oney supply— by K 225 million was m ore
th a n offset by the purchase of governm ent securities by the
ba n k in g system to the am o u n t of K 387 million. Increase in
advances by com m ercial banks of a b o u t K 34 million also
con trib u ted in a sm all m easure to the expansion in m oney
supply. T he fall in the governm ent’s cash balances continued
in this p e rio d in spite of the heavy sale of securities. Notes
a n d coins in circulation increased consistently w ith the increase
in dom estic econom ic activity. T otal direct governm ent loans,
both gross a n d net, d u rin g the first h a lf of 1 9 5 4 /5 5 were
hig h er by a b o u t K 50 m illion th a n in the first half of the
p receding year.
T he index of wholesale prices fo r a g ric u ltu ra l produce
in Ju n e 1955 was ab out 11 p e r cent lower th a n in Ju n e 1954.
T he consum er-price index fo r a Burm ese w o rk e r’s family in
R angoon fell by 7 p e r cent in the sam e period.
T he E co n o m ic S u r v e y o f B urm a , 1955 estimates an
increase of K 195 m illion in the p riv a te m oney supply in
1955 /5 6 , as a result of the governm ent’s expected cash deficit
of K 726 m illion with the p rivate sector to be offset m ainly
by an excess of p rivate foreign paym ents over p rivate foreign
receipts by K 505 m illion.1 Since a m o d e ra te rise in domestic
p roduction can be reasonably expected, an increase of this
o rd er is n o t likely to give rise to any inflationary pressures.
However, this m ust be distinguished fro m speculative rises in
prices especially im port prices as a result of im p o rt restrictions.
T he cash-consolidated budget assum es b alancing of external
paym ents with receipts. T he receipt of the In d ia n loan of
K 300 m illion since, w hich will be p a rtly utilized to finance
consum er im ports both fro m In d ia a n d from other countries,
will help end the sp ira l of speculative price rises.
C O N C L U SIO N
The econom ic situation in B urm a in 1 9 5 4 /5 5 thus presents
a ra th e r m ixed picture— of considerable p ro g re ss m ade in the
im plem entation of the developm ent p ro g ra m m e on the one
h a n d a n d of a m ark ed d e te rio ra tio n in external paym ents
position on the other. F o r the im m ediate future, the governm ent is faced with three alternative courses of action to tide
over the present difficulties. T he first is to continue or even
tighten its stringent im p o rt restrictions at the risk of increasing
the prices of consum er goods. Secondly, it can cut back the
developm ent p ro g ra m m e considerably. T he th ird solution, to
avoid either or both of the first two, is connected with loans
or other assistance from external sources. T he governm ent
has now taken a loan from In d ia p a rtly to finance the im port
of consum er goods. It is also neg o tiatin g a loan from the
In te rn a tio n a l Bank fo r R econstruction a n d D evelopm ent to
finance specific projects whilst increased aid is being requested
under the Colom bo Plan. T he extent of external aid available
and the m easure of success atten d in g the governm ental efforts
at p ro m o tin g p roduction and export as well as im p o rt substitution will determ ine the possibilities fo r ra p id development
of the country in the near future.
1. T h e E c o n o m ic S u r v e y o f B u r m a , 1955 g iv e s t h e fo llo w in g fig u re s in its
c a s h -c o n s o lid a te d s t a t e m e n t ( i n m illio n k y a t ) :
1953/ 5 4
1954/55
1955/56
A c tu a ls
R ev ised
P r o je c te d
D o m e stic r e c e ip ts o f t h e p u b lic s e c to r
1379
1617
1542
D o m e stic p a y m e n ts o f th e p u b lic s e c to r
2016
2458
2268
D o m e stic c a s h d e fic it
L e ss :
E x c e s s o f p r i v a t e im p o r ts o v e r e x p o r ts
N e t c h a n g e in p r i v a t e s a v in g s
C h a n g e in b a n k lo a n s t o p r iv a e b o r r o w e r
I n c re a s e in p r i v a t e
m o n e y s u p p ly
637
841
726
551
22
-8
600
37
0
505
26
0
72
204
195
Chapter 5 . CAMBODIA
Cam bodia has an ag ricultural economy prod ucing m ainly
rice, ru b b er, forest products an d fish. It derives its export
earnings m ainly from rice and ru bber. Norm ally the cou ntry’s
external trad e appears to have been in balance, although in
the first half of 1955 there emerged a small deficit owing to
the decline in rice export consequent upon the po or rice crop
in the previous season.
