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About two decades ago it was strongly believed that agricultural
development would over time considerably ease the problem
of unemployment and underemployment in developing countries
with large agricultural sectors. Development economists
prescribed a “labour-intensive, capital-saving”
strategy of agricultural development for them to achieve
higher growth rates with equity. While the prescription
remains valid for many developing countries even today,
a multitude of important constraints have emerged in the
way of implementing this strategy. For a variety of reasons
many developing countries have adopted agricultural development
policies which depressed or decelerated employment growth.
As a result, the performance of the agricultural sector
in employment generation has been disappointing in a large
number of developing countries.
A number of researchers have recently pointed
out that the current trend towards low labour absorption
in agriculture in the countries falling into the category
of “late comers” is likely to be strengthened
by the labour-saving agricultural innovations likely to
come into the market on a growing scale and at a lower unit
cost (Jayasuriya and Shand, 1986). It is increasingly realised,
by both researchers and policy-makers, that employment opportunities
will have to be found on a greater scale outside the agricultural
sector to reduce unemployment and poverty and improve the
distribution of income, which is one of the key development
objectives in many developing countries today (Anderson
and Leiserson, 1980: Meyer, 1983; Ho, 1986).
A parallel development over the last decade
has been the better understanding of the role of non-farm
economic activities in the process of economic development
in these countries. The literature on various facets of
non-farm activity has burgeoned and it points out that,
if properly promoted, non-farm activity can contribute considerably
to growth and development. Thus, much greater emphasis is
placed today on non-farm activities as a source of employment
and of growth and as a strategy which combines poverty alleviation
and better distribution of incomes with growth.
Despite the important role that non-farm
activities can play in development, very few studies have
been undertaken on these activities in Sri Lanka. Furthermore,
the available literature has failed to deal with an important
aspect of their development, namely, capital transfers for,
and investment in, such activities. In this paper an attempt
is made to discuss the issues relating to this so far neglected
area.
This paper consists of seven sections. Section 2 provides
definitions of the key terms used in the paper. Section
3 discusses the methods and mechanics of capital transfers
and the determinants of capital surpluses in general. In
Section 4, this general discussion is applied to the specific
case of Sri Lanka. Section 5 is devoted to a general discussion
of several aspects relating to investments in non-farm activities
while Section 6 examines non-farm investments in Sri Lanka
together with factors affecting such investments. The concluding
section presents a brief outline of a possible strategy
for promoting non-farm investment in Sri Lanka. Table of Contents:
- Introduction
- Definitions
- Capital Transfers and Surpluses
- Capital Transfers from the Farm Sector in Sri Lanka
- Investments in Non-Farm Activities
- Non-Farm Investments in Sri Lanka
- Strategy for Promoting Non-Farm Investments in Sri
Lanka
- References
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