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by Ravi Ladduwahetty

The National Chamber of Commerce of Sri Lanka has made every possible endeavour to commit the Government in identifying and addressing important issues connected with the promotion of an industrial culture in Sri Lanka, NCCSL President Asoka de Z Gunasekera told the Daily News in an interview yesterday.

Every effort was made to make Government Institutions, such as the Customs, Tax Department and Import export institutions understand the difficulties faced by the industrial sector, he said.

The NCCSL Chief said that his vision for the Chamber is for NCCSL to be the leading National Chamber represented throughout the country, encompassing the entire spectrum of industry, trade and commerce and the service sectors of Sri Lanka.

NCCSL will be the leading source of services to business countrywide whose advice and opinion is much sought after by the Government, private sector, the media, and respected by the public in general. To be internationally recognised as the focal point for trade, commerce and service activities in Sri Lanka.

The interview:

Q: You headed the National Chamber of Industries last year. This year you are the head of the National Chamber of Commerce of Sri Lanka. What are your priorities?

A: In my capacity as the Chairman of the National Chamber of Industries, we took up the challenge of focusing the importance of not only safeguarding, but also upgrading local industry, while stressing competitiveness. These include issues of work ethics and attitudes, corporate culture, trade union relationships and the need for better management.

All these become important to be competitive nationally as well as internationally. We made every possible endeavour to commit the Government in identifying and addressing important issues connected with the promotion of industrial culture in Sri Lanka. Every effort was made to make Government Institutions, such as the Customs, Tax Department, and Import export institutions understand the difficulties faced by the industrial sector.

The Chamber stresses the need for a National Industrial Policy. The awards ceremony that was organised for the first time, in the history of the Chamber, gave due recognition not only to medium and macro levels, but also to the cottage industry with capital infusion of even up to Rs. 50,000.

"I feel privileged that immediately after my term of office in the Chamber of Industries, that I have been given the responsibility of leading the most important National Chamber of Commerce of Sri Lanka", he said.

The National Chamber of Commerce of Sri Lanka (NCCSL) founded in 1948, was created to look after the interests of indigenous Sri Lankan business at a time when the market was unfairly dominated by the foreign business community.

After achieving our initial objectives, the Chamber focused its attention in the mid 1950's to develop its own members. Over the last five decades the Chamber driven by visionary leaders has emerged as the leading national trade and industrial promotion body in the country. The Chamber is the focal point for member companies representing virtually the entire spectrum of industry, trade and commerce in Sri Lanka. Among them the Chamber counts some of the most vibrant and progressive business houses in the country. SMEs too are well represented through membership of the Federation of Associations of SMEs spread over 22 districts. The Chamber has several trade and business organisations that are members.

"I wish to stress the importance of adopting a Vision driven approach in order to meet the challenges facing the local business sector on account of the economic downturn and to equip them with the necessary skills to be competitive in an open market economy".

Our main objectives are to promote and foster economic growth and cooperate with the Government in the attainment of this goal. We need to give every support to the Government to make Sri Lanka become an economically advanced and prosperous nation with an internationally competitive economy. We expect that the end of the ethnic conflict will herald a totally new environment.

We wish to work closely with the Government in identifying the need for accelerating the pace of infrastructure development particularly in rural areas where most of the unemployed reside. This is the first step towards strengthening the rural economy, so that the Industry could spread to areas where it is most needed. The Government's decision to set up a Ministry of Rural Economy is a step in the right direction. We hope to assist our membership in fine-tuning their business strategies shedding businesses with low potential and strengthening businesses with high potential and to face challenges to ensure long term survival.

It is important that our membership be assisted in investing in human capital, committed to train and develop people and to attract outstanding young men and women. We hope to assist the Government in restructuring the present vocational training system to produce persons who are employable.

Q: What is your Vision for the Chamber and the country?

A: Our Vision for the country is that by the year 2010 Sri Lanka to be transformed into a strong and modern economy that can sustain 7 to 8% growth with high investments, through a dynamic private sector functioning competitively in the international arena. In addition by the year 2010, the rural economy to be invigorated through adoption of modern technology particularly the agricultural sector. Again by the year 2010, the country to boast of an infrastructure comparable with any in the region.