Following the conclusion of the P a ris Agreements a t the
end of 1954 which ended the q u ad rip artite arrangem ents)
am ong Cam bodia, France, Laos and Viet-Nam, C am bodia h a s
made its own m onetary and tra d e arrangem ents. In addition
to re-enforcing the existing governm ent adm inistration and
civil service, C am bodia’s im m ediate problem is that of developing its present resources with external aid from the U nited
States and France, giving em phasis to the provision of basic
services such as irrig atio n and transport. An effort is being
made to develope, in particular, the west-coast p o rt of KampongSom fo r the h andling of its trade, although fo r some tim e
to come the country’s m ain export, rice, will have to be
transported fro m P hnom -Penh southw ard down the Mekong
river for export via Saigon.
EN D OF Q U A D R IPA R TISM
Up to the end of 1954, there was an economic union
among Cam bodia, Laos, Viet-Nam and France. This quadripartism was abolished by the P aris A greem ents of 29 and
30 December 1954, ab ro gatin g the 1950 P a u Agreements
relating to tele-communications, control of im m igration,
planning, navigation on the M ekong river, and access to the
P ort of Saigon. T he common assets of the Indochinese d o m ain
were divided am ong the three States, and an agreement was
reached concerning the am ount of customs duties to be paid
retroactively by Viet-Nam to C am bodia and Laos. Decisions
were taken on the abrogation of the customs union, which
was followed by the signing of bilateral agreements am o n g
the three States relating in particu la r to tran sit trad e an d
preferential tariffs. M onetary institutions were tran sferred
from France to the three States. The currency board (Institut
d’emission) stopped functioning on 1 Ja n u a ry 1955 when three
central banks and three exchange-control boards were created.
Each State has its own currency: the riel in Cambodia, the
kip in Laos, and the piastre in Viet-Nam. By agreem ent the
three currencies were established at p a r with each other and
m aintained an identical rate of exchange with the French
franc (F r 1 0 = P r l = R i l = K p 1 ) . A tem porary distribution
was made of the assets an d liabilities of the Institut
d ’emission to enable the three new central banks to start
functioning, with final decision deferred until the actual am ount
of currency notes outstanding in each State became known
after the exchange of currency which began in September
1955.
TABLE
31
D ISTR IB U TIO N OF T H E ASSETS AND L IA B IL IT IE S OF
T H E IN ST IT U T D ’E M ISSIO N BETW EEN CAMBODIA,
LAOS AND VIET-NAM ON 31 DECEMBER 1954
(P r m illion)
Cam bodia
Laos
Viet-Nam
Total
A ssets
F ra n c holding s
....................
A d v a n c es to the States
D ebtsa of the Indochinese
T reasu ry a n d A utonom ous
C om pensation Fund
O thers
......................................
1,300
350
200
305
1,045
2,350
2,545
3,005
1,081
154
341
121
8,331
270
9,753
545
T o t a l .............................
2,885
967
11,996
15,848
1,268
1,493
124
600
256
111
8,827
2,993
176
10,695
4,742
411
2,885
967
11,996
15,848
Liabilities
N otes in circulation
T o t a l .............................
S o u r c e : R a p p o r t a n n u e l d 'é m is sio n , 1954,
a . N o a g re e m e n t h as y e t b een re a c h e d c o n c e rn in g th e fin a l s e ttle m e n t of
th e se d ebts.
