Archives

by Ravi Ladduwahetty

Sri Lanka's performance in industry has overtaken its traditional vocation of agriculture after the open economy since 1978. The economy is right now in a perilous state with the need to drive Foreign Direct Investments. Apparel exports has sustained the economy in both good times and bad while the need for the promotion of small and medium industries will also have to be met. Inquiries for macro-scale agribusiness have come,but the land policies are incongruous.

Here, Industries Minister Rohitha Bogollagama in conversation with the Daily News where he spells out his vision, and also core issues of the industrial sector such as investments, value added agro- industry, implications of the Indo- Lanka Free Trade Agreement and labour.

Q: According to Central Bank data, Sri Lanka's industrial sector has been growing at a much faster rate than ever before, with value addition to the economy, employment generation etc in which it has overtaken the agricultural sector leaps and bounds. It appears at last, that Sri Lanka is transforming itself from a traditional economy to a modernised one. What are your sentiments ?

A: That the industrial sector has grown over the agricultural sector does not speak much for the industrial sector. It only speaks bad of the agricultural sector. From a predominantly agricultural country, we transformed to an industrial country due to the open economy. This is attributable to the investments those were attracted to this country during the period 1978- 1994 and to some small extents thereafter.

But, the decline in terms of industrial spread and the growth in keeping with the other South Asian nations is very much less for a country like Sri Lanka. Therefore, we cannot be happy about progress the industrial sector has shown. This has been further compounded that the Small and Medium Industries have virtually crashed today, which are rock bottom especially in the textile industry. Light engineering today is very non existent.

Only the apparel industry has survived. That is because 60 percent of it is in the United States. It is a patronised market by US authorities, coming by way of quota. That industry has survived. With Germany and UK going into recession, even apparels will not show the progress it showed earlier. So much they are either closing down or reducing their capacities. So, even after 20 years after the industrialisation drive here, we are yet to begin a proper conditioned structure of industrialisation to reach out to ultimate levels of industrial growth.

Q:Given this backdrop, what is your vision as Industries Minister and as a former BOI Chairman for industrial development and investment promotion in the light of the requirement for investments requiring to be at 35- 40 per cent of GDP?

A:The industrial sector has to be developed, given support and confidence. For that, we have to nurse the 50,000 small and medium industrialists who are attached countrywide to the formal economy. Foreign Direct Investments must also be attracted vigorously, which would represent a fair share of the economy. This put together, our level playing field will give the type of development that would make Sri Lanka as a good country for the industrial sector.

The spread of the SME sector will condition this country both in terms of local production and local market oriented industrial products and a wide spread of employment generation. FDI will also infuse capital and technology and would be able to generate the products those will penetrate international markets. This is the way out, if not, we will be left on the wayside.

The development of the SME's would not affect global conditions as we have seen in the last 15 years. We do not want to have investors who come and disappear when the country needs them most. We would not have been in this situation if these global players were in a position to retain themselves in the global market. Our approach should be positive and structured right across the board.

Q: What are the sectors that you envisage growth in the medium and the long term ?

A: In the medium term, the sector that would still hold is the apparel sector which has a strong presence. We cannot let go of our marketing responsibility, with or without the disappearance of the quota regime. Our presence is upmarket. In other sectors we have thought of the high-tech products and the rubber related components which could contribute to the light engineering sector in terms of industrial produce.

Coming back to the long term is the SME sector which ranges from agricultural related machinery and all other parts which could meet the local engineering needs. Traditional products such as the handicrafts and cottage industries should also be uplifted. It is the transfer of technological transfer to them at the local level so that they are given marketing opportunities to market what ever they produce which is a 100 percent value addition that takes place in this country that is produced.

Thus, Sri Lanka will not fall behind other countries in getting a variety of industrial products into the markets locally and internationally. By this method regional development could also be effected.

Q: Do you see that the Indo- Lanka Free Trade Agreement will result in Sri Lanka being the dumping ground for substandard Indian products ?