My vision for the Chamber is for NCCSL to be the leading National Chamber represented throughout the country, encompassing the entire spectrum of industry, trade and commerce and the service sectors of Sri Lanka. NCCSL to be the leading source of services to business countrywide whose advice and opinion is much sought after by the government, private sector, the media, and respected by the public in general. To be internationally recognised as the focal point for trade, commerce and service activities in Sri Lanka.

Q: You were earlier dealing with Industrialists. Now it is traders and service providers. Where will your sentiments and heart be?

A: As I said before the Chamber represents virtually the entire spectrum of industry, trade, commerce and service sectors of Sri Lanka. In pursuance of our objective of enhancing economic growth through competitiveness, we cannot separate these sectors for different treatment.

All of them have common problems and all of them have common roles. NCCSL has a bounden duty to work closely with all four sectors and assist them in every respect.

Q: There are Trade Chambers in large numbers, be it manufacture and industry, trade, garments, exporters, freight forwarding contractors and shipping. Can't these unite at the time of national need?

A: Whilst recognising the need for sector specific Associations/ Trade Chambers which their priority concerned with the problems of that sector only, the unity among Trade Chambers and Associations is an important factor. Economic revival of our country can be achieved only if we work together. It is also important to address the Government with one voice in common problems faced by the entire industrial services and business sectors. It is also very important to represent the voice of the rural community. I am happy to say that the Chamber is a representative of all these sectors.

However, in order to address Government with one voice, one opinion, some of the leading Chambers and Associations have formed themselves into what is known as Joint Business Forum (JBIZ for short). JBIZ has been very active especially at the time that there was a national political crisis which was damaging the economy and investor confidence.

It would be my finest day if I am successful in facilitating the merger of some of the major chambers so that our voice will be stronger in addressing Government towards the needs of our members.

Q: Take the shoe industry. There is a bitter tussle between local manufacturers and importers. There was an import duty of Rs. 100 per pair. How do you see this debate progressing?

A: It is sad to note that the shoe industry is facing a major downturn and with the importation of cheap substandard shoes from countries in the region, it has only aggravated the situation. We need to reckon the fact that although their prices are cheap the quality is sub standard. It is sad to note that a few unscrupulous traders have caused this great threat to the local industry by importing sub standard shoes draining out foreign exchange that we can ill-afford. Similar threats are faced by several other industries such as bicycle parts, surgical gauze, ayurvedic drugs and so on where better quality goods are manufactured locally.

We certainly need to safeguard our local industry. The Government should make every effort to stop the import of sub standard goods especially those that are being manufactured locally. At the same time the local industry must acquire the skills and technology to be more productive and cost effective to be competitive in international markets. The Chamber would do its utmost to increase productivity and competitiveness of local industries and at the same time safeguard their interest against unhealthy competition.

Q: How do you see the conflict between the local manufacturer and importers for Industries such as Ceramic tiles where the imported products is flooded and selling due to the price advantage, despite claims by the local manufacturer that it is lower in quality?

A: The position taken up by the local manufacturer is not worthy. The ceramic Industry in Sri Lanka has reached a high standard and selling well in international markets. It is noteworthy to find out as to why the cost of production is high specially as the Ceramic Industry has acquired state-of-the-art technology from countries such as Japan.

Q: How do you protect the local industry?

A: It is important to have a National Industrial Policy for Sri Lanka. On many occasions, past administrations have made attempts to bring about such a policy but has not been successful so far. Sri Lanka's industrial policy should aim at supporting private sector development in export oriented industries with great importance attached to the diversification of products.

The manufacturing sector faces challenges such as high dependency on imported raw materials, high costs of energy, high cost of finance, lack of proper infrastructure and communication facilities in the rural sector compelling industries to be concentrated in an around Colombo and slow growth of knowledge-based industries.