From 30 September 1955 notes issued by the Bank of
Indo-China, and by the form er Currency Board (Institut
d ’Emission) of the three states, bearing the n ation al effigies
of Laos and Viet-Nam ceased to become legal tender in
Cambodia. Such notes had to be exchanged before 14
October 1955 for piastre notes issued by the form er Currency
Board bearing the national effigy of Cam bodia o r new Riel
notes issued by the N ational Bank of Cambodia. Notes issued
by the form er Currency Board bearing the effigies of Laos
and Viet-Nam as well as piastre and kip notes issued by the
N ational Banks of the two countries are considered as foreign
currencies and are subject to exchange control regulations.1
To facilitate trade and exchange with Viet-Nam, Cambodia
signed, on 27 September 1955, a bilateral paym ents agreem ent
with th at country. An account in term s of U.S. dollars2 a n d
bearing no interest will be kept by the N ational Bank of each
country to record its transactions with the other contracting
party. Settlement of account will take place every six m onths
in the currency of the creditor, or in gold, U.S. dollars,
French francs, pounds Sterling, or any currency which is
offered by the debtor and accepted by the creditor. If during
1.
2.
O n l e a v in g C a m b o d ia a t r a v e l l e r g o in g to L a o s o r V ie t- N a m
m ay n o t
ta k e w ith h im m o re th a n 400 p ia s tre s in n o te s
issued b y th e B a n k o f
In d o -C h in a o r in C u rre n c y B o ard n o te s b e a r in g L ao s a n d V ie t-N a m effigies.
T ra v e lle rs g o in g to c o u n trie s o th e r th a n L ao s o r V ie t-N a m m a y n o t ta k e
w ith th e m m o re t h a n 400 rie ls in C am b o d ian c u rre n c y
n o te s.
T h e r a t e o f e x c h a n g e is 35 p ia s tr e s o r 35 rie ls to th e d o lla r.
64
ECONOM IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
fish to tra d itio n a l m ark ets— V iet-N am , Sin gapore, H ong K o ng
a n d In d o n ie sia ,3 efforts have lately been m ade to develop
o ther m arkets in L aos and V iet-N am , w here com petition from
sim ilar pro d u c ts fro m T h a ila n d and J a p a n is, however, strong.
the six m onths the balance ou tstand ing should exceed the
swing lim it of U S$4 m illion, settlement m ust be m ad e
forthw ith .1 Settlem ent m ust also be m ade forth w ith in the
case of devaluation or revaluation, at the rate of exchange
in effect p rio r to such devaluation or revaluation.
Some pro g ress was m a d e on several a g ric u ltu ra l developm en t projects. T he irrig a tio n w orks of B arai O ccidental were
expected to be finished soon. F u rth e r pro g ress w as m ade on
the C hoeung P re y e m bankm ent w orks, w hich could not be
finished in 1955 owing to lack of personnel, m aterials and
finance. T he canal excavations an d building-up of em bankm ents in K a n d a l a n d K om pong-C ham and sm aller projects for
the im provem ent of irrig a tio n were continued. E xperim ents
were undertaken in the use of m odern and m echanical m ethods
of rice cultivation a n d tim b er extraction. A n o th e r station for
rice genetics was established, to geth er w ith a station for the
study of m aize h ybrid s. T he School of A griculture, which
tra in s agricultural-extension agents, was enlarged. P lan s were
com pleted fo r the construction in K om pong-C ham of a school
fo r the tr a in in g o f forest w ardens.
T he contracting p arties u ndertake to p ro m o te capital
movements com patible with th e ir balance of paym ents situation.
As a transition al m easure, the assets of the fo rm er IndoChinese T re a su ry or other public debt which were tra n sfe rre d
by one p a rty to the other in settling a credit or debit balance
under the term s of the P a ris A greem ent of 29 Decem ber 1954,
m ay be used in the settlem ent of com m ercial or financial
transfers between the c o n tracting parties.
PR O D U C T IO N A N D D E V E L O PM E N T
A griculture, fo restry and fishery
In 1 9 5 3 /5 4 p a d d y production was estim ated a t aro u n d
1,503,000 tons while, owing to u n fav ou rab le w eather and
dam age from pests, prod uction in 1 9 5 4 /5 5 fell by 45 per cent
to 810,000 tons.
The cultivation of rubber is concentrated in the provinces
of Kom pong-Cham and K ratie. P roduction has picked up
rapidly since the end of the war. In 1954 the area planted
was 26,836 hectares, an d p roduction rose to 24,353 tons
(com pared to 17,000 tons in 1938, 13,000 tons in 1947 a n d
- 22,500 tons in 1 953). In 1955 p ro du ction was expected to
show a fu rth e r rise owing to increased availability of lab o u r
and the use of new methods.
Two types of m aize are grow n in C am bodia, w hite maize
for domestic consum ption and red maize for export. In
1 95 4 /5 5 production of maize cam e to 157,000 tons, barely
40 per cent of the average pre-w ar produ ctio n of 400,000 tons.2
T he ou tp u t of other crops in 1 9 5 4 /5 5 reached 19,500
tons for beans, 7,800 tons for soya, 3,600 tons fo r groundnuts,
3,500 tons for kapok, 2,000 tons for sesame, 830 tons for
pepper an d 5,400 tons for tobacco.
Forests cover an area of a b o u t 8.8 m illion hectares, or
50 p e r cent of the total area of C am bodia.
T he m ain
forest products are tim ber, firewood an d charcoal. T im ber
production fell from 56,800 cubic m etres d u rin g the first
h a lf of 1954 to 45,500 cubic m etres d u rin g the first half of
1955.
T he G reat Lake o r T o n lé Sap, a good breeding g ro u n d
for fresh-water fish, accounts fo r a bou t half of C am b o dia’s
average an n u a l p ro du ction of 130,000 tons, ou t of which
35,000 tons are used annually for the p ro du ction of dried
fish. T he an n u a l p ro d u ctio n of sea-water fish is estim ated at
between 20,000 and 30,000 tons, m ainly for export and
dom estic consum ption, a n d a small p a rt was fo r processing
into d rie d fish. 80,000 tons of fresh, salted, dried a n d
sm oked fish are ab so rb e d annually by the hom e m arket. In
1954, 17,400 tons of fresh a n d dried fish were e x p o rte d ; in
the first half of 1955 the total qu a n tity exported am ounted
to 6,800 tons. In view of the post-war fall in exports of
1.
2.
D e lay s in s e tt le m e n t o f o v e r five w o r k in g d a y s, e i t h e r f o r th e u s u a l s ix
m o n th s ’ s e tt le m e n t o r o th e rw is e , m a y c a u s e a n i n te r e s t p a y m e n t o f 4
p e r c e n t p e r a n n u m to th e c re d ito r. I f s e tt le m e n t is d e la y ed f o r o v e r o n e
m o n th , t h e c r e d ito r m a y s u s p e n d n e w p a y m e n ts to th e a c c o u n t o f th e
d e b to r.
B e fo re th e w a r C a m b o d ia ’s m a iz e e x p o r ts w e re la rg e ly a b so rb e d b y F r a n c e ,
w h ic h h a s s in c e th e w a r e x p a n d e d i ts o w n p r o d u c tio n o f m a iz e . A3so
m a iz e h a s h a d d iffic ien tly in c o m p e tin g in p o s t- w a r m a r k e ts b e c a u s e its
p ro d u c tio n r e q u ir e s m o re la b o u r t h a n w h e a t.
As the ex o rb ita n t rates of interest (k no w n to be a ro u n d
100 p e r cent p e r a n n u m o r m ore) c h a rg e d to fa rm e rs by
p rivate m oney-lenders h a d severely h a n d ic a p p e d a g ric u ltu ra l
p roduction, the Co-operative Societies a n d the Office of
P o p u la r C redit were established to p rovide cheaper credit. In
1954, the Office of P o p u la r C redit g ra n te d loans to the extent
of Ri 56 m illion, of which R i 30 m illion w ent to the provincial
m u tual a g ric u ltu ra l c redit agencies, R i 23 m illion to a g ric u ltu ra l co-operatives, Ri 750,000 to livestock b re e d in g a n d the
rest to cottage a n d sm all industries. L oans g ra n te d b y the
office d u rin g the first half of 1955 reach ed R i 31.4 m illion.
In d u stry an d transport
In d u stry in C am bodia is still of the h a n d ic ra ft type, with
very few m odern factories. P o w er p ro d u c tio n in P h nom -P en h
totalled only 15 m illion kW h in 1954, as c o m p ared with
18.2 m illion kW h in 1953; it rose to 9 m illion kW h in the
first half of 1955. T he alcohol o u tp u t was 89,000 hectolitres
in 1954, as c o m p ared with 92,000 in 1953; it a m ounted to
39,000 hectolitres in the first half of 1955. Rice mills,
generally on a small scale, n u m b e re d 4 7 in 1951, b u t nearly
300 m ore have been established since 1952.
The volum e of freig h t traffic h a ndled by the Royal
C am bodian R ailw ay increased fro m 4 6.6 m illion ton-km in
1953 to 60.2 m illion ton-km in 1954. In 1955, stress was
laid on m o d ernization a n d extension of the existing system
(w hich is 385 kilom etres in le n g th ), increase of rolling
stock, im provem ent of tracks a n d buildings. T he link between
P h n o m -P e n h and B angkok was officially p u t in service on 22
A p ril 1955 and two services were assured each week on this
line. The freig h t c a rrie d on the P oipe t-P h n o m -P en h line
d u rin g the first q u a rte r of 1955 declined, c o m p ared w ith the
corre sp o n d in g p erio d of 1954, ow ing m ainly to the p o o r rice
harvest.
In 1955 provision was m ade fo r the m aintenance of the
existing netw ork of ro ad s (4,000 kilom etres in 1 9 5 3 ), together
with the com pletion of a 150-m etre concrete bridge.
C onstruction of th e p o rt of K am pong-S om started early
in 1955. Steam ers were expected to be able to use th is port
in July 1956.
3.
B e fo re th e w a r J a v a a lo n e a b s o r b e d 80 p e r c e n t o f th e to t a l e x p o r t of
d rie d fish f r o m C a m b o d ia .
C H A PT E R 5.
On 14 J a n u a ry 1955 a sem i-governmental enterprise was
established in Phnom -Penh, to provide airline service both
inside an d outside Cam bodia, with local capital of which 51
per cent was to be subscribed by the government.
65
CAMBODIA
m illio n ). The State of Viet-Nam was the principal supplier
of C am bodia’s imports, accounting for Ri 1,430 million (69
p er cent of total im p o rts), but it was estimated that, of this
am ount, only Ri 30 million represented m erchandise of
Vietnamese origin. The French Union supplied total imports
valued at Ri 314 million.
Substantial economic aid from the U nited States and
France has helped to finance m any im p o rtan t development
projects. F ro m July 1954 to June 1955 U nited States aid
am ounted to Ri 462 million for im portant projects in
agriculture an d social services, in addition to funds for the
construction of the ro a d leading to the p o rt of Kampong-Som.
The F rench G overnment has authorized a sum of Ri 560
million fo r 1955-56. F o r 1955 alone Ri 45 million an d Ri 25
million have been allocated respectively for the construction of
the ocean po rt at K am pong-Som an d the aerodrom e at PhnomPenh, with another Ri 10 million on a scheme for im proved
water supply. A ustralia has earm ark ed £A 130,000 for
industrial equipm ent and technical assistance, while New
Zealand has provided £NZ 30,000 for the construction of the
apprentice school of the R oyal C am bodian Railway.
Im ports d u ring the first half of 1955 came to Ri 694
million, with the Republic of Viet-Nam as the m ain supplier
accounting fo r Ri 242 million or 35 per cent.1 Next
in im portance were the French Union and Hong Kong.
Im ports from Japan, the United States, the Federal Republic
of Germany and the Netherlands also increased. It is significant to note that in the first half of 1955, while Viet-Nam’s
share in total im ports fell from 69 per cent in 1954 to 35
per cent, H ong K ong’s share rose from less than 3 per cent
to 11 per cent. T he m ain products im ported were petroleum
products, cement, vegetables, fruit, sugar, beer, milk, wheat
flour, pharm aceutical and metal goods.
TRADE
Im ports and exports are subject to licences issued by the
Directorate-General of Foreign Trade, the Exchange Control
B oard and the Committee on US Aid Im ports.
In 1954 there was a small surplus of R i 61 million,
though d u rin g the first half of 1955 there was a deficit of
Ri 83 million owing to p o or rice crop and export. The total
value of trade appears to have declined.
Of the total exports of C am bodia in 1954, 38 per cent
went to Viet-Nam and Laos, 21 p er cent to the French Union,
19 per cent to the sterling-area an d 16 per cent to the dollar
area. Of the exports d u rin g the first half of 1955, 35 per
cent went to Viet-Nam and Laos, and 27 p e r cent to the
French Union.
Most of the export earnings have to be surrendered to
the N ational Bank of Cam bodia at the official rate. The
exporter is, however, perm itted to retain a small part, as
follows: (1) from proceeds of exports to the dollar area,
3 per cent for free disposal by the exporter, 12 per cent for
the im port of specified comm odities; (2) from proceeds of
exports to other currency areas, 10 per cent for the im port
of specified commodities.
E xport earnings of Cam bodia in 1954 reached R i 2,120
million, of which 58 per cent were derived from exports of
rice and rubber.
Exports of rice and derived products in 1954 am ounted to
300,000 tons (R i 830 m illio n ), of which approxim ately 78,000
tons went to Viet-Nam and 3,000 tons to Laos. The French
Union took 89,000 tons an d M alaya and Indonesia 57,00 and
44,000 tons respectively. D uring the first half of 1955, exports
of rice and derived products am ounted to 87,000 tons, with
Viet-Nam taking 60,000 tons, the French Union 13,000,
Malaya 9,700 and H ong K ong 3,500 tons.
R ubber exports in 1954 am ounted to 30,000 tons (Ri 412
million) of which 77 p er cent went to the U nited States.
D uring the first half of 1955, ru b b e r became the leading
export of Cam bodia, rice receding to second place. R ubber
exports in this perio d am ounted to 11,500 tons, with the United
States taking 76 p er cent.
Maize exports were estim ated a t 96,900 tons (R i 200
million) in 1954; they am ounted to 14,400 tons (R i 34
million) d u rin g the first half of 1955. Exports of fishery
products am ounted to nearly 18,000 tons (R i 110 million)
in 1954 and 6,777 tons (R i 31 m illion) d u rin g the first half
of 1955.
Total imports in 1954 were estimated at Ri 2,059 million.
The m ain products im ported were metal and metal products
(Ri 472 m illion ), textiles (R i 328 m illio n ), petroleum products
(Ri 166 m illio n ), tobacco, cigarettes and cigars (R i 155
m illion), cement (R i 111 m illion) a n d beverages (R i 100
FIN A N CE AND PRICES
Since the abrogation of quadripartism in December 1954,
Cam bodia, unlike Laos and Viet-Nam, has not signed an
agreem ent with France. On 3 Ja n u a ry 1955 the National
Bank of Cam bodia was established as the bank of issue, in
succession to the form er Institut d ’emission of the three States.
A provisional allocation to the N ational Bank of the assets
and liabilities of the form er Institut d ’emission was made at
the end of December 1954; it was to be adjusted after the
results of the exchange of currency were known. Agreement
was also reached on the sum due by the Republic of Viet-Nam
to Cam bodia on customs duties previously collected (see
table 3 1 ).
The N ational Bank of Cam bodia was established by a
special statute with an authorized capital of Ri 100 million
(75 p er cent subscribed by the government, 25 per cent by
private individuals and com panies). It issues currency,
discounts bills, makes loans, buys and sells gold and foreign
exchange. It is required in the course of time to build up
a gold and foreign-exchange reserve equal to one-third of the
m oney supply. The note issue, which stood at Ri 1,268 million
on 31 December 1954, rose to Ri 1,928 million on 31 July
1955. The foreign assets of the bank in the same period
rose slightly from Ri 1,300 million to Ri 1,320 million.
At the beginning of 1955 five banks had offices in
Cam bodia. The Phnom -Penh Bank was recently established
in Phnom -Penh. In June 1955, the H ong Kong and Shanghai
B anking C orporation also opened a branch there. F rom |
1.
M e rc h a n d is e o rig in a tin g : fr o m V ie t-N a m w as e stim a te d a t R i 9 m illion.
66
ECO N O M IC SU R V E Y O F A S IA A N D T H E F A R E A ST , 1955
Ja n u a ry to Septem ber 1955 th e sight deposits of the c o m m ercial banks increased fro m R i 339 m illion to R i 801 m illion,
cash balances fro m R i 210 m illion to R i 751 m illion a n d
balances ab ro a d fro m R i 94 m illion to R i 155 m illion. S h o rtterm com m ercial bills a n d advances declined fro m R i 185
m illion to R i 172 m illion. T he b an k s seem to be in a high ly
liquid position.