A: Indian products are continuing to enter the market as our products are not good enough. Sri Lanka cannot take advantage of a bilateral agreement that was meant for two countries. Would have to look at it afresh and get the type of treatment that Indian products are meant. If there are shortfalls, they have to be remedied.

Q: Do you see that Indian manufacturers will set up business here for manufacturing and re-export, making use of the ideal investment conditions here ?

A: There are economies of scale. The tariff and other conditions are built in. These are norms that we could determine that could set ultimate goals in an industrial country. That is why I am working on the small and medium industrial sector as it is the sector which will work as it did in the past. My Ministry is working very close with the Indian Government so that capital and technology transfers could be effected.

Q: It appears as if the apparel industry has taken the pride of place in investments. However, over 70% of the turnover is spent on raw material imports where real value addition is around 30%. Hasn't your Ministry and the BOI considered the promotion of investments for the manufacture of raw materials such as fabrics and accessories, so that not only valuable foreign exchange could be saved, but could lead to the reduction of transit times which would have otherwise have been incurred in imports ?

A: Textiles are the raw material of the apparel industry. What happened to the textile industry here is the opposite to the apparel industry. Apparels industries grew, the textile industry has got closed simultaneously. Now what is the reason ? Could the BOI prevented it from happening ?

About 60 textile factories have closed other than Kabool Lanka Ltd. This is not good. It happened due to policy decisions of earlier Governments of making textile imports duty free. Textiles were protected where even local consumption was low. There were no competitive developments in the textile industries at all. Meanwhile world production trends and marketing also changed.

Exporters also have the option of sourcing these products from their locations, as dictated by buyers. These products have to be sourced from outside as the local production based is not strong enough. On the other hand my Ministry is studying the textile industry so that the benefits could be got on the long term basis.

Q: The apparel industry, despite big numbers, has a value addition of around 30%. What measures will you take for promotion of value added agro-based industries where raw materials could be grown here, where production could be labour/capital intensive, where the value addition could even rise up to even 80% - 90% ?

A: Agriculture and agro-industry are major areas that we are focusing on. However, the food industry has not developed and has bee largely been restricted to imports and also to traditionally crops. Agro- industry ensures that the markets are sustained over a period of time.

In order to have value added agro- industry, we have to have the food industry in three compartments. Only the traditional forms of agriculture has gone on in the most primitive manner. As the Industries Minister, I have asked my officials to study how products could be growth where they are qualified for the second and the third stage. We have to treat food production to meet the requirements of 19 million people.

Q:How many of these people drink a glass of milk daily, have dessert, sweets etc ? What is the percentage?

A:The rice and the vegetables/ fruits will have a local/ export market. The Ministry is encouraging the collection centres who will be out-sourcing to the growers. The collection centres will have the warehousing and the cold rooms. These products will be getting to the polas the supermarkets and the chain stores and also to export markets. Until we get a stable local industry we will never get foreign markets at all. Once this is developed it will have a series of benefits such as employment and income generation and economic stability. It will also bring other sectors into the market place in a strong network of development.

Q:Sri Lanka has spent upto Rs. 10.6 billion in 1998 for sugar imports. However, the Director of the Sugarcane Research Institute states that a total of 43 value added agro-based industries could be established from sugarcane, which could not only cushion raw material prices of sugar which are subject to worldwide fluctuations, but could result in a series of by-products which could be manufactured profitably for export such as chip board, paper, ethyl alcohol etc. resulting in new vistas such as establishment of industrial townships. What are your sentiments ?

A: Pelawatte Sugar produces only 16 percent of the total national sugar production and there is much scope. However even with four other plants Sevanagala Hingurana and Kantalai they would not have scope for other products as things stand. This is a decision that should be taken. But, it cannot be a greater dimension as tariffs are limited between 10 and 25 percent. But there are inbuilt taxes such as the NSL and the GST. These inbuilt taxes get into areas those get associated with them. This is area that we need to have a look afresh. Taxes have to be exempt at production levels.