Sri Lanka should aim at manufacturing industrial products with high quality to be competitive in International markets, adopt cleaner production techniques and embrace new innovation in manufacturing new products and services.

It is important to take industry to rural areas by encouraging post-harvest technology and agro-processing at the farm itself.

All these need intensive training, creating awareness, investment in technology improving the infrastructure part of which must be attended by the state itself. The SMI Sector should be assisted to be more competitive. Protection is not the correct word to use in terms of local industry. What we should aim is to enhance their productivity to be competitive.

We should also look at opening the economy to cross border activities, regulations and control. Large scale training facilities with higher technology are important. There should be a method by which the industrial performance can be monitored in order to see the comparative advantages and to give recognition and to facilitate such industry.

The SMI sector should be assisted to be more competitive to give them an exposure to better technology and management expertise.

Q: The banks are said to face a severe crisis with assets terribly inflated. It is reported that if the real values are mentioned, a lot of them would be insolvent! Your comments?

A: What we see is completely different. To us Banks are one of the few institutions that did reasonably well even when there was an economic downturn. The high rise buildings put up by some banks are testimony to this belief. There may be a few unscrupulous Bankers who have lent against inflated collateral. Generally, Bankers are very cautious and the opinion among the business community is that they will not lend unless there is an extremely high chance of recovery.

However, it is a fact that the banks are finding it difficult to dispose of some of the real estate that they have seized. This does not mean that the Banks will be insolvent.

Q: What is your advice to Government on this?

A: The Central Bank is the authority on bank supervision. They should tighten their supervisory arm and be alert to the faintest signal that a bank is not doing well. They have a duty to safeguard the interests of the depositors.

Q: With the termination of the Multi Fibre Agreement in 2005, around 80% of the apparel industry is expected to be laid off. What is your answer? What about the training in other areas of either apparel in terms of non quota regime or other industries all together and What are the Chambers thoughts on these?

A: There is no doubt that Sri Lanka's Apparel Industry is under threat with the Multi Fibre Agreement ending in 2005. I believe the apparel industry is already preparing itself to meet the challenges. Once again, I need to stress that it is a matter of being competitive in price, quality and delivery time. This is so not only for the apparel industry but also across the board.

Whilst the private sector can look after such matters as increasing productivity and improving quality the price will depend very much on labour costs, energy costs, financing costs and better infrastructure facilities, all of which are under government control. The government has a huge role to play. As much as it is the responsibility of the private sector to keep the industries going profitably, it is the responsibility of the state to control the costs mentioned above.

The government has also the responsibility to negotiate for bi-lateral preferential trade agreements that can help to sustain those industries, despite the Multi Fibre agreement coming into operation. However, in the long term Sri Lanka has to develop knowledge based industries to replace the labour intensive industries. This would mean investment in training and re-training. This goes back to our initial question of the relevance of present vocational training institutes.

Q: Are you satisfied with the economic growth of the country with the peace process widely believed to be on the right track?

A: According to the Central Bank Report the third quarter of 2002 recorded a growth of 5.3% It also predicted that if this growth rate continues the annual growth could be well over 3% forecast for the year.

However it warned that unless there is high investment and revival of construction activities prospects for future expansion remains low. It also warned that the future growth rate would depend on the speed and depth of urgent structural reforms, efforts to enhance investment, efficiency and productivity in all segments of the economy. With the ceasefire being sustained for almost an year and the peace initiatives gaining momentum with every round of talks, investor confidence is building up and we are confident that Foreign Direct Investment would flow in.

Q: Why are there still no massive inflows of foreign direct investment?

A: Investors are cautious and selective. They are adopting a wait-n-see policy. This process could be expedited if President Chandrika Bandaranaike Kumaratunga and the Cabinet could see eye-to-eye on matters of national importance and send the correct signals to the international community. At present these signals are conflicting and confusing.

Q: There are the one off investments such as Indian Oil and also possibly Mitsui Heavy Engineering and Ship Building Co. Ltd which is pursuing building power plants in Trincomalee. How do you see prospects for similar mega investments in the future?

A: The divestiture proposals of the Government and infrastructure development programs available for investment are so big that nothing less than mega companies can handle them. Further the rebuilding of the North and the East is a major undertaking. There will be many more mega players on the scene.

However, the Government and the BOI should formulate rules and regulations to ensure that investors pay the settlement fees and bring into the country the investment monies agreed upon, rather than be allowed to borrow from local Banks. We have heard of cases where BOI companies have not brought in any monies but borrowed from local Banks, and left the country leaving only the keys to their offices when their businesses failed.

Q: What is your message to the business community and to the Government on the peace process?

A: The message to the Business Community is for them to make very effort to build linkages with the Chambers in the North and East and help in the economic development of that area. We are strongly of the belief that economic development is a pre-requisite for sustainable peace. It is for this reason that the NCCSL pioneered taking several delegations to Jaffna, as well as established Chambers in Vavuniya and Batticaloa. Our message to the Government is to say that the Chambers and the business community are fully behind the peace process. We wish to appeal to the Opposition to extend their fullest cooperation towards achieving peace rather than bickering on contentious issues to gain narrow political advantage.

It is high time that the politicians of this country though of placing the country before self and party. It might do everybody good to remember that with Peace everybody would be a winner.

Q: Do you think that a 5% target is realistic for 2003 given the positive aspects of the peace process?

A: Already a growth rate of 5.3% has been achieved in the third quarter of 2002, which will push the annual growth rate of 2002 to over 3%. However if this is to be sustained in 2003 we must pay heed to the warnings of the Central Bank that were discussed before.

Q: What sectors do you envisage will grow?

A: Undoubtedly, the service sector would be the leading contributor to growth. Much of this sector is still in government hands and needs to be divested for faster growth through better management, infuse of new technology and improvement in productivity. Leading service sectors would be Tourism, Foreign Employment, Telecommunication, Shipping, Banking and Insurance.

The Industries sector would be the next contributor with Apparel as the leading Industry followed by Rubber based industries. The agriculture sector too should show an improvement with the farmers in the North and East coming into the market.

Q: Irrespective of the growth rates projected, how do you see the cost-of-living?

A: Higher growth rate would result in a higher standard of living for the majority of the people. The cost-of-living would rise along with the rise in the standard of living. The cost-of-living would also be dependent on world prices of oil and food. Growth would also result in creation of job opportunities and generate more employment, so that people would be able to cushion the rise in the cost-of-living. It is only the unemployed and the socially marginalised people who would be most affected by the rise in the cost-of-living. Safety nets should be provided for such categories.

Q: Despite wage increases, how do you see savings?

A: Savings in fixed deposits and Treasury Bills will not rise as interest rates have dropped considerably. People may revert to investing their savings in other forms such as in the stock market and investment in real estate. Domestic savings would not be sufficient to meet the capital investments needed to achieve a growth rate of over 5%. There has to be foreign direct investments.

Q: If the budget deficit is to be kept between 3 to 5 % how do you see savings and investments?

A: It is very unlikely that the budget deficit could be at 3 to 5 %. This would mean a considerable less spending by government, which in turn would result in a stagnant economy Government needs to spend on infrastructure development that is so vital for the economy to grow and investors to come in.

Q: Former CCC Chairman Chandra Jayaratne wrote to the PM saying that all state banks should be partially divested for good governance. But BOC Chairperson Sumitra Moonesinghe says that the Banks do not need to be divested because fundamentals are all right at this stage. Your comments?

A: This is welcome news, but state banks have to be cautioned that they are not under pressure to give loans to political cronies without collateral or with less collateral. We have heard of many cases of this nature which are the bulk of the non performing loans.

On the other hand banks are quick to resort to parate execution on others resulting in loss of jobs and properties, making destitute, people who were once proud and outstanding. When borrowers face difficulties in payment Banks should first advise and assist in restructuring such industries to be sustainable.

Q: What is your vision to boost exports?

A: To have a good quality product at a competitive price. To create a demand through a marketing strategy. To find markets by participating in exhibitions and using the internet as a source of information.

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