The revised budget estim ates showed a total expenditure
of Ri 2,612 m illion in 1954,1 as ag ain st R i 1,290 m illion in
1953, w hich was m ainly due to a four-fold rise in defence
expenditure fro m R i 457 m illion in 1953 to R i 1,633 m illion
in 1954. In 1955 there was a decline in budget expenditure
to R i 1,742 m illion, accounted fo r m ainly b y a halving of
defence expenditure to Ri 740 m illion w hich was m ad e possible
by contribution fro m ex ternal aid. B udget revenue stood m ore
or less u nchanged at R i 1,642 m illion. T h e deficit, R i 977
million in 1954, was estim ated to decline to R i 100 million
in 1955. L ater revisions of the estim ate, however, tend to
point to a grea te r deficit of R i 700 m illion, ow ing to
an increase of Ri 300 m illion on the expenditure side an d
a reduction of Ri 400 m illion in revenue. Less th a n one-third
of the deficit was expected to be financed by external contributions to defence.
T ax revenue accounted fo r about four-fifths of the total
revenue d u rin g 1953-54. Customs duties, an d transaction and
consum ption taxes, co ntrib uted respectively Ri 624 m illion
and Ri 398 m illion in 1954, which together represented 80
per cent of total tax revenue. T axes on incom e and wealth
accounted for only 8 per cent of total tax revenue in 1954.
D u rin g the first seven m onths of 1955 the working-class
cost-of-living index in Phno m -P enh rose by 10 per cent, fro m
188 to 207 ( 1 9 4 9 = 1 0 0 ) , while the index fo r the m iddle class
m oved up m ore slowly, from 183 to 193. D u rin g the sam e
period the wholesale price of white rice No. 1 rose steeply
by 15 p e r cent, while the prices of black an d w hite pepper
rose by about 3 an d 9 p er cent respectively.
1.
T h e fisc al y e a r is th e s a m e a s th e c a le n d a r y e a r.
C O N C LU SIO N
C am bodia, w ith a p o p u latio n density of only ab o u t 30
per sq u are kilom etre, is largely undeveloped. Owing to
insecurity in recent years th e re has been some crow ding of
ru ra l population in cities. T h ere is sh o rtag e of personnel, at
all levels, especially in governm ent service w hich h ad to be
exp anded afte r the end of q u a d rip a rtite a rra n g em e n ts in fiscal,
m onetary, tra d e an d m a n y o th er fields.
U n d er the term s of a tre aty fo r econom ic, financial,
technical an d cu ltu ral cooperation signed w ith J a p a n early in
D ecem ber 1955, 10,000 Jap an ese fa rm fam ilies will be allowed
to em igrate ann u ally to C am bo dia over a p erio d of at least
five years. J a p a n also plans to send m aterials an d engineers
to C am bod ia to b u ild a m odel city.
C am bodia has n orm ally a tra d e surplus, m ainly through
the exp ort of rice, ru b b er, fish a n d fo re stry pro d u cts, an d it
should usually be able to finance the cost of its requirem ents
for im ports of consum er goods. E x te rn a l aid, however, has
helped to finance the co u n try ’s defence cost in recent years.
In developm ent, the governm ent has show n keen interest
in specific projects re latin g to the provision of basic services,
e.g. the construction of the K am pong-Som h a rb o u r, the new
ro a d leading to the h a rb o u r from P h nom -P enh, irrig a tio n an d
other public works. E x tern a l aid, m ain ly fro m F ra n c e a n d
the U nited States, h as been a very significant factor in m ak in g
these p rojects possible.
A tw o-year econom ic developm ent p ro g ra m m e of C am bod ia (1956-957) is b eing com pleted, to be followed by an o th er
five-year p rogram m e. A Council of P lan n in g , consisting of
10 to 12 m em bers, is plan n ed to be established in Ja n u a ry
1956, u n d er the d irect supervision of the P rim e M inister.
T his council will be a policy m a k in g body w hereas the
D irectorate of P la n n in g will re m a in as an executive organ
fo r p la n n in g developm ent p ro g ram m e s of the country.