Q: Industrialisation can be two fold i.e. import substitution and export promotion. Industries which are for import substitution, are clamouring for tariff protection with imported products. With the liberalised economy, the Government is going for tariff reductions and more so with the Indo Lanka Free Trade Agreement. How do we reconcile this perennial conflict aimed at protecting local industries ?

A: The issue here is the need for the lifting of the industrial base in Sri Lanka, while maintaining the competitive edge in terms of commerce and trade This edge lies in the economies of scale. The Government is fully committed to the lifting of the local industrialists especially the SMI sector while maintaining the quality and productivity laws which should get associated with the local industry. Once the quality tools are established, then ours could be compatible with any imported product in the world.

Tariffs are mandatory for a decent price within the framework of free trade. This also means that local trade has to be developed. Ground conditions for both local and imported products will have to be harmonised which will be in consonance with the commitment of a Government which will serve the consumer equally.

Q: Indications are that industrial relations in the country are deteriorating rapidly. It has also been observed that the JVP backed trade unions (the Inter Company Trade Union) has grown phenomenally within a short span of two years in all major part of the metropolis and almost the entire hotel sector. Speculation is also rife that the JVP will mobilise its worker and base into industrial strike action which means that the delivery of goods at the right time and right price will be affected. Your comments ?

A: This is a hypothetical question in terms of what the JVP could do in terms of industrial unrest. We are a Government that believes in a very harmonious employer- employer relationship. In order to achieve that, my Ministry has brought about an Industrial Cultural Unit that will bring drastic changes on the industrial floor in terms of productivity enhancement, quality awareness and skills development and ultimately good industrial relations. This is the ultimate goal in terms of industrial relations.

At the same time, if there are political elements those are promoting worker unrest to the detriment to the industry that is a matter that has to get tapered in terms of labour regulated developments so that nay industrial dispute will have to get cornered and disassociated purely within the Industrial Disputes Act rights and responsibilities. There is nothing that these unruly elements can do to pull out workers from an industrial floor. If there are manoeuvring for the workers to be pulled out, that will not be an industrial dispute but a political dispute.

The Industrial Disputes Act is clear from the outside rights of the workers to politically oriented actions. The consequences will be seen in the light of the workers' needs as opposed to what the political elements want the workers to do.

Q: In Sri Lanka, employers are requested to have fair labour practices while the employees and the trade unions are required to have reciprocate the gesture, which they have not. Your comments ?

A: I think that the employers will also seek productivity while the employees will look at security. That is not happening sufficiently due to several factors such as attitude problems such as people not getting used to industrial floor which needs cultural changes etc. due to several factors.

The worker is right out while the employee is right on top. There should be a partnership in the production process. That is why we have set up the Industrial Culture Unit in my Ministry which will enhance discipline, productivity and other attributes.Minus those industrialists can survive.

Q: Despite the development in the industrial sector, Sri Lanka is yet a low skill/ low technology/low investment base. Due to the escalation of the cost structure, this cannot be pursued with in the long term. The next step is to make the country a high skill/ high technology/high investment/low labour base. What is your vision for the industry to get there ?

A: It is a phenomenon that is not suited for Sri Lanka. Our skill is to develop the labour to suit the industry while getting the big investor to be a part of Sri Lanka's economic advancement. We have a strength of providing the labour at the correct price, which could contribute to industrial growth. The solution lies in getting the right orientation for industries and for industries to come up in terms of markets and markets to be generated rom the support of the overseas collaborators and technological transfers to suit industrial production. We have to have a vision of investment technology and overseas marketing and labour to be procured on skills development.

Q: Finally, what is the Government's policy of taking industry to rural areas?

A: Industries have to be in rural areas. There is no other area that is meant for industries. That is where the land is and that is where the people are living where the land is and the infrastructure could be developed. We have to look for a shift of industries.

The essence of this Government's strategy is the Rural industrialisation Program. That is why the Government set up five industrialised jurisdictions.That would concentrate on the industrial base in the rural sector that would develop the periphery.

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager